Quite a bit of intellectual and policy effort has been put behind the paradigm of the individual patient as a consumer. This is the core thesis of the high deductible health plan policy push where exposure to high first dollar cost sharing will lead to price and utilization discipline. People will be inclined to price shop for high value services and decline low value services at almost any price.
That is the the theory.
Brot-Goldberg et al (2015) shows that this is bunk, at least in how a general population reacts to deductibles:
We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services). We then leverage the unique data environment to study how consumers respond to the complex structure of the high-deductible contract. We find that consumers respond heavily to spot prices at the time of care, and reduce heir spending by 42% when under the deductible, conditional on their true expected end-of-year shadow price and their prior year end-of-year marginal price. In the first-year post plan change, 90% of all spending reductions occur in months that consumers began under the deductible, with 49% of all reductions coming for the ex-ante sickest half of consumers under the deductible, despite the fact that these consumers have quite
low shadow prices. There is no evidence of learning to respond to the true shadow price in the second year post-switch
But what if this is merely an information problem instead of a human behavior/processing problem? Could this paradigm still work?
This morning, one of my Duke Margolis colleagues, Michael Frake of Duke Law along with Jonathan Gruber and Anupam Jena looked at the behavior of a hyper informed group of patients as consumers: doctors getting care. We would expect that doctors are highly skilled, compared to the general population, in differentiating low value and high value care. They, after all, unlike the typical patient, had gone to medical school even if their post graduate training was not relevant to the problems that had sent them to get care from other doctors. We should see a result if the patient as a shopper/consumer problem is merely an information problem.
Well… let’s look at the results:
Our results suggest that physicians do only slightly better than non-physicians – but not by much and not always. Across most of our low-value settings, physicians receive less low-value care than do non-physicians, but the differences are modest, and generally amount to less than one fifth of the gap between what is received by non-physicians and recommended guidelines. The
results are slightly more mixed in the case of the high-value care analysis, with some evidence suggesting that physicians appear to receive high-value care at roughly the same rate received by non-physicians and some evidence suggesting that physicians do slightly better than nonphysicians. These results provide a rough boundary on the extent to which additional information disclosure (beyond prevailing levels) can be expected to improve the delivery of health care in the U.S. Relatedly, these findings suggest that, despite the threat to the optimality of the health care system posed by information asymmetries between physicians and patients (Arrow 1963), most of the explanation behind the over- and under-utilization of low- and high-value services likely arises from factors other than informational deficiencies of patients.
Translating that out of economics and into English, information matters a little bit. There is a slight reduction in low value care and there might be a slight increase in high value care. And this is for the subgroup of the population that is most qualified to evaluate medical information. Frakes, Gruber and Jena establish an upper bound of the value of medical information for individual decision-making. And it is not zero but not a system changer either.
So what does this mean for policy? If the best informed sub-population can use their informational skills and training to reduce low value care by only 20%, most of us will do far worse in this particular task. To me, that adds onto the pile of evidence that the patient as a consumer model relies on a false assumption that the patient is a good shopper and a good evaluator. If we want price discipline, than we need, as a society, to make those choices and put in either explicit “No’s” into the systems or create meaningful price spreads. Creating meaningful price spreads can mean narrow networks or tiered networks where high value providers that follow clinical guidelines are far cheaper for the patient to use. Creating meaningful price spreads can mean the proliferation of value based pricing strategies where high value/high efficacy treatments are low or no cost sharing while low value treatments are high cost sharing or require significant administrative burden. This is technocratic tinkering that has to be done at either the insurer level or a governmental level. If we as a society deem spending fewer resources on healthcare while holding or improving quality is a desired result, then the model of the patient as a consumer runs into a brick wall of reality.
Betty
David, I hope your research and analysis is reaching the right people. Our health care policy has been long driven by these myths about the individual consumer making market-based decisions. Hogwash! Hope you can get this info to some of the Dem campaign folks.
Betty Cracker
Yet more evidence that a market model where informed consumers make rational purchasing decisions simply doesn’t work in healthcare — thank you for highlighting it.
p.a.
It’s been 40 yrs since I took an undergrad econ course. Are they still teaching, at the econ 101 level, that the consumer is a rational actor, despite the rise of behavioral economics? (I was on the cusp of the change from ‘complete information’ to ‘sufficient information’: both bullshit)
J R in WV
I have always believed that the concept of a patient shopping for health care is so much bunkum. I am not at all interested in a low-price surgery — I want it to be super sterile, experienced staff from surgeons to assistants. The best anesthesiologist (I have had mediocre guy punching my shoulder looking for the nerve to block — no thanks!)! The best surgeon replacing my joint!
I do want a good price on the generic support drugs my doctor prescribes — one of which went from a $5 co-pay for a 90-day supply to thousands of dollars from one pharmacy visit to the next. Can you spell Martin Shkreli? Not him, but the same event, trust fund guy buys a popular generic and runs the price up by 5000%. I should look him up and take a meeting with him!
But like most people, I will go to the hospital imaging center where my family doctor practices, to the surgeon he recommends, to the specialists he knows and prefers. Fortunately he is closely associated with a good teaching hospital, knows well which doctors have the best outcomes, and provides great advice. We’ve been seeing the same guy since about 1979. Board certified Family Practice, followed by Cert as a gerontologist, as he realized all his patients would be come old eventually. Eccentric guy, but a great doctor.
But people without a primary care doctor? What can they do if they fall and are injured? They see someone recommended by the ER – not always the best specialist as we have learned through painful experience.
The idea that shopping for medical care, even with great pricing information, which doesn’t exist at all, is a fantasy. No one actually knows what a patient really needs up front, and it can take a lot of expensive work to find out what is really needed.
Ruckus
@Betty Cracker:
Illness throws rational out the window so fast you’d have thought that it actually caused pain to use. You want to get better and not feel like shit, not worry about something which you can often do nothing about. Money
Ruckus
@J R in WV:
And as we get older and acquire diseases which will disable us worse than just aging and usually have less money, just feeling OK can be a big hurdle.
MattF
I’ve been in and out of doctor’s offices, hospitals and outpatient facilities for the past year and a half (nothing dire, thankfully), and no one– no physician, no nurse, no assistant, no para-anything– has even alluded to the prices of medications, procedures, lab tests, or visits.
The big choice one makes seems to come down to the choice of a particular hospital system, everything appears to follow from that. I get an occasional EOB form, but that’s it, pretty much.
ETA: Now, I recall that the little old lady who wheeled me out of of the lobby of a local hospital whispered to me that I should ignore the request for payment that the hospital would make at the exit doorway.
JKC
@J R in WVA-
You’re spot on about ER referrals. Most of the time, if you get a specialty referral from the ED, it goes to whoever is on call, not whoever is best suited to follow up on the problem.
JKC
@MattF- Clinical staff don’t talk about prices to patients because most of us have no idea how things are priced. It’s ridiculous.
Butch
Bleeding? Stop by for an estimate.
People at the doctor’s office are there because they’re worried about something. They don’t have the time or energy to be “informed consumers.”
David Anderson
@Betty: I know I’m read by the right people.
As far as my relationship to healthcare and markets, it is a lot like my relationship to the first woman I loved and who loved me back — it’s complicated and twisty. I think I need to write that up a bit more later this week as putting it on paper should discipline my thinking.
jl
I don’t see how the consumer price shopping can work at all for conditions where there are consequences over the annual life spans of the insurance contracts, there is way too much room for insurers and providers to use price discrimination to game the wedge between their short term revenue/profits and long term social cost/benefit of care. And with the massive use of price discrimination in US health care market and very strong local and regional, sometimes statewide oligopolies, it’s just unworkable. And we need to make huge progress on many providers even being able to quote a reliable spot price for a well-defined bundle of care.
I think Dave is getting way lost in the deep weeds. At some point the fundamental economics and lax regulatory structure of the health care market becomes so dysfunctional consumer choice can’t solve the problems. We got now, what, like over 20 countries that get better results at a much lower percentage of GDP. You want to towards improved Obamacare, look at the Netherlands or Switzerland. You want to go Medicare for All, look at Australia. You can look at New Zealand. Germany. Taiwan.
I just don’t see the kind of technocratic tinkering that involves putting even more burden on the consumer in the current mess we have for a health care system, that Dave is talking about, going anywhere interesting in the current US health care system. Don’t get me wrong, it needs to be explored to get the best we can from this mess, but no real solution over the long term.
CODave (pka NJDave)
I want to join in the “Thanks David, for highlighting this!” and the views of many that “It was always transparent BS!”
I recently had emergency surgery. The surgeon who operated is absolutely top notch. I’m alive and well due to her skill and team leadership (intern: “Shouldn’t we do a CT scan?” Surgeon: “No, I’ve seen enough.” By the time they got me to the OR from the exam room the infection had visibly spread, validating the surgeon’s emphasis on speed.)
Now, what well informed decision did I make? I got a Silver plan with one of the best hospitals in the state in-network. It also was one of the closest to where I lived. Maybe one could argue that picking an insurance plan was an informed medical decision. Yeah, right.
Meyerman
A long time ago (1999), my friend was an internal medicine resident. The chief of her program was Hal Sox, editor of the Annals of Internal Medicine, which had just published a study comparing sigmoid versus full colonoscopy. Long story short, full colonscopy did not catch enough cancer or pre-cancer to make it better choice than sigmoid colonoscopy, all things considered. Hal was interviewed by NPR about the paper and he intoned all the solemn cost vs. benefit, rigorous controlled study words that he was expected to provide. See, back in those days, cost containment was a thing. But I will never forget: as they ended the interview Sox was asked which procedure he would choose for himself as a colon cancer screen. His answer: full colonscopy.
Betty Cracker
@Ruckus: True, and if it’s your child, it goes out the window even faster.
Capri
Nobody can be a rational price shopper for anything if the price of the item they are buying is “it depends.” Go to the grocery store and try to get the best price for butter when instead of one price for a pound of butter there are 10 prices for each brand and the prices overlap and have various ranges. See how rational consumers become then.
It always struck me that the folks who believe that “market forces” will correct the health market despite all the other factors at play are basing that solely on their belief that the invisible hand is a magical corrective. Is there any data anywhere that has shown something other than what was described in this post? But people keep tinkering because, like conservatism, market forces can not fail, they can only be failed.
NY Robbin
Small World Alert: the cited author in the OP (Zarek Brot-Goldberg) is my cousin’s son (with unusual taste in children’s names).
jl
@Meyerman: @Betty Cracker: That brings up another issue for any consumer health care decision that involves irreversible consequences or large changes in probability of death or permanent disability: when changes in the probability of death or permanent disability as a result of a decision over a short time horizon is large, there is really no economic theory or data to guide how people ‘should’, or do, make decisions.
The theory and methods that economic wonks prefer, from real world market decision making, calculates the value of life and health from data on consumer decisions in product and labor market that involve very small changes in annual probability of death that swing around a very low base probability. What you do is you blow those far below one percent changes around a below one percent base probability up to one hundred percent and call that ‘the statistical value of life’. What do those estimates mean for much larger changes in probability of death or disability that are common in health care? No one knows.
So the next best alternative is to ask people in hypothetical choice situations in surveys and questionnaires and dump a load of fancy multivariate statistics on that data. The results are unstable and vary from study to study.
There is a lot of hocus pocus bogus scientism involved in the sage advice the wonks pump out, IMHO. I probably qualify as one of the wonks, so it’s on me as well as others.
patrick II
@J R in WV:
I have always found that getting the best family care doctor you can is very important, not just for his work but for his frankness and recommendations. He knows who the other good doctors are and he’ll tell you. I even have had a couple of occasions where they recommended NOT going to someone — and that’s probably even more important, and unusual.
Villago Delenda Est
One does not go shopping for health care when one is in the middle of a coronary emergency.
Market based solutions suck, particularly when you are deliberately prevented from looking at price tags, even if they exist.
Betty
@David Anderson: Glad to hear that!
OzarkHillbilly
Republicans are immune to reality.
StringOnAStick
Ok, I’ve just done the closest thing to provider shopping, and I chose the option that’s going to cost us the most! We did this because we both want my new knees to let me get back to the high level outdoor activities that we did before the arthritis shut me down. I went to the knee replacement guy at the U.S. Olympic medical center and it will cost us at least $10k more than the place 3 blocks from our house, but the research I did and the doctors I know personally all pointed me to that guy I’m lucky that we can afford it a and I feel some guilt that others can not.
Lynno
The medical insurance does not encourage shopping providers for price. We currently have healthcare market that offers care thru an insurance company network…PPO HMO and whatever slick name they come up with. If you go out the network the patient liability could be more than the deductible.Patients pick medical providers that are in the network and close to home, work, or their support system. The kind of medical plan where the patient might shop for price would be a straight indemnity plan. Do indemnity plans even exist anywhere in the world?
David Anderson
@Lynno: indemnity plans are out there but rare
Ruckus
@Villago Delenda Est:
The last time I had to go to the ER was an emergency caused by a pharmacy. Not the wrong medication, but not delivering any medication as they said they had, to the doctor ordering it. And they lied to him once again after that and delayed another 3 days. And then the med arrived at my home a week later. That was a fun week. I was pretty sure I was going to die.
Ruckus
@StringOnAStick:
If you can afford it there is no reason that you should feel guilty. It’s not the users that is the problem, even those that can pay the maximum, it is the system that provides what we call health care that is based upon money made rather than reasonable outcomes.
Pat McCrory
Plus. From my experience, a patient’s first priority is having a good PCP, who will in turn refer him/her to good specialists as needed.
Also, sometimes the less expensive option has gaps. e.g., my husband needed an MRI recently, and was given two lower cost options in addition to the university medical center. He chose the more convenient one, which conducted the MRI imaging fine. But never followed through by sending the results to the referring specialist. After a lapse.of several days plus several phone calls between my husband, the lab, and the specialists his images were finally viewed by the surgeon.
This gap in care would not be the typical experience if he’d stayed w/in the university system as their records are linked via computer networking.
T K Tsouderos
It’s worth noting that for the sort of care that drives up costs – the expensive, chronic, complicated kind – shopping around makes no difference to consumers with or without high deductibles or even high out-of-pocket maxes. A cancer diagnosis, heart surgery, a child’s stay in the NICU – all of these will blow right by the OOP max, and it doesn’t matter to the consumer, financially, if he or she can save the system $10,000 or even $100,000 by choosing a different provider, if there was any way to do this for complicated situations like these.