It’s time to right the wrongs caused by a consumerist approach to healthcare

Applying consumerist principles to the healthcare sector was meant to be the solution for all that ailed us. Think tanks and consultancies talked at length about how it would improve patient experiences, clinical outcomes and affordability.

While these consumerist forces have driven some progress in patient experience and clinical outcomes, cost continues to be a problem. By most accounts, affordability has moved one step forward and two steps back.

History tends to repeat itself. What we are experiencing is a failure on our part to adequately understand unintended consequences; in this case, those of shifting an ever-increasing share of our healthcare costs to individuals. This failure hurts individuals — and their employers — in three distinct ways.

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Forcing impossible trade-offs
Everyone has seen the figures (66.5% of bankruptcies from 2013 to 2016 stemmed from medical issues) and read staggering headlines (like the Nobel laureate who sold his medal to pay medical bills). The rise in out-of-pocket responsibilities for insured consumers has — and continues to — force nearly impossible trade-offs between physical and financial well-being.

Creating a flywheel of rising premiums
Rising out-of-pocket responsibility also means healthcare providers are increasingly exposed to financial risk from commercially insured individuals who may be effectively uninsured for the first $6,000 of healthcare costs.

A 2018 survey by Sage Growth Partners found that 36% of responding hospitals had more than $10 million in bad debt. Many members simply cannot afford to pay these bills, which in turn forces hospitals to write those receivables off as bad debt — but not before expending a great deal of time and expense attempting to recollect a portion of those debts.

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The consequences of these charge-offs do not end with providers. They resurface in the form of higher fees for the portion of the costs that are almost always collected: payments from insurers or self-funded employers. The cycle is complete when these changes to the providers’ chargemasters emerge as higher insurance premiums for employers and employees.

Causing long-term damage through short-term thinking
Collectively, there’s enough academic and anecdotal evidence to support two assertions: Earlier care is almost always more cost-effective; and individuals put off care due to financial constraints. It’s all too common to see insured members who face even modest cash outlays (specialist visits, copays on medications) taking a near-term view by delaying care because of those financial constraints. As a result, they can experience long-term harm in the form of significantly worse health and financial outcomes. There was ample evidence of this behavior during the pandemic, with an estimated 41% of adults delaying or avoiding medical care early on.

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There’s a path forward where we as a society encourage the behaviors necessary to address the same affordability challenges we’ve compounded with consumerist efforts to date, but the proper infrastructure needs to exist first.

For example, legislating increased price transparency is good, but it’s better to put that information in the hands of individuals in a manner that is actionable while incentivizing the optimal behavior. Care navigation is good, but it’s better to enable widespread access to high-impact digital solutions that demonstrably improve the lives of people with chronic conditions.

For their part, HR leaders and benefits advisers have been making significant strides in this space. The emergence of “financial well-being” as a bona fide category of benefits in recent years is clear acknowledgement that a problem exists — and evidence that employers want to be part of the solution. However, viewing this issue as a discrete category risks missing the point altogether. Financial well-being touches every aspect of our lives, including our mental, physical, and social wellness.

For instance, health insurance is not a “prepaid voucher for 10 provider visits” — it’s a financial instrument to manage risk to employers and employees. We’re living through a change in how these instruments are structured, with the average deductible for single coverage increasing by about 182% from $584 in 2006 to $1,644 in 2020. This shift has created a new set of financial and societal risks that are adversely impacting employees and employers alike.

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Forward-thinking employers are intuitively addressing this issue, looking at an emerging wave of benefits that tighten the connection between employee health and wealth. Whether it’s making mental health a priority, finding creative ways to help employees pay off student loans, or empowering team members to afford the care they need, there are a growing number of ways to support the whole employee.

While the decision to apply consumerist ideals to healthcare did a fair share of damage, the sector is not beyond saving. Truly innovative organizations are setting everyone up for success by not viewing employee welfare and company finances as mutually exclusive. Instead, these companies are embracing benefits that accomplish both objectives at once.