HEALTHCARE
February 1, 2006

Consumer-Driven Health Care: Ethical and Legal Pitfalls

With health care costs continuing to grow at a much higher rate than inflation, some policy makers have seized upon yet another technique they hope will restrain spending — "consumer-driven health care" in the form of "health savings accounts."

Consumer-driven health care is the latest in a series of efforts since the early 1970s to control health care costs. One of the first approaches was health planning, whereby hospitals could not increase the number of beds, and providers could not make major capital expenditures for equipment or new services, without first obtaining permission from the state, known as a certificate of need. This effort failed because the state had little incentive to limit the growth of its health care infrastructure. Health planning largely has been abandoned, although, interestingly, the Clinton health reform plan proposed to reinvigorate it.

Consumer-driven health care is the latest in a series of efforts since the early 1970s to control health care costs.

The next approach was outright price controls. Building on the refusal of insurers to pay more than the "usual, customary or reasonable fee," Medicare in the early 1980s replaced its cost-plus payment system for hospital care with a prospective payment system, known as DRG, whereby hospitals were paid a fixed amount based on the patient's diagnosis, and later began to pay physicians according to a "resource-based relative value scale" (RBRVS) fee schedule. This, too, failed to constrain health care costs satisfactorily. The reasons are too numerous and complicated to explore here, but the major problem with the idea was that it limited the amount doctors and others could collect per service, so providers simply increased the number of services they provided to patients.

The cost-containment poster child of the 1990s was managed care. Managed care took as many forms as health care management consultants could invent catchy names and clever twists but, in essence, the more the provider spent on patients, the less profit remained for the provider. In the "capitation" model, providers were paid a fixed amount per patient per time period. This effectively transformed providers into health insurers for the most costly patients (or at least insurers for the costs for which the providers had not purchased stop-loss insurance).

Despite all the hoopla, managed care enjoyed only a brief period of apparent cost-containment success in the mid-1990s. HMOs are failing to hold down costs because physicians resist external controls on clinical decision-making and because of relentless, albeit only marginally-successful, legal attacks.

Is Consumer-Driven Health Care the Solution?
Persistent health care inflation at levels that many believe are unsustainable has led insurers, employers and the Bush Administration to promote consumer-driven health care as the new panacea. They call their idea "health savings accounts."

The idea is to turn traditional health insurance on its head. Unlike traditional insurance where the insurer paid for expenses beyond a relatively small deductible up to a certain level and then the patient became responsible for the rest, under consumer-driven health care the patient is responsible for costs up to a certain threshold, beyond which the insurer becomes responsible.

With a health savings account, patients would get fixed, pretax amounts of money from their employers or from the government to purchase health plans with extremely high deductibles, leaving the patient financially responsible for the first several thousand dollars of annual health care costs. The idea is that, since patients are free to reinvest any money left in their accounts at the end of the year, they will have an incentive to make wise health care spending choices.

With a health savings account, patients would get fixed, pretax amounts of money from their employers or from the government to purchase health plans with extremely high deductibles...

But notice what happens. Under health planning and price controls, the government and private insurers make financial decisions by regulating large-scale expenditures and establishing maximum fee schedules. Managed care imposes financial pressures on physicians and other health care professionals to make frugal spending decisions. But under consumer-driven health care, as the name indicates, the financial decision-maker becomes the patient. The ethical and legal issues raised by the consumer-driven health care movement stem from this feature.

Patients' Heightened Need for Information
One of the defining features of consumer-driven health care - making patients financially responsible for a substantial amount of first-dollar (i.e., prior to insurance kicking in) health care costs - actually is not new at all. Before the spread of third-party payment (by an insurer or the government, for example), patients who could afford to pay for health care did so out of their own pockets. What they saved by being thrifty on health care they were free to spend on other things, or they could save the money and spend it on health care at a later time.

But consumer-driven health care is different from this traditional method of health care financing in several important ways. Traditionally, there was much less high-cost care in the physician's armamentarium, and what there was - private sanitaria, expensive surgeries, long-term hospitalization — was much less widely available. In short, physicians had relatively few expensive options to offer most patients. Today, however, patients face a bewildering array of high-cost options.

Second, in contrast to the past when most high-cost interventions provided little proven value, expensive options available today include some, if not many, that offer significant clinical benefit, and decisions to forego them may have serious and even dire health consequences.

Third, the old system was a paternalistic one in which patients by and large were expected to rely on their physicians to decide what services the patients would receive. Today, in contrast, the principle of patient autonomy and its embodiment in the doctrine of informed consent, at least in theory, make patients co- if not the principal decision-makers. Indeed, the consumer-driven health care model owes part of its origin to consumerists who strongly believe in patient control.

On the one hand, patients may seem to make better decision-makers than health care professionals. Patients can apply their own value systems and tailor their purchases to their individual level of risk aversion. A vitalist can ask for everything possible to prolong life. A person who is highly risk-averse can purchase extra tests to rule out more remote possibilities of illness. Putting patients in the driver's seat avoids the need for caregivers to attempt to determine patient preferences through the informed consent process, or to guess at those preferences with the risk of getting them wrong.

Do Patients Know Enough?
Yet the consumer-driven health care model rests on a questionable assumption: that patients are well informed and able to process often complex information in a rational manner. This may not always, or often, be the case. The best illustration is the debacle created by the new (2006) Medicare prescription drug benefit. The media is full of accounts of seniors who are bewildered by the blizzard of private drug plans, each one covering a different assortment of drugs at different prices and doing business only with certain pharmacies.

The Kaiser Family Foundation reports that 60 percent of seniors surveyed stated that they understood their options "not too well" or "not at all." The Medicare program has sought to provide individualized information through websites and toll-free phone services, but beneficiaries complain that they have had trouble getting through or obtaining the information they need. Similar though less well-publicized difficulties are faced by individuals when they have to select a health plan from the menu provided by the dwindling number of employers who still offer a choice.

The media is full of accounts of seniors who are bewildered by the blizzard of private drug plans, each one covering a different assortment of drugs at different prices...

Consumer-driven health care will only make patients' lack of information worse. In addition to choosing a high-deductible health insurance policy and an accompanying health plan to handle the administrative tasks of paying providers, patients will have to identify their treatment options, determine and evaluate the pros and cons of each option, and factor in how much they cost.

Clearly they will not be able to do this without a lot of help. Where is this help going to come from?

Can Anyone Help the Consumer?
One possibility would be for patients to consult a "medical advocate." This would be a new kind of health care professional whose job would be to inform and advocate for patients when they had complicated decisions to make, were seriously ill or when third-party payers resisted paying for needed services. Unlike "patient advocates" who are paid by hospitals and therefore have a conflict with the interests of patients, medical advocates would be paid directly by the patients themselves and, therefore, owe allegiance only to the patients' interests.

The problem, of course, is that few patients are able to afford the extra cost to hire an advocate. An alternative is for the government to employ the advocate, similar to the public ombudsman programs for nursing home residents. But the government is also a third-party payer, by far the largest in fact, so the advocate would have a divided loyalty. Moreover, as the experience with the Medicare prescription drug program demonstrates, patient demand for assistance easily can overwhelm available government information resources.

Faced with the decisions thrust upon them by consumer-driven health care, what is a patient supposed to do? There's really only one answer: They will turn to their caregivers for help in making those decisions. In the case of the Medicare prescription drug benefit, for example, the Kaiser Family Foundation reported that approximately one-third of seniors surveyed stated that they were very likely to consult their physicians in selecting Medicare drug benefit plans, and two-thirds expected their physicians to be "very" or "somewhat" knowledgeable about the subject; 25 percent of those surveyed planned to ask their pharmacists for help.

Perhaps this reliance of the patient on the advice of the caregiver seems no different from what is supposed to happen when the caregiver obtains the patient's informed consent to treatment. The health care professional, typically the patient's physician, is required to give the patient information about risks, benefits and available alternatives. But with consumer-driven health care making patients far more cost-conscious, caregivers will have to help patients balance not only the benefits and risks of the recommended course of action and the available alternatives but also the costs and relative cost-effectiveness of these options. It is likely to be difficult for the caregivers to acquire this information, especially if the care options involve services from multiple providers and in different settings.

Legal Problems?
An interesting question is whether caregivers can be liable for failing to obtain their patients' informed consent if the caregivers omit or fail to provide accurate cost and cost-effectiveness information as part of the informed consent process. So far, no court has clearly required disclosure of cost information but this could and arguably should change under a consumer-driven health care regime. Another interesting question is what the patient's remedy would be.

Presumably, the patient would be able to recover the difference between the cost of the service that the patient would have selected had he or she been given the appropriate cost information and the cost of the service that the patient actually received, together with compensation for any differences in outcomes if the service that the patient would have selected would have produced a better result. If the patient can show that the failure to provide cost information was motivated by the caregiver's self interest, as discussed below, the patient also might be entitled to punitive damages for breach of the caregiver's fiduciary duty to act in the patient's best interests.

Another concern is the effect that cost information will have on the informed consent process. With commentators generally agreeing that caregivers are not good at imparting the more limited information presently expected, it is hard to have high hopes for the quality of the more complex conversations of the future.

Economic Conflicts of Interest
Under traditional fee-for-service insurance, the self-interest of patients and providers was basically aligned. Patients had an incentive to obtain the most comprehensive care possible, since, with the exception of typically low deductibles, co-payments and coinsurance, they were not paying for their care, and providers had an incentive to provide the most comprehensive care possible, since they received more revenue the more services they provided. HMOs and managed care changed this, creating a conflict between patients and providers to the extent that patients would benefit from more care, but the provider had a financial incentive to stint.

What about under consumer-driven health care? Providers may have incentives to skimp on care if their patients continue to be enrolled in managed care arrangements that place severe financial constraints on providers. But now the patients also will have an incentive to limit services in order to keep their spending under control. The financial incentives of providers and patients thus appear aligned, at least until the patient's spending exceeds the high deductible and the patient's health insurance takes over.

HMOs and managed care changed this, creating a conflict between patients and providers to the extent that patients would benefit from more care, but the provider had a financial incentive to stint.

However, a conflict would occur under consumer-driven health care between patients who wanted to limit services and providers who were paid on a fee-for-service basis. While the risk to patients under managed care was that they would receive too few services, under fee-for-service the risk is that the provider would attempt to deliver more services than the patient deemed necessary.

Courts generally have not required physicians to disclose economic conflicts-of-interest to their patients as part of the informed consent process. It is interesting to speculate whether the courts will change their stance if patients begin to complain that they would have rejected recommended treatments if they had been made aware of their physicians' conflicts of interest.

The Death of Professionalism
The very name "consumer-driven health care" reflects the idea that recipients of medical care should think of themselves as "consumers" rather than as "patients." This could promote the notion that the relationship between patient and health care professional is an arm's length relationship, where the rule is "buyer beware", and where patients can no more count on health care professionals than used care sales persons to look out for the "consumers'" interests.

It's possible that consumer-driven health care could erode the trust between patient and caregiver that is so important to a successful therapeutic outcome and that avoids the need for patients to expend substantial resources on monitoring to make sure that caregivers are not taking advantage of them. Not only would an erosion of trust harm patients and waste scarce health care resources but it would tend to transform caregivers from professionals into mere tradespeople, with a consequent loss of social status.

Consumer-driven health care must not displace the principle that health care professionals are responsible for their patients, requiring them to place the patients' interests ahead of their own.

Who's Responsible for Mistakes?
A further set of problems would arise under consumer-driven health care if patients insisted on making what caregivers regarded as poor clinical decisions based on costs. What if a patient chose a treatment approach that the caregiver felt was below the standard of care? Should the patient's choice immunize the caregiver from liability for malpractice?

As a general rule, caregivers legally are only required to provide patients with "reasonable" care and to inform patients about "reasonable" alternatives.

Even if the caregiver does not offer a substandard option to the patient, however, the patient may learn about the option from other sources, such as the Internet and direct-to-consumer advertising. What if the patient demands such an option, say, because it is cheaper? If the patient is harmed as a result (either by the intervention directly, such as by a bad side effect, or by foregoing a more beneficial alternative), can the patient successfully sue the provider for failing to adhere to the standard of care?

Historically, courts have been reluctant to make patients responsible for protecting themselves from their own bad decisions. (The only exception is when patients refuse to follow orders, such as discharging themselves prematurely from a hospital or refusing to take medications as prescribed.) The courts seem to be saying that, in a relationship in which patients have so much less knowledge and expertise than their caregivers, it is appropriate to expect the caregivers to protect patients from making mistakes of judgment.

Yet on occasion, a court will conclude that a patient assumed the risk of a mistaken judgment and, therefore, should not be able to recover damages from the provider. In Schneider v. Revici, for instance, a court held that a jury could bar a breast cancer patient from recovering damages from her doctor for treating her with selenium and dietary treatments after she signed an agreement in which she acknowledged that the doctor's approach was unproven. Courts increasingly may be willing to make patients responsible for their choices under a consumer-driven health care approach. Unless and until this occurs, providers have the option of refusing to follow a patient's request to pursue a substandard option by terminating the patient-provider relationship, but only after notifying the patient and giving him or her a reasonable opportunity to transfer care to another caregiver.

Two Conceptions of Patient
Ultimately, one's attitude toward the consumer-driven health care approach may depend on how one views patients. Proponents tend to view patients as intelligent, well informed, rational and empowered. Opponents are likely to view patients as poorly-educated, ill-informed, frightened and vulnerable. The poorly-educated patient clearly needs greater assistance and security. The empowered patient might be better off in the free market environment that consumer-driven health care seeks to foster, in which patients can make their own decisions without interference from self-serving providers and an overly-protective legal system.

An ideal approach might respond differently to different patients, being more deferential to patients who seem comfortable with a consumerist role and more protective toward others. But it is unclear how caregivers could identify which patient was which.

Conclusion
It remains to be seen if consumer-driven health care can do a better job of controlling health care costs than the techniques tried in the past. What is clear is that it will put additional strains on caregivers if they are expected to provide patients with information about the relative costs, as well as the risks and benefits, of their options, and if caregivers continue to be responsible for providing a reasonable standard of care regardless of costs or patient preferences. For these reasons, consumer-driven health care is unlikely to be the final chapter in the saga of efforts to contain health care costs.
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