The Big Government Conspiracy to Protect Rich Guys
I am not a proponent of conspiracy theories. That said: some conspiracies are real — and designed to protect the wealthy at everyone else’s expense. I’m referring, of course, to the conspiracy by the medical industrial complex to keep medicine costly. The conspiracy insulates the industry and its practitioners from competition using regulatory barriers and exclusive licensure cartels. At first glance these may all seem reasonable, but they extort one-fifth of our national income.
One of the biggest threats to the status quo is information technology, which is shaking up numerous industries in our economy. Local newspapers have taken a huge financial hit as more people began obtaining their news from online sources. ITunes and Amazon have decimated retail stores as fewer consumers want to from buy brick & mortar storefronts. Netflix is putting pressure on traditional cable provider monopolies. Increasingly, consumers want access to low-cost, convenient medical care over the phone or the Internet without an inconvenient office visit. Yet, the medical conspiracy is trying to block anything that negatively impacts practitioners’ incomes.
Consider the example of Opternative, a startup that offers web-based refractive eye tests for free. The tests are offered in 39 states and available to 18 to 45 year olds. Rather than an office visit where an optometrist flips through lenses of various strengths, individuals take exams using their computer and phone. The way the test works involves viewing letters on a desktop computer screen from 10 feet away while answering questions on a smart phone. An ophthalmologists in the state where each patient resides will review the exam for a $40 fee and write an optical prescription if needed.
It’s easy to understand why optometrists oppose inexpensive online exams. At my optometrist, comprehensive exams cost anywhere from $90 to $120, depending on the range of services performed. Healthy adults ages 18 to 39 are encouraged to have a comprehensive eye exam only once every five to ten years. From age 40 to 54 comprehensive exams are recommended every two to four years. Online eye exams are a low-cost, convenient way to check vision between comprehensive exams. Opternative’s studies have found its tests are comparable in quality to in-person refractive eye exams. But as one might expect, local optometrists disagree. The American Optometric Association also opposes the use of web-based eye tests. Any time competition rears its ugly head, the legacy stakeholders cry foul. After all, “patient safety” (a euphemism for threatening local providers’ incomes) cannot be compromised.
Members of professional guilds like optometry can afford to make campaign contributions to state office holders, who run a protection racket in exchange for contributions (economists call this rent seeking). Earlier this year lawmakers in South Carolina voted to outlaw eye exams that are not conducted in person. After the governor vetoed the bill, lawmakers voted overwhelmingly to override the governor’s veto (Senate 39-3; and House 98-1). The public interest law firm, Institute for Justice, recently took the case and filed a lawsuit on behalf of Opternative.
Other forms of telemedicine face similar threats. The Texas Medical Board recently tried to prevent physicians from treating patients using telemedicine (over the phone) who they had not previously seen in person. Of course the proposed rule was all in the name of safety, but it was a way to prevent local providers’ patients from seeking lower-cost care from a competing doctor by phone. The Texas Medical Board appears to have backed down after being sued.
Other battles are also being won in the courts. The North Carolina State Board of Dental Examiners was recently sued by the Federal Trade Commission for anti-competitive behavior. The dental board is responsible for licensure and acts against people who practice dentistry without a license. At least seventy-five percent of its members are practicing dentists, who are elected by fellow dentists.
When it came to the dental board’s attention that some non-dentists were whitening teeth at mall kiosks and store fronts, it sent cease & desist letters threatening legal action. Thus the board was quick to guard dentists’ turf, arguing that applying hydrogen peroxide teeth whiteners by non-dentists was practicing dentistry without a license. It was legal for consumers to whiten their own teeth at home; but not for someone to assist them for a fee.
The case went to the U.S. Supreme Court, who ruled against the dental board. The high court’s reasoning was the dental board lacked sufficient state supervision and was essentially conspiring to prohibit competition from individuals who were not members of its licensure cartel.
There is big money in medical care. As a health economist I can assure you that the entrenched interests will do anything to keep that from changing. Services as simple as eye exams on computers, phone calls to physicians who only have virtual offices, MinuteClinics staffed by nurse practitioners, these all have the potential to keep a lot of dollars from flowing into traditional medical practices.
Regulatory capture theory posits that regulated industries soon become captured by the industries they regulate. Imagine the temptation when the regulatory boards are composed of practicing members of the guild they regulate. This is especially true when membership in the cartel is exclusive and highly lucrative. You see, some conspiracies really are real.
A version of this Health Alert also ran in Town Hall.
That said: some conspiracies are real — and designed to protect the wealthy at everyone else’s expense.
Devon, you are absolutely too correct. You should also include the slime oozing out of our TV sets. The propaganda.
President Trump will replace Obamacare with Health Savings Accounts or tax-free HSAs. The media refuses to inform the American people what this means because they HATE the tax-free HSA. Hillary said, “HSAs put too much money in the Private Sector.” The TRUTH is the tax-free HSA is the MAGIC bullet that helps everything and everyone. The Democrats are too stupid to use the MAGIC of the tax-free HSA to help Obamacare. Here is an EXAMPLE:
A 64-year-old couple earning $65,000 a year in the 50010 zip code, Ames, IOWA, Obamacare health insurance cost is $1,885 a month, with a $6,450 deductible per person, and they qualify for ZERO tax credits. If this couple deposits $1,000 in their tax-free HSA at IOWA State Bank, this diminishes the MAGI (Modified Adjusted Gross Income) to $64,000 and now this couple qualifies for $1,632 a month in Obamacare federal tax credits. That is like $20,000 a year!
So these poor self-employed farmers in IOWA don’t know that if they save $1,000 in their own tax-free savings account, at IOWA State Bank (ISB), they get $20,000!!
If I was filling President Trump’s teleprompter I would make him say, every time he mentioned the tax-free HSA, I will let Americans save premium, ELIMINATE taxes and build wealth.
There is a very long history in medicine of established interests, mainly doctors, trying to stifle competition at every turn. However, primary care only accounts for 6% of healthcare costs and any health insurance executive will tell you that primary care doesn’t break the bank like hospital based care and expensive specialty drugs can and often do. If you want to put a dent in healthcare cost growth, let’s have price and quality transparency tools for hospital based care so both patients and providers can identify the most cost-effective high quality providers in real time and direct more of their business to them. Also, maybe insurers and PBM’s should just refuse to cover overpriced drugs that just plain cost far more than they’re worth because drug companies will always charge as much as they think the market will bear. Maybe the market should bear less than it currently does and maybe drug companies should charge more than they do now in other developed countries rather than let them freeload on the U.S. market.
Separately, regarding Ron’s cherry picked data about the 64 year old couple making $65K a year, if the ACA subsidy ceiling were removed and the 9.5% limit on the individual or family contribution toward the premium remained in place, the couple could buy their health insurance policy for $179 per month with the rest subsidized. Since there aren’t that many uninsured people remaining who don’t qualify for a subsidy under current rules, it wouldn’t cost all that much to just get rid of the current 400% of the FPL limit on income to be eligible for an ACA exchange plan subsidy.
Correction: The 64 year old couple could buy an ACA health insurance plan for $515.58 per month ($65K income x .095 out of pocket contribution toward the premium) with no income ceiling to qualify for a subsidy. That’s not cheap but it’s manageable if they have some savings and they will be eligible for Medicare a year later.
Stop the lying Barry. This is what Healthcare.gov says, “Above $64,080 — You won’t qualify to save on an insurance plan. You can buy one through the Marketplace at full price.”
These other bozos here at the NCPA might fall for your BS but not those of us that know the truth.
Crawl back under your rock Barry. Take Bob with you.
You might try reading what I wrote / said once in a while, Ron. I said IF THERE WERE NO INCOME CEILING for subsidy eligibility, the customer would not have to pay more than 9.5% of MAGI for his premium out of pocket. That would require a change in the current law which could be done at reasonable cost.
OH, you are talking about BarryCare. I’m talking about reality and you are just pretending you are the dictator.
Play nice Ron.
At least initially, health policy begins as an idea. I’m not suggesting I’m ready to support raising the ceiling above 400%, but it’s certainly a better idea than expanding cost-sharing subsidies to people who already get $3,000 to $5,000 in subsidies. Another idea (again, not saying this is the NCPA proposal), would be to allow a tax deduction for families too well off to qualify for a subsidy.
Devon, a 64-year-old couple in IOWA paying $1,885 a month with a $6,450 deductible is more than Medicare costs for an 80-year-old couple with a little deductible.
Barry thinks the government can just pay for every person’s health insurance in America and we currently owe $20 Trillion, get real.
Why can’t we tell these Socialists that they are crazy?
If your aricltes are always this helpful, “I’ll be back.”
Barry you are totally correct. All this week I have been hearing painful stories from older couples who make too much for subsidies, and in MN or WI a 62 year couple faces premiums of $2,000 a month even for a crappy silver plan. This can exceed 33% of their pretax income, even more brutal toward their after tax income.
And often they have a pre-ex condition that prevents them from getting a short term plan.
Gov Dayton of MN has proposed that such couples get a 25% rebate from state funds.
Good for him, because help is not coming from Washington.
I have been amazed and repelled by the willingness of Congressional Republicans to let middle class Republican voters suffer from the insufficient subsidies in the ACA.
I guess these people are considered collateral damage.
The Urban Institute estimates that creating a ceiling on health insurance expenses (as Barry describes) would cost about $10 billion a year. I do not want want to tease any reader with how fast both parties can spend $10 billion on Medicare or Defense.
AS far back an the Nixon Administration there were discussions of the government reinsuring all medical costs above an arbitrary amount (I’ve heard $50,000 mentioned). My worry is that if the government agrees to cover (or required health insurers to cover) all costs above a threshold, that guarantees there will be more bills above that threshold.
Devon – I’ve been told that in Medicare Part D, only about 5% of beneficiaries exit the donut hold and enter the catastrophic coverage zone. Costs within that zone account for fully 52% of Part D claims. As it was explained to me, for each claim within the catastrophic coverage zone, the patient is responsible for 5% of the cost, the insurance plan covers 15% and the government (taxpayers) covers the other 80%.
Reinsurance for traditional health insurance plans could work similarly but without any patient exposure. There could be a modest exposure, perhaps 10%, that remains with the insurer to mitigate the potential for excessive spending once the reinsurance attachment point is reached. If you index the Nixon era $50K number that you referred to, that would be the equivalent of something like $250K-$300K today which strikes me as reasonable.
I’m not saying I would propose this as a policy solution. But I wonder how this would work. Would the government pay it using Medicare price controls? Or would private insurers be required? None of it sounds like a good solution. In the short run it would save money for patients. At some point the providers would have less resistance to raising fees.
We have never come to a good solution to how to deal with fees way above the deductible other than managed care. I talked to the CEO of IntegraNet and the way they deal with it is a physician is assigned to each patient as their medical home. The physician closely coordinates the care patients’ receive. The main goal is to keep seniors out of the hospital. I believe we need something like that to deal with the sickest patients.
Do you mean intensive case management? While that would probably be OK with me, it also probably means that the patient would have some limits applied to what care he gets and doesn’t get, especially in end of life situations. We can’t afford to give everything to everyone and most people can’t afford to pay for the big stuff out of pocket. Limits have to be applied somehow.
That’s a genuinely imsvispere answer.
Thanks Bob. Here in NJ, I have a 57 year old friend who bought a broad network PPO off-exchange plan from Horizon Blue Cross for $998 a month. The deductible is 10K! Fortunately for him, he can afford it but it’s still insane.
Devon, I was not referring to any reinsurance plan where the government covers any expense over an amount like $50,000.
I would call that catastrophic reinsurance, and it would cost in the hundreds of billions a year. I do not favor it.
What I propose is the government lift the 400 per cent of poverty limit on subsidies. A person making $70,000 a year would still be assured of paying no more than $7,000 on health insurance.
This would only cost $10 billion because almost all the people making $70,000 a year are in corporate plans and would not need this subsidy.
Regarding the whole theme of this post, there is a great article by John Cochrane on lowering the costs of health care.
http://faculty.chicagobooth.edu/john.cochrane/research/papers/after_aca.pdf
Bob,
You are correct this is a great paper. I’m wondering if you have read the whole thing. I think the best part of the paper is section IV on what insurance plans people should have starting on page 22
Ron, you assert that your Iowa couple gets over $20000 of tax credits by driving their income down below $24,000.
I wish that were true.
Here is what I get when I plug their data into the Kaiser calculator:
You are likely eligible for financial help
Based on the information you provided, your income is equal to 399% of the poverty level. This means you are likely eligible for financial help through the Health Insurance Marketplace. An estimate of your cost for coverage and amount of financial help in 2017 are provided below. To find out your actual amount of financial help and to get coverage, you must go to Healthcare.gov or your state’s Health Insurance Marketplace.
Estimated financial help: $199 per month ($2,393 per year)
as a premium tax credit. This covers 28% of the monthly costs. Your cost for a silver plan: $517 per month ($6,202 per year)
in premiums (which equals 9.69% of your household income). The most you have to pay for a silver plan: 9.69% of income for the second-lowest cost silver plan
Bob, how do you get so confused? I wrote, “this diminishes the MAGI (Modified Adjusted Gross Income) to $64,000 and now this couple qualifies for $1,632 a month in Obamacare federal tax credits.”
This is how stupid Obamacare is.
My post is clear.
At $64,000 of income the couple qualifies for about $199 a month in tax credits, not $1,632 in tax credits. They would have to be dirt poor to get $816 each in tax credits, I believe.
Bob, I will go slow for you. YOU said you got $30,000 to help people with Obamacare yet you know so little. I am not surprised.
Look at zip code 82601 (Casper, WY)
64-year-old couple earning $64,000
How big is the tax credit?
Check here:
https://www.healthsherpa.com/
Bob, your answer:
$65,000 income = ZERO tax credits
$64,000 income = $22,476 tax credits
That is why it is called “the cliff” Bob.
Admit it Bob, Obamacare is too stupid for words.
So why isn’t the couple with $64K of MAGI paying 9.5% of that income as its contribution toward the premium? It doesn’t make any sense.
Separately, everyone knows that the cliff phase out of ACA premium subsidies is grossly unfair. It was done that way presumably to meet CBO budget scoring constraints. It can be fixed at reasonable cost in my opinion especially since Medicare costs grew significantly slower than expected since the ACA became law. We addressed the SGR / doc fix issue and we should address this premium subsidy phase out issue too.
Barry you say
So why isn’t the couple with $64K of MAGI paying 9.5% of that income as its contribution toward the premium? It doesn’t make any sense.
they are paying or I should say they can. the subsidies are based off the second least expensive silver plan and that one would cost $2,390 a month for the 64 year old couple making $65,000
All Ron is saying is the people will buy the Bronze plan for $2019
Oh wait a minute they wont buy anything and roll the dice and wait for Medicare in a year.
Lee, thanks for the clarification.
That’s a shrewd answer to a tricky quetison