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Curbing the high cost of healthcare is expected to be a major focus tonight when President Bush delivers his State of the Union address. The President has long pushed for changes that would make individuals more responsible for their own healthcare choices. The theory is that people spending their own money will seek out higher quality and lower cost care. However, early indications are that some of these new plans have not yet lived up to that promise. NPR's Julie Rovner reports.

JULIE ROVNER reporting:

Ten years ago, everyone thought managed care would be the answer to exploding healthcare costs. But that theory was flawed from the start, says Merrill Matthews, who heads the Council for Affordable Health Insurance.

Mr. MERRILL MATTHEWS (Director, Council for Affordable Health Insurance): The way managed care controlled the cost was by having somebody look over the doctor's shoulder, somebody looking over the patient's shoulder, making sure they weren't using too much care. That's never a system that was gonna work well in the United States. People don't wanna be told what they can and can't have.

ROVNER: So, managed care has given rise to something called consumer-driven care. It comes in a variety of forms, including health savings accounts, or HSAs, and health reimbursement arrangements, among others. But Matthews says all the plans have one thing in common. They give consumers an incentive to spend less on health care. When an insurer is paying health bills, consumers are insulated from its true cost.

Mr. MATTHEWS: What the consumer-driven movement does is remove some of that insulation and give people the incentive to ask the question, where do I get value for my dollar?

ROVNER: The basic idea is this: consumers buy an insurance plan with a high deductible. It would pay for serious illnesses or catastrophic costs. Consumers would also have a tax-preferred savings account. They could use that account to pay for routine health costs, and keep anything they don't spend. Matthews says that encourages them to spend more wisely.

Mr. MATTHEWS: So, if a patient, for instance, chooses one doctor over another, and the cost is a little less, the patient benefits. If the patient chooses an X-ray over an MRI, all in conjunction with the advice of the physician, that's less expensive. The patient benefits.

ROVNER: There's a third requirement to make these health plans work, giving patients the information they need to make those wise choices. When he signed up for a consumer-driven plan three years ago, Washington D.C. resident Jim Jaffe, thought that's what he would get.

Mr. JIM JAFFE (Resident, Washington, D.C.): My expectation was that I would be presented with a wealth of data of prices and quality, and I could choose a doc or a facility of my choice who would be 75% good, for 25% of the price.

ROVNER: Instead, Jaffe says the website run by his plan is less than ideal.

Mr. JAFFE: It can tell me that taking Lipitor is probably cheaper than getting a heart attack. But it can't tell me where to get cheap Lipitor, and it can't even tell me which hospital is safer or cheaper if and when I get a heart attack.

ROVNER: In some ways, he says, the plan comes with all the faults of any other health insurance company.

Mr. JAFFE: Insurance companies tend to have problems, because they're dealing in a language that's basically foreign to them, which is to say, English. And they have problems with some words like, for instance, free, which, to most of us mean we don't pay anything, but in this case, I've had at least four instances where they've offered me free services, and subsequently tried to get me to pay for them.

ROVNER: Like his wife's free mammogram, which came with a $25 fee to have the doctor read it. Then there's the list of preferred providers that includes a hospital that's been closed for four years. And when Jaffe went looking for a colonoscopy, he got a list.

Mr. JAFFE: That includes four hospices within ten miles of my home in the Psychiatric Institute of Washington, and with due respect, I don't think any of these institutions actually do colonoscopies.

ROVNER: Jaffe's experience with consumer-driven healthcare is not unusual, says Paul Fronstin of the Employee Benefit Research Institute. At least partly because the plans are so new.

Mr. PAUL FRONSTIN (Senior Research Associate, Employee Benefit Research Associate): It's hard for people to get good information, which makes it very difficult to assume responsibility over your healthcare.

ROVNER: Fronstin says that probably helps explain a survey conducted last year, which found those with HSAs and other consumer-directed plans less satisfied than those with more traditional types of insurance coverage.

Mr. FRONSTIN: People are very frustrated by the amount of or lack of information on cost and quality. And that certainly shapes their opinion about these plans. To the degree that these plans may be providing information, people don't see it yet.

ROVNER: Those in the consumer-driven plans also say they're not yet experiencing the promised savings, according to the survey. In fact, people are finding exactly the opposite.

Mr. FRONSTIN: And we do find that people in these plans are spending a higher percentage of their income on out-of-pocket expenses and premiums than people with comprehensive plan. And that finding is exacerbated for people that are less healthy, and/or lower income.

ROVNER: President Bush is clearly responding to public opinion by elevating healthcare as a political issue, but it's not at all clear that his prescription, giving consumers more responsibility, will be very popular with voters. Drew Altman, President of the Kaiser Family Foundation, says surveys sponsored by his group have long found consumers wary about being on their own when it comes to health insurance.

Mr. DREW ALTMAN (President, Kaiser Family Foundation): They're actually pretty attached to the employment-based health insurance system, which sure, while they like to see their employer give them better benefits, they also see their employer as running interference for them in a pretty complicated world of health insurance arrangements.

ROVNER: Altman says those same surveys also show that people may be resistant to spending their own money for healthcare, since they already think they're spending too much.

Mr. ALTMAN: The big worry people have is that the costs of their health insurance is going to go up. So, this idea that health economists love so much, that people should see more of the cost of their health insurance, this may strike average Americans as a pretty strange idea.

ROVNER: Democrats are already linking the President's plan to give individuals more choice and control over their healthcare in general to the new Medicare Prescription Drug benefit. The myriad choices of Medicare Part D, as it's called, are frustrating many seniors. Here's how former Senate Minority Leader, Tom Daschle put it last week.

Senator TOM DASCHLE (Democrat, South Dakota): Now we haven't seen any leadership at all from this administration on healthcare. And the best thy could do was Part D for Medicare, and if you like Part D for Medicare, you will love consumer-driven healthcare.

ROVNER: In fact, says Kaiser Foundation President Altman, it's not overreaching to combine the President's proposals for the healthcare system in general with the Medicare drug plan, or even plans to turn Medicaid over to private insurance companies, as some Republican governors are planning.

Mr. ALTMAN: We're seeing the beginning of a really fundamental shift in how we think about health insurance in our country, from shared responsibility and risk from pooling, to everybody makes their own deal, individual responsibility and individual risk instead.

ROVNER: But unlike President Clinton's failed health insurance plan of a decade ago, which was printed, sliced, and diced in the public square, this plan is coming in such dribs and drabs, that it's been mostly overlooked. The President's speech tonight could change that. Julie Rovner, NPR News, Washington.

YDSTIE: Health savings accounts are part of the President's consumer-driven health initiative. You can find out how these accounts work at our website, npr.org.

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