The young and healthy are the winners, and the moderately sick are the losers with consumer-directed health benefits, according to a study conducted by Dwight McNeill, Ph.D., of the Agency for Healthcare Research and Quality. When Dr. McNeill was at Brandeis University, he received support from AHRQ (National Research Service Award training grant T32 HS00062) to conduct a simulation of estimated out-of-pocket spending for premiums and medical care by consumers in consumer-directed versus traditional plans (health maintenance organizations, or HMOs, and preferred provider organizations, or PPOs). In addition, he analyzed demographic factors associated with out-of-pocket spending based on data derived from the 1998 Medical Expenditure Panel Survey.
The consumer-directed benefit plan used in the simulation offered a $1,000 health reimbursement account (HRA) with total deductibles of $1,500, $2,500, and $3,500; a maximum out-of-pocket limit at the deductible; and no coinsurance. When a beneficiary spends more than $1,000 a year on medical care, the individual exhausts the annual HRA and enters the risk zone in the "gap." The likelihood of reaching the gap increases with age to more than 50 percent for those 55-64 years of age.
It does not take much medical care to trip the $1,000 gap at today's medical prices (about the cost of a colonoscopy). The young and healthy are potential winners with consumer-directed plans because their relatively low use of medical care allows them to build up HRA balances. However, these opportunities are limited. Most employers do not allow employees to take HRA balances with them when they leave, and most young workers do not stay long at one job. Second, HRA balances do not provide investment opportunities, as do 401(k) pension savings plans or medical savings accounts. Dr. McNeill suggests capping health insurance expenses to a small percentage of income (up to 5 percent) to limit the financial burden on the sick.
See "Do consumer-directed health benefits favor the young and healthy?" by Dr. McNeill, in the January 2004 Health Affairs 23(1), pp. 186-193.
Reprints (AHRQ Publication No. 04-R033) are available from the AHRQ Publications Clearinghouse.
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