Genuine Healthcare Consumerism: Like Waiting for the Easter Bunny -- But We Shouldn't Stop Looking for all the Eggs

Will Market Forces Ever Exert Real Influence in Healthcare Spending Decisions?

Kicking off this post with an old joke-

“A guy walks into a psychiatrist's office and says: ‘Hey doc, my brother's crazy! He thinks he's a chicken.’ Then the doc says, ‘Why don't you turn him in? ‘  Then the guy says, ‘I would . . . but I need the eggs. ‘

I guess that's how I feel about relationships. They're totally crazy, irrational, and absurd, but we keep going through it because we need the eggs.”

Excerpted From Woody Allen’s film -- Annie Hall

That may or may not be true about relationships, but there’s an element of truth about it when thinking about Consumer Directed Health Care Spending and the long overdue promise of being able to harness market forces to bend the cost curve downward.

The CDHP Promise:  Crazy, Irrational and Absurd?

It’s been over 20 years since the advent of the Consumer-Directed Health Plan movement – coming on the heels of the backlash against fully managed care. The evangelicals of consumerism promised to drive down costs in a way that the PPOs that rose in the wake of HMOs could not – namely by shifting responsibility for more health care spending onto patients (aka ‘consumers’) directly. 

The promises were enticing: the disintermediation of the insurance companies from health care spending decisions would usher in a new age of choice and preference for individuals. Consumers would begin to act in their own best interests by focusing on the cost of healthcare services rather than simply following a prescribed course of action from their doctors or insurance company. And they would be armed with the most powerful incentive of all: their own money.  A high deductible and a tax-advantaged savings option would coax patients into ‘shopping around’ and lead to greater value for employees and a more efficient market for healthcare generally.

 The flaws in this construct were, of course, self-evident to many.  Critics argued that there were simply too many hurdles to overcome in the healthcare/insurance marketplace to turn this vision into a reality. The big four among those hurdles were (and still are):

 1. Information Asymmetry: No member of the patient, doctor, insurance company triumvirate ever possesses complete information about the other. The health insurance buying/underwriting decision has always been highly asymmetric, even more so after ACA and consumer protections around preexisting conditions. That asymmetry is then often multiplied several times more -- often against the patient’s best interest -- once an individual actually has a healthcare need that is not ‘routine’, and enters the system.

2. Risk Segmentation: A high deductible with a savings option in exchange for a lower premium is an open invitation to those who expect to use less care, and thus adverse risk selection is inevitable -- and potentially fatal to the entire idea;

3. Information Opacity: the services that are to be ‘consumed’ are extremely complex – sometimes even made deliberately opaque in an effort to preserve an ‘information advantage’ over the buyer – but often times simply because healthcare procedures and technologies are enormously complex subjects – and most often require a treatment regimen and not a series of independent ‘purchases’;

4. Healthcare Literacy: survey data shows that most members fail to understand the basic cost-sharing provisions of the plans that they are already enrolled in. That gap in understanding is then dwarfed by the lack of expertise that non-experts have when it comes to judging the quality of the care that they are being ask to choose --and factoring the quality component into the ‘cost’ decision that they are being asked to make.

In short, it was acknowledged that the healthcare marketplace was indeed grossly inefficient and unequal, but that consumer-directed plans would NOT solve the problem.  It was all crazy, irrational and absurd. What companies were really doing was rationalizing a plan design that was primarily engineered to shift more of the burden onto employees in the face of spiraling healthcare costs. It was not sustainable.

While this might be true at one level, the consumer-driven model has not collapsed under its own weight as predicted -- neither at its initial outset nor after the passage of the ACA. Some real good is coming out of elements of consumer-directed models. The growth in coverage in HDHC plans with a savings option is undeniable, and some costs have come down. Nevertheless, the grandest promises made for consumerism remain unfulfilled – that much is clear and incontrovertible.

The Goose That Would Lay the Golden Eggs: The Amazon Effect

At the time, the response to the loudest critics of a consumer-directed model was, and still is, wrapped up in three words: Tools, Technology and Transparency. 

Those would be the Three Golden Eggs that we needed to make it all work as promised.

Even though Amazon itself was still an internet infant at the dawn of consumerism, futurists envisioned a new buying experience that could get applied to healthcare. Choices. Price Comparisons. Price Guarantees. Consumer Reviews. Recommendations -- based on YOUR preferences and needs. All presented in a single simple and easy-to-understand graphical interface. 

 Shop, tap, buy. It would be that easy. But of course it isn't that easy. Amazon itself has pulled the plug on its Haven Healthcare joint venture, and IBM is now shopping for a buyer for its prestigious, but unprofitable, Watson Healthcare business.

But what if price transparency does finally get closer to reality . . . and what if we look at the "Amazon Effect" just a bit differently.

Point, Click, interact with an AI application with access to unbiased pricing data and then -- if the patient needs personal intervention -- they can connect with an expert practitioner who is also a consumer advocate.

In the end that patient might walk away having been given genuine choices about actual services, and a summary of not only cost but the implications for cost-sharing and spending account details tailored for that individual patient. The consumer then gets guided towards making a truly informed cost/quality decision while being told in advance exactly what the impact on cost-sharing would be.

Too good to be true? Perhaps. But why not continue to try to get there? The fact that it rarely (almost never?) works this way today doesn't mean that we are pursuing something that is imaginary. It is more the case that we have yet to tap the potential for upending the experience around a set of limited -- but very common -- healthcare purchasing moments. The obvious ones -- thinking in terms of planned events -- such as elective surgery, pregnancy, maternity care and family planning, as well as chronic condition management.

While there are many really great niche applications and providers that can help with some aspects of this decision-making today -- and there are great new ways that link consumers to centers of excellence that drive accountability for cost/quality outcomes -- the ultimate Amazon-like experience has not been part of those models. Price and cost-sharing are rarely presented in advance. Consumers are not really 'directing' their spending. They are still being directed - usually with little to no comparisons and little discussion about price or value.

The Good News (Part I): We Now Have Two of the Golden Eggs In our Basket -- Tools & Technology

The fault for the lack of real consumer choice lies not with the ability to provide the tools and the technology -- the fault lies with the still persistent lack of the genuine price transparency and the data parity needed to drive those new tools and technologies.

But we may be able to get there. We already possess two of the Golden Eggs. Technology has certainly transformed itself around the user-experience -- and data management tools have advanced to the point where some providers have amassed patient analytics that are as sophisticated as Amazon's customer analytics. Still missing is a shared and transparent and understandable cost infrastructure -- national price and quality metrics that are simplified/harmonized in their presentation and are universally recognized and applied so that they can be used at scale and we can measure the impact.

Price transparency is the missing golden egg that we still need to find.  Whether it’s coming from your crazy chicken brother, or the Golden Goose, or the Easter Bunny . . . that is the missing egg still worth believing in . . . and still worth seeking.

It's worth it because those early market-driven promises for consumer-directed healthcare spending model may not be imaginary. We still just do not know. We haven't collected all the eggs to give it a genuine attempt -- at least not at scale.

The Good News (Part II): Price Transparency is Starting to Come -- Slowly and Fitfully -- at Least at Hospitals

We are just three months past the effective date of regulations that mandate hospital price transparency. And so far it’s all a hot mess. Most hospitals still cannot comply (or will not) – and there are almost as many versions of disclosure and interpretations of the word "transparency" as there are hospital systems. 

But it’s a start. And it’s worth it to keep on trying to get it right.  We have to keep trying because we have to find out if it can really help make a material difference in cost and quality -- or not.

But will Price Transparency actually ever exist? Will we ever get closer to true Information Parity? Will it even make any difference if we do? Will the law of unintended consequences reveal that price transparency and true consumerism may actually makes things worse and not better? 

These are key questions, and I don’t pretend to know the answers. I don't think any of us really knows. It's entirely possible that better information and more cost transparency will still not unleash the market forces that will make a meaningful improvement on cost or quality. The missing golden egg that we seek may still not contain any silver bullets.

Future posts will examine some of the empirical and anecdotal data about the pros and cons behind CDHC and the evidence that's been gathered to date. And explore concrete ideas for how we might get back to testing those initial promises if/when we find that last egg, or the government finally regulates it into existence.

For now, I am still hopeful that those two-decade old promises are not just industry mythology. I'm still all-in on encouraging the search for that last precious egg, and still a very big believer in what might still might be achieved when market forces are finally permitted to exist in this most unusual of all markets.