How to Solve Our Health Care Mess? Put Consumers in Charge
June 2003
For too many years Americans have been divorced from the consequences of their health care decisions. Third-party payment has enabled us to see a doctor, purchase medications, and receive surgery, without a thought about cost. In some minds this is a wonderful thing - get all the health care services you need without agonizing over affordability.
But being unconcerned about affordability carries a price. If we as consumers are not worried about cost, we spend more than we would otherwise. That puts pressure on the people who actually pay the bills. If we are not worried about cost, they certainly are. They will not give us a blank check. They will limit our access to services, one way or another. Regardless of the kind of third-party involved, whether an insurer, an employer, or the government, they will decide what is worth paying for and what is not. That is the cost we pay for "free" care provided by a third-party.
Ultimately, there is only one way to put consumers back in the driver's seat. Give them control over the resources, so they can make their own value judgments and trade-offs about their own health care priorities.
Getting from where we are today to a system in which people have control over their own health resources is not going to be easy. Fortunately tools are being created to help us make the transition. Many of these tools are relatively primitive, but they will get better every year. With experience, we can fine-tune some of the new ideas listed below to help limit the growth in health care costs and return control to health care consumers. Here are some of the ideas that are putting consumers in charge.
Flexible Spending Accounts (FSAs) enable workers to place part of their salary into an employer-sponsored account to pay directly for health care expenses. A provision of FSAs requires unspent funds to be forfeited to the employer at the end of the year.
Medical Savings Accounts (MSAs) are actually owned by the employee in conjunction with a high deductible insurance plan. Any unused funds stay in the accounts and build interest over time, similar to a 401(k) account.
Indemnity insurance, unlike a third-party payment system, is a "two-party" contract in which an insured person pays a premium for future protection, and the insurer pays money to the insured person when a loss occurs. The consumer is paid the benefit directly, and is then responsible for paying the health provider. There is no expectation that the insurer have anything to do with the provider of care.
Defined Contribution is a system in which the employer provides a fixed payment dedicated to employee health insurance benefits, and workers then use that contribution as core funding for a variety of benefit plans or benefit structures, often supplemented with their own funds.
Opt-Out Provisions allow workers to take their employer's regular health care contribution in cash and use it to supplement a spouse's coverage, or for both earners to pool their funds to purchase coverage for the whole family.
Independent Physicians represent a growing movement in the physician community to opt-out of insurance plans and the Medicare program. Many doctors are switching to a cash-based system, either independently or as part of a network of similarly inclined physicians, like SimpleCare. These physicians are finding substantial savings in overhead costs, which enable them to charge their patients less for services.
New Information Systems allow doctors and patients to benefit from the transactional power of the Internet. Services now available on-line include doctor quality and price information, making appointments and getting follow-up care, on-line billing, information on treatments and finding disease-specific support groups.
Today there is a burst of innovation and energy going into creating a new approach for health care financing. The new era will put patients back where they belong - in the driver's seat of the health care system. After all, health care is not primarily about doctors, hospitals, insurers, and it is certainly not about employers and the government. Health care is about people. The best way for people to express their needs, values and desires is through a market-based system that gives them the power to spend resources in a way that reflects those values.