Are Patients Smart Enough to Choose Higher-value Providers and Insurers?

I’ve been hearing the argument lately that healthcare is so complex that patients are incapable of making good decisions. I (mostly) disagree. Here’s how I break this argument down:

Treatment decisions: This is when the patient weighs the different treatment options’ risks and benefits and decides on the one that is right for them. This certainly cannot be done without the assistance of a physician, who needs to simplify those risks and benefits and help clarify which ones are most relevant to the patient. Shared decision making! These decisions are important and determine many aspects of healthcare spending and patient outcomes and satisfaction, but they are not integral to fixing the healthcare system.

Insurance plan decisions: This refers to patients choosing which insurance plan they will get. There are actually usually two rounds of decisions for this. The first-round decision is done by the employer, which narrows down the many options in the region to just a few. Then the employee does the second-round decision of choosing one of those options. A similar process happens with Medicaid in many states–Medicaid contracts with a few different insurers, and the enrollee chooses one. And even Medicare Advantage has a similar two-round decision. Patients need to understand what their likely care expenses will be that year (super tough to predict for many people!) and then choose the plan that seems most likely to cover those care needs with the lowest out-of-pocket spending. And since out-of-pocket spending is a combination of many things (deductible, copays, coinsurance, other alternative payment schemes like reference pricing or multi-tiered networks), this can get pretty complex, and would likely be impossible for a majority of people to easily identify the plan that would be best for them. The two-round decision most people face simplifies this quite a bit by narrowing down the options (at the risk of agency costs), but sometimes there are still too many options. And for those dealing with the open market without a first-round decision narrowing down their options, ways to simplify their selection are an absolute necessity. That’s why I like the idea of dividing plans into different standardized tiers according to their coverage, networks, and out-of-pocket requirements. Software-encoded decision algorithms, which have a patient put in their information and then identify the plan best suited to them, are also great.

Provider decisions: Patients get to choose which providers they go to for care. Lumped in this category is also imaging options (like my experience shopping for an MRI), lab options, and any other medical services they may need. These provider decisions are subject to two rounds of decisions just like insurance plans. The insurer does the first-round decision by narrowing down the provider options (the “in-network providers”), and then the patient typically chooses one of those. What do you need to understand to be able to choose the best provider? I’ve talked about this elsewhere. Patients need simple, salient quality metrics, and they need to know their expected overall out-of-pocket costs. Relatively well-educated people can use well-structured information like that and 80% of them will make the right decision. I don’t know what percent of people with less education can make the right decision when there’s an obvious right answer, but certainly it will be much lower.

So, can patients make good provider and insurer decisions? I believe most of them can if they have the right information and the incentives to consider both cost and quality of the options available to them. It will never be 100%, but that’s okay, because we don’t need 100% of people to make a perfectly rational high-value decision in order to get the changes necessary to start fixing healthcare.

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