Spike has done his homework. UPDATE – well, Spike actually quoted a different report, not the original McKinsey one. I should have done some source checking, did not, and apologize for the oversight.) In response to a comment from another reader (Michael Trapier), he read the entire article by McKinsey on CDHPs et al. Here’s Spike’s quote from the article, which deserves its own post. (again, turns out this quote was from an EBRI research report), and read the comments below:
“While people reported using health services at similar rates across health plans, adults with CDHPs and HDHPs were significantly more likely to report that they had avoided, skipped, or delayed health care because of costs than were those with comprehensive insurance, with problems particularly pronounced among those with health problems or incomes under $50,000. The survey asked whether in the last year respondents had delayed or avoided getting health care services when they were sick because of costs. About one-third of people in CDHPs (35 percent) and HDHPs (31 percent) reported delaying or avoiding care, twice the rate of those in comprehensive health plans (17 percent).
Having a health problem made it more likely that people avoided or delayed care. Among people who reported being in fair or poor health or having at least one chronic health condition, those in CDHPs or HDHPs reported delaying or avoiding care at higher rates than those in comprehensive plans: 40 percent of those in CDHPs and 31 percent of people in HDHPs, compared with 21 percent in comprehensive plans. People with HDHPs and CDHPs in households with incomes of under $50,000 were also more likely to avoid or delay care: nearly half of those in CDHPs and more than two in five in HDHPs reported delaying or avoiding care, compared with one-quarter (26 percent) of those in comprehensive plans in that income range.
In addition to delaying or avoiding health care, people in HDHPs were significantly more likely to skimp on their medications than were those in comprehensive plans. The survey asked respondents whether in the last 12 months they had not filled a prescription because of costs. More than one-quarter (26 percent) of those with HDHPs said they had not filled a prescription because of cost, compared with 16 percent of those in comprehensive health plans (Figure 17). Having a health problem made it more likely that people avoided filling prescriptions, particularly those with HDHPs: One-third of those in HDHPs with health problems had not filled a prescription because of cost, compared with one-fifth (21 percent) of people in comprehensive plans.”
That’s a (rather lengthy) quote from the study you cited. In fact, that whole study talks about how total healthcare use is the same for each group, but out of pocket costs are way higher for those in CDHPs and that people in comprehensive group care found that their plan made it easier for them to incpororate costs into their decisions about treatment.
As for health economics, the reality is that as long as there is EMTALA, (which says that hospitals must treat patients in need of emergency care regardless of their ability to pay), creating systems where preventive pay is discouraged will only be more expensive for all of us. And I don’t see anybody having the political will to void EMTALA. We’re all in this together, whether you like it or not.”
That’s a lot of good work, Spike.
Notably, the time period for the study did not enable the researchers to identify changes in health care costs over time. One has to wonder if the failures to comply with drug regimens etc. would actually lead to increased health care costs over time. Actually, you don’t have to wonder.
BTW – the McKinsey report also notes that CDHPs did have a substantial correlation with participants’ awareness of costs; desire to seek alternative treatment, and likelihood of involvement in healthy behaviors. But I wonder if the latter was not an artifact, and if the participants’ healthy behaviors made it more likely that they would select CDHPs.
What does this mean for you?
More evidence that CDHPs will do nothing to reduce medical expenses.

There’s so much spin in the press about Bush’s approach to health care the facts are pretty much ignored. So, as a public service, I’ve winnowed through the partisan, the strident, the pedantic and the ideology-driven cacophony surrounding Bush’s State of the Union proposals for health care to get to the facts about HSAs, CDHPs and consumerism in health care, and the viability of the whole mess .
Here’s the real story, complete with facts, citations, and sources.
HSAs as a means to reduce the number of uninsured
– Robert Laszewski – Bob notes that “increasing the tax-deductibility of out-of-pocket expenses for HSA programs …doesn’t do a whole lot for an uninsured person in a zero bracket…the President’s tax cuts increased the number of low income people who do not pay taxes.” And, studies show fewer than one million of the 46 million uninsured are likely to enroll in HSA plans.
HSAs as a way for consumers to fund health care costs and reduce premiums
That presupposes there is cash in the account to pay for services up to the deductible, and that the policy then covers needed care. Fact is, more than half the 3 million HSAs have not been funded at all – not even a cent. Hard to see how they will pay for care with non-existent funds…
Consumer-directed health plans as a means to reduce health care costs.
No, they won’t. And CDHPs may actually increase health care costs; reports indicate similar programs in other areas have had “unintended consequences” – less compliance with preventive medicine as an example.
Portability of health insurance
Bush’s HSAs are portable, but that does not mean the insurance behind them is. Insurers offering HSAs can still require medical underwriting, which eliminates coverage for chronic conditions and/or increases premiums to a level that is unaffordable. So, insurance is not portable at all. And making it portable would require a drastic change to the COBRA laws, or de-coupling private health insurance from employers. Neither is anywhere close to being considered, much less the subject of legislation. However, Bush’s administration is making an attempt to drastically change existing laws governing these matters – like ERISA, state regulatory authority over insurance plans and the like. These are huge undertakings, and the chances of all the required legal changes actually occuring are zilch.
Viability
This gets to the heart of the matter, which is “do voters believe Bush has credibility when it comes to health care“. A USAToday poll indicates the majority do not. According to California HealthLine, a “USA Today/CNN/Gallup poll of 1,066 U.S. adults conducted between Jan. 20 and Jan. 22 found that about 60% of respondents disapprove of how Bush has addressed health care issues, compared with 40% in mid-2002″.
Couple the citizenry’s skepticism with the potentially negative implications for tax revenue from the Bush proposals, and his stated desire to halve the $900 billion deficit by 2010, and the Bush program looks unattainable.
Which is just as well, as it will do nothing to reduce health cost inflation or expand coverage.

Pres. Bush’s statements on health care and health insurance in the State of the Union (free subscription required) address left me somewhat confused about the President’s real objectives. While he advocated controlling the cost of care, he also strongly endorsed extending tax breaks for insurance and any individual expenditure on anything medical.
These two programs are contradictory. Reducing the consumer’s real cost of health care makes them less likely to reduce expenditures, thereby feeding medical inflation.
The central premise of the Bush plan appears to be a belief in the power of information and tax policy to encourage better decision making by health care consumers. This approach, known as consumer-directed health care, will do nothing to reduce health care inflation.
Bush also:

An excellent ongoing debate on HSAs is raging at Ezra Klein’s blog.
Ezra is engaged in a discussion w libertarian/conservative Adrienne and others about the role of and impact upon society of HSAs.
Here’s an excerpt
” (Adrienne) If your ultimate goal as a health policy wonk is to push for government-financed health care, then criticizing HSAs and the consumer-driven health care approach is your bread and butter, the overwhelming evidence that many people like having the HSA option notwithstanding.
(Ezra) Well, yeah. If yesterday I was paying to help sick, old people not go bankrupt and today I’m not, I’ll probably be a happy camper. At least till I get sick and/or old. I’m sure the healthy young things populating HSA’s are ecstatic to have lower premiums, but I’m similarly sure that HSA’s are a bad idea. And since they will eventually destroy regular insurance if widely adopted…”
Leaving aside the ideological asides, the debate provides good perspective on the pros cons and disagreements about same. There’s also less twisting of facts and perceptions than one normally finds in left-right debates.
My perspective is once you strip aside the labels and ideology, it is blindingly apparent that HSAs and CDHPs cannot and will not reduce health care inflation – they just do not address the key drivers – aging, technology, over-utilization…
So, if you want to debate HSAs on their merits, go ahead – just don’t confuse them with medical cost containment.

Half of the 2 million people who have signed up for consumer directed plans with health savings accounts have yet to put anything into the accounts. Interesting, as one of, if not the major attraction of the plans was the tax-favored status of the dollars going into the savings accounts.
(Matthew Holt at The Healthcare Blog has a transcript of Pres. Bush’s interview with the Wall Street Journal in which Bush describes HSAs as one of the ways to make health care more affordable…)
What appears to be happening is what I (and others) have been predicting all along. Employers, staggering under the burden of rising health care costs, have all but given up and thrown in the towel. Those who have given up are dropping their health plans in favor of the new high-deductible plans, thereby shifting more of the burden onto employees. In those instances where the CDHP option is offered alongside regular heath plans, CDHP participation is in the low single digits.
The idea (at least the politicians’ idea) behind CDHPs is that they will make the consumers more directive, more involved, more aware of their health and thus better consumers. I’m not sure the employers care much about the theory; what they do care about is health care inflation is now less of a problem for them.
I write that with no malice towards employers; many have decided health care is simply unmanageable. It is digging into their profits, their ability to fund new businesses or products, increase wages, enhance training, pay bonuses and executive stock options, and hire new workers. Employers in the US are tasked with addressing the health care needs of their workers, a challenge their competitors in other OECD countries don’t worry about.
Here’s more detail from Milt Freudenheim’s article in today’s New York Times:
” people have evidently signed up not because they are eager to direct their own medical spending but because the plan looked cheap or they had no other insurance option. And at least half of those enrolled have not put money in their health savings accounts. So there will be no money building up for next year’s out-of-pocket expenses

This blog world is getting incestuous…
Ezra Klein posted an excellent summation of the issues inherent in HSAs on his blog about the time I was posting here on CDHPs, and the two crossed paths in the ether.
Here is an excerpt from Ezra’s commentary (for a non-insurance guy he certainly understands adverse selection) –
“Because what HSA’s really do is separate the young from the old, the well from the sick. Currently, insurance operates off of the concept of risk pooling. Since health costs tend to be unpredictable and illness isn’t thought a moral failing, we all pay a bit more than we expect to use in order to subsidize those who end up needing much more than they ever thought possible. The well subsidize the sick, the young subsidize the old, and we all accept the arrangement because one day we will be old, and one day we will be sick, and no one wants to shoulder that alone.
But HSA’s slice right through this intergenerational, redistributionist arrangement: they’re a great deal for young, healthy folks because they don’t force subsidization. Just don’t get sick. And if you’re already sick, don’t think you can hide by remaining in traditional insurance plans: when the healthy rush towards HSA’s, older plans will hold only the ill, and insurance companies will send premiums skyrocketing to recoup the difference.”
While this was happening, Matthew Holt’s The Health Care Blog was commenting on both matters; and…
all three have been picked up by the DailyKOS, with much intelligent and insightful commentary. If you think no one is paying attention, the 90 comments elicited by the dailykos post will change your mind.
Here’s an excerpt:
“HSAs are (1) a terrible idea that look like another give away to corporations and (2) a sellable idea that can easily be spun into sounding like the greatest health plan ever” (say this last word with teenage girl enthusiasm, stretching it out and heavily accenting the “ver” part of e-VER).
I try (really) to avoid histrionics on this blog, but the CDHP/HSA cure-all for the world’s sins thing makes me nuts. It reveals a superficial at best understanding of health care, the economics thereof, and the real drivers of health care cost inflation.
Can we please drive a stake in its non-existent heart and start thinking about real issues, like aging, technology, drug utilization, uninsurance…..

President Bush’s health care reform efforts appear to focus on expansion of Health Savings Accounts. I’m not sure how that reforms health care; it does have some impact on health care financing by switching some of the reimbursement from insurers to individuals, but other than that I’m hard pressed to see how HSAs will help lower health care costs.
In his January 21 radio address, Bush said “he would push to limit health care costs by expanding tax-free “Health Savings Accounts,” which let people set aside money for routine medical expenses.” (Houston Chronicle).
Most folks who know anything about health care costs attribute inflation to the aging population; the growth in technology; rising labor costs for hospitals; the burden of costs shifting from the uninsured to the insured; rising drug utilization and pricing; and perhaps a soupcon of defensive medicine.
In his address, Bush also said “For the sake of America’s small businesses, we must … make health care more affordable and accessible,” Bush said He also called for better price disclosure for medical services and expansion of health care coverage for the uninsured. (Reuters/Houston Chronicle, 1/21), as quoted in California HealthLine.
“I decided this is a national issue that requires a national response,” Bush said, adding that the government must ensure “that health care is available and affordable”…
Where health savings accounts fit on this list as a cure for a cause I can’t see. Are there limits on technology? Authority for CMS to negotiate with big pharma? A major new effort to train nurses? Stringent application of technology review by CMS? An effort to cover the uninsured through the expansion of Medicaid?
No.
What does this mean for you?
I guess it is up to the rest of us to fix health care. The Bush program is not exactly “reaching for the stars”.

I recently had the opportunity to meet Dr. Alain Enthoven of Stanford University at his offices in California. One of the topics about which we have corresponded is the relatively new “consumer directed health plans” or CDHPs. Faithful readers will know that I am no fan of CDHPs; my take is they are simply the old indemnity insurance programs with higher deductibles coupled with broad based PPOs.
My problem with CDHPs is rooted in a belief that they will have no real impact on health care costs, except for the very real potential to increase acute episodes and associated costs due to lower compliance with preventive treatment plans. This opinion is backed up with facts, and has been the subject of an energetic debate on this blog.
Dr. Enthoven recently debated Regina Herzlinger on this very subject. Here are a few excerpts from his comments.
1. CDHP will be ineffective at moderating growth of health expenditures in the long run and in improving value for money. Health expenditures are very concentrated on relatively few people. In any given year, some 85% of health expenditure dollars will be spent on people who have exceeded their deductibles or can reasonably expect to do so, for any level of deductibles that is reasonable for most people. For them, the marginal cost of more care will be small, probably near zero, certainly not enough to affect their decisions once they are hospitalized.
2. The main appeal of CDHP is to employers who are eager to find a way to shift costs back onto employees, to “rebalance their compensation portfolios,” as benefit consultants say. The costs will be shifted to people with chronic conditions who will usually reach and exceed their deductibles. CDHP, including HSAs, will be great for the healthy and wealthy who can benefit from the tax shelter aspect more than ordinary workers. So CDHP can be expected to grow rapidly.
3. About three quarters of health care spending is now on people with chronic conditions. The emphasis in our health care delivery system needs to be on teaching and motivating these patients to change their life styles and adopt much more healthy patterns of behavior. CDHP is based on the idea that a key to economy is keeping people away from the doctor