565 (Author at Cato Institute) https://www.cato.org/ en The Government’s COVID-19 Failures Are an Argument Against Medicare for All https://www.cato.org/publications/commentary/governments-covid-19-failures-are-argument-against-medicare-all Charles Silver, David A. Hyman <div class="lead mb-3 spacer--nomargin--last-child text-default"> <p>Some&nbsp;have said the failure of America’s medical system to handle the surge in demand caused by COVID-19 is proof that the country needs Medicare for All. They couldn’t be more wrong.</p> </div> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>Many countries with nationalized, single‐​payer schemes, including England, France, Italy, and Spain, have seen their health‐​care systems stretched past the breaking point by the pandemic. More importantly, the responsibility for America’s lack of preparedness lies squarely with our dysfunctional government. The real lesson to be learned from our botched response to COVID-19 is that giving the government control of the entire health‐​care system would be an enormous mistake.</p> <p>No system that is sensibly designed to meet our normal needs for goods and services can respond instantly to a&nbsp;massive surge in demand. That’s why stores ran out of toilet paper, bottled water, face masks, antibacterial wipes, and other items when panicked shoppers went on buying sprees after the pandemic first hit. To increase production, manufacturers must acquire additional supplies, hire more workers, add shifts, expand facilities, make shipping arrangements, and so forth. Because doing these things takes time, in the short run supply is fixed.</p> </div> , <aside class="aside--right aside--large aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>No one should want to nationalize the health‐​care system after this pandemic.</p> </div> </div> </aside> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>The health‐​care system also faces short‐​term supply constraints. It takes years to produce the thousands of new doctors, nurses, pharmacists, and EMTs that are needed when a&nbsp;crisis hits. It takes time to make more hospital beds, ventilators, ambulances, and personal protective equipment too. That we ran short of these resources when the coronavirus reached our shores is not a&nbsp;sign of a&nbsp;poorly run system, but of one governed by basic economic imperatives: Health‐​care businesses sensibly kept only enough resources on hand to deal with expected demand, because maintaining excess capacity was not worth the expense.</p> <p>The pandemic caused demand to skyrocket past expected levels, so, as typically happens with mass disasters, we’ve faced shortages. Some can be eased by importing goods and workers from outside the affected region — think of New York, which is now asking for help from doctors in other states. But others can only be addressed by ramping up production, which can take weeks, months, or even years.</p> <p>Since markets discourage businesses from maintaining too much excess capacity, how should we prepare for catastrophes like COVID-19? The usual answer is that government must do the heavy lifting. Unfortunately, the government’s record of preparing for disasters is poor.</p> <p>The response to the COVID-19 crisis is a&nbsp;case study in governmental ineptness. In 2006, the federal government estimated that 70,000 ventilator machines would be needed in a&nbsp;moderate influenza epidemic. Instead of going with a&nbsp;large, established device maker, in 2010 HHS hired Newport Medical Instruments, a&nbsp;small one, to build a&nbsp;fleet of inexpensive portable devices. Before production started, however, NMI was purchased by Covidien, a&nbsp;larger device maker. Eventually, Covidien&nbsp;<a href="https://www.nytimes.com/2020/03/29/business/coronavirus-us-ventilator-shortage.html?referringSource=articleShare" target="_blank">backed out of the contract</a>, no ventilators were delivered, and the government enlisted a&nbsp;new vendor in 2019. The government also allowed a&nbsp;contract dispute to interfere with the maintenance of the ventilators it already had. Consequently, when COVID-19 hit, the federal supply of ventilators was far too small and thousands of the machines the government did have didn’t work. Fourteen years after the call for ventilators went out, the federal government is just starting to fill the need.</p> <p>What about drugs? Scientists are now studying whether Remdesivir may be effective in fighting SARS‐​CoV‐​2, the virus that causes COVID-19. Remdesivir was developed six years ago to combat various viruses, including dengue fever, the West Nile virus, Zika, MERS, SARS, and Ebola. But it was never approved for use — apparently because Gilead Sciences (the patent holder) saw too little financial gain to warrant the cost of the FDA’s approval process. The result is that we are effectively starting from scratch in the search for a&nbsp;COVID-19 treatment.</p> <p>The federal government also botched the process for creating and administering coronavirus tests. Because SARS‐​CoV‐​2 is a&nbsp;new variant, a&nbsp;new test was needed to track its spread.&nbsp;<a href="https://www.washingtonpost.com/politics/2020/03/30/11-100000-what-went-wrong-with-coronavirus-testing-us/?utm_%E2%80%A6&amp;utm_campaign=wp_post_most" target="_blank">German researchers</a>&nbsp;developed one in mid‐​January, but the CDC decided not to use it, instead pressing ahead with the development of a&nbsp;separate test. When that test was released in late January, it proved&nbsp;<a href="https://khn.org/news/cdc-coronavirus-testing-decision-likely-to-haunt-nation-for-months-to-come/" target="_blank">faulty</a>, and the FDA prevented private laboratories from developing tests of their own. The CDC also distributed its few test kits&nbsp;<a href="https://khn.org/news/cdc-coronavirus-testing-decision-likely-to-haunt-nation-for-months-to-come/" target="_blank">equally</a>&nbsp;to labs across the country, without regard to the size of local populations. The result was a&nbsp;dramatic shortage of valid tests in populous areas, which created the false impression that the number of cases in the U.S. was low. In early March, facilities in the U.S. had administered&nbsp;<a href="https://www.washingtonpost.com/politics/2020/03/30/11-100000-what-went-wrong-with-coronavirus-testing-us/?utm_%E2%80%A6&amp;utm_campaign=wp_post_most" target="_blank">3,099 tests</a>. By comparison, South Korea, a&nbsp;much smaller country whose epidemic started the same day as ours, had administered more than 188,000.</p> <p>Even after the government‐​created bottleneck was broken, testing in the U.S. was still stymied by shortages of swabs, transport media, and reagents that are used to wash genetic material out of swabs for examination. Evidently, none of these items were stockpiled in sufficient quantities. Items needed to protect testers and health‐​care providers, such as N95 face masks, were also in short supply.</p> <p>The federal government’s Strategic National Stockpile is supposed to include such personal protective equipment, as well as antibiotics, vaccines, ventilators, and other supplies needed to deal with a&nbsp;pandemic. Since its creation in 1999, the SNS has proven its value in responding to Hurricane Katrina and the 2009 H1N1 swine‐​flu pandemic, among other disasters. But SNS stockpiles were depleted during the Obama presidency, and hadn’t been replenished by the time the current crisis began. Originally, the SNS got caught up in the fight between congressional Republicans and President Obama over spending, with neither side willing to bend enough to ensure that it was fully replenished. After that, Obama wasn’t willing to expend the political capital necessary to fix the problem, and President Trump hasn’t been willing to do so either.</p> <p>The U.S. spends almost $1 trillion a&nbsp;year on national defense, but it handles our security so poorly that a&nbsp;virus born in a&nbsp;provincial city in China has killed thousands of us, sickened hundreds of thousands more, and sent us into economic freefall in barely a&nbsp;month. With a&nbsp;record like that, no one should want the government to have more responsibility for the health‐​care system than it already does. Medicare For All won’t help the country in ordinary times or in emergencies — it will only make things worse.</p> </div> Tue, 14 Apr 2020 09:35:22 -0400 Charles Silver, David A. Hyman https://www.cato.org/publications/commentary/governments-covid-19-failures-are-argument-against-medicare-all Paying Beneficiaries, Not Providers https://www.cato.org/regulation/spring-2020/paying-beneficiaries-not-providers Wed, 11 Mar 2020 03:00:00 -0400 David A. Hyman, Charles Silver https://www.cato.org/regulation/spring-2020/paying-beneficiaries-not-providers No, Medicare for All Won’t Save Money https://www.cato.org/publications/commentary/no-medicare-all-wont-save-money Charles Silver, David A. Hyman <div class="lead mb-3 spacer--nomargin--last-child text-default"> <p>When the massive new health program known as Medicare was created in 1965, President Lyndon Johnson got health care providers on board by buying their support: He promised that the government would let&nbsp;<em>them</em>&nbsp;decide how much to charge and which services to deliver. In many countries with single‐​payer health systems, governments decide how much they will pay; when adopting Medicare, the U.S. let providers make that decision. It gave doctors and hospitals the&nbsp;<a href="https://economix.blogs.nytimes.com/2014/02/28/how-the-medical-establishment-got-the-treasurys-keys/" target="_blank">keys to the U.S. Treasury</a>&nbsp;and guaranteed their profits.</p> </div> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>Spending went through the roof as “<a href="https://facultystaff.richmond.edu/~bmayes/pdf/JHMAS_Jan2006_RMayes.pdf" target="_blank">unrestricted cost reimbursement</a>&nbsp;became the&nbsp;<em>modus operandi</em>&nbsp;for financing American medical care.” The costs wildly exceeded the government’s expectations at the time: A&nbsp;<a href="https://www.washingtontimes.com/news/2009/nov/18/health-programs-have-history-of-cost-overruns/" target="_blank">1967 estimate</a>&nbsp;by the House Ways and Means Committee predicted that, in 1990, Medicare’s total cost would be $12 billion. The actual cost was $98 billion—eight times as much.</p> <p>Half a&nbsp;century later, we are still living with the consequences of the decision to put providers in charge of the payment system. A&nbsp;<a href="https://docs.wixstatic.com/ugd/29ca8c_4975d361740b434b88649860658f9e8f.pdf" target="_blank">recent study</a>&nbsp;by scholars at Johns Hopkins University estimated that in 2018, fully “48 percent of the entire U.S. federal budget” was spent on health care. That isn’t a&nbsp;typo, and it’s not an accident either: Industry groups lobby the government around the clock to maximize the number of taxpayers’ dollars they receive.</p> <p>Medicare for All’s supporters promise that this time will be different. Once a&nbsp;single‐​payer program is implemented, they argue, the government will save billions of dollars by slashing payments to&nbsp;<a href="https://www.salon.com/2019/03/03/medicare-for-all-will-drastically-lower-prescription-drug-prices-by-taking-on-pharmas-greed_partner/" target="_blank">drug‐​makers</a>,&nbsp;<a href="https://www.heritage.org/medicare/commentary/how-medicare-all-bills-would-worsen-the-doctor-shortage" target="_blank">doctors</a>, and&nbsp;<a href="https://www.nytimes.com/2019/04/21/health/medicare-for-all-hospitals.html" target="_blank">hospitals</a>.</p> <p data-content-child-index="1-0">Although cuts of that magnitude would severely affect patient care, there’s no need to worry. If past is prologue, they will never occur. Time after time, providers have blunted initiatives designed to economize at their expense. There’s no reason to think this Congress will succeed when virtually every past Congress has failed to reduce the flow of Medicare dollars.</p> <p>Consider how, in recent years, a&nbsp;few attempts to save money fared:</p> <ul> <li>In 1997,&nbsp;Congress tried to rein in spending increases by tying Medicare spending on physicians’ services to something called the Sustainable Growth Rate (SGR) formula. Whenever payments to doctors grew faster than GDP, the SGR was supposed to reduce them automatically. The formula triggered payment cuts in 2003 and every subsequent year—<em>but the cuts never happened</em>. Under pressure from physicians, Congress adopted a&nbsp;series of “doc fixes” that delayed them and often gave doctors a&nbsp;raise. Finally, in 2015, when the SGR formula required payment cuts of roughly 25 percent,&nbsp;<a href="https://www.medpagetoday.com/washington-watch/washington-watch/50991" target="_blank">Congress repealed it</a>&nbsp;entirely, plowed the whole cost of doing so into the budget deficit, and guaranteed raises for doctors through (at least) 2019.</li> <li>In 2019,&nbsp;the industry used lawsuits to put the kibosh on three money‐​saving initiatives. First, the Trump administration’s attempt to require drug‐​makers to&nbsp;<a href="https://www.nytimes.com/2019/07/08/health/drug-prices-tv-ads-trump.html" target="_blank">include list prices</a>&nbsp;in consumer‐​directed advertisements went down in flames when a&nbsp;federal judge decided that the Department of Health and Human Services lacked the power to impose it. Then, the administration’s&nbsp;<a href="https://www.beckershospitalreview.com/finance/supreme-court-sides-with-hospitals-in-multibillion-dollar-payment-dispute.html?tmpl=component&amp;print%E2%80%A6" target="_blank">attempt</a>&nbsp;to save $3 billion to $4 billion over nine years by changing the way payments to “disproportionate share” hospitals are calculated&nbsp;<a href="https://www.supremecourt.gov/opinions/18pdf/17-1484_4f57.pdf" target="_blank">met the same fate</a>. Finally, a&nbsp;lawsuit brought by the Association of American Medical Colleges, the American Hospital Association, and nearly 40 hospitals&nbsp;<a href="https://www.advisory.com/daily-briefing/2019/10/23/site-neutral" target="_blank">killed</a>&nbsp;any hope of saving about $800 million a&nbsp;year by eliminating “site‐​of‐​service differentials” that pay doctors employed by hospitals more than physicians with independent practices—even when the physicians are delivering the same services in the same offices.</li> <li>2019&nbsp;was also the fifth year in which the Centers for Medicare &amp;&nbsp;Medicaid Services (CMS) failed to implement legislation enacted in 2014 which sought to save&nbsp;<a href="http://www.cbo.gov/sites/default/files/House%20introduced%20Protecting%20Access%20to%20Medicare%20Act%20of%202014%2C%20March%2026%2C%202014.pdf" target="_blank">a&nbsp;paltry $200 million over 10&nbsp;years</a>&nbsp;by discouraging physicians from needlessly ordering expensive CT scans and MRIs. Regulations were supposed to take effect in 2018, but more than&nbsp;<a href="https://www.medpagetoday.com/radiology/diagnosticradiology/81781?xid=nl_mpt_DHE_2019-08-24&amp;eun=g452253d0r&amp;utm_source=Sailthru&amp;utm_me%E2%80%A6" target="_blank">two dozen</a>&nbsp;medical societies complained, so the Trump administration&nbsp;<a href="https://www.npr.org/sections/health-shots/2019/08/09/749272488/trump-team-hits-brakes-on-law-that-would-curb-unneeded-medicare-ct-scans-mris?ft=nprml&amp;f=1001" target="_blank">delayed</a>&nbsp;them until January 2020.</li> <li>Big Pharma&nbsp;is currently working overtime to kill the Prescription Drug Pricing Reduction Act, which would penalize drug companies for raising prices faster than the rate of inflation. Although the bill has bipartisan support,&nbsp;<a href="https://www.statnews.com/2019/08/29/drug-price-increases-doomed-pharma-lobbying/?utm_source=STAT+Newsletters&amp;utm_campaign=083b09f23b-%E2%80%A63/5" target="_blank">knowledgeable observers</a>&nbsp;say it has no chance of achieving the 60 votes needed to pass the Senate. Indeed, the bill may not make it out of the Senate Finance Committee, since 13 of the 15 Republican senators on the Committee oppose it.</li> <li>The health care industry&nbsp;has also turned back efforts to audit its charges. Medicare Advantage plans, which are paid based on how sick their enrollees are, don’t want Medicare to know whether they are exaggerating enrollees’ illnesses, so they have&nbsp;<a href="https://www.axios.com/cms-clawback-medicare-advantage-audits-health-insurance-92edb13e-5abd-4527-8503-c0c74b501d58.html" target="_blank">fought off</a>&nbsp;or watered down efforts to audit their reports. CMS is already unenthusiastic about auditing the health care system: for the past four years, it has&nbsp;<a href="https://www.wsj.com/articles/why-obama-stopped-auditing-medicaid-11574121931" target="_blank">canceled Medicaid eligibility audits</a>, and “has never taken meaningful actions to minimize improper payments from the [Medicaid] expansion.</li> </ul> <p>If Medicare for All’s fans are banking on a&nbsp;Congress dominated by Democrats to bring the industry to heel, their hopes are misplaced. Democrats&nbsp;<a href="https://thehill.com/policy/healthcare/238871-senate-overwhelmingly-approves-house-doc-fix-bill" target="_blank">voted for “doc fixes”</a>&nbsp;repeatedly and stood&nbsp;<a href="https://www.acponline.org/acp-newsroom/senate-joins-house-to-repeal-sustainable-growth-rate-sgr-averting-future-deep-cuts-or-additional" target="_blank">shoulder to shoulder</a>&nbsp;with Republicans when the SGR was repealed. The parties may differ on some things but judging by their actions they both believe that the government cannot possibly spend too much money on health care. Only a&nbsp;person who is incredibly naïve or who ignores history entirely can believe that Medicare for All will be financed on the backs of doctors, hospitals, and drug companies.</p> <p>Medicare for All is also certain to drive up spending by generating an enormous surge in demand for medical care. The bills pending in Congress promise soup‐​to‐​nuts coverage&nbsp;<em>for free</em>. Premiums, deductibles and copays are supposed to vanish. If that happens,&nbsp;<a href="https://faculty.chicagobooth.edu/john.cochrane/research/papers/after_aca_published.pdf" target="_blank">prodigious consumption</a>&nbsp;of medical services will be inevitable.</p> <p>The fundamental problem is that Medicare for All’s supporters have cause and effect reversed. They think Americans need universal comprehensive coverage because health care is expensive. In reality, we spend too much on health care&nbsp;<em>because</em>&nbsp;we rely so heavily on third parties—Medicare, Medicaid, and private insurers—to pay our bills. In 1960, when patients paid about $1.73 out of pocket for every $1 paid by an insurer, health care spending per capita was&nbsp;<a href="https://www.statista.com/statistics/184955/us-national-health-expenditures-per-capita-since-1960/" target="_blank">$165</a>. In 2010, when patients paid out 16 cents for every insurance dollar, spending per capita was $8,400. And in 2017, when the ratio was 14 cents out of pocket for every insurance dollar, spending per capita was $10,740.&nbsp;<em>The more we rely on third party payers, the more we spend</em>. Because the full‐​on, government‐​run, single‐​payer plans introduced by Senators Bernie Sanders and Elizabeth Warren will reduce out of pocket costs to zero, they will drive spending to new heights.</p> </div> , <h3 class="heading"> Paying out more than it takes in </h3> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>What about the various “public option” proposals, including the less‐​sweeping version also known as “Medicare for all who want it”? They will open the doors to the treasury wider, too. Although supporters assert that premiums will cover the public option’s costs, that’s not how government‐​funded health care works. Public programs are heavily subsidized with taxpayers’ dollars. A&nbsp;typical&nbsp;<a href="https://www.urban.org/sites/default/files/publication/24151/412945-social-security-and-medicare-taxes-and-benefits-over-a-lifetime_0.pdf" target="_blank">one‐​earner couple</a>&nbsp;pays $70,000&nbsp;in Medicare taxes during the working spouse’s lifetime and gets $427,000&nbsp;in benefits in return. The premiums for Medicare Part B, which pays for doctors’ services, originally covered 50 percent of the cost, but today cover only 25 percent. Premiums for Medicare Part D (which covers prescription drugs) are so low that the program depends on general tax revenue for&nbsp;<a href="https://www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/" target="_blank">more than 70 percent</a>&nbsp;of its funding.</p> <p>A public option is sure to follow the same path, paying out far more in benefits than subscribers pay in as premiums. Proponents will want millions of people to sign up, and the easiest way to get them to do so will be by making the public option a&nbsp;steal.&nbsp;<a href="https://twitter.com/ewarren/status/1195370950700732416?wpisrc=nl_health202&amp;wpmm=1" target="_blank">Elizabeth Warren</a>&nbsp;has already said that the public option she wants to create in the course of transitioning to Medicare for All “will be immediately free for nearly half of all Americans.” Interest groups like&nbsp;<a href="https://assets.aarp.org/rgcenter/health/i29_buyin.pdf" target="_blank">AARP</a>, which wants a&nbsp;subsidized buy‐​in option for near‐​seniors, will pressure Congress to support the program with taxpayers’ dollars too.</p> <p>Like the advocates of Medicare for All, the public option’s proponents also hope to save billions of dollars by paying doctors and other providers at Medicare rates or something similar. (Medicare pays hospitals about&nbsp;<a href="https://www.nber.org/papers/w21815" target="_blank">half</a>&nbsp;as much as commercial insurers, and it pays doctors about 20 percent less.) We’ve seen this movie before, however, and that’s not how it ends. If threatened with drastic payment cuts, doctors and hospitals will fight back in the public arena. They will generate widespread panic by threatening to close their doors. That’s what happened during the managed care revolution in the 1990s, and the backlash was ferocious. Americans like their doctors, and hospitals have huge traction in their communities. When providers rose up against managed care, state legislators introduced more than 1,000 bills designed to protect patients and&nbsp;<a href="https://www.healthaffairs.org/doi/full/10.1377/hlthaff.17.4.80" target="_blank">calm</a>&nbsp;consumers’ fears of losing control of their health care. The public option’s proponents are seriously underestimating the industry’s power to rally the public.</p> <p>If neither Medicare for All nor the public option is an attractive means of controlling health care spending, what is? We believe that the spending crisis will disappear when Americans pay for most medical services directly, the same way they pay for everything else, and reserve insurance for catastrophes. Homeowners’ insurance kicks in when houses are destroyed by fires or other calamities that rarely occur. Homeowners pay out of pocket for predictable non‐​catastrophic expenses, like maintenance, remodeling and new paint. Health insurance should work the same way.</p> <p>More concretely, a&nbsp;national health reform that truly wants to address spiraling costs should take the following steps:</p> <p><strong>Increase retail options.</strong>&nbsp;Let retailers like Walmart, CVS Health, Costco, and the Surgery Center of Oklahoma that operate on a&nbsp;cash basis offer a&nbsp;full range of medical services. They have demonstrated their power to make primary care, blood tests, medications, hearing aids, eyeglasses, surgeries, mental health counseling, dental cleanings and telemedicine cheaper. Lower prices will help everyone, and poor people, who are especially sensitive to costs, will benefit the most. Competition from retailers will pressure traditional providers to be more consumer‐​friendly, too.</p> <p><strong>End tax subsidies.</strong>&nbsp;Eliminate the tax exclusion for employer‐​provided health insurance and all coverage mandates. These steps will encourage (but not require) people to switch from expensive comprehensive insurance to much cheaper high‐​deductible catastrophic care insurance, and to pay for most treatments themselves. The entry of tens of millions of new cash‐​paying health care consumers into the market will cause the retail sector to expand, and the pressure to lower prices will grow.</p> <p><strong>End Medicare as we know it.</strong>&nbsp;Replace Medicaid, Medicare and other programs that provide in‐​kind benefits with a&nbsp;single program, modeled on Social Security, that gives poor people cash plus an insurance policy covering catastrophes. If combined, the budgets of existing social welfare programs would more than suffice to bring all Americans above the federal poverty line. Cash transfers would also enable people to pay for food, housing, education and other social&nbsp;<a href="https://www.healthypeople.gov/2020/topics-objectives/topic/social-determinants-of-health" target="_blank">determinants of health</a>&nbsp;that affect wellbeing more than medical treatments do.</p> <p>Will these arrangements work perfectly? Of course not. But they will vastly out‐​perform the existing system, which is known to waste&nbsp;<a href="https://jamanetwork.com/journals/jama/article-abstract/2752664" target="_blank">almost $1 trillion a&nbsp;year</a>. And unlike Medicare for All and the public option, these proposals will transform the health care system without raising taxes or putting the economy at risk. When consumers pay for most medical services directly—the same way they pay for nearly everything else—the health care spending crisis will disappear.</p> </div> Mon, 25 Nov 2019 10:03:05 -0500 Charles Silver, David A. Hyman https://www.cato.org/publications/commentary/no-medicare-all-wont-save-money A Supercenter for Medicine https://www.cato.org/publications/commentary/supercenter-medicine Charles Silver, David A. Hyman <div class="lead mb-3 spacer--nomargin--last-child text-default"> <p>As politicians talk about how to reduce medical costs,&nbsp;<a href="https://quotes.wsj.com/WMT" target="_blank">Walmart</a>&nbsp;and CVS are doing something about it. This month Walmart opened its first Health Center, in Dallas, Ga. It offers “primary care, labs, X‐​ray and EKG, counseling, dental, optical, hearing and community health education,” all under one roof, a&nbsp;company press release announces.</p> </div> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>The health center follows Walmart’s business model of “everyday low prices.” A&nbsp;dental cleaning costs $25, a&nbsp;doctor’s visit $40.&nbsp;A&nbsp;test for a&nbsp;urinary‐​tract infection is $10; a&nbsp;pap smear $50, a&nbsp;vitamin B-12 injection $18. Immunizations range from $39.84 for a&nbsp;flu shot to $223.88 for an inoculation against the human papillomavirus. Although Walmart Health Centers take insurance, most patients have deductibles high enough that they must pay out of pocket, so low prices benefit them directly.</p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Pols talk of reducing health costs. Walmart and CVS are doing something about it.</p> </div> </div> </aside> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>Walmart will face determined competition.&nbsp;<a href="https://quotes.wsj.com/CVS" target="_blank">CVS Health</a>&nbsp;expects to have 1,500 HealthHubs by the end of 2021. They’ll focus on managing chronic diseases, which are estimated to account for 75% of total health‐​care spending. Other rivals include Walgreens and a&nbsp;host of urgent care centers.</p> <p>These primary‐​care clinics are following a&nbsp;path blazed by specialized providers of services not covered by insurance, such as Lasik vision correction. Lasik is 20% to 30% cheaper after inflation, and significantly better, than it was 10&nbsp;years ago. Specialized retailers also offer prescription eyeglasses, cosmetic surgery, fertility treatments and vasectomies. They post prices, hold sales and offer financing plans. Ambulatory surgery centers are getting into the act, offering transparent pricing and disclosing their infection rates.</p> <p>Why are major retailers entering the health‐​care market now? Because tens of millions of consumers can’t afford traditional providers. Even employees who get coverage through work often have high deductibles. Policies sold on the ObamaCare exchanges require many consumers to pay substantial amounts out of pocket as well. There are also some 28 million uninsured Americans looking for cut‐​rate care. Retailers are expanding their offerings to meet demand for less expensive options.</p> <p>As the election nears, candidates will squawk incessantly about changing the health‐​care system from the top down. But as they jockey for positions on a&nbsp;spectrum that runs from “merely socialist” to “give everyone everything for free,” patients will keep driving a&nbsp;revolution from below in the delivery of health care. If we’re lucky, retail clinics will offer affordable medical treatments across the country before the politicians have a&nbsp;chance to make our health‐​care system even more expensive and dysfunctional than it already is.</p> </div> Thu, 03 Oct 2019 11:08:47 -0400 Charles Silver, David A. Hyman https://www.cato.org/publications/commentary/supercenter-medicine Saving Lives from Opioid Overdoses: Naloxone Policy Discussion and Training https://www.cato.org/multimedia/events/saving-lives-opioid-overdoses-naloxone-policy-discussion-training Jeffrey A. Singer, David A. Hyman, Jonjelyn Gamble, Jeff Vanderslice <p>Naloxone—an opioid antagonist that reverses overdoses—is a&nbsp;safe, effective, critical tool for preventing opioid‐​overdose deaths. The U.S. Food and Drug Administration nevertheless continues to require a&nbsp;prescription for each naloxone purchase, an unnecessary requirement that limits access to this life‐​saving drug.</p> <p>On October 2, the Cato Institute will hold a&nbsp;two‐​part Capitol Hill Briefing to discuss how naloxone can save even more lives. First, Cato senior fellow Jeffrey A. Singer and Cato adjunct scholar David A. Hyman will discuss the effectiveness of naloxone and the effect of, and reasons for, the FDA’s prescription requirement. Second, the Washington, DC, Department of Health will conduct naloxone training for all willing adult attendees and will distribute easy‐​to‐​use Narcan, a&nbsp;nasal‐​spray version of naloxone, to those who complete the training.</p> <p>Attending this event could help you save a&nbsp;life. We encourage each congressional office to designate at least one staffer to attend this event, train in naloxone administration, and keep this life‐​saving drug on hand anywhere someone may need it.</p> Wed, 02 Oct 2019 12:00:00 -0400 Jeffrey A. Singer, David A. Hyman, Jonjelyn Gamble, Jeff Vanderslice https://www.cato.org/multimedia/events/saving-lives-opioid-overdoses-naloxone-policy-discussion-training Comment https://www.cato.org/publications/regulation/comment Mon, 23 Sep 2019 15:50:00 -0400 David A. Hyman, Benedic Ippolito https://www.cato.org/publications/regulation/comment Farewell to the Cadillac Tax on Health Plans? https://www.cato.org/multimedia/cato-daily-podcast/farewell-cadillac-tax-health-plans David A. Hyman, Caleb O. Brown <p>Like the promise of Medicare cuts, the so‐​called “Cadillac Tax” on health plans was probably never going to last long. David Hyman explains why.</p> Mon, 26 Aug 2019 10:46:00 -0400 David A. Hyman, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/farewell-cadillac-tax-health-plans David A. Hyman discusses millions of Texans being vulnerable to surprise medical bills on KTRH’s Houston Morning News https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-millions-texans-being-vulnerable-surprise-0 Thu, 22 Aug 2019 11:17:00 -0400 David A. Hyman https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-millions-texans-being-vulnerable-surprise-0 David A. Hyman discusses millions of Texans being vulnerable to surprise medical bills on KTRH’s Houston Morning News https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-millions-texans-being-vulnerable-surprise Thu, 22 Aug 2019 11:15:00 -0400 David A. Hyman https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-millions-texans-being-vulnerable-surprise ‘Erectile Pricing’: Why Viagra’s Cost Defies the Laws of Economics https://www.cato.org/publications/commentary/erectile-pricing-why-viagras-cost-defies-laws-economics Charles Silver, David A. Hyman <div class="lead mb-3 spacer--nomargin--last-child text-default"> <p>Among economists, it is an article of faith that competition lowers prices. But when it comes to prescription drugs, the ordinary rules do not apply. According to a&nbsp;new&nbsp;study, competition not only fails to reduce drug prices, it may drive them higher.</p> </div> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>Using data supplied by Blue Cross Blue Shield, researchers studied the prices of 49 widely used brand‐​name drugs over six years. They then focused on 17 drugs that had direct therapeutic equivalents—i.e., competing brand‐​name drugs that treat the same medical condition. For example, Humalog, Humulin, and Novolog are all forms of insulin used to treat diabetes. Competition should have caused the prices of these 17 drugs to rise more slowly than those of the remaining drugs.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Competition works to lower prices in the rest of the economy, so why doesn’t it pressure pharma companies to sell brand‐​name drugs for less?</p> </div> </div> </aside> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>In fact, the median prices of the 17 drugs with therapeutic equivalents grew slightly&nbsp;faster&nbsp;than those of the 32 drugs that did not face competition, although the difference was not statistically significant. Not only that, but the price hikes for the therapeutically equivalent drugs “were highly synchronized” and were “some of the largest cost increases” observed in the study.</p> <p>We first noticed this phenomenon—synchronized price hikes for competing drugs—when studying the prices of Viagra, Cialis and Levitra, which are treatments for erectile dysfunction. In theory, Viagra’s price should have fallen when Cialis hit the market, and prices for both drugs should have declined further when Levitra became available.</p> <p>That did not happen. Instead, over many years, the prices of all three drugs rose in lockstep. Instead of seeking to gain market share by cutting prices, the pharma companies played “follow the leader.” When one charged more, the others did too. Because of the products involved, we named the&nbsp;phenomenon&nbsp;“erectile pricing.” The new study shows that erectile pricing is not limited to ED drugs.</p> <p>Competition works to lower prices in the rest of the economy, so why doesn’t it pressure pharma companies to sell brand‐​name drugs for less? One reason is that the number of sellers is small, making it easy for drug makers to coordinate. They need only mimic each other’s price changes until they all learn to “follow the leader.”</p> <p>Insurance coverage compounds the problem by insulating consumers from high prices and making enormous amounts of money available to pay for drugs. When copays are fixed, consumers have no incentive to use less expensive drugs, and manufacturers cannot gain market share by charging less. And manufacturers can raise prices because Medicare, Medicaid, and private insurers will pay pretty much whatever they ask. Simply stated, when patients use insurance to pay for drugs, prices go up.</p> <p>The solution to this problem can be found in the very same drug stores that sell overpriced prescription drugs. Drug stores also sell thousands of cheap over‐​the‐​counter medicines such as aspirin, cough syrup and hydrocortisone. Because consumers pay for these items themselves, their prices are both transparent and reasonable. When consumers start buying prescription drugs directly, their prices will be transparent and reasonable too.</p> <p>The fundamental problem is that existing arrangements, which include coverage requirements imposed by the Affordable Care Act, heavily subsidized premiums for Medicare, tax exemptions for dollars spent on employer‐​provided health insurance, and zero out‐​of‐​pocket contributions by Medicaid recipients, encourage people to use insurance in the wrong way. Why pay for drugs with post‐​tax dollars when one can purchase them with pre‐​tax dollars by buying insurance through one’s employer? Why pay for drugs directly when premiums for Medicare Part D&nbsp;are priced at only 25 percent of the program’s cost? Existing arrangements encourage people to maintain comprehensive (rather than catastrophic) insurance coverage — which drives up the cost of everything.</p> <p>A more sensible arrangement would encourage consumers to pay for most drugs directly and reserve health care coverage for true catastrophes. Insurance works best when it covers disastrous events that rarely occur, such as house fires..</p> <p>Replacing existing arrangements with more sensible ones will require dramatic tax, entitlement and insurance reforms. We don’t expect those changes to happen any time soon, but as premium hikes and the rising cost of Medicare and Medicaid make comprehensive coverage less and less affordable, something will have to give. If that “something” includes a&nbsp;shift from insurance to direct purchasing by consumers, competition will help bring drug prices under control.</p> </div> Sun, 23 Jun 2019 10:44:00 -0400 Charles Silver, David A. Hyman https://www.cato.org/publications/commentary/erectile-pricing-why-viagras-cost-defies-laws-economics David A. Hyman and Charles Silver discuss retail health care on KCUR’s Up to Date https://www.cato.org/multimedia/media-highlights-radio/david-hyman-charles-silver-discuss-retail-health-care-kcurs-date Tue, 21 May 2019 10:30:00 -0400 David A. Hyman, Charles Silver https://www.cato.org/multimedia/media-highlights-radio/david-hyman-charles-silver-discuss-retail-health-care-kcurs-date David A. Hyman discusses his co‐​authored book, Overcharged — Why Americans Pay Too Much for Health Care, on KFTK’s The Marc Cox Morning Show https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans-2 Mon, 20 May 2019 13:08:00 -0400 David A. Hyman https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans-2 David A. Hyman discusses his co‐​authored book, Overcharged — Why Americans Pay Too Much for Health Care, on KFTK’s The Randy Tobler Show https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans-1 Sat, 11 May 2019 15:37:00 -0400 David A. Hyman https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans-1 25 Years of Patient Power https://www.cato.org/multimedia/events/25-years-patient-power Bill Cassidy, John Goodman, Paul B. Ginsburg, David A. Hyman, Michael F. Cannon <p></p><div class="event-book"><a href="https://www.amazon.com/Patient-Power-Solving-Americas-Health/dp/0932790917?tag=catoinstitute-20" target="_blank"><img border="0" data-src="https://object.cato.org/sites/cato.org/files/images/ppcover.jpg" class=" lozad" /></a></div> <p>A quarter century ago, the Cato Institute released a revolutionary book, <em>Patient Power: Solving America’s Health Care Crisis</em>, by John C. Goodman and Gerald L. Musgrave. <em>Patient Power</em> introduced the United States to a bold and radical way of thinking about health care.</p> <p>When third parties pay medical bills, Goodman and Musgrave wrote, providers come to view third‐​party payers as their customers, not the patients. As a result, instead of maximizing patient satisfaction, providers deliver care to maximize their revenue given third‐​party payment formulas. Instead of falling, costs rise. Third‐​party payment is the reason patients can’t talk to their doctors by phone, email, or Skype. It is why patients don’t have Uber‐​type doctor house calls at night and on weekends. <em>Patient Power</em> showed that if people controlled and managed their own health care dollars, the medical marketplace would change radically—almost overnight.</p> <p>Indeed, <em>Patient Power</em> changed the world. Thanks largely to Goodman and Musgrave’s work, more than 20 million people are managing their own health care dollars in health savings accounts. A roughly equal number are managing their medical spending through health reimbursement arrangements. And employers are experimenting with giving individuals complete financial control over everything from hip and knee replacements to blood tests.</p> <p>Come hear the authors of <em>Patient Power</em> and other leading scholars discuss the book’s impact on health reform and how its insights can still inform the debate.</p> Tue, 09 Apr 2019 12:51:00 -0400 Bill Cassidy, John Goodman, Paul B. Ginsburg, David A. Hyman, Michael F. Cannon https://www.cato.org/multimedia/events/25-years-patient-power Don’t Buy the Buy‐​In: Why Medicare Coverage for 50 and over Will Only Make Things Worse https://www.cato.org/publications/commentary/dont-buy-buy-why-medicare-coverage-50-over-will-only-make-things-worse Charles Silver, David A. Hyman <div class="lead mb-3 spacer--nomargin--last-child text-default"> <p>Compared to the incredibly expensive Medicare‐​for‐​All plans Democrats are pushing, the Medicare Buy‐​In (MB-I) proposal recently filed by Sen.&nbsp;<span data-behavior="rolloverpeople" target="_blank"><a data-nid="188195" href="https://thehill.com/people/debbie-stabenow" target="_blank">Debbie Stabenow</a></span>&nbsp;(D‐​Mich.) probably seems fiscally responsible. The bill would&nbsp;<a href="https://www.freep.com/story/news/local/michigan/2019/02/13/debbie-stabenow-medicare-coverage-michigan/2860052002/" target="_blank">allow people between the ages of 50 and 65 to purchase Medicare plans</a>&nbsp;with help from the same tax credits and cost‐​sharing subsidies that are available on the ObamaCare exchanges. How could anyone object to giving middle‐​aged people the option of buying the same coverage for medical needs that senior citizens receive?</p> </div> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>Easily. Medicare has enormous problems, none of which the buy‐​in proposal will fix.&nbsp;The best bet is that the buy‐​in option will replicate these problems and make several of them worse.</p> <p>Start with fraud, waste, and abuse.&nbsp;<a href="https://www.healthaffairs.org/do/10.1377/hpb20121213.959735/full/" target="_blank">One‐​third of the dollars</a>&nbsp;Medicare doles out are stolen, spent on treatments that are unnecessary or ineffective, or otherwise poured down the drain. Given Medicare’s current size&nbsp;<a href="https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html" target="_blank">($706 billion in 2017</a>), we are wasting about $212 billion a&nbsp;year. MB-I won’t protect federal funds any better than Medicare currently does, so if the bill becomes law that number will increase substantially.</p> <p>Now consider how MB-I will be paid for. As everyone knows, Medicare is grossly under‐​funded. At current benefit levels, the program will need&nbsp;<a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads/tr2018.pdf" target="_blank">trillions of dollars</a>&nbsp;more than Medicare taxes are expected to raise. MB-I’s proponents contend that the program will pay for itself out of premiums collected from new enrollees. Don’t believe that for a&nbsp;second.</p> <p>In traditional Medicare, a&nbsp;typical one‐​earner couple can expect to receive benefits worth $427,000 after paying in only $70,000. In Medicare Parts B&nbsp;and D, beneficiaries pay only about&nbsp;<a href="https://www.kff.org/medicare/issue-brief/medicares-income-related-premiums-under-current-law-and-changes-for-2019/" target="_blank">25 percent of the average cost</a>&nbsp;of the goods and services they receive. If MB-I ever rolls out, its sponsors will face heavy pressure to charge too little, partly because they will want to ensure that millions of middle‐​aged Americans sign up and partly because doling out goodies (and saddling future generations with the bill) is what Congress does.</p> <p>These artificially low premiums will also devastate private insurers. Private carriers have to charge premiums that reflect enrollees’ risks because they cannot use tax dollars to make up the money they would lose by setting premiums too low. Consequently, unless we also subsidize the cost of private insurance, middle‐​aged subscribers will migrate to MB-I — dramatically increasing the total cost of the program. If the premiums are low enough, employers will dump middle‐​aged workers into MB-I too — further destabilizing the coverage market.</p> <p>MB-I will also affect the benefits that Medicare provides. Congress is already strongly inclined to make Medicare ever more lavish because the senior vote is so important. MB-I would add millions to the Medicare rolls, making the pressure to expand benefits that much worse. Hospitals, doctors and drug companies would find it advantageous to ramp up their political influence campaigns too, because billions of new dollars targeted at the health care sector would be under the federal government’s control. If you think corporate money exerts too much influence in politics now, wait until MB-I comes along.</p> <p>Consider an example of what waits ahead. Until now, Medicare has not covered drugs like Viagra and Cialis for men or Vagifem for women, on the ground that declining sexual activity is a&nbsp;natural part of aging. But if millions of younger men and women are added to the program’s rolls, the case for covering these drugs will be much stronger. And once the drugs are made available to younger beneficiaries, older victims will cry “age discrimination” and demand coverage for them too. Given the spinelessness they’ve shown in the past, it’s a&nbsp;safe bet that Medicare’s administrators will immediately capitulate.&nbsp;</p> <p>Finally, any expansion of Medicare, including MB-I, will make the health care spending crisis worse. The spending crisis started when Medicare and Medicaid came online in the mid‐​1960s and it’s been with us ever since. There are many reasons for this. A&nbsp;major one is that the Medicare program’s primary mission is to spend money, which it does like a&nbsp;well‐​oiled machine. No one associated with the program—neither beneficiaries, providers, administrators, nor members of Congress—has any interest in restricting the dollar flow. To the contrary, because tax‐​payers foot the bills, everyone wants Medicare to spend more.&nbsp;</p> <p>By comparison to Medicare‐​for‐​All, MB-I is the lesser evil. But it is better to leave bad enough alone than to make things worse by expanding the government’s control over health care spending.</p> </div> Fri, 05 Apr 2019 12:03:00 -0400 Charles Silver, David A. Hyman https://www.cato.org/publications/commentary/dont-buy-buy-why-medicare-coverage-50-over-will-only-make-things-worse David A. Hyman and Charles Silver discuss the topic, “Why is health care so expensive?,” at the Grassroot Institute of Hawaii https://www.cato.org/multimedia/media-highlights-tv/david-hyman-discusses-topic-why-health-care-so-expensive-grassroot Tue, 19 Mar 2019 11:50:00 -0400 David A. Hyman, Charles Silver https://www.cato.org/multimedia/media-highlights-tv/david-hyman-discusses-topic-why-health-care-so-expensive-grassroot Arbitration Not the Answer to Fix Surprise Medical Billing https://www.cato.org/publications/commentary/arbitration-not-answer-fix-surprise-medical-billing David A. Hyman, Benedic Ippolito <div class="lead mb-3 spacer--nomargin--last-child text-default"> <p>Surprise medical billing — when patients are unexpectedly charged exorbitant prices from providers who do not accept the patient’s insurance — is squarely on the radar of policymakers inside the beltway. However, a&nbsp;popular proposed solution is likely to do more harm than good.</p> </div> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>Surprise bills from out‐​of‐​network providers can be eye‐​popping. Whether it is a&nbsp;<a href="https://www.npr.org/sections/health-shots/2018/08/27/640891882/life-threatening-heart-attack-leaves-teacher-with-108-951-bill" target="_blank">$109,000 bill for a&nbsp;heart attack patient</a>&nbsp;rushed to a&nbsp;nearby out‐​of‐​network hospital or a&nbsp;<a href="https://www.npr.org/sections/health-shots/2018/02/16/584296663/how-a-urine-test-after-back-surgery-triggered-a-17-800-bill" target="_blank">urine test that cost $18,000</a>, everyone has heard a&nbsp;story about surprise medical bills — and most people wonder why the legal system can’t figure out a&nbsp;way to protect patients from them.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Forcing hospitals to solve the problem of surprise medical bills will work — and will minimize the chances of unintended consequences.</p> </div> </div> </aside> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>Surprise medical bills are not random. Instead, they reflect clear strategic (if not outright abusive) behavior by certain types of providers.&nbsp;<a href="https://jamanetwork.com/journals/jama/fullarticle/2598253" target="_blank">Evidence shows that</a>physicians who are&nbsp;<a href="http://overchargedforhealthcare.com/" target="_blank">least likely to be chosen</a>&nbsp;by patients, like anesthesiologists and emergency department (“ED”) doctors, often set their list prices in a&nbsp;way that maximizes their ability to engage in “balance billing.” Indeed, some ED staffing companies have deliberately decided to be out‐​of‐​network for all patients that walk through the door — again maximizing their ability to balance bill — but leave patients owing massive amounts.</p> <p>What can we do to fix this problem? Policymakers have a&nbsp;variety of tools at their disposal, from explicit price capping to more market‐​oriented contract reforms. However, mandatory arbitration seems to be attracting a&nbsp;lot of attention from policymakers, particularly&nbsp;<a href="https://www.dfs.ny.gov/consumer/hprotection.htm" target="_blank">since it was implemented in New York in 2015</a>. The arbitrator can consider a&nbsp;wide array of information (including proposals from both the provider and insurer), and then settle on a “fair” price.</p> <p>At first glance, this approach probably sounds appealing. Arbitration seems like a&nbsp;fairly light touch policy that sets up a&nbsp;way for stakeholders to adjudicate their issue with minimal government intervention.</p> <p>Policymakers should not be fooled. Arbitration is neither “light touch” nor a&nbsp;solution to the true problem at hand. Instead of solving the fundamental issue, it kicks the can down the road to an arbitrator who faces the same challenges of any rate setter.</p> <p>Common sense suggests that arbitrators are likely to develop simple rules of thumb to resolve disputes over surprise medical bills (New York’s law&nbsp;<a href="https://www.dfs.ny.gov/insurance/health/OON_guidance.htm" target="_blank">includes a&nbsp;benchmark</a>). Stated differently, arbitration is just rate‐​setting in another guise — and the arbitrator faces the same challenges of any rate setter. Even the most knowledgeable rate setter would find it difficult to come up with a “missing price” that closely approximates the true market price. And, whether rates are set too high or too low, rate setting can introduce large market distortions and unintended consequences.</p> <p>Arbitration alleviates none of these tradeoffs and instead largely serves to make the process less transparent. If the arbitrator choses a&nbsp;bad rule of thumb (as some argue the New York law does), the incentives to become an out‐​of‐​network provider could even be increased.</p> <p>Rather than pursue arbitration, policymakers should encourage market actors to determine appropriate prices for themselves. Consider a&nbsp;typical example: the patient goes to an in‐​network hospital, but the doctor in the ED is out‐​of‐​network. Rather than try to deal with the resulting surprise medical bills with arbitration, policymakers should require all services provided in an ED must be bundled together in a&nbsp;single hospital bill. This approach forces the hospital to negotiate with the ED physicians for a&nbsp;market price — which will then be reflected in the hospital’s bill (and payment).</p> <p>A similar approach can be taken in cases where patients schedule in‐​network procedures, only to find out an ancillary provider, like an anesthesiologist, was out of network. Again, policymakers should force hospitals to take responsibility for who will be staffing their facility, and ensure that patients are not surprised by a&nbsp;bill when they have chosen to go to an in‐​network facility.</p> <p>Finally, it is important to emphasize that most hospitals have eliminated the problem of surprise medical bills. For example, at the median hospital, only about&nbsp;<a href="https://www.nber.org/papers/w23623.pdf" target="_blank">1% of visits to the ED</a>&nbsp;have any out‐​of‐​network bills. Meanwhile, at a&nbsp;small number of hospitals nearly everyone who comes to the ED receives such a&nbsp;bill. A&nbsp;relatively small number of hospitals have allowed these bad‐​apple providers to get away with sending surprise medical bills — and we should make those hospitals fix the problem they have created.</p> <p>No one has ever gotten a&nbsp;surprise bill from the guy at the auto body shop that installed the bumper. All‐​in pricing prevails in markets where consumers choose their providers and are able to shun those who misbehave. Policymakers should build on that insight. Forcing hospitals to solve the problem of surprise medical bills will work — and will minimize the chances of unintended consequences.</p> </div> Wed, 13 Feb 2019 10:02:00 -0500 David A. Hyman, Benedic Ippolito https://www.cato.org/publications/commentary/arbitration-not-answer-fix-surprise-medical-billing Putting the Ivory Tower Together Again: Identifying and Fixing the Faults — Panel III: Is Competition the Key to Getting the Tower Back in Order? and Closing Remarks https://www.cato.org/multimedia/events/putting-ivory-tower-together-again-identifying-fixing-faults-panel-iii-competition Neal McCluskey, David A. Hyman, Michael DeBow, Sandy Baum, James Kvaal, Laura Meckler <p>Is higher education inherently broken, or do we just need tweaks like simplifying financial aid applications? Maybe the problem is too much profit‐​seeking … or not enough. Or maybe the incentives for everyone are just wrong.</p> Tue, 12 Feb 2019 12:36:00 -0500 Neal McCluskey, David A. Hyman, Michael DeBow, Sandy Baum, James Kvaal, Laura Meckler https://www.cato.org/multimedia/events/putting-ivory-tower-together-again-identifying-fixing-faults-panel-iii-competition David A. Hyman discusses his co‐​authored book, “Overcharged — Why Americans Pay Too Much for Health Care,” on the Intelligent Medicine Podcast https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans-0 Thu, 20 Sep 2018 11:43:00 -0400 David A. Hyman https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans-0 Be a Shame If Anything Happened to Your Merger… https://www.cato.org/regulation/fall-2018/be-shame-anything-happened-merger Wed, 12 Sep 2018 11:34:00 -0400 William E. Kovacic, David A. Hyman https://www.cato.org/regulation/fall-2018/be-shame-anything-happened-merger David Hyman discusses his co‐​authored book, “Overcharged — Why Americans Pay Too Much for Health Care,” on Tertium Quids’ Freedom & Prosperity Radio https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans Mon, 30 Jul 2018 10:15:00 -0400 David A. Hyman https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-co-authored-book-overcharged-why-americans Overcharged in the Emergency Room https://www.cato.org/publications/commentary/overcharged-emergency-room David A. Hyman, Charles Silver <div class="lead mb-3 spacer--nomargin--last-child text-default"> <p>When 8‐​month‐​old Jeong‐​whan Park fell off a&nbsp;bed and bumped his head, his parents took him to the emergency department at Zuckerberg San Francisco General Hospital. It took doctors little time to determine Jeong‐​whan was fine, and they discharged him&nbsp;3&nbsp;hours later.&nbsp;Two years later, Jeong-whan’s parents got a&nbsp;bill in the mail for $18,836 — of which $15,666 was for something called “trauma activation.”</p> </div> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>If your air conditioning went out in the middle of a&nbsp;heat wave — a&nbsp;life‐​threatening situation for many elderly people — the technician doesn’t demand $15,666 just to show up. They will probably charge a&nbsp;standard fee for a&nbsp;service call, but the fee is both transparent and reasonable. The same applies to plumbers, electricians, and every other trade we know of — no matter how dire the emergency to which they are summoned.</p> <p>HVAC techs, plumbers, and electricians don’t charge outrageous service fees&nbsp;because they can’t. They operate in markets where they face competition to please consumers who are spending their own money. If they charged $15,666 just to come to your house, they would be out of business before the next heat wave hit. Hospitals operate in markets where government blocks competition, which would otherwise result in lower prices. Government also encourages open‐​ended insurance, which allows hospitals to price‐​gouge because most patients are too heavily insured even to notice, much less punish the price‐​gougers.</p> <p>The combination makes it possible for hospitals to hit patients with huge trauma activation fees, no matter how inconsequential their injuries. For example, St. Mary’s Medical Center charged a&nbsp;woman $13,626.35 for an hour’s worth of treatment for her burned fingers, of which $12,500 was the trauma activation fee. Another hospital billed a&nbsp;bicyclist with road rash $12,500.&nbsp;A&nbsp;third hospital charged $33,000 to treat superficial cuts.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>If we want to make it harder for the U.S. health care system to gouge patients, we should focus on eliminating provider monopolies and increasing competition.</p> </div> </div> </aside> , <div class="mb-3 spacer--nomargin--last-child text-default"> <p>But, the prize for the most outrageous trauma activation fee probably goes to Lawnwood Regional Medical Center in Florida.&nbsp;Eric Leonhard was wheeled into the ED at Lawnwood with a&nbsp;broken pelvis — and wheeled out again in less than an hour because&nbsp;they didn’t have the right specialist to treat him. But that didn’t keep Lawnwood from billing him for $32,767, which comes to about $800 per&nbsp;minute.</p> <p>There is nothing inherently wrong with charging a&nbsp;standard fee to ED patients on top of whatever services they consume. Operating a&nbsp;trauma center is expensive, and hospitals must cover their costs. A&nbsp;trauma activation fee is like a “cover charge” for being wheeled into the emergency room with a&nbsp;major trauma.</p> <p>But something is clearly wrong with the amounts of these fees and how often hospitals assess them. There can be no ethical justification for, in the case of Jeong‐​whan, charging $18,836 for a&nbsp;physical exam. Insurers negotiate many of these fees down, but the prices can still be outrageous. For patients who don’t have a&nbsp;health plan that negotiates lower rates with the hospital — either because the hospital was out‐​of‐​network or the patient was uninsured — the trauma activation fee can be a&nbsp;terrifying surprise that destroys a&nbsp;patient’s credit rating.</p> <p>While the abuse of “trauma fees” is scandalous, it’s also a&nbsp;drop in the bucket. In a&nbsp;recent book, we chronicle hundreds of examples of how bad policy allows everyone in the health care system — hospitals, doctors, pharmaceutical companies, nursing homes, air ambulance services, etc. — to overcharge patients and taxpayers. </p><p>If we want to make it harder for the U.S. health care system to gouge patients, we should focus on eliminating provider monopolies and increasing competition. If hospitals had to compete for our business, they wouldn’t even consider using any of these schemes to rip people off. Open‐​ended insurance has compounded the problem, by protecting providers from cost‐​conscious consumers. Why should a&nbsp;hospital lower its trauma activation fee if an insurer is ultimately on the hook — and higher trauma activation fees provide a&nbsp;higher starting point for negotiation between the hospital and the insurer?</p> <p>What should we do in the interim? We aren’t prepared to suggest the use of tar and feathers on hospital administrators — but maybe it is time to start naming and shaming hospitals that abuse trauma fees.&nbsp;Maybe someone should ask Mark Zuckerberg whether he knows what the hospital that bears his name is up to.</p> <p><strong>Update:</strong> After this story was published on June 28, Zuckerberg San Francisco General Hospital agreed to waive the $15,666 trauma response fee charged for Park Jeong-whan’s visit to the hospital. In a&nbsp;letter, the hospital’s patient experience manager said the hospital did a&nbsp;clinical review and offered “a sincere apology for any distress the family experienced over this bill.” Further, the hospital manager wrote that the case “offered us an opportunity to review our system and consider changes.”</p> </div> Sun, 22 Jul 2018 12:00:00 -0400 David A. Hyman, Charles Silver https://www.cato.org/publications/commentary/overcharged-emergency-room To Err Is Human https://www.cato.org/multimedia/events/err-human Mike Eisenberg, Carolyn M. Clancy, MD, David A. Hyman, Michael F. Cannon <p><em>To Err Is Human</em> is an in‐​depth documentary about medical mistakes and those working behind the scenes to create a&nbsp;new age of patient safety. Through interviews with leaders in health care, footage of real‐​world efforts leading to safer care, and one individual’s compelling journey from victim to empowered patient advocate, the film provides a&nbsp;unique look at our health care system’s ongoing fight against preventable harm. Join us for a&nbsp;special private screening of the documentary.</p> Thu, 12 Jul 2018 16:05:00 -0400 Mike Eisenberg, Carolyn M. Clancy, MD, David A. Hyman, Michael F. Cannon https://www.cato.org/multimedia/events/err-human David A. Hyman discusses lowering prescription drug prices on the State Policy Network’s Tipping Point New Mexico Podcast https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-lowering-prescription-drug-prices-state Thu, 05 Jul 2018 11:15:00 -0400 David A. Hyman https://www.cato.org/multimedia/media-highlights-radio/david-hyman-discusses-lowering-prescription-drug-prices-state Overcharged: Why Americans Pay Too Much for Health Care https://www.cato.org/multimedia/cato-video/overcharged-why-americans-pay-too-much-health-care Charles Silver, David A. Hyman <p>Why is America’s health care system so dysfunctional and expensive? Why do hospitalized patients receive bills laden with inflated charges that come out of the blue from out‐​of‐​network providers, or that demand payment for services that weren’t delivered? Why do we pay $600 for EpiPens that contain a&nbsp;dollar’s worth of medicine? Why is more than $1 trillion—one out of every three dollars that passes through the system—lost to fraud, wasted on services that don’t help patients, or otherwise misspent? In a&nbsp;new book published by the Cato Institute, <em>Overcharged: Why Americans Pay Too Much for Health Care</em>, Cato adjunct scholars Charles Silver and David Hyman answer these questions. <em>Overcharged</em> shows how government replaces competition and consumer choice with monopolies and third‐​party payment, making America’s health care system as expensive as possible.</p> Tue, 03 Jul 2018 09:28:00 -0400 Charles Silver, David A. Hyman https://www.cato.org/multimedia/cato-video/overcharged-why-americans-pay-too-much-health-care