BLOG STARTUPS, VENTURE AND THE TECH BUSINESS

December 7 2011
by Todd Hixon

Consumer Driven Healthcare Proponents Finally Proven Wrong — NOT!

I’m commenting on a blog post by fellow Forbes.com contributor Rick Ungar: Consumer Driven Health Care Proponents Finally Proven Wrong. I am an advocate of consumer-driven health care, and I don’t agree with his conclusion.

Rick cites the example of Grand Junction, Colorado, a community that has achieved low health care costs (Medicare spend about 30% below average) and good outcomes through a regional program led by a physicians organization working together with a non-profit insurance company. The program emphasizes primary and preventative care and uses peer reviews and financial incentives to encourage doctors to avoid ordering unnecessary tests and procedures.

This is a great example of how much improvement can be realized from a coordinated, accountable health system, a thesis that I support and about which I have blogged.

But, I don’t see how this example proves consumer-driven health care wrong. The link in Rick’s logic chain that breaks is: “consumers … make fewer visits to the doctor as a result of having to pay a greater share of the cost of their visits” and thus do not benefit from good primary care. It doesn’t work that way, for two reasons.

The data I’ve found shows that consumers with more financial responsibility on average behave intelligently and do not skimp on preventative care (the study compared consumers with high-deductible health plans to those with typical low-deductible PPO plans). The consumers with more skin in the game had higher rates of annual physicals, wellness programs, and compliance with doctors’ recommendations, and they also questioned medical bills more frequently. They had lower rates of hospital admission and emergency room usage. Medical costs for this group are lower and growing slower (source).

And, empowered consumers can choose health plans that emphasize primary care and pay less for other services, because they know that this improves health and dramatically reduces total cost. MD VIP and Qliance, two of the Medical Home companies (the new name for intensive primary care) have published very compelling data on the total cost savings that result from intensive primary care. Consumer-driven health care means (to me) that consumers have more financial responsibility and more ability to decide how their health care dollar is spent. Actually, I like to talk about “customer driven” health care, which brings in the plan sponsor because, for working people, health care is effectively a joint venture between consumers and plan sponsors. A major union local in the Puget Sound area offers members financial incentives (lower weekly contributions) if they sign up for a medical home program. The customer is empowered here, and everyone wins (except for the medical providers who want to sell unnecessary service). Qliance is a NAV portfolio company; learn more at Qliance.com.

By the way, there is no contradiction between customer-driven health care and accountable care. Empowered health care customers can direct their dollars to accountable care organizations that deliver good outcomes, lower costs, and other aspects of a good service.

I don’t pretend that customer-driven health care is the total answer or works for everyone. After all, 20% of the U.S. population uses tobacco! However, the U.S. health care system will eat infinite amounts of money if no one pushes back. Nothing pushes back like the invisible hand of Adam Smith, i.e., a market. The health care system overspends in big and little ways. No administration can catch it all; it takes the vigilance of individual customers to find the little excesses that add up to tens of billions, e.g., ridiculous overcharging for generic drugs (more).

I do believe that most people are smart. With education and advice, and working together with plan sponsors, they can make choices that drive both better health and big savings.

This post first appeared on my Forbes blog (link).

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