Sunday, January 12, 2014

Penny Whys?

We tried to introduce our kids to money and financial concepts relatively early. We encouraged them to save some of their monetary gifts, let them put the money in the offering plates at church, and provided them with a modest allowance for chores commensurate with their age and abilities. For all that, they never really seemed to fully appreciate the “value of money” until they started earning a paycheck outside the home (I knew they were “getting” it, when they wanted to know who FICA was!).

Perhaps because of their early education, there weren’t massive behavioral changes. I was pleased to see their spending on gifts for family members rise with their income and, after an initial spending “spurt” (likely attributable to a sense of newfound wealth), they seemed to settle in. But what happened next was that, while they would spend money on others, they tended to hold back. In fact, what seemed to emerge was not so much a pattern of setting money aside, but a reluctance to spend; not so much saving, as hoarding. Indeed, it was interesting to see how they reacted to spending now that it was their own money.

One of the premises underlying the introduction of consumer-driven health plans is that they do a better job of “engaging” the participant/consumer in the cost(s) of their health care decisions, either in providing a finite amount of financial resources from the employer for that purpose, designing the plan so that the worker has a more direct financial involvement in the decision, or both. In fact, the 2013 EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey (CEHCS) found evidence that adults in a consumer-directed health plan (CDHP) and those in a high-deductible health plan (HDHP) were more likely than those in a traditional plan to exhibit a number of cost-conscious behaviors.

However, one of the policy concerns with those designs is that individuals would make medical decisions based on expense, rather than medical necessity. Indeed, recent research by the EBRI Center for Research on Health Benefits Innovation (CRHBI) notes that medication adherence—which has been shown to produce substantial savings as a result of reductions in hospitalizations and emergency room use—is known to be affected by out-of-pocket cost to patients.

That EBRI CRHBI study, published in a recent issue of The American Journal of Managed Care,
examined the impact of adopting a health savings account (HSA) consumer-directed health plan (CDHP) on medication adherence for individuals with five chronic conditions disease. Based on the experience of a large manufacturer that replaced all of its existing health insurance options with a CDHP-HSA, the research found that in the first year under the new plan, the number of prescriptions filled, the proportion of days covered, and the proportion of patients who were adherent declined for all conditions except asthma/COPD. While the effects diminished some in the second year for those with diabetes, the levels persisted among those with hypertension, dyslipidemia, and depression.

These findings have important policy implications, in that—notwithstanding the presence of HSAs and employer contributions—medication utilization and adherence declined when high deductibles were imposed.

As the article explains, if these reduced levels of medication adherence for chronic conditions are sustained, it is likely that they will increase medical costs and adversely impact worker productivity. Certain regulatory changes might permit some mitigation of the impact, by supporting CDHP design changes that would provide first-dollar coverage for chronic disease medications for participants using HRAs. Moreover, it suggests that employers may need to provide education and ongoing support to encourage appropriate use of account funds so that prescription drug use for chronic conditions remains a priority for their workers.

There’s an old saying that cautions against being “penny wise and pound foolish”—the tendency to conserve relatively small amounts, only to be wasteful when it comes to larger expenditures. It is, after all, one thing to set money aside for a rainy day, and another altogether to trigger a rainy day by not spending enough on the right ones.

Nevin E. Adams, JD

[1] “Findings from the 2013 EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey” is available online here.

[2]  “Medication Utilization and Adherence in a Health Savings Account–Eligible Plan” is available online here.

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