Who's responsible for making the U.S. healthcare system the most expensive in the world? If you are a top hospital or insurance executive, a well-paid physician or a drug company official or stockholder, the answer lies in the mirror.
That is the unflattering portrait painted by Dr. Elisabeth Rosenthal, editor of Kaiser Health News, in "An American Sickness: How healthcare became big business and how you can take it back." She has expanded her New York Times series on hospital pricing, called "Paying Till It Hurts," into a far-reaching critique of the financial games played by every sector of the industry.
Insurers, hospitals, physicians, drug and device companies, and testing and ancillary service firms are each put under the microscope. They all suffer from the same disease: profit maximization.
She summarizes her conclusions in 10 rules that describe dysfunctional sub-markets ruled by regional monopolies, powerful guilds and patent-protected manufacturers. They include "more treatment is always better;" "there are no standards for billing;" and "prices will rise to whatever the market will bear."
She doesn't let the patient advocacy groups that have hitched their wagons to some of the industry's worst profiteers off the hook. "If the March of Dimes was operating according to today's foundation models, we'd have iron lungs in five different colors controlled by iPhone apps, but we wouldn't have a cheap polio vaccine," quips one physician critic.
If the term "profit maximization" makes you squirm, it should. As she constantly reminds readers, most of the players in the healthcare system operate as not-for-profits or are licensed to pursue the altruistic aim of curing sickness and avoiding harm. How did the noble endeavors of the saints and scientists who created our nation's medical institutions evolve to a point where pundits can now use the label "medical-industrial complex" without drawing protest?
Knowledgeable readers will quarrel with some of the details. Her critique of hospital pricing, for instance, relies on examples of uninsured patients getting dinged by exorbitant chargemaster rates, which are primarily used by hospitals as a starting point in price talks with insurers. A small number suffer needlessly. But those are not the rates paid by Medicare, Medicaid or insurers. The issue of cost-shifting goes unexplored.
But there are many more cringe-worthy examples of indecipherable bills, disease upcoding, out-of-network charges, administrative waste and outsized executive salaries. Most hospital industry officials-at least those being honest with themselves-will admit something is broken at the heart of the pricing and payment system.
And what is that? Here's where the book's last third-the diagnosis and treatment for the sickness she's diagnosed-falls short. Rosenthal spends many pages encouraging patients to observe what's going on in the emergency room, question the need for tests and procedures and quarrel with their bills.
She calls for tighter rules for insurers, smarter plan purchasing by consumers and greater antitrust enforcement. She demands total price transparency, a tougher negotiating stance with drug and device makers, and a ban on physician-owned facilities.
Yet she skips quickly past policies that would unwind the system's fundamental flaw, the one that drives almost all the market dysfunctions she describes. That flaw is uncontrolled fee-for-service medicine.
The U.S. is not unique in using fee-for-service to reimburse providers. But other countries tightly regulate prices and utilization, either through a single-payer insurance system or with powerful regulators. They use tools like use limits, price controls, bundled payments and global budgets.
The U.S. has only begun experimenting with these approaches, and under the current administration, those may end. That leaves the system wide open to the profit maximization she decries.
Harry and Louise sitting at a kitchen table scrutinizing medical bills may be a good advertisement for deep-sixing 1990s-style reform. It's no solution for a 21st-century medical system that's badly in need of radical payment reform.l
