With Joe Biden not seeking re-election, might the American people be spared his latest cure for our sick healthcare system? Sadly, the answer is no.
Systems thinkers describe behaviors or activities that repeatedly happen in complex organizations or systems as archetypes, viz., drifting goals, escalation, tragedy of the commons, and the best description of federal solutions for healthcare: fix-that-fails-or-backfires.
Medicare, the 1965 program that supposedly assured timely, quality medical care during our golden years, will run out of money, be insolvent, in less than four years, according to the Trustees. At that time, Medicare will be unable to provide hospital care for seniors.
Medicaid (also 1965) was intended to assure adequate medical care for the small number of medically fragile Americans. This federal “fix” failed so badly that Medicaid enrollees experience death-by-queue — they die waiting in line for medical care that never comes. A fix that not merely fails but backfires. (See my previous analysis on the topic here.)
Washington’s 1986 “fix” for healthcare was the Emergency Medical Transport and Labor Act (EMTALA), creating the unfunded mandate that has been forcing smaller hospitals, especially rural ones, to close, leaving millions of Americans with no locally available care facilities.
Health Insurance Portability and Accountability Act of 1996 (HIPAA) increased the likelihood of medical errors by obstructing medical communication. HIPAA was another federal fix that not only failed but backfired badly.
The Affordable Care Act (ACA, 2010) was touted as providing “all the care Americans deserve.” Millions did get “free” insurance through Medicaid expansion. What they didn’t get was care! Access to care went down, fewer doctors accepted new Medicaid patients, and wait times for care lengthened. While Medicaid insurance was free for individuals, the ACA’s cost to taxpayers was $1.76 trillion.
Despite sweeping rhetoric and grandiose promises from Washington, each federal “fix” made healthcare worse.
Now Biden, really Democrats, bring us their latest ill-conceived brainchild, Hospital Price Transparency. Biden contradicts himself. He claims that by encouraging free market forces, price transparency will lower hospital prices. He also says that by suppressing free market forces, his Inflation Reduction Act of 2022 will lower drug costs.
Price transparency will extend Washington’s 100 percent failure rate when “fixing” healthcare.
In the everyday (free) market, price transparency works to lower prices because of free market forces. As buyers are payers, they need to economize. As sellers compete for buyers’ dollars, they must keep prices low. In a free market, sellers make their prices available — transparent — to the public. Otherwise, consumers won’t buy.
The key to understanding Democrats’ constant failure-to-fix healthcare is the existence of the third-party payer. Healthcare is the only market where the buyer, aka the patient, does not pay for the services or goods he or she consumes. Since buyers don’t pay, they have no incentive to economize. Seeing price lists won’t change their spending behavior. Politicians know this, or they should.
In healthcare, prices or charges are not what the seller is paid. Payments are based on government-issued Allowable Reimbursement Schedules, generally a small fraction of charges. Making prices, not payments, transparent will give the public a wildly exaggerated impression of what providers are paid. Politicians certainly know this.
Price transparency is one more “fix” that will fail and backfire. A recent Wall Street Journal editorial explained, “The laws of economics continue to exist even when politicians [like price transparency advocates] ignore them.”
Price transparency won’t reduce healthcare spending because it can’t. The market forces that normally drive down spending have been suppressed in healthcare by Washington.
The primary function of any healthcare system is to provide medical care. Price transparency reduces access to care by taking money away from patients to pay bureaucrats. For example, President Obama diverted $716 billion from medical care for seniors, i.e., from the Medicare Trust, to pay for ACA infrastructure.
A quick reading of the rules and regulations for price transparency shows the extent of BARRCOME — bureaucracy, administration, rules, regulations, compliance, oversight, mandates, and enforcement — necessary to implement federal regulations such as price transparency. (In a free market, price transparency is automatic, with no need for government spending.)
BARRCOME consumed as much as half of the $4.8 trillion the U.S. spent on healthcare in 2023. These are healthcare dollars taken from health (medical) care. Spending on regulating price transparency will only further reduce money available for patient care.
Price transparency is about to join an unenviable list of federal healthcare fixes-that-fail-or-backfire. What President Reagan said in 1981 about the economic crisis he inherited is equally true about U.S. healthcare. “In this present crisis, government is not the solution to our problem; government is [emphasis added based on his tone of voice] the problem.”
If Kamala Harris, or whatever Democrat who replaces Biden wins on November 5, Biden’s latest fix-that-fails will remain in force. Unfortunately, the Trump team has been similarly mesmerized by free market catchphrase, price transparency, despite the fact it doesn’t work in healthcare’s third-party payment structure.
Whichever party wins in November, unless Washington miraculously and for the first time recognizes and accepts economic reality, Americans can look forward to fewer doctors, longer wait times for care, and more death-by-queue.
Deane Waldman, M.D., MBA is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of the Center for Healthcare Policy at Texas Public Policy Foundation; former Director, New Mexico Health Insurance Exchange; and author of 12 books including multi-award winning, Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine.
image, Pixabay license.
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