Medicine Can Be Consumer-Centric

Published August 1, 2006

Your Health Matters: What You Need to Know about U.S. Health Care
by Gregory Dattilo and Dave Racer
Bloomington, MN: Alethos Pr Llc, 2006
336 pages, hardcover, ISBN: 0977753409, $24.95
Available through

“For far too long, the [health care] news has been dominated by myths and misconceptions, and truth has been buried,” Gregory Dattilo and Dave Racer write in their new book, Your Health Matters: What You Need to Know about U.S. Health Care. The system, they note, is made up of a patchwork of public and private payers, which the authors point out many Americans find complex and confusing.

Yet we have a greater stake in how well our health care system functions than in any other industry, because “nothing else matters if life itself is threatened by illness or injury,” they write. Therefore, the U.S. health care system, with its extensive safety net, reflects our willingness to do all within our power to extend life and alleviate pain and suffering.

In writing this book, the authors aim to crush health care myths, remove misconceptions, and make people aware that today’s decisions will affect tomorrow’s health care system. They begin by debunking the common misconception that the United States has a “health care crisis.” There is no crisis of “care,” say Dattilo and Racer; rather, the United States has a crisis of “cost.”

Unique Service

Why is the cost so high? Health care is a scarce resource. Virtually all goods and services in our economy are rationed through prices, but health care is different from other areas of the economy in three important ways:

  • the sick and injured cannot do without medical care;
  • those in need of care have an unlimited demand for it, especially if someone else is paying the bill; and
  • few people pay their own health care bills directly. Most are paid by third-party insurers or government.

Bit by bit, Dattilo and Racer identify the origins of the problems with the U.S. health care system. Before 1940, health insurance was almost unheard of, and patients paid most of their medical bills directly out of pocket. Today, slightly more than 10 percent of medical bills are paid directly, and many people consider health insurance coverage to be synonymous with health care.

Government Interference

In addition, government intervention in the health care market has greatly boosted demand and distorted incentives. Because of the tax subsidy for employer-sponsored health coverage enacted more than 50 years ago, obtaining health coverage through one’s employer has become the norm. In 1965, the government created Medicare for the elderly and Medicaid for the poor. Once covered by health insurance, enrollees acquired a sense of entitlement to whatever care they wanted, the authors say.

Thus, America has already taken the first step toward socialized medicine. Few people know or care about the cost of the services they consume, and they feel entitled to any treatment, whatever the cost. They believe everyone ought to have access to health care regardless of ability to pay–even those who simply refuse to pay.

Should we proceed down this path? The authors say no.

Socialized Care

Dattilo and Racer briefly describe the socialized health care systems of France, Germany, Britain, Canada, and Japan. In these countries, health care is viewed as a basic human right–although none of these nations seems to be able actually to guarantee that right. For example, health spending is still escalating, despite the fact that medical care in these countries is rationed through long waiting lists and starved of adequate funding.

Proponents of universal coverage cannot have it both ways, the authors observe. Medical care cannot be high-quality, easy to get, and free at the point of service without expenditures eating up an increasing share of personal income. Our sense of entitlement is at odds with the goal of low-cost health care. If care is free–i.e., socialized–then it inevitably will be rationed, say Dattilo and Racer.

Consumer Pressure

Fortunately, the market can cure what ails U.S. health care, say the authors. An example is the market for corrective eye surgery. In 1991, when LASIK was first introduced, it cost as much as $10,000 per eye. Fifteen years later, entrepreneurial surgeons advertise prices as low as $600 per eye, sometimes lower. The authors write, “This pricing process is totally consumer driven, because the patient pays 100 percent of the costs out of his or her own pocket. Lasik surgeons have had to set their prices at a level that their patients are willing to pay.”

Another example of free-market medicine is elective heart scans, where prices also have fallen. If patients paid more of their medical bills directly rather than relying on insurance, the authors say, medical prices would become competitive due to pressure from consumers. This would happen for two reasons: Consumers spending their own money are sensitive to prices, and suppliers are forced to compete with each other by improving quality and lowering prices.

Doctors practicing under consumer-driven health care will interact with patients differently than those working under managed care. They will have to provide information, answer questions, and give options that fit patients’ preferences, forcing medicine to become consumer-centric, say the authors.

To achieve this, however, will require a new mindset from patients, providers, and payers. For its part, government will have to stop interfering in the health care market with unnecessary and counterproductive mandates and regulations.

Devon M. Herrick, Ph.D. ([email protected]) is a health economist and senior fellow at the National Center for Policy Analysis in Dallas, Texas.