Health Reform: The Problem with Hospitals

This post starts to approach a basic problem with health reform -- hospitals. This will be a recurrent theme, but let me start with an exchange with my beloved ultra Right Wing brother-in-law, Jim. Jim knows the public transportation area inside out, especially urban busing. He knows from this scene that private competing rather small companies can outdo larger, cumbersome, bureaucratic, and labor union infested companies with ease. I think he is right, and I might even give him a chance to express his views on this subject here in the future - to our expected and hoped for audience of 10 viewers.

Jim takes his experience and his belief in free markets and tries to apply it to the health care area, as so many do (Harvard Business School, especially.) So here is what he says:

Here's an authority you can believe in. The Pres. of a branch of the Aussie
medical assoc said "(The system) is basically broke and all health services are
in trouble." The most profound quote of all comes from Liberal health
spokeswoman Jillian Skinner: "The centralized control of hospitals means nobody
is accountable". Hospitals are run of the "state" of course.

She grasps the essence of a high cost, inferior system that is not
accountable to individual patients because an individual can never seek
redress from his or her government masters.

I vote Skinner takes Dashelle's place at HHS. Of course a true liberal
would be rejected by illiberal members of the majority party in Congress.

And by the way Austrialian healthcare is mixed between federal, state
governments and some private sector. Medicare, funded by the government of
course, covers all Aussies, reimburses visits to Doctors, with a fee
cap and covers all hospital costs. Its complex but a perfect window into
what is taking place in this country.

Shift as many people over to government medicare until the entire
system collapses when an even smaller number of
people pay for more of the costs the government
doesn't reimburse in the form of subsidies to each and every health care
provider.

The only winners will be the tens of thousands of new governmemt
bureaucrats developing ever more complex formulas to drive down "expenses"
as health care deficits soar, more taxes must
be conficated, while more hospitals close due to lack of funding and
Doctors rightly demand higher reimbursement fees from a bankrupt government.
Welcome to health care utopia.

OK, you get the drift of Jim's thought, using Australia. So, here is what I responded:

Jim, I think one of the very biggest problems in our health sector is the actions of hospitals, which are led very poorly, which have little incentive for efficiencies, and whose response has generally been to combine with one another and raise prices. One example cited by Jamie Robinson in the journal Health Affairs cites the cost of medical devices. If you look into it, the hospitals, which are the purchasers, do absolutely nothing to get good prices, but simply order the devices the doctors want - and make no effort to get the docs to agree on one device among themselves -- and they don't even know what prices they are paying. Just so irresponsible, but this is what they all do.

But as a very capital intensive industry, I'm really not sure how to structure it. I'd like to see competition, but that has never worked in the hospital sector. The government needs to play a role in structuring the hospital landscape so that competitive and responsible forces come to the fore. As things stand now, the hospitals are pretty much on their own, and they are real malefactors. (And, the managers pay themselves a shitload.)

Budd

I'm using this exchange, probably not too expertly, as a set up for a couple more posts. Watch for them!

Budd Shenkin