ABSTRACT
Faced with mounting costs of health insurance for its employees, the state of Missouri hired a consultant from PriceWaterhouseCoopers to help it figure out what to do. The theory of consumer choice says that given limited budgets, consumers think hard about their own needs and desires. They seek good information about alternative ways of meeting their needs and desires, and ultimately, they make careful trade-offs to arrive at good decisions. Policymakers are thinking about similar approaches to restrain the burgeoning long-term care needs of the baby-boomer generation. When health care consumers are given the "freedom" to allocate limited care dollars, they are pushed to choose on the basis of cost, not medical criteria. Consumer-driven medical care decisions would seem to undermine the basic tenets of preventive medicine: regular check-ups, monitoring, and compliance with prescribed therapies. The theory of consumer choice says that if people have enough information, they can make the best decisions that will yield greatest individual and welfare.
