Consumer Directed Healthcare – Requirements For Success

A recent article in the Wall Street Journal got my attention.  It was about a Chinese prevention-oriented physician, Dr. Hu.  His practice was very effective in treating hypertension, one of the largest killers in China.  He gave free advice and low-cost generic drugs to treat hypertension which proved to be effective and resulted in his popularity among the people.  However, the hospital and its related physicians became very upset with Dr. Hu because his methods negatively affected their income which is based to a high degree on the utilization of high-tech drugs and expensive testing in the hospital.  One third of the population in China has access to the healthcare system with health insurance.  Two thirds of the population have no health insurance and must pay for their services out of their pocket.  Hence they look for the best value in medical services available.  Dr. Hu is continuing his practice of prevention in spite of the “frosty” relationship with the hospital and other physicians.

This story about healthcare in China illustrates the problems and opportunities of Consumer Directed Healthcare (CDH).  When people spend money out of their pocket they tend to shop for healthcare services more like they would for food or other consumer services. They look hard at the price and quality of the service.  Our system is currently based primarily on third parties who insulate the consumer from the true cost of healthcare services. In spite of the number of uninsured, those with insurance are often over insured.

Our healthcare system continues to grow with no end in sight.  The per capita healthcare costs in 2005 were $6,697 and accounted for one sixth of GNP, while in 1980 it was only one tenth of GNP.  At the same time, last year 61% of businesses offered health benefits to at least some employees down from 69% in 2000.

There are several critical changes that must occur in our present healthcare system if we are to capitalize on the Consumer Directed Healthcare movement and make healthcare more available to all in a more cost effective manner.  They are the following:

1. We need to take personal responsibility for and a more preventive approach to our health. The Center for Disease Control has stated that preventable illness and medical conditions comprise approximately 80% of the burden of illness and 90% of all healthcare costs and account for 8 of 9 leading causes of death.  More than half of all Americans are obese, a number that has grown dramatically over the last decade.  Researchers say that obesity poses a major threat to public health due to the clear association between obesity and a variety of chronic diseases such as Type II diabetes, heart disease and cancer.

The concept of a high deductible health plan (HDHP) coupled with a Healthcare Savings Account (HSA) must become more understood.  However, HDHP’s are off to a good start.  A Goldman Sachs study recently reported that 6.7 million lives were covered in 2006 and projected it to grow to 49 million by 2010.  Medicare now offers an HSA alternative but very few know about it.

2. Price and quality information must become ubiquitous.  Currently this information is very difficult for the average citizen to obtain.  Most information is by word of mouth and haphazard at best.  Hospital information is available and easier to obtain than physician information.  Most of the sources are private and charge for data access.  A new website committed to providing transparent pricing information to consumers for free is  A visit to the site will reveal the significant range of prices for the same procedure at different hospitals.  For example, according to a recent study it cost $91to treat a patient for strep throat in a doctor’s office and $310 in a hospital ER. They are working on providing physician data sometime later this year.

3. Physician malpractice reform must become reality.  The direct costs of the mal-practice system are about $28 billion annually in addition the amount spent on misplaced or lost information.  But this is only the tip of the iceberg.  Defensive medicine, such as extra tests are currently necessary which adds a significant additional amount to the cost of healthcare.  Meaningful reform in the mal-practice arena must be made.  Trust must be restored to the legal system and become able to fairly assess good care from bad care.

A reasonable reform is the development of specialized healthcare courts which would have no juries.  Specially trained administrative judges would receive advice from neutral experts who would make decisions and write opinions on standards of care.  More information on this concept can be obtained at

4. Limit and equalize the tax deductibility between employer based healthcare insurance and non-employer based individual insurance. Currently, tax law favors third-party insurance over individual self insurance and favors employer-provided insurance over individually purchased insurance. It will be necessary to develop some kind of community rating and insurance risk pools for health plans so that premiums become affordable to all regardless of their health. Subsidies should be available to those with low income.

In conclusion, we have a very sick healthcare system and the wrong people are being rewarded. We need a fully informed patient with choices.

Routine and minor care should be provided by HSA’s. Catastrophic care and long term illness would be covered by traditional private insurance. More freedom in the healthcare market place will offer new opportunities. The fact of the matter is the system will change.  How will it change?  Will it be primarily consumer controlled or government controlled?


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