Republicans have long articulated a case for reforming American health care. That case, in short, is this: Too many people are buying too many health care services with other people's money. The key to controlling health care spending, according to this view, is to give individuals "skin in the game"--that is, financial incentives to be more prudent health care consumers.
This theory underlies virtually all of the GOP proposals floating around Washington, including House Speaker Paul Ryan's plan, revealed in February, to "repeal and replace" Obamacare and transform Medicaid. The basic idea is to limit the federal government's role (and financial stake) in health care by shifting more of the costs and burdens onto individuals via measures such as high-deductible health care plans. Make health care "consumers" feel at least some of the pain of paying for their care, the thinking goes, and they will shop for better deals and stop demanding care they don't need. This, in turn, will force providers to be more efficient, reduce their prices, stop pushing unnecessary care, and thus lower the nation's health care bill.
Republicans are right about the desperate need to control health care spending, which is eating away at both the federal budget and the livelihoods of individual Americans. But their theory of change rests on a peculiar vision of human nature, which, not to put too fine a point on it, assumes that most Americans are hypochondriacs. While we all know somebody who fits that description, most of us are actually not eager to hand our bodies over to be punctured with needles, probed with instruments, and cut open with scalpels. We do so only when the pain gets bad enough or when our doctors say we should. And when it comes to making health care purchasing decisions, our own judgment isn't necessarily the best guide. A recent study of workers whose Fortune 500 employer switched them to a high-deductible health insurance plan found that employees never learned to do price comparisons, and while they reduced their health care spending, they did so not only by cutting back on wasteful services like unneeded CT scans, but also by forgoing necessary care, such as a follow-up visit after a diagnosis of diabetes.
Even if policy changes could somehow make Americans savvier medical consumers, the effect on overall health care costs would be surprisingly small. That's because the vast majority of Americans aren't big users of the health care system. Rather,...