NCPA - National Center for Policy Analysis

Consumer Directed Health Plan: Answer to Rising Costs

August 18, 2003

Over the past year, medical journals, business magazines and major newspapers have boldly pronounced that the era of heavy managed care is over and that a new era of consumer-driven health care financing is beginning. Conferences on consumer-driven health care are noteworthy by both their abundance and their high attendance. Indeed, a recent survey of its members by the National Association for Business Economics (NABE) found some fascinating results:

  • Two-thirds of business economists say that consumer directed health insurance is either very important or extremely important in controlling costs, improving access and increasing quality.
  • Moreover, they rank the most important cause of rising health costs as being a lack of patient incentives while a lack of provider incentives ranked second.
  • Today about 1.5 million Americans are in consumer-driven plans -- less than 1 percent of the employer coverage market.
  • However, many health plans and benefit consultants see consumer-driven plans accounting for 20 percent of the market by 2005 and as much as 50 percent by 2007.

Proponents hope that consumer-driven plans will encourage consumers to make better medical care decisions by reestablishing the link between service use and employees' financial liability. If employees respond to these incentives and use Web tools not just to make decisions regarding their plan but to select providers based on quality, make informed treatment decisions, and manage chronic conditions, quality of care should improve.

Source: Jon R. Gabel, Anthony T. Lo Sasso and Thomas Rice, "Consumer-Driven Health Plans: Are They More Than Talk Now?" Health Affairs, Health Tracking: Marketwatch Web Exclusive, November 20, 2002; "NABE Panel: Federal Deficit a Risk, Monetary Policy about Right, Health Care Needs Major Reform," NABE Economic Policy Survey, National Association for Business Economics, August 15, 2003.

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