Forcing Medical Patients To Be Consumers Wreaks Havoc on Our Health System

By Niko Karvounis, Health Beat. Posted February 22, 2008.

One of the most common justifications for consumer-driven medicine is reduced health care costs. The reasoning here is two-fold:

• Since they're high-deductible and low premium, consumer-driven health plans require more out-of-pocket spending. Consumers are more cost-conscious when they have to actively shell out for purchases. As a result, they will user fewer health care services -- and thus overall health care costs will fall.
• If consumers are in the driver's seat, competition in an open market will drive prices down. For-profit providers will want to offer the best deal to get the most business. Consumers will also have better information thanks to the commoditization of medicine, which will translate medical jargon into universally comprehensible knowledge. Smarter consumers translate into less over-payment for services.

This is standard-issue free market orthodoxy at its finest. Unfortunately, this isn't the whole story. In fact, there's an even stronger argument to be made that consumer-driven health plans could lead to higher health care costs.

The Wrong Patients Forgo the Wrong Care

Research by the RAND Corporation's health insurance experiment shows that when you shift costs to the consumer, patients forgo both wasteful and effective care. And this is particularly true of the patients who cost us most in the long run -- those suffering from chronic diseases.

A 2007 paper from the National Bureau of Economic Research looked at retired California public employees on Medicare, and its findings contradict some of the basic assumptions of the consumerist movement.

The study's authors -- from Harvard, MIT, and the University of Oregon -- found that chronically ill patients who are asked to shoulder more of their health care costs deferred, neglected, or opted-out of doctor's visits and drugs when the price got too high. This short-term cost reduction led to long-term catastrophe, as their hospitalization rates were significantly higher than other patients suffering from chronic diseases. Immediate savings ultimately led to a greater -- and otherwise preventable -- use of more expensive care. Oops.

This makes a certain amount of sense. Chronic diseases are not always in-your-face. They often simply simmer. But if the disease isn't managed, ultimately it explodes. Until that happens, it's easy to ignore the problem, especially in a context of consumerism that places an emphasis on convenience above all else.

Meanwhile, chronic disease is the big ticket item in our health care system. You might think it would be cancer. But most people with cancer either die or survive -- they don't linger on, in need of continuous care, for twenty years. Ten percent of the nation's sickest patients run up 70 percent of our health care bill, and most of them suffer from one of five chronic diseases (diabetes, congestive heart failure, coronary artery disease, asthma and depression). You can't manage costs unless the system is built to manage chronic diseases. Period.

Here consumerists would point out that more transparent information would help consumers make better choices. But the reality is that no one looks at health care costs in a vacuum -- it's one of many expenditures that individuals and families have to juggle. Even if a chronically ill patient knows exactly what to do, he or she might be unlikely to do it when given the option to pay for treatment or something else. That might be the "consumer's right," but it means higher long-term costs for everyone.

Consumer-Driven Medicine Turns Health Care into a Commodity

In a market-driven health care system, businesses try to maximize revenue and minimize cost. The quickest way to do that is to market what's already out there, rather than waste time on true innovation.

Retail health clinics, for example, want to "cross-sell" by encouraging patients to pick up other products that the store sells on their way in or out of the clinic. Why? Because it's a low-cost way to increase profits: shuttle patients from the clinic to the prescription counter, no muss no fuss.

A similar reasoning prevails in the prescription drug industry. A January study from York University found that the U.S. pharmaceutical industry spends almost twice as much on promotion as it does on research and development. Again, it's easier to troll for new customers than to build a better product. Every enterprise wants to leverage existing assets for as much profit as possible rather than incur the cost of something new and risky. Volume becomes more important than quality.

Even when something new does come along, the emphasis is still on volume of consumption rather than actual effectiveness. Recall a recent post of mine on numbers needed to treat. Even though this stat is the final word on drug effectiveness, it gets no airtime in drug marketing. Lipitor, the world's number one cholesterol-lowering drug, only helps one percent of the people who use it. But this number is nowhere to be found in the drug's advertising, and despite its relative ineffectiveness it still makes up a full one-quarter of Pfizer's profit and has been prescribed to over 26 million Americans.

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