CONSUMERS: Trade up players, but maybe not enough of them

Once again there’s something very important in a WSJ/Harris poll which concentrates on the people that, when I was at Harris, were called the "Trade up players". These are the people with enough discretionary income to buy themselves a better class of service from their providers.  As I know many of you don’t have WSJ access, I’ve quoted most all of the results.

"Do you have health insurance? It could be from an employer, that you purchase yourself or from a government program like Medicare or Medicaid?"

Base: All Adults

Yes, have health insurance 87%
No, do not have health insurance 13

* * *

"Which one of these statements best describes you?"

Base: Adults with health insurance

I only go to doctors that accept my health insurance 85%
I sometimes go to doctors who don’t accept my health insurance 15

* * *

"Whether or not you have done so in the past, how willing would you be to go to a doctor who doesn’t take your health insurance if he or she was highly recommended by a source that you trust?"


"How willing would you be to pay the full cost of a doctor’s visit – rather than use your health insurance – if you . . .?"


The important issue is that pretty uniformly, those with incomes over 50K, which is a little over average household income and around US median income, are willing to spend more money to get a better class of service. Obviously this means a couple of things

a) If you are marketing a health care service to wealthier Americans there is a willingness to pay for it. Of course that’s a well known fact to chiropractors, orthodontists, and cosmetic surgeons. But it might mean that other physicians and providers might start to think about providing better access and customer service, for a small fee (and I don’t mean insisting on $20,000 for concierge service). This is the Nordstroms approach, and one that health care providers should be thinking about emulating (and one that some are).

b) This willingness to pay is a minority effect — it’s a big minority and may be a majority in the case of referrals from someone the patient trusts.  But for most of these services more people are unwilling to pay extra, and of course large majorities of those with lower incomes, even those with health insurance, do not want to pay extra.

This tells me that continued bifurcation is likely to be the case when people seek health services that they have to pay out of pocket for, with roughly double the number who want to "trade up" skimping on "extras". Why does this matter?  Because in our brave new consumer world, cash may be an increasingly important way that patients pay for health care, especially for "minor" care out of their HSAs. So this correlates with much other data about user fees at the point of care–they tend to prevent lower income people from getting care (including often needed care).

Like it or not, we are slowly heading towards this future.  Unless, that is, you live in Rochester New York.

Meanwhile, (and this is a bit of a throwaway for Ron) the Kaiser Network Health Policy Report notes that the CBO is out with a study showing that "Uninsured workers are unlikely to purchase individual health insurance, regardless of whether they receive tax credits or other subsidies to help cover the cost of premiums, according to a report released on Friday by the Congressional Budget Office". Proving to my mind once again that high deductible health plans are not going to solve the uninsurance problem and that voluntary universal health care is a myth.

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12 replies »

  1. //Do you think Ron can afford it?//
    He’s the one arguing for the free-for-all ownership society. Time to put his money where his mouth is. 😉 ‘

  2. //Go ahead and put up a podcast of our commercials so everybody can get a “feel” of the HSA.//
    Matt – you should think about this. And you should charge more for running a podcast commercial than posting links.

  3. Ron,
    I agree completely. Recall this dire press release from FamiliesUSA:
    “According to Families USA, 14.3 million U.S. residents spend more than 25% of their incomes on health care; this number grew by one-quarter between 2000 and 2004.”
    When the claims in this statement were independently verified (by me), it revealed the following much less sensational reality:
    In 2004, it is estimated that about 4.9% of people in the U.S. were part of a family whose total healthcare utilization (by those under age 65) cost someone an amount equal to at least 25% of that family’s annual earnings; this number may have grown by 15% since 2000 from 4.1%.

  4. Matthew,
    I don’t believe that agenda driven garbage from the Kaiser Family Foundation and the Robert Wood Johnson Foundation, trust me I know. These people first come up with the results they want and they are totally biased. I’m sure, uninsured people won’t take free health insurance, come on.
    I have just produced our new HSA Radio commercials with special attention paid to slowing down all the uninsured from jamming our phones and website. I like to leave the uninsured to the rookie HSA salespeople. We prefer to switch people who currently have coverage because they have money and can just make choices. Our stats still have 20% uninsured enrolling which is half of the company’s stats.
    I will e-mail the commercials to you. My wife has always been the voice and I write the message. This time she wrote two of them and it’s like she was writing them with you in mind Matthew. Her voice is so much better than the others on your podcasts. Go ahead and put up a podcast of our commercials so everybody can get a “feel” of the HSA.
    Remember, these radio commercials will be on WJR, the boomer, in Detroit which blasts into Canada. That’s one reason we talk about the pain of Socialized Medicine. I always say President Bush but Pam took that out of the ones she wrote. She does put in her’s “Free and Open Markets”, which is nice. I couldn’t help myself and one commercial the message is:
    If you are a Union Worker you probably can’t go tax free with an HSA — But if you are self employed you can start today, go tax free with an HSA, at blah, blah blah. When you concentrate on the great American tax dodge, the tax free HSA, it keeps the broke people from responding.
    The Robert Wood Johnson propaganda machine should forcast what % of the market will have individual insurance in 5 years, ha ha. We dropped all the way down to 6% market share but in 5 years individual insurance will have 15% or more and growing. So we will be switching millions of people off dangerous group health employee plans.
    Reform has begun.
    That liver cancer story is stupid. These people get “student insurance” with a $100,000 max then complain because they were idiots. My daughter and her “boy friend” are moving to OR. By state law, her “boy friend’s” insurance is going up with us because he is required to add on maternity. If he gets liver cancer he has $8 million lifetime max before we pull the plugs. So my daughter won’t be blamming the President for her own stupid mistakes. I bet the $8 million coverage is cheaper than this “student insurance” too.

  5. On the Liver Cancer story: the really great thing about LiveJournal, as opposed to more professional “journalism” style blogs, is that you can join or build communities of common interest. That sort of thing could eventually have some sort of political impact.

  6. Head exploding is what we’re all about. But if health isn’t a public good, why is education?
    Meanwhile I’m reading (or actually on the verge of starting to read) a new book from the Cato guys on what they think we should do (which probaby fits closer to your paper). If you want to send me yours I can add it in the review. Of course I may not agree with every point.
    On the other hand, if we can get to a genuine coverage system that protects agains medical bankruptcies and the kinds of terrible impact on families like this one,http://www.livejournal.com/users/surrealbadger/309.html and it’s a market HDHP system, I’d take it over what we have now.

  7. Matt,
    Point taken, but my point is that you can’t force people to take what they don’t want (e.g. auto insurance, jobs, education), even by law, regardless of its rectitude.
    As you love to point out, health care is not a classic market, but neither is it a classic public good (Kenneth Arrow) as are education and defense, to which you refer. As I pointed out the other day, you have to realign incentives and change attitudes before you can affect the wholesale change you desire. I maintain that CDHC would require less change in attitudes, behavior, and time in the U.S., which alone will produce a cost savings compared to a single-payer system (SPS).
    I am not convinced that the entire cost of change to a SPS would realize a net savings compared to a change to CDHC. All the presumed savings of SPS assume starting from the point of immediate full-implementation assuming 100% buy-in by 300 million people. Canada hasn’t perfected it in 30 years with only one-tenth the population, which is relatively homogenous, and a large percentage of which are within a few hundred miles of each other. This sea-change in the U.S. would take at best a generation or three. I’m not saying that it isn’t doable, but we have to consider ALL the costs (direct and indirect), not just the savings.
    CDHC as I see it will free up government capital to invest in the IT infrastructure necessary for efficient health care; similar to the interstate highway system projects in the 50’s. That would be more consistent with the role of government as envisioned by the Constitution.
    As I’ve also pointed out before, I have no problem with universal health care financing (insurance is a misnomer), as long as the government doesn’t run it. Just look at the mess it has made of Medicare and Medicaid. I can see something closer to the VA system working, but even it re-engineered to a more market-oriented model in the 90’s. Of course, it also has essentially no budget constraints, and a relatively uniform (no pun intended) population.
    Some day I’ll send you my plan in this regard that I had to write for a snarky left-leaning (to be kind) professor on my candidacy exam. But I warn you, it involves HSAs, vouchers, tax and tort reform, and a constitutional amendment among other things that will make your head explode.
    I love this blog!

  8. //user fees at the point of care//
    In the current system, cost and difficulty are deliberately being used to discourage the poor from accessing care. If you tell a poor person that they will have to pay $2000.00 for the ER visit, they will go elsewhere and try to suffer it out, hoping they are wrong about those early signs of lymphoma or their raging case of typhoid will just go away. Poor people are inured to the idea society expects them to suffer if they can’t pay their way out of it.
    What county hospitals are currently doing is just as bad, though. Now the poor person goes through triage and gets a confirmation that they do need to see a doctor, though no tentative diagnosis to enable them to make any sort of decision about cutting their losses. *Then* they are routed to the payment area before they go to the doctor in urgent care. At the payment area, the clerk determines whether you have insurance, and they warn you that you will be billed if you don’t qualify for their programs. They don’t give you a ballpark on how big that bill will be. I’m not sure whether pricing transparency is appropriate at this point either: if I had been told it was $2000, then I probably would have left despite not having any good way of estimating my condition from the triage nurse. Furthermore, I would go away having already wasted several hours waiting for care.
    In my opinion, inflicting a financial burden on someone who is already sick/injured is going to be wrong no matter where you slip it into the process or how indirectly you try to handle it. Medical care should be handled on some sort of subscription basis, separate from point of care. The moral hazard problem should be handled in some way other than financial threats. Frankly, I think the wait time is a pretty good disincentive as it is, and the pundit ideas of hospital waiting rooms overflowing with people who don’t really need medical care is just a myth. If there is anyone “extrs” in the hospital waiting room, it’s indigent people who were rerouted there by failure of social services elsewhere.

  9. //Somehow we are going to have to get others to pay for what these people apparently don’t want, and then make them responsible enough to use it.//
    Well Joe,You have hit the nail on the head. As discussed elsewhere in the comments here when I was criticized for being oppsed politically ti HSas but still had one, I pay for plenty of things I don’t use and/or dont want to pay for. I dont have kids, but I pay taxes for schools, I don’t want troops in Iraq but I’m paying for that too. Unless you’re completely blind you know that some form of a universal health insurance system would be more efficient and cheaper than what we have now (it is in every other country). So why not force everyone to be in it?
    Or perhaps let me off paying for school taxes and any share that goes to the military?

  10. “Proving to my mind once again that high deductible health plans are not going to solve the uninsurance problem and that voluntary universal health care is a myth.”
    Wow! That’s quite a leap of (il)logic.
    At best, the study confirms what we’ve known for years: relatively young, healthy, single adults would rather spend their money on something else, regardless of cost (to a point). As with anything, we can argue about their decision, but it is THEIR decision. To generalize these results to any other population is inappropriate, especially since the pseudo-R-square is about 0.2. There is 80% of the variance in the elasticity difference that is not explained from these demographic factors and this financing option.
    I agree that “voluntary” universal health care is a myth; you can only force people that don’t want care to take it. I think you meant that voluntary universal health care INSURANCE (really FINANCING) will not solve the uninsured problem; this is true. Somehow we are going to have to get others to pay for what these people apparently don’t want, and then make them responsible enough to use it.
    Any ideas?

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