Posted on January 21, 2019 by Yves
Smith
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.
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 similarbetween 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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