(2024-06-13) Doctorow The Health Industry's Invisible Hand Is A Fist

Cory Doctorow: The health industry’s invisible hand is a fist. The US has the rich world's most expensive health care system, and that system delivers the worst health outcomes of any country in the rich world. Also, the US is unique in relying on market forces as the primary regulator of its health care system. All of these facts are related!

belief in the power of markets to "efficiently allocate" goods and services....ceases to be useful when it encounters a messy world of imperfect rationality, imperfect information, monopolization (monopoly), regulatory capture, and other unavoidable properties of reality. (market failure)

• for a different perspective, see (2024-07-09) ZviM Medical Roundup 3, section on "Hanson".

In the 1980s, Reagan's court sorcerers decreed that they could fix health care with something called "Prospective Payment Systems," which would pay hospitals a lump sum for treating conditions... The hospital system responded by "upcoding' patients.... As Robert Kuttner writes for The American Prospect, this kind of abuse was predictable from the outset, especially since Health and Human Services is starved of budget for auditors and can only hand out "slaps on the wrist" when they catch a hospital ripping off the system.

Upcoding isn't limited to Medicare fraud, either. Hospitals and insurers are locked in a death-battle over payments, and hospitals' favorite scam is sending everyone to the ER, even when they don't have emergencies

The US health industry is bad enough to generate a constant degree of political will for change, but the industry (and its captured politicians and regulators) is also canny enough to dream up an endless procession of useless gimmicks designed to temporarily bleed off the pressure for change

But there's another wrinkle here. The same people who claim that prices can solve all of our problems also insist that monopolies are impossible.

When a single hospital system is responsible for the majority of care in a city or even a county, how much punishment can regulators realistically subject it to?

Kuttner describes how Mass General Brigham cornered the market on health-care in Boston, allowing it to flout the rules on pricing. In addition to standard tricks – like charging self-pay patients vastly more than insured payments (because individuals don't have the bargaining power of insurers), Mass Gen Brigham's price data is a sick joke.

That's where companies like Multiplan come in: this is a middleman that serves other middlemen. Multiplan negotiates prices on behalf of insurers, and splits the difference between the list price and the negotiated price with them

But – as the Arm and a Leg podcast points out – this provides the perverse incentive for Multiplan to drive list prices up. If the list price quintuples, and then Multiplan drives it back down to, say, double the old price, they collect more money.

Are older voters getting pissed off at politicians for slashing Medicare? No problem: just create Medicare Advantage, where old people can surrender their right to government care and place themselves in the loving hands of a giant corporation that makes more money by denying them care.

Shareholders love monopolies, so they drove monopolization throughout the health supply chain. As David Dayen writes in his 2020 book Monopolized the pharma industry monopolized first, and put the screws to hospitals:

Hospitals formed regional monopolies to counter the seller power of consolidated Big Pharma.

Consolidated hospitals, in turn, put the screws to insurers, so they also consolidated, fighting Big Hospital's pricing power.