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Consumer Directed Health Care and Health Savings Accounts

"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.