The proportion of healthcare services purchased through insurance has increased significantly over the past century, thanks to tax exemptions for employer-sponsored benefits. This has led to a surge in spending on treatment, as consumers are insulated from the cost of services. However, making patients bear more of their costs out of pocket is not an effective way to reduce wasteful healthcare spending. Instead, it can inhibit access to care, particularly for the seriously ill, who account for a large proportion of healthcare spending.
The current system, where patients have little control over the purchase of healthcare, has shifted control to bureaucrats and insurers. Critics argue that this arrangement deprives individuals of access to their preferred doctors and drugs, and displaces a personalized patient-clinician relationship with “checkbox medicine” preoccupied with reimbursement and regulatory compliance.
Advocates of “direct payment” for medical care propose cutting out the middleman and relying on cash payment for services. However, this approach is unlikely to be effective, as patients may not have the incentive or resources to shop around for the best-priced medical care. Moreover, high deductibles have been shown to reduce the utilization of medical services, rather than steering patients to cheaper sources of treatment.
The federal government’s attempt to finance healthcare by distributing cash uniformly to Americans is likely to accumulate funds in the hands of those who need assistance least. The heaviest healthcare costs are typically incurred by households that have high utilizers of medical care, who use more than average year after year.
Some forms of insurance, such as fixed indemnity health insurance, may facilitate the direct purchase of medical care by patients. However, the appeal of such plans is likely to be limited, as they may leave patients unable to pay for treatment, particularly if their cases involve costly complications.
Ultimately, improving the healthcare system requires making insurance more responsive to patients’ concerns. Allowing employers to provide pretax funds for their employees to purchase their own insurance can enable individuals to opt for more cost-effective plans that better suit their personal health needs and circumstances. This approach can reduce the largest hospital and drug expenses, rather than just shifting the burden of paying for them onto the seriously ill.
It is also important to note that Americans typically want health insurers to cover more, not less. A large majority of adults want insurance to pay for weight loss drugs, medical services without prior authorization, and to limit surprise medical bills. Therefore, improving the healthcare system requires a nuanced approach that takes into account the complexities of the current system and the needs and preferences of patients.