Consumer-Directed Health Plans and the RAND Health Insurance Experiment

Joseph P. Newhouse


Health Affairs. 2004;23(6) 

In This Article

A Combination of Managed Care and Cost Sharing?

How will the increased initial cost sharing mesh with managed care? I see them as complementary. One result of the RAND HIE was that the variation in cost sharing affected the likelihood of seeing a physician or other health professional about a medical problem, but it had only a small effect on the costliness of an episode once care was sought.[14] By contrast, the tools of managed care aim primarily at the costliness of an episode. For example, today's disease and case management tools attempt to increase compliance with preventive measures and coordinate among providers, thereby reducing the cost of chronic disease episodes. The embryonic efforts to tier networks on quality as well as price and to improve quality by paying for performance also attempt to reduce the costliness of episodes. The use of networks to lower unit prices as well as utilization review and provider profiling to reduce service use all target spending conditional on the patient's having sought care for the problem.

Furthermore, higher initial cost sharing may make the instruments of traditional managed care more effective. Because the early managed care arrangements reduced patient cost sharing, the patient had no way to express the intensity of preferences for the service.[15] Thus, either the health plan or the physician was cast in the role of the bad cop who was potentially denying the patient a wanted service, stoking the fires of the counterrevolution. Although a high deductible will certainly not eliminate all such cases of denial, it will cause some voluntary reductions in care seeking for conditions that managed care would otherwise try to limit. And disease and case management tools may offset some of the reductions in appropriate care seeking that the cost sharing in the RAND HIE discouraged.