Effects of a Consumer Driven Health Plan on Pharmaceutical Spending and Utilization

Department of Finance, Director, Medical Industry Leadership Institute, Carlson School of Management, University of Minnesota, 321 19th Avenue South, Room 3-122, Minneapolis, MN, USA.
Health Services Research (Impact Factor: 2.78). 06/2008; 43(5 Pt 1):1542-56. DOI: 10.1111/j.1475-6773.2008.00857.x
Source: PubMed


To compare pharmaceutical spending and utilization in a consumer driven health plan (CDHP) with a three-tier pharmacy benefit design, and to examine whether the CDHP creates incentives to reduce pharmaceutical spending and utilization for chronically ill patients, generic or brand name drugs, and mail-order drugs.
Retrospective insurance claims analysis from a large employer that introduced a CDHP in 2001 in addition to a point of service (POS) plan and a preferred provider organization (PPO), both of which used a three-tier pharmacy benefit.
Difference-in-differences regression models were estimated for drug spending and utilization. Control variables included the employee's income, age, and gender, number of covered lives per contract, election of flexible spending account, health status, concurrent health shock, cohort, and time trend. Results. CDHP pharmaceutical expenditures were lower than those in the POS cohort in 1 year without differences in the use of brand name drugs. We find limited evidence of less drug consumption by CDHP enrollees with chronic illnesses, and some evidence of less generic drug use and more mail-order drug use among CDHP members.
The CDHP is cost-neutral or cost-saving to both the employer and the employee compared with three-tier benefits with no differences in brand name drug use.

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Available from: Stephen T Parente,
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    • "While the authors found that baseline year spending for CDHP enrollees was 16 percent lower than that of HMO and PPO enrollees, their results suggested that spending increased more for the CDHP group than the controls in the postyear. Follow-up work revealed that 3 years after CDHP was offered, CDHP enrollees continued to have higher spending than point of service (POS) enrollees (Feldman et al. 2007); additionally, prescription drug spending did not differ between switchers and stayers (Parente, Feldman, and Chen 2008) beyond the first year. While these findings tend to be at odds with the notion that CDHPs serve to limit spending, how much one can conclude from single employer settings is not clear. "
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    ABSTRACT: The impact of consumer-driven health plans (CDHPs) has primarily been studied in a small number of large, self-insured employers, but this work may not generalize to the wide array of firms that make up the overall economy. The goal of our research is to examine effects of health savings accounts (HSAs) on total, medical, and pharmacy spending for a large number of small and midsized firms. Health plan administrative data from a national insurer were used to measure spending for 76,310 enrollees over 3 years in 709 employers. All employers began offering a HSA-eligible plan either on a full-replacement basis or alongside traditional plans in 2006 and 2007 after previously offering only traditional plans in 2005. We employ difference-in-differences generalized linear regression models to examine the impact of switching to HSAs. DATA EXTRACTION METHODS; Claims data were aggregated to enrollee-years. For total spending, HSA enrollees spent roughly 5-7 percent less than non-HSA enrollees. For pharmacy spending, HSA enrollees spent 6-9 percent less than traditional plan enrollees. More of the spending decrease was observed in the first year of enrollment. Our findings are consistent with the notion that CDHP benefit designs affect decisions that are at the discretion of the consumer, such as whether to fill or refill a prescription, but have less effect on care decisions that are more at the discretion of the provider.
    Health Services Research 08/2010; 45(4):1041-60. DOI:10.1111/j.1475-6773.2010.01124.x · 2.78 Impact Factor
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    • "Specifically, how individuals respond to the cost sharing features of CDHPs has not been widely studied and prior studies of CDHPs have several limitations. Past research is commonly based on case studies of a handful of employers or small surveys of employer and employee attitudes and experiences with regard to CDHP (see Lo Sasso et al. 2004, Buntin et al. 2006; Feldman, Parente, and Christianson 2007; Wharam et al. 2007; Parente, Feldman, and Chen 2008). External validity is a distinct challenge when examining the experiences of just a few firms. "
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    ABSTRACT: We use unique data from an insurer that exclusively offers high-deductible, "consumer-directed" health plans to identify the effect of plan features, notably employer contributions to the spending account, on health care spending. Our results show that the marginal dollar contributed by the employer to the spending account is entirely spent on outpatient and pharmacy services. In contrast, out-of-pocket spending was not responsive to the amount the employer contributes to the spending account. Our results represent the first plausibly causal estimates of the components of consumer-driven health plans on health spending. The magnitudes of the effects suggest important health care spending consequences to higher employer contributions to spending accounts. Our findings are most directly relevant to health reimbursement arrangement plan designs, though our results are still of value to health savings account plan designs. Copyright (c) The Journal of Risk and Insurance, 2010.
    Journal of Risk & Insurance 03/2010; 77(1):85-103. DOI:10.1111/j.1539-6975.2009.01346.x · 1.41 Impact Factor
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    ABSTRACT: Using results from peer-reviewed empirical analyses we describe the development and impact of the consumer-driven health plan market over the last 5 years. The results of these analyses show that consumers are responding to the financial incentives of these new health insurance benefits. Although the results may not always be what the consumer-driven health plan developers intended, there is clear evidence of 'consumerism', where individuals act in a way that generally increases their access to healthcare or investments, if the opportunity is present. Just as Medicare Part D enrollment demonstrated consumers could identify differences in prescription drug plans and make rational choices, so too are prospective patients able to function as consumers in the medical marketplace when give the opportunity.
    Expert Review of Pharmacoeconomics & Outcomes Research 08/2008; 8(4):343-8. DOI:10.1586/14737167.8.4.343 · 1.67 Impact Factor
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