Center for Business and Economic Research - Ball State University


CBER Data Center
Projects and PublicationsEconomic IndicatorsWeekly CommentaryCommunity Asset InventoryManufacturing Scorecard

About

Commentaries are published weekly and distributed through the Indianapolis Business Journal and many other print and online publications. Disclaimer

RSS Feed

Disclaimer

The views expressed in these commentaries do not reflect those of Ball State University or the Center for Business and Economic Research.

Recent

Bank Failures Warn of Deeper Economic ProblemsDuring the Great Recession, a whopping 0.014 percent of banks were closed by the FDIC.

Remote Work Through the Eyes of Three 20-SomethingsRemote work is here to stay.

Remote Work and Labor MarketsThere are more remote workers today than there are immigrants in the U.S.

The Amish in IndianaIt is hard not to draw similarities between the Amish and newer immigrant groups.

View archives

Top Tags

jobs and employment 228
economics 176
education 146
economic development 144
state and local government 124
taxes 122
finance 108
budget and spending 100
recession 100
indiana 99
Browse all tags
Reporter / Admin Login

March 27, 2006

Consumer Driven Health Care is Coming

I once had a doctor – I no longer remember who – that shared with me a little joke about medicine that comes to mind every year as I get older and more susceptible to life’s little ailments.  Doctors, he said, don’t really cure anything.  They just let you trade in one malady in for another.

I know he was talking about the side effects of medicines and treatments we take for our weak hearts and faltering knees.  But I keep thinking that it applies equally well to the situation of health care financing as well.  Employers, governments, and individuals are being crushed by the mushrooming costs of health care goods and services, and most are not happy about it.   Yet the cures to these problems – if anything can be said to truly cure them – are things we won’t like either, at least at first.

Of course, to even get started on this discussion we need to agree on what the problem with health care financing is.  And that’s not easy.  Many people think that the problem is high costs, and the only way they know to solve it is to shift the cost for what they consume to someone else. 

There is a lot of that going on in health care.  Medicare cuts reimbursement rates and effectively shifts hospital costs to private payers.  Cash strapped Medicaid programs in states tighten eligibility and push more people out of the program, pushing costs to community hospitals that care for those who can’t pay.

But the problem isn’t really high costs, by themselves.  With our affluent, aging population, in an era of rapid advancement in medical science, it would be surprising if health care did not consume an ever larger proportion of our total spending.

It’s what we’re getting for that spending that is the problem.  The United States spends at least 50 percent more per capita on health care than other industrialized countries, yet on fundamental measures like average life expectancy and infant mortality we rank no better than average, and often worse.  We practice expensive medicine, largely because we are shielded from seeing the true costs, with little, if any, improvement in outcomes.

Enter the idea of “consumer-driven” health care.  It’s a very simple, appealing idea.  Put consumers in charge of decisions on what services and drugs they use, and they will force providers to be more responsive and efficient.  Leave insurance, the third-party payer, there to step in only for the catastrophic events that overwhelm our ability to pay.

But as everyone who has investigated the high-deductible/health savings account (HSA) insurance plans offered by many employers these days knows, there is a big catch.  The only way you, the consumer, can be said to be truly in charge of your health care spending is to spend your own money.  That means money out of your own pocket.

When you’re spending the money you’ve taken out of your paycheck and put into your HSA on things like physical therapy, pain medication, or even followup doctor’s office visits, you will ask the question – do I really need to do this?  For all of us who have never known anything but third-party payer systems, it is an utterly foreign concept.  We have lived our entire lives having someone else – usually a medical professional – tell us what we need.

And maybe we’d like to go on that way.  From the point of view of those of us with employer-provided health care, consumer-driven health care replaces one problem with another.  We now need a lot of information – on the price, the quality, and the effectiveness of care and treatment options – we didn’t need before.  And worst of all, we’ve actually got to spend our own money.  More of it, in fact, than we would have under our old plans, unless we ratchet down our use of routine drugs and services.

Those facts probably explain why those who have opted for HSA’s and high-deductible plans thus far tend to be younger, less obese, more likely to exercise, and generally less likely to consume health care.  Look for that to change in the near future, as cost differentials widen.

Link to this commentary: https://commentaries.cberdata.org/225/consumer-driven-health-care-is-coming

Tags: health care, finance


About the Author

Pat Barkey none@example.com

Patrick Barkey is director of the University of Montana Bureau of Business and Economic Research. He has been involved with economic forecasting and health care policy research for over twenty-four years, both in the private and public sector. He served previously as Director of the Bureau of Business Research (now the Center for Business and Economic Research) at Ball State University, overseeing and participating in a wide variety of projects in labor market research and state and regional economic policy issues. He attended the University of Michigan, receiving a B.A. ('79) and Ph.D. ('86) in economics.

© Center for Business and Economic Research, Ball State University

About Ball State CBER Data Center

Ball State CBER Data Center is one-stop shop for economic data including demographics, education, health, and social capital. Our easy-to-use, visual web tools offer data collection and analysis for grant writers, economic developers, policy makers, and the general public.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues affecting the state and nation. Learn more.

Terms of Service

Center for Business and Economic Research

Ball State University • Whitinger Business Building, room 149
2000 W. University Ave.
Muncie, IN 47306-0360
Phone:
765-285-5926
Email:
cber@bsu.edu
Website:
www.bsu.edu/cber
Facebook:
www.facebook.com/BallStateCBER
Twitter:
www.twitter.com/BallStateCBER
Close