“The Medical Cost Reduction Act of 2017”

Yves here. This October post from the site New Laws for America hasn’t gotten the attention it deserves. Fighting for single payer should not preclude advocating other ideas for bringing the medical-industrial complex to heel; in fact, they should be seen as complementary. Forcing the health care rentiers to fight a multi-front war has higher odds of success than relying on one option.

Due to the length of the post, author Bob Hertz didn’t unpack some of his ideas fully. For instance, he calls for the creation of “Health Courts” which appear to be modeled on small claims courts. Hertz says, “….he patient will not need an attorney.” In fact, as most readers know, parties to a suit can plead their own case in court, but judges take a dim view of that. Presumably what Hertz meant was that judges would expect most plaintiffs to be representing themselves and therefore procedure would be less strict than in most courts. Similarly, he calls for a national fee schedule for emergency procedures. One would presumably need some sort of local cost adjustment.

By Bob Hertz. Originally published at New Laws for America


Law #1 – Establish A National Fee Schedule for Emergency Procedures
For unscheduled hospital admissions and surgeries, patients cannot realistically “consent” to provider charges.

The documents that patients must  sign to “pay whatever is charged”  or to “ pay whatever your insurance does not cover” are what legal scholars call ‘procedurally unconscionable.’

The patient  must agree to the terms of the providers.  The only way to receive desperately-needed care  is to accept whatever charges are assessed. The patient is simply assumed to have provided informed consent to any procedure, and to any fee from any provider. This is not normal commercial practice…..instead it is naked force. And it must change, with the following new rules:

  • In emergencies, the charges  to an uninsured or ‘out of-network’ patient must not exceed 150% of the lowest basic charge in the Medicare fee schedule. (i.e., no upcoding)
  • Hospitals can no longer use their “chargemaster” rates to bill the uninsured.
  • Doctors called in for emergencies cannot charge 800% of Medicare, as they often do today.

Any provider who tries to bill above the allowed rates, for patients who are clearly unable to provide informed consent, will be considered guilty of consumer fraud. Not only will their bills be uncollectible, they could be charged criminally in the most egregious cases.

For a long time now, the operating principle in health care has been “the more you bill, the more you make.” We want a new system where a provider can be harmed by raising prices.


Name of Procedure Average ChargeMaster Price 150% of Average Medicare Price
Chest pains treated in ER $25,556 $4,591
Pneumonia and Pleurisy $52,865 $11,526
Transient Ischemia $30,182 $5,668
ER visit for a fall – no broken bones $9,149 $2,139
Full metabolic panel, done in hospital $7,302 $257

Hospitals can keep their chargemasters for insurance negotiations, or to collect on Medicare ‘outliers” – but no patient can be billed that way ever again. Connecticut has largely imposed this rule for the uninsured, but that is one small state in a very large nation.

Hospitals will claim mightily that they cannot get along on the Medicare fee schedule, or close to it . . . But frankly, many American hospitals are overbuilt, over-staffed, over-equipped and overpaid.

However, safety-net hospitals should still receive federal aid for emergency care. The emergency room is in part  a public service, i.e. part of our infrastructure – and taxpayer funding must play a role.

For example, EMTALA regulations require hospitals to  stabilize any patient, regardless of payment – but EMTALA has never had any  funding! Hospitals are even required to try and collect from patients, before getting federal help for bad debts. This is all dishonest:  If we demand that hospitals provide a public service at less than full charges, then we must compensate the hospitals.

If it costs $20 billion more per year in new federal  funding to maintain our emergency care system, this is acceptable. It is better for all taxpayers to bear some amount in taxes, versus single patients being charged astronomical amounts. Most other countries do not expect hospitals to survive on user fees alone.

Ambulances should be paid for through taxes immediately. Fire departments are often providing the service already; therefore, the taxes we pay for fire departments should increase.These new limits on ER charges will not lower the cost of health care by themselves. But they will remove the monstrous insult of chargemaster billing.

Laws #2 and #3 – Bring Down High Drug Prices

Law #2 – Remove All Bans on Imports

If a drug has been approved by other first-world nations, this would constitute automatic approval by the FDA.

Consumers could then purchase any drug from a foreign nation, at the foreign nation’s price.

In 2012, Congress authorized US Customs to destroy any drugs obtained from Canadian pharmacies. The ostensible reason was to protect the public from dangerous counterfeit drugs. However, for the entire previous decade, during which millions of prescriptions were filled, not a single case of an American being harmed was ever reported.

Sample OECD prices for drugs:

Medication name US Price for 30 days supply Canada’s Average Price England’s Price Spain’s Price
Celebrex (pain) $330 $51 $112 $164
Copaxone (MS) $3,900 $1,400 $862 $1,191
Cymbatta (depression) $240 $100 $46 $71
Enbrel (immune) $3,000 $1,646 $1,117 $1,386
Gleevec (leukemia) $8,500 $1,141 $2,697 $3,348
Humira (arthritis) $3,049 $1,950 $1,102 $1,498

(From the International Federation of Health Plans 2013 Report)

The pricing of specialty drugs is a daily outrage. The hepatitis drug Sovaldi was developed in part with grants from the National Institutes of Health. The current seller (Gilead) set the price for Sovaldi at $100 a pill, even though the cost to manufacture 84 pills is less than $100. Gilead made back its entire initial investment in less than a year, and now is focused on reducing its U.S. taxes by $10 billion through yet another “corporate inversion.”

The only way we will ever have lower drug prices is for the payers to be able to say no, and walk to a near substitute.

In many cases, the Canadian or English drugs are the same pills as the ‘American-made’ drugs, produced overseas in plants that have been inspected by the FDA. The only difference is that some of those drugs are shipped to countries with lower prices, and others are sent to the United States for price gouging.

Of course the drug makers will try all their legal tricks:  paying off the competition, making a slight change in a drug to start a new patent, or even parking their patent with an Indian tribe to avoid American court challenges. We must be sure that all of these fail.

Law #3 – Eliminate FDA Approval of New Generic Medications

The price gouging around Epipen would have ended quickly, if new versions of genetic drugs did not require an approval process. We should let reputable drug companies produce whatever generic drugs they want.

Companies must be prevented from ‘stealing’ popular and effective drugs that have been in the public domain for years, and then claiming them as private property until their competitors can slog through FDA approval. By the time the FDA gives anyone else permission to compete, the price gougers will have made their fortune and can move on to their next scheme.

Here is a quick solution –Get rid of FDA approval on generics!

If an office products company like Staples tried to charge $50 for a box of paper clips, a competitor would have a price of $1 on the street in a week.

But not in the drug industry!  Thanks to the FDA, Staples would be protected for years even though no patent is involved. Competitors would be bogged down for years in litigation, or in waiting for the FDA to prove that no one could cut their finger on a non-Staples clip.

All this would be happening while Staples spends millions of dollars lobbying Congress, and some people would do without paper clips altogether unless they had really good  insurance.

We do not need the FDA to take over two years reviewing competitive generic drugs, when the original version has been on the market for years and pose zero danger to anyone.  Here is one area where deregulation is definitely the answer.

>Law #4  – Establish Health Courts, Where Patients Can Challenge Medical Bills

Anyone who believes they have been overcharged will have access to  specialized Health Courts, where they can receive a hearing on their grievance.

The courts will be staffed by physicians and judges. All court costs will be paid by the federal government – probably about $500 million a year –  and the patient will not need an attorney.

The courts will have authority to reduce medical bills.

Here are the types of bills that can be challenged:

  • Double charges for anesthesiology (by the nurse-anesthetist and the anesthesiologist).
  • Separate hospital bills  for medical supplies such as oxygen and cardiac monitors (that are part of standard equipment in any ICU).
  • Extra billings for ‘facility fees’ (where a doctor charges extra because his office is considered part of a hospital) – where an echocardiogram that cost $350 one year then costs $1600 after the doctor’s practice was purchased.
  • Padded bills for basic lab tests – i.e. $350 for a blood profile that can be purchased for $31 in any free-standing private lab. (Often the doctor’s testing machine will be paid for in less than a year of normal usage, and everything after that is pure profit.)
  • Outlandish charges for diagnostics – i.e. $5000 for an echocardiogram that costs $350 to cash buyers, and for which Medicare reimburses $275, or $4000 for an MRI that costs $200 in Japan.
  • $50,000 in charges for an air ambulance trip that only costs $7,000.
  • $4,000 for a drug infusion that costs $750 in Italy or Britain.
  • $35,000 for an artificial knee, that costs about $700 to produce in labor and materials.
  • $12,000 for a colonoscopy, just because it is done in an academic medical center.

Please note: A patient can go to Health Court even if they are insured.

For example, if your insurer approved  $5000 for an echocardiogram,  and this  left you with a bill for $4000 after your  deductible and coinsurance, you may still have a grievance.

We need such courts, because traditional lawsuits are not adequate. A $5,000 surprise bill may be financially significant to a patient, but it is not enough for a private attorney to take the case, and not large enough for the state attorney general to pursue.

There is no shortage of case law to assist the plaintiffs, including the doctrines of:

  • Unconscionable pricing
  • Lack of mutual assent
  • Fraudulent non-disclosure
  • Undue influence
  • Unfair trade practices

This is not to say that patients will win every single case in health courts. Sometimes the cost of a procedure is in fact explained to the patient in advance, and is in fact reasonable in light of the resources required.

The main target of the courts is blatant price-gouging, with no added medical benefits, which is imposed on patients who have no opportunity to select otherwise. “Charging what the market will bear” is not an acceptable principle for medicine. Entire areas of health care are dominated by unfair trade practices.

State legislatures or Congress can enact  general standards for what constitutes a reasonable range of charges. All relevant information can be considered by the Health Court, including  payments made by public and private payers – Medicaid, Medicare, and other insurers.

Once a complaint gets to Health Court:

  • All bill collections are suspended while a patient is waiting for a hearing. Sending a disputed bill to a collection agency would be an unfair trade practice, with real legal consequences.
  • The results of all hearings will be published. This in itself will give providers a strong incentive to avoid Health Court, by restraining their charges upfront.

Any ‘Gag orders’ that  prohibit the disclosure of insurance payment rates will be unenforceable.

CMS shall publish its full schedule of Medicare rates, to further assist patients in analyzing prices and getting ready for Health Court.

There have already been a small number of patient victories in the courts – see the following citations.

Collins, Paul. “Judge rules against hospital in bill dispute.” Martinsville Bulletin 26 Apr 2016.Mundy, Jane. “Attorney Files ER Overcharges-Action Lawsuit.” Lawyers and Settlements.com 29 Oct 2013.

Rice, Sabriya. “Lawsuit claims freestanding emergency room operator scams patients.” Dallas News 11 Jan 2017.

We just need many more victories!


Thanks to these laws, it will be easier to survive without private health insurance.

And not a moment too soon! In the ACA’s individual insurance market, many policies are already financially worthless.

For example: If a 60-year old man is in decent health, why should he buy a policy that costs $950 a month and has a $4,000 deductible?

If he is unsubsidized, he will pay over $11,000 a year for basically nothing unless he is hospitalized, and even then he must pay another $4,000 before any benefits kick in.

How much uninsured health care could he buy for $15,000 a year?

He can buy a blood count for $31, an X-ray for $47, and an MRI for $275 from consumer-direct providers in most cities. With the new drug prices described above, he can pay for most of his prescriptions out of pocket.

At the Surgery Center of Oklahoma, he can purchase:

  • Arthroscopic knee surgery –$5,300
  • Rotator cuff repair – $8,260
  • Leg fracture repair – $6,375
  • Inguinal hernia – $2,010
  • Hysterectomy – $8,000 (for his spouse)
  • Tonsillectomy – $3.050 (for his child)
  • Carpal tunnel release – $2,750

There is still a role for catastrophic insurance, however. Almost no one has the cash to pay for bypass surgery, advanced cancer, septic shock, respiratory failure, or major injuries. Complex surgeries and long rehabilitations are not really quotable.

This catastrophic insurance should cost less than our current qualified plans – but  still, there will be some who do not buy it.

The answer might be an extra income tax, which enables the purchase of Medicare Part A. (This would replace the original ACA penalty for not having conventional health insurance.)

In practice, the person who refuses to buy private health insurance will pay a small amount of extra federal income tax. In exchange, they will be protected against large hospital bills by Medicare Part A. The hospitals will get paid also. If the average uninsured person pays about $1,000 a year in taxes, this should cover the new benefit.

Part A covers hospital room and board, and after a $1,360 deductible and no coinsurance, at least for 60 days of inpatient care. Part A does not cover doctor’s charges, so the persons who stay uninsured will still have some exposure.


Many aspects of health care are only expensive due to monopoly rents – especially drugs, minor surgeries, and outpatient care. We must  chop away at these areas.

But “chopping away” does not just mean high-deductible health insurance, where vulnerable patients have “more skin in the game.”

This can be a cruel form of cost control. It relies on the patient to deny themselves care; also, it expects the patient  to ‘shop around’ in a manner that can harm the doctor-patient relationship.

(Besides, the citizens of Canada, Germany, France, Sweden, and Japan have almost no ‘skin in the game’ by our standards–but those countries somehow control health costs.)

The struggle to make health care cheaper must feature some degree of old –fashioned government force, such as:

  • Strict regulations on hospital billing
  • International competition for drug companies
  • Punishing price-gougers both legally, and through bad publicity, in health courts

The fight against medical price-gouging will be endless, but it also needs to start tomorrow!

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  1. Clive

    My travel insurance policy has a clause that, when incurring a claim for treatment in the US, the insurance carrier will pay out a maximum of Medicare + 150% for any treatment costs. Given that it is a travel policy, there’s no such thing as a “network” where coverage is concerned.

    This must be a fairly standard underwriting stipulation so can’t be an unusual situation for US hospitals being paid for by non-resident claimants via their insurance. So the implication is that the hospitals just routinely acquiesce to this insurer signed-off cram-down. Certainly I wouldn’t pay them a dime myself and I don’t have any US assets to seize so if the healthcare provider wanted to get anything more out of me, it would have to risk undertaking a very uncertain international cost recovery procedure where a UK court would look very dimly on any claim because they’d want to see proof of why Medicare + 150% didn’t cover their actual costs. And I could do discovery in court to get an understanding of their real costs of providing their services.

    So, in summary, the Medicare + 150% cost ceiling must be a defacto normalised restriction on healthcare costs right now (certainly if you can get an insurer to watch your back and fight it out with the hospital on your behalf — which is not, of course, always the case by any stretch of the imagination).

    1. MK

      I do alot of bankruptcy work in western New York. I have rarely seen a hospital sue a former patient. What I do see all the time is the hospital will place the bill for collections and ruin a person’s credit.

      Nursing homes (long term care facilities), specialty providers (orthodontia, “plastic surgery”, etc.) and transporters (mercy flights, ambulances, etc.) WILL sue in most cases.

      1. Clive

        Oh yes, emergency medical repatriation will a) cost a fortune (I’ve heard £250,000 and upwards) and b) while you’ll get consular assistance to get you home, you and your family will be hounded for the rest of your lives until you pay up or go bankrupt. Even a bankruptcy isn’t a fix-all. That’s because the company doing the medical evac will have an operation in the country you’ve been sent back to and will be well versed in cost recovery.

        I love travel and would really like to spend some time on a bit of a Grand Tour of the US but between ESTA and medical cover costs I am amazed you guys get anyone putting up with the hassles of visiting your shores. I’d have to steel myself to do all the admin…

  2. Wade Riddick

    Why don’t we manufacture our drugs in a public utility owned and operated by each state to keep state dollars in state? It would be quite cheap. The first state to do this would vastly undercut the price-fixing PBM cartel (which is why nobody’s done it yet).

    You could redirect the profits towards clinical trials into cheap public domain chemicals that corporate America will never sufficiently research (e.g., curcumin, low-dose naltrexone, benfotiamine and cannabidiol).

    You could also block the FDA from requiring clinical trials to prove that chemicals remedy the symptoms caused by the deficiencies of same said chemicals.

    No, that’s not a joke.

    A diet deficient in fiber has left us with an epidemic of obesity, cancer, diabetes and numerous other inflammatory/insulin-resistance conditions due to the way fiber promotes GLP-1. The FDA approved GLP-1 drugs after expensive clinical trials but then wouldn’t allow fiber supplement makers to tell customers that fiber remedies the drop in GLP-1 caused by fiber-deficient diets – unless makers of these non-patented, public domain supplements did the same expensive clinical trial. In other words, they wouldn’t let patients have access to information about the public goods that had been taken from them and the damage this caused.

    When I suffered from gut dysbiotics because antibiotics, dental mercury and NSAIDs had given me a colossal G.I. infection and the only cure was a fecal transplant, the FDA threatened to go after my doctor’s license because the procedure might give me arthritis and feces was “a drug” – and yet they did nothing about the antibiotics, dental mercury and NSAIDs which had, in fact, given me arthritis and aggravated it.

    To top off the insult, the FDA allows c. diff infection patients to reeceive these curative transplants but no one else with any other type of infection (which violates their own rules since “drugs” can be prescribed for off-label uses).

    Why? Because a fecal transplant can cure Crohn’s disease and ulcerative colitis (70-80%) for a few hundred dollars whereas a single biologic to merely *treat* such conditions runs $100K+ a year. Think of the damage… to CEO stock options. (By the way, everyone ever born vaginally received a fecal transplat from mom. That’s an awful lot of arrests for illegally giving a “drug” to a minor…).

    The unregulated for-profit provision of public goods is extortion because it leads to the rationing of public goods by the utility in order to raise their “price.” Do you really want your fire-fighters having a profit motive to start fires all over the city – policed by cops also trying to make a profit?

    1. el_tel

      Thanks for the article and I agree regarding publicly owned companies to produce generics. It’s a scandal that an MAOI antidepressant (off patent for half a century) has something like a 900%+ markup in the UK and Australia – all because there’s’ a monopoly supplier generic producer which isn’t challenged because the health systems in various countries can’t be bothered. (The market for the drug is small and old and dying off – a new competitor *could* compete the price down but their profit would be short-lived and probably not justify the set-up fixed costs.)

      But ‘reform’ must happen on other fronts too – like better requirements for continuing professional development (CPD) – to counter the still endemic view among two generations of physicians that “MAOIs are bad m’kayyyy”. MAOIs have been proven to be the most effective antidepressants (caveat – the ketamine trial in the links yesterday may ultimately show even better effectiveness than these) and their side effects (the “notorious” cheese effect has long been shown to be over-blown and provided a physician doesn’t prescribe to a patient with an obviously “massively overly hectic life” there’s little need to worry.) This is just one example based on personal experience but there are loads of others. e.g. the “rediscovery” of nefopam for patients whose total joint replacement hasn’t addressed chronic pain (5-7% of patients) but which clinical commissioning groups in Nottingham are reducing prescribing of on cost grounds.

      1. Wade Riddick

        There actually may be a new use for MAO-A inhibitors. As fat ages, it catabolizes norephinephrine by oversecreting MAO-A and then impairing the burning of fat (lipolysis). This damages fat metabolism but it also can cause fibrosis in places like the kidney and it can damage tendon repair. (Of course, curcumin inhibits MAO-A and is anti-fibrotic – not to mention a potent chemotherapeutic – but has problems with absorption.)

        This is the real problem in the generic shortages. Many of these drugs have new uses but you can’t get to them due to supply issues or they won’t let you have them in the form you need (e.g., compounded into a topical).

        1. el_tel

          Thanks for that. I only read about topical forms once, quite a while back, so I don’t remember the details and will take as read what you say.

          But the oral pill form is old, out of patent, and easy to produce. It’s not like modern ones with gene-based tweaks or compounding issues are required. There are, of course, choices between MAOIs in terms of whether they act primarily against MAO-A, MAO-B, or both – with slightly different implications for the boosting of the three main neurotransmitters (serotonin, norephinephrine and dopamine) – but they’re all experiencing “reducing demand” as numerous physicians have told me – patients on them on them tend to be old, having been put on them years ago, and are quite happy with them….but they’re dying out, as is demand for the drugs, which is awful since my MAOI has been described by a psychiatrist as “the mother of all anti-depressants” and, having kept up CPD, knows the risks are far less than was thought 2-4 decades ago. Yet too many young doctors are wowed by drug reps selling SSRIs/SNRIs etc – drugs which may work, but if they do, don’t work according to how the original psychopharmacology studies claimed they should (i.e. start working around day 4). So uncertainty remains over their mode of action (if any)….but there’s huge money to be made by tweaking these and finding new subgroups of patients for whom what is essentially a “me-too” drug has a marginal benefit. So supply issues arise for MAOIs when they have no real manufacturing reasons for this – merely economic based on “an ill-informed physician demand function”.

    2. Spring Texan

      Along the lines of what Wade suggests, this excellent piece:
      “Since shortages of critical drugs became a fixture of the American medical landscape a decade ago, pundits have proposed an array of incentives to encourage more production from pharmaceutical companies. But an obvious alternative or supplement — having the government manufacture the drugs — appears not to have made it to anyone’s list.”

  3. Dr Duh

    150% of Medicare is brilliant.

    However, to make it work you will need to establish price controls throughout the economy.
    Education costs capped at 150% of community college
    House payments and rent capped at 150% of public housing
    Restaurants bills capped at the 150% of VA cafeteria
    Cars prices capped at 150% of the cost of a Ford Taurus
    The list is endless…

    I actually think this would be rather nice. You could accomplish it with asymptotically increasing sales taxes. It would be unwieldy. But with the death of cash and today’s information technology you could probably pull it off. You’d still have a range of goods, but none of the obscene excess that has become such a prominent part of the landscape.

    This would work even better with an aggressively progressive taxation system. One where you effectively capped incomes at 150% of the median wage.

    Of course those kinds of price and wage controls would never happen. But since the government is such a big player in the medical market they could impose controls on it. Once you did it would definitely cut costs and certainly would cut incomes among physicians. Hardly a tragedy, since as a profession we are well paid relative to the vast majority of people. Still I wonder, who would be willing to practice in NYC if they couldn’t afford an apartment or in California if they couldn’t buy a house? I guess people would still practice in those areas, but they’d avoid emergency call. We have a ‘hospital’ nearby that doesn’t have an ER for exactly that reason. Actually, it would drive down all prices since it would remove the incentive for insurance companies to contract with physicians and hospitals to avoid monster charges.

    It would spell the doom of private practice and potentiate corporate healthcare. That might be more efficient, but shareholder interests would start to edge out patient interests. (CEOs don’t take the Hippocratic oath) You could turn to benevolent dictator type HMOs like Kaiser. But they have their own problems. We have a Kaiser hospital that is totally disinterested in non-Kaiser patients. Their ER only admits the ones they absolutely have to and then stabilizes and ships them out ASAP. (Often to the detriment of the patient, but that’s just my grumpy opinion)

    In the long run it would drive the deprofessionalization of healthcare, but to be honest that trend is well on its way. I’m sure Dr Google will continue to improve by leaps and bounds.

    1. Yves Smith Post author

      With all due respect, you have not been paying attention. The provisions of the ACA virtually force physicians into corporate practice. Absent those who reconfigure themselves to not take any insured patients (like MDs practicing “anti-aging medicine”), the private practice is going the way of the dodo bird.

      See this 2013 post:


      And one from 2014:


      My MD gets such crappy reimbursements from my insurer ($60 for an office visit in NYC) that the only reason she can afford to be in private practice is that my estimate is that at least half of what she does across her patients is non-reimbursable procedures (she is not a derm yet she offers Botox, for instance. And no, I don’t do that sort of thing).

      1. susan the other

        Thank you for this post by Mr. Hertz. It cuts through all the nonsense and makes straightforward sensible recommendations. I just experienced a big dose of corporate medical “services” for some minor surgery and I can only say it isn’t efficient, productive, or competitive. It is pure incompetence and sloppiness which masquerades as efficiency and benefits the corporation at my expense. I just walked out without signing their little promise to pay crap. The whole thing had all the earmarks of a fiasco, a churning.

      2. Wade Riddick

        Would these be the same doctors in the same corporate practice you’re expecting to sit on this new court and rein in prices? Doesn’t this recreate the same self-dealing problem with ISDS panels and arbitration panels?

        Isn’t this problem really more similar to the industrial bargaining issues over sector wages like you see in, say, Australia or Germany? Aren’t we just negotiating here for what we’ll allow professional medical labor/capital to charge customers?

        1. Allegorio

          A national health service is the only solution for rational health care. Regulatory capture is universal and seemingly unstoppable.

          1. el_tel

            Unfortunately there’s been regulatory capture in the NHS too. There’ve been (allegedly) health economists who three days a week work on setting the rules for how economic evaluations should be done, then two days a week doing consultancy for pharma companies helping them with their models to “achieve the cost-effectiveness result” to maximise funding chances. Biiiiiig conflict of interest.

            Whether or not that’s true, it’s certainly true that there is only a small band of health economists who know how to do the required Bayesian Decision Analytic modelling required inside out and who have an inbuilt advantage with bodies like NICE. The field, since it broke off from “mainstream economics” in the 1970s, has always felt it had to “fight its corner” – in doing so it did get the ear of regulators, but also proceeded to become an inward looking group who saw no need for external oversight of their models – perhaps why, despite my efforts a few years back, I got no other health economists interested in coming over to NC to read/contribute. A sad state of affairs IMHO.

  4. el_tel

    Incidentally via this site you can see the UK prescribing data, costs incurred, at the level of the General Practice (Family Physician group), Clinical Commissioning Group (CCG – my practice is one of 20 forming our CCG) etc. It’s fascinating for data nerds to see trends in prescribing for certain drugs, the variation between practices (not needs adjusted unfortunately so you often need some local knowledge before you make judgements about outliers).

  5. fresno dan

    And not a moment too soon! In the ACA’s individual insurance market, many policies are already financially worthless.

    For example: If a 60-year old man is in decent health, why should he buy a policy that costs $950 a month and has a $4,000 deductible?

    If he is unsubsidized, he will pay over $11,000 a year for basically nothing unless he is hospitalized, and even then he must pay another $4,000 before any benefits kick in.

    How much uninsured health care could he buy for $15,000 a year?

    He can buy a blood count for $31, an X-ray for $47, and an MRI for $275 from consumer-direct providers in most cities. With the new drug prices described above, he can pay for most of his prescriptions out of pocket.
    So I see a medicare beneficiary (with his wife) at HICAP the other day looking to see if there is someway, ANYWAY to save on their crushing prescription drug bills (he had had a stroke and the anticoagulants were super expensive and NONE of the insurance paid any better than his current health care) – and like a lot of middle class people, they have too much money for Medi-CAL, “Extra Help” (Extra Help is a program to help pay for prescription drugs applied through Social Security – yeah, I know, needlessly cumbersome and convoluted) as well as all the other medicare saving programs that actually never manage to save any middle class person anything….
    So buy (LOL, I was editing this and I meant to say “by” – but buy works just as well) the time the prescription drugs are paid for, they aren’t middle class anymore. It is a frequent complaint from people who are above the limits for help, and I certainly can understand why.
    I’m not a doctor and I can’t make recommendations, but it strikes me that one of the problems is that there are a lot of EXPENSIVE drugs that are of pretty dubious benefit, especially when looked at from a cost benefit perspective. FDA cannot consider cost benefit in approval decisions. For example, when I first was diagnosed with adult onset diabetes, my general practitioner prescribed Avandia. Ironically, I worked for FDA and had had a heart attack.

    So much for the value of FDA approval. But Avandia also doesn’t WORK as well as Metformin, which as a generic was 100 to a 1,000 times cheaper than the hot new drug. Many physicians just prescribe whatever the pharmaceutical “detail” salesmen (and saleswomen) peddle. And I have certainly read the same with regard to anticoagulants for stroke and cardiovascular prophylaxis as opposed to aspirin.

    In the case of the stroke victim, maybe there are circumstances that compel some of the high priced medications, although I note that FDA trials are studiously designed not to answer questions of overall benefit (drugs are approved on the basis of ANY benefit – not on the basis that the new drug is a BETTER drug….look it up). It is not my decision to make, but I can’t help but think the medicare beneficiary quality of life, and probably risk as well, would be much better with a cheaper drug regimen.

    1. Allegorio

      Please consider a national health service that researches treatment efficacy. Without the profit motive in medicine, so much would change. Perhaps all the medical vultures would find different careers, perhaps on Wall Street, and make way for people with a true aptitude for medicine.

  6. AstoriaBlowin

    If you are buying pharmaceuticals under USAID funded programs for distribution outside of the US, the safety standard for the drugs is that their manufacturer is overseen and approved by a “stringent regulatory authority” which is basically the FDA, and its EU, Swiss and Japanese equivalents. So the US govt is already paying for and affirming the quality and safety of pharmaceuticals from other countries, just not for use in the USA

  7. Grumpy Engineer

    I must commend Bob Hertz for his well-conceived proposals here. They would eliminate a lot of the abuse that happens out there while still providing room for the more conscientious providers to make an honest living. It’d be much closer to what I’d call a “well-regulated competitive marketplace” than what we have today. To his list, though, I would add a fifth item:

    Law #5: Allow health insurance companies (and Medicare/Medicaid) to decline coverage for medicines that are still under patent protection. If a healthcare provider chooses to provide or prescribe a medicine that is still under patent protection, they must warn patients about the lack of coverage and provide an expected cost.

    Hertz’s Laws #2 and #3 would create competition between drug manufacturers that would keep prices much closer to actual production costs, but they would not help when a medicine was still under the monopoly granted by the US Patent system. This proposed Law #5 would deal with that exception.

    Now I must note that my proposal could make it more difficult for non-wealthy patients to obtain a new medicine that was actually more effective than the older medicines. [Yes, Virginia, it’s true. Sometimes the pharmaceutical industrial complex invents new medicines that work better.] But I think it should be done anyway. The strengthened coverage regulations in the ACA have largely forced insurers to say “yes” to all medicines, regardless of how outlandish the price tag might be. The unwanted impact on our health insurance premiums is obvious.

  8. Vatch

    At first I thought that the article was about a bill that had been introduced in the Congress. Sadly, that doesn’t appear to be the case, so we don’t have the convenience of asking our Senators and Representative to support a specific bill.

  9. Carolinian

    Thaniks for this great great article that gets to the nub of the medical crisis. IMO the abuses by insurance companies track back to the enormous and unrestrained prices of our “charge master” system. When even minor procedures cost $50,000 the insurers have every incentive to game the system.

    Of course chances for passing such sensible solutions through Congress are slim but it does matter whether we correctly identify the problem. I’d say the left are far too ready to let the medical profession off the hook for their role in all this. It isn’t just about greedy insurance companies.

  10. Bill Carson

    It seems to me that there ought to be a way to sue a healthcare provider to make them prove that a healthcare cost is reasonable.

    In what other industry is it possible for a goods or service provider to charge whatever they damn well please?

    Could a lawyer do a simple will for someone and send them a bill for $78,000 and expect to get paid?

    Could a plumber charge $23,000 for a weekend call to unclog a drain?

  11. Spring Texan

    Uneasy with the statement that: “But frankly, many American hospitals are overbuilt, over-staffed, over-equipped and overpaid.”

    Over-staffed? WIth billing or oversight personnel, possibly, but not with floor nurses. Most hospitals don’t staff adequately with nurses and it’s a big safety and morale problem — plus hiring underqualified people to do some nursing duties. The only time I was in the hospital as an adult, after an emergency surgery, staffing was horrible; and that’s what I’ve seen visiting others also. I feel very sorry for staff and very terrified for anyone who is in the hospital.

    That’s why another law we really need — in hospitals AND in nursing homes — are minimum staffing requirements. I was a nursing home ombudsman and there are NEVER ever enough CNAs, at least here in Texas. They are overworked and people have to wait inordinately for essential things.

  12. Allegorio

    “Forcing the health care rentiers to fight a multi-front war has higher odds of success than relying on one option.”

    In a similar vein, a national health service alternative should be considered as well with salaried employees that would also do research on the efficacy of treatments. The NIH already funds most medical research. The NIH would be expanded and take over the hospital systems, medical schools and pharmaceutical manufacture, a completely non-profit system for the benefit of the patients not the practitioners. The system would also be positioned to handle public health emergencies, like epidemics and the like.There would be no reason to ban insurance, it would just become obsolete. This certainly would be the most cost effective health care system, reducing both costs and malpractice.

    Whereas it seems an unreasonable prospect, given the power of the medical industrial complex, after all we can’t even get medicare for all past the political gatekeepers. I think however if this proposal becomes part of the discussion, it could scare the medical vultures into accepting medicare for all, with all its prospects for graft that it still provides, rather than an efficient patient centered system.

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