“Consumer-directed health care” (CDHC) is a euphemism for shifting health care costs onto patients with skimpy insurance policies that offer virtually no coverage. Popular with conservatives, CDHC plans are based on the idea that Americans currently have too much insurance coverage, and would be more prudent purchasers if forced to pay more of their own health care costs. CDHC plans have very high deductibles (e.g. $10,000 for a family), and some come with an attached health savings account (HSA), a private bank account that can be used to pay health expenses (although half of all employees have nothing in their HSA).

But this concept is fundamentally flawed. Americans are not “overinsured,” illness and medical bills currently contribute to half of all U.S. bankruptcies (pdf). These plans simply shift costs from insurers and businesses onto families. Moreover, they offer no hope of controlling health costs, as the sickest 20 percent of the population responsible for 80 percent of health spending (people with tens or hundreds of thousands of dollars in health costs annually) has no incentive to change their spending. In reality, these plans add another complex layer of administration which will exacerbate wasteful health spending.

This fact sheet provides background on consumer directed health care and outlines the arguments against it.

Click here to read the fact sheet (pdf)

Read the testimony of Senior Health Policy Fellow Dr. Don McCanne on HSAs. Submitted to the Committee on Ways and Means, United States House of Representatives.

For additonal information, read an exchange between Dr. Don McCanne and Dr. James Knight on Health Savings Accounts.

It is often suggested that the best way to cover the uninsured would be to provide them tax credits to buy private insurance. But tax credits simply launder public money through wasteful private insurance system that takes a one-third cut of every dollar. With the cost of private insurance policies skyrocketing ($10,000+ for family coverage), the size of tax credits would have to be substantial to help the uninsured get coverage. Moreover, studies have shown that offering these credits barely makes a dent in the number of uninsured because it gives employers the incentive to drop coverage for their employees.

In this brief, PNHP Senior Health Policy Fellow Dr. Don McCanne details the case against using tax credits to cover the uninsured.

Click here to read the brief (pdf)

This 1991 report from the GAO confirms that a Canadian-style single-payer system could save enough on administrative waste to provide comprehensive coverage to all Americans.

Click here to read the report (pdf)

In this excerpt from “Universal Health Care: What the United States can Learn from the Canadian Experience,” the authors (including PNHP Past President Dr. Claudia Fegan) provide a realistic survey of the strengths and weaknesses of the Canadian health system, debunking many of the common myths.

Click here to read the excerpt (pdf)

In June 2005 the Supreme Court of Canada ruled in a close (4-3) opinion that Quebec’s ban on private insurance duplicating services covered by the public system violates that province’s Charter of Rights and Freedoms. The case (Chaoulli v. Quebec) was brought by Dr. Jacques Chaoulli, an extreme right-wing physician with close ties to pro-privatization political organizations. In an unusually strongly-worded dissenting opinion, the minority criticized the questionable basis for the case, its overtly political motivation and the phony “experts” brought to testify.

Click here to read PNHP’s statement on the Canadian Supreme Court Decision

Click here to read a backgrounder on the case (pdf)

In this 1999 article, physician economist Dr. Edith Rasell outlines a possible system for financing national health insurance. Savings on administration (currently 31 percent of health spending) would be combined with current sources of public funding (Medicare, Medicaid, SCHIP, etc). A modest 2 percent personal income tax would replace insurance premiums and out-of-pocket costs currently paid by individuals (the average individual health insurance premium alone is today more than $3,500), and a 7 percent payroll tax would replace employer contributions and relieve them of the costly burden of administering their own health benefits (industrialized sectors currently pay as much as 14 percent of payroll for health care).

Although Dr. Rasell’s is the most often cited financing structure, any number of different arrangements could possibly be used. Since the financing of public programs is more a matter of tax policy than health policy, PNHP does not endorse any single financing proposal.

Read “An Equitable Way to Pay for Universal Coverage” (pdf)

In this pair of studies from the Canadian Medical Association Journal, a distinguished team of researchers led by Dr. P.J. Devereaux at McMaster University (Ontario) performed large scale meta-analyses on the existing research concerning mortality rates and payments for care at private for-profit vs. nonprofit hospitals. Since private for-profit hospitals are virtually nonexistent in Canada, the research examined U.S. for-profit hospitals. Taken together, the studies reviewed 23 academic papers (15 on mortality rates, 8 on payments) examining more than 26,000 hospitals.

After all the research was reviewed, the evidence against for-profit hospitals was conclusive: for-profits had 19 percent higher costs and 2 percent higher death rates. The authors attribute these defects directly to the for-profit nature of the hospitals: The necessity to generate revenues to satisfy investors, the significantly higher administrative costs and the large executive bonuses, they say, “result in limitations of care that adversely affect patient outcomes.”

Read “Payments at For-Profit and Non-Profit Hospitals” (pdf)

Read “Mortality Rates of For-Profit and Non-Profit Hospitals” (pdf)

In this 1997 NEJM study, Drs. Steffie Woolhandler and David Himmelstein examine costs of care and administration at for-profit, nonprofit and public hospitals in the U.S. They found that administration consumes 34.0 percent of total costs at for-profit hospitals, 24.5 percent at nonprofit hospitals, and 22.9 percent at public hospitals. Compared with public hospitals, nonprofit hospitals were 23 percent costlier and for-profits were 34 percent costlier. Among acute care hospitals, for-profits had higher adjusted costs per discharge ($8,115) than did nonprofit ($7,490) or public ($6,507) hospitals. Much of this difference was due to higher administrative costs.

Read “Costs of Care and Administration At For-Profit and Other Hospitals in the U.S.” (pdf)

In this 1999 JAMA study, Drs. David Himmelstein, Steffie Woolhandler, Ida Hellander and Sidney Wolfe examined the performance of for-profit HMOs vs. nonprofit HMOs on 14 quality-of-care indicators. Compared to the nonprofits, for-profit HMOs performed worse on all 14 care indicators. After controlling for HMO model type, geographic region and method of data collection, the researchers found investor-ownership to be consistently associated with lower quality care.

Read “Quality of Care at Investor-Owned vs. Not-for-Profit HMOs” (pdf)

Medicare advantage (formerly Medicare + Choice) plans are private for-profit plans that administer Medicare benefits. Given a big boost by the 2003 Medicare drug bill, supporters argued that competition and businesslike efficiency of these plans would drive down costs. In fact, the reverse is true. Private plans enrolled only cheap, healthy seniors and dumped the rest on the traditional program. The result has been large overpayments by Medicare to the private plans. This latest report from MedPac finds private plans are paid an average of 111 percent of what it would have cost to treat their beneficiaries in traditional Medicare.

Click here to read more (pdf)

In this 1994 JAMA article, PNHP Past President Dr. Gordon Schiff and colleagues outline why single-payer national health insurance is key to improving health care quality. Read “A Better Qualtiy Alternative”