The health care “villains”? It’s the hospitals, not the insurers

Everybody loves to hate health insurance companies.  There are endless anecdotes about denying needed coverage and they aren’t the ones actually making us healthy– that’s the hospitals.  Thing is, it’s the hospitals that are the relative “villains” in our health care drama as they are the ones very much responsible for driving up the super-high prices that bedevil health care in this country.  Thus, a very nice piece from Reihan Salam that explains how it is that hospitals are able to so effectively drive up prices (for which we all pay one way or another):

As for why hospitals charge such high prices, it’s fairly simple: They do it because they can. In a competitive market, a provider who jacks up prices risks losing customers to competitors who charge less. But what if incumbent providers have the political muscle to keep competitors out of the market? What if regulators look the other way when incumbent providers buy up the competition, or even help the process along? That, in a nutshell, is the situation with America’s hospitals, as Chris Pope outlines in a recent Heritage Foundation paper onconsolidation in the health care market. Because most medical care is purchased not by consumers but by third parties, like Medicare and Medicaid or your insurance company, and because consumers rarely get access to reliable data on quality, they place an extremely high value on convenience. If you’re not saving money by shopping around for a better deal, and if you have no idea if you’re getting better care, you might as well go to the hospital closest to you. Hospitals that don’t face competition from other nearby hospitals thus have a huge amount of power in their local markets. If a private insurer refuses to pay a hospital’s exorbitant prices, a hospital can just walk and wait for the insurer’s customers to scream bloody murder over the fact that they can’t use their local hospital.

Bummer.  And if you are counting on politicians to save us, think again:

Forget about big cities—there is a hospital in every congressional district in America, and local hospitals are often among the largest employers in the district. One of the reasons President Clinton’s 1993 health reform effort failed is that he never won over the hospital lobby. President Obama learned from the Clinton debacle; hospitals were among his most important allies. Republicans get in on the act too. Right now, for example, a number of GOP lawmakers are pushing a Medicare “reform” that guarantees higher payments to doctors and hospitals today in exchange for the promise of spending reductions a decade or two from now. Good luck with that.
You can hardly blame them though. The health sector employs more than a tenth of all U.S. workers, most of whom are working- and middle-class people who serve as human shields for those who profit most from America’s obscenely high medical prices and an epidemic of overtreatment. If you aim for the crooks responsible for bleeding us dry, you risk hitting the nurses, technicians, and orderlies they employ. This is why politicians are so quick to bash insurers while catering to the powerful hospital systems, which dictate terms to insurers and have mastered the art of gaming Medicare and Medicaid to their advantage. Whether you’re for Obamacare or against it, you can’t afford to ignore the fact that America’s hospitals have become predatory monopolies. We have to break them before they break us.  [emphasis mine]
Hmmmm.  How do you break government monopolies.  Can you say, “government regulation”?  Of course, Salam is actually a “reform conservative” so he’s not about to openly admit government is the solution:

Curbing the power of the big hospitals isn’t a left-wing or a right-wing issue. Getting this right will make solving all of our health care woes much easier, regardless of where you fall on the wisdom of Obamacare. Let’s get to it.

Of course this is a left vs. right issue.  Who does Salam think will curb the power of the big hospitals?  A groundswell of populist revolt?  No.  Government.  When you look at all those modern democracy health systems that out-perform us, every last one does so, in part, by relying upon government to help keep prices down.  Until we make a serious effort at doing the same (the ACA is a partial effort) we are going to continue to be bankrupted by health care prices.

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About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

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