The dynamics of the healthcare marketplace have shifted in recent years, increasing the consumers role in selecting coverage that is appropriate for them. While consumers have been tasked with actively participating in the healthcare marketplace, they still may struggle in doing so effectively. This disconnect caught the eye of Nobel Prize winning Economist Richard H. Thaler. Thaler writes,
“Professor Sydnor and Chenyuan Liu, a University of Wisconsin colleague, studied 331 firms that offered high- and low-deductible plans with an average difference in deductibles of $1,300. Their analysis showed that for as many as half of the companies, the high-deductible option clearly appeared to be the smart choice for nearly everyone”.
So why do so many people choose the costlier health plan? Thaler attributes this to “intertia” and “deductible aversion”. It is easier for consumers to stick with their old plan rather than crunch the numbers to see if a new plan may be more appropriate. Low deductible, high premium plans may also give the illusion of better quality care, even though the high deductible plan may have access to the same network of care providers. According to the 2017 Healthcare Consumerism Index by Alegeus, “Healthcare consumers are more engaged and thoughtful about buying a TV and booking travel than they are about making decisions that concern their own healthcare”, an eye-opening outcome to the study.
Alegeus assigns a single score to various common purchases based on the amount of pre-purchase due diligence and degree of focus on cost/value consumers exhibit when making purchase decisions. The index is scored on a scale of 1-100 where “the greater the number, the greater degree of consumerism exhibited”. The score assigned to healthcare spending is 60.1 and was the lowest out of the 5 reported purchase types. Notably, consumers put the most effort into buying a TV, above much larger purchases like buying a car and healthcare. Additionally, just 29% of consumers surveyed say they invest their healthcare savings. Considering our analysis on the real return of investing in an HSA, consumers might may be better off trying to combat medical inflation rather than let their purchasing power deteriorate.
Alegeus says the 2017 Consumerism Index “clearly signals the need for significant education, tools and support as consumers assume more financial responsibility for their healthcare costs”. Check out these Devenir Solutions to see how we are working to support consumers and providers alike with healthcare investing.
And be sure to stay tuned to the Devenir blog for actionable insights and fresh perspective on the healthcare investing investment topics that matter most!