Viewpoint: Sharing cost savings with patients could reduce strain on state

Beck Stacie
Guest Columnist

Delaware is an outlier among states in the high cost of health care and this is true across demographic groups. The state is paying too much for Medicaid and state employee health-care plans.

The way to reduce costs while maintaining or improving quality is to raise productivity. The best way to do that is to incentivize behavior by those closest to the problem: the patients and their doctors.

The state should consider offering an alternative to current MCO plans. This is a health savings account coupled with a high-deductible insurance plan. This would allow patients to use part of the health savings account to pay the fees of a direct primary-care practice. The state should review and change regulations and laws to make it easier for primary-care physicians to establish direct primary-care practices.

Why this will work

• Already the prevalence of health savings accounts/high deductible plans in the private sector is bending the cost curve down among providers. The state of Delaware provides health care for about 25 percent of the population through Medicaid/CHIPS alone. A shift of even part of this population will have a strong impact on the health-care market.

• A concern about health savings accounts is that patients will forgo necessary preventative visits. Membership in a direct primary practice solves this problem. Patients pay a fixed monthly fee for access to a primary-care practice, which includes routine visits and tests (e.g., strep), telephone or online consultations, etc.

• Patients’ incentives are to find a direct primary-care practice that helps them conserve funds in the health savings accounts. Primary-care practices can be enlisted to shop for low-cost care (e.g., imaging). Patients with chronic conditions, like diabetes, are more likely to adhere to treatment and avoid complications. Studies show that cost savings can be double the annual cost of the fee.

Potential drawbacks

• There will be patients who are not capable of managing a heath savings account. However, there is likely to be a learning curve as patients learn from those with experience with the program. Physician practices will also have an incentive to educate patients who could benefit from the program. Thirdly, when a large enough portion of patients become price sensitive, providers will respond, even if some patients remain price-insensitive.

• Patients lack price and quality information. This can be corrected by passing a law that providers must post an initial consultation fee for cash-paying patients and that they must provide estimates of the cost of additional services, unless the patient signs a waiver (for non-emergency, routine care). Other states require this. Delaware is lagging here.

Why this is better

• The state contracts with managed-care organizations that in turn negotiate with the providers. The incentives appear to be similar to that of health maintenance organizations and are likely to fail for the same reasons: patient dissatisfaction/failure to adhere. The benefits received by individual physicians are likely too low relative to significant downside risks (e.g., litigation) of limiting care.

• The combination of direct primary care, health savings accounts and high-deductible insurance aligns the incentives of both doctors and patients, who are the most able to make cost-effective decisions.

• The paperwork burden is reduced for primary-care doctors (absorbing up to 40 percent of time) freeing up time and improving retention. This increases the supply of their services.


Stacie Beck, Ph.D., taught economics for 30 years at the University of Delaware, published in the areas of finance, international economics and macroeconomics, and worked on various public policy issues in conjunction with the Caesar Rodney Institute. She received her doctorate from the University of Pennsylvania.

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