How to Positively Affect Health Care Costs


Just this afternoon I experienced a classic fundamental of economics:  Consumption.

I had lunch at a pizza buffet.  All the pizza and soda I could consume for the low low price of eight dollars American.  of course I had to render to Caesar, so it REALLY was about $8.50, but I digress.

At some point I pushed away from the table satisfied; I was fat dumb and happy.  Full.

As I reflected on my lunch I was happy.  If asked, I would have reported that the food was fresh, hot, on time and tasty.  Further, I wasn’t leaving hungry.  All in all a very successful experience.

But I had a nagging thought, something in the background was rubbin’ a little.  I was missing something.  And then it dawned on me.

There was still pizza left on the buffet!  There was more to eat!

So I went back.  And then went back one more time.  And finally, as I was getting up for the third time when I realized I didn’t even WANT anymore pizza; yet I still was drawn to the buffet.  I was torn.

Not until I saw the dessert pizza did I experience closure.  Bliss!

As I was driving back I realized how silly this whole thing played out.

I ate way more pizza than I otherwise would have.  Further, I actually ate dessert, something I NEVER do.  And to top it off, I spent a full hour or more at the restaurant when normally 20 minutes will do me.

All this because?

Because once I paid my “price of entry” the food and drink was free.  And NOT getting all I could bothered me.  Silly, yes?

But true.

As true, in fact, in health care as in pizza buffets.

So, it shouldn’t surprise us that when we begin to break down the “health care buffet” model and introduce health care consumers to real price, that we see the consumption of health care go down.  In exactly the same way you would see my pizza consumption go down if I was paying per slice.

The Wall Street Journal has a fascinating story on how this is taking place today in today’s markets.

Insured Americans are using fewer medical services…

Why?

… patients are consuming less health care as they pick up a greater share of the costs.

Now, for sure, the reason for this is at least somewhat dependant on the recession:

The new trend comes amid a broader drop in health-care use as more Americans lose their jobs and their health insurance. Such cutbacks have happened before in recessions…

However, this reduction in services is not wholly caused by folks losing insurance or losing their jobs.

More Americans also are buying high-deductible health plans that force them to bear more of the upfront costs for health services. Some 18 million Americans bought high-deductible plans this year, compared with 13 million last year

This is the very strategy that I try to talk people into.  Buy a health insurance plan with a high deductible, a VERY high deductible, and then contribute to an HSA plan.  Tax free health care.  Plus, you get the advantage of thrift:

At the beginning of the year, Dan and Natalie Johnson, of Gig Harbor, Wash., used the website eHealthInsurance.com to buy a new plan with a high deductible, now set at $5,500 for their family. Their previous coverage had no deductible.

Now, the couple says they are thinking twice before scheduling doctor visits. Recently, when their 16-year-old daughter’s allergy prescription ran out, Ms. Johnson called the allergist’s office to ask for a renewal, without coming in for an appointment, as she would have done under their previous insurance.

And this spring, their son, 14, got his athletic physical at a local urgent-care clinic that charged just $40, instead of a doctor’s office, which would have cost about $90. “We don’t want to go through our savings going to the doctor,” says Ms. Johnson, a photographer.

And what does this all mean?

In an interview, Aetna’s chief financial officer Joseph Zubretsky said companies might eventually have to do just that. “If utilization stays down, it will have a favorable impact on rates,” he said.

Lower prices.  Exactly as you would expect.

Obama and the Democrats aren’t interested in providing a mechanism to bring higher quality care to more people at a lower cost; they’re interested in developing a population of people who become dependent on government.  If you think I’m kidding, ask anyone over 55, even a Tea Partier, what they think of phasing out Social Security and Medicare.

Dependent loyal subjects voters.

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2 comments
  1. Mondo Rama said:

    The medical services not being consumed are largely ‘preventative care’.

    If I can’t afford to go to the dentist to have my teeth and gum’s checked and cleaned, I will require more fillings before I die.

    If I can’t afford treatment or medicine for my kidney disease, it will cost a whole helluvalot more when I am admitted and treated for acute renal failure.

    If you don’t replace the bald tires on your car and then wreck it because you lose control when it rains, will you be saying “Thank goodness I didn’t blow $400 on new tires!”? Only if you are short-sighted or sustained a head injury during the crash.

    More people having access to affordable care will ultimately lower consumption of the higher-cost services. A little now vs. a lot later. It’s pretty easy economics.

  2. pino said:

    The medical services not being consumed are largely ‘preventative care’.

    The facts of the story don’t seem to support you.

    It speaks of people making rational decisions concerning their health. No where does it suggest that people are finding the care they want unaffordable.

    For example, the family decided to get the physical at a $40 urgent care center. They decided against the $90 doctor visit.

    They renewed a prescription by phone rather than schedule a doctor’s visit.

    People are getting their teeth cleaned and yearly checkups. Further, they can afford it when they want to. The facts are that when people are responsible for the costs of their care, they shop. And THAT brings price down with quality going up!

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