NCPA - National Center for Policy Analysis

Benefits of a Consumer-Driven Health Care System

January 27, 2004

Consumer-driven health benefits, which allow an employee to direct their own health care spending as part of an employer-sponsored health benefits plan, are gaining in popularity.

Dwight McNeill a researcher at the Agency for Healthcare Research and Quality compared traditional comprehensive benefit plan design with "first generation" consumer-directed benefit designs. His analysis finds:

  • The healthy group, those will annual spending less than $580, saves an average of $584 with a consumer-directed plan relative to the traditional plan, for a 491 percent gain.
  • The slightly sick lose an average of $250 in consumer-directed plans relative to traditional plans, for a 66 percent loss.
  • The moderately sick lose an average of $581 in consumer directed plans relative to traditional plans; a 61 percent loss.
  • However, the very sick -- those in the top 5 percent of spending -- gain an average of $300 in the consumer-directed plan; a savings of 16 percent.

Thus, the young and healthy and the very sick are potential winners with consumer-directed health benefits, while the moderately sick are the losers.

Source: Dwight McNeill, "Do Consumer-Directed Health Benefits Favor the Young and Healthy?" Health Affairs, January/February 2004.

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