Weekend Reading – Patients as Consumers

Posted on October 2, 2009

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Today’s recommendation is a relatively brief article that presents some great insights into the challenges of making consumer-driven health care a more central part of efforts to reform the health care system as a whole.

The article, “Talk to the Invisible Hand” by Darshak Sanghavi, discusses the various reasons why the health care marketplace is a very different animal from marketplaces for other consumer goods. The problem, succinctly stated by Sanghavi, is that “the usual rules of the marketplace seem not to apply to health care.” The author continues:

When left to their own devices, buyers ignore product quality, fail to value goods properly, and overpay vast sums. (Weirdly enough, they’re also happy as clams with the results.) Yet every health reform bill with a chance of passing involves significant cost shifting to patients. Like it or not, patients will have to be better consumers. That’s why it’s critical now to fix the failures of the market before we throw open the gates for business.

The author argues for a stronger government hand in health care, although not in the sense that has been discussed over the past many months of the health care reform debate. Citing recent work by economists Richard Thaler and Cass Sunstein, Sanghavi calls for the government to be more involved in setting up strong “choice architecture” which would guide patients in making reasonable, rational  health care decisions. Some examples that he gives include:

Worried that consumers are buying the more expensive, less effective blood-pressure pill? Have the FDA redesign the drug labels to steer patients to the right choices. Are heart surgery patients inexplicably going to the fancy hospital with worse outcomes? Consider jacking up the co-pay for underperforming centers to discourage patients from going there. Are people often choosing insurance that doesn’t pay for regular pediatric checkups? Make sure that the default insurance choice for families includes full coverage for checkups. Worried that doctors are ordering too many expensive CT scans? Require hospitals to have a “radiation account” program to let patients track their cumulative lifetime radiation exposure (and their cancer risk) to discourage too many scans.

Personally, I’m a fan of consumer-driven health care – I even walk the walk, as I have a health savings account and am covered by a high deductible insurance plan. But my own experience reflects the challenges that the article outlines – seeking out health care (especially for one’s children) is quite different from going to the mall or buying a book online. The theory behind consumer-driven health care makes a lot of sense, but there are some real world challenges that must be addressed for it even to come close to meeting its potential for creating a more efficient and less costly health care system.