The Pri(n)ce of Healthcare

Tom Price, President Trump’s new Secretary of Health and Human Services (HHS) strode to the podium to the sound of applause.  The two thousand medical administrators and physicians at the annual meeting of CAPG, a trade organization representing physician groups, heard him described as the most influential person affecting the 300+ participating groups that provide care for millions.   Only the third physician to lead HHS, many hoped that the orthopedist and six term GOP congressman would bring new sophistication to the federal government’s healthcare programs.   

The perfectly coiffed Secretary looked every bit the new man in charge of healthcare.  Sadly, his resonant voice soon dashed any hope for substance.  He might have commented on the essential U.S. healthcare quandary:  A country with average household income of $56,000 can’t afford the $15,000 annual cost of health insurance for a family of four.   Neither Republicans nor Democrats can conjure up inexpensive insurance that covers unaffordable healthcare services.   What does the Secretary think?  He sidestepped the issue, twice patting his audience on the back by touting the American health system as “the finest in the world.”  Seriously?  If Price had attended the morning session he would have heard that the U.S. spends about 6% more of its GDP on healthcare than average developed country.  That extra $1.2 trillion amounts to more than twice the defense budget.  Yet U.S. health outcomes for crucial measures like infant mortality and lifespan rank average or even worse.  Yes, U.S. medical technology leads the world and foreign dignitaries still travel here for world class, high tech care.  But shouldn’t the secretary of HHS understand that the measure of a healthcare system is the quality and accessibility of care provided to average citizens?  

Perhaps more surprisingly, Price failed even to comment on the GOP-sized elephant in the room: The proposed House and Senate healthcare measures, supported by the administration, then awaiting action.  The non-partisan Congressional Budget Office estimated that the measures would cause millions to lose coverage.  Price’s Hippocratic Oath had no sunset provision.  If allowing millions to face loss of their coverage under the Affordable Care Act (ACA) would somehow “do no harm” why not explain the thinking to those on the front line?

Despite Price’s silence, the now fading proposals reveal a strategy of shifting national healthcare priorities toward an individualist rather than a collective approach.  This shift can be seen most readily in the GOP opposition to the standard benefit package, an ACA provision that requires insurance to cover  specific services.   Advocates for repeal note that eliminating standard benefit would reduce the cost of plans.  Although true, the savings occur only because enrollees play “benefit roulette,” hoping that that the omitted services don’t turn out to be needed in the future.  And if they do?  Dr. Price and the GOP would just leave that problem to the individual selecting the plan. 

Similarly, the proposed rollback of the mandate to purchase insurance allows individuals to opt out of the system entirely.  GOP proponents promote the change as enhancing individual liberty.  They ignore the fact that when uninsured individuals get sick and arrive at emergency rooms, they no longer opt out.  The costs of their care get covered by those paying into the system.   Those opting out become “free riders,” enjoying catastrophic coverage paid for by others.  Price and other advocates of repeal seem unconcerned about balancing individual liberty versus personal responsibility and social consciousness.   They also fail to appreciate that insurance—the pooling of community resources to cover risk—is inherently collective and rewards individuals with financial and healthcare security in return for the their support of others.  Secretary Price should stop promoting the illusory benefits of healthcare libertarianism and advocate instead for the health security of all the American people.       

The Secretary’s CAPG photo-op resembled a prince’s foray to a rebellious provincial outpost.  He did not brook questions from the assembled nor deign to meet the organization’s board.  He granted permission for four questions that were submitted and approved in advance.  The attendees might have been reminded of the Bourbon monarchs, who on their restoration to the throne of France to were said to “have forgotten nothing and learned nothing.”  The Republicans in Washington have certainly not forgotten their years of opposition to the ACA.  Their willingness and capacity to adapt and to learn more about U.S. healthcare needs in the post-ACA era remains uncertain.  Secretary Price’s recent visit to CAPG provided little cause for optimism.      

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21 replies »

  1. Allan, I agree with you that it can be difficult to separate the social and economic determinants of healthcare outcomes in order to focus on the medical. That has been used for a generation to rationalize the fact that we don’t seem to get have better outcomes in the U.S despite paying so much more than other developed countries. I think the outcomes in the Medicare population are helpful in that regard. Even this population, which has essentially universal access, does no better than middle of the pack. Athough social determinants may also be playing some role in the fate of Medicare patients, I think it’s hard to escape the fact that Americans just don’t get value commensurate with what is being spent on healthcare.

    In regard to the costs of the system, drug and device development, as an example, uses capital and human resources based on long standing assumptions about pricing endpoints. I think it’s doubtful that the country would reverse all the assumptions and let the healthcare infrastructure built up over a generation starve to bring down costs. This market is far different than the housing market, which is the sum of many individual decision makers. These decisions are made by the government and by large corporate entities. They are not subject to the same sort of market crash as occurs in housing and other markets. In my view, there are far too many institutional defenders of the status quo, both on the supply and demand side, to allow that sort of disruption.

  2. “Unfortunately, you can’t take system that has been fed on limitless third party payment and then pretend that competition will make it affordable.”

    Dr. Stone, are you saying that because it is difficult after “been fed on limitless….” that one has to keep doing the same thing? I don’t think so. What happens to price when suddenly money isn’t available? In the recent housing failure there wasn’t a lot of availability of money to purchase homes. What happened to prices? They fell. At the worst there might be a few very necessary drugs that can’t fall to the same degree. There will be plenty of savings to pay for them while the system converts to more reasonable pricing levels.

    By the way your comment on infant mortality outcomes and lifespan indicate something other than lack of quality from the healthcare system. Perhaps those things should have been mentioned in a blog having to do with social causes for high infant mortality rates and mortality, such as drug addiction, murder etc. Infant mortality when broken down into quintiles based upon weight demonstrates that the US is best in the world at keeping low birth weight infants alive and we fare among the top in the healthy group. If one can keep low birthweight infants alive that means it isn’t the healthcare system that is causing the high numbers of deaths.

  3. If the measure of success were saying nothing, the Secretary succeeded in spades.

    A constitutional convention? Seriously? That should make conservatives tremble in their boots. The first Constitutional Convention was a runaway convention. They were supposed to modify the Articles of Confederation and they completely reconfigured the government. Aren’t people aware of that? A constitutional convention could rescind any or all of the Bill of Rights, as just one example. If the U.S, Congress can’t even pass a healthcare bill, do we really to trust their ilk to revise the Constitution of the United States? It would be like having Beavis and Butthead edit Shakespeare.

  4. Hi, Anish. You should have gone to business school. Unfortunately, they don’t teach this stuff in cardiology fellowships.

    The cost of a CT can be viewed as a the sum of the fixed and variable cost. The fixed cost is the payment on the loan, the cost of the maintenance, etc. The variable cost is the component that varies with the use of the machine.

    Say that your CT is busy 50% of the time with insured patients paying $1100. That covers the fixed costs. The marginal cost of another scan is pretty cheap. So, if you can get $400 for that additional scan, it adds to the bottom line because you’ve already covered your fixed costs. . If you had to take $400 for all the scans, you would not be able to cover your fixed cost and you’d go broke. But if you can price discriminate, you can make additional money by doing discount scans. The fact that you charge $400 for the marginal cash patient doesn’t mean that $400 is the “true cost.” It’s just price discrimination and it allows for additional revenue.

    You’re from Philly. So, imagine you’re trying to help others negotiate the traffic on that miserable stretch on I-76 at Route 1. And, you find out that if you go through that at 5;00 AM, it’s not so bad! But, if everyone tries that strategy, it won’t work. Same with $400 CT scans.



  5. Hi, Peter.

    I don’t think that price controls will really control medical costs. Why does an MRI cost $1100? Yes, I’m sure that there is a fair profit margin built in to the price. But, fundamentally, an MRI is a huge capital expenditure and requires high cost maintenance. Limiting charges won’t change the fact that it’s both capital and labor intensive. Richard Nixon learned that price controls don’t work. I don’t think we want to re-learn that lesson.

    If there’s a benefit to a single payer, I think it would be the massive reduction in plan overhead from 15-25% for commercial plans down to less than 5%. Those billions could be directed toward care rather than shareholder profits. It might also provide a structure for system wide utilization efforts.

  6. Hi, William.

    I’d be interested in your thoughts on how competition will reduce the costs of Hepatitis C treatment, which runs about $80K per treatment.

    Unfortunately, you can’t take system that has been fed on limitless third party payment and then pretend that competition will make it affordable.. Research and development in healthcare has long since discounted the absence of a ceiling in healthcare expense. So, “build it and they will pay.” Those costs are now baked into the pie.

    I’ll grant you that competition is better than the absence of competition. Health systems competing against each other help to ensure that costly resources are not overused. But, using overly costly services more efficiently will still not make the current system affordable.

  7. Was this example that of urologists bidding and competing on their own procedures and services OR was it urologists increasing in number in a fee-schedule-system and making their own prices and costs by increased volume of services?

    The details of this market count.

    I agree completely with your second paragraph, Allan. Good.

  8. Bill, wasn’t there a study years ago involving urologists where increasing the number of urologists didn’t reduce prices, but it did increase costs?

    We need many eyes, ears and pockets to create competition that controls prices. Those ears, eyes and pockets need to come from the patients.

  9. Better term is price management. Medicare already does it. All single pay countries do it and is the reason for their lower costs.

    If increasing supply of providers will increase competition, how do you propose to do that? Would doubling number of hospitals bring down prices? How would you train more docs to cut their own throats on price?

  10. When have price controls worked? Why do we still believe in them?

    Japan has tight price controls over all health care. Physicians are paid less who work in universities and in large urban centers than in the countryside…because they needed to pay rural and boondocks physicians more to facilitate patient access in these areas. Guess what happened? Huge underground bribery payments are made by patients to university docs inorder to bypass this system.

    Competition, increase supply or reduced demand are the only sustainable ways to get prices down. Large purchasing–having a single entity buy everything–works for awhile but this is actually equal to price controls.

  11. No one wants to do price controls. Well, I am sure a lot of liberals do but they don’t think they can get enough votes for it, and they are probably correct. Any party imposing price controls loses the next election. What you might be able to do is reference pricing. Again, the left would be happy with this, but not sure you get any support from the right, but you might. Also, paying cash does not guarantee lower prices.

  12. Read my cat scan blog- one solution is price control – something dems didn’t do when they had 60 votes. Since they didn’t mandate price controls and focused on insurance coverage , providers and hospitals had a ball with the ACA. Glad u agree.

  13. “A country with average household income of $56,000 can’t afford the $15,000 annual cost of health insurance for a family of four. Neither Republicans nor Democrats can conjure up inexpensive insurance that covers unaffordable healthcare services. What does the Secretary think? He sidestepped the issue”

    Nobody wants to address the real issue.

    “Proposing to expand the current individual market without fixing the cost side of the equation enriches the few at the expense of many.”

    You think paying cash is the answer? The cost control will only be controlled if Medicare for all WITH price controls. That enriches the many at the expense of the few providers who want to charge $1100 for MRI, and the other stuff as well.

  14. I’ve been disappointed that cms has just continued macra as designed by its predecessors. It’s the law – so there needs to be something – but certainly how one meets the stated value based goal is up to cms.

    But this post is the usual hyper partisan view that just hits the usual unoriginal talking points of the resistance. Daniel Stone is either too lazy to understand the other sides argument, or is being disingenuous. The GOP version of the individual mandate is a penalty for not maintaining continuous coverage . The other side’s plan for reducing the Cost of that CT scan is to not cover it. Yes u read that right. If the govt covers it for those 45 million folks in the current format – the Ct scan costs $1100. If you pay cash – it’s $440. Dan – read my last post If you’re not following. Proposing to expand the current individual market without fixing the cost side of the equation enriches the few at the expense of many. — Just what a liberal would want ??

  15. AS I recall, MACRA was one of the few bipartisan things coming out of Congress. I had zero hopes of him addressing it. He was put in place to cut Medicaid.


  16. Dr Price, a surgeon by trade, probably dazed by the “ginormaty” of HUD. Really, what could he say other than nothing. The current levers that are, or might be, available for solving its problems show absolutely no indication for their possible, future success. Just remember, doing nothing will likely end-up with a state driven constitutional convention. We are currently only a few states away from it. So, along with a ban on deficit financing and Congressional term limits, we might also end up with…….?

  17. Agree. Very disappointing. Where is just the slightest regulatory relief?

  18. As a fellow ortho, I did have high hopes for Dr Price. Sadly he has disappointed. He has done ZERO to reduce burdensome MACRA/MU/CertEHR programs. Zero. Even though he stated how damaging they are and he was going to change things. He has not. I did have some reservations when he was appointed as he is from a generation of MDs that are willing to take all they can get and sell out their younger generation of MDs. So at this point, I am actually more depressed about the future of medicine, as I actually had hope. If Clinton got in, I knew we have no chance, as she would have continued this MACRA Value Based Care mess that will do nothing to improve cost, in fact worsen it, make it more complex and drive more of us out.But at least that would not have hurt as much as actually have some hope in Price.