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POLICY: Joe Paduda on consumer spending restraint

Joe Paduda has an article about Steve Case’s determination to piss away $500m changing health care. In it he correctly notes the problem with Colin Powell’s argument that buying health care services and buying TVs are about as simple as each other. (Actually I think buying a TV is very complicated but that’s another discussion). Joe has a very interesting case study about his own decision when concern for his daughter’s health over-rode concern for his pocketbook.

We are insured under a high-deductible MSA plan, so any charges would come out of our pocket. I thought about it for a few seconds, than agreed. I also agreed to have her brought over in an ambulance for the fifteen minute trip. I knew full well that the risk was minimal, the costs would be over $2000 for this “preventive” measure, and I would pay all that out of my own pocket. Was the very small risk worth the outrageously inflated cost? You bet your life it was.

Now the next question is, what if Joe were not a well educated and (I guess and I’m sure he’ll tell me if I’m wrong) a relatively wealthy consultant, but a single mother to whom that $2000 would mean not being able to pay the rent or put food on the table. That’s where the fallacy of an at the point-of-care economic decision by the consumer is demonstrated. And that’s where this isn’t like buying a TV.

Rational consumer-choice advocates (i.e. Alain Enthoven) tried to push this level of selection back up to the "sponsor" level. That meant that the health plan made the decision about treatment based on some level of cost-effective assessment about what was the best thing to do in each case. The UK now has a central body (the NICE) that hands down these guidelines. But no one who’s well versed in health policy seriously believes that these judgment should be made at the point of care, because the situation is totally uncertain, and the consumer almost always knows less than the provider and half the time is not in a coherent enough shape to make the decision.

There are plenty of places where there is a need for much better consumer-ist focus in health care — notably health plan and provider customer service.  But making these types of decision at the point of care is not one.

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9 replies »

  1. //Based on watching my relatives I don’t see huge advantage in aging into my 90s or 100s.//
    I was a live in assistant for a man who lived to over 100. His mind was sharp, and he lived a rich life in his community. He was appreciated by many people, including me. He only declined and died after his sons decided to sell his house and moved him to another state.
    I appreciate the ability to make a reasoned decision based on family factors, and I wish every power to the decisions you make for your family. However, it’s not right to project that into a generalization that all other people should be “reasonably” constrained by with loaded words like “entitlement”. I think life is the fundamental entitlement. Why do people hand-wring over fetuses and then deny the maximum of life to their elders, who should be honored and respected? That makes no sense to me.
    //noble or demonstrate common sense, but because they can’t afford 100% of the care and they have no access to insurance.//
    Since I’m in that category, I understand. However, I wish we lived in a civilization where people valued what I could contribute and would want to save my life. In my case, people will just rip the plug out of the wall because I’m a burden.
    //Cadillac care//
    I agree with that. My suspicion is that there’s a way to provide for good medical care and shared costs without Waiting Five Months For An Appointment, and all the other ills supposedly associated with rationing. It’s just a threat that people with an interest in preserving the status quo make.
    //We need to figure out what trade-offs we can live with//
    My vote is we cut the costs at the level of the not-so-sick instead of not doing the max for critically ill/injured people who want their best shot to continue life. I think people should have the right to choose something different as well – I’m just arguing against pressuring everybody else to make the same choice with words like “entitlement”.

  2. //Get back to us when you actually are in the ICU, and your decision literally is life or death.//
    Gadfly, the people in family live into their 90s and 100s and I’ve got a husband with MS. I have considered the quality of life argument for a long time because I’ve always been surrounded by people who were facing it. Based on watching my relatives I don’t see huge advantage in aging into my 90s or 100s. The reality is that cost will factor into decision made about my health care and quality of life will be a factor as well. My husband feels the same way because he has a disease that could turn him into a vegetable overnight. I don’t want to spend the last 5-10 years of my life bedridden and staring at the ceiling, particularly if I bankrupt my husband doing it–so I might choose to avoid the ICU entirely. That’s a personal choice I choose to make. But if healthcare costs and insurance costs keep spiraling it is a choice that more and more people will have to make, not because they are chosing to be noble or demonstrate common sense, but because they can’t afford 100% of the care and they have no access to insurance. I think transitioning to a system that extends resources to everyone by more equitably sharing costs and promoting wise health care spending is a better option than a system which provides total care to some and no care to others. Right now we’ve got the latter system and continuing to argue for a system with Cadillac care and minimal cost sharing won’t fix the problem. We need to face the reality that we all need to contribute to our health care costs. Once that happens consumers will also start to demand more market efficiency in exchange for the dollars they spend and perhaps spend more wisely. But the uptopia of everyone having universal access to the full resources of our medical system with minimal out-of-pocket costs isn’t deliverable. We need to figure out what trade-offs we can live with and re-engineer a system that is affordable long-term. I’m not a fan of government intervention but I don’t see the private sector solving the problem–Matthew’s recent posts on overhead and fraud just underscore that issue.

  3. Gadfly- the flaw in your arguments lie in the fact that in your world– if you need something, then the people who supply what you need– should be forced to supply it, whether it be health care or any other service. What rights ought the providers have in your world? If all physicians worked only 35 hours/ week, the problems in healthcare would worsen… In your comments above you appear to be including doctors in “the richest people” category– a description many (for whom average debt upon completion of residency training is approx $130,000) would disagree.

  4. //companies have tried to convince the French to work more than their current 35 hour week and take less than the 4 weeks allotted vacation.//
    And companies are Entitled to exploit workers more than they already do why?
    Somewhere people have really lost track of the goals of civilization. Shouldn’t we be shooting for a better quality of life of every individual? Work for survival not for slavery? Opportunities to develop the spirit, to contribute to philosophy, the arts, and all the things that make a civilization great? Where is the pursuit of happiness? What does working faster and harder to make the richest people wealthier (so they in turn can reduce more people to dependents) really accomplish? How did the scope of our vision get reduced to cracking the whip over our neighbors?

  5. Actually the percent of those who are insulated (to a great degree) from the cost of healthcare is closer to 83% of the population. Over the last dozen years or so the portion of the pop that is uninsured has hovered around 17%. About half of those have access to taxpayer funded programs, but opt not to participate. About a quarter of those uninsured are also not covering themselves voluntarily as they are between jobs (and coverage) or simply divert their funds to other things besides health insurance.
    As for the sense of entitlement, I would submit that those who live in areas where healthcare is socialized into a single payor system, they too have a sense of entitlement. Along those lines, companies have tried to convince the French to work more than their current 35 hour week and take less than the 4 weeks allotted vacation. Such attempts have failed miserably.

  6. //our entitlement philosophy toward healthcare.//
    To paraphrase the West Wing, there’s only a short putt away from Entitlement to Family Pressure and a Syringe in the Nightstand. It’s terrific when people know how they want to handle the end of their lives, but it’s terrifying that this philosophy might end up being enforced on others. Even the Holocaust was justified by “moral” and “reasonable” arguments.
    //heroic measures//
    Get back to us when you actually are in the ICU, and your decision literally is life or death.

  7. Let me add a different perspective. Different consumers view health care differently. My husband and I have good savings and are financially responsible. In buying health care we want to understand exactly what our liability is because we recognize that money spent on health care will impact our ability to fund other things–i.e. we actually have assets to pay the bills that a hospital will chase. If I were making the choice between a $2K ambulance ride and a ride in the car–unless I needed to be on life support it would be the car. And whether or not I’d be on life support would likely be driven by my probability of recovery. I have no desire to prolong my life even a day at extraordinary cost when recovery prospects are unlikely. To me it would be stupid to spend the last week of my life in ICU burning money that would otherwise fund my husband’s retirement. That’s an unusual attitude in the U.S. because of the way we supply health care. It is not unusual in countries without our entitlement philosophy toward healthcare. I believe that many consumers’ attitudes would make this shift if they were linked closer to cost liability for a portion of their care. The less exposure to cost a consumer has, the more interest they have in having heroic measures performed on their behalf. Right now about half of our population has insulation from cost–so it is no surprise that costs keep rising.

  8. //no one who’s well versed in health policy seriously believes that these judgment should be made at the point of care, because the situation is totally uncertain, and the consumer almost always knows less than the provider and half the time is not in a coherent enough shape to make the decision.//
    Excellent way to put it. This is part of what I’m trying to get people to realize about just blindly getting on board with the EMR. With that access to information comes Point of Care Billing. In fact the Point of Care Billing will be put in place first while the modules that benefit patients will be put in place in a leisurely pace. Member fee hikes and governement “incentives” are going to pay to implement this “mod shakedown”. This is disgusting. I want someone to do a study of EMR roll outs with a focus on the priority placed on billing systems, and especially Point of Service Billing.

  9. Exactly right.
    The point-of-care business model in healthcare isn’t like many other commercial transactions. I’ve been known to joke that the closest one I can find is, really, a mob shakedown. A doc and a mobster can both credibly say to a person, “listen, if ya don’t pay up, there’s gonna be pain and there’s maybe gonna be dying. And although I can’t explain it, you know what I’m telling you is true.”
    I’m NOT saying this because i think docs are mobsters; what I’m saying is that believing people will make good consumer decisions in this kind of transaction is self-evidently looney. It’s going to be based on consumer ability to pay, not the consumer’s preference.

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