The Illusion of Choice in Health Care Consumerism

By Aobo Dong

The rhetoric of “choice” has been pervasive in U.S. health care reforms and the consumerist health care culture for a long time. The idea is that giving patients more choices over doctors and insurance plans would increase competition in the industry and consequently improve the quality of health care patients receive. However, Allison Hoffman made a convincing case debunking this seemingly intuitive idea in this week’s HLS health law workshop. She argued that reform efforts aimed at increasing consumer choice often fail to empower patients to make better health care choices, and instead, create a wasteful market bureaucracy that is anathema to free market ideals. Her argument reminds me of one of my earlier blog posts on U.S. drug prices, where I compared insurance companies to the Central Planner in a socialist economy. Indeed, there are ironically many institutions and features in the so-called market-driven U.S. health care system that resemble authoritarian and technocratic practices that are directly against the principles of a laissez-faire health care economy.

I will expand Professor Hoffman’s argument by making a few additional points. First, her presentation discusses a number of revealing ways in which the market-based competition creates a false sense of choice in health care. Even Obamacare, which is supposed to offer patients more choices in the Exchange, fails to transcend the falsity of consumer choice. Most patients do not make the best available choice, even when they’re “nudged” by experts in the decision-making process. I’d like to also point out that even if consumers are capable of making the best choice for themselves, whether by thinking with perfect rationality or by accepting “expert opinions,” the choice they ultimately make could still be suboptimal or even disastrous. To understand why this might be the case, it is important to realize that the target population for Obamacare is the minority of people who do not have adequate employer-sponsored plans. Thus, many people enrolled in Obamacare may not have stable jobs and income levels. Nonetheless, the mechanism that determines how much premium for which one qualifies is predicated on an estimation of that individual’s projected annul earnings – a number that is hard to know in advance for those without stable income levels. Hence, a person who made the “right choice” by selecting a silver plan with only $100 monthly premium after receiving a $900 subsidy to cover a $1,000 plan at the beginning of a year may find herself owing the federal government thousands of dollars at the end of the tax year, if she happens to end up with a much higher income level. Had she known the future outcome, she would have chosen a less expensive plan to begin with, but either choice would be a gamble for her. This arbitrariness must be attended to in future health reforms.

Second, the “moral hazard” rationale – that patients would engage in behaviors that undermine their own health if they are insured or that they would abuse their insurance during sickness – could actually influence consumer behaviors. To counter moral hazard, many advocate increasing patients’ cost-sharing obligations so that they would be less likely to abuse their insurance. While it is true that no one is likely to deliberately hurt themselves just because they have insurance to cover losses, some moral hazard based insurance policy may actually cause patients to behave differently or prevent people with “unhealthy” behaviors from joining. In my own research on HCSMs – alternative “non-insurance” cost-sharing ministries run by evangelical Christians “bearing each other’s medical costs” – have strict eligibility requirements and reimbursement restrictions on lifestyle choices. For example, medical costs resulting from tobacco or alcohol would not be reimbursed. Thus, if someone has tobacco-induced lung cancer, no cost sharing might be available. Additionally, STDs caused by sexual activities outside of heterosexual marriage would not be covered. These “moral hazard” policies could have a large deterrence effect on individual behaviors – making them strong “arbiters of morality.” Thus, under HCSMs, the costs to build a censoring mechanism based on moral hazard turn out to be saving these ministries a significant amount of money. Yet, the autocratic element of such measures remains strongly inconsistent with free market ideas.

Lastly, I’d like to suggest a rather radical idea that may be too far-fetched to even think about in our current political environment. I wonder whether the fact that market competition fails to produce good health care outcomes has more to do with the market itself than the principle of competition. In other words, could competition work better if a competitor with significant competitive edge enters the deadlocked American health care marketplace? What if, hypothetically, insurance companies from Canada and Mexico start contracting with American providers and provide appealing, low cost choices for consumers? Or, these transnational insurance companies could even create border-crossing incentives for American patients to use foreign providers at a significantly cheaper cost? Since drug prices and medical expanses are significantly lower in other developed countries, allowing transnational health care access might create competitions that would not be possible for any American insurance company. I know that many Taiwanese Americans seek healthcare back in Taiwan, where high-quality universal health care is the norm. If such transnational health-seeking endeavors could be happening much more frequently and closer to American borders, it might be able to disrupt existing norms in the U.S. market and potentially drive health care costs down. Similarly, a radically cheaper federal-insurance option or single-payer system might also create such disruptions and norm-shifting competitions. Nonetheless, these conversations can never happen unless there is enough political will to seriously question some fundamental assumptions our current health care system relies on.