Moving Consumers to the Head of the Class

Creating a customer base that’s aware of the link between cost and services has become the next big challenge in managed care. It’s a daunting task.

Educating consumers to the point where their wise choices rescue a health system whose costs have spiraled beyond managed care’s control is a neat concept. Give employees the money and responsibility to select their own benefit packages, goes the theory, and the results will be better outcomes for less outlay.

The idea has gotten more play lately for several reasons: reports that health benefit premiums may rise 20 percent in 2003, a turn away from capitation, and a recent ruling by the IRS that makes it financially more advantageous for employees to enroll in defined-contribution systems.

In such an atmosphere, the educated patient is an idea striking in its simplicity and rationality — the very goal of the consumer-oriented health care movement.

“To the extent that patients can become educated without any costly technological interventions — just by learning more about their disease, understanding self-care, interacting with doctors more effectively — potentially, that could become cost savings,” says Richard L. Kravitz, MD, director of the Center for Health Services Research in Primary Care at the University of California-Davis School of Medicine.

A consumer must know the cost of the service he’s demanding and be responsible for at least a portion of it, says Thomas Morrow, MD, medical director of One Health Plan of Georgia.

“This message is hard to hear over the noise of the often conflicting media and advertising messages,” says Morrow. “There is skepticism as to the motive of the health plan, and this approach suffers from less-than-desirable physician support.”

Still, he says, the effort must be made to counteract “those behaviors that are detrimental to our collective health.”

Many factors

Educating consumers is easier said than done, and touches on many issues: the complexity of the health care system, the difficulty in linking lifestyle choices to long-term health in the mind of the public, disease management, cost-shifting, and defined contribution.

Generally, what is meant by an educated consumer is someone with knowledge of disease prevention and how to apply that in his own life, and of how much the service he demands costs. Of course, knowledge of cost does not mean that someone will choose the cheapest option — especially if someone else is paying.

That’s where cost-shifting, mostly in the form of the much discussed defined-contribution movement, comes in. Patients, experts hope, will choose more cost-effective methods of care if more comes out of their pockets.

There has been some success. For instance, three-tier formularies have forced consumers to become more aware of their medication choices. More recently, Humana has gained some attention by testing two products — SmartSuite and SmartSelect — on its own employees.

“For the first time, people can see what benefit choices they make and know how much those choices cost them in terms of premiums,” says Jonathan T. Lord, MD, senior vice president and chief clinical strategy and innovation officer at Humana.

Lord says that while SmartSuite (introduced in 2001) meant giving employees six options, as opposed to just an HMO or a PPO, SmartSelect (introduced this year) is “completely customizable.” For example, under SmartSelect, an individual can elect a plan with a high deductible and a special cash account to help offset out-of-pocket costs. Also, enrollees can choose an “extended network” of specialists with, for instance, an option to see an allergist for $40 a visit and $3 an injection.

In recently profiling Humana’s efforts, the New York Times focused on Cheryl Brock, a benefit analyst with the company. “She created 12 possible health plans, using a benefits calculator the company provided to compute the costs,” the newspaper reported. “She then broke down what each plan covered, asking herself which plan was best suited for her if she had thousands of dollars in claims, a few hundred dollars in claims, or if she fell somewhere in the middle.”

However, Lord admits, educating Humana’s employees has proven to be a more difficult task than expected. (Not everyone approached the issue with the same intensity as Cheryl Brock.) The hope of future savings in managed care in general turns on the question: Can enough consumers be educated to the point where costs are reduced?

Theory vs. practice

Good theories don’t always translate into good policy, points out Leonard H. Friedman, PhD, MPH, associate professor at Oregon State University.

“The notion is that if you put people in charge of their medical benefits, they’ll be able to make educated decisions, but I think health care is, at heart, an incredibly emotional thing,” says Friedman. “It’s not like going out and purchasing a pair of shoes or a new car that you can mull over while looking at Consumer Reports and talking to other people.”

This is an issue that recently struck too close to home for Friedman. Last September, his wife was diagnosed with ovarian cancer.

“Our first reaction was, ‘Give us the very best surgeon that we can get, even if it means going to the East Coast. We’re going to do it, regardless of the cost.'”

In our litigious society, with malpractice insurance costs for physicians rising ever more steeply, consumers may well be able to find doctors who will not hesitate to point them toward more expensive treatments.

Even without the threat of lawsuits, the saying that “Education begins in the doctor’s office,” is not always believed, says Jaan Sidorov, MD, the medical director of care coordination at Geisinger Health Plan.

“Most doctors — and I’m allowed to say this, I’m a physician — don’t know how to educate patients,” says Sidorov. “That’s not a big part of our curriculum when we go through medical school and residency. We don’t spend a lot of time on ferreting out all the nuances of properly educating patients.”

Of course, getting paid per member, per month may not encourage this sort of dialogue.

“Doctors can argue that the capitation they receive is not adequate to covering the cost of educating the consumer,” amends Sidorov. “That is correct. On the other hand, I’d argue that even if we paid doctors to do it, they’d do a lousy job.”

There are other challenges as well.

Regarding cost-containment strategies pegged to consumers, a recent study in Health Affairs, titled “How Low Can You Go? The Impact of Reduced Benefits and Increased Cost Sharing,” points out that “the technologies that are needed to support a consumer-driven market — standardized quality measurement, risk adjustment, and effective communication of health plan performance — are not yet advanced enough to enable such support.”

Sidorov says his organization uses videotape and the Internet to inform patients about their diseases and treatment options. He’s a great believer in educating patients in the name of better outcomes, but observes that educating them with one eye focused on lower costs is a wholly different challenge.

“It is very difficult for health care consumers, based on the information available to us today, to decide whether Hospital A is really better than Hospital B, and whether Health Plan A is really better than Health Plan B,” says Sidorov. “Most health plans are NCQA accredited, and faring well in quality and satisfaction. But what does that mean to the average consumer? Will consumers take the time to find the data? My guess is no.”

Even experts can have difficulty determining how well, for instance, diabetes patients fare in Health Plan A as opposed to Health Plan B.

“I’ve seen the numbers,” says Sidorov. “One health plan has a score of 88 percent, and another has 91 percent, and yet another has 76 percent. Is that clinically meaningful? Is that statistically meaningful? I don’t know. Some health plans may attract sicker patients. Some health plans have different demographic variables.”

It’s daunting.

“How are we going to educate consumers, when even the hospitals themselves can’t get their act together in terms of coming up with valid statistics?” asks Sidorov. “I guess the managed care industry and employers are trying to candy-coat pushing more cost down to the level of consumers, forcing them to be a participant in some very hard financial decisions.”


In fact, discussing the educated consumer can be something of an afterthought to cost shifting. The Washington Post points out that “if there is one overarching cause of soaring health care expenditures, it is Americans’ insatiable appetite for each and every medical test and treatment available….”

Employers react by passing more costs to employees, arguing that if consumers had more financial stake, they’d be better customers. Without having “skin in the game,” as one expert puts it, educated consumers can actually drive costs up.

“The industry can say that it’s essentially forcing the consumer to take a more active role in his health care because it’s coming out of his pocket,” says Arthur N. Leibowitz, MD, of cost shifting. He is the former chief medical officer for Aetna U.S. Healthcare and now is the executive vice president and chief medical officer for Health Advocate. “The issue is: Is the typical employee equipped to do that?”

The consumer, educated or otherwise, needs help.

“I don’t think you can actually create a more efficient system by passing the financial responsibility onto consumers,” says Leibowitz. “You’ll save the employers some money, but employees are going to bear the brunt of it.”

How far such cost shifting can ultimately go is an open question.

“… [S]hifting sizeable financial risk to consumers on a broad scale could lead to another backlash [against managed care], possibly larger than the one preceding it,” points out the article on cost shifting in Health Affairs. “What would happen next is pure speculation. Depending on the political and social environment, we could see a return to some aspects of managed care. Alternatively, health care could become more stratified if the wealthy can buy out of managed care constraints, while middle-class consumers resolve to view its cost-controlling devices as the best way to limit their financial risk.”

Class issues

This raises societal issues that will not escape the notice of policy makers.

James Robinson, PhD, MPH, professor of health economics at the School of Public Health at the University of California at Berkeley, noted in an article last year in the Journal of the American Medical Association that “consumers vary enormously in their financial, cognitive, and cultural preparedness to navigate the complex health care system. The new paradigm fits most comfortably the educated, assertive, and prosperous and least comfortably the impoverished, meek, and poorly educated.”

There are already signs that a niche industry is beginning to anticipate the results of continued cost shifting and the growing demand for educated consumers.

The Institute for Healthcare Advancement, a think tank in Los Angeles, has written health reference books at the 3rd and 5th grade reading level for distribution by HMOs and clinics because it says that there are over 90 million Americans who lack the necessary reading skills to function as informed patients, let alone insurance brokers.

“Health literacy, as we’re describing it, is the ability to read and comprehend prescription bottles, appointment slips, and other essential health related materials required to successfully function as a patient,” says Gloria Mayer, EdD, the institute’s president. Citing a study from Georgetown University’s Center on an Aging Society, Mayer estimates that “$73 billion in unnecessary health care expenditures” is attributable to patients with low literacy skills.

“The problem is that consumer-driven health care creates different challenges to those members of society who lack the skills to navigate the system because of they have poor reading abilities or dyslexia,” says Mayer.

“Although these obstacles can be overcome and patients can learn how to utilize the health care system appropriately, the education will not be cheap and the health care system has not traditionally valued or paid for much health education. Consumer-driven health care is not in itself the total answer for all patients.”

Leibowitz’s Health Advocate, formed with four other former Aetna U.S. Healthcare officials, is a company whose very existence is based on the premise that health care is too complex for the average consumer to maneuver through.

“You deal with people and you start talking to them about deductibles, noncovered expenses, coinsurance, annual maxes: These are not problems that the average consumer can deal with well,” says Leibowitz. “I have a glossary of 50 terms that you need to comprehend in order to understand the health care system.”

Leibowitz uses the analogy of giving someone the wiring schematic for a building and telling him that a light fixture on the eighth floor doesn’t work.

“He could take the wiring schematic and eventually he could probably figure out how to fix it,” says Leibowitz. “But it would be a lot easier to hire an electrician, and that’s kind of the way we function. We work on issues that we’re familiar with both clinically, because we’re doctors and nurses, and administratively, because obviously we ran the largest health plan in the country and we understand.”

Getting through

This is not to say that attempting to educate consumers with the goal of limiting needless utilization is not a worthwhile pursuit, just that creating such a customer base will not be easy.

“The first year we did this, we spent five months on education before the enrollment process,” says Lord, the Humana official, about the test-marketing of its SmartSuite and SmartSelect products on its employees. “And we found through surveys that even that wasn’t enough. What we learned is that we essentially have to communicate continuously with employees.”

As the New York Times put it, in reporting on Humana’s efforts, “employees will have to take the time — several hours at least — to cruise their options and design a plan that fits their lifestyle and pocketbook.”

These “several hours,” part of the workday at Humana, may be more than employers are willing to pay — until the HMOs they contract with request rate hikes in the 20-percent range. Where else, besides to educated consumers, can employers and health plans turn?

“Whether it’s prescription drugs being brought to market or whether it’s emerging technology, we’ve got to become more prudent consumers of health care,” says Mohit Ghose, a spokesman for the American Association of Health Plans. “We’ve got to understand that health care costs more than the $10 you pay as a copayment.”

Consumers must become more educated about drugs

Total national health expenditures will double, from $1.4 trillion to $2.8 trillion, between 2001 and 2011, according to the Centers for Medicare and Medicaid Services.

A report by the National Institute for Health Care Management Research and Education Foundation notes that under the circumstances, cost-conscious insurers face a choice of reducing benefits or raising premiums. NIHCM suggests that physicians and patients also will have to make some thoughtful decisions.

“Physicians and consumers will be challenged to make more rational choices among alternative drug therapies,” weighing disparities between spending and clinical value, says the report.

“To make cost-effective decisions, they will need to increase their understanding of the relative value of pharmaceutical alternatives: the relationships among price, clinical outcomes, effect on nondrug forms of medical spending as well as on nonmedical costs such as lost work productivity.”

NDAs approved by therapeutic potential, 1989-2000

New drugs approved by chemical type and therapeutic potential, 1989-2000*

New molecular entities (new active ingredients)Incrementally modified drugs (old active ingredients)In addition, the FDA approved 116 “other” new drugs, nearly all of them through a standard review.