Many Americans have an unhelpful habit of viewing the health reform debate as a morality play where those who treat us, usually doctors and hospitals, are viewed as the good guys and those who pay for those services, generally insurance companies or government programs like Medicare, are seen as villains.
When a physician suggests another test, we assume that they’re trying to be helpful rather than merely increase their income. When an insurer refuses to pay for a test proven unreliable or has a less expensive alternative, we assume that the decision comes from heartless profit-maximizing bean counters.
That’s why Obamacare limits insurance profits while imposing no such limits on hospitals, where double-digit profits are typical. Evidence suggests everyone in the system wants to do well while doing good. Steven Brill’s new and outstanding analysis of medical economics makes that case.
Brill seems to suggest that those who are highly compensated (think of a hospital administrator, or drug or insurance executive earning more than $1 million annually) are probably being rewarded for the profits he or she brings in for their employer – and that while insurance executives may gain by holding costs down, the others win when costs go up. The latter category is much larger and the disparity becomes larger yet when highly-compensated physicians are aware of the link between how much they do and how much they earn.
A growing portion of our medical care comes from large corporations – and that trend is accelerating because of Obamacare. This change can improve quality but will definitely increase costs. More than half the physicians practicing in America are now on a payroll. Often they’re employed by hospitals that are merging into larger units. Hospitals defend such mergers by arguing their resulting need for more supplies, ranging from sheets to x-ray machines, will allow them to buy at discounted wholesale rates. But charges to privately insured and uninsured patients, which are not directly linked to costs, often rise. A hospital chain that controls more beds and more physicians can demand higher payments from insurers, who can’t afford to exclude major players from their networks.
Here in Washington, Medstar Health operates both the 900-bed Washington Hospital Center and the 600-bed Georgetown University Hospital. While it might be possible for a brave insurer to put together a cost-effective network that included only one of these hospitals, only a foolish insurer would exclude both. In fact, they’re a must-buy package for insurance networks, giving Medstar a strong negotiating position. Medstar’s top executives each earn more than $1 million annually.
As they add more hospitals to their system, their compensation and clout with insurers will rise, inevitably raising costs without assuring better outcomes. To date, antitrust officials have been relaxed about such mergers, which sometimes have positive fallout by hastening the use of electronic medical records and protocols that can improve patient care.
In any event, these combinations tend to simultaneously increase both the price of services and the number of such services provided.
Most sophisticated observers of American medicine believe that it costs more than it should because too much is being done, even after adjusting for those who are now being denied the care they need. Until the health fairy arrives, spending less will ultimately require doing less. We regularly see lists of where trims could be made without jeopardizing care, most recently from the Choosing Wisely campaign, here physicians advise on where the fat can be trimmed.
Unfortunately, the public doesn’t yet accept this logic. Their understandable quest for the magic cure is fed not only by advertisements (from drug firms, hospitals and physicians) that promise to make them feel better but also by government campaigns that promote more mammograms, colonoscopies and cholesterol tests (each helpful when used appropriately) that aren’t balanced by suggestions that the conservation ethic applies to medicine. The best response to a problem typically involves doing the minimum to solve it.
Efforts to rationalize care by restricting services, like mammograms, to those most likely to benefit typically spur strong responses from providers and their patients – who see such initiatives as insensitive efforts by accountants more interested in cost than benefit.
Casting such efforts as part of a morality play undermines the possibility of an outcome that will focus on what’s best for patients rather than their providers’ priorities.
For 16 years, Jim Jaffe worked for House Democrats who served on the Ways and Means Committee, apprenticing with Representatives Green, Gibbons and Gephardt before working for Chairman Dan Rostenkowski.