Choice In Health Care

In reading their paper on creating a better health care system(Nov/Dec 05), I was disappointed that my Stanford Universityfriends and colleagues, John Cogan and Daniel Kessler, did notinclude the principle that all consumers should have a financiallyresponsible choice among alternative health care financing anddelivery plans—as we have here at Stanford. Perhaps theytook it for granted that most people have this kind of choice,although, in fact, barely 10 percent of the employed insureddo.

It is important for people to have such a choice because premiumdifferences (risk-adjusted) reflect the total annual per capitacost in each delivery system. The financially responsible choiceof health plans puts market pressure on each delivery systemor network to be innovative in reducing total cost—andnot just costs in the first $1,500 below the deductible.

Adding to our excessive tax preferences to cover out-of-pockethealth care spending is not wise, especially when we do notknow how the federal government will be able to pay for obligationsit has already assumed.

National health spending has doubled its share of gross domesticproduct (GDP) in the past twenty-five years. Absent some quitefundamental change, this will double again in the next twenty-five,seriously straining public finances. We need to look for policychanges that are far more ambitious than a 6.2 percent reductionin private health spending.

We need to close the gap between spending growth and GDP growth.That will require a fundamental change in financial incentivesfor consumers (making a cost-conscious choice of a full healthplan instead of selecting a low-priced doctor) and providers(replacing fee-for-service with per capita prepayment and salaries).Perhaps when things get bad enough, such fundamental changewill become politically feasible.

Alain C. Enthoven

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Choice In Health Care