Economist on the myth of consumer-driven health care plans

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Health economist Jane Sarasohn-Kahn writes:

“The theory behind ‘consumer-driven health care’ is that when the health care user has more financial ‘skin in the game,’ they’ll become more informed and effective purchasers of health care for themselves and their families. That theory hasn’t translated into practice, based on data from the Employee Benefits Research Institute’s (EBRI) latest Consumer Engagement in Health Care Survey.”

Her “hot points” summary:

“Over the past decade, employee benefits consultants and certain health policy theorists have pointed to consumer-driven health care (CDH) delivered through healthcare reimbursement accounts as an effective vehicle for bending the cost curve of health in the U.S. EBRI’s data should give CDH proponents pause. Consumers don’t behave in straight-line, lock-step fashion when it comes to health care consumption: the general rules of Economics 101 don’t apply for a whole range of reasons I and many other economists have discussed.

Don’t assume that consumers having more financial skin in the health care game will make them smarter health consumers. Many health citizens make what seem to be smart fiscal decisions for health care consumption in the short run — like postponing visits to doctors when they feel ill, or skipping doses of medication. These often lead to longer-term dismal physical outcomes.”

But she doesn’t address the assumption that consumer-driven health care plans will provide consumers with the information tools they need to make better choices – a point addressed by one commenter in reaction to her piece on the The Health Care Blog:

“To understand the impact that consumer driven healthcare can have you need to understand the openness of the health care system. Currently the information available to health care consumers is not complete. I have a high deductible health plan and an HSA. It is very difficult to compare prices between providers. Additionally information regarding success rates and effectiveness of service providers is difficult to obtain. When care is needed urgently there is not time to perform this analysis. In contract, if you want to buy a TV or almost any other item, volumes of information is readily available. Consumers can easily find retail prices, sale prices, expert reviews, consumer reviews, and product details. The information informs the decision making process and, as a result consumers (usually) make better decisions. Providers are forced to compete with each other in the open. This competition brings about lower prices and higher quality as the lower quality/higher priced providers will lose market share to their competition. Only when the health care market reaches this level of openness will you be able to gauge the effectiveness of consumer directed healthcare.”

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Susan Fitzgerald

January 14, 2011 at 3:14 pm

It’s early days for CDHC, for at least a couple of reasons:
–the lack of transparency noted by the commenter. While we are not likely to comparison-shop in an emergency, we use a lot of non-emergency care that could benefit from price/quality transparency. More health plans are building comparison tools on their websites, and the marketplace is responding to this need also.
–the fact that people do not understand their coverage, whatever it is. Once you get past co-pay, most people have no idea what’s going on. They don’t understand the terms (co-insurance, deductible, etc) and they don’t understand what’s covered or not (tiered benefits for pharmacy, in-network providers. My employer did some research on levels of consumer understanding and clearly, health insurers need to do a much better job of educating people.
It would be great if coverage could be less complex,in general.

victor montori

January 15, 2011 at 5:49 pm

It is a failed concept. I am all for transparency and accountability. However I take care of sick people. These people do not live in urban areas with five competing clinics. When they are super sick they do not make financially minded decisions. When they are healthy they similarly hate to go to the dock. The action is in between. When their judgement says ‘go get help, this does not feel right’ but their pocket book says “hold on! Given the high deductible this will come from me and I aint have cash right now for this, in part because of all we pay for premiums!”. As a result this people either get better on their own (savings!) or get worse and postpone their care until the care they are no longer productive, the care they need is prolongued and more expensive, etc. This is a failed concept that assumes healthcare is or ought to be like any other market. It is not and ought not to be. Also, note that sample sizes in each practice for each treatment are too small to render precise enough comparisons. Yet, I still like more transparency and accountability.