If you think health care is expensive now....

Just wait until it's free!

This statement has now earned the distinction of being a time-worn adage.  And we are hearing it more and more frequently as social critics and public policy experts worry about what will happen to demand for health care services when 30-some million people are added to the ranks of those with some kind of health insurance under the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare.

People with health insurance coverage tend to seek and consume more health care than those without.  The more striking comparison, however, becomes significant when we consider that many of the 30-plus million newly insured will achieve that status through expansion of Medicaid, the public health insurance program for the poor.  Utilization of health care services by Medicaid recipients is typically greater than that of those with private insurance.

One perspective on this difference is based on a simple economic principle: when something is "free," people tend to use more of it, even to waste it.  Health care services for Medicaid recipients are not, of course, free, because they are paid for (albeit at a rate that does not cover costs) with public dollars.  (Note here that the acceptable terms include "public funds" and "taxpayer dollars."  "Federal revenues" may also pass muster.  But do not use the term "government funds" or anything like it.  There are no "government funds."  The government has no funds but those it takes directly from taxpayers.  Any time you hear about "government money," remember that's your money and mine.)

But while no health care services are free in the big picture, Medicaid recipients typically have no (or minimal) out-of-pocket expenditures.  So, as this analysis goes, when people's decisions about consuming health care services are unattended by financial responsibility, there is no part of the decision-making process that weighs whether the desired services are really needed - an aspect of economic decision making that occurs every time we have to pay for something.

Those of us in the health care industry who are engaged in the business of providing health care, some of whose patients are Medicaid recipients, know that there is much more to it than a lack of financial responsibility.  It is easy to say that if we just imposed a co-pay, they would stop running to see doctors for every ailment, no matter how trivial.  But it is really not that simple.

No, of course it isn't, I hear the cynics saying.  And then they go on to cite another simple economic principle: the value of time.  You see, there are only 24 hours in a day, and we have to decide what to do with them.  How many times have you heard folks say they have not consulted a physician about something because they don't have time?  They are simply too busy with life's many obligations, most notably family and work.  So those who are stuck on simple economics point out - and this point is not without merit - that many (certainly not all) Medicaid recipients are unemployed, which means they have a lot more time to be consumers of health care than if they had to work for a living.

These two economic principles are no doubt important.  But there is another factor operating in this complex equation that I think may be just as significant: education.  In our society there is a strong correlation between level of education and income.  So it comes as no surprise that the poor, in general, and Medicaid recipients, in particular, are less educated than the general population.  Tied to that lack of education is a relative lack of understanding about matters of health, illness, and injury.  The more you know about health and illness, the better prepared you are to make sensible decisions about when you can take care of your own minor ailments and when you need professional help.

There are some who say they have the answer to this looming problem: Just Say No.  In other words, scrap the plan to add tens of millions to the Medicaid rolls. But while there is an economic argument to be made on either side of this question, there is also one of social justice.  I will save that for a future entry in this blog.

The policy wonks are surely correct in predicting a large increase in health care utilization when we add 30-some million to the ranks of the insured in the manner that is planned.  Just as surely, there are numerous approaches that might be effective in keeping the increase in consumption from becoming a runaway train. I believe the single approach with the greatest potential is education.  The newly insured must be given informational resources, targeted to their level of knowledge and sophistication, that will help them make rational and prudent decisions about seeking health care.  And the system must be designed to assure they take full advantage of those informational resources.  Only then can we assure that the currently uninsured are given access not to more health care, but to the right health care.