Without education, consumer-driven healthcare will fail

Milton Friedman, a Nobel Prize winning economist, has propagated the concept that that no one spends someone else’s money as carefully as they spend their own. This is the key concept that proponents for health savings accounts (HSAs) and consumer-driven healthcare (CDH) use to argue their case for potentially the biggest overhaul of the healthcare industry since HMOs were launched during the Nixon administration.

With nearly 20 percent of the nation’s GDP spent on healthcare, it is clear that things must change or we will face a potential collapse of the current system. Consumer-driven healthcare holds that people with high-deductible insurance policies coupled with savings accounts will drive down healthcare spending by being more careful consumers than those who are sheltered from the cost of care by co-pays. Opponents argue that CDH is really just cost shifting from employers to employees and that rather than spending more responsibly, consumers in these types of plans will be more inclined to avoid necessary care. Who is right?

The CDH solution empowers people to make more cost-conscious decisions because it effectively changes employer-based healthcare from a defined benefits system to a defined contribution system. Employers can still offer employees protection from very costly, major medical events with high-deductible insurance while funding a CDH account with defined contribution dollars that can be used toward minor medical expenses.

The federal government allows the CDH accounts to be funded with pre-tax dollars and employees are instructed to use these dollars for first dollar, ‘under-the-deductible’ expenses, as well as for a myriad of other healthcare spending – including over-the-counter medications, alternative medicine and other things that may not be typically covered by the employer’s plan and hence, not applied toward the deductible.

Here is the fun part – the employer then tells the employee to ‘go and spend wisely’, oftentimes without any specific education, tools or support necessary to make better choices.

News flash: very few Americans have attended medical school and they simply do not know enough or have the ability to make better choices. Most folks don’t know the difference between an otoscope and a colononoscope – which is concerning since one enters through your ear and the other through your rear! So what needs to be done?

In the early 1980s, employers began making a monumental shift in employee retirement benefits as they began offering defined contribution 401K plans rather than defined benefit pension plans. Today, approximately 50 million American families have 401K accounts and most have a cursory understanding of their contribution requirements, portfolio composition and how they perform transactions. Much of this knowledge was transferred from a new industry of financial advisors that grew aggressively following the emergence of 401Ks and IRAs. Financial advisors helped people better understand how to manage their own investments.

Managing your healthcare dollars, including choosing the right provider, the right care, at the right time, for the right price is more complicated – and potentially much more important – than managing your retirement accounts. But where is the budding industry of healthcare financial advisors to help people better make these critical decisions? It is largely non-existent, except for a few cases.

Without the help of healthcare financial services, CDH consumers all too often fall into one of two categories: the healthcare spender blows through their healthcare account immediately and is left with large bills and no back-up plan, whereas the healthcare avoider avoids necessary care in order to save money. To steer clear of either of these scenarios, consumers must be given access to healthcare financial services that can empower them to recognize when to get care and what type of care to get.

In order to create successful CDH consumers, healthcare financial services need to include the following components:

• They must be high tech and high touch. While technological solutions provide ways to sort and deliver mass quantities of information, a high touch component is necessary to help consumers understand the output of the technical component. This may include 24-client service and nurse lines.
• They must always be available. One of the earliest messages I learned as intern is that people get sick in the middle of the night. Technology must be reliable and support round-the-clock (24/7) in order to meet the needs of the consumer.
• They must provide easily accessible and digestible health and cost management information. This includes a medical library, nurse line, self-diagnostic tools, Rx generic and substitution information, and price and quality comparison information.
• They need to give consumers the ability to manage their medical claims and healthcare account balances in one place – an online personal CDH desktop. In other words, the health insurance component and the healthcare account component of to their plans must be integrated to provide seamless use.

Consumer-driven healthcare will fail unless consumers are educated, empowered and supported with the knowledge they need to make good decisions. Just like during the rise of 401Ks and IRAs, there is a need for a higher, not a lower level of service, that was provided in the old world. Without the mission critical healthcare financial services, CDH will not create careful consumers that decrease spending, but may be, as the critics claim, just another cost shift.

Dr Neeleman and his health and equity advisors provide 24-hour healthcare financial services for over 1000 employers and 27 health plans and TPAs nationwide.