Topic: Health Care
Health Care Cartel Announces Price Cut Representatives of the Health Care Industry offer to adjust prices for the President.by Gene DeNardo
(libertarian)
Friday, May 15, 2009
When faced with competition, providers and producers often lower prices. Seldom does this occur as a "pre-emptive" strike. The higher price is usually held for as long as possible to build up reserves and strengthen market position. After all, it is the consumer that demands lower prices, through sagging sales, from the producer, not competitors.
A pre-emptive "promise" of lower prices just occurred in the health care industry. Representatives from the Service Employees International Union, Pharmaceutical Research and Manufacturers of America, Advanced Medical Technology Association, America's Health Insurance Plans, American Medical Association and the American Hospital Association in a letter addressed to the President said they would "do our part to achieve your administration's goal of decreasing by 1.5 percentage points the annual health care spending growth rate".
The industry coalition did ask for a small concession, that government require mandatory health care insurance for all. This of course, is for the "good of all", not any expression of self interest!
The message of the letter itself is secondary to what the raw existence of the letter admits.
In any market even approaching a free market, a letter of any kind would never be written to anyone, especially a President, by representatives of the workers of an industry along with a goods [drug] manufacturer and an insurance provider for the consumers, machine manufacturers, the association representing "elite" [doctors] workers in the industry and the owners of the buildings that they all work in or supply goods for or receive services in. You would never be able to get them all in the same room without the ensuing fracas creating the need for the same services they are employed in, immediate health care!
Secondly, since when in a free market is it ever possible for conflicting interests to guarantee and carry out a price or cost adjustment in the downward direction? And what actor in a competitive market voluntarily deprives himself of revenue?
These conditions and an improbable letter of this sort is possible when all parties are working together to assure the market is not free and not competitive. And, when a future action by an actor even more powerful, in this case that would be the government, threatens to upset this forced balance. We can determine that the interests fear that future governmental action will either directly remove some or all of the guaranteed existing profits or will actually, in a socialized manner, introduce competition at some level and pressure prices downward.
Insurance providers probably have the most to lose. The United States government rarely intervenes in a complete Socialist manner. There is little chance we will all be receiving care from State appointed doctors in State owned facilities. Instead, the prevailing mode of operation is one that benefits the corporate actors involved. The government would most likely "pay" into the existing system, creating more guaranteed and higher profits, along with higher prices. This is the area where insurance providers have to wonder if they will be included or face some degree of elimination.
The health insurance system is actually not a real insurance plan. Mutual type insurance collects a group of individuals who have a small individual risk of incurring a traumatic event that would destroy their ability to function in society. Fire insurance is a good example. The chances are slim that your house would burn down, but if it did and there is nothing in reserve to make up the loss, you would be devastated. If a large group of homeowners pool their resources and cover the individual loss that might occur, then the small premium that is required to create a reserve for the few individuals who will need the fund is well worth the cost.
This type of insurance would completely fall in line with health services that require extraordinary cost. Some individuals would require extensive costly care, so the entire group pays to remove the risk of financial devastation [or the option of no care] to the few. The risk is removed for a proportional cost.
But, people do not "insure" to have their house painted. You could, but it would roughly pan out to cost the same as simply having your house painted. This is due to the reality that everyone needs their house painted and this generates a large supply of house painters and paint manufacturers until the price is no longer dependent on a risk but instead on common occurrence.
The market "insures" that what we do and what we require everyday in our lives, barring monopoly or other interference, is in line with "everyday" costs. There is no need to insure our everyday needs. In any reasonably free system, these needs will be met without the need for extraordinary effort. If not, then our economic system isn't sustaining us or for that matter itself and that has serious consequences!
Do you categorize basic health care as an everyday need or an extraordinary need? All babies are born, is the care of the doctor during childbirth an economic action that is surrounded by high individual risk and the need for "insurance" to pay the cost? A diagnosis of the flu virus and the resulting prescription for cough medicine? The yearly checkup? It wasn't in the fairly recent past and with the presence of even minimal competition, it wouldn't be.
This condition is what the left refers to as a "failure of Capitalism" and what the right refers to as the "free market". It is neither. It is simply the lack of a free market, presence of government intervention and corporate monopoly influence and power. Remove the competition from a marketplace and anything, even the food that we eat, can be priced out of the reach of the consumer and failure to satisfy any need, even basic needs, follows quickly behind. The monopolized health care industry is utilizing the concept of insurance to subsidize operation and great profit.
The health care industry is no great mystery. It employs the same fundamentals of any market. Land and buildings are needed to perform the action. Labor is the driving force. Capital helps enable and intensifies the process.
Limit the land: limit the amount and type of buildings; use both government restriction and industry imposed regulations to limit the hospitals, clinics and related research centers; limit access and production of the tools and machines and instill requirements that link building and machine, to further limit consumer access to products and services.
Limit and control labor: use government and industry to limit the amount of doctors and the type of assistants and associates that you wish to privilege; create extensive specialization to further limit competition; require extensive certification and education that exceeds or ignores the actual service, and then limit availability to that education.
Privilege the entry of Capital into the industry: channel and specialize the entry of Capital and restrict the open flow of investment, creating greater return and concentrated deposit of funds and Capital; utilize government investment and regulation to create and direct private profit.
If you are successful, you may even be able to remove the foremost indicator of the free market system; price! It is no coincidence that criticisms of Socialism most always mention the inadequacy of pricing, the inability of accurate price structures within the Socialist economy. The health care industry has achieved this phenomenon.
Have you bought much lately that wasn't priced? If you haven't, you have been fortunate to have good health, because the health industry in large part is without price, at least pricing that is readily available to the consumer.
In what other industry is the price of no consequence until the final bill is received? In what free market do we purchase services or products and receive the price after payment? In what industry is the competitor's price not only virtually unattainable but of little consequence? The health industry has monopolized to a point that pricing has been virtually removed and is barely an afterthought filed away with mounds of other dated paperwork. If you want open pricing in a hospital, your only option may be the snack bar!
The exception is the insurance premium. However, this cost is calculated based on all the concealed pricing within the actual health industry. The insurance provider merely adds the necessary markup to provide for their own costs and profits. As long as funding for the premium is available, there is no incentive for the insurer to question pricing.
Others have questioned pricing. There is an entire sub-industry within the industry that audits care billing. Apparently, as high as these semi hidden costs are, they often appear on bills even higher, prompting a multi-million dollar business that corrects these errors for their clients. For some reason, errors in the other direction are not common!
The right will pronounce that we just need to have choice, the individual as opposed to the employer, is better able to negotiate and obtain superior service. Somehow we don't have that choice now, even though individual health care is available to all for a price. It seems we need a right handed government decree to declare our individual choice.
The left will announce we simply need government to insure that all are covered; all will receive service and funding. While the thought of sick citizens of any economic class without the ability to obtain needed care is a travesty in the wealthiest nation in human history, more government money would simply mean higher costs and profits to an already subsidized monopoly, not to mention more government debt.
The health care lobbyist's letter to the President did offer a solution to the health care problem. It isn't the solution they recommended, that was just "business as usual". The solution lies in the admission of the letter; we, the insurers, workers, owners and manufacturers are working in collusion with each other and the government, within a monopolized system and we have, can and will control prices at will.
When this condition is no longer applicable, health care will no longer be an issue and will once again become a "service".
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The views expressed in this
article are those of Gene DeNardo only and do not represent
the views of Nolan Chart, LLC or its affiliates. Gene DeNardo is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
I always try to negotiate pricing with my health care providers. Unfortunately the bill-you-later / screw-you-later attitude prevails. Before they even look at you, we have to file all sort of paperwork so taht they can send us to collection agencies if we can't pay whatever they feel like charging. They even get offended when I asked for the charges up-front for stitching my kid's accidental scar. As if I am not a good parent and I am supposed to let them screw me later with the final bill. "Oh don't worry, the insurance pays" is what they tell me. I have to respond to them: "No they don't, I have a high deductible HSA so the first several thousand dollars of payment comes from my own money in my HSA account." So on the government bill: "Don't worry. the government will pay" We already have socialized medicine: its called Medicare and it is a mess.
They get even more offended when I make the auto machanic comparison. I tell them that any auto mechanic service place will get me a full diagnosis with a quote for free or for an up-front nominal fee and then I have the choice of getting my own mechanic, getting my own used parts for them ti o install, do it myself or let them do it at the agreed price. Or even sell the car to a junkyard if the repair is not worth the value of the car. HOW DARE I COMPARE THEM TO DIRTY AUTO MECHANICS! is the attitude that I get from them. Their snobish attitude is the worst.
Another example: My kid's pediatrician tells me to buy a breathing machine for an treatment at home for my kid. "Don't worry, the insuarance pays" is what they tell me. "I am not going to buy a machine for only four days of usage. Can I rent them?" I asked. "let me see what I can do?" she replies. And then she comes later with a machine from the office that she let me borrow for 4 days FREE of any additional charges. Now that particular situation was good customer service. She is going to get her high consulting fee from me anyway, so why not show a little bit of appreciation to me the customer by letting me borrow the machine?
Negotiating with a mechanic, lawyer, contractor, plumber, etc.. should be no different than negotiating with a physician.
Gene, this is an elegant explanation of free market as it applies to health care! Thank you for writing it. Why can't everyone understand the simplicity of the free market model?!
trd is right. Free markets encourage price comparison and thereby lower prices for the consumer. Health care is no different that any other commodity in this respect.
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