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CONSUMER
CHOICE MATTERS, #3
DATE:
February 11, 2003
TO:
Consumer Choice Matters Readers
FROM:
Greg
Scandlen
IN
THIS ISSUE:
World
Health Organization on Medical Savings
Accounts
The
The World Health Organization has
released a major study of Medical
Savings Accounts around the world. It
looks at programs in the U.S., South
Africa, mainland China, and particularly
at Singapore. The report is more
balanced than one might expect coming
from WHO, but it can't avoid the
dismissive tone we often hear from
statists. Still, there is some useful
information here.
The
bulk of the report is on Singapore,
which has had a mandatory MSA program
since 1984. The report characterizes the
evidence from Singapore as
"unclear," but by any measure
Singapore must be considered a raving
success story. Its growth in health care
spending has tracked almost perfectly
its growth in GDP since the program was
introduced. Today Singapore spends less
than four percent of GDP on health care
and the balance held in the MSA funds
equals four times the annual spending on
health care nationally. WHO quibbles
with some of these results, pointing out
for instance that, "12 percent of
daily outpatient users also visit
traditional Chinese medicine
practitioners," which are not
counted "in Singapore's health
accounts." The report does not
attempt to estimate how much money goes
into these types of services, but if a
mere 12% are supplementing their regular
treatment with other services, it could
not be a major factor. And this factoid
does not undermine the remarkable
20-year restraint in cost increases for
those services that are included.
The
more important point that should be made
about Singapore is that the majority of
health spending in that country is paid
out-of-pocket, even without considering
the MSAs. In 1999, out of total health
care spending of $160 billion (in
Singapore dollars), $60 billion was paid
by government, about $10 billion by MSAs,
and $90 billion directly out-of-pocket.
The real source of Singapore's cost
consciousness isn't the MSA, but the
out-of-pocket portion of health care
spending. MSAs' primary purpose is
moving a system that relies on
third-party payment (like the U.S.,
where 85% of all health care spending is
paid by third parties) toward a system
that relies more on direct payment, and
the cost consciousness that goes with
it.
The
other interesting discussion in the
paper is on China, which started an MSA
pilot program in two cities in 1994. At
the same time it also revised provider
payments to prospective fee-setting. The
MSA was accompanied by a "Social
Insurance Account," essentially a
high-deductible health insurance plan
with a substantial co-payment. The
results were impressive, including a 27%
decrease in per capita spending and a
24.6% decrease in total health care
spending in one of the cities. The WHO
paper questions how much of the
decreased spending could be attributed
to the MSA versus the change in provider
payment. But China decided in 1998 to
extend the program to all urban workers
with a goal of enrolling 80 million
workers by the end of 2001. The paper
does not tell how well the expanded
program has worked.
Finally,
the paper takes quick looks at the U.S.
and South Africa. It dismisses South
Africa as having insufficient evidence,
and says the American experiment was
"unsuccessful as there are very
limited number [sic] of people
interested in joining." Overall, it
concludes there isn't enough information
to assess whether MSAs are a good idea
or not.
SOURCE: www3.who.int/whosis/discussion_papers/pdf/paper52.pdf
Or www.who.int/evidence
click on Discussion Papers. Look for
paper #52.
Can
Consumers Get the Job Done?
The
Portland Oregonian ran a major
article on consumer-driven health care
on February 2, 2003. Written by Joe
Rojas-Burke, the article isn't all
favorable. It says consumer-driven plans
have enrolled about 1.5 million people,
including a local woman who is diabetic
and has other chronic health problems,
but who "wants the choice; then I
can make my own decisions." But she
also worries about the potential cost
burden for people with serious health
problems. The article says, "the
fairness issue arises in all plans that
reward consumers for not spending health
care dollars." But it cites Dan
Perrin of the Archer MSA coalition as
saying that by lowering the cost of
insurance, MSAs could "dramatically
increase coverage to the
uninsured." He points out a
Treasury report that 73 percent of the
people who bought an MSA last year were
previously uninsured. The article adds
that HRAs and MSAs, "may also help
workers cope with increasing
out-of-pocket costs as employers raise
deductibles and drop services from
coverage." On the other hand,
Victoria Bunce of the Council for
Affordable Health Insurance says with
HRAs, "the only way the employee is
going to get that money is to spend
it." She thinks HRAs will not
encourage thrift.
Anne
Robinow of Patient Choice says, "If
employers are not careful about plan
design, they could easily end up
spending more money." At the same
time, she says people have been
sheltered from the true cost of the
services they consume, "We have
given consumers too much of a free
lunch." But she adds that it is the
providers, not consumers, who can
"re-engineer health care
delivery."
MyHealthBank's
Donald Sacco, however, argues that
consumerism will radically transform
health care. Consumers "will become
the force that pushes medical providers
to tranform quality." But Sacco
acknowledges that, "a lot of
people, including many politicians, are
still reluctant to accept the fact that
a consumer can be an effective purchaser
on their own behalf."
SOURCE: www.oregonlive.com/search/index.ssf?/base/business/104410435550330.xml?oregonian
FROM
THE STATE THINK TANKS
Ethan
Allen Institute: Health Care Reform
Agenda for the States
The
Ethan Allen Institute has released a
report on "A Health Care Reform
Agenda for Vermont." The
recommended reforms could apply as well
to any other state in the country, and
it includes suggestions for federal
reforms as well. This concise document
was prepared by eleven nationally known
free-market health care experts, under
the auspices of the State Policy
Network. It begins by making a clear
distinction between a "Service
Delivery Paradigm," in which
patients are "passive vessels into
which competent professionals deliver
the elixir of health care," and a
"Patient Power Paradigm," in
which individuals are "considered
competent to recognize the essentials of
healthy lifestyle choices and effective
self-treatment for non-acute
conditions." The report goes on to
suggest seventeen specific actions
states could make to move towards the
Patient Power Paradigm and ten actions
for the federal government. The list is
not intended to be exhaustive, and the
report hints at a number of second tier
actions that would be worth considering
in the future.
SOURCE: www.ethanallen.org/publications/specialreports/modelhealth.pdf
Rio
Grande Foundation: A Prescription For
Medicaid Reform
The
Rio Grande Foundation of New Mexico has
issued a report on reforming that
state's Medicaid program. The paper was
written by Kenneth Brown and Harold
Messenheimer, both PhD economists. It
discusses the recent history of Medicaid
in New Mexico, including soaring costs
and enrollments and a legislature that
routinely chooses the most expensive
option available when thinking about
what to do next with Medicaid. The
report then questions several of the
central premises of Medicaid:
- That
it is appropriate for the state to
"give" poor people medical
services, rather than giving them
the means to purchase an insurance
program similar to what other people
have. As it is, because Medicaid
covers virtually everything for
free, there is no reason for
recipients to think twice about
consuming a service.
- That
New Mexico benefits from expanding
Medicaid because the federal
government pays 75% of program
costs. In fact, New Mexicans are
taxed by the federal government to
raise that 75% match, so there is
little net gain for the state.
The
report walks through the dilemmas facing
New Mexico's (and every other state's)
Medicaid program - increases in
population, eligibility, utilization,
underlying health care costs - and
predicts annual cost increases ranging
from five to ten percent for the next
decade. To the extent the program grows
faster than state revenues, the state
will have to cut back on other services.
One answer is easy - simply cut back on
benefits, eligibility, or rates of
payment, but, "this straightforward
approach is, in our view, inadequate and
inadvisable. Far better to take a longer
term look and design something that will
still be workable and affordable five or
ten years from now."
It
would be far better, say the authors, to
move to a system of defined
contributions which provide cash
assistance in the form of a voucher to
the needy on a sliding scale basis,
providing a family of four with no
income with an annual voucher worth
$6,600 and reducing by $300 for every
$2,000 in income earned. Thus a family
of four with $20,000 of income would
qualify for $3,600 in assistance, one
with $30,000 would get $2,100. These
families would then be free to choose
their own insurance plan in keeping with
their own needs and values. The coverage
could include a medical savings account
program with the understanding that
unused balances would be available for
other purposes only five years after
losing eligibility for the program.
SOURCE: This report will soon be
available at www.riograndefoundation.org
VENDORS
CORNER
Proweh
Health Systems of Birmingham,
Alabama, announces savings of 28 percent
for a client that adopted its MSAPlus
product last year. The report is based
on comparing the six month period of May
to October, 2002 with the same period in
2001. Company president Gerald Chandler
said the consumer-directed health care
concept, "is so new there are few
firms with year to year results"
and that measurement is difficult in
those companies with multiple options.
But this was a total replacement client,
so comparison is easy. The results
exceeded the expectations of the Mercer
Human Resources Consulting Group, which
issued an opinion last year that
expected savings in the 10 to 25 percent
range. Specifically, there were
reductions of 58% in emergency room
cost-per-visit, 25% in diagnostic X-ray
and lab costs per encounter, and a shift
of 11.3% from name brand to generic
drugs. At the same time, there was an
increase of 9.6% in physician office
visits and 31.2% in the total number of
prescriptions written.
SOURCE: www.benefitslink.com/cgi-bin/pr.cgi?database_id=33823
or go to www.msaplus.com
Synertech
reports it is servicing over 100,000
members of consumer-directed health
plans with its claims processing,
enrollment, database management,
coordination of benefits and other
tools. It anticipates substantial growth
in the business in the coming year, with
total consumer-driven enrollment
expected to reach 400,000 to 500,000 in
2003. Company president Steve Rock says,
"We have helped the leaders in the
move to consumer-directed programs make
their concepts a reality." The
company was founded in 1986 and provides
outsourcing, application services and
system maintenance in the commercial,
Medicaid and Medicare markets.
SOURCE: For more information, contact
Heidi Irwin at hirwin@synertechsystems.com,
or 717-703-6349.
Asperity
Decision Solutions has changed
its name from PlanSmartChoice, under
which is has worked since 1995. It
provides Web-based tools to large
employers, including the FEHBP program.
The tools include help to employees in
finding the "best-fit" health
plan, a benefits comparison module, and
a calculation module to help employees
estimate their out-of-pocket costs under
various plans and benefit designs.
SOURCE: For more information, contact
Andrea Boyles at aboyles@asperity.com
or visit www.asparity.com
Greg
Scandlen
Director
Center for Consumer Driven Health Care
The Galen
Institute
P.O. Box 19080
Alexandria, VA 22320
703-299-9206 (office)
301-606-7364 (cell)
Please send all
comments/questions directly to me at gmscan@aol.com.
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