Slowing of Healthcare Spending Due in Part to High Deductible Health Plans

As the economy continues to limp along, many Americans are feeling squeezed. Unemployment and underemployment are at elevated levels. Gas prices are high. But at least healthcare is getting cheaper, right?

Well, that depends on who you ask.

According to data from the Centers for Medicare and Medicaid Services (CMS), Health Care Expenditure (HCE) growth has slowed significantly throughout the recession (2009-2011). The last three years of HCE growth have been 3.8%, 3.9%, and 3.9%. From 1980 through 2008, HCE growth bounced between 14% and 6% annually.

 HCE vs % GDP

(CMS – National Health Expenditure Accounts)

On the other hand, HCE measured as a percentage of Gross Domestic Product (GDP) continues to gradually rise (depicted by the red line in the graph above). Aside from the debate about whether overall healthcare costs have truly slowed or not, it’s interesting to know that there has been a shift in who is bearing the brunt of healthcare expenses. From an interview with Susan Dentzer (Editor and Chief of “Health Affairs) on PBS:

“Private health insurance coverage declined almost 2 percent in the one year from 2009 to 2010. And, of course, it had declined in the prior year as well. So people were losing their jobs, losing their health care coverage, having to pay more. Those people who did have coverage have had to pay more. We know that employers have been shifting more of the costs of health care to workers.

So, now if you go to the physician or if you go to the hospital, the likelihood is that you’re going to have a higher co-insurance rate. You’re going to pay more of that bill directly yourself. So all of those things came together. And it meant truly people went to the emergency department less. People went to doctor’s offices less. People did less elective surgery in hospitals.”

While Ms. Dentzer’s comments speak directly to reduced health care expenditure attributed to unemployment, she also alludes to another factor. That factor is the emergence of the consumer directed health plan, otherwise known as a High Deductible Health Plan (HDHP).

In an article by Forbes, studies indicate that the use of HDHPs quadrupled during 2006-2011 and increased another 14% from 2010 to 2011 alone. Studies by the RAND corporation indicate that Americans who transition from traditional coverage to consumer directed plans use 14% less health care related services with no negative health outcomes.

This trend to HDHPs can be viewed as an effective tool for cutting healthcare costs and putting the choice in the consumer’s hands or it could be seen as an unnecessary burden to an employee in a tough economy.

Opinions likely vary, what is yours?

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