Transcript What You Need To Know About Medicare

Outlook on Consumerism in
Health Care
Paul Fronstin, Ph.D.
Director, Health Research and Education Program
Employee Benefit Research Institute
Copyright© - Employee Benefit Research Institute Education and Research Fund, 1978-2008. All rights
reserved.
The information contained herein is not to be construed as an attempt to provide legal, accounting,
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from EBRI-ERF.
HSA & HRA Enrollment
(millions)
AHIP
2006
2007
Notes
3.2 (HSA-only)
4.5 (HSA-only)
HSA & HSA-eligible. Employment &
individual market. No info on
methodology.
10 (4.5 HSA,
5.5 HRA)
No info on methodology.
AAPPO
CDMR
6
10.3 (5.8 HSA,
4.3 HRA)
No info on methodology.
ICDC
5.5
8
EBRI estimates based on data printed in
ICDC.
KFF/HRET
2.7 (1.4 HSA,
1.3 HRA)
3.8 (1.9 HSA,
1.9 HRA)
Workers only. Does not include
dependents.
Mercer
2.4
4
Workers only. Does not include
dependents.
EBRI/
Commonwealth
3.6
Mid-range of
above
2
Large Employer Interest in HSAs:
Likelihood of Offering a HighDeductible Health Plan with an HSA
60%
By 2005
54%
By 2006
56%
50%
40%
35%
28%
30%
19%
20%
10%
8%
0%
Very likely
Somewhat likely
Source: Mercer Human Resources Consulting, 2004.
Not likely
3
HSA Offer Rates, by Firm Size,
2006 & 2007
60%
2006
2007
50%
39%
40%
30%
22%
20%
10%
4%
7%
6%
9%
0%
10-499
500+
20,000+
Source: Mercer Human Resources Consulting,
4
2007 CDHP Offer Rates Compared to
2006 Predictions, Selected Firm Sizes
50%
Offer Rate
Predicted HRA Offer Rate from Prior Year
Predicted HSA Offer Rate from Prior Year
40%
31%
30%
30%
23%
25%
22%
20%
10%
10%
0%
3-199
Source: published & unpublished data from KFF/HRET.
5,000+
5
Health Plan Enrollment, 1988 & 2007
13%
57%
21%
2007
Account-based
POS
PPO
HMO
FFS
11%
16%
73%
1988
5%
3%
0%
10%
20%
Source: KFF/HRET.
30%
40%
50%
60%
70%
80%
90%
100%
6
Three “Types” of Consumerism
• Simple
– Generally higher cost sharing
• Lite
– Account-based plans (HRAs & HSAs)
• Heavy
– Align incentives with real time information on
price, quality, treatment options, and outcomes.
7
What is Heavy Consumerism?
• Strategic use of cost sharing
– diabetes in Asheville, NC, et al.
– NY heart surgery
• Condition-specific information at hospital
and physician level
• Tiered cost-sharing
8
Annual Claims Distribution
“20/80 Rule”
$40,000
Average Cost Per Person
or higher
$30,000
20% of population
that accounts for
80% of spending
Average Cost
$20,000
$10,000
$0
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percent of Population
Source: EBRI estimates from MEPS.
9
15 Most Costly Conditions Account
for Over 50% of Spending
Heart disease
9%
Trauma
7%
Cancer
6%
Pulmonary conditions
6%
Mental disorders
5%
Hypertension
4%
Diabetes
3%
Arthritis
3%
Back problems
3%
Cerebrovascular disease
2%
Pneumonia
2%
Skin disorders
2%
Endocrine
2%
Infectious disease
2%
Kidney
1%
Total spending
56%
10
Challenge of Consumerism
• “All we need to do is present people with
more information, greater choices, and the
right kind of incentives, and good things
will come.” speaker at Dec. 2007 EBRI
Policy Forum
11
Consumerism in Retirement
• Low participation in retirement plans.
– 20-30% of employees don’t participate and
forgo employer match.
• Poor investment choices.
• Too much information is overwhelming
leads to herding effect.
• Education changes intentions but does not
modify behavior.
12
401(k) Plan Participation Rates,
by Age Groups, 2003
100
90
80
70
67
69
67
61
60
56
60
50
38
40
30
20
10
0
Overall
20s
30s
Source: Fidelity Investments.
40s
50s
60-64
65-69
13
401(k) Plan Participation Rates, by
Age Groups and Earnings, 2003
100
90
Overall
20s
30s
60–64
50s
40s
90
89
90
90
90
87
83
65 to 69
80
70
62
57
60
50
40
58
52
48
47
37
30
20
10
0
$20,000–$29,999
Source: Fidelity Investments.
$100,000 or more
14
Percent of 401k Plan Participants with Company Stock
Option Who Allocate 50% or More of Account
Balance to Company Stock, by Age Group, 2006
25%
19%
20%
17%
16%
16%
15%
14%
12%
10%
5%
0%
Overall
Source: EBRI.
20s
30s
40s
50s
60s
15
Percent of 401k Participants With Zero
Equity Allocation in Account Balance,
by Age Group, 2006
50%
47%
42%
40%
36%
33%
34%
31%
30%
20%
10%
0%
Overall
Source: EBRI.
20s
30s
40s
50s
60s
16
The Paradox of Choice
% Visiting
40%
60%
% Buying
30%
3%
17
More Investment Choices Means
Lower Participation
Predicted Participation Rate
80%
75%
70%
More Choices, Less Participation
65%
60%
55%
50%
2
7
12
17
22
27
32
37
42
47
52
57
Number of funds offered
Source: Iyengar, Jiang, and Huberman.
18
Consumerism Predictions
• CDHP backlash.
• Movement to greater transparency.
• Usable information on cost, quality,
outcomes.
• Strategically-designed cost-sharing to create
incentives based on above data.
19
“Headlines”- Characterizations of the
Employment-Based System
• Vanishing
• Employers are fleeing the system
• Employer-based health care is ending. It is
dying in front of our very eyes
• Employer-based health coverage is melting
away like a popsicle on the summer
sidewalk
20
Percentage of Employers With 3-199
Employees Offering Health Benefits,
1996-2007
80%
65%
70%
68%
63%
60%
50%
66%
60%
59%
59%
59%
40%
30%
20%
10%
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Kaiser Family Foundation.
21
Worker Eligibility and Take-Up Rates for Own
Employer Health Benefits,
Wage and Salary Workers Ages 18-64, 1988-2005
100%
90%
87.9%
86.5%
77.8%
75.7%
85.2%
84.9%
84.8%
84.0%
83.5%
80%
70%
73.6% 74.0%
60%
74.9%
76.2%
74.0%
50%
40%
Eligibility rate
30%
Take-Up Rate
20%
10%
0%
1988
1990
1992
1994
1996
1998
Source: Employee Benefit Research Institute estimates based on
data from the Current Population Survey.
2000
2002
2004
22
Percentage of Workers, Ages 18-64, With
Employment-Based Health Benefits,
1994-2006
90%
80%
73.3% 73.3% 73.5% 73.6% 74.2% 74.6% 74.9% 74.3% 73.0% 72.1% 71.7% 71.4%
70.9%
70%
60%
50%
40%
30%
20%
10%
0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: Employee Benefit Research Institute estimates based on data from the Current
Population Survey, March Supplement.
2004
2005
2006
23
Percentage of Private Consumer Health Care
Expenditures that are Out-of-Pocket and
Private Health Insurance Payments, 1960-2005
80%
Out-of-pocket Payments
Private Health Insurance
70%
60%
50%
40%
30%
20%
10%
0%
1960
1965
1970
1975
1980
Source: Centers for Medicare and Medicaid Services.
1985
1990
1995
2000
2005
24
Big Questions
• Is current employment-based system
sustainable without fundamental reform?
• What changes are needed to shore
up/strengthen the employment-based system?
• Is the employment-based system worth saving?
• What is the role of the employer, worker, et al?
• Where is the employment-based system
heading?
25
Employer Interviews
•
•
•
•
•
10 employers – leaders in field
Senior HR and Benefits. One CFO.
All jumbo employers – 14,000 – 200,000+
650,000 workers + dependents covered
Over $10 billion spent on health care
– one-half of 1% of private spending
• 3 of 10 moved to HRA or HSA
– 13-60% enrollment, 4% overall
• Viewpoints not necessarily nationally representative, but
they are informative, and influential.
– Towers Perrin complement study.
26
Why Coverage is Offered
• Business case
• Competitive labor market – recruitment &
retention
• Wellness, prevention, DM have positive
effect on worker health & productivity
• Despite view on bottom line – role of
employer is access
27
Employer Innovations
• Health coaches for both healthy and unhealthy employees
• Educational campaigns
• Increased emphasis on preventive care and enhanced wellness
programs
• Increased innovation in disease management programs
• Elimination of employee and family premiums when choosing a
high performing health plan
• Elimination of cost sharing when choosing in-network health
care providers
• No-cost on-site health screenings
• Quarterly scorecards of health plans
• RFPs from health plans every 2 or 3 years
28
Employers Not on the Verge of
Dropping Benefits
• None would be the first to drop coverage
– “Insane”
– “Would be last”
• Would drop coverage if…
–
–
–
–
elimination of the employer tax deduction
movement to universal system
erosion and/or elimination of ERISA preemption
Other employers dropped coverage
• Think talk of dropping coverage by other employers is an
empty threat
29
Next Generation of Benefits
• Greater focus on shared responsibility and
accountability
• Individuals need to be become more engaged, and
should make informed decisions
• Employers starting to facilitate next generation
– Could be seen as step away from employment-based
system
• Account-based health plans may play role in next
generation of benefits, but will not play central
role.
30
Thank you
EBRI
1100 13th Street NW, Suite 878
Washington, DC 20005
Phone: 202-659-0670
Fax: 202-775-6312
www.ebri.org