A Word in Praise of Collective Consumerism

Question mark created from colored pills. Medical concept.

Anthony J Culyer Emeritus professor of economics, University of York, England; adjunct professor, University of Toronto, Canada; visiting professor, Imperial College London, England.

It is hard to argue with Barasz and Ubel when they say “there are crucial differences between healthcare and typical consumer domains that warrant special consideration by policymakers and researchers alike.”

They provide a cogent review, under the headings of “price” and ”quality”, of many of the issues that need settling whether one is trying to understand the behaviour of patients or being more normative by making prescriptions for what they call “designing thoughtful programs and policies”. So far, so good. The trouble is that they are far too firmly fixed on the consumer as an individual. Of course all consumers are ultimately individuals and have rights as such and require respect. But a great deal of consumer activity is also collective. By neglecting this they bypass amultitude of interesting and important policy issues – to the solution of many of which health policy analysts can make important contributions. For example, at the macro level:

  • what accounts for the way in which individual and collective decisions about price and quality in health care are separated and institutionalized? (this needs a descriptive answer) and
  • what ought to be the principles that determine the respective spheres of collective and individual choice-making about prices and qualities? (this is a normative matter and required social value judgments). I have elsewhere described a possible outcome of the normative version of the question as “demand-side socialism” (Culyer 2012).

In most countries, we observe certain kinds of choices being made at a collective level. For example, the disciplining of clinical professionals is usually given to a professional body with statutory powers; the determination of the safety of medicines is usually given to a regulatory agency with the authority to deny access to the market to products deemed to represent an unacceptable risk of harm. Also, in most countries we observe at the individual level many of the choices so well described in Barasz and Ubel: for example, choice of physician, setting of care, choice of benefits package in insurance plans.

Ever since Arrow’s classic article (Arrow 1963), often regarded as the intellectual foundation of health economics, a major theme in health economics has been the analysis of market failures and what might be done to prevent, mitigate or compensate for them. The list is formidable: incomplete markets; externalities (physical, psychic and financial); asymmetry of information (the professional knows better how to diagnose and the likely consequences of various treatment options, the patient knows better about the personal consequences, attitudes to risk, timeliness, consequences for family and informal carers at home); imperfect agency; supplier-induced demand; publicness (in the sense that a cost or benefit if incurred by one is also incurred by many, as in the sympathetic public externality from protection against catastrophic medical expenditures, or the benefits of vaccines as herd immunity is approached); irrationality (in the specific sense that actual individual behaviours often deviate from the standard expected utility maximizing model) on which so much welfare economics is erected; incompetence to decide (as with infants, some mentally compromised people and some elderly); unprofessionalism and professional payment distortions; moral hazard; adverse selection; rigged loading charges. In few if any other fields are the standard conditions for a Pareto optimum so flagrantly and comprehensively breached.

All too frequently, that is where the analysis stops. And this is also where Barasz and Ubel stop: “we urge policymakers to … enact policies accordingly.” According to what? In nearly all these cases, at least a part of the response is a collective intervention of some kind. Alas! Collective actions are no less prone to the same challenges and failures that afflict markets. Most of them have had their fair share of analytical attention. Yet all too frequently ideological generalities are offered in the place of careful analysis. Nearly all the high-level health policy issues fall into the individual/collective bucket of choices: determination of overall health care expenditures public and private, single or multiple insurers, single or multiple purchasing, publicly or privately owned, for- or not-for-profit, use of cost-effectiveness thresholds, parallel public-private systems, tax funding, zero charges at the point of use, co-payments.

It would have been a far more complete answer to their “challenge” had Barasz and Ubel extended their critique of the micro, with its implied solution to be found in the macro, to a review and assessment of the collective possibilities. What are the underlying principles that place boundaries on the exercise of individual discretion? What are the principles that collective agencies themselves require for efficient and equitable prioritization and choice? Is there an optimal rate of health care expenditure? Think of clinical guidelines and best practice: what role for economic efficiency calculations in their design, how enforceable should they be? How far should individual clinical “freedom” of judgement be constrained? Think of NICE in the UK: how should its threshold (just one?) be determined, what role for equity and what freedom to depart from NICE prescriptions should be allowed by lower tier authorities and individual clinicians? Think Affordable Care: what quality care is most likely to maximize the nation’s health at a reasonable price?

None of these questions is unanswerable!

 

Read the full article “Unhealthy consumerism: The challenge of trading off price and quality in health care”, by Kate Barasz and Peter Ubel, in the May 2018 issue of Behavioural Public Policy here