Quite a bit of intellectual and policy effort has been put behind the paradigm of the individual patient as a consumer. This is the core thesis of the high deductible health plan policy push where exposure to high first dollar cost sharing will lead to price and utilization discipline. People will be inclined to price shop for high value services and decline low value services at almost any price.
That is the the theory.
Brot-Goldberg et al (2015) shows that this is bunk, at least in how a general population reacts to deductibles:
We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services). We then leverage the unique data environment to study how consumers respond to the complex structure of the high-deductible contract. We find that consumers respond heavily to spot prices at the time of care, and reduce heir spending by 42% when under the deductible, conditional on their true expected end-of-year shadow price and their prior year end-of-year marginal price. In the first-year post plan change, 90% of all spending reductions occur in months that consumers began under the deductible, with 49% of all reductions coming for the ex-ante sickest half of consumers under the deductible, despite the fact that these consumers have quite
low shadow prices. There is no evidence of learning to respond to the true shadow price in the second year post-switch
But what if this is merely an information problem instead of a human behavior/processing problem? Could this paradigm still work?
This morning, one of my Duke Margolis colleagues, Michael Frake of Duke Law along with Jonathan Gruber and Anupam Jena looked at the behavior of a hyper informed group of patients as consumers: doctors getting care. We would expect that doctors are highly skilled, compared to the general population, in differentiating low value and high value care. They, after all, unlike the typical patient, had gone to medical school even if their post graduate training was not relevant to the problems that had sent them to get care from other doctors. We should see a result if the patient as a shopper/consumer problem is merely an information problem.
Well… let’s look at the results:
Our results suggest that physicians do only slightly better than non-physicians – but not by much and not always. Across most of our low-value settings, physicians receive less low-value care than do non-physicians, but the differences are modest, and generally amount to less than one fifth of the gap between what is received by non-physicians and recommended guidelines. The
results are slightly more mixed in the case of the high-value care analysis, with some evidence suggesting that physicians appear to receive high-value care at roughly the same rate received by non-physicians and some evidence suggesting that physicians do slightly better than nonphysicians. These results provide a rough boundary on the extent to which additional information disclosure (beyond prevailing levels) can be expected to improve the delivery of health care in the U.S. Relatedly, these findings suggest that, despite the threat to the optimality of the health care system posed by information asymmetries between physicians and patients (Arrow 1963), most of the explanation behind the over- and under-utilization of low- and high-value services likely arises from factors other than informational deficiencies of patients.
Translating that out of economics and into English, information matters a little bit. There is a slight reduction in low value care and there might be a slight increase in high value care. And this is for the subgroup of the population that is most qualified to evaluate medical information. Frakes, Gruber and Jena establish an upper bound of the value of medical information for individual decision-making. And it is not zero but not a system changer either.
So what does this mean for policy? If the best informed sub-population can use their informational skills and training to reduce low value care by only 20%, most of us will do far worse in this particular task. To me, that adds onto the pile of evidence that the patient as a consumer model relies on a false assumption that the patient is a good shopper and a good evaluator. If we want price discipline, than we need, as a society, to make those choices and put in either explicit “No’s” into the systems or create meaningful price spreads. Creating meaningful price spreads can mean narrow networks or tiered networks where high value providers that follow clinical guidelines are far cheaper for the patient to use. Creating meaningful price spreads can mean the proliferation of value based pricing strategies where high value/high efficacy treatments are low or no cost sharing while low value treatments are high cost sharing or require significant administrative burden. This is technocratic tinkering that has to be done at either the insurer level or a governmental level. If we as a society deem spending fewer resources on healthcare while holding or improving quality is a desired result, then the model of the patient as a consumer runs into a brick wall of reality.