I blog about free markets in medical care and transparent pricing.
Ludwig von Mises adopted as his life motto a verse from Virgil: Tu ne cede malis, sed contra audentior ito. The translation is: Do not give in to evil, but proceed ever more boldly against it. His writings and his life reflect the extent to which he truly adopted this wisdom. His refusal to compromise, while closing many doors to him (and nearly costing him his life, as he was forced to flee Nazi Germany), has inspired some of the greatest thinking about economics and its relationship to human behavior. Lew Rockwell’s dream of an institute dedicated to the field popularly called “Austrian” economics, is named after Mises, no doubt signaling to all that compromise of principle would simply never be entertained.
I’ve always liked Mises’ motto, wondering what a world would be like where more people adopted this way of thinking. I ran into another saying this past weekend at the annual meeting of the Association of American Physicians and Surgeons (AAPS) that I wanted to share with you, no less powerful in my opinion, than Mises’ favorite quote from Virgil.
Principiis Obsta, Finem Respice. The translation is: Resist the beginnings, consider the ends. Interestingly the author, Publius Ovidius Naso, known as Ovid in the English world, was, like Virgil, a poet of Latin literature. This quote was revealed at the AAPS meeting as used by a former Nazi to describe the sequence of events in Germany that led to their fascistic insanity. Very small steps, unnoticed by most, led to the totalitarian regime we all now know well.
I think these two quotes have affected me because they are unfortunately applicable in our time. Bob Dole of Kansas was asked in a debate once if there was an issue over which he was willing to lose an election. His opponent was making the case for an absence of principle in Dole’s career. Dole simply did not know what to say. He, like almost anyone in politics or with power, chose victory and the maintenance or growth of their power and influence, over principle. It seems like people will say anything these days to gain power, knowing their future actions bear no resemblance to prior pledges and promises.
So what does any of this have to do with health care? Universal health care was the issue that eventually brought power to the Nazis. This is an extremely inconvenient fact for those promoting it. Countries that have embraced this insanity have wholeheartedly embraced rationing of care to the sick and euthanasia, as an individual’s health, rather than staying an issue for that individual, became a matter for the “state.” In Great Britain (a country Hayek warned in his Nobel prize winning “Road to Serfdom, was embracing the very economic policies of the Nazis they were fighting!) euthanasia has morphed into murder, as their Liverpool Care Pathway is used to “free up” hospital beds.
“But that can’t happen here,” you say! The Independent Payment Advisory Board screams otherwise. The data mining through electronic medical record systems screams otherwise. ”Meaningful use” and “best practices” cookbook medical approaches scream otherwise. Accountable Care Organizations, HMO’s by another name, scream otherwise. I think none of these small steps would have occurred had we heeded the advise from Virgil and Ovid.
G. Keith Smith, M.D.
Thanks to the goons in D.C., health insurance is basically witheld from most folks’ paycheck just like the Ponzi schemes social security and Medicare. That the purchase of health insurance is a deductible expense for employers and not for employees creates the most perverse consequences, one of which is that insured employees feel like their health care is essentially “free.” This creates an artificially high demand, employers try to check with all manner of obstacles. Employers as the providers of this insurance are also inclined to provide this product in name only, to the extent many can get away with it. HMO’s are essentially this “insurance in name only” product. Barriers to real care (not the ridiculous and cheap “wellness” insanity) prevent patients from gaining access in a timely fashion or getting the care at all. This is achieved by granting bonuses to the gatekeepers to the extent to which their denial of real care has been effective. Patients enrolled in HMO’s have health cards they carry around authorizing them to see a doctor whose job it is to deny them care.
People are on to HMO’s. They suck and everyone knows it. It has become very difficult to peddle this fraud. Even employers have soured to this scam as they tend to lose their best employees once this product is implemented.
The legislative session just ended here in OKlahoma featured two of the biggest insurance companies in the country proposing a bill that was essentially a fraud. Since HMO’s suck and everybody knows it, they assigned it three different letters of the alphabet. HMO became EPO, or exclusive provider organization, a product that provided for no out of network benefits. The usual political suspects aligned with those in the insurance industry, pushed hard for this with the help of the largest lobbying firm in the state. Incredibly, this legislation failed. House Bill 2447 got nowhere, thanks to the efforts of my friends Patrick Gaines and Tonya Lee, two people who have worked hard to protect medical practice in Oklahoma from attacks on the free market, like this bill. They have never met a free market-threatening bill they have not been able to kill. Their record of success and ability to build political coalitions is truly remarkable.
Much of what we have been able to accomplish at our facility has been due to the efforts of these two, working hard on the political front, keeping the looters and cronies (who would hamstring our efforts to offer quality care at low prices) from having the success they experience regularly in other states.
Hats off to their success. Their success has translated into ours. Many thanks to you two.
G. Keith Smith, M.D.
IPAB: Independent Payment Advisory Board. MLR: Medical Loss Ratio. ACA: Affordable Care Act. Can you say George Orwell? Let’s take one at a time.
IPAB: First, there is nothing independent about this proposed outfit. Selection of the folks on this panel will make senate confirmation hearings look apolitical. These seats, like almost everything in Washington, will be sold. Not really sure why Blagovich is in jail….selling seats and positions of influence is standard operating procedure in D.C. Second, there is nothing advisory about this outfit. What they say goes. And they will be wrong. No one and no group can possibly determine the “moving target” of the market clearing price (that price that is “correct,” in that at this price there are neither surpluses or shortages) and get it right. What is the “correct” price today may not be the “correct” price tomorrow. What’s right in Baton Rouge may not be right in Camden Maine. They should all read Mises’ “Socialism” prior to taking the job…not that it would make any difference. Here he clearly shows that socialism’s failure is due to the absence of a rational system of pricing. In fact any economic system without rational market-determined pricing will fail. IPAB, however, is not a board intended to maximize the utilization of resources. It is intended to intentionally ration care by setting a price below that required in the marketplace. One would have to be incredibly naive to believe otherwise.
MLR: You should know what this means. It has two meanings. What those in government say it means to effect and then what it is really meant to do. Two really different things. What the government says: no more than 10-15% of a health insurance company’s revenue from premium collection can be used for administrative overhead. 85-90% must be paid out to satisfy claims. HOORAY for the consumer, right? Wrong. Here is what MLR really does. It puts the little insurance companies out of business. 10% of 20 billion dollars is enough to pay administrative expenses at the big boys. 10-15% of 8 million dollars may not be enough to get it done for the little player. Result? All of the little guys clients go to the big boys. Less competition in the marketplace. Consolidation in the marketplace. Why do you think the giant insurance companies supported this aspect of the newest health care legislation?
Affordable Care Act: Even the government’s own studies show that this legislation will add at least 1 trillion in health care spending. This will be primarily absorbed at the state level with wildly increased Medicaid expenditures. Companies providing health benefits to employs are anticipating huge increases in their obligations. Many companies will begin seeking insurance products that are insurance in name only, with little or no benefits attached. EPO’s(exclusive provider organizations) are an example of such a product, an unimaginative twist on HMO’s.
I think that in his worst nightmares, George Orwell never imagined such unapologetic and false labels issued by the state.
G. Keith Smith, M.D.
Ok. This is really important so let’s go over this again. Health maintenance organizations are organizations designed to make money by denying you health care. I decided to write this blog after seeing an editorial in our local paper pushing people to consider HMO’s as a way to decrease ”out-of-pocket” costs. These organizations have come and gone through the years but not before causing great pain and suffering. Check out this article on the origins of HMO’s. Your primary care doctor in this scheme is compensated by the extent to which money is not spent on you. Bonuses are typically paid at the end of the year based on the primary care doctor’s gatekeeping skills. That is, if your diabetes is complicated and difficult to manage, the primary care doctor makes more money by making damn sure you never get to see an endocrinologist. There may not even be an endocrinologist on the plan. If your hemorrhoids are difficult to manage and all of the ointments and steroids aren’t working, you will be told that “..you just need to give it more time..”..or something like that. It is very unlikely that you would be able to see a colorectal surgeon for your condition, let alone have anything done about it. Here’s my favorite, though. Your child needs their tonsils removed because of their apnea and frequent throat infections. You are told that “tonsillectomies are a thing of the past.” “This operation is just not necessary.” ”We can manage this with antibiotics.” You watch your child suffer and notice that the families whose children had their tonsils removed aren’t sick all the time like your little tyke. You get angrier and angrier, and are now on to the HMO denial game. You mention to your pediatrician that you have decided to file suit against him for denying your child appropriate care and PRESTO!! ..you have an appointment with an ear, nose and throat surgeon…..in 5 months. ”That’s the soonest we could get you in.” Why? Because there is only one ear, nose and throat surgeon on the HMO plan. And he is horrible. A reputation so bad that even you as a non-physician know that you will never let him touch your child. And the only reason he is signed up for this crappy plan is that the folks running this HMO guaranteed him that he would be the only one….he would get all of the business. He would get all of the business, not because he is any good, but because he was on the plan and whose practice is so bad that he would sign up for anything. The HMO pays him horribly, but his waiting room is full. This idiot would be out of business were it not for schemes like this. The free market would have crushed him many years ago.
HMO’s are a little like Canadian health care, but worse. If you poll Canadians, the vast majority will tell you that their health plan is great. Why? Because the vast majority of Canadians have never tried to access their health plan. It is a great plan until you get sick. HMO’s are the same sort of thing….with this caviat: in Canada the physicians aren’t incentivized to deny you care like they are in HMO’s. In Canada, everything is limited and rationed by the government. In HMO’s, your suffering translates in to larger dividend payments for the shareholders holding HMO stock. Your child’s chronic infections and denial of their tonsillectomy results in a bigger Christmas bonus for your pediatrician.
As an employee you may be increasingly pressured to sign up for crap like this. You will likely be told that it is for your own good and will save you money. Herding you into an HMO is very much like taking away the health benefit portion of your compensation entirely. You are probably better off uninsured.
G. Keith Smith, M.D.
How do HMO’s work? Physicians are paid a “capitated rate.” That means that for every patient (capitated means “head”) the physician receives a set amount of money….regardless of the care rendered to the patient. Typically at the end of the year, the extent to which the physician has been successful in limiting the patient’s health costs results in a bonus…to the physician that denied them care! The patient typically has no “out of pocket” expense. What sort of incentives are produced by a system like this? If you said,” the patient is likely to seek the physician regularly because it doesn’t cost them anything,” go to the head of the class! If you said,”the physician doesn’t want to see any patients because he has already been paid for seeing them whether he sees them or not,” you too, go to the head of the class. So the patients can’t get an appointment and the physician’s waiting room is empty!! Who wins? The insurance company or employer that offers this “insurance product” wins because no one gets any care and costs are minimal!
Several different versions of this abomination have been tried. Sometimes it is just called something else. The lesson is that if your physician is paid the same whether they see you or not you are going to have a more difficult time getting in to see them (and if you do, good luck getting them to give a flip about your condition). It is interesting that this type of medical economic system was invented in fascist Germany in the 1930′s. One new twist on this is the physician hospital employee. A colleague of mine told me last week that he had difficulty at a local hospital getting a pulmonologist (lung doctor) to see one of his patients because….you guessed it!…he and all of the other lung doctors had recently become salaried employees and are paid the same regardless of whether they see 1 or 100 patients a day. What a great way to eliminate customer service.
Can you imagine how motivated a restaurant would be to serve you if they were paid the same regardless of the number of patrons entering their establishment? Or the plumber or electrician that is paid the same regardless of how much work he does? What insanity! What is it that leads people to believe that the same market forces that shape our behavior and discipline everyone involved in commerce don’t apply to medical service?
True competition and the free market will lower costs and lead to an improvement in the quality of medical care for everyone just as these concepts and market forces have for every other economic aspect of our lives.
G. Keith Smith, M.D.