Patient Directed Health Care
June 17, 2002
Eighty-eight percent of Americans with private health insurance coverage get it through employers, but surveys show that employees prefer a change: choosing their own health care providers and getting involved in treatment decisions. However, they do not want to spend more money or put themselves or their families at financial or clinical risk.
Costs are reduced and care is improved when patients are involved in their own treatment decisions. One idea now being pioneered by a number of companies is Patient-Directed Healthcare Benefits (PDHBs), usually an option from among other employer-sponsored plans. They give employees and their families greater input in selecting the benefits they receive, how they will pay for their health care, and the choice of the doctor and hospital they prefer:
- Employer and employee contributions are used to purchase major medical insurance -- with preventive care provided for all employees and covered in full.
- The employer places separate funds in a Personal Health Account (PHA), from which the employee is able to directly pay for discretionary medical expenses (see figure).
- The employee can use the PHA funds to pay for alternative health care services and other IRS-allowed health care expenses.
- Employees also can use employer-funded PHAs to directly purchase individual health insurance coverage.
The knowledge that they can access care they need at the time they think they need it provides employees security. But since they are spending their own health care dollars from a PHA, they have an incentive to spend wisely and to save money for future health care events. Funds not spent will accumulate and can be used to pay premiums for early retirement health insurance or to fund coverage for prescription drugs and Medicare supplemental coverage after age 65.
Source: Ronald E. Bachman, FSA, MAAA (principal, PricewaterhouseCoopers), "Giving Patients More Control," Brief Analysis No. 399, June 17, 2002, National Center for Policy Analysis.
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