Matt Stoller on US Health Care

Investment Analysis Clubs Macro Economic Trends and Risks
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So the two key features of our health care system were as follows. First was banker-organized rationing known as “managed care.” And the second was the rise of vertically integrated giants across every part of the industry, from drug distribution to insurance to hospitals. It was these features, and not the lack of universality, that distinguished U.S. health care from every other nation. Everywhere else, you could ask for the price of medication or service. In America, that price would be, “it depends if you have market power.” The lack of any consistent pricing is the key feature in U.S. health care, in everything from drug distribution and reimbursement to hospital billing to medical supply procurement.

Despite the bitter fights over health care during the Bill Clinton era, the advent of drug benefits for seniors under Bush and Medicare Advantage, and the ACA during Obama’s Presidency, underpinning our health care system was a consensus that corporate power was good. Both sides adopted the ideological goal of eliminating the power of the clinician and the patient, and to move that power to middlemen, who could often control the situation through various forms of pricing choices, like prior authorization or hidden rebates.

I did a story about what happened when Ohio eliminated CVS Caremark and UnitedHealth, from running its drug benefit system for Medicaid. It turns out, the state saved $140 million over two years, even as dispensing fees to pharmacies increased by 1200% on average, and the program got better, with patients able to access 99% of pharmacies. Corporate waste is the main problem in health care.

Other states have also done something like this, with similar success. Abroad, the Japanese run a high quality cheap system. They do not have Medicare for all, there are lots of health insurers. But their government has a list of all treatments with a price next to each treatment. That’s the price. There’s no billing department to fight with other billing departments, there are no quality surveys to give bonus payments to hospitals, no random arbitration firms over price. The price is the price. It’s not like the U.S., where the same procedure or drug could have thousands of different permutations, depending on the insurer, hospital system, physician, and so forth. We could do what Japan does - Medicare has a price list. Just do Medicare prices for all, as Phil Longman keeps suggesting.

Getting rid of corporate power in medicine works.

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Excellent description of how the bipartisan culture of corruption in Washington works.

intercst

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Perhaps - but Stoller seems to recognize that if someone other than the patient is going to pay for health care, then you have to move pricing decisions to someone other than the patient and the clinician. That’s why he mentions the Japanese price list further down the article. Instead of middlemen getting to control the situation through pricing choices, the government controls the situation through pricing choices.

Which is certainly a valid alternative, and one that most single-payer systems use in order to keep costs down. But it’s not exactly an option that returns the power to the clinician and patient - it just puts someone else in charge of pricing in order to keep systemic costs in check.

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The last thing you want is a “middleman” controlling pricing choices. They are a major source of “skim, scam and fraud”.

The only reason we have “middlemen” like Medicare Advantage, Pharmacy Benefit Managers (PBM)s, and rapacious health insurers is because of the bipartisan culture of corruption in Washington where large campaign contributions are exchanged for lack of antitrust enforcement and policies that prevent price competition.

intercst

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Sounds good but it is very misleading. The Japanese government keeps medical costs low and as a result medical professionals are not being paid a competitive wage for the work they do. As a result, Japan has a major health worker shortage. https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(23)00515-9/fulltext

The only reason the japanese system hasn’t broken down is because of the good health of the average Japanese citizen. Specifically, the japanese aren’t obese. If the Japanese were as fat as Americans, their system would have been overwhelmed a long time ago.

This is further evidence for American decadence and decline. We blame everyone else rather than hold ourselves accountable. American health care is super expensive because Americans are super fat, which increases the frequency of chronic diseases like diabetes that cost a ton of money to treat. There is no system that can provide health care for a population with the obesity levels of Americans without going into heavy debt or being unaffordable for most.

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Mr. Market should control prices. Governmet should regulate Mr. Market.

Health insurance in America is no longer insurance, it’s a middle
man that makes healthcare very expensive.

It’s unfortunate that Americans are clueless about the proper role of insurance which is to protect wealth. Ordinary healthcare should not be insured, it’s part of the everyday budget. Insure only what you cannot afford to pay, not every bandaid and aspirin pill you buy.

Insurance deductible should be high enough to discourage overuse and low enough to be affordable. That way both parties are safeguarded.

The Captain

Ex insurance sales agent affiliated with the Venezuelan branch of Blue Cross Blue Shield

PS: I ran my insurance portfolio on an Apple ][ with VisiCalc and VisiDex 1978-09. I returned to Data Processing because I didn’t like the insurance company.

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This sounds nice but is irrelevant. It is like saying we can eliminate the national debt by cutting spending on foreign aid.

In the US, 50% of health care costs comes from 5% of patients. These tend to be elderly with lots of chronic diseases.

The mean total expenditure per HRP (high resource patients) during calendar year 2011 was $43,104 versus $3,955 per patient for the full population. Treatment of back disorders and osteoarthritis contributed the largest share of expenditures in both HRP and the full study population, while chronic renal failure, heart disease, and some oncology treatments accounted for disproportionately higher expenditures in HRP. What Contributes Most to High Health Care Costs? Health Care Spending in High Resource Patients - PMC

Average family health care annual deductible is about $5K, for individuals about $2.5K. In other words, Americans with insurance are already paying out of pocket for most of their ordinary health care needs.

The best and perhaps only way to make health care broadly affordable is to reduce the number of high resource patients who have all sorts of expensive chronic diseases, much of which could have been avoided by exercise and a good diet.

Those adamant about living a lifestyle that increases the likelihood of expensive chronic diseases should pay more for health care insurance.

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Or impose price controls. Which is what most other countries do.

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Irrelevant to whom?

  • The insurance company?
  • The insured?
  • To healthcare policy?
  • To the drug and pharma industry?
  • To hospitals and clinics?
  • To others?

It most certainly is not irrelevant to my insurance coverage.

I’m proof that exercise and a good diet restores health so I agree with this notion.

But what if the primordial cause of bad diet is the result of harmful food produced by industry, in turn encouraged by misguided government dietary guidelines?

Bad food includes

  • Seed oils
  • Excess sugars
  • Low fat food
  • Harmful additives
  • Farm raised fish
  • Fruit juice and smoothies
  • Pesticides and antibiotics used by the food industry
  • Etc. (a very long list)

The Captain

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I agree in large part. But…

While it’s true that U.S. dietary guidelines (especially the much lamented food pyramid) and industrial food production have contributed to unhealthy eating patterns, it may be overly simplistic to call them the “primordial cause.” The problem stems from a feedback loop among government policy, corporate profit incentives, and consumer demand for cheap, convenient foods. Early guidelines emphasizing low fat and high carbohydrates may have unintentionally encouraged processed foods, but industry marketing, agricultural subsidies, and cultural habits have been equally responsible. The result is not a deliberate system producing “bad food,” but a complex mix of economic, scientific, and social forces that have shaped the modern American diet.

Pete

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I agree but my point is that the prime mover was government guidelines, a case of Good intentions paving the road to Hell.

The Captain

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Yes, it’s interesting how all this came about. The government guidelines were the midpoint not the beginning. The Dietary Goals and Food Pyramid came long after several earlier developments.

First, postwar (WW2) industrial agriculture had already created a food system based on high-yield crops (corn, wheat, soy). Second, the processed food industry was already expanding, with convenience foods like TV dinners, breakfast cereals, and canned goods becoming dominant. I remember this vividly as a kid in the 60s asking mom for tv dinners since they were “fun” to make. I ate tons of garbage cereals then, too, until I just starting disliking the super sweetened ones and then just stopped nearly altogether. Which leads to the 3rd big thing that predated all the guidelines and pyramids: Sugar and refined flour were already central to the American diet by the 1950s–60s. It took a generation to take hold and for us to start seeing the effects, but the drivers were set.

The guidelines codified existing trends rather than originating them. They also reflected prevailing nutrition science and food economics, not a ground-zero cause.

Pete

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Thanks for the history lesson! There was more, Kellogg inventing cornflakes to stop “self abuse.” It adds up to lots of financial and religious motivations.

The Captain

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LOL
I’m learning a lot here!

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Yep - I’m never going to dispute the role of religion in society as a force for “not so good” oftentimes.

The Kellogg story really does show how early food culture mixed moral and financial motives. It started out with people pushing bland, “pure” foods for moral reasons, then over time the industrial and profit side completely took over. So the roots are quirky and a bit preachy, but what we ended up with is mostly driven by economics and convenience, not religion anymore.

(Kellogg was a strange dude: Dr. John Kellogg Invented Cereal. Some of His Other Wellness Ideas Were Much Weirder | HISTORY )

Pete

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Don’t forget Kosher and Halal but as far as I know neither has bad health outcomes.

The Captain

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Wow - this is getting fun! I just remembered a book that came out about a decade ago that had to do with Kosher food in the USA:

It recounts how iconic products such as Coca-Cola and Jell-O tried to become kosher; the contentious debates among rabbis over the incorporation of modern science into Jewish law; how Manischewitz wine became the first kosher product to win over non-Jewish consumers (principally African Americans); the techniques used by Orthodox rabbinical organizations to embed kosher requirements into food manufacturing; and the difficulties encountered by kosher meat and other kosher foods that fell outside the American culinary consensus.

An interesting and informative picture of how Kosher food was integrated into not only Jewish, but also mainstream, diets in the US. Coke and Jell-O are two of those that may not contribute to the best health outcomes, though :wink:

Pete

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I worked for Morton Salt for 2 years. We packaged kosher salt. I asked shortly after I started what we did to make the salt “kosher”. They said “nothing. We had a Rabbi come by and bless the bins that the salt was stored in.”

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Yes, sometimes it can be as simple as that. Other times, it is more complicated, such as the proper way to butcher animals or making wine (you cannot fine the young wine with gelatin since that is made from bones, but you can use egg whites), etc. There is just about nothing you can do to make bacon Kosher (real bacon, not turkey or other faux bacon, of course).

Pete

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If only it were so simple. One has to look at both sides of the cost-benefit equation from a broader perspective.

Impose price controls and less money goes into medical system while the demand for medical services is unchanged. With less money in the system, health care workers can’t get paid as much even at a time of a growing doctor/nurse shortage. Yes, US doctors make a lot of money relatively speaking. But it requires 10 years post-college training and lots of debt to get there. In comparison, finance jobs pay doctor-level salaries right after college. What career do you suppose most of America’s best and brightest are choosing?

In addition, like it or not profits are what motivates drug discovery. The profitable US market is a big reason why US companies have long dominated drug and medical innovations. Reduce money going into the medical system without reducing the demand for medical care will mean reducing the pace of drug development.

The only way I see to reduce US health care costs without reducing US quality of health care is to generally improve the health of the US population before expensive chronic diseases develop.

Not to whom but to what. It is irrelevant to the high cost of US health care. When 5% of patients make up 50% of health care costs the remaining 95% get screwed regardless of the system. We have an aging population with increasing frequency of expensive chronic diseases. The only solution to health care costs are either or some combination of increasing immigration to bring in younger, healthier folks to pay more taxes or reducing the frequency of chronic diseases in the aging population.

Again irrelevant. We live in a free market economy where individuals choose what they eat. It has long been obvious to most everyone that fresh fruits/vegetable are healthy while donuts, chips, soda will make one fat. It has long been obvious that exercise is good and being a couch potato is bad. I am betting that 80% of the US population cannot describe the past or current food pyramid and 50% believe it is in Egypt. Blaming it for US health care costs is misplaced I think.

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