American Consequences - September 2018

professor, Bill Kissick, was a MD who also taught in the medical school at the University of Pennsylvania. He was extremely smart, knowledgeable, and engaging. He had been one of two physicians intimately involved in the drafting of the Medicare legislation and showed us pictures of himself shaking hands with President Lyndon B. Johnson. Unfortunately, the issues that we studied around 1990 are roughly 92% the same as the problems we face today, because, as Dr. Kissick admitted, “ We had the best intentions, transparency of pricing so you know what you will pay for something before you buy it, the ability to shop for alternatives, and ratings of the goods or services provided. None of those three things are included in American health care. The crazy patchwork of pricing on a typical hospital statement, often from providers you have no recollection of or direct contact with, is astonishingly opaque and complex. Compare the different rates for the same service or product among privately insured, government-paid, and the off-the-street “rack rate” patients. Woe to those in the last category. It is rather like the scene in Casablanca where Humphrey Bogart as Rick and Ingrid Bergman as Ilsa are in the souk and a merchant offers her some linens first for 700 francs, only to be willing to part with them “for a special friend of Rick’s” for 100. The creation of the Centers for Medicare & Medicaid Services (CMS) injected vast pools of government money into the health care system. Worse, it dissociated those paying and but no understanding of economics! ” The typical economic system includes

those receiving the service. When you do that, prices invariably rise. More dollars chasing goods and services leads to inflation, as any Econ 101 student can tell you. When offered the choice between a Rolls-Royce and a Yugo at the same price, everyone will opt for the burled wood and leather interior with serious horsepower over plastic and vinyl and hamsters running on a treadmill pickup. Wouldn’t you? We have a system of perverse incentives that leads to the delivery of more care that will be reimbursed, rather than the proper care, not to mention the practice of “cover-your-ass medicine” for fear of malpractice litigation. These factors combine to the common estimate that one in three health care dollars is spent in fraud, waste, or products that aren’t needed or have no demonstrable therapeutic benefit. My late father was once the inspector general for all Medicare and Medicaid fraud in the state of New York, so I have a feeling that the numbers may actually be higher. A 2017 study of 3,000 medical treatments in randomized controlled trials by BMJ Clinical Evidence found that just 35% were deemed to be “beneficial” or “likely to be beneficial.” I guess that is why it is called “the practice of medicine.” Yet while physicians are practicing, patients are charged what the insurer traffic will bear. Isn’t it time to just admit that doctors are also members of the genus Homo Economicus , and there is more than a distinct possibility that Adam Smith will trump Hippocrates on occasion, if not routinely.

22 September 2018

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