The lonely consumer

One of the trends which troubles me a little in the U.S. health care debate is the push to foist “choice” on us. Giving individuals “choice” seems to be the new panacea for health care, as if we didn’t already have some choices – here in the land of the “free market.” If only individual consumers had more choice over the way their health care dollars are spent, or so the argument goes, the more prices for health care would come under control, and the better care we would receive. On the surface it seems reasonable enough. After all, who doesn’t like having the freedom to make their own decisions.

Here’s my problem with it (there are actually several – bear with me). Having more health care choices tends to be a much better deal for healthy people; especially considering the choices suggested in the U.S. (less expensive policies with higher deductibles, health savings accounts, etc). If you are someone with no health problems, which health insurance plan are you more likely to purchase? Are you more likely to choose an expensive health insurance plan with little or no deductibles and inexpensive co-pays, or a cheaper plan with high deductibles which covers a percentage of catastrophic care only? I’ll wager that 99 percent of the time you’re going to go with the cheaper plan – the cheapest perhaps being private contributions to a health savings account (HSA). The catch here is it defeats or undermines the best feature of health care systems: risk sharing. Most healthy people don’t plan to be sick. It’s a surprise. Human nature tends to make us believe we’re invulnerable, until we suddenly find out were not. We inadvertently underestimate the amount of coverage we need (there are aren’t many reliable ways to predict how sick we’ll be, or when), making the allure of an HSA particularly strong. In the mean time, healthy people would be putting less money into the system, thereby making it harder to cover the people who really need it – and possibly leaving more (unexpectedly) sick people with woefully inadequate coverage, despite a few grand saved in a meager HSA. Consider that people already find out their coverage is insufficient, when it’s too late – without this choice of stripped down plans and HSAs. I fear this is a prescription for disaster.

This wouldn’t be a problem if “choice” (re: independent consumers, unleashed from the the constraints put on them by their insurance companies, and spending their own dollars saved in HSAs) by itself led to significantly lower prices; but I have my doubts. In certain large economic systems, unorganized individuals tend to have less choice (perhaps the same amount at best), not more. The trend in health care, like many large industries, is to consolidate. As an individual health care consumer, you’re not necessarily negotiating price with a local provider, you’re “negotiating” with the local branch of a health care corporation. If there are few companies operating in your area (or if you’re in a rural area and there’s just one) how much leverage do you have as a single consumer? Where I live (a relatively large market for health care – they used to call it “God’s waiting room”), if I need blood work done I can go to Quest Labs in Palm Harbor, Quest Labs in Clearwater, Quest Labs in Tampa, Quest Labs in Pasco, LabCorp in Palm Harbor, LabCorp in Clearwater, etc. That may look like a lot of choices to some, but it really isn’t. It’s easy to say you’re for choice. It sounds good, it’s easy to say… and it means nothing. The tricky part is identifying what those choices really are, and where the pitfalls lie. Unless we’re going to force corporations that are responsible for providing a chunk of our care (or the care that’s most expensive anyway: labs, hospitals, etc) to un-consolidate, I see no practical difference between “free market” care and government care, so far as choices are concerned.

The other factor in the price we pay is demand. As much as we’d like to make analogies to other industries, getting health care isn’t like purchasing other goods on the open market. It’s very nature leads to much higher demand. If I’m a diabetic who needs insulin, I need insulin. Its not like going to the grocery store and deciding to pass on the broccoli because green beans are on sale. If the price isn’t right on a new television I can wait for a better price with few consequences. If I wait for health care, it could kill me. I’m no expert (my last class in economics was in high school, and it wasn’t my favorite subject then), but it seems to me that the current climate of low supply (or even sufficient supply, with few real choices – because of “free market consolidation) and high (inherent) demand leads to high or relatively fixed prices… regardless.

If consumer choice is the way to control prices, then a system held up as a model for consumer choice should be less expensive. The Swiss system has been such a system. And it seems they do spend less… only 11.5 percent of their GDP, compared to 15-16 percent in the U.S. However, I’ve also read that total cost in proportion to GDP is rising faster in Switzerland than in most other countries (above average, as reported by the WHO; although I don’t know how fast it’s increasing compared to the U.S.).

Let me be clear that I mean no offense to the Swiss. The purpose of this entry is not to attack or put down the Swiss health care system. The U.S. would do well to have a universal system as good as the Swiss, considering what we’ve got now. But let’s be clear, the Swiss system isn’t exactly the model of “free” market health care that it seems to be made out to be. From what I’ve read the Swiss system relies heavily on significant government regulation and price controls. Can you honestly say a system that (in part) relies on price controls is really realizing lower costs because of choice or competition?

This doesn’t have much to do with the rest of this entry, but just for fun… try arguing for price controls with a conservative politician in the U.S. Talk about good times!

Interestingly, I’ve heard the Swiss system compared to “Clinton Care,” or “Hillary Care” (the more popular name since she started running for president), which of course was the doomed Clinton universal health care proposal from the early 90’s.

Now isn’t that rich? A health care system that was characterized as a disaster in waiting, fraught with government meddling and depicted in scary TV ads suggesting you won’t be able to see your doctor any more… is now held out as a model for consumer choice in the world (second to the U.S., of course). I don’t know wether to laugh or cry.

Note: It’s probably pretty easy to rip into this entry, filled as it must be with rambling and hasty comments which undermine previous points. I my defense, I can only say that I’m happily medicated today. At least the steroids seem to be doing their thing :-)

Give the gift of words.