Consumer-directed healthcare
How it will affect you
By Linda McDonald

U.S. consumerism — a growing movement in many industries — is now infiltrating the healthcare industry. Much of the motivation among consumers seems to be financially driven.

Not only do consumers want to put a stranglehold on increasing costs of healthcare, they are also demanding more control over the care they receive and how their healthcare dollars are spent.

Managed care attempted to control cost escalation in healthcare, but it has failed to offer consumers the choices and the control they demand. Increasingly, consumer-driven (also called consumer-directed) healthcare (CDHC) is gaining popularity.

CDHC is an innovative approach for controlling costs (from an employer’s perspective) and for improving access to affordable, high-quality care. CDHC pairs savings vehicles such as health savings accounts (HSAs) or health reimbursement arrangements (HRAs) with high-deductible health plans (HDHPs) to give consumers greater control in decisions affecting their healthcare and healthcare spending.

CONSUMER-CENTRIC

In this developing CDHC world, no longer is it the big insurance company’s deep pockets that consumers reach for to cover healthcare expenses: It is their own smaller pockets.

“With consumer-driven healthcare, consumers have control over how they spend their healthcare dollars,” said David Randall, executive director, the Consumer Driven Healthcare Institute (www.cdhci.org) in Washington, D.C.

Just as consumers shop for the best prices on milk, gasoline, and clothing, they will shop for the best quality healthcare at the best price. In order for consumers to make informed decisions about how best to spend the dollars they have dedicated to healthcare, they will demand that information from providers is readily available.

Healthcare providers will want to make certain consumers have the tools they need specifically related to price transparency. They will need to share safety, cost, and quality information that meets the consumers’ individual needs, and make it available across all communication methods: e-mail, Internet, print, and phone.

Ronald M. Hendrickson, executive director of the International Chiropractors Association (ICA), concurs and reports that among ICA chiropractic members in the United States, nearly all use e-mail and nearly 51 percent have Web sites for their practices. “The flow of information to and from the consumer via the Web has generated new demands and expectations, and continues to represent a valuable new frontier for the profession,” said Hendrickson.

MANAGED CARE VS. CDHC

Attempts by health insurance providers and by government to control spiraling U.S. healthcare costs have included managed-care programs, and more recently CDHC. Both systems want individuals to obtain the healthcare they need (medical necessity) as cost-effectively as possible.

In managed care, an established organizational structure determines medical necessity, and directs if and how that medical care can be obtained.

According to Kevin Corcoran, executive vice president of the American Chiropractic Association, “CDHC turns this equation on its head, giving more control and more responsibility to the consumer.” The underlying principle behind CDHC is that individuals who are spending their own money are more likely to seek less costly alternatives.

Managed-care organizations are modeled after the traditional financing structure. The employer pays most or all of the insurance premium, which insulates the employees from their actual healthcare expenses. That buffer can work to fuel utilization because there are few economic reasons to do otherwise, according to Corcoran.

The CDHC model typically features an employer-provided HDHP for major healthcare events, along with employer contributions to personal HSAs. Employees become the gatekeepers and use those HSA dollars at their discretion for routine healthcare costs. “In many ways, this segment of the market will function like the cash-basis system that was prevalent 20 years ago,” said Corcoran.

“Should annual expenses exceed the employer’s contribution to the account, the employee pays the difference,” he added. This gives individuals an incentive to spend more carefully, reducing overall medical utilization.”

According to Aetna President Ronald A. Williams, well-designed consumer-directed healthcare plans (CDHPs) should allow plan members to be consumers when they can be, but not punish them when they need to be patients.

In its July 2005 Issue at a Glance, Aetna reported that CDHPs most commonly include three major components:

• A health fund or health savings account,

• High-deductible medical coverage that includes preventive care not charged against the deductible, and

• Access to informational tools that help consumers make informed decisions.

Aetna touts itself as the industry leader in CDHPs.

FUTURE OF MANAGED CARE

Over the past five years, participation in CDHC has increased, according to Randall, but it will take more time and education to see a full pendulum swing away from managed care. Randall doubts that traditional health benefits will ever completely disappear, but he forecasts that consumers and providers will embrace new financing innovations.

CDHC seemingly offers the consumer the most control over healthcare, in both access and affordability. In this consumer-centric model, industry experts agree that consumers are the driving force that may or may not move healthcare reimbursement in the United States away from managed care to CDHC.

Employers who have taken the dive into CDHC are seeing typical savings of 15 percent to 25 percent on CDHC products according to Corcoran. He cautions that while that is a significant savings, it may not be large enough to warrant overcoming the “hassle factor” for the employee education and admin-istrative training efforts required for successful implementation.

In his 2006 State of the Union address, President Bush stated that he will strengthen HSAs. In addition to portable HSAs, the Bush administration wants to do more to make insurance coverage portable, so workers can switch jobs without having to worry about losing their health insurance.

Such a move would transfer greater ownership of healthcare financing vehicles to the consumers. It is that heightened sense of investment, coupled with increased control over how those dollars are spent, that will ultimately manifest change in the healthcare reimbursement system.

TAKING ADVANTAGE OF CDHC

Corcoran and Randall agree that chiropractors who want to take advantage of this growing healthcare trend need to be leaders in providing education about CDHC. Not only must they educate themselves about the various managed-care and CDHC alternatives, they must educate their patients.

Becoming recognized as a consumer resource about healthcare financing provides value-added service from the chiropractor.

This isn’t easy. Corcoran suggests:

• Build a relationship with a competent health-insurance agent. Choose someone who knows the local market and is intimate with CDHC. Agents can offer education about healthcare financing and they are in a position to promote the benefits of chiropractic care to their clients.

• Offer consumer-education seminars on CDHC. Ask the insurance agent to offer seminars that explain managed care vs. CDHC and how chiropractic care may be an effective, lower-cost treatment option for consumer ailments.

• Sponsor employer-oriented education seminars. Employers need to kow about CDHC, too. Your agent should be able to adapt the seminars according to the audience — either employers or employees, who have differing needs with regard to CDHC.

• Don’t wait. This type of marketing provides a service to consumers that other providers — across disciplines — may not be offering.

Through early and informative positioning, a chiropractor can become an expert in the public’s mind on healthcare financing options as well as chiropractic medicine.

It is important to note that this opportunity is not unique to chiropractors. All healthcare providers can and will try to offer the same informative marketing. The time for key positioning at this crossroads is now.

Industry experts seem to agree that the biggest barrier to adoption of CDHC is education.

Employees need help to understand why they should accept and embrace the new buying habits required by a CDHC model; and employers need help to understand the potential cost savings to their organizations as well as the improved health choices that CDHC offers;

Healthcare providers who provide timely support in this education process will serve themselves and their communities well.

SIDEBARS:
CDHC's financial implication
How CDHC Started
Study shows CDHC drives down medical costs

Linda McDonald is a freelance writer from Jacksonville, Fla. She can be reached by e-mail at Linda@mcdscreations.net or through her Web site, www.mcdscreations.net.