Most consumers don't understand even basic concepts behind traditional health-insurance design, a team of behavioral economists from a number of top American universities has discovered:
"The first survey was designed, in part, to uncover how well the insurance holders understand four basic traditional health insurance concepts — deductible, copay, co-insurance and out-of-pocket maximum — as well as how well they believe they understand them. Analysis of responses revealed that while insured Americans felt confident about their own understanding of these concepts, their actual understanding was much lower; only 14 percent of all respondents accurately understood all four concepts.
The first survey also found that only 11 percent of respondents presented with a traditional insurance plan incorporating all four of these elements were able to compute the cost of a four-day hospital stay when given the information that should have enabled them to do so."
The study is being cited as evidence that simplified insurance plans offered through the ObamaCare marketplaces to allow consumers to price-shop should be simplified even further, and that conclusion is appropriate. However, I'd take the lessons from the survey an important step further.
Conservatives continue to stress an approach that puts health-care decision-making in the hands of the individual consumer, rather than insurance companies or government regulators. Make people responsible for their own decisions, and they'll make the right ones. It's consistent with their overall ideology that left to its own devices, the market can solve all such problems.
In many cases it can. Health care is not one of those cases.
Consumers know what kind of flour they want to buy, and know how to compare prices and quality. Over time, through their own trial and error and through word of mouth, they can even distinguish between an honest, competent general contractor for their home expansion, and a contractor likely to rip them off. They can get a sense of whether this auto mechanic is to be trusted, or whether he's trying to talk you into expensive repairs that you don't really need.
And if you make the wrong decision -- if you turn down repairs that really were needed -- your car breaks down on the freeway at rush hour, but in most cases nobody dies.
Again, health care is another animal altogether. A free market requires that buyers and sellers have roughly equal information about the proposed transaction; if one party has vastly more information than the other, that party is going to get the best part of the deal every single time. Even if it was possible to set aside the emotions often involved when seeking health care for yourself or a loved one, there is no way on earth that an individual consumer can engage with the medical-industrial complex on anything like an equal basis.
It's like going into court with your life on the line and trying to serve as your own attorney against a team of experienced professionals. Theoretically, you could argue, the court will still reach the appropriate verdict. But in real life, things don't work that way.