Consumer-Directed Health Care*

Introduction

Rising healthcare costs, restrictive managed care plans of the 1990s and poor patient care experiences are all catalysts for the Consumer-Directed Health Care (CDHC) movement in this country. CDHC asserts that when patients, or consumers, are given a financial stake with decision-support information, the healthcare system will be transformed into a market-driven system. Many believe this type of system will help create more competition in all areas, spawn new innovation in healthcare delivery, foster better relationships between providers and patients, and erase many of the inefficiencies in the system. As consumers are actively engaged, the quality of health care will go up, choices will improve and prices will come down.

True Cost of Care

In the past, consumers have been shielded from the true cost of medical care through co-payments and co-insurance, with very little financial incentive to seek out the best value in medical care. By the same token, medical providers are paid by third-parties (insurance companies, employers and government) when they treat individual illnesses and injuries. The CDHC market-driven model helps align provider reimbursements with the demand for quality and cost information. More insurance carriers will pay for positive outcomes and for keeping people healthy.

Healthy Outcomes

When consumers have a financial stake, they become proactive partners in their own healthcare. In CDHC models, staying healthy has financial rewards for the patients. As evidenced by the passage of the Patient Protection and Affordable Care Act (PPACA), preventive care is becoming as valued as the medical and surgical treatment of the disease itself – and for good reason. Some studies show that as much as two-thirds of the costs for treating the complications associated with diabetes could be averted with appropriate prevention. As we manage or even avoid chronic diseases such as diabetes, the quality of life will improve for millions of people, and the cost of providing healthcare services will decrease.

What is a Consumer-Directed Health Plan (CDHP)?

A Consumer-Directed Health Plan (CDHP) is typically used to describe health insurance plans with a Health Savings Account (HSA), Health Reimbursement Account (HRA), or Flexible Spending Account (FSA) component. The high-deductible plan covers preventive care for free and provides coverage for catastrophic illness and injuries after a deductible has been met. There is a built in safety net as these plans also include a maximum out-of-pocket amount per year. The HSA or HRA can be used to pay for expenses not covered by the high-deductible insurance plan. Depending on the type of reimbursement account (HSA, HRA or FSA), the funds may roll over from year to year, accumulate interest and have tax advantages. View a comparison of the different types of CDHC reimbursement accounts.