If We Want to Fix Healthcare, We Need to Make It Economically Rational

Why we need to put consumers in charge

The coronavirus pandemic has put an exclamation point on something lots of us already knew: our healthcare system is fundamentally broken.

Over the last 12 months, as more than 500,000 Americans have died, we’ve seen even more clearly all the flaws in our system, from issues of access and equity to healthcare’s nonsensical economic underpinnings. (In the last year, hospitals and healthcare providers have lost more than $500 billion while health insurance companies have made record profits.)

If there’s any light in this dark situation, it’s that the appetite for change is stronger than ever. Patients are embracing things like telehealth and shifting their expectations for how healthcare is delivered. Healthcare providers are seeking out new partners and new models. And new companies are springing up.

The key to maintaining this momentum and truly improving our healthcare system? We need to focus on making access to healthcare economically rational behavior for consumers.

Right now, it just isn’t — largely because of the way the model is set up. In most market sectors, the person who decides what to buy, the person who pays for it, and the person who benefits from it are the same — i.e., the consumer. If you buy a car, you decide which one, based on its features and your budget. You pay for it with cash or a loan. And you benefit from it — you get to drive the car.

Things don’t work like that in healthcare. If you go to the hospital, a medical professional decides what to do, usually without much input from you. A third party — your insurance company — pays for it, so there’s no conversation about cost between you and the hospital. (In fact, because payments are negotiated secretly between insurance companies and hospital administrators, even your doctor probably has no idea what you’ll be charged or what she’ll be paid.) And yet it’s you who benefits from the care.

This arrangement leads to the strange realities that define our current system. Insurance companies are incentivized to charge as much as possible for premiums while paying out as little as possible for care. Healthcare providers make more money the sicker you are and the more treatment they prescribe. And since insurance often feels like other people’s money, consumers don’t have much incentive to shop on price.

The result of all this is that the consumer-driven checks and balances that motivate other companies in other industries to offer a competitive product at a competitive price — that reward them for reducing inefficiency, innovating, and providing a great experience for the consumer — are largely absent in healthcare.

Fortunately, some alternatives to our broken system are now starting to emerge. Take Ro, a company that works outside traditional health insurance and offers treatments for a variety of conditions, from erectile dysfunction and weight management to smoking cessation. Interacting with Ro is like interacting with most other consumer-focused services: what you get and what it costs are stated clearly on their website.

Other companies — including some health systems — are beginning to offer what’s called direct primary care. In exchange for a flat monthly price, consumers get unlimited access to primary care services. The advantage of this approach is not only price transparency; it also puts the focus on keeping people well, not just treating them when they’re sick.

This consumer-centric approach to healthcare — which we call health assurance — is what we need going forward. It will lead to better care, more innovation, and lower costs — money we can use to expand access to the overall system. We urge our colleagues in the health ecosystem — providers, insurers, policymakers, entrepreneurs, technologists — to put the consumer first and put the consumer in charge. When that happens, everyone will benefit.