The Market Ticker
Commentary on The Capital Markets- Category [Health Reform]

Naw, really?

Today’s frenzy of hospital mergers and physician practice acquisitions is giving hospital systems even greater leverage to inflate opaque “charge-master” medical bills that even hospitals are sometimes unable to itemize sensibly. With no mechanism to allow free-market forces to keep prices in check, this translates into higher health-insurance deductibles and copays for insured Americans, and in the case of Medicare and Medicaid, higher taxes.

What free market forces existed before Obamacare to put a stop this sort of crap?  None!

See, that's the problem -- you can't take your car into a shop without the mechanic providing you a binding estimate before work begins.  This doesn't mean that he can't find other things he thinks you should do, but it does mean he can't do them and bill you for it without your consent.

General consumer protection laws prohibit this practice, which used to be very common.  It was not that long ago that it was relatively common to take your car in for an oil change and come out with a $500 bill for a bunch of other stuff you never agreed to before the fact, and have the mechanic demand the money before you got your car back.

This was stopped by government agencies and consumer protection laws across the land because it was an outrageous practice that amounted to extortion -- and thus it was made illegal.

Well?  How come this goes on now in hospitals?  How come everyone involved in doing it, including Dr. Mackary, isn't sitting in the dock right now facing felony consumer fraud charges?

As Dr. Makary notes the medical industry is one fifth of our economy.  But what he doesn't mention is how it got to be 1/5th of our economy instead of 3-5%, which it formerly was before hospitals, drug companies and physicians started with this sort of crap like chargemaster pricing, refusing to provide a price at all, "balance billing" and even billing for services not requested after a price was given or even billing for services that weren't performed!

I say that until every one of the individuals and firms involved in this crap is staring down indictments for that blatantly outrageous behavior and both the individuals and firms are forced to disgorge all of their previous payments made under such schemes, the prosecution of which would return medicine to the former 3-5% of the economy and thus dramatically improve the personal balance sheets of Americans generally, people like Dr. Makary can go stuff their complaints about Obamacare where the sun doesn't shine.

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C'mon Faux News, report the truth.

One of the most-onerous votes in recent years on Capitol Hill is the so-called “doc fix.” That’s the patch Congress re-ups periodically to make sure that seniors on Medicare continue to receive medical care. 

If Congress doesn’t cough up a chunk of change for the doc fix, doctors who treat Medicare recipients could experience an abrupt 21 percent reduction in their federal reimbursement – and would likely stop taking those patients.


The House adopted the new plan more than two weeks ago. The Senate is poised to consider the plan in the next few days. But this isn’t pretty. The doc fix costs more than $200 billion. $141 billion of that is unpaid for over 11 years. This explodes the deficit and drives budget hawks crazy.

Yes it does, because instead of treating the disease we instead throw money at it.

The disease is monopolist pricing practices in medicine.  It is why Sovaldi is available in third world nations for $900 and yet costs $83,000 for the same drug here in the United States; the drug companies got laws passed to make it a felony for you to buy it for $900 and then bring it here to sell.  Do you understand what this is -- a law that makes it a felony to sell property you acquired through a consensual economic transaction and wish to sell in a similar consensual economic transaction -- all to protect a company's ability to screw you?

This sort of "protection" exists across the medical industry.  There is nowhere in the country that you can take your car to be worked on and they are not required to provide you a binding estimate.  Try getting a price for a medical procedure before it's performed -- it's nearly impossible.

Further, even if you get one try enforcing that price after the fact -- good luck.

General consumer protection laws nationwide make this sort of game illegal in virtually every line of business except one: Medicine.

If you addressed this the cost of medical care, and thus the money spent by the government on it in entitlements, would fall by some 80%.  You would no longer need medical insurance for any but the most unfortunate of events, and since those are rare the insurance would be cheaper than your car insurance.

But..... nobody will take this on from either the left or right, and you, America, will not stand up and demand that they do.

Why not?

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If you want to know why the nation is going bankrupt, and the medical industry is a big part of the reason, you need only look at practices like this -- $20 million here and $20 million there and soon we're talking real money:

One lucrative source of income for Dr. Melgen: 37,075 injections of a macular degeneration drug he billed Medicare to treat 645 different patients, according to the data. The government paid him back at an average reimbursement of nearly $320 for each procedure, according to the records.

The name-brand drug reportedly has a cheaper alternative, but it’s not illegal for physicians to prescribe whichever treatment they believe works best, Medicare officials told reporters on a conference call Wednesday. They did not specifically discuss Dr. Melgen by name.

 But when you're paid a percentage of the bill do you choose a less-expensive or a more-expensive alternative when the patient doesn't see the charge or have to pay it?

Well now that's not obvious is it?

What's even better is that this guy gave $400,000 to Menendez -- but his office is in Palm Beach Florida!

Exactly what purpose would he have giving money to a New Jersey Senator?

Good question... but it sure looks like things worked out for him, doesn't it?

Now what sort of multiplication factor does 6% have in terms of damage to you as a taxpayer?  Oh that's simple -- about 17x... so for every dollar made "more than it should have been" by him you got reamed for $16.66.

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The pukefest is on today....

Congress is within reach of trashing the old and unworkable formula that Medicare uses to pay doctors. By itself, this is what it sounds like -- a bureaucratic maneuver that matters little to anyone but the doctors who treat Medicare patients. The system that Congress replaces it with, however, could represent a big step forward in improving the quality, and lowering the cost, of everyone's health care.

Uh, no.

At any rate, changing the way Medicare pays doctors is worth some deficit spending -- especially if not changing the formula, and relying on more short-term fixes, is also likely to result in deficit spending. If a new payment formula can change the way doctors practice, the long-term savings and the improvement in public health may make it worthwhile.

Worthwhile?  Utter nonsense.

What would be worthwhile (and also take a chainsaw to deficit spending) would be to remove the special exemptions in the law for medically-related goods and services and then vigorously prosecute under the Sherman, Clayton and Robinson-Patman acts the medical health care providers, facilities, insurance companies, physicians, pharmaceutical and supply firms.

There is utterly no way that you can have a $5 box of surgical absorbent pads be billed out for $77 in a hospital (which is utterly common, by the way) except via various forms of behavior that are recognized in the law as either blatant violations of anti-monopoly statutes, consumer-protection statutes or both when applied to virtually every other area of commerce.

The law recognizes that if there is a hurricane approaching (an exigent circumstance) you cannot, as a gas station owner, suddenly charge people $25/gallon for gasoline when it was $3/gallon previously.  Try that and you'll go to jail.

But you are in exactly the same position when flat on your ass riding on a hospital gurney into the OR, or in the ER.  You are a captive of the hospital and its pricing structure at that point in time and have no meaningful ability to negotiate.  Yet you can buy at retail, in single unit quantities, that box of absorbents for $5 on Amazon.  If you're a hospital and buying them by the caseload you're probably paying $2.50 -- that $5 is a retail price.

Yet the hospital will not only refuse to tell you in advance what supplies will be used and what they will cost (if the surgery is elective), despite having data on literally thousands of similar procedures and thus knowing exactly what is likely to be used, thereby using that intentional lack of disclosure on their part to prejudice your ability to negotiate in an exigent circumstance such as a heart attack or other medical emergency you are literally unable to negotiate.

Exploiting customers and holding them hostage in this fashion is, in virtually every case of commerce, unlawful.  Your car dealer cannot do it; they used to all the time when it came to repairs, but consumer protection laws were passed that forced them to issue binding estimates that had some rational connection with the service to be performed.

If you want to actually put a stop to the insane amount of money we spend on Medicare and the deficit spending it causes then you must stop the practice of billing someone $77/box for surgical wipes that cost $5 when bought at retail in single-unit quantities, along with $30,000 for a vial of scorpion anti-venom that costs $100 a couple hundred miles south in the country of origin, and which can be bought OTC there in Mexico.

The way for Congress to do this is quite simple: Repeal the special exemptions that exist and then start putting the people who pull this crap in prison where they belong.

The cost of medical care, were we to do that, would plunge by 80% and MedicareMedicaid and private health "insurance" as we currently know it would all become unnecessary.  What would remain of these current systems would be a low-cost catastrophic insurance policy that we could provide as a social benefit to those who are truly poor and thus unable to afford its modest (few hundred dollars a year) expense.

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