Families in CDHPs Reduced Health Care Spending

February 4, 2013 (PLANSPONSOR.com) – Families that switched to consumer-directed health plans (CDHPs) from traditional plans spent 21% less on health care in their first year, research found.

According to a research report issued by RAND Corporation, approximately one-third of the savings resulted from lower spending per episode of care. Costs per episode of care fell because enrollees used fewer or less expensive services in a given episode of care.   

For example, the report said, enrollees used 4.9% fewer name-brand drugs, made 6.5% fewer visits to specialists and had 17.7% fewer hospital stays in the first year after switching to a consumer-directed plan. 

However, the research found as enrollees reduced medical spending, they cut back on the use of some beneficial services. Some preventive care, such as childhood vaccinations, dropped, while rates increased among enrollees in traditional health plans. Rates of mammography, cervical cancer screening and colorectal cancer screening decreased among those with CDHPs compared with those in traditional plans. The use of blood tests for glucose and cholesterol also fell.

The researchers’ projection showed that an increase in consumer-directed plan enrollment to 50% would result in annual savings of $57 billion in health care costs. That decrease would be the equivalent of a 4% decline in total health care spending for the nonelderly.   

At the 25% level, the savings for the nonelderly population would be more than $28 billion (in the range of 1% to 2%). At the 75% level, the savings would be more than $85 billion (in the range of 5% to 9%).  

A team of researchers from RAND, Towers Watson and the University of Southern California conducted a series of studies to examine the effects of CDHPs on the costs and use of care. The team collected claims and enrollment data from 2003 through 2007 for more than 800,000 households insured through 59 large employers across the United States.  

The research report is here.