While the potential of consumer-directed health plans is promising, this design still leaves many questions about coverage unanswered.
Every flood starts as a single drop of rain, and every trend starts as an idea with just a few early adopters. The students of managed care who use a telescope are able to see the flood in the distance — the flood that will change the environment as much as managed care did a generation ago. This generation's flood is consumer-directed health plans (CDHPs).
Estimates suggest that as many as 12 million enrollees or 6.7 percent of the market will join a CDHP, with $88 billion in revenue for these plans by 2007. Another indication of the public interest is demonstrated by more than 1.1 million hits on a Yahoo web search looking at consumer-directed health care. In addition, the Wall Street Journal reported that 55 percent of Whirlpool's employees were currently enrolled in this type of plans.
What is consumer-directed health care? For the purposes of this article, these are plans characterized as having any mechanism that drives the consumer to make personal economic conditions a significant part of the health care purchasing decision. The term consumer-directed health care has gained traction, but a more accurate term is market driven as the market is finally hitting medicine after a lull of nearly three-quarters of a century.
How we got here
Remember that employer-based health care coverage started in the 1920s, followed by the start of the Kaiser system by Henry J. Kaiser in the 1930s.
Earlier, physicians and the few hospital beds in service were (except for the charity caregivers) fee-for-service and self-pay. Self-pay at that time really wasn't a big deal as most care was rendered in the home. Little could be done in a hospital that could not be done in the home — until anesthesia changed surgery forever.
Now, only uninsured working people pay the actual price for care — the rest of us pay a small portion of the care and are totally insulated from the asking price. And few of us would ever pay the asking price. A recent hospitalization for a surgical procedure cost my family only 10 percent of the asking price, thanks to a good negotiator at my insurance company.
But that is all changing. In this form of health insurance, the insurer is going to pay first-dollar coverage (in general) for preventive care only. After high deductibles, high copayments, and high coinsurance are paid by the member, the employer will then pick up the rest of the tab. This places the cost of care directly in front of the consumer. Now, more than ever, the consumer will be looking at the cost from a personal perspective. How will that affect health care and in particular how will this trend affect some of the most expensive care — the latest technology?
First, the promise of a consumer-directed health care delivery system is great. Proponents suggest that consumers, by using transparent information on quality and cost, will make wise decisions concerning care and choose the best care individualized for their particular needs. These plans offer promises that many of the uninsured will be covered and that people will relish the choice. But, there is a dark side also.
There is considerable confusion even among experts on how to gauge quality. In addition, there is little information about the actual cost of care — be it medical or pharmacy — because of the complex web of discounts, rebates, incentives, bundling and other elements built into the payment structure. In addition, Adam Smith, in his treatise, An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776, talked about the perfect market needing the perfect information. Perfect information demands transparency and there is little transparency in the present system.
There are virtually no head-to-head clinical trials involving the various biotech products currently approved by the FDA. In many cases, there is little analysis comparing these products with each other. An example of this is evident in the psoriasis arena, where all of the biologics have been compared to placebo, topical corticosteroids, and light therapy.
Trust is an issue
Also, patients are loath to totally trust physicians as they have become aware that physician behavior can be dramatically affected by the various incentives built into the current system, such as profit from infused therapies, capitation, and other risk arrangements.
So what will MCOs and manufacturers have to consider? Who is threatened? Who will benefit? What questions remain unanswered? How will physicians and patients be affected by CDHPs?
Physicians are going to be major losers. Their time commitment to explain the cost-benefit analysis will increase the office visit time, but without an increase in payment. Cash flow is likely to suffer as biotech products administered by physicians are likely to require more patient responsibility. Will the physician now act more like a financing company? Will the physician refuse to administer products if there is a high copayment/coinsurance without payment up front? Will the doctor demand the products be supplied by specialty pharmacies that then bear the risk?
Our current system clearly taxes the well to pay for the ill. Many of the high-cost biologics (hemophilia and enzyme replacement therapies come to mind) are for truly ill patients. These patients, using high-cost biologics, have no other choice and will be hit with an inordinate portion of the cost of care, more so than those using a few more affordable, generically substitutable small molecules. Will they avoid care? Will they choose less effective care? Will their conditions worsen so as to transfer costs to the health plans? Will they face a financial responsibility that is unbearable?
Health plans will face the formidable task of providing comparative data on a variety of goods and services. They will probably still have to perform prior authorization and other formulary and medical management processes. They may be faced with demands from providers for higher payments to make up for the uncollectible amounts that physicians may bear.
They will also have to face the immediate need for instantaneous transaction data, as with PBM systems, and produce these sophisticated systems to ensure that rapid payment mechanisms are in place for this complicated form of insurance. In addition, they will have to deal with confused ill people who are now facing many unknowns and will be in the position of helping people obtain care who cannot afford it, perhaps through the National Organization of Rare Diseases and Medicare.
Manufacturers will face many of the issues discussed above. In addition, they will now face a world where the patient is fully engaged in a value decision and for many their market share will drop, not moving to a competitor biologic, but to small molecules or even saying no to therapy. The groups at greatest risk will be the companies marketing drugs for rheumatoid arthritis, psoriasis, perhaps anticoagulants, and even cancer.
Will this flood create a tsunami that destroys all in its path, or will it simply rearrange the sands in the riverbed to create new environments? Perhaps both, but to be certain, all of the stakeholders in medicine will need to be prepared to ask the serious questions this new market-driven approach will produce so that new technology will continue to be an important part of "Tomorrow's Medicine."