Breaking the Triple Constraints, or, Why I Like Lasik

In an earlier post I suggested that lawmakers fix Medicare before asking the American people to support an even larger healthcare system. Controlling the cost of Medicare, without harming benefits, is essential to buildingthat trust. How can we do that?

In considering how it can be done, I can't help but think about Lasik, the elective eye surgery that many people get to correct their vision, and when successful, to live without glasses or contact lenses.It changes lives, but it's paid for entirely out of pocket.

When Lasik was first introduced, it was expensive, and few doctors could perform it. Years later, the cost has come down, the quality has gone up, and the number of doctors who perform it has increased as well.

Isn't this what we want for the rest of healthcare: lower costs, higher quality, more accessibility? And somehow, it happened without government intervention or subsidy. Adam Smith would be proud.

But how and why did it happen? Certainly the fact that it's an elective procedure played a part (elasticity of demand for you economics geeks out there). But there's an aspect of human behavior involved that I want to point to and suggest it might be the key to breaking the triple constraints of healthcare and here it is: knowing the cost of your care before you need it makes a material difference.

I found some testimony given to the House Ways and Means Committee which supports this idea.The original text is available here.

It's not a dry read - it's conversational and moves quickly.

I'll draw your attention to one specific part of the testimony, where Ha Tu of the Center for Studying Health System Change and Dr. Regina Herzlinger of the Harvard Business School are testifying about high-deductible plans (i.e., plans where patients have more financial skin in the game and therefore more of an interest in how much their care costs).

In the text, search for the words: "Mr. McCrery" to get to it quickly. They testify that evidence shows that as people become aware of the cost of care, they do two things:

1) Decide not to get the care, because they don't really need it (this applies mostly to elective procedures) but more poignantly,
2) Their outcomes improve because patients know how much it's going to cost them if they don't comply with their medication schedules, follow-up appointments, checkups, etc.

As the testimony cautions, we don't want to oversell the benefits of this model, but how much could we reform healthcare if consumers knew the real cost of care, and had more of a stake in their own healthy choices?

For example, heart disease is the leading killer of American men and women, and is highly preventable through behavioral changes such as smoking cessation and weight loss years before the adverse event happens. If you knew today that a heart attack would cost you $20,000 (and not just your $500 deductable) do you think you might take a little better care of yourself?

Put another way, if you can see how putting calories or fat content on restaurant menus might make a positive difference in diners' choices, it shouldn't be much of a stretch to understand how seeing the cost of your future care might positively influence your present choices.

In another blog entry I will walk through a simple example ofof how removing the insulation from cost that we have might have a positive ripple effect through the entire healthcare system.