Imagine a future in which the health-care system provides consumers high-quality care in a variety of convenient forms at competitive prices. In this vision, insurers, employers, and governments offer consumers financial incentives to take better care of themselves — to exercise, eat right, stop smoking, and follow treatment regimens for chronic problems such as asthma and diabetes. The system encourages consumers to plan for the health-care needs they can anticipate (i.e., nonemergencies) by “shopping” for products and services much as they do for a new car; consumers make informed decisions based on readily available reports on quality, service, and price. Providers and product manufacturers compete for different segments of the market using a variety of channels, formats, and business models. And consumers confused by the profusion of offerings can turn to agents who help them design the most suitable health-care programs for themselves and their families.
Such a robust retail health-care market is more than a vision; it is a real possibility. Today’s troubled U.S. health-care industry is the result of decades of good intentions and unintended consequences. Payers (defined as government and employers, who foot the bill for most health-care costs) and patients alike struggle to cope with complexity and cost. But most efforts to control costs — by government and by the private sector — have proven unsustainable and have unintentionally increased complexity. The upshot is a situation in which only 61 percent of employers offer coverage for active employees, approximately 30 percent cover retirees, and 46 million Americans are uninsured.
The problem is structural. Major decisions about health care in the U.S. have traditionally been made by employers, who determine for their employees which benefits and forms of coverage are needed, what types of providers are included in the network, and which organizations administer the benefits. But this paternalistic approach effectively allowed the consumer to be a passive participant in his or her own health care. The consumer has had no economic incentive to seek the best care at the fairest price, or to give up unhealthy habits. Limited competition, unclear pricing, inconsistent quality measures, and complex regulations preserve the disconnect among the three major stakeholders in the system — payers, consumers, and suppliers. This last group includes doctors and other care providers, hospitals, and pharmaceutical companies.
Since 2003, however, the situation has come to seem far less intractable than it once did. That year, Congress enacted legislation that could lead to a transformation of the entire U.S. health-care industry from a wholesale to a retail model, in much the same way that retirement plans moved from defined-benefits to defined-contribution schemes. We’re already seeing early signs of a true retail marketplace:
• New health-care formats and competitors are gaining traction, with MinuteClinics and RediClinics — low-cost walk-in health-care centers for common ailments — at one end of the spectrum, and highly personalized “concierge care” at the other.
• Companies that aren’t traditional health-care players are leveraging their capabilities to create entirely new offerings that enable and encourage the move toward health-care consumerism. Fidelity, for example, is developing products and tools that exploit the emerging health–wealth intersection, such as a calculator that helps predict out-of-pocket health-care costs.
• More employers are starting to offer consumer-directed health plans (CDHPs): high-deductible policies that are usually paired with health savings accounts (HSAs) or health reimbursement arrangements (HRAs) designed to help consumers save money that they can use to offset additional health-related expenses whenever they arise.
• In perhaps the single biggest change, the federal government and leading private-sector payers are driving providers to make cost and quality data more transparent so that consumers can make better-informed choices. Standardized data on cost, service, and outcomes has the power to establish a new basis of competition. Payers are also pushing for new payment mechanisms, such as pay-for-performance, that base reimbursement on outcomes or adherence to broadly accepted clinical guidelines, known as “evidence-based medicine.”