Healthcare Reform – Irrational Consumers

The actual thought of price comparisons on medical services seems almost ridiculous. You don’t cut costs on your health. But that’s exactly the problem. If you had forethought and a choice between two procedures; One was $10,000 and the other $100,000, both with equal chance of success, which would you choose?

An individual having a heart attack typically does not provide a preference for which hospital they are taken to by ambulance. It typically is based on distance. Unless one is specifically staffed for cardiac emergencies, you will most likely be taken to the closest.

You probably don’t have time to the go on line and check the prices for cardiac services. Even then, these prices are typically are not available. Think about this. When is last time you when to a restaurant and ate without knowing the price of the meal? Would you even entertain eating at such a place? Probably not because you don’t know if the veal is $10 or $150. These are rational consumer choices that you apply to everything except health care.

These choices are not typically provided to us and they are mechanism through which competitive market forces prices down. We don’t allow this to happen, thus we are irrational consumers.

HMO’s do provide this service to a limited extent by in network and out of network coverage. They pre-negotiate rates to try to get the best prices on services. If you work with in their network, you are getting the best rates they could find.

On the individual side, Heath Savings Accounts try to encourage this behavior. This type of account combines a tax free savings account with a high deductible health plan. The idea is that the consumer controls spending from the HSA up to the deductible. Since the consumer is in charge, they tend to make better choices.

10 thoughts on “Healthcare Reform – Irrational Consumers

    • Thanks, for making it person to your family. I do believe that narratives about real people are most effective in helping the public understand public policy and the effects of policy change. My two sons are in college and I had already been afraid of what they would do if they didn’t get a job with benefits. I have preexisting conditions which would preclude me from getting insurance on my own. I have always said that were it not for my husband’s job as an academic at a state college,our family’s trajectory would have been very different. Some people have not been so lucky.When middle class people who have health insurance finally grasp what’s in it for me and my family they will see that this is not another poor people’s entitlement . Unfortunately a lot of people don’t see life in terms of the common good and don’t link how supporting what is good for the greater good will benefit them as well. Your link about how health care will free people with regards to employment opportunities is most apt. When workers begin to see how many more employment and educational opportunities are available to them when they are not tied to one job or locked into one profession, they will ultimately be living the American Dream! Can’t imagine any Republican taking issue with individual freedom and the free market!

      • Thanks for the comments @ramakanthization and @mannavable. I think you will be plseaed with future videos in which Dr. Dass and others speak about the considerations, lessons, and challenges of mHealth. Stay tuned!

  1. Once you unhinge the various parts of healthcare from the cost of paying for the healthcare you cannot solve the problem.

    • The insurance regulation alone is what sold it to me. No more dropping people from policies because the company considers acne a pre-existing condition, no more caps on how much a company will pay. It doesn’t go far enough, but we can make those changes incrementally. And just so we are clear here, I have no issue with moderate intelligent Republicans.

  2. Efforts to improve public health, even if enhanced by insights from behavioral economics, are unlikely to have a major impact on health care costs. Studies show that preventive medicine, even when it works, rarely saves money.

  3. One of the major problems in today’s medicine is that frequently even in very technical situations the patient/family is given the responsibility to determine the appropriate action.

  4. Until we as a society are willing to create a mechanism to clarify the role of patient choice and physician responsibility, successful health care reform will elude us.

  5. One of the major problems in today’s medicine is that frequently the patient/family is given the responsibility to determine the appropriate action. In other instances patients/families wish to receive treatments that are also inappropriate because of the patient’s medical condition. The problem is an unrealistic sense of patient autonomy which is among the major reasons why our health care is so outrageously expensive.

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