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The Democratization of Health Care: The Force of Consumer Demand

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This is the age of health care reform and I would like to make the case that we allow the attractive force of consumer demand to drive the future development of our health care system.

Consumer demand is the purchasing patterns of an individual or cluster of individuals. These patterns can be measured in terms of their size (financial value or number of people); they can be localized by geography and duration; or described by the socio-economic characteristics of the individuals whose activities form the patterns. In a free-market economy, consumer demand is akin to gravity. It is an attractive force around which product development, distribution networks and retail centers -- markets -- are formed and stabilized. The challenge with consumer demand is that it is a malleable force, easily influenced by other factors. We will focus our attention on two: the predictability/inevitability of consumer need and the necessity of health insurance.

First, there is an objective reality: It is a statistical certitude that, beginning with the birth experience, we will all touch the health care delivery system as patients in our lifetimes. In large populations such as ours, illnesses occur within predictable ranges. We can predict with a high degree of accuracy the number of people who will become diabetic, have a heart attack, succumb to cancer or go on dialysis at the community level. We may not know with certitude precisely who in the neighborhood will get sick from what, but we do know that a predictable number will require medical assistance each year. At that moment, those afflicted must enter the market to purchase medical care.

The management problem is that the average consumer cannot directly pay for medical care. This brings us to our second variable: insurance. The practice is to purchase health insurance through employer-based private insurance or government-mandated social insurance. Those without insurance tend to rely on government-sponsored safety nets for their care.

The type or absence of insurance influences the quality of care available to the consumer. Those without insurance (who are not in the one percent), if they receive services at all, tend not to receive best modern therapy. When they are chronically ill, the frequency of their care is more sporadic and disease progression is more likely to occur at a faster pace. In these communities, we speak of health disparities.

The type of insurance (Medicare, Medicaid, or employer-based) can also inform consumer demand, because insurers are positioned between the consumer and the businesses that provide care. Operating on the flawed credo that health care is a scarce resource and that scarcity is driving up health care costs, insurers/payers deliberately attempt to down regulate consumer demand through a variety of devices -- copays, coinsurance, restrictive formularies and reimbursement strategies to name a few. Unfortunately, by shrinking consumer demand in terms of the number of people who are accessing care and the monetary size of the market, they also chase away capital investment, stifle competition and innovation, and artificially sustain the life of old, less effective and thereby more costly therapies.

Insurers are well aware that their role as paymaster influences health services markets. They seem less inclined, however, to acknowledge the extent to which their behavior distorts purchasing patterns with deleterious consequences for the individual patient as well as for the wider society's ability to effectively provision quality health care and achieve positive outcomes. Their prime directive should be to do no harm. They should foster an environment in which the interaction between the individual consumer and those in the business of providing health care is given the greatest possible latitude and support.

The fact that the consumer needs to use an insurance instrument to purchase health care does not mean that those who issue those policies should substitute their preferences for those of the consumer. Insurers must learn to trust the power of consumer demand operating in a free economy. It is consumer demand that has built our vibrant national economy, and it can do the same for health care. It will cause purchasing patterns to take hold, competition will emerge to reshape those patterns, and a cycle of rapid innovation will prevail. It is in a cycle of competition and rapid change that our best chance to drive down health care costs while meeting consumer demand will obtain.