The Myth of the Sovereign Consumer

By Kim Bellard, May 22, 2014

The title of this post comes from a provocative article by Bruce Vladeck in a recent Health Affairs Web First edition focused on provider consolidation.  I'll get back to Dr. Vladeck, but anyone who has been following my posts knows that provider consolidation has been a source of much concern to me, so the four articles in this HA edition were of much interest.

Paul Ginsburg and Gregory Pawlson's article takes it as a given that providers have been consolidating, are going to consolidate, and that, left unchecked, this would tend to raise prices.  They outline a fairly comprehensive list of potential strategies to deal with this impact. 

Another article, from economist Martin Gaynor, reviews the issue of consolidation, some of the research on it, and the various ways that competition is regulated. 

A third article, from MD/JD Professor William Sage, suggests that the problem is not so much provider consolidation as it is "getting the product right."  He argues that much of our health care system isn't as competitive as it could be because a "..long history of regulation and subsidy has distorted prices, quality, and innovation." 

The fourth, and most fun, article was from Dr. Vladeck.  He doesn't seem as worried about either provider consolidation or the ultimate need for government rate setting (although he acknowledges it is not politically likely).  He views the Sage and Ginsburg/Pawlson articles as being based too much on what he calls a "fundamentally obsolete conceptual model": the myth of the sovereign consumer. 

Dr. Vladeck seems skeptical of Sage's proposals to redefine the product, and sees consumers as being clearly worse off than twenty years ago, especially since:

...consumers are regularly inundated with self-serving or downright erroneous information from health insurers, providers, and entrepreneurs alike about health care services and their use that carries the implicit message that any illness or financial difficulty is essentially the fault of the consumer.

Huh?

Dr. Vladeck concludes that large payors, including the government, may be the best bet to control prices, but concludes that "instead of continuing to try to impose axiomatic and solipsistic theories on a reality to which they increasingly fail to apply, we need to figure out what kind of health care system we really want and how much we are prepared to pay for it."

I don't disagree with his conclusion, just most of what preceded it.

Chip Kahn, President of the Federation of American Hospitals, used the HA edition to post his thoughts on consolidation.  Not surprisingly, he's all for it, citing what he sees as the more ominous consolidation on the health plan side. 

Neither Mr. Kahn nor Dr. Vladeck seem to credit a slowdown in the rate of increases to the last recession, or to changing consumer behavior due to increased cost-sharing and less confidence in their economic prospects. 

Which leads back to Dr. Vladeck's "myth of the sovereign consumer."  Yeah, I'd have to agree that the record is pretty poor about consumers taking good care of their own health.  I'd also have to agree that the full impact of increased cost-sharing is, as yet, unclear. 

At the end of the day, though, given a choice between having responsibility for my health or abdicating it to someone else, I'd rather have it, and I think most people would agree.  It's not that the "sovereign consumer" is a myth, it's that we haven't ever really tried it. 

Frankly, in many ways, it is pointless to decry provider consolidation, because it is going to happen, just as it is happening in virtually every other sector of the economy.  

The Commonwealth Fund is "searching for the next breakthrough in health care, by which they mean "an idea, a paradigm, a strategy that positively and profoundly disrupts the status quo."  Finding ways to truly empower consumers -- not just paying lip service to it -- may just be such an idea.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting