Patients, not lawmakers, should control health care reform

Congressional Republicans — as well as some Democrats — are butting heads with President Barack Obama and his congressional allies over the latter group’s desire for a “public option” in health care. This new government-run insurance program would theoretically compete against the 1,300 private insurance companies already in existence as part of an effort to lower overall health costs.

By most estimates, though, such a plan would cost billions of dollars and, according to the Lewin Group, result in as many as 119 million Americans dropping their private insurance coverage over the next decade.

So rather than commit huge sums of taxpayer dollars to an inefficient new government health program, lawmakers should expand patient-directed health plans — as they’ve already proved capable of expanding coverage and driving down costs.

Patient-directed care is premised on the idea that people will spend their health care dollars wisely if they’re directly responsible for purchasing their own medical care. The same principle is in force for every other good in the marketplace, so why should health care be any different?

Unfortunately, politicians and regulators have failed to see health care in this light. Government regulations have absolved ordinary consumers — i.e., patients — from making decisions about their own health care. Third-party insurers pay for more than 85 percent of health care in this country, so most patients are completely unaware of how much the services they consume actually cost.

This encourages health care providers to deliver expensive — and often unnecessary — care. And consumers, who perceive their care as free of charge, tend to demand all manner of services, regardless of whether they’re expensive or even beneficial.

Patient-directed products, on the other hand, empower consumers with information about their health care options so that they can make educated treatment decisions with their doctors. Most patient-directed plans combine a high-deductible insurance policy with a tax-advantaged health savings account. The insurance policy protects patients in the event of a major medical emergency, while the HSA allows them to pay for routine care on their own.

Patient-directed products most closely resemble other forms of insurance, like that for automobiles. Just as drivers are responsible for paying for oil changes, patient-directed policyholders must cover routine trips to the doctor. Many such plans even cover a basic amount of preventive care.

Armed with control over their health care dollars, patients have exercised a great deal of market discipline. According to the American Academy of Actuaries, health costs plummet anywhere from 4 to 15 percent in the first year of a patient-directed plan. When compared with traditional preferred provider plans (PPOs), patient-directed plans can yield effective savings in the first year of up to 20 percent.

And the savings aren’t just a one-shot deal. After the first year, patient-directed products continue to produce annual savings of 3 to 5 percent off traditional PPOs.

Thanks to patient-directed plans, many prominent companies have seen their insurance costs plummet as their work forces have become healthier. Grocery store chain Safeway, for instance, reported that its patient-directed plan has kept per-capita insurance costs flat over the past four years. By contrast, most other companies’ costs have increased an average of 38 percent during the same period.

Opponents of patient-directed products and HSAs often argue that consumers avoid getting necessary preventive care when they have to pay for it themselves. But the data tell a different story.

The American Academy of Actuaries actually found that consumers with patient-directed plans use preventive services like routine checkups more often than those with traditional plans — 12 to 14 percent more often, by one estimate. Such patients also pay fewer visits to the emergency room.

Achieving meaningful health reform does not necessitate spending billions of dollars on new government programs. Lawmakers could deliver coverage to more people and cut costs faster simply by encouraging the expansion of patient-directed care. The evidence is clear — but will Congress heed it?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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