John Stossel’s article in ABC News suggests why health care costs are out of control.   In his article he asks us to think about what would happen if you had an insurance policy that paid for your groceries.  You wouldn’t care what things cost.  Why buy hamburger?  Just buy expensive steaks.  Why look for sales?  Why shop at the store across the street?  If the insurance company’s paying, who cares? 

People with consumer-driven health plans are motivated to find the best value before spending their own money.   They comparison shop, do their research, and might even negotiate the price of service before visiting a provider.  They care because they are spending their own money.

In an effort to keep health care costs down, Whole Foods management decided to offer its employees high-deductible health insurance.  With this plan, employees have an incentive to find out what provider offers the best value (price & quality).  If they are savvy consumers they can make their health care dollars go a lot further by spending wisely.   Health care costs at Whole Foods went way down because employees started asking “what things cost” before visiting a provider.  The employees like the plan so much they decided to keep it.  The employees now ask “how much will this cost?” because now it matters.  It’s their own money they are spending.   The Whole Foods experiment works because:

Facts:

1. When consumers spend their own money, they spend less because they care about what things cost.
2. When consumers shop around before spending money, costs go down.
3. When consumers make informed choices, health care costs go down.