During a town hall in Milwaukee, Wisconsin with Rep. Paul Ryan (WI) on Monday, Mitt Romney proposed lowering health care spending by shifting more costs to the beneficiaries and working “with the principles that exist in the consumer market” to control spending. Responding to a question about health care costs, the former Massachusetts governor suggested that sicker Americans would use less care if they paid more for it and shopped around to different providers looking for the best possible deal:
ROMNEY: If you’re unfortunate enough to get a very serious condition and you have the insurance most people have. You pay the deductible and then it’s free! And so, you’ll go to a doctor and a hospital. You’d never think of asking about how much it’s going to cost because you don’t pay the bill — the insurance company does. In other countries like Switzerland, they have the patient pay 20 percent of the bill for elective surgeries and of course if it’s an emergency they don’t. But that gives you the chance to shop around….I’m also not naive enough to think that there would be a heck of a lot of problems that would be better run if we got the government out and turned back to the free market.
Republicans like to claim that exposing people to the true cost of health care — that is, putting more skin in the game — would discourage overtutilizaiton of care and force health care beneficiaries to act more like consumers, shop around, and select the best deal for a given service or treatment.
The theory sounds good, but there is very limited evidence that it actually works. After all, insurers have been shifting individuals into high-deductible plans for some time now, but premiums and prices continue to increase. It turns out that buying health care is nothing like buying a new cell phone or a laptop. You have to do more than compare the tech specs, prices, and warranty options. Health care is ultimately about extending life and delaying death and asking anyone — particularly sicker Americans — to make consumer decisions without knowing the complexities of medicine is not only fool-hearted but outright cruel.
It also doesn’t make much economic sense, as most of our health spending is concentrated among the sickest Americans — those who suffer from multiple chronic conditions and cannot choose to forgo care or shop around for treatments. While half of the population spends little or nothing on health care, 5 percent of the sickest Americans account for almost half of total costs. Just 1 percent of the population was responsible for a whopping 22 percent of health care costs in 2009 or about $90,000 per person, a recent study from the Agency for Healthcare Research and Quality concluded. That top 1 percent of spenders “tended to be white, non-Hispanic women in poor health; the elderly; and users of publicly funded health care.”
As Yale professors Theodore Marmor and Jerry Mashaw pointed out in the Philadelphia Inquirer last year, “if free medical care led to more reckless overuse, countries like Canada and Germany, where patient costs are either zero or minimal, would suffer disproportionate inflation in expenditures or severe access pressures. They don’t.” Indeed, those nations spend less on health care than Romney’s Swiss model — which has higher out-of-pocket costs and the third highest health spending in the world! The theory doesn’t even hold up in the American health care system, where individuals with higher cost sharing in the employer based system with higher cost sharing don’t spend less than Medicare enrollees with smaller cost sharing.
All this suggests that patients aren’t very good at controlling health care costs and that this task probably lies with the providers and the government’s ability encourage hospitals and doctors to coordinate care and deliver services more efficiently.