HSAs Reduce Use of Outpatient Services and Prescription Drugs, Increase Use of Inpatient Services; Overall Spending Unaffected

Summary

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) included a provision that created what are commonly known as high-deductible health plans (HDHPs). The MMA also created health savings accounts (HSAs) to help individuals in high-deductible plans — the only tax-preferred account that gives individuals a “triple tax advantage.” Since that time, employers have taken two paths. Some have offered HDHPs in conjunction with HSAs, the combination of which is commonly known as HSA-eligible health plans or HSA plans. Others have simply raised deductibles in other types of health plans.

It appears that deductibles have been falling in both real and nominal dollars in HSA plans, but they have been increasing in other types of health plans, such as preferred provider organizations (PPOs). Furthermore, employer contributions to HSAs fill in part of the difference in deductibles between HSA plans and PPOs. While a gap remains, the movement of PPO deductibles toward HSA plan deductibles raises a question as to whether differences in deductibles are less of a distinguishing factor when it comes to managing health care use by type of health plan. If that is the case, it is important to understand whether the HSA impacts use of health care services and overall spending.

The purpose of this paper is to examine the impact of plan type on use of health care services and spending. The analysis focuses on enrollees in HSA plans and PPO enrollees who are in health plans with deductibles large enough to be HSA eligible as a way of isolating the impact of the HSA on use of health care services.

Key Findings:

• We find that HSA plans have mixed effects on use of health care services. Inpatient admissions and days were higher in HSA plans than in PPOs. The additional inpatient admissions do not appear to be coming from emergency department visits, as HSA plan enrollees used emergency departments less than PPO enrollees.
• Office visits shifted from specialist visits to primary care visits among HSA plan enrollees.
• HSA plan enrollees filled fewer prescriptions as compared with PPO enrollees.
• When it comes to health conditions, we see vast differences in changes in use of health care services by plan type between those with no health conditions and those with two or more. Among individuals with no health conditions, HSA plans resulted in fewer emergency department visits relative to PPO enrollees, fewer specialist visits, and fewer prescription drug fills, while visits to primary care providers increased. In contrast, among enrollees with two or more health conditions, there were no instances of decline in health care services among those in HSA plans relative to PPO enrollees. Instead, those with two or more health conditions experienced increases in inpatient admissions, inpatient days, and primary care office visits.
• The findings on the impact of HSA plans on spending relative to PPOs largely mimic the findings on use of health care services. Spending on inpatient services was $61.30 per member per year (PMPY) higher among HSA plan enrollees than among PPO enrollees, and spending on primary care visits was $4.20 higher PMPY. These amount to 6 percent and 2 percent higher, respectively, among HSA plan enrollees than PPO enrollees. In contrast, where use of services was lower, spending was also usually lower. Spending on emergency department visits was $19.10 or 7 percent lower PMPY among HSA plan enrollees, and spending on specialist visits was $4.60 or 2 percent lower PMPY. While prescription drug use was lower among HSA plan enrollees, spending on prescription drugs among HSA plan enrollees was not statistically different from spending among PPO enrollees.
• Overall, HSA plan enrollment had no impact on total spending — there was no statistically significant difference in overall spending between HSA plan and PPO enrollees. However, spending was $60.30 or 2 percent lower PMPY among HSA plan enrollees with no health conditions as compared with PPO enrollees, but spending was $2,490 or 6 percent higher PMPY among HSA plan enrollees with two or more health conditions. This higher spending was driven by 21 percent higher spending on inpatient services.