Friday, May 8, 2009

What is wrong with the idea of "Consumer Directed Health Care": A "Technical" Answer to the "Thought Experiment"

Dr. Frey's "Thought Experiment" led colleague Robert Ferrer, MD MPH, of the University of Texas Health Science Center at San Antonio, to come up with an alternative, more "technical", response to the "technical" question:

The problem with consumer-directed spending is that it has the potential to curb only a small portion of health expenditures. The healthiest half of Americans accounts for only 3% of health care expenditures. Conversely, the sickest 5% account for 55% of expenditures and the sickest 10% for 70% of expenditures. So most health spending isn't folks with a cold or twisted ankle who run to the doctor. Most health spending is NICU babies and 20 year-olds with massive trauma from car accidents and cancer patients and old folks with congestive heart failure and 5 hospitalizations in the last year. None of those is engaging in discretionary spending or likely to "value shop" for health care or to direct their own spending.

I think the reason that consumer-directed spending has gained so much traction is that the vast majority of our policy wonks and lawmakers are healthy enough (with a few Ted Kennedy exceptions) to be in the category of folks for whom health spending IS discretionary. That's the world they know.

Thanks to Dr. Ferrer for adding these clear, and usually ignored, insights to the discussion

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