3 Ways Trump Could Disrupt Health Care for the Better

Yves here. Recall that in his post on his French health care and magical snotty snails, Michael Olenick mentioned in passing that pharmacists in France can prescribe medications for routine ailments, unlike their US counterparts.

I would not be that keen about the “let patients shop better” were it not for the appalling opacity of medical service prices, particularly for operations. It isn’t just that doctors and hospitals should be required to show what their services cost, they should be required to adhere to them. No bait and switch.

But as I am sure readers will point out, these are not disruptions but changes at the margin. The fee for service model, with insurers adding costs, needs to go.

By Peter Hilsenrath, Joseph M. Long Chair in Healthcare Management & Professor of Economics, University of the Pacific and David Wyant, Assistant Professor of Management, The Jack C. Massey Graduate School of Business, Belmont University. Originally published at The Conversation

Since his winning presidential campaign, Donald Trump has been repeatedly billed as a disrupter. From trade and foreign policy to immigration, Trump has consistently tried to shake up the status quo.

As experts in health care management and policy, we believe the president should now focus his talent for disruption in our sector.

And unlike the issue of immigration, there is widespread bipartisan appreciation of the crisis in health care, with bloated costs and an industry that fiercely resists change.

Why Health Care Needs Disrupting

While the growth of health care costs has been relatively muted in recent years, they are still cripplingly high and pose a threat to the entire economy.

Health care now accounts for about 18 percent of the economy – up from about 13 percent two decades ago – and is expected to make up about a fifth of the U.S. gross domestic product by 2026. The United States spends more on health care than any other country.

Yet Americans have little to show for it. U.S. life expectancy at birth, for example, is lower than 11 other high-income countries including Japan, Germany and the U.K. At the same time, infant mortality is the highest.

In addition, despite the mitigating impact of the Affordable Care Act, 28.3 million remained uninsured in 2018.

Furthermore, rising health care costs crowd out other consumer spending, which has the potential to erode Americans’ standard of living.

Here are three ways Republicans and Democrats can come together to disrupt the health sector to reduce costs and improve efficiency.

A pharmacist fills prescriptions at a Walmart in Leesburg, Florida. Reuters/Charles W Luzier

1. Let Nurses and Pharmacists Do More

One of the key drivers of rising health care spending is the high cost of labor.

And one reason for that is state laws and regulations control what medical professionals can and cannot do in a way that requires high-paid physicians to perform certain duties or make medical decisions that nurses, pharmacists and others with more modest salaries could easily do. While the intent may be to ensure quality, the end result of this ring fencing in our view is that it protects certain groups – including nurses and others – from competition. It also ties the hands of health care managers seeking to improve efficiency.

For example, state scope of practice rules generally restrict prescribing medications to physicians – even though others such as nurse practitioners and pharmacists are fully qualified to do this in most cases. Similarly, ophthalmologists rather than optometrists are primarily allowed to prescribe eye medication, while dental hygienists require the supervision of a dentist.

And as for the impact on quality, a 2013 study showed that the quality, safety and effectiveness of care is similar between less costly nurse practitioners and more costly physicians.

To change this, Trump could direct federal regulators to craft guidelines that greatly expand the scope of what nurses, pharmacists, hygienists and the like can do, and then have Medicare and Medicaid make payments to health plans, hospitals and states contingent on compliance with those guidelines.

Increasing competition and letting less well-paid health care professionals handle more of these duties and decisions should help contain and possibly even lower costs.

2. End the Monopoly on Drugs

Another major culprit behind out-of-control health care inflation is high prescription drug prices, especially for patented medicines. Most prescriptions are for generic products that are commonly inexpensive, but new drugs often command eye-popping prices.

Studies show Americans pay at least three times more for drugs than residents of other high-income countries. And a quarter of Americans who take a prescription drug say they skip doses or take fewer pills than they should because of the high cost.

Pharmaceutical firms can charge such high prices for new drugs because patents give them monopoly power for years. Moreover, insurers have been willing to pay.

The Trump administration has already made an important if narrow move to remedy this by directing that Medicare Part B use international reference prices in some cases when reimbursing pharmaceutical companies. That is, the program would pay the average price of a drug in a basket of countries, which is usually lower than prices in the U.S. A recent government study of the impact estimated the program would have saved more than $8 billion had reference pricing been used in 2016.

But it could do more, particularly as there is significant bipartisan interest in the issue.

An even bolder approach would involve reforming the patent system underpinning biomedical research. Currently the patent system provides incentives for biomedical research, with the potential to reap enormous profits. A more efficient way to finance groundbreaking research in our view would be to put a tax on the sale of prescription drugs and use the proceeds to fund research on new ones.

Pharmaceutical and other biomedical companies would compete for those grants – making the decision over what types of drugs to develop a social decision rather than a private one – and any drug they develop with the money would be patent-free. Nobel Prize-winning economist Joseph Stiglitz, for one, has argued in favor of an approach similar to this.

In our view, this would drastically reduce prices.

3. Put Consumers in the Driver’s Seat

A third problem that leads to high health care spending is the lack of consumer control.

Normally, when someone wants to buy something – be it groceries or a car – a consumer looks around in stores or online and compares prices to make an informed choice about what works best given her needs and budget.

Health care does not conform to this model. Information is asymmetric —- which means one side knows more than the other —- and consumers tend to defer to their providers. Moreover, insurance renders consumers insensitive to prices with little incentive to shop. Cost containment breaks down if shoppers cannot obtain prices.

Trump could empower consumers by aggressively pushing for greater standardization and use of technology in health care. This could include giving consumers more control of their health records in the cloud and requiring insurers and providers to give them more information about prices and the quality of competing options. And as with occupational control, the administration could condition Medicare and Medicaid payments on following its standards.

Knowledge that all providers have ready access to all your medical information will likely encourage switching to lower cost providers. And just as giving consumers more control led to significant innovations, competition and savings in retirement plans, the same thing would happen in health care.

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24 comments

  1. Skip Intro

    Ah markets, cause of, and solution to, all our problems.

    Some good out-of-the-box thinking, to go after the abuse of government-granted patent monopoly instead of crossing the all-powerful healthcare denial cartel.

    Reply
  2. jackiebass

    Like many businesses there is little competition in health care. Where I live in a small city in upstate NY there are two providers that control everything. Both use the same business model so that means you really have no choice.

    Reply
  3. The Rev Kev

    He could more than disrupt the health care market, he could win the 2020 election with it. I thought about one scenario for this. About one year from now Trump announces that he will make it law that hospitals must post their prices for their work and must stick to it. He also announces that he is opening up America to imports of generic drugs to compete with local drugs because anything else would be a “trade restriction”! The leadership of the Republicans and Democrats would hate these ideas on sight but, but the voters for both parties would love it and polls already indicate that this is one issue that unites them. The Democrat and Republican leadership insist that this cannot be done straight away but must be done slowly over time (like the pullout in Syria) but Trump says that this will result in the unnecessary deaths of thousands of Americans! Any of the candidate for the 2020 election that try to oppose this will become mincemeat and implode. Who wants to try to defend sky-high medical costs? Trump can go to the polls saying the Democrats brought you Obamacare but I saved you tens of thousands of dollars savings with my ideas and saved a lot of American lives. Even if he loses or has to sacrifice one of those two ideas he still wins on the remaining idea and gets to beat his opponents on the head with the lost scheme. Hell, if I was an American and Trump succeeded in this, even I would vote for the sob.

    Reply
    1. False Solace

      Trump appears to be too ignorant and incompetent to do anything of the kind. Rules went into effect this month to force hospitals to post their prices online. But we all know the price you actually pay depends on whatever your sketchy insurance managed to negotiate. The posted price might apply to one person out of a hundred, who will negotiate it down with the hospital billing office or end up paying twice as much in fees and penalties to a collections agency.

      Trump has said hopeful things about health care before. Before he became a Republican he praised the universal systems used overseas. As President he outright stated Australia’s system is better than America’s. He has also talked about “doing things” about drug prices before. But every time he meets with Big Pharma execs he backpedals.

      Trump’s operating method is to say whatever will be popular with crowds at his MAGA events, then do whatever big business tells him is good for groaf. He appears to have no idea what could be done, much less what should be done. And his MO is to gut protections and regulations, not enforce them on shyster execs. His whole administration is made up of shyster execs. Expecting Trump to enforce new regs against any industry is like expecting Ursula the Sea Witch to cut you a deal on a new pair of legs, it just ain’t gonna happen.

      This reminds me a lot of all the hopeful talk about Obama. It lasted 8 years and he never did anything. He coulda. But he didn’t. Trump is the same but for different reasons. I wish it was different but I don’t see any reason to doubt it.

      Reply
  4. Bob

    And so nothing is to.done abou insurance costs that skim some 30% off the top in admin fees ?
    Go to any dotors office and see three or four clerks keeping the billing straight with the insurance company This deliberate on the part of the insurance companies who know that by delaying, denying or losing claims more.money os to be made.

    Reply
    1. Carolinian

      Assuming your 30 percent is correct then the $30,000 for a three day hospital stay would still be $20,000 for a three day stay despite the admin overhead. Insurance costs were a lot more reasonable back when medical costs were more reasonable. Therefore in this chicken/egg situation it is the medical costs that are the main driver. It’s easy to demonize faceless insurance bean counters while making excuses for the people who are curing our diseases and saving out lives but clearly it’s the medical profession’s enthusiastic embrace of capitalism that is at the root. A medicare for all that doesn’t address costs would not bring the US in line with lower cost countries.

      Reply
      1. tegnost

        it seems to me like an exercise to protect the industry from m4a, keeping the highly paid grifters highly paid. Sort of like a wall. Incrementalism. By the way my 2 day stay in the hospital was $50,000…and the “responsible” insurance company did everything they could, including stalling, extending court dates at the last minute, what’s that? Paperwork! We need another 3 months! Grifters gotta grift.

        Reply
      2. ChiGal in Carolina

        HR 676 and S 1804 to a lesser degree contain cost control measures in addition to eliminating insurance. It is anticipated that primary care providers would be paid the same or possibly more, in line with a greater emphasis on preventive care, but that specialists will take a big hit.

        That is why it is opposed by the AMA, despite docs for the most part despising being micromanaged by insurance cos and the endless paperwork.

        EMRs/EHRs are not designed to support treatment but to capture maximum billing.

        Reply
    2. Yves Smith Post author

      Don’t make stuff up. It is a violation of our written site Policies.

      The cost of health care admin IN TOTAL is estimated at 30%, and that is the high end of prevailing estimates. Way higher in the US than in the rest of the world due to cost of fighting insurers, much of which is borne by MDs.

      Reply
  5. Carl

    Pretty much lost me in the first sentence of the second paragraph when he claimed that health care costs have been “muted” in the last few years. Even granting a slower increase, the fact is that costs were starting from a jaw-droppingly high level to begin with, and exponential increases have led to an absurd situation. One of the ways I entertain myself when traveling in other countries is astounding people with tales of actual experiences in the US healthcare system, and their costs.

    Reply
    1. tegnost

      yeah I made it this far before going hmmmm….
      While the intent may be to ensure quality, the end result of this ring fencing in our view is that it protects certain groups – including nurses and others – from competition. It also ties the hands of health care managers seeking to improve efficiency.

      Reply
      1. tegnost

        1. Introduce more competition to the nurses union and give managers more leeway to squeeze people, but probably not themselves, who being in the administrative layer don’t do health care, they do…something else? it may lead to lower costs!
        2 A tax and more competition, but unlike the competition between nurses and lower pay, this competition is between corporations over higher pay. Oh and lets not leave out that when insurance companies pay for expensive drugs, they’re heavily invested in the sector through the stock market, sort of like when an individual owns a bunch of exxon stock they don’t mind so much paying 4$/gallon for gas, pay with one hand and get it back with the other. Part of the holy trinity of the bailouts, save the banks, save the insurers, save wall st., rinse, repeat. This supposedly will drastically lower prices, but why wouldn’t the manager referenced in #1 take that money for himself thank you very much rather than lower prices?
        3.shopping, technology (hello, added patent costs, just a different wall st sector gets an infusion) and for bezos, manage your own health care through the cloud! Innovation! Competition! Savings!, but no real reasoning as to why…won’t lower prices, adds multiple layers of gameable bs that future mba’s can use to fleece the rubes. This looks more like job creation program for mba’s not a new paradigm.

        These are not disruptions they’re supports.

        Reply
  6. Robin Kash

    This is advice on “improving” the present system. It is beyond redemption. Trump could trump all by pressing for Improved Medicare for All. There are at least two bills, HR 686 and S1804, that could move us there.

    Reply
  7. Matthew G. Saroff

    Health care COSTS are not the biggest problem in the American system.

    Health care PRICES are the biggest problem in the American system.

    The difference is that the former is a function of technological and labor issues that are inherent to the system, while the latter is a function of greed.

    The latter is far easier to address, and in fact can be addressed by legislative fiat, as it is in most of the world.

    Reply
    1. Yves Smith Post author

      No, we also have a lot of overtreatment. Doctors ordering too many tests, like annual EKGs for people at <5% heart disease risk, patients demanding drugs they saw on TV, patients not accepting that there isn't much that can be done about what they have and seeking out doctors who will give them treatments with low success rates (back spinal fusion surgery, for instance).

      Reply
  8. divadab

    Trump would make a real difference by implementing Medicare for All. He’d enter the ranks of the sainted Presidents – Saint Ronnie, Saint FDR, Saint JFK and now Saint the Donald.

    Reply
    1. marym

      Other than mentioning universal healthcare a few times during his campaign (though his website had nothing but the usual Republican blather like buying insurance across state lines) he seems to prefer moving in the opposite direction.

      Trump Administration Plans Effort to Let States Remodel Medicaid

      System could resemble block grant proposals favored by conservatives

      States would still have to adhere to certain requirements but could get far more leeway in how they design their programs, likely in exchange for some type of cap on federal funding, the people said.

      States may be able to use waivers to get flexibility in exchange for an upper limit to that federal funding, for example. And while certain low-income groups would still have to be covered, states could try other approaches aimed at moving recipients out of Medicaid and into the individual insurance market.

      Trump storms ahead with Medicaid work rules, even though they’re disastrous for enrollees

      Ignoring empirical evidence that it’s fomenting a healthcare catastrophe, and a federal judge’s warning that it’s legally out of line, the Trump administration has quietly reapproved a punitive work requirement for Medicaid clients in Kentucky.

      …data from Arkansas, the only other state given permission by the Centers for Medicare and Medicaid Services (CMS) for Medicaid work requirements, show that its system is throwing residents off Medicaid by the thousands.

      The fraud behind the expanded Medicare benefits for people with multiple chronic illnesses

      Normally we should celebrate the fact that Congress and the Trump administration have decided to expand Medicare benefits for people with multiple chronic illnesses – essential benefits such as nutrition, transportation and housing that extend beyond the usual health care benefits. How could anyone criticize this, the Chronic Care Act?

      The problem is that individuals who remain in the traditional Medicare program will be deprived of these benefits. The expansion is limited to individuals who sign up for the private Medicare Advantage plans. This is another blatant effort to privatize Medicare by providing more funds and better benefits through the private plans while depriving the traditional Medicare program of such funding.

      Reply
      1. jrs

        The title might as well have been “What Hillary Clinton could have done to disrupt healthcare if she had been elected” and be as valid.

        Even those who think expanded Medicaid was one of the positive impacts of the ACA (and it was) the work requirements are making it increasingly useless in the states implementing them (the usual suspects).

        Reply
  9. shinola

    I would assume that someone with Trump’s reported net worth has an investment portfolio that includes a significant portion invested in the stock market. How much of that includes stock in companies involved in the medical bidness (pharma, insurance, etc.)?

    I also assume that Trump’s 1st consideration in just about any decision is “What’s in it for me?”

    So, would Trump deliberately do something that could very well impair the value of his portfolio?

    (Although, having the ultimate inside information, Trump could divest in any business related to med. care before the push for price controls or M4A. Trump being Trump, I assume he would have no compunction about acting on inside info.)

    Reply
  10. Ford Prefect

    Add one more:

    Change the AMA billing model so that GP-type doctors (family care, internal medicine, pediatric, etc.) get paid more and specialists cost less. That will encourage more doctors to go into family practice and reduce reliance on more expensive specialists.

    BTW – I was at a restaurant and the sommelier informed me that without a Platinum credit card, half of the wine list was unavailable at the pricing shown on the wine list. The actual prices would be available to us when the bill was tallied at the end of the meal. When the final bill came, I was also informed that, while the restaurant took Mastercard, the particular sous chef who worked on our meal only took Visa so using the Mastercard is a $20 upcharge to the meal because I was using an out-of-network sous chef to prepare the meal.

    Reply
  11. Susan the Other

    One thing I’d like to impart: component control. For all pharmaceuticals produced here or overseas: There must be a verifiable standard that can be RELIED upon. I recently personally suffered the effects of a two-tiered irresponsibility in this control: A drug to control hypertension; made in India; substituting sub-standard chemicals; not controlled properly and therefore released into the population (for profit)… Metropol Succinate. From India. This problem had been documented at least 3 years before it was prescribed for me. Impurities to save money and create profits overruled reality. Disgusting. This BP drug actually makes your BP skyrocket. It’s all over the Internet; read it for yourself. My BP went to 250 over 150. Really. I called an ambulance and I have hated my GP ever since. That weasel.

    Reply
  12. John Beech

    On this one subject, this FL-registered Republican voter is a socialist – and – is with Bernie. Except Bernie doesn’t really go far enough in my opinion and instead of his bill, I like HR676 a lot better!

    I’ll make a political prediction, come next year the President is going to be losing and will latch onto health care disruption as a way to save his Presidency. Until then, the GOP is going to control him like they have with judges. Once he figures it out he’ll disrupt health care like he has Foggy Bottom. I only hope he follows along with HR676 because that’s how I’m voting next time. Yes, I’ll be a single-issue voter in favor of HR676.

    Reply
  13. Catman

    I had surgery this summer. Two months before, I asked what the cost would be. I was told I’d get that info a week before the surgery. But a week before the surgery, I was told they hadn’t processed it yet. I ended up finding out 1 day before the surgery was scheduled.
    Now, it was a necessary surgery, so I didn’t have much choice, but a few things bothered me even more than the lack of price transparency.
    1. There were only two surgeons who did this surgery in the Seattle area. I asked the surgeon’s assistant why that was the case, “Well, it’s not that profitable.”
    2. Following the surgery, I got 3 bills – one a month after, the second a month and a half after the surgery, and the third was 3.5 months after. Once I got the last bill, I was given 30 days to pay.

    Reply

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