What is the Impact of the Internet
on Medical Care Use and Cost?
New Findings from a Consumer Driven
Health Plan
Stephen T. Parente
Roger Feldman
Jon B. Christianson
Funded by the Robert Wood Johnson Foundation
Health Care Financing and Organization Initiative.
Presentation Overview
† 1999 Dreaming: The Internet and “eHealth Plans”
† 2005 Reality: Health Plan Web Portals
† A Conceptual Model for Effect of Internet Use on
Medical Care Demand within a Consumer Driven
Health Plan
† Research Questions
† Study Setting & Data
† Statistical Modeling Using Instrumental Variables
† Results
† Implications
June, 2005
1999 Vision of E-Commerce in 2005
Reality of 2005
† $250 billion of the New Health Economy would
be e-commerce (e.g., mostly e-prescribing).
† Ubiquitous electronic health records
† $250 billion of the New Health Economy would
be e-commerce (e.g., mostly e-prescribing).
† Ubiquitous electronic health records
„ Providers access/enter data on web
„ Patients access/enter data on web
„ Information access as seamless as credit card
transactions
„ Providers access/enter data on web
„ Patients access/enter data on web
„ Information access as seamless as credit card
transactions
† Informed health care shoppers (patients) pick
hospitals and physicians based on quality.
† Internet-enabled medical savings accounts.
† Informed health care shoppers (patients) pick
hospitals and physicians based on quality.
† Internet-enabled medical savings accounts.
Consumer Driven Health Plan (CDHP)
Storyline to Date
What is the Relationship Between the
Internet and CDHPs?
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Version 1.0 – Dot-com ehealth insurance (1998-2004)
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Version 1.5 – ‘Me-too’ HRA responses (2003-2005)
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Definity Health
Vivius
Lumenos
Healthmarket
Destiny Health
Aetna
Cigna
Humana
Blue Cross Blue Shield
Version 2.0 - Health Savings Accounts drive up demand (2003-on)
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2003 MMA
Dot-com venture capitalists get return on their investment
“Ownership society” proposals
United Health’s Golden Rule/Exante/UHC Trifecta
“The Health Partners HSA”
Fidelity, Vanguard, Merrill Lynch looking to jump in
† Early CDHP developers made new and innovative use of the
Internet a key part of their business plan.
† Primary selling point #1: Better informed consumers/patients
will be more knowledgeable purchasers of medical care.
† Primary selling point #2: Giving consumers an incentive to
evaluate the price of medical care goods will make them even
more engaged.
† Proposed outcome: e-health plans will lead to more costeffective health care consumption.
† Previous research by Baker, Bundorf & Wagner (2003) suggests
consumers actively seek information on the web. The key
question is whether information-seeking affects demand.
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Research Questions
Study Setting
1. What is the Impact of the CDHP Web
Portal Use on Total Expenditure?
2. What is the Impact of Pharmacy Web
Information on Rx Expenditure?
3. What is the Impact of Active Monitoring of
Personal Care Account (PCA) on Spending?
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A Conceptual Model of the Impact of CDHP
Internet Search on Medical Care Demand
Get CDHP
Knowledge
Health plan-related
Internet Search
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3rd Stage
Econometric Model of Three Stages
Objective: Estimate impact of CDHP web portal use and CDHP benefit
knowledge on medical care demand.
Issue: Internet use and benefit knowledge are likely to be endogenous to medical
care demand.
Approach: Use an instrumental variables approach similar to work by Parente,
Salkever and DaVanzo (2005) where benefit knowledge for one type of medical
service (e.g., flu shot) was instrumented by benefit knowledge of another service
(e.g., mammography) and general benefit knowledge.
Instrument candidates used in this analysis:
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Don’t get CDHP
Knowledge
2nd Stage
Alternatives offered
Plan design
Communications with employees
Sponsor’s objectives for the plan
Econometric Approach
Medical Care Demand
1st Stage
Study size: 565 continuously employed workers in 2002 and 2003.
Take-up of CDHP approximately 4% in 2002 and 7% in 2003.
Other plan choices were: (HMO: 51%, PPO: 13%, Tiered: 29%)
General caveat: ONE Employer’s experience can be quite different
due to:
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No Demand
No Demand
Two telephone surveys (Spring, 2003 & Spring, 2004)
Claims data from 2002 and 2003 for CDHP enrollees
Human resources records for all employees
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Medical Care Demand
University of Minnesota’s CDHP Plan: Definity Health
Years Studied: 2002 and 2003
Data – Unique combination of:
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Overall university health plan benefit knowledge
Have a usual source of medical care
Like to have a plan with online tools
Are concerned with out of pocket expenses
Instruments must be correlated with Internet use or benefit knowledge, but must
not affect medical care demand.
Used two-stage lease squares with tests for over-identification.
What is the Impact of the CDHP Web
Portal Use on Total Expenditure?
1. Internet usei = f(agei, genderi, incomei, health statusi,
prior health plani,t-1, information preferencesi, εii)
2. Knowledgei = f(Ineti, agei, genderi, incomei, health
statusi, prior health plani,t-1, other knowledgei,,,ε21)
3. Medical Care Demandi = f(Ineti, Knowledgei, agei,
genderi, incomei, health statusi, prior health plani,t-1,,,ε31)
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What is the Impact of the CDHP Web
Portal Use on Total Expenditure?
Regression Models by Outcome Variables
1st Stage
2nd Stage
2nd Stage
2nd Stage
Internet Use
Knowledge
Demand/Cost
Demand/Cost
Survey Case-mix Survey Case-mix Survey Case-mix Claims Case-mix
2003
Mean
Variables
What is the Impact of Pharmacy Web
Information on Rx Expenditure?
Dependent Variable(s)
Total Expenditure (Logged in regression)
Health Plan Portal Use for Plan Choice (1=Yes, 0=No)
CDHP Benefit Knowledge (1=Yes, 0=No)
$7,464
0.640
0.522
7.698
7.698
0.640
0.522
Information Variables
Health Plan
Portal Use for Plan Choice (1=Yes, 0=No)
Knowledge (1=Yes, 0=No)
CDHP Benefit
0.522
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-
-1.552
4.492
-0.196
0.899
0.586
0.511
0.327
0.594
0.036
-0.213
0.113
0.061
0.134
-0.116
0.141
-
-
1.896
0.351
$64.0
5.408
0.053
0.061
-0.001
0.091
-0.040
0.031
-0.020
0.040
0.606
0.865
0.005
0.094
0.0004
0.191
0.474
0.640
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-0.123
Instruments
General Consumer Benefit Knowledge (1=Yes, 0=No)
Consumer does not like out of pocket risk (1=Yes, 0=No)
Consumer likes Internet plan tools (1=Yes, 0=No)
Consumer has a regular physician (1=Yes, 0=No)
Control Variables
Overall health of consumer (1=Excellent, 5=Poor)
Chronic illness of consumer's contract (1=Yes, 0=No)
Consumer Income (1/1,000)
Condition Counts (from Claims using Johns Hopkins ADGs)
R-square
Notes:
Regressions also adjusted by prior heath plan choice, age, age squared, gender, and number of dependents
BOLD Coefficients significant at p<.05
What is the Impact of Pharmacy Web
Information on Rx Expenditure?
What is the Impact of Active Monitoring
of PCA on Spending?
Regression Models by Outcome Variables
2003
1st Stage
2nd Stage
Mean
Rx Internet Use Rx Demand/Cost
Variables
Survey Case-mix
Survey Case-mix
Dependent Variable(s)
$1,514
0.863
Rx Expenditure (Logged in regression)
Rx Health Plan Internet Portal Use (1=Yes, 0=No)
5.408
0.863
Information Variables
Rx Health Plan Internet Portal Use (1=Yes, 0=No)
0.863
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-6.381
0.586
0.511
-0.021
-0.137
-
1.896
0.351
$64.0
-0.030
0.027
0.0002
0.041
1.921
0.002
0.037
0.138
Instruments
CDHP Benefit Knowledge (1=Yes, 0=No)
CDHP Portal Use for Plan Choice (1=Yes, 0=No)
Control Variables
Overall health of consumer (1=Excellent, 5=Poor)
Chronic illness of consumer's contract (1=Yes, 0=No)
Consumer Income (1/1,000)
R-square
Notes:
Regressions also adjusted by prior heath plan choice, age, age squared, gender, and number of dependents
BOLD Coefficients significant at p<.05
What is the Impact of Active Monitoring
of PCA on Spending?
2003
Mean
Variables
Regression Models by Outcome Variables
1st Stage
2nd Stage
2nd Stage
Account Monitoring Spent within Account Spent over Deductible
Survey Case-mix
Survey Case-mix
Survey Case-mix
Dependent Variable(s)
Consumer finished year with $$ in account (1=Yes,0=No)
Consumer finished year spending thru deductibe (1=Yes,0=No)
Used web site to monitor PCA Balance (1=Yes, 0=No)
0.304
0.545
0.464
0.464
0.304
-
0.545
-
0.464
-
-0.322
0.320
0.586
0.511
0.060
0.572
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-
1.896
0.351
$64.0
-0.003
0.053
-0.0008
-0.168
-0.045
-0.001
0.198
0.156
0.001
0.352
0.121
0.161
Information Variables
Used web site to monitor
PCA Balance (1=Yes, 0=No)
Instruments
CDHP Benefit Knowledge (1=Yes, 0=No)
CDHP Portal Use for Plan Choice (1=Yes, 0=No)
Control Variables
Overall health of consumer (1=Excellent, 5=Poor)
Chronic illness of consumer's contract (1=Yes, 0=No)
Consumer Income (1/1,000)
R-square
Notes:
Regressions also adjusted by prior heath plan choice, age, age squared, gender, and number of dependents
BOLD Coefficients significant at p<.05
Summary of Results
† No statistically significant impact of general CDHP web site use
on medical care demand.
† CDHP subscribers with higher benefit knowledge may consume
more medical resources. Results differ depending on case-mix
method used (survey-based methods show results and claimbased methods do not).
† Consumer use of CDHP pharmacy Internet tools is associated
with a substantial reduction in pharmacy expenditure.
† Consumers who have money left in their PCA are less likely to
examine their accounts.
† Consumers who actively monitor their PCA balances are much
more likely to exceed their deductible.
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Implications
† Use of the Internet by CDHP subscribers appears to
be associated with moral hazard in all cases
examined, except pharmacy.
† The value of the Internet as the enabler of a lowercost ‘Consumer-driven’ health plan is not clear.
† May need long-term data to see if what seems like
moral hazard may be cost-savings in the long run
(e.g., 5 years out).
Next Steps
† Work with the CDHP to get actual consumer web site
behavior as substitutes and possible complements to
the survey data.
† Identify more opportunities to apply 3-stage
conceptual model: I-net info Æ knowledge Æ
demand.
† Refine econometric model to identify other
relationships between the CDHP web site use and
demand for medical care as recorded in claims data.
† Extend this work to more specific study populations
in larger employers, particularly to subscribers with
chronic illnesses and special medical needs.
For more information on our research
Please visit:
www.ehealthplan.org
Thank You!
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