Consumer-directed health plans, rational economic theory and the Triple Aim

November 22, 2017 / By Katie Christensen

The consumer-directed health plan (“high deductible”) remains a popular insurance option, theoretically leaving patients more empowered than ever to optimize the Triple Aim initiative (maximum health and quality while minimizing cost) through the selection of cost-effective providers and an understanding of treatment options. 

The underlying premise, of course, is that with transparent, informed decision-making, rational economic theory will take effect. Consumers will seek out less expensive options which meet their medical need. In order to optimize cost savings, compromises will take place. Patients may be more willing to delay a test or not run to the physician office (or urgent care/emergency room).

Are consumers adequately informed?

Certainly open for debate. Even though the well-child visit is fully covered without a co-pay and not subject to a deductible, patients sometimes don’t go for fear of a cash outlay.  Given the financial considerations, do any of us know what the mid-level E&M charge is for each of our neighboring hospitals? Or how it compares to the urgent care clinic?  How about the charge for a stress test? Chest x-ray? CMS charge-level data by HCPCS can be quite illuminating…albeit not readily available in the public forum.

Even the motivated healthcare consumer is confronted with challenges to understand price. The exact CPT code is oftentimes not specifically known prior to the date of service, and furthermore, it is not a straightforward process to efficiently evaluate price and quality across the provider community.

Do consumers behave rationally when it comes to opting for care? 

Although it is generally accepted that diagnosing a condition early and taking your medications are important, patients are willing to take that risk within the realm of an individual risk pool, taking an  “It won’t happen to me” approach.  It works the other way as well. Given that our health is at stake, a patient is sometimes biased to the more expensive offering with a perceived increase in quality. And given the changing landscape of quality, the definition and interpretation is left to the individual, and/or word of mouth. If all politics is local, so is health care.  We are emotional beings, and are subject to prioritizing those emotional responses above traditional rational decision-making.

More than just price, incorporating brand/provider loyalty …

Elasticity is an economic concept that describes the price variation that a consumer is willing to compromise before seeking alternative arrangements. Commodity type products will typically have low elasticity whereas emotionally-tied or luxury items will have greater elasticity.  Patients maintain a relationship with their provider community, including specialists and potentially hospitals. To that end, price variation may not be the driving determinant in choosing care delivery, even with outperforming or comparable quality.

… and not every patient is equally empowered. 

Consumer-directed health plans put the member at least partially in the driver’s seat when weighing alternatives. The individual member is both empowered and yet potentially incapable of evaluating alternatives. 

With more than one-third of total healthcare expense driven by our 65 and over population, and 43 percent of the population either illiterate or capable of simple literacy tasks, it is unreasonable to expect complex cognitive discipline within these populations, not to mention the level of support varies widely.

If healthcare delivery is not driven by rational economics, how relevant is it to our national Triple Aim dialog?

In our race to ensure the long-term viability of the Medicare trust fund for the next generation, we have an obligation to advance our economic models stimulated by cross-discipline research. 

 “Imperfect people are making imperfect decisions, and behavioral economics does a better job than mainstream economics of explaining and predicting this reality.”

Having some “skin in the game” resonates as a meaningful way to engage the consumer, but we can do better. As an industry, we need to enhance the manner of presentation, elevating our data-driven discussions to provide meaningful patient-specific decision-making information.

Our kids are betting on us.

Katie Christensen is a healthcare consulting manager within the Population and Payment Solutions organization of 3M Health Information Systems.


  1. An Introduction to Behavioral Economics
  2. The End of Rational Economics