ELISABETH ROSENTHAL — AN AMERICAN SICKNESS, HOW HEALTHCARE BECAME BIG BUSINESS AND HOW YOU CAN TAKE IT BACK — 2017
This book is essential to understand the total and final dead end the USA find themselves in, right now, with their ambition to repeal and replace Obamacare. But first the simple summary of the author given right at the beginning, the ten rules that negate the simple logic of a free and open capitalist market economy to replace it with totally manipulated and perverted monopolistic cannibalistic economic looting.
How Economic Incentives Have Created Our Dysfunctional US Medical Market
Real life examples from patients (and readers!) that inspired my list of 10 Economic Rules
1. More treatment is always better. Default to the most expensive option.
2. A lifetime of treatment is preferable to a cure.
3. Amenities and marketing matter more than good care.
4. As technologies age, prices can rise rather than fall.
5. There is no free choice. Patients are stuck. And they’re stuck buying American.
6. More competitors vying for business doesn’t mean better prices; it can drive prices up, not down.
7. Economies of scale don’t translate to lower prices.
8. There is no such thing as a fixed price for a procedure or test. And the uninsured pay the highest prices of all.
9. There are no standards for billing. There’s money to be made in billing for anything and everything.
10. Prices will rise to whatever the market will bear. The mother of all rules!
What does this mean?
In Noam Chomsky’s words in his Requiem for the American Dream the political stalemate of America and the West comes from the fact that we do not have any capitalism any more right now in our societies because the private corporations with the support of the political institutions and politicians have completely taken the control of the market that is no longer free and open but entirely monopolistic with the only cannibalistic ambition to devour the public, to make them pay as much as this corporate greed can imagine.
The objective of these corporations in their economic management is not to satisfy the demand with an affordable offer but it is to make as much profit as possible, even if they have to kill the free market.
The author gives a full demonstration of how pharmaceutical companies, hospitals, doctors and insurance companies have coordinated their efforts to build a monopolistic healthcare business model in which all is calculated to make maximum profit.
The principle is simple: Build a hierarchical business model in which each tier calculates its profit separately and exponentially and projects its own calculations onto the next tiers. Let’s take the case of a hospital.
1- The hospital as a catering real estate institution will bill its profit separately on the basis of something like a three- or four-star hotel price list. COST A + 30% (or more). Two mistakes: the real estate value of the hospital is overvalued instead of being realistically valued and stretched over twenty years for financial coverage. The second mistake is that a hospital is not a real estate business and its real estate investment does not have to make a profit. Even the food they serve has to make a profit, be it outsourced or not.
2- The personnel, non-medical and even medical up to nurses, will be billed not as a cost but as an investment that has to bring in a profit. COST B + 30% (or more). What’s more the whole personnel of the hospital is taken into account for every single patient which means the cost for each patient is by far over-valued. Each patient has to pay for every member of the personnel no matter whether these members have been used or not by the patient.
3- The medical personnel will all bill their services separately, be they members of the permanent staff of the hospital as an institution or independent outsourced organizations or individuals. COST C + 30% (or more). The outsourcing brings even more speculation because one doctor for example of any specialty can via Internet connections follow three or even more surgical intervention or patients. That on-line at-a-distance intervention is billed for each patient, who is yet simultaneously treated and followed with two or more other patients, as if the doctor had operated for him alone. In other words, for a one-hour intervention, the doctor will bill three or more times the full fee and will thus multiply his income and create cost and billing inflation to his sole profit.
4- The laboratories will work the same way either as part of the hospital as an institution or as outside, outsourced, autonomous labs. COST D + 30% (or more). All current costs for the lab to just open and function are counted for all tests accumulatively and what’s more each parameter in a blood test for example will be billed as a full separate test though the machine does many of these parameters simultaneously on the same blood sample. Instead of billing one blood test as a whole, it may bill ten to twelve different tests all at full price as if they had been done separately. And of course the analysis of the results by a doctor employed by the lab will be billed on its own as a fully separate expertise intervention.
Shall we go on? We could of course see that #1 that is billed on its own will nevertheless be taken into account at all the other levels as part of the billing at those other levels. You end up paying for stepping into the hospital and staying there for treatment two, three or four times. That’s what they call the “facility fee” and it is counted at every single level with in a lab for instance a facility fee for having spent fifteen minutes sitting on a chair while the nurse or doctor or technician was performing the particular test he had been prescribed to perform.
And that is not all. The billing is going to change according to the insurance status each patient has. If they are insured, the billing will depend on the agreement between the hospital and the particular insurance company they are dealing with and each insurance company has its particular agreement with each hospital and its particular network of medical institutions, doctors and labs they work with and cover for every particular patient. If the patient is on Medicare then normally the hospital should only bill the amount Medicare has negotiated with the particular hospital and that is what Medicare considers as the normal price, often defined as positioned between a minimum and a maximum. If you are not insured be sure the price will skyrocket into the clouds.
But that’s not all. You have to take into account the deductibles, generally a certain amount of expenses that have to be paid fully by the patient before the insurance company starts paying what they have to pay by contract. Then you have the co-payments which can be important and are the parts of all expenses that are not covered by the insurance company (within the covered price accepted by the insurance but there might be extra-billing on the side of the hospitals or doctors or labs). Pharmaceutical drugs can be so expensive that the pharmaceutical companies accept to cover the co-payment after insurance payment, which proves that this amount of money they turn into a discount for the patient does not leave them profitless. Far from it since the profit is incredibly higher than in any economic field. They call this procedure “copay assistance.” But Medicare patients are banned from this system by Medicare itself meaning that a Medicare patient who is financially less wealthy or simply poorer will not benefit from this clause and will pay more than a normal privately-insured person.
And yet that is not all. There is then the “donut hole.” That’s the most vicious element in this healthcare system. But let me quote Elisabeth Rosenthal (‘page 233):
“In 2015, for example, the patient paid the first $270 as a deductible and then a 25 percent co-payment on up to $2,960 in retail costs for drugs. If costs exceeded $2,960 in a year, patients hit what is known as the “donut hole,” when they had to pay 100 percent of the cost, making them think twice about taking very expensive medicines they might not really need. Once their outlays hit a retail cost limit of $4,700 for their medicines, Medicare kicked in again, paying 95 percent.”
That’s what is called Medicare Part D supposedly to prevent over-prescribing or over-use of drugs.
You end up in that system with a three-tier situation.
1- At the top the insured patients who can benefit from no-pay assistance. They are those who pay least.
2- Medicare patients are supposed to pay less but they cannot have no-pay assistance and they have the donut hole with deductibles and co-payment. They end up paying more or getting less medical treatment.
3- The uninsured are worst off. They pay the highest prices and they have no coverage whatsoever. Among those you have the young healthy people who do not need treatment because they are not sick or have perfect vision and perfect teeth. How long, and when will the next accident happen in their health like a heart attack or hepatitis, a flu epidemic or tuberculosis, not to speak of some STDs, like AIDS? But among these you also have those who do not have insurance because they can’t afford it in a way or another even with the Affordable Care Act. For example, because they are illegal immigrants, non-documented workers or residents, and of course their children are the same. We are speaking of about 20 million uninsured Americans to which you have to add the estimated 11 million illegal immigrants or residents. Those pay the most and if they cannot pay too bad for them, isn’t it? They can always turn the other cheek.
And they will tell you that is the perfect illustration of Matthew 5:38–40 (New testament, New International Version, NIV): Eye for Eye 38 “You have heard that it was said, ‘Eye for eye, and tooth for tooth.’ 39 But I tell you, do not resist an evil person. If anyone slaps you on the right cheek, turn to them the other cheek also. 40 And if anyone wants to sue you and take your shirt, hand over your coat as well.” Diseases and sicknesses are the bad guys in this Healthcare fable and what’s more they all come from God and we have to accept God’s will, don’t we? Insurance is going against this divine guidance, isn’t it?
This system is by definition unequal and unjust. This is no longer capitalism. This is the exploitation of the market as a milch cow. That explains why the French company Sanofi’s drugs are sold in France and the US in the proportion of 1 to 3 or 1 to 4 as for prices. The health insurance of all people in France negotiate the prices and the drugs cannot be sold but at the agreed prices. In the US the very same drugs are sold at a free price, so three or four times higher, and generic drugs are in all ways restricted in their access to the market and are not encouraged, whereas in France the patients who take a brand name drug when a generic exists will be penalized, including financially. It is the responsibility of the pharmacist to implement this rule.
This situation leads some people like Dean Baker of the Center for Economic and Policy Research (CEPR) in Washington DC to demand the repeal and replace of all patents (and copyrights), hence all protection of intellectual property because it is abused by some industrialists particularly in the field of pharmaceutical drugs and school text books.
The present book is full of examples of abuse and misuse of such constitutional provisions to protect and encourage intellectual property and invention or creativity. A fair protection has been turned by some industrialists into a means to exploit and even loot the market for profit.
But the book is short about what can be done. In fact, little is proposed to improve the Affordable Care Act. Most of the suggestions are unrealistic for most people, like doing research to find the prices and costs of hospitals, or various medical operations. First of all, most people cannot, I mean do not know how to, do this. Second a lot of data in the field of real costs of medical acts is not available. You would need to be a hacker to penetrate the computer and databases of these institutions. Third who has the time to do it, if they work on a regular full time daily basis?
It is good for a patient to ask his or her doctor, dentist or eye doctor how much his or her tests, dentures or eyeglasses are going to cost. But it should be an absolute and legal obligation for various medical personnel to provide the patient with such estimations and for insurance companies to say before the acts within a short delay how much they will cover and how much the patient will have to pay.
What’s more patents should be only to cover R&D expenses, and as soon as these expenses are covered the price should be reduced and generic drugs should be authorized. This has to be federal legislation since patents are in the US constitution.
Finally, all medical drugs, equipment and procedures should have to be negotiated as for their prices with all the stake holders, and patients as well as the federal state and the fifty states should represent at least 50% of the decision makers.
The free and open market is real capitalism, as Noam Chomsky would say, when the cost of a goods or service is calculated honestly and when the profit margin is decent and enables the public to get the goods and the service at a reasonable affordable price. That means the cost of the goods and service at every step has to be calculated so that it is lean and it brings in economies of scale that have to be automatically transferred to the customers, the patients in this case.
Final cost of goods at the end of the production cycle.
$100 + producer’s profit 12% = $112
Transportation and wholesale distribution
$112 + cost of service: $25-$50 + profit 12% = $137 + 12% = $153.44
$162 = 12% = $181.44
$153.44 + cost of service $25-$50 + profit 12% = $178.44 + 12% = $199.85
$203.44 + 12% = $227.85
$181.44 + cost of service $25-$50 + profit 12% = $206.44 + 12% = $231.21
$231.44 + 12% = $259.21
We come up to the final range of the public price between $199.65 and $259.21. In other words, the full cost of production is multiplied by between 2 and 2.5 times or so. At most you may have to add the sales tax when it applies. And this sales tax should apply only at the very last step and if paid at previous levels it should be recuperated in a way or another. All economies of scale are supposed to reduce the productive cost or the cost of service at all levels. These figures are purely arbitrary but the system proposed here is the only sustainable economic model possible. If the market is really free and open prices should tend to go down and not up. Provided competition is guaranteed and protected.
The last element is that there should be absolutely no advertising for prescription drugs and medical institutions. No lobbying either. Simple transparent honest procedures to certify drugs and to bring information — and only true information — to the professionals of the medical profession and to the public. Moreover, all information about the patients should be available in open access to all professionals of the medical profession under the security of passwords. Along that line the new IT technology should be used to have all medical information concerning patients available in two or three clicks for any doctor or certified medical institution in only one simple and single compiled file. That should generate enormous economies of scale in clerical work and in medical time. But all that has to be ruled, regulated and managed by some legal procedure under the authority of lawmakers.
In other words, the diagnosis in this book is excellent but the prescription and the treatment are far from satisfactory. The US will have to see its life expectancy drop and its opioid addiction crisis worsen for politicians to understand healthcare has to be available at a very affordable cost to everyone RESIDING in the country, permanently or temporarily, national or foreign, legal or not.
We are still far from even the consciousness of the urgency of the problem. Trump finds it easier to flex his tongue muscle on a rostrum or his finger muscles on a twitter keyboard about North Korea than to tackle the healthcare problem. In fact, he does not care about public health since for him healthcare is not a public need but private choice, like the type of shoes you wear or the color of socks you display.
As Russell Conwell said in his “Acres of Diamonds”: “To sympathize with a man whom God has punished for his sins, thus to help him when God would still continue a just punishment, is to do wrong, no doubt about it, and we do that more than we help those who are deserving. While we should sympathize with God’s poor–that is, those who cannot help themselves–let us remember that there is not a poor person in the United States who was not made poor by his own shortcomings, or by the shortcomings of someone else. It is all wrong to be poor, anyhow.” (http://www.americanrhetoric.com/speeches/rconwellacresofdiamonds.htm)
And one punishment from God to the poor is that they will die younger than the rich because they do not have any serious health insurance. How do the Social Darwinists say: “Let the fitter survive”? In my dictionary that is called eugenics. But as the Britannica Encyclopedia says: “However, [eugenics] ultimately failed as a science in the 1930s and ’40s, when the assumptions of eugenicists became heavily criticized and the Nazis used eugenics to support the extermination of entire races.” (https://www.britannica.com/science/eugenics-genetics) To let the poor die early with diseases whose treatments they cannot pay for is a soft option that can easily replace the Nazi methods of euthanasia, genocide, extermination and incineration.
Dr. Jacques COULARDEAU