Auction 2012: The Health Care RacketFebruary 1, 2012
The point of seeing a doctor – or being one – should be to improve health. After all, besides your mother or spouse, who do you count on to care about your well-being more than your doctor does? That is literally his or her job. But what I’ve found, and I’ve written about in my new book Greedy Bastards, is that the same incentives distorting banking, energy, education, and government are distorting our very bodies.
The American health care system has incentives so out of alignment for everyone involved that it’s a Greedy Bastard paradise. For American health care providers, the goal isn’t to get you healthy, but to get you paying. And similar to banking where the costs of a low interest loan might be a hidden balloon payment, the costs of our health care system are hidden from the end consumer.
One basic problem with the system is how doctors are paid, the fee for service model. In fee for service models, doctors are paid based on the treatments they deliver rather than the health outcomes they generate. So for instance, if you need an expensive surgery, your doctor gets paid to operate. If you don’t need surgery, your doctor doesn’t get paid. This creates an obvious incentive to recommend surgery, even when you don’t need it. And it also discourages looking at the evidence of what works and what doesn’t, because expensive but ineffective procedures create more profit for the doctors and hospitals that host and perform them.
This prioritizing of money over health outcomes shows up in the political influence the American Medical Association uses to stifle competition. Shikha Dalmia, a senior policy analyst for the nonprofit think tank Reason Foundation, described in Forbes how the AMA used its political influence to insist that only doctors could deliver babies, even though midwives have performed this service for years. “In 1995 thirty-six states restricted or outright banned midwifery, even though studies have found that it delivers equally safe care at far lower prices than standard hospital births.”
Then there’s the prescription drug problem, where pharmaceutical companies leverage their political influence to protect and expand drug monopolies. In one case, a company called KV Pharmaceuticals got the FDA to give it an exclusive franchise over a hormonal agent used for years by obstetricians. The price jumped from $300 a treatment to $25,000. Pharmaceutical companies advertise to convince you that you are sick, and spend $61,000 per doctor on promotional costs to get doctors to prescribe you their drugs.
This wouldn’t be affordable for most of us if we had to pay the sticker price. But we don’t, because most of us are covered by increasingly expensive third party health insurance (through our employers, which is yet another problem). This insurance is protected by a law granting health insurance companies the right to monopolize state coverage, a monopoly retained by the enormous sums spent by the health insurance industry in Washington ($263 million from 2009-2010 alone).
None of this improves health outcomes, or is necessary for good health. Sometimes it is counterproductive, because it discourages collaboration and the adoption of best practices. In my book, I spent time learning about the Mayo Clinic, where doctors are paid on a flat salary, and where they operate in teams. This promotes the sharing of information, and leads to far better health outcomes. I also spoke with Jeff Brenner, a specialist in Camden, New Jersey, one of the poorest areas in the country. He assembled a team to specifically target the most expensive cases, and using this technique of hotspotting, was able to save millions of dollars. For instance, he found out that one diabetic was continually relapsing because he wasn’t wearing his glasses when he injected himself with insulin, and so was taking the wrong dose. This alone saved thousands of dollars in hospital bills, but in our fragmented health system, it wouldn’t be anyone’s job to tell you that you aren’t taking your medicine correctly. In fact, the hospital would make money on every return visit.
As with banking, energy, and education, we have the skills and tools we need to improve outcomes and cut costs. We know how to stop Greedy Bastards from ruining the system and bankrupting us. They are after all operating according to certain incentives, and those incentives are malleable.
As part of our Auction 2012 series in collaboration with The Huffington Post and United Republic, we’re focusing on the true costs of money in politics, and how it affects the quality of care we get in America.
Dylan got the chance to talk to Paul Blumenthal, Editor of HuffPost FundRace, covering money and influence in politics. He previously worked as the Senior Writer for the Sunlight Foundation covering influence, lobbying, and transparency issues. You can follow him on Twitter @PaulBlu.
Here’s the full conversation:
DYLAN: Welcome to another edition of the Greedy Bastards Antidote, as part of our Auction 2012 series with the Huffington Post and United Republic. Joining us today, Paul Blumenthal, Editor of HuffPost FundRace. We’ve talked about banking, we’ve talked about energy and the unholy alliance and the price that we pay. Well, today, we’re talking healthcare. And, Paul, where do we most acutely feel in our own lives the cost of money in politics as it pertains to the way healthcare is delivered in America?
PAUL: I mean, I think that there are a lot of ways that directly play a role in our lives. One of the big ones is drug prices. I mean, a number of Americans who are using drugs, prescription drugs, has shot up dramatically over the past decade and the price of those drugs has shot up dramatically. And there’s really been pretty much nothing done by Washington to help control those costs to help people get the kind of drugs that they continue to go to to help them with their heath. And, you know, I think you saw this most acutely and the role of money in politics, you saw this most acutely in the healthcare reform debate where you actually saw the Obama Administration who, you know – Barack Obama, you know, one of his direct quotes is, “I don’t want to learn how to pay the game better; I want to put an end to the game-playing,” went ahead and came into office and goes and meets with the pharmaceutical industry’s top lobbyist to cut a deal where the pharmaceutical industry will provide support for the Bill, including money on outside advertising, the kind of stuff foreseen spent by Super PACs now to support the legislation. And in exchange, the Obama Administration basically gave them a lot of the policies that they wanted to keep in place, like keeping the country from being able to re-import drugs from Canada so that people could get cheaper prices or keeping the Medicare prescription drug program from being able to negotiate with drug companies to get lower prices for seniors.
DYLAN: And that I think is the thing that really sticks in everybody’s craw. We talked about this with energy, you know, the American identity is one that believes in a culture of integrity and choice and fairness and competition, right?
DYLAN: And yet we see time and time again whether it’s the banks that pay the government to avoid competition to get bailed out, the energy companies that pay the government to transfer the cost – the actual cost of hydrocarbons to the government as opposed to having to manifest it in the marketplace where it would obviously change behavior dramatically where we’d actually see the cost of hydrocarbons on the retail side, and now in pharmaceuticals where the most basic, most simple, most fundamental American principle of choice and competition is being taken away from us because these guys are paying off our government. Is that unfair?
PAUL: I’m sure that almost every American out there who’s paying really high prices for their prescription drugs thinks that that’s unfair. And, you know, the fact that a lot of the generics are kept off the market or pushed back. I mean, a whole other proposal that was pushed off the table in healthcare that was actually just defeated in Congress outright with the help of the pharmaceutical industry was a proposal that would have banned payments from the brand name prescription drug companies to generic companies to keep them from developing generic drugs, even after the patent had expired. So these companies basically just bribe other companies to keep them from putting out cheaper drugs. And who – you know, both sides of the companies, they benefit because they’re both making money and then the consumers are the ones who get hurt in the end.
DYLAN: And at the end of the day, is not our government, our politicians the ones that we actually are paying, do hire to protect our interests from exactly what is happening?
PAUL: I mean, that’s…
PAUL: That’s theoretically the idea of a representative government is, you know, we’re supposed to send people to Washington to represent our interests and not necessarily the entrenched interests that are, you know, staked out on K Street.
DYLAN: And so we get it with drugs, but the number one probably the most acute place where the dysfunction in American healthcare is felt goes to the overarching narrative of a bought government and two sets of rules, basically, where there’s one group of people in America—those who live safely and cozily inside of the employer-based private health insurance monopoly and don’t see an issue, as they see if with the healthcare, at least in terms of its availability, and those who do not live inside of the sort of illusory bubble of the private health insurance monopoly and the employer-based healthcare system and either have to pay a remarkably high price to get health insurance or simply don’t do it all because it’s too expensive. How does money in politics perpetuate two classes of Americans, two sets of rules—one for the privileged who live in the legacy Eisenhower employer-based health insurance monopoly system—an increasingly small group of people, by the way—and those who are forced to deal with prohibitively high prices and no healthcare at all?
PAUL: Well, I mean, you know, it’s just another example that we saw in the healthcare reform debate where any effort to create something like a public option was thrown away to allow people to be able to have access to a better market for and more competitive market for healthcare that was sort of outside of this employer-based system that leaves a lot of people out in the cold. And, you know, the administration tried to make a deal with the insurance company, eventually wound up leaving out the public option and the insurance companies then went behind their backs and gave $86 million to the Chamber of Commerce secretly, which they didn’t have to disclose, and then the Chamber of Commerce spent those ads to attack the healthcare Bill and to attack members of Congress who voted for it or to pressure members of Congress through advocacy ads. So, I mean, you see money in politics playing a role not only through lobbying and campaigning contributions, but through these non-profit groups, these trade groups that, you know, take money to be able to work as hitmen against bills, basically.
DYLAN: At the end of the day when it comes to healthcare, is the barrier to more effective healthcare policy a lack of understanding by our politicians or is it really as simple as – do they understand it but the role of money makes it such that they won’t do it?
PAUL: I think that a lot of them do understand it, and I think that there’s also a lot of problem of a lack of understanding by the general public and the inability to really have their voice heard at this level. I mean, these organizations, these trade groups, these lobbying groups, you know, they have so much knowledge on these issues that it’s really easy for them to steamroll members of Congress into believing that this policy is really going to actually hurt consumers when it will help them in the end. And, you know, there’s a lot of confusion I feel like around health policy and a lot of these other policies where we’re just really not getting the real story. And a lot of that is because we’re getting this misinformation from these third-party ads, these issue advocacy ads, whether it’s in the clean coal ads and the energy debate or ads being spent against healthcare reform.
DYLAN: And my final question for you on this issue. We understand the drugs, we understand the employer-based healthcare, I also understand that the AMA, and I talk about this in the book “Greedy Bastards”, that the AMA actually prohibits or regulates or advocates and gives money to the government to restrict the number of certified available medical school seats for doctors. They were literally allowing a trade association to artificially deprive us of the natural supply of doctors in order to create pricing power for member of the AMA. That’s the craziest thing I’ve ever heard when I learned that.
PAUL: It’s a crazy policy and, you know, what we see in Washington is people like doctors. Everyone respects the doctors, so they’re great agents for these, you know, other companies that might be less well-liked to send out into Washington or just to use talking points to prevent any kind of sort of reform that could ease the barrier for, you know, maybe just somebody who has a nursing degree to be able to set up shop and just provide nursing services rather than having to be a part of the doctor’s office, and then the doctors are limited exactly the way you just explained. You know, it just perpetuates itself.
DYLAN: Well, all of this, remember, is the best recruiting vehicle in the history of the world, not only to get money out of politics and push for a 28th Constitutional Amendment to do that with the things like the Get Money Out Amendment. In the short term, Paul, you’ve got to figure we have to be able to generate the legislative momentum to simply demand transparency in the Super PACs.
PAUL: You would imagine so. I mean, there was one vote short in the Senate in 2010 – I should say one vote short from actually clearing a filibuster because it was filibustered, it got 59 votes and there would have been a Bill that would have provided transparency for the Super PACs, something that really basic. And there are a few new bills that have been introduced that would do the same now, but it’s questionable. I mean, there was clearly a partisan motivation on blocking that Bill back in 2010. You had people like John McCain and Scott Brown who are now opposed to Super PACs who voted against that Bill back then.
DYLAN: Why, why – that’s a question for a different podcast. We don’t want to make ourselves too irritated.
DYLAN: Paul, thank you very much. If you want to, again, track Paul’s report, HuffPost FundRace, the newsletter. You can catch him routinely on the front pages of the Huffington Post covering money in politics. We are privileged to be collaborating with Paul and many of his colleagues all week long this week to bring you Auction 2012, in partnership not only with MSNBC and the Dylan Ratigan Show and Huffington Post, but also with the anti-corruption group that we’ve partnered with, United Republic. So if you want to learn more, do visit their sites, as well. And hope to talk to you next time. Paul, thank you so much for your time today.
PAUL: Thanks for having me.
DYLAN: All right, Paul Blumenthal, Huffington Post, we’ll talk to you next time on another Greedy Bastards Antidote.