Consumer Focused Health

Image via WikipediaWhile Medicare is busy guarding the front door, to ensure that no cognitive or primary preventive care is ever billed as useful time, top-down price setting has allowed our “nationalized” system for seniors to pay up to almost 2X the going rate for durable medical goods.

As related in the NYTimes, Congress has been setting the price for goods, and lobbying efforts have ensured that price is significantly higher than can be found elsewhere on the free market.

On Wal-Mart’s Web site, you can buy a walker for $59.92. It is called the Carex Explorer, and it’s a typical walker: a few feet high, with four metal poles extending to the ground. The Explorer is one of the walkers covered by Medicare.

But Medicare and its beneficiaries aren’t paying $59.92 for the Explorer or any similar walker. In fact, they’re not paying anything close to it. They are paying about $110.

For years, Congress has set the price for walkers and various medical equipment, and it has consistently set them well above the market rate, effectively handing out a few hundred million dollars of corporate welfare every year to the equipment makers.

The core of this goes to an argument about top-down vs. bottom-up control. Our current system is top-down…the oligarchs decide who gets what and they put out regulatory arrangements that they think make sense…and if what you do doesn’t fit, too bad. The market works bottom up, people have a budget and make their own choices. When people aren’t forced to make choices and disruptive pricing does not create competitive advantage, you see a system stagnate at the prices of yesteryear for political reasons–as companies aren’t forced by competition to drive prices lower.

In the abstract, fixing the health care system sounds perfectly unobjectionable: it’s about reducing costs (and then being able to cover the uninsured) by getting rid of inefficiency and waste. In reality, though, almost every bit of waste benefits someone.

Doctors who perform spinal fusion surgeries, despite decidedly mixed evidence that they’re effective, are making a nice living. Hospitals that order $1,000 diagnostic tests, even when a cheaper one would work just as well, are helping their bottom line. Medical equipment makers selling walkers for $110, while Wal-Mart sells them for $60, are fattening their profits.

The current fight to protect those profits is a microcosm of what you can expect to see if a larger effort to rein in health costs ever gets going. The defenders of the status quo won’t say that they are protecting themselves. Instead, they’ll use the same arguments that the medical equipment makers are using — that a change will destroy jobs, bankrupt small businesses and, above all, harm patients.

“This is small compared to what broad health care reform would look like,” Kerry Weems, the top official at the agency that runs Medicare, told me, “and you can see the reaction.”

The current system of overpaying the manufacturers dates back to 1989, when Congress adopted a “fee schedule” for durable medical equipment and allowed any company to sell the equipment at the official price.

Its amazing to me, that in the country that fought to bring democracy and capitalism to the rest of the world, we’ve encouraged a medical system based on socialism. In the long term, socialism isn’t a practical fix to anything, as people get lazy and entrepreneurs see risk with no reward.

Moving our health system away from its current socialistic roots and into a true market, while painful, would significant decrease the social burden it is placing on workers, families, and taxpayers and incent (and improve the flexibility to deliver) the creation of lower cost models to deliver care.