No Market in Healthcare
29th December 2024
All prices in the US are directly linked to the Medicare pricing of healthcare services. All private insurers pay based on a fractional increase in Medicare-allowed reimbursement, for not just Medicare Advantage products but all insurance products. Medicare produces prices (and price adjustments annually), with variations for regional costs, but all reimbursement is directly tied to Medicare payment policies. That a discussion of healthcare in America can ensue without an acknowledgment of this circumstance is beyond ridiculous, and indicates that our thought leaders are idiots and we do not have a serious country.
How did this come about? Most directly when RBRVS (Resource-based Relative Value Scale) was enshrined. This was a way to “calculate” the value of medical services. Imagine that! A centralized authority can CALCULATE the value of all medical services. Who would have ever guessed? In this case, it was Dr. Hsaio, a public health expert at the Harvard School of Public Health, along with his “team.” Oh, the arrogance! Oh, the abuse! But in this case, he was working at the behest of the…you guessed it, a Conservative Republican administration under Reagan (in 1988), soon to be a little less conservative under GHW Bush. Those RBRVS calculations included a factor for training, for equipment and infrastructure, for time and effort, for ancillary costs, for regional cost of living factors, even a factor for malpractice, etc.
The formula was long, but everyone in the GHW Bush administration had full confidence in the ability of Harvard experts to CALCULATE the value of medical care. There was no factor for outcomes, of course. Or severity of illness. This was a significantly distorted, but nonetheless, Labor Theory of Value on steroids! And of course, for all who heard it, there was the unforgettable testimony of the esteemed Marxist economist, Gail Wilensky, head of the HCFA (now CMS) to Congress in the Reagan administration, in which she excoriated the “…perverse incentives inherent in a fee-for-service system.” She sounded like a member of the Soviet Politburo in the final years of the Cold War. (Did the Soviets win that?). Of course, what she meant was the perverse incentives in a fee-for-service system paid for by the deep pockets of the federal government with no questions asked. Which is how Medicare operated up to that point.