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Will HSAs lead to smarter spending or sicker patients?

From the May ACP Observer, copyright 2006 by the American College of Physicians.

By Lola Butcher

The patient won temporary relief from a steroid injection after her ongoing shoulder pain didn't respond to anti-inflammatories. But when the pain returned, her internist recommended physical therapy.

"And then she said, 'I have a high-deductible health plan. How much will that really run me?' " said Robert M. McLean, FACP, a rheumatologist at Connecticut Medical Group, a 15-physician practice in New Haven, Conn. The patient balked at the total—and declined the therapy. "Suddenly $50 or $60 three times a week for a month starts to add up."

Instead, he offered her another steroid injection, marking the first time in his 12 years of practice that he'd truly altered a treatment recommendation—not just a medication option—to accommodate a patient's response to a cost-benefit analysis.

"I see that happening increasingly in the future, and I don't know that it's completely a bad thing," he said. "When patients are paying more, if not all, of the costs of a particular treatment, they deserve to be informed."

The impact of health savings accounts (HSAs), which must be linked to high-deductible health plans, extends to drug choices as well. "Many people who have HSAs are coming in and saying, 'I can't afford the Lipitor [atorvastatin calcium] anymore—is there something less expensive?' " said internist Keith W. Michl, FACP. "In one case, I stopped the guy's Lipitor because I really didn't think the data were strong enough to justify spending that amount of money."

Not surprisingly, internists are giving HSAs a mixed welcome. Some say such accounts are making patients more aware of how they spend their health care dollars, which can lead to more informed decisions and cost savings. And some physicians, to rein in their own skyrocketing premiums, are opening HSAs themselves.

But others worry that HSAs may backfire as patients delay care until they are sick or elect to make a house payment instead of funding their HSA.

In such cases, said Tom Teliska, MBA, director of managed care for Albany Medical Center, in Albany, N.Y., "[hospitals] and physicians will be left holding the bag." While Albany Medical has treated only a few hospitalized patients with HSAs, he reported, the center has already had some problems collecting.

What's the appeal?

Consumer-directed health plans emerged in recent years in response to employers' demands for premium relief. Because such plans often feature high deductibles—which for HSAs in 2006 must be at least $1,050 for individuals and $2,100 for family coverage—they offer lower premiums than a traditional HMO or PPO.

The federal government supported the concept by authorizing HSAs, allowing people to set aside money to pay for deductibles and other expenses. The government also anointed the accounts with triple-crown tax status: A person who opens an HSA uses pre-tax dollars to fund the account, where the money grows tax-free until it is withdrawn tax-free if used for medical expenses.

Supporters believe HSAs make consumers more cost-conscious—which in turn could drive down costs and improve quality. Because consumers have more at stake, proponents claim, they will bring to health care the same comparison-shopping mindset they take to buying a car.

But what impact HSAs will have on cost and quality is really uncharted territory, said Robert B. Doherty, ACP's Senior Vice President for Governmental Affairs and Public Policy. "It is unclear if patients will really shop around when their health or the health of family members is at stake," he said.

The College, which currently considers HSAs "unproven," endorses consumerism concepts as long as account designs do not threaten patients' ability to access care. In a position paper released last year, ACP stated that growth in such plans should not erode current workplace coverage—and that employers need to offer low-deductible insurance products, along with the high-deductible plans currently associated with HSAs.

But Mr. Doherty acknowledged that more companies likely will offer HSAs as an option or use them to replace conventional coverage. Already, 3 million such accounts have been opened, jumping from 1 million last year. And forecasts from Forrester Research Inc., a national research firm, claim that more than 6% of patients with commercial insurance may be in consumer-directed plans next year.

HSA pros and cons

Despite their limited experience with the new accounts, some physicians are optimistic, saying HSAs could lead to more recognition of physician expertise.

"A major problem in the health system is that the actual value of what doctors do is incredibly devalued because people don't pay for it," said Dr. McLean, a member of ACP's Health and Public Policy Committee. "When a doctor's opinion is, to them, just a $10 co-pay, it loses value."

Primary care may be particularly appreciated by newly cost-conscious consumers trying to get the biggest bang for their HSA buck. One of Dr. Michl's patients recently complained about an $800 bill from an ear, nose and throat specialist who treated her son's nosebleed.

"She said, 'I'm never going to do that again,' " said Dr. Michl, a solo practitioner in Manchester Center, Vt. "I suspect people are going to understand that primary care doctors generally charge less, and we don't use a lot of high-tech expensive procedures."

But even if high-deductible plans make patients more aware of costs, internists and office administrators worry about major HSA downsides. Those include:

  • Not funding accounts. Theoretically, patients with high-deductible plans will have money in HSA accounts to cover their deductible and out-of-pocket expenses. However, cash-strapped individuals or poor money managers may not set up or fund an HSA. And while employers can fund HSAs for workers, not all choose to do so.

  • Putting off diagnoses. Patients with HSAs may be reluctant to seek a diagnosis that could lead to high medical costs. "You have people sitting on their symptoms because they know they're going to have a huge expense," said Ann Donovan, administrator for Heartland Hematology Oncology Associates in Kansas City, Mo. "We end up getting them because they've been admitted to the ER."

  • Avoiding tests and treatments. Patients are going to think twice about ordering certain pricey tests, like high-cost imaging and endoscopies, Dr. McLean said. Already, one of Dr. Michl's patients with an HSA recently declined a mammogram, citing financial concerns as one more excuse not to get the screening he recommended.

    High-cost drugs—for cancer, for example—can also tip the scales. "If you get one treatment with one of those drugs, you could meet the whole deductible that day," Ms. Donovan said. "And chances are people don't have that kind of money in savings." She noted that a $2,500 deductible is no longer unusual.

  • Getting enough cost information. Physicians may not want to spend time comparing costs with patients—or may not be able to provide the level of information HSA consumers need to make a cost-benefit analysis.

    While physicians frequently discuss prescription-drug costs with patients, other conversations are trickier. If a patient asks an internist to defend the value of a subspecialist referral, for example, the physician has to know what that specialist appointment will cost.

    "Doctors don't think in terms of dollar values when they're charging their services," said Connecticut's Dr. McLean. "They think in terms of, 'is it a Level 3, 4 or 5 visit?' When you're now converting over to true cash, we are really relatively ignorant of what people are being charged or what they should be charged."

  • Challenging physician bills. As patients bear more financial responsibility, Ms. Donovan foresees more tough conversations about money as patients choose to use HSA funds for non-medical expenses—despite withdrawal penalties.

    "Our patients, or [others in] long-term chronic illness situations, could use that money to pay their house payments," she said. In an effort to get paid eventually, Ms. Donovan, at least for the time being, sets up interest-free long-term payment plans for patients who can't meet their deductible.

    "You just can't abandon the patient," she explained—but added that as the number of HSAs grows, the practice's ability to extend such arrangements will diminish. "More of these patients may end up going through hospital outpatient departments because physician practices will not be able to absorb the loss."

Part of an evolution?

From a policy perspective, analyst Robert A. Berenson, FACP, thinks HSAs and the broader consumer-directed health care movement are missteps on the road to solving America's health care cost crisis.

"I don't give it much hope for holding down health care costs, but I think it does threaten the doctor-patient relationship," said Dr. Berenson, a senior fellow at Washington's Urban Institute, a nonpartisan economic and social policy research organization. Many consumer-directed health care advocates, he pointed out, want patients to shop for medical services just as they would airline tickets or cellphones. "I am concerned about substituting the commercial ethics of vendor-customer transactions for the special professional-client relationship."

He points to an emerging trend—in which consumer-directed plans waive a patient's deductible for preventive care—as evidence that the model is flawed.

"That says, 'we're not going to let [patients] use their own discretion because we don't think they're going to make the right decision when it comes to prevention,' " Dr. Berenson said. But when it comes to diagnosis and treatment decisions, which doctors have trained for rigorously for years, "that's where we're going to let people become smart consumers?" he said. "It doesn't compute."

But individuals equipped to be good health care consumers—and small business owners, like many internists—may disagree. For them, high-deductible plans are an attractive option.

Anne Rose Eapen, FACP, who practices in Reston, Va., abandoned her traditional PPO plan when HSAs first became available in 2003. "Every year [the premium] was going up and up, even though I was not using it very much," she said.

Because some staff members had health issues, consumer-directed plans were not a good choice for them. But for her personal coverage, Dr. Eapen is comfortable with a $5,000 deductible, and a monthly premium of $123, less than half what she paid for PPO coverage back in 2002.

Dr. McLean likewise opted for a high-deductible plan for his family, but is unwilling to push that extra financial risk to his staff. He sees the consumerism movement as part of an evolution away from managed care to whatever comes next.

"I think it's a way station," he said. "But it's a necessary one as people try to answer the question: 'Where should we end up?'"

Lola Butcher is a freelance writer based in Springfield, Mo., who specializes in health care business writing.

The information included herein should never be used as a substitute for clinical judgment and does not represent an official position of ACP.

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