I’ve seen a number of opinion pieces in various different forms about education and healthcare and there’s one point they miss. When you increase the willingness to pay without increasing the supply, the price will go up. That’s not just axiomatic it’s tautological—saying the same thing in a different way.
The effect of reducing out-of-pocket in healthcare is to increase willingness to pay. The same is true of subsidized (or free) loans for education.
“The effect of reducing out-of-pocket in healthcare is to increase willingness to pay.”
Now I’m confused. I thought health care was free. Insurance pays for it……
Fairly sound as a general principle but doesnt always hold true in health care. Reducing out of pocket for the kinds of care you want people to engage in can reduce long term spending by avoiding more expensive care in the future.
Steve
If you could provide an example of how that has operated in the past, it would be nice. As it is it’s a hypothetical.
It has been demonstrated that people in general are unable to make the determination you’re asking of them and there are few indications that physicians are better able. Take the use of statins, for example. Although there is copious evidence that statins improve morbidity and mortality in people who’ve already experienced a cardiac event, the evidence that their use in the general population will produce beneficial results is largely assumed.
Sure, If I can find the papers in my archives later will post. Diabetes and HTN. We want people to take their medications for both of these. When out of pocket costs are high people will skip on meds for these two. There arent much in the wya of symptoms for most people, in the short to medium run, for HTN and even for most type 2 diabetics. Untreated the HTN pts have a higher risk of stroke, MI and renal failure. All fo those are expensive to treat. Diabetes is similar. (You can also have some pts needing hospitalizations for very high BP or from very high sugars also.)
Its also the idea behind colonoscopies and mammograms. It is much less costly to treat a breast cancer you catch early and success rate is higher. (Was going to link to paper on this with various estimates of cost savings but maybe the statin paper may be more useful.)
On statins if you dont have risk factors there isn’t any benefit. Even then you need to estimate the risk to determine if they are high enough and if you are over 75 they arent generally recommended. That said, if you are in the high risk group, say you already had an MI, if you keep out fo pocket costs high pts will skip their statins as they are expensive and you dont really much different if you skip them, in the short term.
https://jamanetwork.com/journals/jama/fullarticle/2795521
Steve
I’m trying to figure out how that relates to the subject. It’s pretty clear that Medicare costs per patient are rising rapidly. Are you saying that they would be even higher? Again that’s speculative. Another possibility is that hospitals, physicians, etc. would charge what the market will bear regardless.
It was in reference to out of pocket costs. You seem to be saying if I haver you right that if you cut out of pocket spending people will want to utilize the service more which will increase the cost absent an increase in supply. In the examples I give we think that higher out of pocket costs are increasing total costs so cutting out fo pocket can reduce total costs even if, or maybe because, utilization increases.
Steve
Your proposition presupposes that people will preferentially elect treatments that will reduce costs (something for which there is actually counterevidence) and that providers will allow their incomes to decline which I find unlikely.
I must not be phrasing this clearly. What I am suggesting is that you deliberately lower the out fo pocket costs for those treatments that will let you avoid higher long term spending. You are correct that people dont decide which therapies to use based upon effectiveness so you give them financial incentives to do that.
Steve