Albert R. Hunt: Health care is more broken than we thought

03/09/2013 12:00 AM

03/08/2013 5:17 PM

A recent cover story in Time magazine, “Bitter Pill: Why Medical Bills Are Killing Us,” was a serious, exhaustively reported piece about the scam the U.S. health care system has become. The article by Steven Brill has created unusual buzz in Washington, D.C.; it spares no vested interest.

Nonprofit hospitals, the cornerstone of many communities, capriciously overcharge patients, sticking the powerless with exorbitant bills while paying lavish salaries to their executives. Drug companies, which charge humongous markups to American customers, rake in huge profits. Trial lawyers, with the threat of legal action, add to the cost of defensive medicine. President Obama’s Affordable Care Act does little to bend the cost curve, and while conservatives rail against Medicare, the government-run program is more efficient and customer-friendly than the private system.

None of this is new. Yet it resonates for several reasons: Brill documented the particulars more forcefully, and as health care spending approaches 20 percent of the U.S. economy, almost every American is affected and the debate is politically polarizing.

When asked to respond to these charges, most of the system’s stakeholders react in similar ways: Many of these criticisms are valid – except when it applies to us.

The American Hospital Association says, yes, the current billing system is broken, but hospitals aren’t to blame. When patients look at hospital bills, said Richard Umbdenstock, the group’s president, the prices reflect not just the cost of a particular item but “all the resources required to provide the care.” Moreover, he said, the “vast majority” of patients don’t pay the initial bill; that’s just the starting point.

Linda Lipsen, chief executive officer of the American Association for Justice, which represents trial lawyers, said in an interview that Brill’s article correctly focused on health care costs. Brill opposes the limits on malpractice suits advocated by some conservatives. Yet Lipsen takes issue with his more moderate call for a “safe harbor” standard that would require a defendant – a hospital or a doctor – to demonstrate that care was within the bounds of accepted medical practice.

The pharmaceutical industry insists that drugs account for less than 10 percent of health care costs, are rising at a slow clip and that bargaining by big-bulk purchasers creates a genuine market system.

If all this were true, the system would be fine. It isn’t. Three-fifths of U.S. bankruptcies are caused by medical bills. There is little procedure or price transparency; it’s difficult to check a physician’s record or the performance of drugs and treatments.

Medicare gets whacked a lot these days by politicians. Brill demonstrated that the program is more cost-effective. Rather than raising the eligibility age for benefits, he said, lowering the age limit and allowing more people to qualify would decrease health care costs.

Obama’s health care law guarantees that a lot more Americans will have health insurance – a good thing – but the administration is on shakier ground when it contends that the measure will curb costs.

Overall, the system is predicated on a nebulous assumption that there is a real marketplace affected by supply and demand. That’s largely a myth. Consuming health care isn’t the same as purchasing shoes or a car: If you go to the emergency room or are diagnosed with cancer, you’re not likely to bargain-shop.

The system’s big stakeholders have well-connected lobbyists, and are important campaign contributors or forces in their communities.

They react to articles such as Brill’s, but really aren’t much worried. They are rich, powerful and protected.

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