Putting the consumer in charge of health care

June 6, 2001

Free Market Foundation

Managed care with tight physician panels, utilisation review and capitation- is giving way to a “new culture of health care consumerism,” says James C. Robinson, an associate professor of health economics at the University of California, Berkeley.

Writing in the Journal of the American Medical Association, Robinson makes the following points:

Instead of attempting to control health care coverage and costs, employers are providing information and incentives to help individuals make their own cost/quality tradeoffs.

Health plans are backing away from tight restrictions and attempting to recast themselves as entities that enable consumer choice.

Physicians and hospitals, meanwhile, no longer aspire to the dual role of managing the cost as well as the quality of medical care.

While most industrialised nations rely on the public sector to impose capacity limits and price controls, Americans are loath to allow government to ration health care resources, he says. That leaves consumers, “by default if not by design,” in charge of setting priorities and managing care.

The consumer movement will make the U.S. health care system more responsive to people’s preferences, says Robinson. However, healthy people will pay less while really sick people will have to pay more out of pocket.

Historically, insurers used so-called “community rating” to spread the costs and risks of insuring populations that included chronically and seriously ill individuals. “That’s long gone,” says Robinson. “We’re continuing down that trajectory of people paying for the health care they use.”

Robinson predicts that the other industrialised countries will follow the retreat of the U.S. from managed care. “I think what’s happening in the United States is going to happen in England and Germany with a little bit of a delay,” he said.

Source: Reuters, Consumerism, Not Managed Care, Will Define US Healthcare; James C. Robinson, “The End of Managed Care,” Journal of the American Medical Association, May 23-30, 2001.

For text (requires subscription)
http://jama.ama-assn.org/issues/current/rfull/jsc10027.html

For Managed Care Problems and Solutions http://www.ncpa.org/pi/health/hedex2c.html

RSA Note:
If professor Robinson is correct we will observe the strange phenomenon of wealthy industrialised countries abandoning the community rating system as prohibitively costly and unworkable whilst unfortunate South African medical scheme members continue to have the system imposed on them by an autocratic Department of Health. How many years will it take and how many medical schemes will be driven to insolvency before the government once again allows medical schemes to utilise actuarially sound policies and management techniques in managing their schemes in the interests of their members and not according to government prescription?

Eustace Davie
Director
Free Market Foundation.