Consumer perception of health has expanded drastically in the last 30 years. A long time ago, it was adequate to just “feel” well. Today, health is also defined as adequate preventative care, supporting healthy lifestyle choices for long-term health and adequate access to health care. All three of these factors are heavily influenced by consumer health care insurance availability and affordability. Subsequently, health care insurance availability and affordability is influenced by market threats and health care market equilibrium.

The largest group of health care consumers in America today is the Baby Boomer generation (approximately 76 million Americans). This generation is faced with rising costs as the health care industry faces its most turbulent time in history due to staffing shortages, decreasing insurance reimbursements and staggering malpractice costs within the industry. Compounding decreasing private insurance reimbursements, this generation is also facing a Medicare crisis as they reach age 65.

To complicate matters, as this generation ages they are faced with new health care problems and chronic conditions that demand treatment for wellness. As the consumer perception of health and wellness becomes more complicated, so does the demand for healthcare. When compared to figures from 1984, a significant amount of Americans show higher levels of preference in terms of which hospital and which provider they use for long-term care. Surprisingly enough, regardless of age, a higher percentage of Americans also show an increased use of specialists (2010 PRC National Consumer Perception Study).

Health care is unlike most other goods as consumers actively seek out methods and resources to safeguard their intangible sense of wellness. Consumer motivation to safeguard health is directly proportional to the long-term benefits of wellbeing and marginal “health stock”. Consumers recognize that better health leads to less sick days, increased productivity and higher pay. Americans especially are preceptive to health care specialists and care due to the high internal locus of control associated with Western culture. Western ideals espouse self-determination that’s driven by a strong sense of internal control. Health-seeking behavior is a prime marker of this cognitive view of one’s external environment. As a result, American culture encourages and rewards this behavior.

Today’s long-term wellbeing is driven by the three factors discussed earlier: preventative care, support for healthy lifestyle and access to care. As these three items are met (with increasing costs), a consumer’s sense of “health stock” rises. Health stock is the perception of consumer control over one’s health and consumer satisfaction with health care in relation to resources spent. Resources can be defined as time, money or even travel to healthcare access.

Today, the cost of consumer happiness in relation to health stock and perceived wellness is higher than ever. In 1990, the total cost of the health care industry was approximately $714 billion. In 2008, this cost tripled to $2.3 trillion. Compared to the rest of the world, the American health care industry has expanded exponentially in terms of cost while accessibility has risen only marginally. This increased demand has led to an increased cost as market threats keep the industry turbulent.

References

Anderson, G., & Frogner, B. (2008). Health Spending In OECD Countries: Obtaining Value Per Dollar Health Affairs, 27 (6), 1718-1727 DOI: 10.1377/hlthaff.27.6.1718

Branscome, J. July 2006. Employer-Sponsored Single, Employee-Plus-One, and Family Health Insurance Coverage: Selection and Cost, 2004. Medical Expenditure Panel Survey & Agency for Healthcare Research and Quality (AHRQ), Statistical Brief #134.

Grossman, M. (1972). On the Concept of Health Capital and the Demand for Health Journal of Political Economy, 80 (2) DOI: 10.1086/259880

PRC, 2010. 2010 PRC National Consumer Perception Study: Snapshot of America.

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Some of the factors that drive the health care industry, such as aging and chronic illness, are quite predictable. These predictable factors shape the majority of private health care industry strategic thinking. Health care consumers directly feel the impact of these predictable changes over time. As consumers age, health care becomes more expensive in both terms of premium payments and amount of care required.

The predictable changes within the health care industry aren’t the ones that threaten true market equilibrium- rather; it’s the unpredictable market threats that cost consumers and providers big time. A unique challenge of health care market equilibrium is the rate at which unpredicted market threats emerge. The highly enmeshed relationship between health care providers and payers ensures that small changes within the market create ripple effects across the entire health care industry.

Unpredictable market threats can be as simple as a recalled medicine or unanticipated side effects of a popular drug. Another market threat (which initially may be seen as positive) could be a new piece of technology that redefines treatment for a particular illness or diagnosis methodology. Such market threats sweep instantaneously across an entire industry and stress both financing and market viability.

A recent example of an unpredictable market threat is the FDA’s discovery of toxic side effects of Vioxx, a popular painkiller, after market approval. Admittedly, over 50,000 patients may have died or had complications due to the FDA’s lapse in proper labeling for Vioxx. This discovery stressed the prescription medication market and changed requirements of drug providers that stressed FDA authority and raised costs across the entire health care industry.

Today’s changing health care environment has several primary threats that stress both consumers and providers. The most pressing threats against health care market equilibrium are regional malpractice crises, rapidly changing government regulations, decreasing insurance reimbursement levels and regional provider shortages.

As a result of the turbulent health care industry market threats, many health care insurers have opted to play the defensive line when it comes to insurance. Health care industry professionals match their current understanding market trends to their own goals and business strategy. Changing the rules of competition within the industry also drives disequilibrium that can both help or harm the health care industry consumer. As a result, defensive health care industry players raise premiums for consumers across the board, deny coverage to perceived high-risk consumers and cut reimbursement to providers.

Increasing government regulations further compound today’s changing health care industry market. In the short term, guaranteed care threatens to increase consumer cost if preventative care is not adequately followed by the consumer market. In the long term, guaranteed care will actually stabilize market costs as health care will spread across the continuum of whole life care, rather than just during periods of employment or illness.

Health care consumers are often forced to ride the abrupt changes and threats to the industry with increased costs and less availability to care. Conservative approaches to healthcare, such as ensuring adequate preventative care, can cut costs drastically and safeguard consumers from sudden shifts in costs. Upcoming changes to malpractice legislation and guaranteed care will also help stabilize the health care industry in the long-term strategic market.

References

Bonabeau E (2004). The perils of the imitation age. Harvard business review, 82 (6) PMID: 15202286

D’Aveni. “Strategic Supremacy Through Disruption and Dominance”. Sloan Management Review 40 (Spring 1999): 129.

Kumar K, Subramanian R, & Strandholm K (2002). Market and efficiency-based strategic responses to environmental changes in the health care industry. Health care management review, 27 (3), 21-31 PMID: 12146781

Schroeder, S. (2002). Primary Care at a Crossroads Academic Medicine, 77 (8), 767-773 DOI: 10.1097/00001888-200208000-00003

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