Stephen T Parente, University of Minnesota Giridhar Mallya, University of Pennsylvania

1. Is Consumerism at Odds with Prevention?The indirect effects of consumer-directed health plans on preventive service utilization Stephen T Parente, University of Minnesota Giridhar Mallya, University of Pennsylvania Craig Pollack, University of Pennsylvania Daniel Polsky, University of Pennsylvania Roger Feldman, University of Minnesota William McGuire Presentation at the American Society of Health Economics, June 24, 2008 Sponsored by the Robert Wood Johnson Foundation’s Health Care Financing & Organization Initiative (HCFO) and the U.S. Department of Health and Human Services

2. Presentation Overview • Background • Research Question • Research Setting • Empirical Approach • Caveats • Results • Discussion

3. Health Coverage $$ Annual Deductible Preventive Care 100% Annual Deductible Consumer Driven Health Plans • Consumer owns the Health Savings/Reimbursement Account (HSA/HRA) • Unused $$ roll-over at year end • HSA must be purchased with complementary high deductible health plan (HDHP) • Can be purchased by consumers in the state-regulated individual or small group markets. • Employers provide HSAs/HRAs as part of their benefits package. • Money deposited in HSAs is tax-advantaged. • For HSA, unused $$ at 59 years of age can be used for medical care and retirement. • For HSA, early withdrawal penalty for any use other than healthcare. HSA/HRA

4. Previous Literature • Rowe, et al (2008), compare preventive care rates in CDHP and a PPO settings managed by Aetna – No difference in prevention. • Mallya, et al (2007): compare preventive care rates in CDHP and traditional plan in one employer: In CDHPs -fewer preventive care visits; more pap smears. • Busch, et al (2006), Alcoa mandated high-deductible coverage for a subset of employees. Found no significant difference in preventive care use. • Wharam, et al (2008), total replacement study. Little change in cancer screening. Closest to this study.

5. Research Questions • Primary: What is the impact of consumer driven health plans on preventive care? • Secondary: What factors affect the utilization of preventive care when offered in a total health plan replacement setting with a CDHP?

6. Conceptual Model • Health benefit design affects the demand for medical care, including preventive services. • Increased patient copayment acts as price increase in medical care demand. • Can be empirically tested by the evaluation of a reduced form expression of the demand for medical care in a CDHP total replacement with higher cost sharing.

7. Data to Address Research Questions • Four Large employers with over 50,000 covered lives. • Medical & Pharmacy claims and enrollment data or two years: pre and post implementation of CDHP design. • The employers had a full replacement of their PPO/POS plan designs with a CDHP design. • Two of four employers adopted CDHP design later in 2006, the rest in 2005. • Continuously enrolled sample for two years.

8. Econometric Approach • Use a two part model to complete a Difference-in-difference estimate of the effect of expenditure on of a CDHP total replacement. • Evaluate probability of getting any preventive care use for a set of specific measures: • Any preventive care visit • Colonoscopy screening age 40 to 64 • Mammography screening, women aged 40 to 64 • Cervical cancer screening, women aged 24 to 64 • Use firm-specific interaction with the second year of adoption to identify the impact of CDHP total replacement.

9. Caveats • Unlike previous work, we can not control for the impact on income. • There is unexplained market level variation. Have considered using state-effects as a correction. • Early results.

10. Attributes of Individuals w/Coverage at Baseline from 4 Firms

11. Descriptive Statistics of Prevention Services

12. Descriptive Statistics of Expenditures

13. Summary of CDHP Impact – by Firm – for Expenditures and Prevention

14. CDHP Replacement Effect:Total Expenditures

15. CDHP Replacement Effect:Total Medical Expenditures

16. CDHP Replacement Effect:Consumer OOP Medical Expenditures

17. CDHP Replacement Effect:Total Pharmacy Expenditures

18. CDHP Replacement Effect:Consumer OOP Pharmacy Expenditures

19. CDHP Replacement Effect:Probability of Any Preventive Visits

20. CDHP Replacement Effect:Probability of Colonoscopy Screening

21. CDHP Replacement Effect:Probability of Mammography Screening

22. CDHP Replacement Effect:Probability of Cervical Cancer Screening

23. Summary of CDHP Impact – by Firm – for Expenditures and Prevention

24. Summary of Empirical Findings • Total replacement with CDHPs achieves a level of cost savings not seen in previous empirical studies where consumers had other plan choices. • Significant increases in consumer expenditures found in some firms. • General decrease or neutral affect on prevention. Few of the changes in preventive care measures were statistically significant. • At best consumerism affects prevention in a neutral fashion. At worse, consumers use prevention less. • Irony is that prevention was covered at 100% reimbursement with no cost-sharing in all of the firms.

25. Next Steps • Get more precise firms specific affects beyond a linear probability model. • Address selection more completely. • Bootstrap correct standard errors for interaction affects on expenditure and utilization. Prior work has shown the bootstrapped significance is not as significant as the non bootstrapped method. • Try to find firms with second and third year post replacement affects

26. Thank You!For more information on our research, please visit:www.ehealthplan.orgStephen T. Parente, Ph.D., M.P.H., M.S.Associate Professor, Department of FinanceDirector, Medical Industry Leadership InstituteCarlson School of ManagementUniversity of Minnesota321 19th Ave. South, Room 3-122Minneapolis, MN 55455612-624-1391 (v)sparente@csom.umn.eduhttp://www.tc.um.edu/~paren010