BOCA RATON, Fla. -- Involving consumers in decisions about the cost of health care is critical to lowering the cost of health care, according to Regina Herzlinger.
Herzlinger, a professor at Harvard Business School, conducted a seminar on "Consumer-Driven Health Care" at the Food Marketing Institute Midwinter Executive Conference here late last month. Herzlinger spoke to the group by a telephone hookup because she was snowed in at Boston.
She said when consumers are involved in the quality and cost of goods, the quality tends to rise and the cost tends to go down. She offered the example of automobiles, which, in the past couple of decades, are markedly better in quality and are much lower in price.
By contrast, Herzlinger said, health care is characterized by an absence of consumer involvement: "Someone [other than the patient] does the shopping. So the cost of health care is inflating at a great rate. Worse yet, 46 million people don't even have health insurance."
Indeed, she said, health care has three negative characteristics:
Many employers offer just one policy choice, so there is no way for many workers to tailor coverage to their needs.
Innovation in health care is "punished," owing to the fact that providers are paid when they perform services and prescribe drugs. Providers are not paid to prevent conditions from occurring in patients and, in fact, will lose money by doing so.
The quality of health care being offered is unknown to the patient.
Herzlinger said one way to ameliorate the situation is to enter into situations that offer workers a choice of providers, a choice of insurers, and information about medical conditions and providers. Costs can also be lowered through the establishment of "focused factories," which are medical centers that specialize in the treatment of a single disease and have under one roof all facilities needed for treatment. That approach makes sense because 80% of health care costs are expended on a small number of diseases, namely heart disease, hypertension and cancer.
Another cost solution is to offer insurance policies that have deductibles of several thousand dollars and which, in exchange, offer very high lifetime maximums. Such policies have been known to lower insurance costs by some 13%, she said.
"High deductibles make consumers aware of the cost involved in health care and invests them in saving money," Herzlinger said. "It makes them think about the cost of going to an emergency room instead of a doctor's office for treatment, and to think about using generic drugs to save money."
