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Can Overuse of Health Care Be Managed by Giving Consumers More Choice and Responsibility?

After six years, the Affordable Care Act has failed to adequately rein in costs or prices.

This has been the mantra of market advocates for many years under the theory of consumer-directed health care (CDHC), which posits that patients will be more judicious in their use of health care if they have “more skin in the game” (ie. through more cost-sharing). It has been repeated so often and for so long as to become a meme: a self-replicating myth or slogan that by constant repetition becomes part of everyday language, without regard to its merit.

Here is a classic quote in 2006 by senior fellows at the Hoover Institution, a conservative think tank, putting the blame and responsibility on patients for the control of health care costs: “Greater reliance on individual choice and free markets are the solutions to what ails our health care system … A handful of policy changes that harness the power of markets for health services have the potential to give patients and their physicians more control over health-care choices, create more health insurance options, lower health care costs, reduce the number of uninsured persons — and give workers a pay increase to boot.” [1]

A Rebuttal of This Meme

The last three decades have demonstrated how false this claim is in terms of cost containment. Over utilization by patients is not the root cause of health care inflation, as these findings show:

• Increased cost-sharing through deductibles, co-payments, coinsurance and out-of-pocket costs when patients seek health care not only don’t adequately control costs but add financial barriers that lead many patients to delay or forgo care altogether. The 2003 Commonwealth Fund Biennial Health Insurance Survey led Commonwealth Fund President Karen Davis to draw this conclusion: “the evidence is that increased patient cost-sharing leads to under use of appropriate care.” [2] A 2007 systemic review by investigators at RAND and the National Bureau of Economic Research found that studies published between 1985 and 2006 showed that increased cost-sharing for prescription drugs is associated with increased use of ER visits and hospitalizations as well as worse clinical outcomes. [3]

• Even with health insurance, many millions of people find necessary care unaffordable. The cost of health insurance and care in 2016 now exceeds $25,000 a year for a typical family of four with an average employer-sponsored PPO plan, triple that in 2001 [4]; this is an impossible burden compared to today’s median household income of about $53,000. According to a report from the Commonwealth Fund in late 2015, health care costs are unaffordable for one in four privately insured working-age people and more than one-half of those with incomes below 200 percent of the federal poverty level ($23,340 for individuals and $47,700 for families of four). [5]

• Almost all health care services are ordered by physicians, up to one-third of which are unnecessary, inappropriate, or even harmful. [6]

Physician-induced demand is much more important than patient-induced demand. Demand by patients for health care is not very sensitive to prices. The major factors that drive up health care costs include higher prices, technological advances, changing thresholds for defining existing “disease” (e.g. osteoporosis and hyperlipidemia), wasteful administrative costs in a mostly for-profit inefficient system, vigorous marketing by providers and suppliers, including direct-to- consumer advertising of drugs and medical devices, and corporate profiteering throughout our medical-industrial complex.

• Almost two-thirds of US physicians are now employed, especially by expanding hospital systems, with pressure on them to become more “productive,” including by upcoding services to drive their employers’ revenues up.

Underutilization by patients is a much bigger problem than overutilization, since many patients cannot afford care, even if insured, because of high deductibles, copayments, coinsurance, and out-of-pocket costs. Deductibles for bronze plans purchased on the ACA’s exchanges in 2014 averaged more than $5,000 for individuals and $10,000 for families. [7]

• According to a 2014 report from the Commonwealth Fund, almost one-third of privately insured, working age Americans with a medical problem did not go to a doctor because of cost [8]; a 2015 Gallup poll found that as many as 16 million Americans with chronic conditions avoided seeing a doctor because of out-of-pocket costs. [9]

• If patients shop, as they are advised to do on the ACA’s health exchanges, prices are not transparent for either hospital or physician services, and directories of networks are often inaccurate. For many patients with urgent needs, shopping is not realistic, and if insured, they are frequently restricted in their choices by their coverage.


Despite some 30 years’ failed expectations that more cost-sharing by patients will contain costs of health care, why do we continue with this policy that increasingly makes health care inaccessible and unaffordable to a growing part of our population? The big reason, of course, is the economic and political power of the corporate stakeholders in our present multi-payer financing system, such as the insurance, drug, and medical device industries. Their power in the political process supports the status quo and resists real health care reform. After six years, the Affordable Care Act (ACA) has failed to adequately rein in costs or prices. Cost-sharing is a central part of the ACA, supported by Hillary Clinton, and will be in whatever “plan” the Republicans will come up with if they gain enough political control to repeal and replace the ACA. We must abandon the meme that patients can contain health care costs and move to a single-payer, not-for-profit financing system, or the health care crisis will get steadily worse until the system implodes.


1. Cogan, JF, Hubbard, RG, Kessler, DP. Keep government out. Wall Street Journal, January 13, 2006: A12.

2. Davis, K. Half of Insured Adults with High-Deductible Health Plans Experience Medical Bill or Debt Problems. New York. Commonwealth Fund, January 27, 2005.

3. Goldman, DP, Joyce, GF, Zheng, Y. Prescription drug cost sharing: Associations with medication and medical utilization and spending and health. JAMA 298 (11): 61-88, 2007.

4. Milliman Medical Index. Healthcare costs for a typical American family will exceed $25,000 in 2016 and have tripled since 2001. Milliman, May 24, 2016.

5. How high is America’s health care cost burden? Findings from the Commonwealth Fund Health Care Affordability Tracking Survey, July-August 2015. Issue Brief. The Commonwealth Fund, November 20, 2015.

6. Wenner, JB, Fisher, ES, Skinner, JS. Geography and the debate over Medicare reform. Health Affairs Web Exclusive W-103, February 13, 2002.

7. Goodenough, A, Pear, R. Unable to meet the deductible. New York Times, October 17, 2014.

8. Ungar, L, O’Donnell, J. Dilemma over deductibles: costs crippling middle class. USA Today, January 1, 2015.

9. The editors. Out of Pocket, out of control. Bloomberg View, February 16, 2015.

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