Consumer Driven Health Care has strong advocates and opponents. Legislation that would expand them is hotly debated. The section presents reasons against Consumer Driven Health Care. The next section presents reasons for Consumer Driven Health Care. For each reason, we also give brief counter arguments. Arguments for CDHC are marked by a “+” sign and arguments against CDHC are marked by a “-” sign.
Biased Selection and Higher Premiums for the Sick
– Argument: When people are given a choice between a CDHP and generous traditional health insurance, healthy people will sign up with the CDHP and leave chronically-ill people in the traditional plans with higher premiums. This is called “biased selection” or “adverse selection”. Adverse selection could be particularly acute if the CDHC account lets people withdraw money for things other than health care (after paying taxes and a penalty).
+ Counter Argument: When the CDHC high-deductible insurance offers generous coverage above the deductible and the traditional health plan has an open-ended copay, then people with chronic health conditions and high health care costs may wind up paying less under the CDHC plan. Also, greater flexibility in provider selection under the CDHC may appeal to people with chronic conditions. Whether adverse selection happens or not is an empirical question based on product design and alternative plans offered. It is also possible to avoid adverse selection by: risk-adjusting account contributions (employer pays more for people with chronic illness); offering only one plan — a CDHP; or having one insurer administer and cross-subsidize the CDHP and traditional health plan.
– Response to Counter Argument: If there is little evidence on selection, then it is risky to allow these plans to expand. If they wind up leaving the chronically ill in the lurch, it will be very difficult to reconstruct the risk pools that have been torn apart. Risk adjusting payment mechanisms are still being developed and not easy.
People Will Neglect Preventative Care
– Argument: Faced with paying out of their own account (or pocket) for care to prevent future illness, many people might neglect it. Consumers may not realize the potential health hazards of neglecting preventative care. They may also gamble that if they do get really sick, that the high-deductible policy will pay for the costs.
+ Counter Argument: Good CDHPs provide special support and separate funding for health care to prevent future illness — such as yearly checkups and screening tests.
– Response to Counter Argument: Without separate funding for preventative care, people will neglect it. With separate funding, who decides what is preventative care or not? This segmentation of what type of care is paid from what pocket erodes the cost containment and consumer choice aspects of Consumer Driven Health Care. It begins to seem more like managed care.
Erosion of Employee Benefits
– Argument: An argument against not only CDHC but also defined contribution for health care in general is that it will open the door for employers to ratchet down their contribution to health benefits. This will leave employees in the lurch paying higher out-of-pocket costs.
+ Counter Argument: CDHC is generally better for employees than no health benefits at all. It is also generally better for employees than high out-of-pocket expenses under a traditional health plan — which does not offer employees as much flexibility, control over their health expenses, or financial reward for health management.
– Response to Counter Argument: Unlike dropping health benefits entirely, poorly-funded CDHC allows employers to maintain the illusion of health benefits without the substance.
Too Complicated for Consumers
– Argument: If consumers were frustrated with the complexity of managed care, wait until they try to manage three-tier health plans and customized provider networks on the internet. CDHC expects consumers to make complicated decisions when they are sick and most vulnerable. Also, not everyone has access to the internet and is comfortable using it.
+ Counter Argument: If no one makes cost vs. benefit decisions, then premiums skyrocket. If the consumer is not involved in these decisions, then that leaves providers (uneasy with their mixed role), employers (often caught in the middle and frustrated), health plans (subject to anti-managed care backlash), or the government. People make decisions concerning education, legal services, housing, clothing, food, etc. If people are given the proper tools and education, they can make decisions concerning health care as well.
– Response to Counter Argument: These CDHC plans are too complex. Health care is not a market where consumers can make choices.