Government & Politics

REAL Health Care Reform

"The biggest problem in health care is that there is no pricing at all."

Arnold Ahlert · Feb. 27, 2017

On Friday, Politico released a draft of the GOP proposals to take down ObamaCare. They include eliminating the individual mandate, income-based premium subsidies, and all of the law’s taxes. In addition, Medicare spending would be lowered and states would be given money for high risk pools aimed at covering pre-existing conditions. All of the details regarding the plan’s cost will be influenced by CBO findings and the effect on the federal deficit. Yet if Republicans are serious about creating a so-called “patient centered” plan, it might be extremely useful to heed the words of Florida attorney and former Florida hospital president, Steven I. Weissman. “The biggest problem in health care is that there is no pricing at all,” Weissman explains. “It is not a coincidence that the only product or service permitted to be sold in the U.S. without legitimate pricing is the one which has imposed tremendous financial hardship.”

Last week, Fox News’ Tucker Carlson interviewed Weissman to find out why. The first question he asked and the answer he received was enlightening — and infuriating. “Is there a connection between the amount of money spent on lobbying on health care, and the dysfunction in the health care system?” Carlson asked.

“Absolutely,” Weissman answered. “You can call me a cynic, but the health care industry spends more on lobbying than the oil and gas industries, defense industries and aerospace industries combined.”

Weissman is on the money, so to speak. According to OpenSecrets.org, the total amount of money spent on lobbying for defense, aerospace, and oil and gas is $317 million.

Health care lobbying? A whopping $509.5 million.

As a result, Weissman insists the politicians in Washington, DC, are working to solve the health care problem on the wrong end of the equation. “Repeal ObamaCare, replace ObamaCare, amend ObamaCare and all of the plans are based on the false ideas that we have an insurance problem in the United States, when what we really have … is a health care billing problem, a medical price problem,” he insists.

Weissman highlights an absurdity to which millions of Americans have resigned themselves. “You ask the price of any service, you can’t get a straight answer,” he explains. “The only answer you’ll ever get is ‘what insurance do you have?’”

Again, Weissman is correct. As the New York Times reveals, Americans know how to get price comparisons for any number of products or services. But when it comes to health care, “[P]rices vary tremendously. And there is no established relationship with quality.”

Tremendously is somewhat of an understatement. One analysis showed the cost of a mammography can be anywhere between $128 and $700, while MRI scans can vary by a factor of four. And even when patients are motivated to find the best prices for a procedure or service, they often can’t.

Consumer Reports explains why. “The contracted prices that health plans negotiate with providers in their networks have little or nothing to do with the actual quality of services provided and everything to do with the relative bargaining power of the providers.”

As a result, providers with “a lot of market clout” can charge far higher prices, consumers are often unable to find out how much elective surgery will cost, even when they have high deductibles, and people who go out of network whether by accident or design can be saddled with enormous bills insurance companies aren’t obligated to pay. And because prices are unobtainable, the industry can gouge patients when they are most vulnerable — with an unexpected visit to an emergency room being the most egregious example.

What’s behind this calculated chaos? “Under the current system with ObamaCare, health insurers have been incentivized to pay more out for medical care,” Weissman reveals. “Because under the current law, the only way an insurance company can increase their premiums — and profits — is to pay more out for the underlying medical services. They’re required to pay out 80% of the premiums they collect for actual health care services.”

Thus the disturbing reality, Weissman concludes, is that many patients seeking low prices are better off “pretending they don’t have insurance” when they visit the doctor.

Two developments herald genuine change. First, some health care providers aren’t waiting for Congress to address the issue. Keith Smith’s Surgery Center of Oklahoma (SCO) has a website with an outline of the human body, where a patient can click on a particular body part and a menu of surgical procedures appears. Click on a procedure and you get the price SCO charges for it, with anesthesia included.

The real world results are dramatic. The same procedure for which SCO charges $3,600 cost $40,000 at a Georgia hospital — until the potential patient told his doctor he would go to SCO. At that point, the hospital dropped its cost by 90% to $4,000.

Americans should remember that kind of competition when Congress gets back to talking about allowing insurance companies to sell across state lines to increase premium price competition. That latter is almost irrelevant as long as insurance companies are incentivized to gouge the public.

Second, there may be an international component with regard to price competition. In America, heart surgery costs $90,000. In Bangalore, India, the same state-of-the-art procedure averages $1,800 and includes some of the best patient outcomes in the world. The reason? Indians pay 60% to 70% of health care costs out of pocket and that reality has engendered value-based competition in the market, and a hub-and-spoke structure of coordination between smaller clinics and main hospitals unlike anything found in the United States. Doctors focus on the most complicated procedures while lower-skill tasks are performed by nurses and other workers, further increasing efficiency.

Permanente Medical Group CEO Robert Pearl envisions a future of “global disruption” where insurance companies offer patients all-expenses-paid trips to India to save on health care costs. Addressing skeptics who believe Americans wouldn’t endure such travel, Pearl notes that Grand Cayman Island is in the process of completing a 2,000 bed hospital for only 50,000 citizens. “Maybe it’s just a coincidence,” he writes, “that by airplane Florida is less than an hour away.”

Robert F. Graboyes, senior research fellow with the Mercatus Center at George Mason University, takes it a step further. He explains, “The Internet, email, 3-D printing, garage bio-labs, homemade wearable telemetry, cheap international travel, genomic data, artificial intelligence, managerial innovation and a sharing economy with minimal paper trail are stripping regulators of their capacity to regulate, and cartels of their capacity to organize and control.”

Unfortunately, Republicans may continue allowing insurance companies unfettered power. Former House Speaker John Boehner insists they will, but maybe that’s because he’s working for health care lobbying firm Squire Patton Boggs.

After seven years of trying to repeal ObamaCare, it’s time Republicans started working for the American people. A bill with transparent health care industry pricing is an essential element in upending the current status quo — one that existed long before the enactment of ObamaCare. So is one other essential ingredient that virtually guarantees a viable bill: a requirement that every member of Congress use the very same health care policies they enact for us.

Nothing says “patient centered” better than that.

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