I blog about free markets in medical care and transparent pricing.
If this is the best the statists can do we are in good shape. Dr. Peter Ubel, no Rothbardian, asserts that price transparency could actually increase the price of healthcare (Lasik?) and that while cardiologists and other super specialists make too much money, primary doctors don’t make enough.
Dr. Peter Ubel, like all central planners, suffers from the fatal conceit Hayek brilliantly described in “The Road to Serfdom.” Once again, prices emerge from a free market…they are not imposed. That Ubel thinks or feels some doctors make too much money is irrelevant and more than likely relates to an unresolved envy issue with which he is struggling, not unlike that Mises dissected in “The Anti-Capitalist Mentality.”
I wasn’t going to respond to this silly article but there is something to learn, after all. In response to a question about the free market and price transparency movement we are seeing in the U.S., Ubel says this:
The free market is a wonderful thing, when it enables consumers to make informed choices about which products to buy. But medical consumers, a.k.a. patients, often have a hard time making the kind of savvy choices that will bring discipline to the market. Moreover, they are often in positions of making high-stakes, emotional decisions, in short time spans, without fully understanding their choices. To make matters worse, many physicians I’ve spoken with say they feel it would be inappropriate to discuss the cost of care with patients, especially when they face life-or-death decisions. Hard to imagine how the market, on its own, will work effectively in such circumstances. We need to bring more market efficiency to healthcare, but it is unrealistic to think that a completely unregulated free-market is going to solve our problems.
Now the first thing to say, is that while he is pontificating and thinking deeply about things, we are doing everything he says can’t be done. Also, patients are well-informed in spite of his arrogant characterization of them.
Second, he has contaminated his view with a time twist. Here’s what I mean. He is judging the applicability of free market principles in the future, using a current time context. Here is why that is absurd.
In Oklahoma City, there are car dealerships that are interested in selling you not only your first car, but every car you ever buy. These businesses have built reputations over time, reputations of fair dealing and thinking long term, not the hit-and-run “gotcha” mentality at some car lots. Everyone knows who the reputable dealerships are. The same goes for roofers and plumbers and tire stores and banks and….and now healthcare. Everyone in Oklahoma City knows that if they need surgery, The Surgery Center of Oklahoma is the place they can go that will treat their pocketbook with respect while rendering the best care. The same goes for those needing a total joint replacement. They go to the McBride Clinic Orthopedic Hospital. The same goes for a colonoscopy. They go to Digestive Disease Specialists. The same goes for cancer chemotherapy. They go to my friend Dr. Aleda Toma and her partners at Cancer Specialists of Oklahoma. The same goes for mammography. They go to Breast Imaging of Oklahoma. The same goes for cardiac disease or surgery. They go to my friend Dr. John Harvey and his partners at the Oklahoma Heart Hospital. The same now goes for major gynecological and urological and general surgery requiring an inpatient stay. Patients will very soon know more about Deaconess Hospital, the latest to join us in this price transparency movement.
Here’s my point. The reputations of these facilities have taken time to create. To say that after flipping the switch to free market, people won’t instantaneously know where to go for care, is to disallow the necessary time for discovery of which facilities represent the best value and is logically a cheap trick.
Dr. Ubel thinks the price paid for healthcare is out of whack. Here, he and I agree. Dr. Ubel thinks there is some better way to allocate scarce resources than the free market. This is where we disagree. He has nothing to back up his stance other than his feelings. I think the countless patients we have treated and simultaneously helped to avoid bankruptcy are sufficient to make my case.
G. Keith Smith, M.D.
As Murray Rothbard asked, “cui bono,” or “who benefits.” Here is the answer to his question when it comes to Obamacare, plain and simple. Just as the corporate hospital stocks soared after Justice Robert’s ruling, they soared with the announcement that pay cuts became pay raises and the elimination of the uncompensated care payments became a maintenance of this scam at a 25% reduced level.
It should be increasingly clear who the real beneficiaries of this legislation are, and increasingly clear who they are not (the patients). It would have been more honest to call this “Cronycare,” as the corporate medical players and their stockholders are making a bundle off of the increasingly poor taxpayers.
G. Keith Smith, M.D.
I think it is hard to know what is true these days. One thing is definitely true for me though. I think that most people, myself included, can only take so much truth in one sitting. In my experience, freedom-minded thinkers tend to be independent thinkers and most of the time are open-minded, with a willingness to self-examine and change prior beliefs and thoughts that don’t pass the test of philosophical consistency. This type of mindset can lead folks to something called the truth, something to which ideologues of all stripes are often times blind. And drinking in too much truth too fast can breed unbridled cynicism and a sense of unbalance.
One of my favorite movie lines ever was from “V for Vendetta,” when the chief inspector, brilliantly played by Stephen Rea, asks his protege this question: ”..would you want to know?” In this scene he has reluctantly come to the conclusion that his own government cannot be ruled out as a suspect in the deaths of many of the citizens. He very carefully states that he has no proof, but rather asks that if it were true, “would you want to know?” I see his question now as an extremely well-mannered gesture, an opportunity given to the young protege to limit the pace of unpleasant ideas coming at him.
I think that for those of you who would answer “YES!” to the inspector’s question, you should remind yourselves how unsettling the nature of the truth can be. Believing, for instance, that the Unaffordable Care Act is crafted to line the pockets of various corporate interests, no matter how many are killed or neglected in the process, is not sunny picnic talk. After coming to this conclusion, I craved a P.G. Wodehouse novel for my own balance.
While the truth about the world around us is troubling and unsettling at times, the truth about freedom and liberty itself is always uplifting and buoyant for the spirit. The miracle of the free market has brought affluence to the human race like no other influence on the planet. Mutually beneficial exchange renders both parties wealthier. This tendency to improve your own lot by cooperating with others, while all parties pursue their self-interest, can certainly be soiled by the state, but the tendency and the truth of the nature and consequences of this interchange remain, nonetheless.
The more anger and vitriol I see from the statists, the more I know they are threatened by the growing appeal of the idea of less state coercion in our lives. The more desperate I see statists in their actions, the more I believe they feel their backs to the wall, their power threatened.
I am grateful to all of those whose personal examples have kept me from succumbing to skepticism and cynicism, that although to some degree necessary to survive in this world, can spoil the joy and laughter that an understanding of freedom brings. This is the balance that is difficult to maintain, I think.
In the arena of ideas, no one manages this better than Lew Rockwell, founder of the Ludwig von Mises Institute. Look at his picture on google. He is always smiling! He is funny, all the while having few peers as a hard hitting writer. During the few times I have been around him, everyone around him was laughing. I never met Murray Rothbard, but I understand that he had the same sort of influence on everyone in the room. He was, quite simply, hilarious, but as brilliant and incisive as any scholar of his time.
I suppose I am giving this advice as much to myself as to anyone reading this. Focus on the presence of liberty as much or more than you do on the suffering caused by its absence. The cause of liberty is always good news for those who wish to be free.
G. Keith Smith, M.D.
I once wrote about how happy one of my mother’s friends should have been when Medicare decided to no longer pay for her B-12 shots, as the private sector would figure out a way to make sure there were no shortages of B-12 injections. Ever. Central planners, on the other hand, those in medicine in particular, who assign pricing to products and services always get it wrong. This is the fatal conceit, about which Hayek warned us. A bureaucrat can never discover a market clearing price (that price at which there are neither surpluses or shortages) because this price must emerge from market interactions, not be imposed on an economy.
Thousands of Medicare patients with cancer are getting their first glimpse of what the death panels will look like. In this article by Sarah Kliff of the Washington Post, thousands of Medicare patients are reported to have been turned away from their usual cancer treatment centers because the government has decided on a different price these centers are to be paid. If you guessed that they got it wrong on the low side, you go to the head of the class.
The real story actually has a sinister side. Kliff touches on it but doesn’t know and probably can’t even imagine the mercenary tactics at work here by the big hospitals and Uncle Sam. Remember that hospital-employed physicians are paid 40% more by Medicare for the very same service as physicians that are in private practice. Likewise, hospitals are paid more by Medicare for the administration of chemotherapy than private clinics. Keep this in mind when you hear some government apparatchik moaning about the impending bankruptcy of Medicare. These Medicare cuts, affecting only the private clinics, will not only put them out of business, but that is the intent, the goal, the very purpose.
Remember the lesson from Jim Epstein of Reason Magazine: “industry consolidation is the smoking gun of government corruption.” Or apply Murray Rothbard’s penetrating question: “cui bono?”…who benefits? If you said the big hospitals, you get a gold star.
The short term solution, of course, to save Medicare money on chemotherapy, is to insure that no Medicare patients are treated in a hospital! This is far too logical, though, and the private clinics don’t have the money to throw at lobbyists that the corporate hospitals do.
This is a great example of Jane Orient’s quote that “coverage doesn’t mean care.” These thousands of Medicare patients are getting a feel for what this president means by a “right” to health care, aren’t they? What they really have is a right to hope for chemotherapy. The current regime doesn’t care if you have “coverage.” They don’t care if you get care. What they want is control of your healthcare. Collecting premiums from the taxpayers while simultaneously denying care is a recipe for a profitable “insurance” enterprise, no?
Welcome to Obamacare. We haven’t begun to see the worst. I remain hopeful, however, that this tyranny will usher in a market economy in medical care. I remain hopeful that rather than be corralled into health camps and clinics, the American people will take matters into their own hands and seek alternative sources of “coverage” and “care.” These patients with cancer really haven’t been given much choice though, have they?
G. Keith Smith, M.D.
One of our orthopedic partners brought me this article recently. Some comments.
The author’s conclusion is that Medicare’s pay cuts for orthopedic surgeons performing total knee replacements has paradoxically resulted in more of these surgeries being performed and an overall increase in cost to Medicare. The authors correctly surmise that the surgeons are attempting to achieve “income homeostasis.” But then they gloss over their own punch line. This increase in the number of total knee replacements caused an increase in the total expense exclusively due to the large facility fees paid by Medicare to the big hospitals.
Did you catch that? Remember Eli Lehrer’s claim that exorbitant physician salaries were the reason that medical care was so expensive in this country? This is no exception to the law of supply as the authors state, but rather, the equivalent of someone eating more slices of pizza once they are sliced thinner. The authors also arrogantly pontificate about what the “right” number of total knee replacements should be and what the “right” charge for this should be. These guys have never heard of Murray Rothbard, I’ll bet.
This is an example of the failure of the central planners trying to control a market by deliberately lowering the payment to the surgeons to an amount below what is believed to be the market clearing price, a deliberate attempt to cause a shortage of supply…rationing, in other words. But the policy dunces in D.C. got it wrong once again, with the hospital charges busting the budget.
I can just hear the folks at CMS (Medicare): ”Let’s cut these surgeons to the bone but leave our hospital pals alone.” ”We’ll save bundles off the backs of these surgeons and they’ll see fewer of the patients needing this surgery, too!”
This is no failure of the free market. This is the absence of a free market. This is one of many examples of the unintended consequences of the central health planners, a failed attempt at deliberate rationing. I expect their future attempts to ration care to the elderly to be more overt in the future. Perhaps even those who are saying “Don’t touch my Medicare!” and even some supporters of the Unaffordable Care Act will come around to the idea that we should give the free market a real chance in the delivery of healthcare, a service upon which people’s lives depend.
G. Keith Smith, M.D.
Much can be learned by the reaction to the refusal of several governors to implement exchanges or expand Medicaid in their respective states. I have written at length about the usefullness of Rothbard’s “cui bono” (“who benefits”) concept, to pull back the curtain in an attempt to find the real reasons for this or that government policy/action. In other words, no matter what some government apparatchik proposes, look hard for the beneficiaries of that action and you’ll more than likely discover who was behind it.
On the flip side and as a corollary concept, those who whine the longest and loudest when a government policy is not pursued, are those most likely to have benefitted, had the policy been realized. The reaction of the corporate hospitals to Governor Mary Fallin’s decision to reject creation of an exchange and her refusal to expand Medicaid illustrates the validity of this and signifies a division in the “business” community that merits consideration. I think Governor Fallin had to know this rift would result, making her decision all the more remarkable.
Hospitals and insurance companies have as much or more support on the Republican side of the aisle as they do on the Democrat side, historically. Many times, hospital CEO’s are treated as fellow “businessmen” by those in the business community. The wild profits of hospitals are tolerated as regrettable but necessary. Hospitals smooth this situation over by constantly treating anyone within earshot about how much care they “donate” or give away and their “contributions” to the community. While the hospital-men (modern day highway-men) quietly prayed for Obamacare’s healthy future, other businessmen saw this legislation for what it was: the most gigantic over-reach of federal power in recent memory and one that threatened the very existence of their businesses and enterprises.
Certain Republican legislators having long been in the pocket of the big hospital lobbyists and big insurance, have been in a jam. They had to look like they were against Obamacare to the folks who voted for them, all the while knowing their corporate benefactors were counting on them to do their part. As the governors contemplated nullifying this law, we heard…”..it’s the law of the land, now that the election is over,” and other such statements in an attempt to disarm the rebellion.
In chapter 43 of Thomas DiLorenzo’s blockbuster new book, “Organized Crime: The Unvarnished Truth about Government,” he writes the following:
“As common as it is to speak of ‘robber barons,’ most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction-the distinction between what might be called a market entrepreneur and a political entrepreneur. A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, and/or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.”
If you apply DiLorenzo’s distinction to the business community, two types of entrepreneurs certainly appear, the vast majority of those in the healthcare business falling into the “robber baron” group. Imagine a chamber of commerce meeting where those political entrepreneurs in the various health businesses had to wear an “O” signifying their support of Obamacare, legislation that may represent the ruin of many others in the room. Unable to satisfy the political and market entrepreneurs with her decision, Governor Mary Fallin sided with the free market bunch by rejecting the exchanges and refusing to expand Medicaid (which basically amounts to loading more passengers on the Titanic in the words of one legislator).
Good for her. She should wear as a badge of honor the various attacks she is receiving from the political entrepreneurs in the healthcare business sector. Contrast the principle of her decision with that of New York’s mayor, who pulled his sword in defense of union workers, rather than accept the much needed non-union help in Sandy’s aftermath.
G. Keith Smith, M.D.
Ah. This is the season when ambitious folks will say whatever they think people want to hear. I stopped wondering whether I was being lied to by politicians and bureaucrats years ago. Now I assume that politicians are lying as my default position, this approach vindicated, I think, looking back.
I’ve come to believe that government is in the business for…well….businesses. And big businesses will pay big bucks for political favors, those that mandate the purchase of their products or services, or those favors that hamstring or destroy their competitors. Creating almost impenetrable webs of lies to cover their true purpose is part of the political game, a game usually played in the name of our “well-being” or “safety.”
How do we know what to believe? Even harder sometimes is how to know what to look for. I have mentioned Murray Rothbard’s “cui bono,” (who benefits), as a way to look at historical events, a method that allows one to “back in” to the real reasons that this or that policy is or was promoted. Take electronic medical records, for instance. Who benefitted from mandating the purchase of these systems? If you said, “those producing these systems,” you are well on your way to discovering how government works and/or being accused of being a conspiracist.
Our new friend, Jim Epstein at Reason Magazine, has given us another investigative tool, one which helps us know when to ask Rothbard’s question. During his two days of filming a documentary at our facility on free market health care (due out mid-November) he suggested the idea that “industry consolidation” is a smoking gun, one which helps us know that government and its crony gangsters are up to their usual shenanigans.
A great example would be the rapid disappearance of rural hospitals. This has occurred simultaneously with record profitability at the big city corporate hospitals. The big city hospitals are the obvious beneficiaries of this industry consolidation. The difficulties of the rural hospitals are primarily due to the rules and regulations issued by Uncle Sam with which only the heavy hitting big corporate hospitals can comply. That this hospital industry consolidation occurs, should represent sufficient evidence that the big hospital beneficiaries were actually instrumental in the implementation of these crushing rules and regulations.
Using this approach, let’s take a look at compounding pharmacies and the renewed desire of the FDA to “regulate” them, using the apparent failure of a New England pharmacy to comply with certain obvious control measures as their excuse. Never let a crisis go to waste!
At the Surgery Center of Oklahoma, we used Wydase (brand name of hyaluronidase) until 1999 when the FDA declared their factory “non-compliant.” You can read about the time line for Wydase here. The patent for Wydase had expired, so there wasn’t enough profit in the production of the drug to deal with the FDA gangsters. The compounding pharmacies came to the rescue, partly due to the fact that they don’t have to mess with the FDA’s racket. They have supplied facilities like ours with hyaluronidase for over a decade now without a hitch.
Hylenex and Vitrase, the new brand name producers of hyaluronidase that came on line in 2004, charge 8 times what our local compounder charges us. Every drug the compounders supply cuts in to the business of companies like those making Hylenex and Vitrase. Thanks to the abuses of the compounding outfit in New England, the FDA sees its opportunity to “regulate” the compounders, a move which they know will shut down the compounders, as they are in no position to take on the FDA stormtroopers. This is the type of industry consolidation that Jim Epstein told us to look for, particularly one that occurred with a “safety concerns” sort of veil.
Understand that the FDA doesn’t really want to “regulate” compounding pharmacies. They want to close them! This will leave purchasers of these drugs at the mercy of their primary clients, the big pharmaceutical companies that pay homage in various forms to the government and the gang of politicians running things. Can’t you imagine this sort of conversation with a congressman: ”Do you think you could have the FDA seize the next plausible opportunity to crush these local yocal compounders? It would sure help our stock price.”
Many thanks to Mr. Epstein for this keen but in retrospect, obvious insight. If you see the stock prices of the major pharmaceutical companies soar, you will know that the compounders are in trouble and that the politicians bought in at the lower price.
G. Keith Smith, M.D.
A government agency is using an isolated incident as an excuse to grab more power. As someone blogged on their Tumblr site the other day, “In other news, water is moist.” The FDA, always there to protect us from ourselves, wants the power to regulate pharmacies that compound drugs, rather than manufacture them. The difference between compounding and manufacturing is a matter of quantity. Of course, the reason pharmacies compound drugs at all is that the FDA has made the manufacture of these drugs impossible. Now the FDA wants to make it impossible for patients to obtain these drugs at all, or only at the prices their big pharma buddies demand. The most recent excuse for the FDA invasion of compounders is a fungal tainted steroid solution from an isolated pharmacy in Massachusetts.
As the FDA has run many companies out of business, the only source of certain drugs, some of which are life-saving, has been the compounders. Preservative free drugs for spinal injections, hyaluronidase (a local anesthetic spreading agent) and the life-saving drug, succinylcholine have all been available to our surgery center no thanks to the FDA. These drugs at one time or another for the last 7 years have been available only due to the efforts of local pharmacy compounders. Guess what these pharmacies will do with their compounding business when the FDA threatens to “regulate” them if they choose to continue compounding drugs?
Remember that the FDA is the outfit responsible for granting the exclusive distribution rights for scorpion anti-venom to a single Tennessee company, an action the result of which caused the drug (available for $100 over the counter in Mexico) to achieve a $3750 price in this country. This markup of 37 times dwarfs the usual and subsequent hospital markup of 10 times. Think any money changed hands on this deal? Wonder why the FDA wants more power? It’s because they care so much about us, isn’t it?
Murray Rothbard described the state as “a criminal gang writ large.” Power translates into wealth or more power for later wealth through confiscation. Any time a government agency wants more power this should appropriately be viewed no differently than a mafia gangster seeking to enlarge his territory. The FDA has tried to grab the compounding pharmacies in the past. I know that the Association of American Physicians and Surgeons is on to them and will fight this expansion of government. The FDA’s “clients,” the big pharmaceutical companies will be silent on this, as they will be the primary beneficiaries of this power grab. With the compounding pharmacies out of the way, the giant pharmaceutical companies will be the only source, however unaffordable, of the drugs these compounders have been making available at affordable prices. The FDA’s goal is industry consolidation, the result of which will be more gigantic profits for their primary clients, those greasing the palms of the FDA gangsters. This is crony capitalism at its finest.
And there remain among us those that believe government intervention in health care will cause the quality of care to be higher and the price to be lower.
G. Keith Smith, M.D.
Want to know what will happen to the price of your insurance premiums once the individual mandate kicks in? Look here at what happened in Massachusetts when Romneycare was implemented. I would encourage you to continue to ask “cui bono” as you read this article. If you have followed this blog for any time at all you’ll probably come up with the same answers I did. Not satisfied with bankrupting individuals, the Medicaid expansion provision touted by those in the article will bankrupt or squeeze the state governments, forcing them to face new revenue raising strategies. How long will governors stay tough on this? Probably not long. How do you like Greenwald of Harvard’s comment that Medicaid expansion is a really good deal for the folks in Texas? After all, the federal government (where do they get their money????) will pay for almost all of this expansion!!
Why can’t we just let the market work? It’s not because the poor will be left to fend for themselves, all of the cries to this effect notwithstanding. Market pressures have reduced prices such that cars, computers and cell phones are within financial reach of almost everyone. Why would anyone think that health care is any different? It’s not. The problem with letting the market work is that the folks that are paying off lawmakers at all levels of government wouldn’t have a trough full of your dough and mine at which to gorge themselves. Rather than succeed through an appeal to the legitimate needs of customers, big business has found it easier to appeal to the greed of the slimy legislators. One of the advantages of this business approach is that crushing upstart competitors is part of the deal.
Think the Romneycrats will shun this corporate gravy train? Think if they “get the power” they will alienate their old pals in the insurance and pharmaceutical and hospital industry?
After reading the article linked to above you will see, I think, that the whole point of this Unaffordable Care Act is to make care unaffordable for enough folks that we’ll get to see the sequel. I’m going to give it a name now. Unicare. Give me some ideas if you think there’s a better one.
G. Keith Smith, M.D.
Let’s say you’re one of those well educated leftists believing in a significant role of government in our lives. You hate the republicans because they are just a bunch of crony capitalists, funneling tax dollars away from the poor and middle class to their rich friends in various industries. Part of your justification for your belief and faith in government is that after all, if the government doesn’t take care of the poor and regulate these cronies, who will? Your support of the democrats is based on their promises to soak the rich and other such things to better and more fairly distribute the wealth so that all of the poor and unfortunate can have this government-provided safety net, into which they can fall when hard times hit them.
Question: how does it feel to know that your democrat friends are funneling tax dollars away from the poor and middle class to their rich friends in various industries? Did you see hospital stocks yesterday with the court’s ruling? Did you see the stock of the various big insurers? If you owned Apple computer, and the government ruled that anyone that refused to by an Apple computer would basically be taxed an amount necessary to buy an Apple computer, and the court upheld this law, what would that do to your stock? This is exactly what happened with the court’s ruling and was the intent of the law from the beginning.
Big insurance, big hospitals, big pharma and the HIT (health information technology) industries wrote this health care law. They brought unfathomable amounts of money to the table to be at the table while the bill was crafted. It was written by them and designed by them to put their smaller competitors out of business. That was the purpose of the law. If this isn’t the crony capitalism that has characterized the republican party for the last 50 years, I don’t know what is.
Where has the skepticism of the left gone? Why do you on the left continue to discriminate, favoring one political party over the other, not understanding that the only rational approach is to distrust both sides? How can you believe so easily? Why is there such little distrust when the track record of truth-telling by government for quite some time is so dismal?
It isn’t always necessary to learn things the hard way, but the faith that many on the left have put in government by this administration, grants them undeserved legitimacy and guarantees more tough first hand lessons. Make no mistake, I have little faith in either side. Rather than say “my guys are good and your guys are bad,” why can’t we stop discriminating and declare them all bad?
This crony capitalism from the left should leave many of you on the left breathless. I would encourage you to watch events unfold keeping your mind open to the idea that you have been duped. Ask questions as you see the poor and elderly, those clinging to the promise of Obamacare, increasingly disenfranchised by this legislation. Remember to test not what you hear but what you see with Murray Rothbard’s penetrating question, cui bono (who benefits). Try to get back in touch with your inner hippy and reject the fascistic version of economics traditionally championed by the GOP.
G. Keith Smith, M.D.