Re: Please Critque these informally presented ideas about fixing the rising health care cost problem

Peter Olcott wrote:
Health care costs are rising way too fast simply because the incentives are out of whack. Since the health care consumer does not bear the full, immediate, and direct brunt of their health care choices, they lack sufficient reason to make the most cost effective health care decisions.

The "consumer" lacks sufficient knowledge to make cost effective health care decisions.


The most effective way to fix this problem is to provide the key decision maker (the health care consumer) with sufficient reason to make the most cost effective choices.

The physician is the key decision maker (or at least should be -- unfortunately now it is the insurer).


When health care providers begin to lose business because their costs are higher than their competition, they will be forced to look for ways to lower their costs. This will begin a cycle of increasingly greater efficiency as the initial incentives propagate throughout the health care industry.

No. They will simply try to avoid unprofitable patients, i.e., the sick and poor -- which is exactly what HSAs do.

The key to making this all work is to find some incentive system whereby the healthcare consumer receives the full impact of the weight of their health care choices. In other words if a set of choices results in an extra $5,000 of expense, then this extra $5,000 expense must immediately and directly cost the consumer $5,000. Unless and until the incentives are changed to this degree, health care costs will remain a problem.

Who do you presume makes these choices when you're unconscious or in pain? Probably your physician.

If the health care consumer is insulated from the immediate and direct impact of their health care choices, they will continue to lack sufficient incentive to economize. If the health care provider continues to be presented with health care consumers that are not sufficiently motivated to economize, they lack sufficient reason to seek increasingly more cost effective solutions. In fact quite the opposite. The rational health care provider becomes increasingly more profitable the more they raise their prices, there is no feedback loop of a drop in demand stopping them.

Most health expenditure stems from in hospital specialist services. If you have heart pain and your doctor tells you you need procedure X, which will cost your insurer Y (health savings accounts are insurance), are you going to wait until you see an itemized list of the charges and go comparison shopping for the best deal on behalf of your insurer??

Only by instilling vigorous price competition in the health care industry will the most effective solution to the problem of rising health care costs be fully realized.

Having a single payer system accomplishes the same thing while providing comprehensive coverage for everyone.

The model that would effectively implement these ideas would much more closely resemble health care savings accounts, than the current health care insurance system.

HSAs are nothing but high deductible insurance plans. They will not do anything to contain costs.
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