Ten Ways Consumer Driven Health Care is a Proven Success

By Greg Scandlen

A revolution is underway in American health care, but you won’t read about it newspapers or see it on TV.

The revolution involves a growing number of Americans who are reclaiming their right to buy health care goods and services that they decide are beneficial. They are shrugging off the heavy hand of regulation by Washington politicians, insurance companies, pharmaceutical firms, hospitals, medical organizations, federal agencies, and giant employers, all of whom are fighting over who gets what of the trillions of dollars Americans spend each year on health care.

This is a Consumer Driven Health Care Revolution.

The revolution got underway six years ago, when consumers were able to redirect some of the health care money they earned into new deposits such as health savings accounts, health reimbursement arrangements, flexible spending accounts, and insurance policies with low premiums and high deductibles.

Empowered by control over their own money, consumers increasingly demanded the information needed to make good decisions about their health care. Once they possessed both the money and information, consumers forced changes in the delivery of services to make health care more efficient, more accountable, more convenient, and certainly more affordable.

Instead of paying an insurance company for maximum coverage they were unlikely to use, increasing numbers of consumers decided to buy less-expensive insurance for expensive services and products while banking the monetary difference to pay for services only when they needed them. Employers liked the revolution, too, because it left them more money with which to raise wages or fund a savings account.

Recent studies find that consumer driven health care plans are being used by 20 percent of the privately insured population.1 This is an astonishing rate of growth for an approach that began just six years ago.

But these insurance plans are only the beginning. The important thing is what happens after consumers have more control. Already, consumer driven plans are having a profound effect on the health care system.

The growing use of generic drugs, retail clinics, medical tourism, concierge medicine, physician owned specialty hospitals, and the reduction in the use of hospital emergency rooms may all be attributed to the growth of consumer driven health care.

Even the current recession is highlighting a new era of consumerism in health care. Health care spending usually grows in times of recession because workers who fear losing their jobs—and their insurance coverage—try to maximize their use of services before they get laid off. But during this recession, consumers are deciding how best to spend their own money, and are choosing to preserve their funds instead of spending them on unnecessary health care services. As a result, spending on prescription drugs dropped by 2 percent in the year ended Sept. 30, 2008, physician office visits are down 1.5 percent, and hospital admissions are down by 2 percent.

The Consumer Driven Health Care Revolution has only just begun, and here’s why it will grow:

1. Consumer Driven Care dramatically reduces premiums
2. Consumer Driven Care reduces the rate of increase from year to year
3. Consumers can use the savings to fund their accounts
4. The money consumers put in the account is triply tax advantaged, saving even more
5. Consumer Driven Care is good for the sick as well as the healthy
6. Consumer Driven Care is good for the poor as well as the wealthy
7. Consumers may choose their own provider and their preferred service
8. People with Consumer Driven Plans change their behavior to get more value out of the system and become better informed about their treatments and costs
9. Consumer Driven Care is taking over the insurance market
10. People with Consumer Driven Care are increasingly satisfied with their coverage

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Greg Scandlen is the director of Consumers for Health Care Choices, a project of The Heartland Institute. He may be contacted at gscandlen@heartland.org.