This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
How Healthcare Became Big Business and How You Can Take It Back
By Elisabeth Rosenthal
Penguin Random House, April 2017
From the Introduction
Everyone knows the healthcare system is in disarray. We’ve grown numb to huge bills. We regard high prices as an inescapable American burden.
The current market for healthcare just doesn’t deliver. It is deeply, perhaps fatally, flawed. Even market economists themselves don’t believe in it anymore.
All the harrowing tales in this book occurred despite the 2010 passage and the 2014 enactment of the Patient Protection and Affordable Care Act (the ACA, also known as “Obamacare”). The ACA is not a failure, as some still assert, but the “affordable” in its name was an overreach to win over votes and public opinion.
Each market has certain rules that are determined by the conditions, incentives, and regulations under which it operates. Currently, we buy and sell medical encounters and accoutrements like commodities, but how do participants in the marketplace make purchasing choices? Prices are often unknowing and unpredictable; there’s little robust competition for our business; we have scant information on quality to guide our decisions; and very often we lack the power ourselves to even choose.
The rules governing the delivery of health care in the United States have grown out of the market’s design. The type of healthcare we get these days is exactly what the market’s financial incentives demand. Some have to get wise to them, and be smarter, far more active participants in this ugly, rough-and-tumble world. More important, we have to change the rules of the game, with different incentives and new types of regulation.
The economist Adam Smith spoke of an “invisible hand” with respect to income distribution. But in American healthcare, there’s a different type of invisible hand at work: it’s on the till.
Why an Open Market Won’t Repair American Health Care; A Review of Elisabeth Rosenthal’s “An American Sickness”
By Jacob S. Hacker
The New York Times, April 4, 2017
It was March 2012, and the Affordable Care Act (a.k.a. Obamacare) was before the Supreme Court. Justice Antonin Scalia zeroed in on its controversial requirement that all Americans purchase health insurance. Yes, everybody needs health care, Scalia conceded, but everybody needs food too. If the government could make people buy insurance, why couldn’t it “make people buy broccoli”?
The Affordable Care Act survived, of course — though not before a fractured court made the expansion of Medicaid optional, leaving millions of poorer Americans without its promised benefits. But the question Justice Scalia asked remains at the heart of a debate that has only intensified since: Why is health care different? Why does it create so much more anxiety and expense, heartache and hardship, than does buying broccoli — or cars or computers or the countless other things Americans routinely purchase each day?
For those leading the charge to roll back the 2010 law, the question has a one-word answer: government.
Where Rosenthal’s account falls short is in explaining why this deeply broken system persists. Early on, Rosenthal seems to side with Speaker Ryan and Senator Paul, describing “the very idea of health insurance” as “in some ways the original sin that catalyzed the evolution of today’s medical-industrial complex.” But, as Rosenthal (too briefly) discusses, countries where people are much better insured don’t have anything like our self-dealing, upside-down incentives and outrageous costs. Somehow, despite largely keeping citizens’ skin out of the game, other rich democracies manage to have much lower costs per person — as well as greater utilization of physician and hospital services and better basic health measures.
The difference between the United States and other countries isn’t the role of insurance; it’s the role of government. More specifically, it’s the way in which those who benefit from America’s dysfunctional market have mobilized to use government to protect their earnings and profits. In every country where people have access to sophisticated medical care, they must rely heavily on the clinical expertise of providers and the financial protections of insurance, which, in turn, creates the opportunity for runaway costs. But in every other rich country, the government not only provides coverage to all citizens; it also provides strong counterpressure to those who seek to use their inherent market power to raise prices or deliver lucrative but unnecessary services — typically in the form of hard limits on how much health care providers can charge.
In the United States, such counterpressure has been headed off again and again. The industry and its elected allies have happily supported giveaways to the medical sector. But anything more, they insist, will kill the market. Although this claim is in conflict with the evidence, it is consistent with the goal of maximum rewards to (and donations from) the industry.
Without a clear view of the political economy of health care, it’s easy to see the problem as Justice Scalia did. If we could just start treating health care like broccoli, the market would solve the problem. But as Rosenthal’s important book makes clear, the health care market really is different. Speaking of her Times series in 2014, Rosenthal told an interviewer her goal was to “start a very loud conversation” that will be “difficult politically to ignore.” We need such a conversation — not just about how the market fails, but about how we can change the political realities that stand in the way of fixing it.
In her book, “An American Sickness,” Elisabeth Rosenthal has provided an excellent description of the dysfunction of the business model of health care delivery in the marketplace. On this basis alone it is an invaluable resource for every health policy library – home or institutional.
Rosenthal makes a valiant effort to describe what we can do about it, but she does so apparently under the assumption that we are going to have to live with this system for the indefinite future. Her recommendations largely require a very aggressive stance in dealing with the health care delivery system, especially with the business transactions. A limitation of this approach is that it requires not only access to the system by virtue of good insurance coverage or personal wealth, but it also requires a personality capable of rough-and-tumble negotiations. Most people would not really qualify and thus would not be effective in taking on the medical-industrial complex. She also quite appropriately recommends more aggressive regulation, though, except for the quite modest reforms of ACA, that has not been forthcoming in the environment of political polarization that has dominated the scene in the past few decades.
However this “sickness” is unique in the United States, so hope springs from observing how other nations have made their systems work. I am going to yield to Yale political science professor Jacob Hacker, who also reviewed her book, to provide us with a description of what accounts for other nations’ success, but in one word, it is government.
Rosenthal mentions single payer, but is far too timid here, suggesting, at most, allowing individuals over 55 to purchase Medicare. It is true that single payer reform alone would not correct all of the sins of capitalizing on unfettered market opportunities for excess revenues, but changing the milieu from the market business model to the public patient service model would go a long way toward realigning incentives of the providers. It would be a refreshing environmental change to concentrate on how the health care needs of the patients can best be served instead of wasting time trying to figure out how to pull in more big bucks.
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