HDHP v. HDTV: Thanks anyway, Doc., I want my MTV!

A different angle on the physician versus patient decisionmaking dilemma, discussed previously here, occurred to me as I prepare remarks for this weekend’s Midwestern Law & Economics Association Annual Meeting. (My talk is on the Massachusetts Health Reform Planwhich is also the topic of the upcoming Kansas Law Review Symposium). My thought is this: The mid-90s managed care boom was seen as a way to rein in escalating health care costs by addressing moral hazard. In particular, gatekeeping functions, coverage limits, utilization review, and other managed care cost-containment strategies are supposed to check physicians’ moral hazard in ordering or performing unnecessary tests, procedures, or drugs. A common complaint about managed care is that it gives the final word on what care is medically necessary to bureaucrats, administrators, and bean-counters rather than to physicians exercising independent medical judgment.

The current trend in health care reform, and a key component of the Massachusetts Plan, is consumer-drive health care. Consumer-driven health care aims at the other moral hazard problem in heath care: Patients’ tendency to seek out and use more medical care when they are insured than they would otherwise. Under prepaid managed care and third-party payment, patients are shielded from true costs and have no direct incentive to reduce their health care utilization. Health savings accounts (HSAs) and high-deductible health plans (HDHPs) are supposed to force patients to appreciate the true costs and make conscious, price-driven decisions about whether to seek and forego medical care. As a part of that decisionmaking calculus, patients, not physicians or plan administrators, are expected to judge for themselves what care is medically necessary versus merely “discretionary.” Michele Melden has a thoughtful, comprehensive piece on HDHPs in the Loyola Consumer Law Review.

If managed care operates from the premise that physicians can't be trusted to decide what is medically necessary without administrative oversight, it's hard to see why patients themselves should be expected to determine what care is medically necessary versus merely discretionary. Especially when patients typically possess far less price, quality, and availability information about health care services and products that they consume than retail shoppers browsing the Sunday advertising circulars for specials on high-definition televisions (HDTVs). Are we really better off as a society if a seriously ill patient declines to spend $3000 out of a HSA or HDHP premium for follow-up care and opts instead for a $3000 HDTV?