There Is No Free Market In Health Care

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I’ve been saying this for a long time. Now Steven Brill has documented it thoroughly in his well-researched expose in Time magazine, “Bitter Pill: Why Medical Bills Are Killing Us.”  The cause of rising medical bills is an unregulated medical-industrial complex.

As  summarizes it in Ourfuture Blog as follows:

What serious pundits, policy experts and policymakers have failed to see or have feared to say: There is no free market in health care.

The implications: only government action can bring down the cost of health care. In my articles on the subject, I’ve shown how insurers and employers have been trying to bring the costs down. The problem is: as soon as insurers negotiate prices down, the upstream providers – hospital groups and pharmaceutical companies – just raise them again.

Competition in Health Care Doesn’t Work

Brill exposes the falsity of the glib libertarian/conservative/Republican canard that “competition” can fix the unsustainable rise in health care prices. There is no meaningful competition in an economy in which an oligarchy controls costs. Here are the reasons:

  • Consumers can’t make meaningful choices because the real costs and value of medical products and services is hidden from public scrutiny. 
  • Neither insurers nor hospitals have the leverage to secure better prices with suppliers.
  • Hospitals have the power to set prices well in excess of their costs.

Consumers have no idea what a fair price is, and

Congress has permitted the pharmaceutical industry, lab companies, device and equipment manufacturers, hospitals, nursing homes and others to hide behind a veil of secrecy about the prices they charge, effectively sanctioning massive gouging of patients, businesses, states and taxpayers.

The Public Option Is Invariably the Most Cost Effective

Public delivery systems like Medicare are the most efficient delivery systems for health care around the world, and efficiencies include  low administrative costs and the ability to negotiate prices. But in America, Congress has expressly forbidden it from negotiating fair rates for services. Medicare Part D, designed as a giveaway to insurers, and, by extension to providers, not only privatizes drug coverage, but disallows the government from negotiating prices with providers. Congress has also prevented Medicare from determining which health care goods deliver value to encourage enrollees to select those products.

The Government Protection Racket

After 

giving drug companies the power to set prices without justification, hypocritical Congressional representatives express concerns about the deficit and Medicare’s rising costs, as though they themselves did not create these problems through their own irrational

opposition to government regulation and misplaced faith in the free market to bring down health care costs. But. to be clear,  this is not a political or an ideological issue – it’s strictly a matter of money.

The real agenda of so-called “fiscal conservatives” is to

protect and increase already usurious corporate profits. Adding insult to imjury:

Squeezing Medicare enrollees further by shifting additional health care costs to them, as the deficit hawks propose, does nothing to control spiraling costs. Neither does continuing to countenance the pharmaceutical industry’s practice of setting prices that have no relationship to their actual costs or to what they charge other countries for the same products. The market is broken, and it’s under the control of monopolistic players protecting their economic turf.

The Solution Revealed

The only solution to the problem is balanced regulation. Recall that when healthcare reform was being discussed, the attempt to rein in costs was falsely vilified as “death squads.”

But the Medical Industrial Complex will lose this fight as health care costs continue to grow to a critical point where they can no longer be sustained. Eventually Congress will have to move to control costs. The Romney Ryan plan proposed to do so in the most inequitable way – by cutting benefits to patients. A more moderate government could instead develop government-administered pricing that provides for health care companies to take a reasonable profit through fair and realistic pricing rather than the blatant price gauging that prevails today.

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