Consumer-driven health care

Consumer-driven health care would improve quality, lower costs and increase patient satisfaction, says health expert Regina H. Herzlinger. Under traditional employer-sponsored health plans, consumers are given little choice or control over their medical purchases, and they are given little information on which to base their choices. For instance, about 40 percent of all employers and 92 percent of small ones only offer employees a single health insurance plan.

The consumer-driven approach can offer employees a wide range of plans they can purchase with the employer's contribution (adjusted for the individual employee's health status), their own money or both.

In contrast to traditional managed care plans, consumer-driven health care would:

Enable employees to customise their health benefits – for example, by allowing them to trade lower premiums for higher out-of-pocket maximums.

Charge employees the actual cost of insurance – a 2000 study by the Kaiser Foundation found that for more than 60 percent of American employees, the prices they saw were not the actual costs of premiums paid by the company.

Let providers, instead of insurers, set prices for their services and reap the benefits of innovation.

Offer employees comparative quality and cost information about both insurers and health care providers.

A few U.S. companies already have consumer-choice plans. For example, Medtronic credits $2,000 to the personal care account of each employee and pays 100 percent of his or her preventative care. Employees can use the personal care accounts to cover out-of-pocket expenses for products and services, instead of unwanted insurance. One option with a $3,000 deductible is only $71 per month, saving nearly $1,000 annually over most traditional managed-care options the company offers.

Source: Regina E. Herzlinger, Big Picture: Let's Put Consumers in Charge of Health Care, Harvard Business Review, July 2002.

For more on Problems and Solutions of Managed Health Care http://www.ncpa.org/iss/hea

FMF Policy Bulletin\7 August 2002