Is Health Care Demand Really Elastic?

eyebeholderIn an otherwise unremarkable article about what everyone who is paying any attention has seen, and remarked upon, The Washington Post repeats a claim that seems more and more suspicious to me.

Higher deductibles are a tool to reduce unnecessary health-care use, because people are more likely to think twice about seeing a doctor or getting tests they might not need if they are footing more of the bill.

This sounds rational and logical, but makes the interesting assumption that demand for health care is elastic. Certainly the demand for some health care is more elastic than, say, the desire for health care after a tumble down the stairs or a diagnosis of colon cancer. But the elastic part of that demand is seemingly the least expensive portion of the national health care expenditure. Having the sniffles or an achy back– and a fat deductible– would seem to limit spur of the moment visits to one’s physician, but simple office visits tend not to be expensive. It’s those unavoidable emergency room visits and three day stays in the hospital that run into five figure charges and $105 Tylenol (read directly from a bill on my desk).

Yes, some people probably use the ER as their primary source of medical care, but my guess is that many of those people do not have insurance, or have one of those rapidly disappearing policies with tiny deductibles. Or are illegals and are taking advantage of our societal propensity for fiscal suicide. And I freely admit that I am supposing and guessing just as much as the WaPo seems to be.

Anyway, it’s just a thought. And…a Gold Star for anyone who can identify the photo illustrating this post…but it is only open to readers younger than 45!

11 comments on “Is Health Care Demand Really Elastic?
  1. I cheated on the photo (although I figured the general category if not the specific.)

    Damn you CBD for preempting my “I used to understand healthcare economics, then I took a Kenneth Arrow to the knee” post.

    I dunno, maybe I’ll get around to writing it up anyway with for a BLOG WAR! But the general gist of it would be “yes, but also then again no.”

    There’s a significant amount of elasticity in healthcare which I think is masked by the current system of payment. ER utilization tends to go up with insurance coverage, and as coverage for the ER visit increases (along with a few other co-variables like income.)
    Why wait the weekend for a doctor’s visit when you can be seen right away.
    And thanks to “InQuicker” you now don’t even have to wait in the waiting room (hospitals here are tripping over themselves to set that up.)
    There’s also a massive amount of elasticity in the pharmaceutical spectrum. And that’s made even worse by companies futzing with the cost to consumers by covering co-pays (which don’t reduce the bulk of the cost of drugs.)
    And the list goes on and on and on.
    Some guys at Dartmouth wrote an entire book about this called “Tracking Medicine.”

  2. “Higher deductibles are a tool to reduce unnecessary health-care use, because people are more likely to think twice about seeing a doctor or getting tests they might not need if they are footing more of the bill.”

    First, stated like a true free market hater.
    Second, “…that they might not need”. Stated like a compassion-less tool.

    • The free market in health care has been distorted into something recognizable by any free-market adherent.

      Of course: “unneccesary health-care use?” Fuck you. I will decide how I spend my money.

      I should have emphasized “sounds” rational and logical.

  3. Well at least we won’t suffer from irony deficiency anemia.

    As in, I find it ironic that first you have the remarkably long list of mandatory covered services for a qualifying plan under the PPACA, and then in order to rein in spending these same services are declared “unnecessary”. This was discussed in the run-up to passage of this legislation in ’08 and ’09, utterly predictable then and coming to pass now.

    1. Expand the pool of money by forcing purchase of insurance while enticing “customers” with the lure of broad range of covered services
    2. Drive smaller insurers out of the “market”
    3. Drive smaller medical practices and free standing hospitals out of the “market”
    4. Contain costs via financial disincentives and other barriers to care (pre-authorizations, Accountable Care Organizations, etc)
    5. When #4 doesn’t work, move to more direct
    rationing (“Take the pill granny, not the pacemaker”)
    6. When #’s 1-5 don’t work, consolidate the smaller pool of insurers and the smaller pool of ACO’s into a single-payer structure.

    This was the script and it is playing out according to plan.

  4. One quick anecdote before I go. True story.

    Young couple looks at health insurance (cost-prohibitive on their tight budget) and size of deductibles available to them (daunting). Wife is pregnant, they look at costs of in-hospital birth (cost-prohibitive) and make a seemingly thoughtful decision to go with plan “C” which is a home delivery utilizing a lay midwife. Lay midwife, being basically incompetent beyond making herbal tea and burning incense does not do any real monitoring of the pregnancy, partial placental abruption (chronic) develops, goes unrecognized. Labor ensues, somewhat more difficult than usual. Baby delivered blue, floppy and unresponsive with a barely detectable heart rate. Rushed to hospital via ambulance, resuscitation attempts result in transient recovery of heart rate but no neurologic function. Support withdrawn. Utterly preventable.

    Real life and death consequences of the financial distortions and perverse incentives of PPACA.

  5. Pingback: Cut. Jib. Newsletter. | Then I took a Kenneth Arrow to the knee

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