I blog about free markets in medical care and transparent pricing.
I have come to the conclusion that the main reason my medical free market and transparent pricing message has been so widely and warmly embraced is very simply that it is good news. I have been viewed as a good news guy in a bad news industry. That “here is what we do and here is how much it will cost,” has been received as such good news is an indication of how truly cartelized the medical industry has become.
To be fair, the bad news of Obamacare, has made our message even more appealing. Nothing about this Unaffordable Care Act is good news. Insurance premiums and the costs of healthcare are skyrocketting due to this legislation, access to care is problematic due to physician retirements and employers are laying people off or moving them to part time positions in order to keep their doors open. Recently, The Associated Press’s Ricardo Alonso-Zaldivar reports that some of the sickest and most vulnerable patients will be unable to afford the increasingly high out-of-pocket costs for the drugs they depend on for their very survival.
All of this is quite predicable, actually, as Obamacare was, I believe, meant to fail. The purpose of this legislation, seen in this rare slip by Rep. Barney Frank, was to introduce such price increases that the American people would beg the government for relief: single payer.
This failure currently and long term, however, is beneficial to this administration’s corporate healthcare buddies on Wall Street. Seriously, how would you like to provide a product or service(health insurance) the purchase of which the federal government made mandatory? How would you like to know that your business (giant hospital) will collect from the distant taxpayers, rather than the patients you are supposedly meant to serve? The giants of corporate healthcare are making record profits, profits that will pale when compared to their future ones as the great consolidation of this industry takes place.
But I said I was a good news guy. Here then is the reason for hope. As the costs of healthcare and insurance spiral out of control patients and businesses will increase their out of pocket deductible exposure and do something that has long been absent in the medical industry: shop. Patients will shop for price and quality just like they do for everything else. This, of course, is the unanticipated nightmare of the Obamacare bureaucrats, as real competition will appear (it already has, check out my pricing listed on our website) and actual price deflation will result. The crisis this adminstration has attempted to create will paradoxically create the cure to the mess that the government and their cronies have made of the medical industry.
Patients travel to our surgery center from all over the country to take advantage of our upfront and fair pricing. Indeed, the first patients to show up after we put our prices online were Canadians! In addition to the patients who travel to our center, many patients are using our pricing to leverage better pricing in their local medical markets. As I stated on the John Stossel Show last month, a Georgia hospital recently agreed to charge a patient $4000 for a prostate surgery (rather than the $40,000 initially quoted) after the patient showed them our online price of $3600 and a plane ticket.There is more good news.
Medical facilities and physicians all over the country are jumping on this free market medicine model. The AMA continues, and deservedly so, to lose members, while membership in the free market Association of American Physicians and Surgeons (AAPS) soars. The AAPS growth is largely due to its advocacy of third-party-free physician practices, a model that removes the bureaucrat from the exam room. Big hospitals on physician hiring binges are finding that once they become employees, doctors go on vacation, working less and less, making this patient-disenfranchising model very unstable. More employers are punching out of traditional insurance and seceding from this cartelized system by self-funding, taking the control of their employee health plans away from those insurance carriers whose interests differ from their own.
I could go on. The good news in health care is not Obamacare, but rather is in spite of Obamacare. The free market competition that this legislation has unintentionally spawned will improve quality and lower prices just as competition has done (without exception) in every other industry.
G. Keith Smith, M.D.
Here is a link to my portion of the interview with John Stossel for those of you that are interested. This interview led to my interview tonight with CNBC Asia-Pacific with host Bernard Lo. I’ll post that link as soon as I have access to it. These two shows have reached huge audiences and the response has been impressive, particularly the number of people that are requesting price quotes. Our website actually melted down due to the traffic Sunday night during the Fox News Channel broadcast of Mr. Stossel’s show.
The price war has begun. The competition in health care on quality and price has begun. The beneficiaries will be patients and their pocketbooks. Nothing will create better quality at lower prices than the free market. Nothing will create unaffordable care and poor quality like state involvement in health care. Thanks to all of you who are helping to spread this message, essentially good news in an otherwise bad news industry.
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.
Thanks to Brandon Dutcher for passing this along, an article that contains an admission by the “president” that his own health care bill is a failure. That’s right. He has rescinded the cuts in the “uncompensated care” payments to the hospitals because….ready?….because the Unaffordable Care Act will do nothing to lessen the amount of uncompensated care!
This is embarrassing. This is also devastating for the hospitals attempting to continue to spew propaganda about how the states need to expand Medicaid in order to make up for their loss of uncompensated care payments. I wrote in August of 2012 that the hospitals would perhaps support the Unaffordable Care Act and in return agree to let their uncompensated care payments go, only to get these payments anyway.
It will be interesting to see if this mess continues to unravel or if Uncle Sam starts to play rough. Kudos to the governors (ours, Mary Fallin, included) who have said no thanks to the exchanges and the expansion of Medicaid. The political pressure by the hospital lobby here in Oklahoma has been intense, just as I am sure it has been in other “rebel” states.
G. Keith Smith, M.D.
The Daily Oklahoman, our local newspaper, while initially in opposition to Governor Mary Fallin’s rejection of the health exchanges of the Unaffordable Care Act, is now happily printing supportive editorials of her decision. April 16th’s editorial title, “With Obamacare, Nearly Every Promise Going Unmet,” is perhaps more true than the author(s) has any idea.
Here are some of the unmet promises in the article:
You can keep you doctor. Not with the more restrictive network “panels” and certainly not if as many of the physicians quit practicing as polls show!
You can keep your insurance, if you like it. No you can’t, and even if you wanted to, you will probably not be able to afford it.
This law makes healthcare affordable….you know…the Affordable Care Act….my personal favorite unmet promise.
The cost estimate for setting up the exchanges is now double last year’s estimates. Wow. This has never happened in government, has it?
And soon to be realized by states embracing Medicaid expansion, will be the lie of how the federal government will pay for all of this. The federal government has never promised to pay for something, only to not pay for it have they? Oh, and then there’s this…the federal government is broke.
Here is the part, the editorial left out. When they said that nearly every promise has gone unmet, they were correct, in that several promises that were made have been delivered on, though none the current regime would like to have discussed.
Incentives have been created to force more private practice physicians into the indentured servitude of hospital employment. This allows the hospitals to make money off of these hapless doctors and makes the physicians easier for government bureaucrats to control, corralled into groups.
The Medical Loss Ratio is indeed creating the consolidation of the insurance industry it was meant to create, benefitting the big insurance companies who came up with this, a scheme meant to crush their smaller competitors.
The health information technology industry has made off with billions in revenue they would not otherwise have collected, as a result of the federal government making the purchase of their product essentially mandatory. Physicians are, after all, paid less by Medicare, if they don’t buy these systems and subscribe to this insanity.
I wrote prior to Justice Robert’s ruling that the players involved in the creation of this law, really didn’t care how the supreme court ruled, as they had already accomplished many of their goals, identical to the list above. This law was never about healthcare. It was, rather, like almost everything else that oozes out of D.C., a diversion of wealth from the many, to the well-connected.
While national and state legislators harp, “..get over it….Obamacare is now the law of the land,” keep this quote from Kathleen Sebelius in the Oklahoman’s editorial in mind:
“It is very difficult when people live in a state, where there is a daily declaration, ‘We will not participate in the law.’ “ This rare show of weakness and frustration by one of this law’s architects and primary henchmen should buoy the spirits of those involved in what the French would call, La Resistance.
G. Keith Smith, M.D.
The Oklahoma Council of Public Affairs passes on this quote from the late, great Joseph Sobran:
“What puzzles me is why journalism should be so reflexively on the side of government. During the Watergate era, we heard about the ‘watchdog press,’ the ‘adversary press,’ the press as the ‘fourth branch of government.’ That old skepticism about government, largely illusory then, hardly survives today even as a pose. Today the press seems to see itself as government’s partner, assisting and promoting the expansion of the state. The only politicians it treats with skepticism, verging at times on open hostility, are those who try to put the brakes on government. You might think that after a century of tyranny, total war, genocide and mass murder, not to mention organized robbery through taxation, inflation, debauched currencies, and redistribution, all of which have generated more corruption and social decay—well, a little skepticism toward the modern state itself is long overdue. But the news media still persist in the faith that government is the natural instrument for the betterment of the human condition.”
As I read this it occurred to me that while the modern state and its crimes and folly tend to get a journalistic free ride, any individual even suspected of committing any of the same acts or crimes makes headlines. One of the concepts I encountered when first reading the classical liberal scholars was the notion that the “state” should not be allowed to do anything an individual could not get away with. In short, if an action is considered a crime by an individual, that same action should be considered criminal for the state. This restraining concept, perhaps more than any other, serves to limit the scope of government to a more proper role.
It also occurred to me that while the modern press makes headlines with the possible conflicts of interest physicians may have owning the facilities in which they work and to which they refer, the same journalists look the other way as self-dealing hospitals account for 60% of personal bankruptcies in this country. The gravity and depth of the conflicts of interest present in the every day corporate hospital dwarf the worst examples of physician conflicts to which you could point. After all, if you were trying to make money by self-referral, which would you rather own, an MRI machine, or the doctor and the MRI machine? Which would you rather own, the hospital, or the doctor and the hospital?
Are there doctors who own MRI machines who are by virtue of this arrangement more likely to order an MRI? No doubt they are here and there, ordering the studies that are indicated and a few that are not. The price of these MRI’s are almost without exception, however, the lowest in town, wherever you look. Are there hospital employed doctors who are told to order more MRI’s by their boss? Duh. This overutilization pressure is widespread and standard operating procedure. These hospital MRI’s are, by contrast, the most expensive studies in any town or city you might examine.
What is more damaging? A few doctors who think they can get away with ordering a few unnecessary MRI’s for a low price, or widespread and institutionalized overutilization and abuse of high-priced hospital MRI units? Which of these situations gets the most press? Which of these situations is likely to worsen, the physician owner who acting unethically constantly runs the risk of ruining his reputation and practice by acting in this manner, or the physician employee, who out of fear of his job, orders as many MRI’s as he is told to by his boss?
Conflicts of interest seem to have escaped the notice of lawmakers, as well, when pertaining to the giant hospital interests, while the very name “Stark,” referring to the California ex-congressman, strikes fear in the hearts of many doctors, as this man made a career of restraining physician entrepreneurs, all to the giddy applause of his hospital crony pals. “Stark” laws have served to regulate the manner and the extent to which physicians can own medical facilities in an ostensible effort to curb self-referral abuses. Hospitals in the meantime have been hiring physicians whose various diagnostic and specialty referrals are thereby controlled and funneled to their employers’ institution, representing self-referral abuse on steroids. Exhibiting perhaps the ultimate conflict of interest, many giant hospitals have started their own health insurance companies, another massively corrupt story and missed opportunity by modern media.
Perhaps the crimes of the “state” and the gross hospital conflicts of interest are less noticeable or offensive due to their anonymity. The press actually provides cover for institutional abuses by headlining an individual physician as a “self dealer,” as this provides a useful distraction for the wildfire of entrenched hospital “self-dealing” going on right in front of our face.
The ultimate in self-dealing occurs, of course, in Washington, D.C., the Unaffordable Care Act representing perhaps one of the most gross examples of this “pay to play” game. It is always important to remember that the only thing worse than unethical businessmen and tyrannical government is when the two work together generating laws like Obamacare, a law that will make corporate medicine even richer and grant unimaginable power to would-be tyrants. Keep in mind that this law prevents the construction or expansion of any physician owned hospitals. Keep in mind that this law will result in bundled Medicare payments to the hospitals, from which the doctors will be paid an increasingly smaller portion . Keep in mind that private practice physicians will be paid 40% less than their hospital-employed counterparts for the same services. Keep all of this in mind when you read a front-page account about some individual doctor accused of self-dealing.
Just as the crimes of individuals pale when compared to those of the “state,” the conflict of interest issues of individual physicians (while making great headlines) pale when compared to the well-established and institutionalized self-dealing of the big hospitals. It seems obvious to me that the best way to deal with ownership conflicts of interest in health care would be to prohibit hospitals from employing doctors. That no lawmaker has ever suggested this demonstrates, I think, that the gang in D.C. means to protect their hospital pals more than they wish to curb any abuses of self-referral. Is the press really missing this or are they just looking the other way? After all, if it isn’t ok for doctors to own hospitals, why is it ok for hospitals to own doctors?
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.
Check out this article by Reason Magazine’s editor in chief, Nick Gillespie (many thanks to Brandon Dutcher of the Oklahoma Council of Public Affairs for bringing this article to my attention). It turns out that the uninsured folks the Unaffordable Care Act was meant to help, don’t want this help after all. That’s kind of hard to comprehend, isn’t it? Let’s take a closer look.
Why would the federal government shove a national health care scheme down not only the throats of these folks who don’t want it, but disrupt and basically ruin the insurance everyone does have? Premiums are expected to increase by 100% in most markets using conservative estimates. Are they incompetent or just plain evil?
Put yourself in the shoes of the giant insurance company execs. Fewer and fewer folks are buying health insurance. These companies have priced their product increasingly above the market clearing price. They therefore have a surplus of product and not as many buyers. In a healthy marketplace, they would lower their price and deal with their increased “inventory” in this way, luring customers back to the table.
Or….they pick up the phone and call their congressman! ”I want you to fix things so the purchase of my insurance product is mandatory!” Bingo! Inventory goes flying off of the shelves. Stock prices go through the roof. 25 year old healthy people are now paying $2500/month for an insurance product they don’t want, subsidizing the sick and elderly and those otherwise uninsurable folks entering the market with pre-existing conditions. Pretty sweet deal for the insurance execs if you know who in D.C. to call and how much to pay them to get this kind of thing done.
The rest of the phone call looks something like this: “By the way, let’s throw in a Medical Loss Ratio formula that will destroy my smaller competitors giving these folks even fewer buying options. That will more likely funnel them to me. And you guys get your rationing game face on and cover my back with an Independent Payment Advisory Board so I don’t have to pay much on all these claims. In fact, you could price the physician services so low that no docs will see folks for the more expensive conditions and everyone will blame the “greedy” doctors! There’s a budget balancer for ya! You’ll have all the data you’ll need to get all of this done after you mine the Electronic Medical Record Systems you make all of the docs buy.
Obamacare, just like almost any other “law” oozing out of D.C., was meant to line the pockets of those who wrote and promoted it. Prior to this “law” the medical industrial complex had squeezed about as much money as they could out of folks willing to buy insurance from an increasingly consolidated market. The only way to increase their revenue was to enlist the firepower of Uncle Sam, employing the political means (as opposed to the economic means) of obtaining wealth. This “law” turned non-buyers into unwilling buyers and current purchasers were made to pay more. Their next goal is the destruction of the stop loss industry so that those companies that have seceded by self-insurance are thrust involuntarily into this arena. See my blog earlier this week for details on this.
I may start calling Obamacare “BIFOPE,” for “Buy Insurance From Our Pals or Else.” This conveys the true impetus behind this “law,” I think. And you thought they just cared about you.
G. Keith Smith, M.D.
Imagine that you own a company with 100 employees. Your company has provided traditional health insurance to your employees at a cost of $45,000/month until about 3 years ago when you discovered that you could “self-insure.” You made this move because for many years in a row, the dollar amount of the health claims submitted by your employees didn’t amount to the dollar amount of your insurance premiums. You realized that had you paid for your employees’ health needs out of your operational revenue, you would have been financially better off. Very simply, you now pay this $45,000/month to a fund/trust you set up within your company, out of which health related expenses for your employees are paid. You back this “fund” up with insurance that kicks in for catastrophic claims.
This catastrophic claim deductible (called an attachment point) amounts to your liability or exposure for any given employee’s health needs. This catastrophic insurance is commonly referred to as “stop loss” insurance. As a result of your decision to do this, you now have $1,000,000 in this “fund” or “trust” that would have otherwise been paid to an insurance company. Rather than have an insurance company say what is or is not “covered” you can help your employees with their expenses more personally and more efficiently, having eliminated the insurance company middleman.
Let’s say that your attachment point is $30,000. This means that if an employee has $28,500 of health claims in a year, you pay every dime out of your “fund.” If they have $90,000 of claims, you pay $30,000, the stop loss insurance paying the rest. This is oversimplified, but you get the idea.
Actuaries make their living by applying mathematical models to help self-funded health plans “guess” what their loss experience will be. This information helps determine what the attachment point should be and also helps determine what sort of cash reserves a company should keep on hand. What is the statistical likelihood that one of your 100 employees will develop cancer? What is the statistical likelihood that 5 of your 100 employees will incur claims of over $30,000? These are the types of things that, although uncertain, are predictable within limits.
Part of the problem that actuaries have with their calculations, however, is that one never knows what a cardiac surgery or a hip replacement or a gall bladder removal or a tonsillectomy will cost. There has been simply no way for actuaries to get this information in advance. You can see where this is going, can’t you?
The significance of transparent and upfront pricing that we have embraced and that more and more physicians and facilities are embracing is revolutionary for the self-funded plans, as employers taking this approach can now with much more certainty, ascertain the “risk” their plan must endure. Furthermore, as the costs of healthcare have skyrocketed over the last few years, smaller and smaller companies are venturing down the “self-funded” path, making this decision based on cost savings and partly to maintain some autonomy.
To quote Jim Epstein from Reason Magazine: “Enter Obamacare!” This central planner’s dream catcher has made the risk-benefit proposition of self-funding an even better decision, as self-funded plans are not subject to many of the provisions of this legislation. I have maintained all along that Obamacare was meant to fail, a Trojan horse meant to introduce chaos and even higher prices into the medical economy, just the nightmare the state needs to justify rescuing us with the sequel…single payer.
“That’s crazy,” many of you have said! The Unaffordable Care Act was meant to reduce costs and protect patients and make sure that everyone had “coverage!” Keep dreaming. Uncle Sam doesn’t want you to have “coverage.” Uncle Sam wants you to buy approved coverage, that is, coverage from their crony pals. That is the purpose of the exchanges. The price of insurance has already risen, with up to 100% increases in premiums expected (that’s right, doubling) for January renewals. Residents of states that have embraced Medicaid expansion will (an expansion pushed for hard by none other than the big hospitals) soon hear these same hospitals whining about all of the new Medicaid patients that are not covering the costs of the care they receive and using this as their excuse to continue to aggressively “cost-shift” to others. Translation? The charges and costs everyone will see at these big “not for profit” hospitals will escalate, particularly in the states where Medicaid expansion and exchanges are embraced!
Back to the self-funded bunch. The government can’t just let these businesses stay on the sidelines, refusing to wade into the price whirlpool, can they? 70% of private insurance claims are paid by these self-funded trusts. The government has made promises to their crony buds in the hospital and insurance industry. This self-funded bunch must be reigned in or the scheme to mandate the purchase of health insurance through exchanges that will operate under government oversight (rationing) will fail. As a bureaucrat, how would you devise a plan to stop the growth in the number of companies “seceding” from the system by self-funding and possibly even bring some that are already self-funded into the drowning pool?
The answer is here, here and here. If the National Association of Insurance Commissioners is successful in destroying the “stop loss” industry in each of the states, few-no companies will take the self-funded risk, as they have no effective “back-stop” for catastrophic losses. Bingo! Everyone is now drowning together! Crisis complete. There is no doubt whatsoever in my mind that this attempt to destroy or hamstring the stop-loss industry proves that a single payer system is the goal of the statists, a system that will allow the medical industrial complex to extract wealth even more directly from the taxpayers, rather than profit by providing a service to consumers/patients.
If the state insurance commissioners move (some are already doing this) to raise attachment points or otherwise hamstring this stop-loss industry, you will know that those state commissioners are playing on Uncle Sam’s team. This stop-loss industry represents the biggest obstacle in this country to a Soviet-style single payer system, in my opinion. The efforts to crush this industry are not something the “state” wants you to know about, as this will make their ultimate goal even more ridiculously obvious.
G. Keith Smith, M.D.