Blame the Free Market, Comrade

Published June 12, 2017

Medical pricing in the United States is controlled by the Centers for Medicare and Medicaid Services (CMS), a federal agency with a budget equal to the production of the 16th largest economy in the world. CMS fixes prices using the recommendations of the Relative Value Scale Update Committee, a 31-member committee formed almost 30 years ago.

The ripple effect of these price controls causes Americans to spend on health care an amount equal to the gross domestic product (GDP) of Germany, Europe’s largest economy and the fourth-largest economy in the world.

Nevertheless, in the 2000s, self-described patient advocates blamed free-market policies (which were never tried) for the broken health care system that prompted Congress to pass and President Barack Obama to sign the Affordable Care Act in 2010. These same voices now say replacing Obamacare with free-market policies would make health care and insurance even less affordable.

The fact is that market forces are not to blame for America’s broken health care system any more than two plus two equals five. Let’s break down the math.

CMS is essentially the taxpayer-funded health insurer of almost one-third of Americans, those on Medicare or Medicaid. CMS sets baseline medical prices by determining the reimbursement rates paid to health care providers who treat Medicare and Medicaid patients. Private insurers then use these rates as a baseline for setting their own reimbursement rates.

CMS’ 2017 budget is $1.01 trillion, a little less than the GDP of Indonesia, the 16th largest economy in the world, according to projections by the International Monetary Fund (IMF). For reference, IMF projects the entire economic output of Russia will be $1.56 trillion in 2017. Russia has the 11th largest economy and the second most powerful military in the world: 15,000 tanks, a massive nuclear arsenal, and 144 million people.

Surely CMS will use its trillion tax dollars – about $8,000 per U.S. household – to provide most Americans with high-quality health care in 2017, right? Not even close. CMS will spend its budget on roughly one-third of Americans, 132 million enrollees. However, because Medicare and Medicaid prove to be only partial insurance coverage, many patients choose to purchase private supplemental insurance policies to cover the gaps in this coverage.

Adding the CMS population’s costs to the rest of the country’s health-care-related expenditures, Americans spend $3.35 trillion on health care and insurance each year. This puts total U.S. health care expenditures on par with the GDP of Germany, the largest economy in Europe. Were “U.S. Health Care Expenditures” a nation, it would have the fifth-largest economy in the world.

So, who drives all this spending? Government advocates console us that Medicaid spending parallels that of the nation’s overall spending on health care. This is an understatement – and a misleading one. The fact is, CMS spending drives all other spending. Many people do not realize Medicare reimbursement rates are the baseline against which almost all private insurers set their rates. If Medicare payment rates go up, private insurance company rates go up a proportional amount.

Now, who sets Medicare rates – and by extension, health care prices for the entire country? Medicare rates are strongly influenced by a small group of people at the American Medical Association known as the Relative Value Scale Update Committee (RUC). As of 2010, CMS had accepted 94 percent of the recommendations RUC had offered the federal agency since 1991, Kaiser Health News reported.

Thus, as RUC sets reimbursement rates for Medicare, and Medicare is the price baseline for private insurers, it is fair to say a 31-member panel centrally plans medical prices for the entirety of the U.S. health care system, or the rough equivalent of the fourth-largest economy in the world.

But, sure, blame the free market.

Michael T. Hamilton ([email protected]@MikeFreeMarketis a Heartland Institute research fellow and managing editor of Health Care News. His coauthor on this essay, Chad Savage ([email protected]), is founder of YourChoice Direct Care in Brighton, Michigan and a Heartland policy advisor.

This article was originally published on by Investor’s Business Daily:


* Conservatives Say They’re Losing Health Care Bill Fight

* Lawmakers Again Consider Easing Doctor Maintenance of Certification Mandates

* ‘Cash Money Talks’ When It Comes to Finding a Drug Treatment Bed in Tennessee

* Nursing Homes Feel Shortage of Nurses


Conservatives on and off Capitol Hill fear they’re losing ground in their fight to influence the Senate bill that will repeal and replace Obamacare.

The discussions are still ongoing and a vote isn’t likely for several weeks, but several details emerging from the consequential negotiations last week have the party’s right flank on edge.

A month ago, there was a lot of optimism that the Senate process would go better for conservatives than the House process initially had. They were given a seat at the negotiating table, with leadership inviting both Sens. Mike Lee of Utah and Ted Cruz of Texas to participate in the Senate’s health care “working group.” But with leaders seeking to assuage concerns from all sides of the GOP, conservatives are facing potential policy blows.

Republican leaders Tuesday indicated that they preferred not to repeal as many of the Obamacare-era regulations as the House bill did, including a key protection for people with pre-existing conditions that blocks insurers from charging people more for insurance based on their health history.

That could make it tougher for Republican Sens. Lee, Cruz and Kentucky’s Rand Paul to vote for the bill after they’ve warned for months that Obamacare regulations have to go if premiums are going to come down. …

Also on the table: keeping some of the Obamacare-era taxes in place for at least awhile to reach the $133 billion savings goal that is required under Senate rules.

“That set off alarm bells here,” Club for Growth President David McIntosh said Friday. “The Club for Growth would vigorously campaign against that as fake Obamacare repeal. … If the Senate was trying to send out a trial balloon, consider it shot down.” …

One conservative GOP aide said they are feeling squeezed out of the process.

“It’s … very frustrating because things are happening behind closed door and we are unable to provide input,” the aide said. “(House Speaker) Paul Ryan tried that strategy and ended up with a conservative revolt on his hands, we hope next week Senate leadership will shed more light on the details and process.”

Leadership can’t ignore conservatives. Majority Leader Mitch McConnell can only afford to lose two members and still pass a health care bill. But leadership aides argue that the process is far from a done deal and there are still a lot of details to negotiate. And some conservative members, including Sen. Pat Toomey, a Republican from Pennsylvania, vehemently push back on the idea they’re losing steam.

“I’m not convinced it’s an accurate characterization at this point,” Toomey said. …

Republican senators have said they want to wait for the CBO score before their legislation comes to the floor, unlike their House counterparts, who passed their bill last month.

On Tuesday, Republicans will huddle once again at their conference lunch to try and find consensus. …

SOURCE: Lauren Fox, CNN Politics


What one Grand Rapids-area physician considers a form of “extortion,” others see as a necessary way to gauge how well doctors keep up with modern medicine.

In a contentious issue that in some cases pits doctors against one another, state lawmakers are again considering legislation that proponents argue would ease one of the burdens of practicing medicine in Michigan.

Two bills before the House Health Policy Committee would prohibit the state from requiring a doctor to maintain board certification to obtain a state medical license. It would also bar health insurers and HMOs from requiring the certification for a physician to receive reimbursement payments.

The main sponsor of the legislation, Rep. Edward Canfield, a Republican from Caro and an osteopathic family physician, argues that earning recertification from some medical boards has become a burdensome and costly process over the years.

Prior to 1990, doctors received lifetime specialty board certifications, Canfield said. Since then, organizations that grant board certification and recertification have constantly raised requirements. That started with the American Board of Internal Medicine, which decided in the 1990s it “should have a shelf life” and started issuing limited certifications, according to Canfield. More than 20 other specialty medical boards followed suit and required doctors to retake their boards every seven to 10 years. 

In testimony before the House Health Policy Committee, Canfield said studies “found no difference” in the quality of care delivered by doctors with an expiring board certification and those like him with a non-expiring certification. …

SOURCE: Mark Sanchez, MiBiz


The wait time for inpatient mental health and substance abuse treatment often depends on money or insurance.

Not everyone with a mental health or substance use disorder [needs] inpatient treatment. For some, outpatient services will suffice. 

But for those who do need inpatient treatment, “cash money talks,” said Dr. Daniel Sumrok, director of UT Health Science Center’s Center for Addiction Science in Memphis.

Demand for inpatient treatment outweighs what’s available because the state is in the throes of an opioid abuse and misuse epidemic. The number of overdose deaths hit a record 1,451 in 2015.

Referring physicians often encounter wait times for patients, even those who need immediate care. …

For years, residential programs were primarily self-pay because many insurance policies didn’t cover treatment or the number of days paid for by insurance wasn’t enough to make a meaningful change in a patient. 

That’s changed under the Mental Health Parity Act and the Affordable Care Act so more facilities take insurance. 

But fewer take TennCare, and fewer are available for low-income or homeless people. …

There are long waiting periods. A patient at Erlanger Health System was No. 76 on a waiting list for a treatment facility.

The surest way to get into a residential treatment facility is to pay the total amount without insurance. An evaluation of how a patient will pay is among the very first questions a facility will ask a prospective patient. …

SOURCE: Holly Fletcher, The Tennessean


Brookside Healthcare & Rehabilitation Center near Jenkintown provided 39 percent of the registered nursing a day expected by federal regulators during a recent three-year period.

Advocates and some academics say that’s a sign of a company out to boost profits.

Not so, said Brookside owner Meir Gelley. “It’s not about money. We don’t mind spending the money. As you can see, we have a beautiful facility,” he said.

Gelley, who was one of just a few Philadelphia-area nursing-home owners contacted by the Inquirer who agreed to talk at length about staffing, said his company’s staffing strategy benefited patients.

“If I have a choice of having more people taking care of residents and giving more care, but it’s by an LPN as opposed to an RN,” Gelley said, he will use more licensed practical nurses to provide more direct care, and “the residents are going to do much better.”

For overall nursing care, which includes RNs, LPNs, and nursing assistants, Brookside’s 4.1 hours per patient day easily topped the state minimum of 2.7 hours per day of care, but was well below the 4.9 hours a day expectation calculated by federal regulators based on the mix of patients at Brookside during annual inspections.

“I don’t think anyone is thinking of staffing at 2.7,” said Ann Molesevich, vice president of operation for Gelley’s company, Nationwide Healthcare Services. “The question is, Do we look to staff at a 4.9 because a CMS-driven calculation tells me I should be there?” …

SOURCE: Harold Brubaker,