Let’s stop pretending consumers will shop for health care

Three brilliant experts recently published an article in the Harvard Business Review entitled How the U.S. Can Reduce Waste in Health Care Spending by $1 Trillion. In it, the authors describe a number of policy recommendations including comprehensive demand-side reforms that could save $110 billion.

Accelerate the growth of consumer-directed health plans paired with other reforms to encourage consumers to be more sensitive to prices. These reforms should include increased regulations to promote price and quality transparency and payer innovations to introduce insurance plans with reference prices.

I think it’s time to stop believing that consumers are willing and capable of shopping for health care on a large scale. Finding an inexpensive flu shot may be easy and common but shopping for oncology care is unlikely. Consumers don’t shop around or plan for personal finance either as evidenced by the low savings rate, high level of credit card debt and other financial mishaps. Here’s few reasons why wide scale consumer shopping is unlikely in health care.

Health literacy. Health literacy. Health literacy.

Only 12 percent of Americans have a proficient level of health literacy defined as the ability to obtain, process, and understand basic health information and services to make appropriate health decisions. The cost of low health literacy to the economy ranges from $106 billion to $238 billion annually. When you account for the impact of decisions made due to poor health literacy today, this balloons to $1.6 trillion to $3.6 trillion.

Additionally, while people of color have disproportionately lower levels of health literacy, low health literacy is a problem that affects all segments of the population. A change in context such as a new disease diagnosis, change in medication, or complicated self-care regimens can mean that formerly health literate people face literacy challenges that impede their ability to shop for care.

Spending in health care is an emotional decision

If social psychology and behavioral economics have taught us anything, humans are not rational actors when it comes to money, especially for something as personal as health. Price transparency assumes that people are rational actors who are conscious of and motivated to research, assess and make choices about their health.

Consider the potential scenarios when healthcare decisions are made:

  1. Healthy people make lifestyle decisions that can maintain their health
  2. People at risk of disease onset need to change behaviors to avoid getting sick
  3. People who are already sick must make treatment decisions
  4. Caregivers are making healthcare decisions for loved ones

In the first case, it’s easy for people to make daily tradeoffs for short-term benefit but long-term harm: continuing to smoke, eating unhealthily, not using sunscreen, etc. In the other three scenarios, fear, anger, and other emotions can cloud judgment and add to a sense of desperation to find the best care rather than the most cost-effective.

Shopping and cost sharing means sick people tend to use less health care

A group of economists recently published results from their study of a firm that moved its employees to a high-deductible health care plan. The benefits team at the firm theorized that the change would reduce health care costs by leading consumers to become better shoppers. Instead, they found that consumers, both health and sick, simply used less health care rather than learning how to shop for care.

Demand-side solutions should be built around the emotions related to health care and leverage sources of motivation that contribute to better health. Dr. Kyra Bobinet recently spoke at the Patient Engagement Summit on the role of technology in patient engagement.

If we really want to develop demand-side solutions that reduce health care costs, we need to focus on prevention. Prevention provides the most bang for our buck literally and figuratively because it meets the Triple Aim.

The key to moving more consumers to adopt preventive behaviors will be understanding what motivates people, providing the ability to perform those behaviors, and appropriate triggers to incentivize those behaviors.

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