Needed: A health system for adults

We have met the enemy and it is us. The extraordinarily high cost of American health care has been blamed by policy experts on insurance companies, pharma, malpractice lawyers, hospitals, physicians, the government and the lifestyle/behavior of many Americans. Indeed, a recent public opinion survey shows that the public is willing to blame all of the above for the rising cost of health care in the U.S.: insurance companies (75%), pharma (74%), people not taking responsibility for their own health (64%), the cost of malpractice insurance (62%), the government (59%), hospitals (53%), and doctors (30%).[1] And a comprehensive PricewaterhouseCoopers (PwC) study confirms that there's plenty of blame to share across a wide range of actors.

Click to enlarge.

But there's an important group missing from all of these lists: American consumers. And therein lies a tale.

A recent study in Health Affairs highlights several problems with the attitudes of American health care consumers. These findings were based on focus groups conducted in Santa Monica, CA and Washington, DC. So it's certainly possible they did not represent the views of average Americans. However, according to national survey of 1,000 working-age adults commissioned by CIGNA, only 20% of women and 15% of men bother to compare the costs of doctors and medical procedures vs. 15% of men. This, as you'll see, is quite consistent with the resistant attitude of health consumers towards considering costs that is documented in the focus group study.

If these findings truly are representative, we have a real problem that will challenge our best efforts to contain costs even if insurance companies, pharma, malpractice lawyers, government, hospitals, and physicians are on their best behavior.

Focus group participants were asked to imagine they had various symptoms and were given a variety of diagnostic and treatment choices whose effectiveness differed only slightly, but whose costs varied dramatically (for example, an MRI is roughly twice as expensive as a CT scan). The first problem, according to Dr. Susan Door Goold (one of the study authors) is that "patients for the most part did not want cost to play any role in decision-making." Right. And little children for the most part don't want to eat their vegetables and would vastly prefer to eat their dessert first.

A related (betraying a similar, immature attitude) and unexpected finding was this:

There was an almost vengeful attitude toward insurance companies, the idea that "I've been paying in and now I'm going to get what I'm owed," or "I'm going to get them back for all the money I've paid in all these years."

Admittedly, I've never conducted a survey or focus group on the topic, but I don't get the impression that most people have the same attitude towards their auto or homeowner's insurance. Indeed, to the extent I've had any experience with this, people seem to sensibly be cautious about submitting nickel-and-dime claims for automobile mishaps or minor technically insurable events involving their house knowing that they may well more than pay for this in the form of higher premiums down the road.

What is it about health insurance that inspires this "payback" mentality? The fact that health coverage is tax-subsidized-hence far more lavish and expensive than it need be-certainly can't help. But it also cannot help to have the chattering classes engaged in a persistent battle to vilify insurance companies at every turn. Indeed, some Americans might feel it's their civic duty to wrest every penny possible from those evil insurance companies.

But contempt for insurers is not the whole story. Focus group participants exhibited "a lack of interest in costs borne by insurers and society as a whole; and noncooperative behavior characteristic of a "commons dilemma," in which people act in their own self-interest although they recognize that by doing so, they are depleting limited resources." In short, consumers just didn't care. And why should they? Thanks in large measure to misguided policy prescriptions intended to make health care more accessible and more affordable, we are paying the price for having created a system where only 11 cents of every health dollar is paid directly out-of-pocket. Consequently, we have gotten exactly the kind of consumers one might expect in a system whose incentives have gotten so far out of whack.

How big is the monster created by misguided policies? Just getting rid of the tax exclusion for employer-based health coverage alone would lower group premiums by 45%![2] Think of that 45 percent as being a measure of just how much cost-unconscious behavior by consumers adds to our health care bills. Given that the U.S. spent $845 billion on employer-provided health coverage in 2011,[3] that implies that $400 billion in waste can be attributed to the perverse incentives for patients not to know or care how much the health care they use actually costs-a figure that swamps any of the figures shown on the PwC compilation.

Yet rather than get the leadership we were promised from candidate Obama in 2008 to make "hard decisions" on entitlements or the solemn assertion of President Obama (months before Obamacare was enacted) that he wanted a "serious conversation" about health spending,[3]  we got something else.  As one pundit put it:

Obama may speak of tough choices but he has been remarkably unwilling to make them, or to force his close allies to do so....Obama could have shelved his expensive healthcare reform in these tough economic times, focused on real job creation, and tried again in a second term, on the back of a recovery. Instead, he used a variety of accounting tricks to make his healthcare reform look affordable and used the brute power of the presidency to push it through.

In short, the president-elected to represent all the people-instead ignored the mountains of public opinion data revealing persistent opposition to his health plan to do what he thought would be good for his own legacy and his own party.[4] Sound a little self-centered? If this is what we get from our leaders in Washington, why should we expect the public to behave any differently?

A health plan that forces everyone to chip in to spare Sandra Fluke the cost of her own birth control, isn't a plan designed for adults. It's a transparent political pander designed to appeal to voters eager to offload as much of the cost of health care onto somebody else. If childish behavior was one of the major contributors to America's excessive health care spending, encouraging more of the same surely cannot be the solution.


[1] Respondents also cited advances in technology (40%) and an aging population (39%), but I'm trying to focus on factors where a particular group or behavior was blamed.

[2] That claim is made in Cogan, Hubbard and Kessler's Healthy, Wealthy and Wise (p. 29) but is based on a paper by Charles Phelps.

[3] Table 4 here.

[4] In his 2008 inaugural speech, the president reiterated this theme: "Our time of standing pat, of protecting narrow interests and putting off unpleasant decisions - that time has surely passed." In January 2010, before his strategic decision to proceed on health care, President Obama appeared to recognize the central importance of spending on health entitlements in creating our long-term fiscal crisis and claimed to want a "serious conversation" about Medicare's insolvency.

[5] I've earlier provided a full blow-by-blow, but to recap: a) In late 2007, candidate Obama assured voters: "we're not going to pass universal health care with a 50-plus-one strategy," alluding to the "working majority" he planned to assemble to get this monumental task done; b) passage of the most sweeping reform of health care since Medicare on a pure party-line vote was a maneuver completely without precedent in American history; c) since the summer of 2009, public opinion had consistently shown sharp opposition to the president's health plan, with opponents consistently outnumbering those who favored the plan by 8 to 10 percentage points in poll after poll; d) by February 2010-when the president made his fateful decision to plunge ahead-the average of public opinion polls showed opponents of the bill (54.4 percent) outnumbering those who favored it (37.4 percent) by a full 17 percentage points.


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