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Overhauling the system: Rising costs and consumer-driven care

Posted by on November 28, 2011

An overhaul of  the health-care system much bigger than what’s been described so far is necessary, writes Robert Samuelson in The Washington Post.

“What propels U.S. health spending upward? The …  answer comes in two parts: steep prices and abundant provision of some expensive services. In 2007, an appendectomy cost $7,962 in the United States, $5,004 in Canada and $2,943 in Germany. A coronary angioplasty cost $14,378 in the United States, compared with $9,296 in Sweden and $7,027 in France. A knee replacement was $14,946 in the United States, $12,424 in France and $9,910 in Canada. Knee replacements in the United States were almost twice as common per 100,000 population as in the rest of the OECD. So were MRI exams and angioplasties.”

Coming at the problems of our system from a different direction, Politico runs a thoughtful piece about how the recession appears to be one cause of a recent slowdown in health-care spending. It goes to the heart of the question of whether consumer-driven health care — the way people refer to the high-deductible plans currently on the rise — will really put more “skin in the game” for consumers of health care.

The argument goes this way: most people are accustomed to the standard $20 copay insurance model, meaning that pretty much whatever medical procedure or event they have, there’s only $20 at risk. This tends to mean that people overuse care, the argument continues. Putting a high-deductible plan into place means people have to think carefully about spending on health care, because they’re spending their own money, not the money of the insurer.

The Politico piece reaches back into history for this passage:

“A study that the RAND Corp. ran between 1971 and 1982 is widely cited by both sides in the debate over consumer-directed care. RAND randomly divided 2,750 families into four fee-for-service health insurance plans. One plan covered 100 percent of health costs. Under the other three, consumers had to pay a portion of their expenses, ranging from 25 percent to 95 percent.

“Conservatives note that those who paid a share of their costs spent 20 percent to 30 percent less than those who had full coverage. The research also showed no health consequences for most of those who paid more out of pocket for their care.

“But the RAND study — conducted in an era when health care prices were lower and people tended to spend less of their income on health than they do today — also found that consumers did not necessarily reduce health costs in the smartest way. They didn’t shop around for the most cost-effective treatments. They simply avoided going to the doctor. And this did have negative consequences for the poorest and sickest 6 percent of patients, even though their out-of-pocket expenses were capped.

“The impact on those with high blood pressure was the most dramatic. Patients with full coverage were projected to have a 10 percent lower death rate than those who had to share the costs because their condition was better managed. A later RAND study found that families with high out-of-pocket costs also skipped preventive care such as childhood vaccinations, mammograms and screenings for colorectal and cervical cancers.”


One Response to “Overhauling the system: Rising costs and consumer-driven care”

  1. song says:

    Fascinating write up Jeanne. A couple of authors over at Forbes.com have also been debating over this topic – does consumer driven health care help in controlling costs. I thought their discussions are worth a read too. See http://www.forbes.com/sites/rickungar/2011/11/27/consumer-driven-healthcare-proponents-finally-proven-wrong/

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