CDHP Cost Saving Not Just a One-Time Event

A study suggests CDHPs do not just cut employers’ health care costs in the first year of use.

Health care cost growth among firms offering a consumer-directed health plan (CDHP) is significantly lower in each of the first three years after offer, according to a research paper published by the National Bureau of Economic Research.

Using data from 13 million individuals in 54 large U.S. firms, the research results suggest that—at least at large employers—the impact of CDHPs persists and is not just a one-time reduction in spending. However, researchers did find the decrease in spending may be smaller in year three compared to year one post-offer. They say the results are suggestive and consistent with a decreasing impact of CDHPs over time.

At the firm level, the researchers find that the CDHP offer is associated with an approximately 5% reduction in total health care spending in each of the three years after CDHPs were introduced relative to cost growth observed for non-offering employers.

The decreases in total spending growth observed were primarily due to reductions in spending on outpatient care and pharmaceuticals. In contrast, by the third year there were no differences in either emergency department or inpatient spending. The researchers note that it is more difficult to obtain pricing information that allows workers to ‘shop’ for emergency department or inpatient spending.

Looking at differing CDHP design features, the researchers’ estimates are consistent with the theory that CDHPs with larger financial incentives are associated with greater and more long-lasting reductions in spending than CDHPs with smaller financial incentives. However, they say further research is needed to determine which plan design structures are most beneficial.

The researchers note their results are limited to large employers and may not extend to the small group market. In addition, they note that the findings do not address the concern that short-term decreases in spending with a CDHP is, in part, a result of workers foregoing care and will result in increases in spending in the long term.

Information about ways to obtain the report, “Do ‘Consumer-Directed’ Health Plans Bend the Cost Curve Over Time?” is here.