Devon
Herrick Posted: Aug 31, 2020 12:01 AM
The opinions expressed by columnists are their
own and do not necessarily represent the views of Townhall.com.
I flew on an
airline for the first time in the 1970s. Back then airline ticket prices were
high due to federal regulations. The government believed ticket prices had to
be expensive to ensure enough profit for airlines to invest in quality. According to analysis by The Atlantic,
the lowest price an airline could charge for a flight from New York to Los
Angeles in 1974 was $1,441, adjusted for inflation. Forty years later – after
deregulation – prices had fallen as much as 80 percent for some flights on that
route. As The Atlantic put it, “Deregulation worked.”
This brings
me to health care, which is heavily regulated at both the state and local
level. There is a persistent belief by many health care industry stakeholders that
medical care necessarily must be expensive. This is evident when regulators and
industry stakeholders turn a blind eye to price gouging, excessive markups and
unnecessary care. Not only do lawmakers do nothing about practices that are
fraudulent in other industries, but stakeholders also refuse to even condemn
the practices. Our government is seemingly doing all it can to ensure we pay
far more for medical care than if competition were allowed to flourish.
About 98
percent of medical spending must be authorized by physicians, and doctors order
nearly $3 trillion worth of medical services for patients annually. About
one-third of health care spending is on hospital care. In recent years,
hospitals have been buying up physician practices. The goal is to force
employed doctors to order more tests, hospitalize more patients and boost fees
higher than independent physicians receive. The Obama Administration tried to
discourage future physician practice acquisitions by hospitals by making it
less lucrative. Yet, hospital-owned practices already in place would continue
to receive higher fees. The Trump administration went much farther and enacted
site-neutral payments even for formerly grandfathered facilities, meaning all
hospital-employed physician services would be reimbursed by the government the
same as the independent physicians. Get this: a federal judge ruled against
site-neutral payments because it would save Medicare nearly $1 billion a year,
even though it would do so without benefit cuts. The judge has since been
overruled by an appeals court.
Surprise
medical bills are another example of politicians and insiders protecting
non-competitive behavior. Surprise medical bills are a form of market failure
when consumers cannot punish price gougers or denying them their patronage.
Legislation limiting surprise medical bills is stalled in Congress because
those who profit from them are big donors. In other words, Congress allows the
industry to screw patients in return for money.
There are
two opposing bills in Congress to end surprise medical bills. One would pay
out-of-network providers as though they were in-network. Physicians groups who
profit from surprise medical bills oppose this bill because it cuts off their
gravy train. Another bill would create a government-run bureaucracy to
arbitrate billing disputes between health plans and out-of-network doctors who
want to charge more. This bill is more popular among those whose business model
is ambushing patients with bills they did not expect. The reason presumably is
because arbitrators can be influenced by lobbying or interference that locks in
fees far higher than market prices. This is what happened in New York State
where official guidance tells arbitrators to pay the 80th percentile of list
prices. The 80th percentile of list prices is double, maybe
triple the 50th percentile of in-network collected fees.
Surprise
medical bills are perpetuated by a few bad apples from a handful of physician
specialties. What they all have in common is their patients do not choose them.
Nor can patients refuse their services when they are out of network and charge
much higher fees.
Back in May,
an appeals court in Colorado overturned a jury decision that found a patient
did not owe a $228,345 surprise medical bill based on inflated chargemaster
(list) prices. The patient thought she had done due diligence when she had
initially been told her cost-sharing would only be $1,337. The surgery was
supposedly more complex than anticipated, which lead to a $228,345 surprise
medical bill. The appellate judges ruled the hospital should not have to
litigate to collect its outrageous fees, because (in a nutshell), outrageous
fees, opaque pricing and one-sides contacts are the status quo in health care.
Several
years ago, a Texas woman was ambushed with a $17,850 surprise medical bill for
an unnecessary post-surgical drug test. Her urine sample was purposely sent to
an out-of-network lab known for price gouging. A simple drug test is readily
available for $100 online. An in-office, “pee on a stick” test is about $1 when
purchased in quantity by a doctor. Despite being reported to the Attorney
General and to the Texas Medical Board, the physician lab owner did not lose
his license. Presumably, everyone turned a blind eye because that’s just how
health care is.
Another
place where abuse is tolerated is when rural hospitals are allowed to bill for
lab work they did not perform. This is quite common because rural hospitals
have higher reimbursement rates than big-city hospitals because they have few
patients and are critical to their small communities. Consider this: your
Dallas-based physician orders lab work that is processed locally, but the tests
are billed through a much more expensive hospital hundreds of miles away. Your
cost-sharing could be much higher than necessary. Your premiums rise as a
result. State and federal officials are beginning to see this needs to stop.
Americans
spend nearly one-fifth of our national income on health care. High prices and
services more costly than necessary are tolerated in health care because
lawmakers, regulators and stakeholders all want the industry to be awash in
other people's money. It doesn’t need to be this way. In every other industry,
consumers and suppliers route out waste, fraud and abuse whenever they
encounter it.
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