Closeout Sale on Emergency Appendectomies

State Senator Kathleen Vinehout (D-Eau Claire) relayed to the Journal Sentinel a not-too-uncommon situation regarding her family's health care before she entered public office.

As a farm family, there was no option for employer-sponsored health coverage. Given the choice between $1000 per month family health insurance or sustaining their farm business, the family opted for the latter.

A little over a year later, Vinehout's son was rushed to the hospital for an emergency appendectomy. The family had to refinance the mortgage on the farm to pay the $10,000 bill.

When told of this story, here was the response by Sen. Ted Kanavas (R-Brookfield):

"Senator Vinehout's story is heartfelt," said Republican Sen. Ted Kanavas of Brookfield. "But their plan is completely misguided. They've decided to blow up a health care system that is the best in the nation."

Instead, Republicans back what they call a "consumer-driven model" of health care reform in which Wisconsin residents would get more information, compare costs of procedures and insurance, and make informed choices that would cut health care costs.

Huh? Was Kanavas even listening to the story?

Vinehout's response is right on the mark:

That's a fine goal, Vinehout said, but it doesn't work when someone you love is critically ill in a hospital emergency room.

"The whole idea that consumers would actually be able to shop around for that particular surgery looks a little silly when my husband was in that emergency room and said to me: 'What am I supposed to do? Call a La Crosse hospital and see if they have a special on emergency appendectomies?' " Vinehout said.

"It simply doesn't work. . . . The patient doesn't have the power to be able to negotiate."

There is absolutely a place for consumerism in a health system, but the reality of health care and the health care market is simply too complex for it to be the same type of consumerism that's applied to purchasing common household appliances. The completely off-the-mark response by Kanavas and the right on-the-mark reply by Vinehout exemplifies that perfectly.

Economist Alain Enthoven's ideas for managed health care competition represent a far more responsible way to use the market for cost reductions. By linking payers to providers -- e.g., the Dean Health System is serviced by the Dean Health Plan in Madison -- the health plan cost most accurately represents the actual prices of the provider.

Consumers are then given a choice of health plans that all contain a uniform set of minimum benefits. If they opt for the least expensive plan -- which, in turn, would service the most cost effective provider -- they pay nothing per month aside from what they pay into the system as a whole through some form of taxes or assessments. If consumers opt for a higher cost plan, on the other hand, they pay the difference between that plan and the lowest cost plan.

This system offers significant economic incentives for consumers to pick the lowest cost plan and for the providers to be the lowest cost network so that consumers pick the plan that's associated with them.

The system can further use the market by including a responsible cost sharing formula that drives consumers toward procedures that have proven to reduce long term health costs -- like most preventive care -- while driving them away from unnecessary over-utilization of care.

Utilizing this type of nuanced consumerism within a centralized universal system has the capability to answer the complex issues like the one the Vinehouts faced a year ago, as opposed to the standalone consumerism of Kanavas and other conservatives that acts as if getting health care is no different than buying a TV.