Good piece out this week by Reed Abelson in The New York Times indirectly spotlighting the sharp policy divide between the Trump administration and Democratic presidential contenders seeking a larger government role in controlling the cost of medical care and prescription medications. To the Trump administration that’s anathema. Its response to what it terms the Democratic “socialization” of medical care is to commoditize medical care and prescription drug prices — with price tags attached — so people can shop for it like they might a product on Amazon.
That’s highly disruptive to both the sell and buy sides of the market. The sell side is pushing back and wants to keep business as usual. As Abelson reports, the American Hospital Association is taking the administration to court over an administrative rulemaking that will take effect in about a year requiring they post prices online for at least 300 hospital procedures contending the rule lacks statutory authority.
Also generating opposition, Abelson reports, is a proposed rule that would blow up the confidentiality payers and providers have traditionally enjoyed by requiring them to make public contracted reimbursement rates. Payers and providers also dislike proposals by Democratic presidential candidates that would cover more people under Medicare, including expansive “Medicare for All” proposals such as those by Senators Bernie Sanders and Elizabeth Warren. To them, “Medicare for All” means “Medicare reimbursement rates for all” that would pull billions of dollars off the table: more generous reimbursement rates for employer sponsored medical benefit plans. Those rates are double or more that of government determined Medicare reimbursement rates.
As for the buy side, the Trump administration’s hope is consumers will wield market power to force down the cost of care and drugs. Seema Verma, administrator for the Centers for Medicare and Medicaid Services, wrote this in an op-ed this week:
For too long, the health care system has catered to the demands of powerful vested interests led by hospitals and insurers. The decades long norm of price obscurity is just fine for those who get to set the prices with little accountability and reap the profits, but that stale and broken status quo is bleeding patients dry. The price transparency delivered by these rules will put downward pressure on prices and restore patients to their rightful place at the center of American health care.
Verma complains people don’t know in advance what it they will ultimately pay for an episode of care or prescription until after they receive it. In making it a shoppable commodity, her thinking goes, people can know the price for what they need or desire and make an informed buying decision. That’s disruptive because it requires consumers to alter ingrained behavior in how they interact with medical care, when the cost is generally dealt with after care is received.
Commoditization might work for prescription drug prices and web sites such as GoodRx post comparative price information and offer discounts. But medicine is still regarded as an art and practice. No two patients are alike or will necessarily require the same care even with standard best practice protocols for common complaints and treatments.
Moreover, it’s been decades since Americans customarily paid out of pocket for ordinary care. From the 1940s to the late 1970s, “major medical” indemnity insurance as it was called covered only catastrophic care events. Managed care plans and health maintenance organizations followed, removing incentive to shop for lower cost care by creating an expectation that plans should function as all-inclusive medical bill protection or require only nominal out of pocket cost sharing.