Expensive Health Care: Is it Really the Transaction Costs?

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This recent Fiscal Times article got me thinking about how to apply the lessons of e-commerce to health care.  The article stated at first that individual patient habits were to blame for expensive health care costs, but then goes on to explain that it’s really because they can’t make up their mind about what health care system they want to use.  Can anyone solve that first problem?  There is the “Nudge” phenomenon of gently compelling consumers to behave in desired ways, but this is a very new field of thought incapable of changing an entire industry at this point.

Can anyone solve that first problem?  There is the “Nudge” phenomenon of gently compelling consumers to behave in desired ways, but this is a very new field of thought incapable of changing an entire industry at this point.

The second objection — that customers are “spoiled due to the ‘buffet effect'” — puts the cart before the horse.  Why are customers spoiled?  Isn’t freedom of choice a good thing?  Why assume that getting all services from one health care system is more efficient?  These claims assume away basic human behavior.  

The author has muted enthusiasm that Accountable Care Organizations (ACOs) can direct patients to less-expensive costs of care.  These cost savings, however, are not borne by the consumer.  At the same time, consumers do not see the true cost of care.  This explains why ACO patients may bounce from one hospital to the next.

 The author has muted enthusiasm that Accountable Care Organizations (ACOs) can direct patients to less-expensive costs of care.  These cost savings, however, are not borne by the consumer.  At the same time, consumers do not see the true cost of care.  This explains why ACO patients may bounce from one hospital to the next.

In the age of electronic medical records, the transaction costs of receiving care from numerous providers are lower than ever.  This is not the major cause for concern.  The payment structure is.

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