Robert Geist: Treatment for our malignant health-care market
By Robert Geist MD
December 8, 2019 at 12:03 am
Professor Kevin Schulman’s excellent article, “‘Medicare for All’ won’t fix soaring health care costs” (Nov. 24), accurately identifies medicine’s market symptoms: toxic costs, consolidation of mini hospital-provider (ACO) insurance corporations (often joint ventures with mega-HMOs), inflating narrow network and surprise out-of-network billings, enormous insurance-corporation negotiating power, as well as a pharmaceutical industry with internal kickbacks and possible profiteering.
How did this market, Schulman asks, “evolve in a such a malignant direction?”
Toxic unrelenting cost-price inflation began abruptly after 1965 for the first time in 90 years following passage of Medicare and Medicaid laws. This was a tipping point in time, when 85% of the populace (employed workers since 1942 plus the official old, poor, and disabled) suddenly had inexpensive tax-subsidized insurance—a piecemeal U.S. version of National Health Insurance.
Tax subsidies artificially decreased the price of insurance, which meant that untaxed insurance dollars were used to pre-pay even affordable and expected medical care. As care appeared to be “free” (the boss or government paid for it), increasing demand for services was met by a rise in prices to expand the supply of both clinic and hospital services. Wealth was skewed from other economic sectors into expansion of the medical sector — a case of demand-inflation-sickness induced by political economic malpractice.
Since repealing popular tax subsidies was considered political suicide, economic sloganeering was invoked to sell a cost-inflation panacea: The Health Maintenance Organization Act (HMO) of 1973. “Market failure” was allegedly due to ignorant (later, labeled “self-indulgent”) patients in the hands of profligate (later, “greedy”) providers practicing in an inefficient “cottage industry” doing “sick care” instead of “well care.”
The hype was that inflation would be controlled by private corporate efficiency, profit-driven to maintain health through wellness. The reality was that the HMO Act gave insurance corporations power to control with barriers the use of the medical care they insured; a power not allowed any other casualty insurance company.
Despite the powerful political franchise, the HMO industry failed to control demand-inflation costs for near four decades. In the early 1990s, various versions of managed-care organizations controlled about 90% of the private insurance market. The power of Draconian rationing was unleashed, such as drive-by mastectomies, deliveries, and denied “unnecessary” care, which temporarily reduced the inflation rate from 18% in 1988 to near 1% by 1996. Delay and denial of care drove a public and political rebellion. Politically uncomfortable wearing a black hat, the industry took down some barriers; cost inflation returned.
The response to more inflation was to pass the 2010 Obamacare panacea of massively increased managed-care power through creating a partnership of government-backed ACO-HMO cartels. The partners could then manage market prices and franchise medical care production to the government ACO “partner.” This was accomplished through 2011 federal regulations that repealed patient protection laws.
Anti-trust-law repeal promptly resulted in massive ACO and HMO consolidations. Simultaneously, anti-kickback, and anti-self-referral laws were repealed. This legalized collusive profit-driven rationing of care masqueraded as “efficiency” and “coordination” — and had the potential for profiteering mischief through legalized kickbacks to bedside clinicians for rationing use of corporate dollars.
Does this describe what Schulman called a “malignant” market? We observe today profit-driven, low-utilization, networked, federally protected, high-cost, big-box ACO medical-insurance-cartel profit centers and peaking HMO stock market prices; places where patients and their physicians may be seen and policed as annoying cost centers. The irony is that the high, maybe malignant, cost of bureaucrats rationing medical care has not controlled soaring market costs.
Medical cost inflation will remain an unsolved policymakers’ problem of their own making until costly but popular subsidized pre-paid “free” care access is addressed. Meanwhile, a national strategy of open access politically necessitates popular near-free “well care” for the many inexpensive healthy voters and queues for the few costly ill requiring “sick care.”
The ill were once the primary object of medicine, not cost control. Resolving the problem of medical cost inflation requires a new prescription, i.e., a marketplace where the consumer is king and where money is used to distribute goods and services and to buy insurance against catastrophic financial loss. That is how all other microeconomic private sectors work, where we buy shoes, refrigerators, houses, and cars. Those sectors are free of social engineered inflation.
Can a new prescription be written? There is a Minnesota House bill that would change direction through an experimental Medicaid reform program, which eliminates expensive third-party rationing machinery and gives families debit-card money for out-patient care and savings from prudent spending. Family choice and control are likely the sweet spot for cost control and quality care.
A medical marketplace where American families, not bureaucrats, are king would seem to be a worthy, achievable policy goal for control of toxic soaring costs.
Robert W. Geist MD, of North Oaks, is a retired St. Paul physician.
 Schulman, K. ‘Medicare for all’ won’t fix soaring healthcare costs. LA Times. November 15, 2019. https://www.latimes.com/opinion/story/2019-11-15/medicare-for-all-health-care-costs
Treatment for our malignant health-care market.
Twin cities Pioneer Press.
December 8, 2019.