Healthcare Cost Containment: A Short History Part II-It's the Consumer

Part II in my series on the villains of Heathcare Cost Containment. Part I was about the doctors.


By the early 1980s we were into the Reagan era––the era of individual responsibility. Just as the poor were responsible for being poor and needing only to be kicked off Welfare to end poverty for good, so healthcare consumers were seen as responsible for rising costs. Spoiled by employer-paid healthcare they had no notion of the expenses employers racked up on their behalf. Force them to shoulder a share of the costs and they'd pretty quickly turn into savvy consumers shopping for the best deal.

Accordingly we (yes, I cringe to admit, I was in on the design of such a plan) increased deductibles, though only to about $150, and by then that would be met with just a couple of doctor visits. A few employers required employees to pay a small part of their premiums each month. We also instituted some changes in plan design. Just like now, it seemed a good idea to focus more on prevention, so plans began covering routine medical exams and vaccines at 100%. Prior to that, believe it or not, some plans didn't cover routine physicals at all. We also covered second opinions with regard to surgeries at 100% and a third opinion if someone wanted "the best out of three." The idea was not to deny necessary surgeries but cut down on unnecessary and/or over-performed surgeries. Notice, this was an incentive, not a requirement and the anecdotal evidence at least is that it never caught on. Few patients wanted to go up against their doctors in asking for a second opinion, and when they did, physicians rarely broke ranks, so insurers ended up paying twice for the same prognosis and paying for the surgery anyway. There were also minor incentives for more out-patient procedures.

Just like now there was a great hue and cry against these changes as consumers and their physicians predicted people dying in the streets. Seems people are always more concerned about being under-treated than over-treated. This was also when the HMO offering became a popular option, though only as a second choice. More on HMOs and Managed Care in another post.

Yet again, the measures taken had little if any effect on containing costs. However, the possibly unintended consequence of causing consumers to participate more in healthcare choices, along with some studies being publicized in the press, was that patients began eying their doctors' decisions with a bit more skepticism. Maybe that young mom didn't need the hysterectomy that sent her hormones into a nosedive and deprived her of a third child. Maybe little Joey didn't really require that scary tonsillectomy. And then there were those disquieting rumors of doctors making mistakes––big mistakes––that cost lives and were swept under the rug like recent stories of pedophile priests.

Popular culture often provides a good indicator of political trends. Like Denzel Washington battling the evil insurance companies a couple of decades later in John Q. , the feel-good movie of 1982 was The Verdict in which down-and-out lawyer Paul Newman redeems himself with an early malpractice suit against a physician who, through routine error, sent a young woman into a permanent coma, financially ruined her next of kin, and caused a competent nurse to lose the job she loved because she knew too much. The climax that brings to mind the movie Babe, had audiences cheering as the jury foreman asks if it's possible to award more damages than the original suit requested. Don't believe me? Rent it.

Today many think the easiest and best way to solve our healthcare woes is tort reform. Would you say we Americans are a fickle lot?