Consumerism’s Health Care Limits

By November 3, 2016Commentary

A consulting firm takes on the widespread idea that encouraging “consumerism” will lead to lower health spending.   (LEK Paper)   The paper starts by noting the obvious facts about how high health spending is in the US, and acknowledges that the majority of the “excess”, 60%, is attributable to higher prices, while the remaining 40% is excess utilization.  As usual, however, they don’t deal with “appropriate” utilization, which likely would mean both subtracting and adding service use to get to what the population needs in terms of services to maintain good health.  My personal opinion continues to be that under and over-utilization are at best a wash.  They go on to assert that just making consumers bear more cost doesn’t necessarily make them better consumers of health care, something I strongly agree with.  Their analysis of why consumerism falls short itself falls short, in my opinion.  They give six reasons:  poor plan design, the third-party payer system, difficult to find prices, urgency and emotional stress, treatment advice coming from the same person who wants to perform the service and brand and image building by providers.

I believe they are missing more important factors.  One is that it is very, very hard to expect most people, even with “transparency” and other tools, to make the kind of decisions that need to be made when facing episodes of truly expensive care.  The second is that when you parse where the high spending is, many of the people with expensive conditions are not capable of making decisions, either due to dementia or to the severity of their illnesses, and the surrogate decision-maker dynamic is even more difficult to effect.  And since most of the spending “problem” in this country is actually due to prices, unless you are prepared to cut those prices, and provider incomes, in half by fiat, you aren’t going to due much to slow spending or spending growth.

The four potential solutions examined by L.E.K. are single payer, remove the third-party payment system, have employers get even more involved in care decisions and have payers get more aggressive in creating low-cost solutions.  They think some combination of the last two can work, recognizing that the first two are politically unlikely.  I don’t think the last two have any chance of reducing spending, or even doing much to slow its growth rate.  I don’t know that there is a good solution.  Since public payers now account for over half of total spending, a lot of the effort has to be focussed there.  And some palatable way has to be found to lower provider and administrator incomes.

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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