By Derek Monson

How do we reduce unnecessary or wasteful health care spending so that we can increase health care access and reduce the cost of health care? This is a policy question that has vexed policymakers for many years. But new research suggests that market innovations such as health savings accounts paired with high-deductible insurance coverage (collectively referred to as “consumer-driven health plans,” or CDHPs) may hold part of the answer.

The study, just published by the National Bureau of Economic Research, looked at a dataset of 13 million individuals employed at 54 “large U.S. firms” to see how making CDHPs available to employees influenced health care spending and costs. The researchers note that “there is robust empirical evidence” from previous studies that CDHPs “effectively incentivize patients to change their health care use and reduce costs in the first year” by reducing spending between 5 and 24 percent, according to past research. But, they continue, “the effects of CDHPs on spending in the longer term are … ambiguous and the empirical evidence … is limited.”

The researchers also explain how the longer-term CDHP studies also suffer from methodological limitations that make generalizing their results a questionable enterprise. Hence the justification for their study, which looked at health care spending up to three years after CDHPs are offered by employers to their employees and used better data than the previous studies, with a stronger statistical methodology.

The study found “that spending is reduced … in all three years” after an employer in their data began offering CDHPs to their employees.

The researchers were also able to estimate the impact on health care costs solely from the individuals and families enrolling in CDHPs, which they report amounts to “7 to 22 percentage point reductions in health care cost growth in the first three years of enrollment in CDHPs.”

The CDHP-associated reductions in health care spending were “driven by spending decreases in outpatient care and pharmaceuticals, with no evidence of increases in emergency department or inpatient care.” This means there is no evidence in this study that changes in health spending from CDHPs are the result of simply putting off needed health care services, ultimately leading to costly ER visits or health complications.

In other words, the evidence from this study supports the argument that CDHPs are an effective tool for limiting unnecessary or wasted health care services, with attendant benefits for the cost of health care.

For example, this might look like a parent choosing to treat a child’s cold or flu at home, rather than seeing a doctor “just in case.” Or it might look like an individual becoming more cost conscious due to the fact that they are paying for every dollar of their initial health care spending out of their health savings account, and subsequently pressing their doctor or pharmacist for a less expensive generic drug, or for the most cost-effective treatment plan, rather than just accepting the prescription or plan the doctor recommends. And as basic economics teaches us, as the demand for health care goes down, it will put downward pressure on the price (cost) of health care services.

Of course, this study is not conclusive (as the researchers note) since the data is only from large employers and because it is possible that health complications from decreased health care spending take longer than three years to appear. Nevertheless, this study supports the case that an effective policy approach for controlling health care costs will include encouraging individuals and families to choose CDHPs for their health coverage – further incentivizing individuals and families to seek out the most cost-effective health care available (within reason) and giving them a readily available financial reminder of the benefit of proactively managing and improving their health.

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