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Zack Hutchins
Director of Communications

May 27, 2005

Industry analysts say future of health care should be consumer driven

Rising health care costs will only be reined in when innovation and market choice are unleashed in the health care system, agreed two industry experts at a forum on consumer-driven health plans in Albany May 26.

The forum, sponsored by the Manhattan Institute's Empire Center, featured speakers Regina Herzlinger, a professor at the Harvard School of Business, and Scott Gottlieb, a resident fellow at the American Enterprise Institute, a public policy think tank.

The fastest growing number of uninsured make more than $75,000 per year, Ms. Herzlinger said. We've now gotten to a point where the poor and the middle class can own cars and houses but not health insurance, she continued.

Health coverage should be modeled on the car industry, argued Herzlinger. The car industry, influenced by people like Henry Ford, Alfred P. Sloan, and J.D. Power, found a way to make the automobile less expensive, give the consumer more choice, and give the consumer relevant knowledge about the product.

Consumers have no such choice in health care. In that arena, American consumers have experienced "tremendous inflation and unknown quality, and as a result we have this tragedy that the wealthiest country in the world has 46 million uninsured," Herzlinger said.

Scott Gottlieb, whose comments focused on the new Medicare drug prescription laws, agreed that choice gives consumers a way to control their own health and spending.

"There is evidence that the medicare beneficiaries who have been using the new Medicare drug cards are more likely to purchase generics," Gottlieb said. That's because purchasing brand-name drugs would mean the beneficiaries must pay the price difference out-of-pocket. This will eventually force drug companies to lower the market prices of their drugs and be more responsive to consumers, Gottlieb continued.

Sen. Raymond A. Meier (R-Utica), chairman of the Senate Committee on Social Services and Children and Families, and co-chair of the Senate Task Force on Medicaid Reform, also spoke at the forum, and agreed that consumer-driven plans would benefit everyone.

Many politicians think that they can pass laws that will supersede laws of economics and human behavior, Meier said. The senator said that legislators continue to think that they can tell the public what coverage they need and then mandate that coverage by insurers.

The state has now mandated, among other things, chiropractic care and prostate exams, Meier continued. Even infertility treatments, "never mind your ability or your intent — you're covered."

Meier and Gottlieb both pointed to the Medicaid program as a source of change. Gottlieb pointed out that South Carolina and Florida have both moved to make their own Medicaid programs consumer-driven.

Meier said that change may happen in New York, but only if the federal government, which pays half the hefty Medicaid bill for the state, decided to cap growth in the aid it will provide.

"If the federal government ever does that, New York is going to have to make some very dramatic decisions, because the program would literally become unsustainable at that point," Meier said.

Ms. Herzlinger predicted that the change will come first from businesses, whose employees want consumer-driven plans.

“The way to fix health care is to let the Henry Fords loose,” Ms. Herzlinger said. “Let the Alfred Sloans loose. Let’s have a lot of choice. We have 240 models of automobiles. We have 195,000 book titles. We have 9 million blogs. And we have one choice of insurance policy. Hello? And people wonder why on earth health-care costs are so high.”