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Find the right size of administrative bodies to generate economies of scale. Finally, many recommendations to improve administrative efficiency with organisational changes are around redefining the size of governmental bodies and redesigning the portfolio and operations of health administration entities. The overall aim is to find the optimal size of an administrative entity to achieve efficiency gains without compromising responsiveness. These changes can be part of a major system overhaul or refer to smaller organisational changes and include the mergers of previously separate administrative entities, or in other cases, their separation. For example, Korea’s move from a multi-payer to a single-payer health insurance system considerably reduced resources devoted to administration. This move facilitated a more standardised use of ICT and a standardisation of processes, and is generally associated with greater economies of scale in purchasing, but also in performing administrative tasks. Merging insurers resulted in a reduction of health insurance staff by about a third. The share of administrative costs in total SHI spending went down, from 8.5% in 1997 to 2.4% in 2008 (Jeong, 2010). In Iceland, the Ministry of Health merged with the Ministry of Social Affairs in 2008, while in the Slovak Republic two state-owned insurance companies joined forces with insurance companies in 2010, reducing their number of staff by 10% between 2010 and 2011. As part of the rescue financing deal with the European Commission, the European Central Bank and the International Monetary Fund, Greece merged the health divisions of the four main social insurance funds into one health insurer – the National Organization for Healthcare Services Provision (EOPYY) – and limited its role to purchasing services. Previously separate administrative bodies were also merged in Belgium. In Denmark, however, organisational change referred to the separation of institutions; in this case the Medicines Agency was separated from the National Health Authority to better streamline procedures to license new medicines.Whether agencies are merged or separated depends on the country-specific context but generally countries try to find the most appropriate organisational size to achieve efficiency gains. Consolidation of administrative activities of public insurers or governmental departments can be the result of efficiency targets striving to improve operations within administrative institutions, as was done in France and Australia. These consolidation efforts typically result in a reduction of administrative staff. Again, improvements in the processes of governmental operations can be facilitated by better use of ICT, as seen for example in Korea and Slovenia. Consolidation and separation initiatives typically involve regulators, while the finer organisational changes can also concern managers, and to a certain degree, physicians.

Fourth, it is argued that a competitive, private, free market approach to health care would streamline health care costs to make them more cost effective. 102 However, it is precisely the competition between insurance companies in the private sector that has caused the costs of health insurance to spiral out of control and become unaffordable for so many. 103 A single-payer plan, by providing health care to all Americans regardless of their ability to pay, would keep health care costs down particularly because such a program will not need to spend small fortunes on advertising, consumer influence, and the administrative costs associated with these realities. 104 The lack of competition as a cost-controlling mechanism would apply to hospitals as well as private insurance companies. 105

1. At the macro level: Wide variation in spending on governance and administration 1.1. Administrative costs are influenced by the type of financing system The resources that countries allocate to administrative activities at the system level vary substantially. While the OECD average was around 3% of health spending in 2014, it was double that level in France and higher still in the United States (Figure 6.2). On the other hand, a number of countries report administrative expenditures of less than half that level.

Note: Compulsory health insurance schemes predominantly refer to social health insurance (SHI) funds but can also refer to compulsory health insurance provided by private insurers. Voluntary prepayment schemes mainly refer to voluntary health insurance schemes. The OECD average includes 30 countries. Source: OECD Health Statistics (2016), http://dx.doi.org/10.1787/health-data-en. 1 2 While establishing completely comparable data remains a challenge (Box 6.1), a number of factors undoubtedly play a role in explaining the differences. For example, the costs involved in collecting revenues may be higher in countries with inefficient tax collection systems, large informal economic sectors, or a geographically scattered population. Skills can impact the efficiency of administration: a shortage of skilled workforce and low staff productivity due to insufficient information and communications technology (ICT) support will have an upward effect on costs. Cultural factors such as acceptance of schemes or the level of corruption within a country may impact the cost of regulation and monitoring (Nicolle and Mathauer, 2010). Finally, the legal culture and risk of litigation, with the resulting level of premiums and claims, can affect administrative costs. While differences in the size and scope of planning and management of health care systems can lead to some variations in overall costs, the way that health care is financed in a country – whether mainly tax-based, by social health insurance (SHI) funds, or by private insurance –appears to play a more pivotal role. Indeed, Figure 6.2 suggests that financing schemes organised around SHI funds or some kind of compulsory insurance generally feature higher administrative expenditure than those managed by general governments (covering both central and regional/ state-level governments). Frequently offered by for-profit corporations, voluntary private insurance incurs a relatively high share of total administrative expenditure, albeit accounting for a comparably low share of overall health spending. Thus systems featuring a high proportion of health care financing via SHI funds and/or private insurance generally demonstrate a higher share of administrative spending overall. The following sections explore in more detail the institutional characteristics that lead to these differences. 1.2. The multiplication of funds has a significant impact on administrative costs The high cost of administration is often cited as one of the main disadvantages of (multi-payer) insurance-based, public health financing compared with health care systems where coverage is based on residency and that are mainly financed through taxes (Saltman et al., 2004). Figure 6.3 shows that those systems with a more predominant SHI scheme tend to have higher administrative costs. On average, in countries where social security spending constitutes less than 40% of public health expenditure, administrative costs accounted for less than 2% of public spending on health in 2014, whereas it was more than double that in countries where social security funds accounted for the bulk of public health spending. Interestingly, while administrative costs appear similar for systems with residencebased entitlements, a much larger spread occurs across insurance-based health care systems. Ultimately, this variation reflects the number of different funding pools and the presence of competition, ranging from single-payer to multi-payer systems either with automatic affiliation or with a choice of insurers. Generally, countries with a single SHI

Lemons and cherries So if the rising cost of administration is a primary force driving health care inflation, why don’t we do something about it? That’s because administrative complexity and waste are no accident but rather are baked into our private health insurance system and made worse by continuing attempts to use competitive market processes to achieve social ends other than maximizing profit. Paying a doctor was relatively simple in the 1960s. Most people had the same insurance policy, issued by Blue Cross and Blue Shield, which back then was a private company but operated like a non-profit under strict regulation. But in hopes of controlling steadily rising costs, policymakers encouraged insurers besides Blue Cross to enter health insurance markets, beginning with the HMO Act of 1973. The proliferation of for-profit companies with competing plans raised billing costs for health care providers, which now had to submit claims to a multitude of different insurers, each with its own codes, forms and regulations. Not only that, but insurers quickly discovered the dirty secret of health care finance: Sick people are expensive and make up most costs, while healthy people are profitable. In other words, the vital lesson for an insurer looking to make money is to identify the few sick people and get them to go away (“lemon dropping”) and find the healthy majority and do things that attract them to your plan (“cherry picking”). Insurers are happy to offer discounts on fitness club memberships to attract healthy people, for example. But they punish the sick with higher copays and deductibles, as well as increasingly restrictive and intrusive regulations on preauthorization. Economists call it adverse selection. Regular people call it paperwork hell. Whatever the name, it’s the purpose of increasingly complicated insurance plans and reimbursement forms.

Perhaps the most serious disadvantage of leaving the private insurance industry largely in place is that it pre serves adverse selection, which leads insurers to avoid insurance risks and limit their coverage. Adverse selection in health care occurs when a dispro portionate number of people in poor health select a particularly generous insurance plan.22 Where insurance companies compete as payers, they typically differ in the services they cover and in reimbursement rates. Suppose plan A covers outpatient psychiatric servicesw hile plan B does not, orA reimbursesm ore generously for such services. Patients with psy chiatric problems may gravitate to A, which results in A enrolling many people who need extensive services. This is very costly for the company that administers A. Given variations in different plans' terms, and given that patients may choose from among these plans, the threat of adverse se lection encourages health plans to offer less generous benefits and to ad vertise to wealthier, healthier groups, or to find other ways of avoiding those who most need health care. Now, a system could address the threat of adverse selection by requir ing that each plan cover the same ser vices and charge the same premiums, deductibles, and so on, and by guar anteeing that anyone can enroll in any plan. Standardization of the basic terms of each plan in a system of truly open enrollment tends to level the playing field. But if the terms of each . plan are to be uniform, why have dif ferent plans at all? A champion of competing plans might reply that each is to deliver health care, never merely provide in surance (as Blue Cross and Blue Shield do). Competition in delivery, the argument goes, will promote quality, thereby justifying higher ad ministrative costs. This may be cor rect. Note, though, that each move identified for avoiding adverse selec tion?standardizing prices and cov ered services, maintaining open en rollment, and requiring competing plans to deliver services?steps in the direction of a single-payer system. Later we will return to the prospect of merging single-payer financing with competition.

In health insurance, moral hazard occurs when individuals obtain more health care than they would have if it were not paid for by the insurer. Adverse selection occurs when individuals with greater health care needs select plans that provide greater coverage. Both have an impact on health care spending. This paper estimates the relative impact of each of these in spending under private health insurance. Each is responsible for roughly half of the differences of expenditures between the most and least generous health plans. So enrollees in the more generous plans pay higher premiums because of both moral hazard and adverse selection. Today’s standard in insurance coverage is shifting towards lower actuarial value plans - plans that pay a lower percentage of the total health care costs. What does this study tell us about premiums for these less generous health plans? As more people enroll in them, which they are, the premiums increase to cover the additional expenditures for those who otherwise would have enrolled in the more comprehensive plans. The lower actuarial value plans are subject to favorable selection (the healthy buying less expensive plans in anticipation of not needing care), but that diminishes as higher cost patients move from the more comprehensive plans into these cheaper plans.

How Health Insurance Compounds the Harms of Provider Monopoly The past several decades have witnessed extraordinary consolidation in local hospital markets, with a particularly aggressive merger wave occurring in the 1990s. By 1995, hospital merger and acquisition activity was nine times its level at the start of the decade, and by 2003, almost 90 percent of Americans living in the nation’s larger metropolitan statistical areas (MSAs) faced highly concentrated provider markets.3 This wave of hospital consolidation, predictably, was alone responsible for price increases for inpatient services of “at least five percent and likely significantly more,” and similarly responsible for price increases of 40 percent where merging hospitals are closely located.4 A second merger wave from 2006 to 2009 significantly increased the hospital concentration in thirty MSAs,5 and the vast majority of Americans are now subject to monopoly power in their local hospital markets. In economic theory, monopolies are objectionable because they enable sellers to charge higher prices and thereby cause some consumers (who would be willing to pay a competitive price) to forgo enjoyment of the monopolized good or service. Fortunately, such output-reducing effects are greatly lessened in health care markets because the many patients covered by health insurance can easily pay monopolist providers’ asking prices rather than being induced to give up these desirable goods and services. But unfortunately, precisely because there is no output reduction in response to monopoly price increases, health insurance both amplifies the redistributive effects of provider and supplier monopolies and inflicts allocative inefficiencies that are arguably more distortive and costly than those caused by typical monopolists. Supra-Monopoly Pricing. In the textbook model, a monopoly redistributes wealth from consumers to powerful firms. The monopolist’s higher price enables it to capture for itself much of the welfare gain, or “surplus,” consumers would have enjoyed if they had been able to purchase the valued good or service at a lower competitive price. In health care, insurance puts the monopolist in an even stronger position because consumers do not face, and therefore are not deterred by, monopoly prices. This effect appears in theory as a steepened demand curve for the monopolized good or service. Whereas most monopolists encounter reduced demand with each price increase, health insurance mutes the marginal consequences of rising prices. If health insurers perfectly represented their subscribers’ preferences, their policies would reflect consumers’ demand curves and pay for services at prices that individual insureds would, absent insurance, be willing to pay themselves. But deficiencies in the design and administration of real-world health insurance prevent insurers from reproducing their insureds’ preferences and thus heavily magnify monopoly power. For legal, regulatory, and other reasons, health insurers in the United States are in no position (as consumers themselves would be) to refuse to pay a provider’s high price even if it appears to exceed the service’s likely value to the patient. Instead, insurers are bound by both deep-rooted convention and their contracts with subscribers to pay for any service deemed advantageous (and termed “medically necessary” under rather generous legal standards) for the patient’s health, whatever the cost.6 Consequently, close substitutes for a provider’s services do not check its market power as they ordinarily would for other goods and services. Indeed, putting aside the modest effects of cost sharing on patients’ choices, the only substitute treatments or services insured patients are likely to accept are those they regard as the best ones available. Unlike the ordinary monopolist that sells directly to cost-conscious consumers, the rewards to a monopolist who sells goods or services purchased through health insurance may easily and substantially exceed the aggregate consumer surplus patients would derive at competitive prices. Thus, health insurance enables a monopolist of a covered service to charge substantially more than the textbook “monopoly price,” thereby earning even more than the usual “monopoly profit.” The magnitude of the monopoly-plus-insurance distortion has sometimes surprised even its beneficiaries.7 Of course, since third-party payers (and not patients) are covering the interim bill, these extraordinary profits made possible by health insurance are earned at the expense of those bearing the cost of insurance. Insureds, even when their employers are the direct purchasers of health insurance, are ultimately the ones seeing their take-home pay shrink from hikes in insurance premiums caused by provider monopolies. Discussions of antitrust issues in the health care sector rarely, if ever, explicitly observe how health insurance in general, or US-style insurance in particular, enhances dominant sellers’ ability to exploit consumers. Although scholars have previously observed that prices for health services are much higher in the United States than in other Organisation for Economic Co-operation and Development (OECD) nations (without observable differences in quality),8 and although many have observed that provider market power has been a significant factor in inflating those prices,9 few have observed the synergistic effects of monopoly and health insurance.

For most people, a single doctor’s visit can be a financial obstacle course.

Many patients throughout the year pay hundreds or thousands of dollars in premiums, most often through workplace contributions. Then, at the doctor’s office, they are faced with a deductible, and they may need to pay coinsurance or make a copayment. If they have prescriptions, they’ll likely fork over cash for those, too.

While I am glad to see this kind of citizen engagement, I am disheartened by how many people think that the way to make drugs more affordable is to increase government control of the economy. Nothing could be further from the truth. The fact is we do need to fix the way we pay for prescription drugs. But the solution to our drug pricing problem involves less government, not more – and much more transparency. The problem with drug prices – especially for the coming wave of innovative cures and personalized, precision medicines – is not that they start out expensive, but that they stay expensive for years after they have been on the market. The main culprit here is the regulatory environment that limits the creation of a free, functioning and competitive market for prescription drugs. To illustrate this point, consider how differently things work when other high tech products come to market with a high list price. When the first iPod was released in 2001, it cost $399 and could hold 1,000 songs. Over the next three years, as more alternatives came to market, Apple felt the competition and created an iPod that held four times as many songs as the original and cost $170 less. These days, when 77 percent of Americans own a smartphone, the idea of a $400 dollar iPod seems ridiculous. Competition spurred innovation, which drove down prices. That is what free markets do when unencumbered. Of course, prescriptions drugs are different than iPods, and having access to portable music is much less important than having access to affordable medicine. As a patient and a physician, a father and a grandfather, I am personally interested in solving our drug pricing problem. But this kind of concern is no reason to treat drugs differently, in an economic sense, than any other product on the market. Right now, the federal government prevents competition by impeding how many new drugs get approved, and how they are paid for when they come to market. Fortunately, there are ways to produce safe, effective and affordable drugs while decreasing government regulation. First, we need to increase the number of generic drugs available, and be able to know their prices offered before we buy. This is called price transparency – and economical markets need price transparency. In 2016, patients paid an average of $5.54 out of pocket for generic drugs and $28.31 for branded equivalents. In addition to providing a cheap alternative for patients, generic competition is crucial to lowering prices. After multiple generics are approved, prices fall by 80 percent across the board, saving money for everyone. Fortunately, under Commissioner Scott Gottlieb, the FDA is taking steps to streamline generic drug approvals, putting us on a path to a more robust generic drug market. In fact, we have already seen the results of the efforts as the FDA approved a record number of generic drugs in 2017. Additionally, we need to ensure that the list prices of these drugs are displayed front and center for the consumer to see at the point of sale. This kind of price transparency is crucial for the functioning of an open market, and will help encourage patients to opt for cheaper alternatives whenever they can. Once we increase the number of new drugs on the market, we need to find new ways of paying for them. This is especially important for those new drugs that come with high price tags. I have a personal interest in ensuring that we solve the payment issues for these personalized medicines. I have stage-four prostate cancer, which is close to remission, and my doctors have already engineered a personalized medicine to give me next. This is truly a new frontier in medicine – using our own cells to cure cancer – but I am awaiting the sticker shock associated with it. This is why our real concern should be developing ways to pay for precision medicine that won't bankrupt patients. One way, which is much talked about, is to pay for medicine based on outcomes instead of by dose or injection, which federal regulations now inhibit. If we rolled back these regulations and instead let market forces allocate the costs down and the competition up, we will see costs brought down without jeopardizing safety or efficacy. Rather than raging against a high initial price, we should accept that precision drugs will cost a lot initially, but also that they should be priced based on outcomes. With market forces restored, the initial list price won't matter, as prices fall and everyone can afford precision medicine. The actions we take to address drug prices over the next 10 years will affect how we develop, approve and pay for medicine for a generation. Rather than doubling down on government regulation, we should rely on the free market, which is the best way to allocate these scarce resources, increase competition, lower prices and continue to foster medical innovation for years to come.

Citizen science has a mixed reputation. It includes well-organized, crowd-sourced efforts like the 1830s British great tidal experiment that enlisted members of the public to monitor tides at 650 coastal locations, but it also includes less rigorous dabbling by amateurs.3 Successful citizen science projects often engage laypeople, supervised by professional scientists, to collect and analyze data or even to assist in creating the finished scholarly works4—in other words, the citizens are a source of labor. This article explores an alternative model—citizen research sponsorship—in which citizens supply essential capital assets to support research. The assets could be monetary (research funding, for example), although this article focuses on a different kind of capital: data resources, which are a critical input for twenty-first century biomedical research.5 The citizen research sponsorship model flips the traditional control relationship of citizen science. Instead of laypeople laboring under the supervision of professional scientists, the professional scientists work at the instigation of citizen groups, using the people’s data for projects the people endorse. Citizen groups that control an essential research input, such as data or biospecimens, sometimes succeed in leveraging their asset to enlist qualified scientists to generate desired knowledge. This sponsorship model was exemplified late in the 1980s when a group of Canavan-disease-affected families developed a disease registry and biospecimen bank and leveraged these resources to spur discovery of associated genetic variants and development of a diagnostic test.6 Their sponsorship took the form of supplying data and biospecimens for the research, as opposed to providing funding. This revealed a new dynamic in the era of informational research7 that mines preexisting health records and data derived from biospecimens: money will follow a good data resource, instead of data resources following (and having to be generated by) those who hold money. Data resources are a central currency of twenty-first-century science, and the question is, “Who will control them?” The Canavan families’ scientific success was later marred by litigation when their chosen investigator elected to patent his discoveries and charge royalties on the test.8 They had naively assumed he would put his discoveries into the public domain.9 Citizen sponsors, like any other research sponsors, need well-drafted research agreements if they want to avoid unpleasant surprises. The Canavan families’ greatest contribution to science ultimately may have been that they demonstrated the power of well-organized citizen groups—perhaps, next time, with appropriate consulting and legal support—to instigate high-quality scientific research. Hiring lawyers and scientists is relatively straightforward if a citizen group has money, and money need not always come from external fundraising and donors. A citizen group that controls a critical data resource, coupled with a workable revenue model, may be able to monetize its resource lawfully and on terms ethically acceptable to the group members.

Drive Up Drug Launch Prices?” https://faculty.fuqua.duke.edu/~dbr1/research/Medicare-drug-prices.pdf

Governments and private insurers reimburse health care providers (physician clinics and hospitals) for drugs they administer, such as drugs used in chemotherapy. The amount that an insurer reimburses a provider typically differs from the price the provider pays the manufacturer (Figure 1). The manner in which Medicare reimburses providers affects the drug’s demand and price. We estimate that a 2005 change in reimbursement caused a more than 400% rise in launch prices for drugs administered by providers. Before 2005, Medicare paid providers an amount largely unrelated to the actual price. Medicare reimbursed providers based on AWP which officially stood for average wholesale price, but which was widely known as “ain’t what’s paid.” Beginning in 2005, Medicare reimbursed providers based on average sales price (ASP) (Jacobson et al., 2010; Yurukoglu et al., 2017). ASP is the average price of purchases made by providers in the previous six months. Hence, in 2005 reimbursement changed from an amount unrelated to the actual price to an average of lagged prices. When insurers reimburse providers based on lagged prices, manufacturers choose a higher launch price for two reasons. The first reason is straightforward: providers are less sensitive to the price when reimbursement covers a portion of the price. The second reason is subtle. A provider’s current reimbursement depends on past prices. Hence, while a provider prefers low current prices, the provider prefers high past prices, because the insurer pays the provider more when past prices are higher. Hence, firms “invest” in a high launch price, higher than the profit-maximizing current price, in order to secure higher reimbursement for the provider in the future. By setting a higher launch price, the future reimbursement is higher, so future demand is higher, and the firm can charge a higher price in the future. We illustrate these effects using a model of reimbursement in a market with rising willingness to pay. We look for evidence of drug launch price increases using a difference-in-differences framework. We compare drug launch prices before and after the 2005 policy change, and we compare launch prices for the treatment and control groups. The 2005 policy change affected drugs administered by providers in an outpatient setting. Hence, the treatment group includes the drugs that health care providers administer to patients in an outpatient setting. The control group includes prescription drugs sold in the retail market. In a robustness check, the control group consists of provider-administered drugs that Medicare excluded from the change in reimbursement. Provider-administered drugs are typically in liquid dosage form (measured in milliliters) because providers inject or infuse the drugs. These drugs go directly into the blood so sterility is critical. Manufacturing standards imposed by companies and the Food and Drug Administration (FDA) are costly. To be consistent, we include only liquid dosage forms in both the treatment and control groups. By doing so, we can be confident that changes in manufacturing costs are not driving rising launch prices for the treatment group alone. Average launch prices could also rise if a higher share of drugs are novel, so we include an indicator variable for whether the drug is a new molecular entity, rather than a variation on an existing drug. Furthermore, average launch prices could rise if drugs have little competition, so we control for competition. Finally, average launch prices could rise if a greater share of drugs are in high-value drug classes, so we include drug class fixed effects. We also include year fixed effects to account for other changes over time. We estimate that a 2005 change in reimbursement policy caused launch prices for outpatient drugs to increase more than 400%. We show that outpatient drug launch prices have risen sharply while retail drug launch prices have changed little (Figure 2). We recommend replacing price-based reimbursement with reimbursement based on value. For example, Medicare could reimburse based on a drug’s quality-adjusted life years added relative to the standard of care.

As lawmakers re-evaluate avenues to successful healthcare reform, they must not overlook the urgent need to protect the doctor-patient relationship. Expanded access to healthcare is meaningless unless lawmakers address third-party disruption in potentially life-saving medical treatments. We are at a frightening precipice in the doctor-patient relationship where third parties have more power in the exam room than the doctors treating their patients. At a time when the importance of empowering patients in medical decision-making is being recognized, third-parties are practicing unprecedented interference. This allow payers to have the ultimate authority over whether or not a patient will receive access to treatments that doctors have already deemed necessary. The doctor-patient relationship is a partnership first and foremost. The patient is the center of the medical universe and doctors are taught to recognize the importance of this collaboration. However, the insurers responsible for determining patients’ access to treatments and medications recommended to improve their health – or to even save lives — do not possess the same acuity. In particular, minority communities are facing a lack of access to necessary treatments. Without improved health literacy and a greater understanding of medical ailments, patients often aren’t aware of their rights. Many patients without access to this information do not know that when insurers deny them access, they can appeal and fight for the treatments their doctors feel are most appropriate. While it may be surprising to hear that patients are denied treatments their doctors have prescribed, these practices are fairly common. For example, step therapy requires patient to fail first on a less expensive medication, even if it is likely to be less effective. Obstacles to overturning insurers’ denials may deter patients from pursuing claims, cause them to think that it is too difficult to fight for themselves. Doctors and patients must be encouraged to do everything possible to keep medical decision-making in the hands of patients and the treating physicians. As a cardiologist, I observe this injustice on a weekly, and sometimes daily, basis. For example, individuals with cholesterol issues, hereditary heart failure and statin intolerance, there is now a class of medication called PCSK9 inhibitors that help lower cholesterol when statins have failed. However, many heart patients, especially those in the African American community, have struggled to obtain access to PCSK9 medication. We have also witnessed this with heart failure treatments for African American patients. Many patients who qualify with severe congestive heart failure have been denied lifesaving treatments. It is increasingly difficult to serve and protect patients when doctors cannot easily treat patients that are in need. This stands in direct contrast to basic medical principles. It is unethical to deny treatment for a patient, particularly when other treatments have proved to be ineffective. Rather than determining whether a medication is beneficial for the insurance company’s bottom line, the relevant question should — will it improve or save the patient’s life? Reconciling this priority with those of the insurance carrier is untenable. Instead, doctors are now finding themselves in a triage situation designed to make patients independently prove they require a treatment or a medication. Decisions to approve treatments must be based on the conclusion of a doctor using diagnostic procedures and lab studies to render such a conclusion. It is unconscionable to deny patients a treatment that has proved to work, be effective, and save lives. It’s time for doctors and patients to stand together so that patients not only know their rights but can access their medications. Collectively, they must strive to restore the sanctity of the doctor-patient relationship, and advocate for an end to third-party interference.

Researchers looked at how often Medicare patients went to the hospital during their last six months. They found that a dying person in Hawaii spends an average of 16.4 days in the hospital versus 7.3 days in Utah. They also looked at the number of times Medicare patients went to the doctor during the last six months of life. New Jersey had the highest number of visits, 41.5. Again, Utah's Medicare patients tended to go to the doctor the least - 17 times. Researchers did not measure whether those who died in Utah got better or worse care than patients in New Jersey. But they did try to monitor care by following three types of patients for up to five years after they suffered a heart attack, a fractured hip, or a colectomy for colon cancer. For each illness, they found higher mortality rates for patients in the regions with the most intense care. Dr. John E. Wennberg, director of the Center for the Evaluative Clinical Sciences at Dartmouth Medical School, said the higher mortality rates in some regions could be caused in part by medical error. "There's a lot of concern about medical errors," Wennberg said. "If you hospitalize people twice as often in a community on a per capita basis, you have twice the risk of having a medical error problem."

All you have to do is ask. Everyone has a personal medical horror story or knows one who does. There is consensus among health care consumers and providers that our health care system is plain broken. And while we all agree we must fix it, trying to figure out how leads to murky, confusing, overwhelming, unsolvable messes. When did health care, which should be about taking care of people and excellent customer services, turn into “health scare” – where the patient is treated like a second-class citizen, intimidated and bullied, and possibly left fearing for his or her own life, while accepting mediocre care at best? In my 40 years of practicing medicine, I have witnessed the disintegration of individualized care and the demise of the doctor-patient relationship as subspecialties and advanced technologies have changed the landscape and priorities in health care. We’ve made many remarkable advances in medicine, such as those involving genomics, immunotherapy, organ transplants, immunizations and stem cells. But we’ve lost the humanistic side of medicine. Common sense medicine and the compassionate doctor who is grateful to care for a patient have been replaced with standardized, disease-centered protocols and never-ending tests and procedures with little or no patient touch. That may define progress, but the price of never making eye contact or knowing important details of a patient’s life have led to more problems than solutions. Insurance companies, drug companies, cover-ups for deadly mistakes and just protecting the bottom line have all taken a heavy toll on a most inspiring and caring profession. But patients aren’t powerless, and can take steps to not only protect themselves from bad outcomes, but to ensure they receive optimal care. We can make the system work and integrate modern progress with the wisdom of experience. Improving the Health System and the Patient Experience Simple changes in your personal perspective will improve the entire health system – and your experience as a patient – in short order. It all starts with you and building your self-confidence as a health care consumer. You alone live in your body, so listening or taking advice blindly from a person with a white coat and an MD after his or her name doesn’t guarantee success or health or a long happy life. You may think “the doctor knows best,” but that isn’t always the case. The doctor doesn’t know better than you do. To take control of your health and never be a victim again, follow these seven tenets: 1. Find a doctor who makes eye contact and asks personal questions. There’s no excuse for arrogance. If the doctor is staring at the medical record and doesn’t look at you, she won’t see you as a human being. You’re better off with no care at all than the shoddy care this doctor is about to give you. Just walk away – there’s always a better fit that might save your life.

. In 2016, researchers with the Determinants of Health project modeled the factors correlated with health outcomes.24 They estimated that medical care determines only about 11 percent of health—far less than individual behavior (38 percent), social circumstances (23 percent), or genetics and biology (21 percent).25 (Physical environment determines the remaining 7 percent.)26 These estimates are similar to those of several other studies. For example, J. Michael McGinnis, Pamela Williams-Russo, and James R. Knickman looked at the determinants of early death, estimating that behavior (40 percent), genetics (30 percent), and social circumstances (15 percent) were more important than medical care (10 percent).27 In addition to those estimates, the only two health insurance experiments—the Oregon Medicaid experiment discussed previously and the Rand Health Insurance Experiment—have not found a beneficial effect on physical health from people receiving comprehensive insurance.28 Although medical care is beneficial in many instances, it is often unnecessary and can be harmful. In 2012, the Institute of Medicine estimated that 30 percent of health care is unnecessary.29 In a 2015 piece in the New Yorker, Atul Gawande, a surgeon and a prolific health policy writer, observed that providers and patients often underestimate the costs of medicine.30 He cites three examples: proliferation of antibiotics for viral infections; the downsides from tests, such as increased radiation and false positives; and overdiagnosis, or positive diagnosis for conditions that develop extremely slowly and are unlikely ever to cause a patient problems.31

Where subsidies are not uniform, but depend on modality or other health service characteristics, the more heavily subsidized service will be promoted. This of course may be the intention, but generally such subsidies are set without regards to the distortions that this will create. Many health systems provide more generous public subsidy for medical and pharmaceutical services than for non-medical services. This is despite evidence suggesting that non-medical services, including allied health services, may be highly cost effective in the prevention and management of chronic disease [21,22]. The price differential created by public subsidy for medical primary care services means that that the price to the consumer without insurance for non-medical services will be high relative to publicly subsidised medical services and pharmaceuticals. This provides an incentive to the consumer to increase their demand for medical services compared to non-medical primary care services. This further enhances the monopoly provision of medical services that is already present by default of practice licensing and registration. Even if the consumer has private health insurance, non-medical services are likely to be capped unless the insurer has both an incentive and the ability to reduce health care costs, for example, by promoting alternative models of health care delivery (such as case management), to their insured population with chronic disease. Typically however, subsidy regimens mean that allied health services will be underutilised relative to the level of consumption that is optimal for people with chronic disease [6]. Such funding arrangements create distorted incentives potentially redirecting resources away from cost effective care and undermining the role of non-medical primary care services which are critical to the prevention and management of chronic disease. A further contributing factor to market distortions arising in the primary care setting is the complementarities that arise between medical care and pharmaceutical management. Most ongoing pharmaceutical management requires a prescription from a medical practitioner, thus consumers require regular doctor visits, particularly where drugs have been prescribed for long-term management of chronic disease. Although there is a complimentary relationship that exists between medical and other non-medical services, such as allied health care, they are also substitutable services, and thus potential competitors, particularly in the market for chronic disease management. Inequitable distribution of non-medical primary health care services relating to third party compensation Even within the market for non-medical primary care services there is likely to be an inequitable distribution of services, where entitlement to third party compensation is the driver of demand rather than clinical need. Unlike road traffic and work-place accident victims, people with chronic disease are often not entitled to third party compensation for allied health and other non-medical primary care services, the exception being veterans and holders of private health insurance. Increased demand for these compensated services has resulted in a shift in supply to meet this demand, thus creating a relative shortage of non-medical services. The shortage that has resulted has enabled monopoly pricing, thus the service is targeted to those who are able to pay, or who are eligible for third party funding. Services become even less accessible and affordable to the population with chronic disease or in need of other preventative care. A second effect is that non-medical service providers may focus their effort on services needed by compensated (predominantly accident) victims, thus changing the mix or profile of services that are delivered in the primary care sector away from those needed by people with chronic disease. Possible policy responses to market failures in chronic disease management If the assumption is that consumers with a chronic condition are 'expert patients', information asymmetry is not a significant cause of market failure in the market for chronic disease management. Therefore, supporting consumers to manage their care in partnership with providers, combined with the removal of funding anomalies is necessary to achieve optimal care in chronic disease management and a health service mix across the system more consistent with allocative efficiency objectives. In the long run it is the price effect resulting from public subsidies for some services and not others that is likely to be the major influence on underutilisation of non-medical primary care and preventative services, rather than a consumer's preference for acute care over health promotion or secondary prevention. If the price for preventative services was subsidised to the same degree as medical services and pharmaceutical products there would be less market distortion created by differential subsidy arrangements. Moreover, ideally the level of subsidy (per service and number of services) should reflect current evidence of cost effectiveness. Alternative market solutions to chronic disease management could also be considered, particularly those that encourage competition between providers and promote consumer choice. Publicly provided and funded service vouchers, for example through a scheme such as Medicare in Australia, can support consumers to access appropriate care from an allocative efficiency perspective from providers that may not be currently eligible for subsidy [23]. The allocation of service vouchers could be based on evidence of cost effectiveness of particular services or preventative care for chronic conditions and be may be able to provide sufficient incentives for consumers to access appropriate care from their provider of choice. Where patients have knowledge of their chronic disease then enabling them to choose a provider eligible for a subsidy should be consistent with improved health outcomes. Service vouchers might also help overcome the larger market failure in chronic disease management where individuals are myopic with respect to the consumption of preventative services. Vouchers provide a level of information to the consumer about the services they should be accessing to manage their disease. Consumers would have an entitlement to a given number and type of service vouchers, and, if services are fully subsidised, the price effect is removed from the consumption decision [23]. Other total system options include the adoption of risk-adjusted capitated fund-holding models, which promote flexibility in the service response. Government intervention in health care markets through funding and other mechanisms to address various sources of market failure and inequity in the distribution of health care and health outcomes is widely accepted. However, where governments have intervened by subsidising some types of services and service providers over others, irrespective of evidence of cost effectiveness, this will reduce the ability of the market to achieve efficiency. This is an issue for the management of chronic disease where government subsidy has favoured acute care, including acute exacerbations of chronic disease, and medical services rather than primary and secondary preventative services that are more consistent with the cost effective management of chronic disease [5]. These distortions are exacerbated by fee-for-service payment systems that provide incentives for health care to be technically efficient at the level of a single provider, however provide few incentives for socially efficient delivery. Resource shifts from acute care markets to markets for the primary and secondary prevention of chronic disease, supported through alternative and flexible funding arrangements, are likely to be consistent with achieving allocative efficiency across the health system. With the increasing prevalence and burden associated with chronic disease it is important that these issues are addressed. Alternative funding mechanisms such as service vouchers and fundholder or capitation models may overcome some of the anomalies that have developed over time between the provision of acute services and chronic disease management, supporting health system objectives of equity and efficient allocation of health care resources.

The fact that ST makes patients pay with their time rather than their money is cause for significant concern, as a substantial body of evidence shows that delays in treatment harm patients with a wide array of conditions. For example, a study published in The Lancet found that patients with delays of three months or more in treatment had a 12% lower five-year survival rate than those with shorter delays. Similarly, another study published in the American Journal of Medicine found that rheumatoid arthritis patients who delayed disease-modifying treatment for approximately four months experienced significantly more radiologic joint damage after two years compared to patients who began treatment within two weeks of diagnosis.

For those who contend that administrative positions consist chiefly of make-work jobs soaking up a glut of workers otherwise destined to swell the ranks of the unemployed, this outcome could indeed be welcome. Unfortunately, if PNHP gets its wish, we may all discover that gluts and shortages are enhanced, not avoided, by the central planning process that would necessarily accompany the establishment of this program. A Hayekian Perspective on Centralizing Health-Care Knowledge Reflecting on the way by which scarce resources are allocated, Friedrich Hayek argued that coordination of economic activity ultimately depends on localized and dispersed knowledge, knowledge that no single person or authority can ever claim to possess. In his brief essay on “The use of knowledge in society,” Hayek wrote: the shipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is one of temporary opportunities, or the arbitrageur who gains from local differences in commodity prices, are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others. Only in a decentralized system of decision-making, where price fluctuations can adjust to the reality of needs and provisions, are major gluts and shortages avoided. In contrast, a centrally planned economy typically relies on quantitative models to forecast supply and demand and set prices, and such models either overlook the importance of local knowledge or cannot adequately take it into account: If it is today so widely assumed that [experts] will be in a better position [to use knowledge], it is because one kind of knowledge, scientific knowledge, now occupies so prominent a place in public imagination that we tend to forget that it is not the only kind that is relevant. ... a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. (emphasis mine) Of all economic sectors, health care should clearly rank among those most dependent on local knowledge. After all, how to best treat a patient is decidedly circumscribed in the here and now. Yet, lured by the idea that medicine is a scientific enterprise, we persevere in our attempt to manage health care with the same methods that would fail to optimize the construction and distribution of even a simple pencil. Codes and Data are Not Knowledge It is particularly noteworthy that the PNHP graph depicts the administrative workforce as shooting up in the early 1990s, for it is around that time that payment for medical services would become highly dependent on a byzantine scheme of codification, invented precisely to convey to central authorities in charge of health insurance crucial information about what is taking place in the privacy of medical offices, within the confines of operating rooms, or at hospital bedsides. In 1992, with the passage of the Medicare Fee Schedule, use of this coding system became mandatory. From then on, clinical care would be spoken in the lingua franca of CPT, ICD, and E/M codes, and the term “documentation” would take on a bitter significance for doctors. But translating the what, how, and why of local medicine into cryptic ciphers for remote bureaucrats does not make the business of health care any more intelligible to the central planner, regardless of whether the codes are transmitted by an archaic fax machine or digitized and made immediately accessible by means of mandatory electronic health records systems. Codes and data, of course, are not knowledge. Hayek’s shipper engaging in tramp trade can make a judgment about the significance of empty spots on a boat because the context associated with that information elicits meaning based on which he acts. In contrast, a CPT code 99204-21 (new patient visit, E/M coding level 4, prolonged service) associated with ICD-9 code 786.50 (chest pain, unspecified) hardly conveys any real knowledge and cannot possibly be a basis on which relevant decisions can be made or value established. These codes cannot help determine the needed supply of doctors, nor that of drugs and other material necessities. The only tangible effect of the coding scheme, then, is simply to require a massive influx of administrators charged with “interpreting” and acting upon its obscure data signals. And when price is divorced from value, shortages and gluts necessarily ensue. Although a single payer could conceivably reduce administrative burden and cut costs, its doing so will never be on the basis of “knowledge of the particular circumstances of time and place” that is at the heart of genuine medical care.

Stephen, May 2020, “Why the Economic Aspects of Healthcare are not Unique,” NIH, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7328842/

Life or Death?

Stephen, May 2020, “Why the Economic Aspects of Healthcare are not Unique,” NIH, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7328842/

The information asymmetry between purchasers and healthcare insurance providers, which contributes to moral hazard and adverse selection, also exists between patients and healthcare practitioners. Arrow identified the latter instance of information asymmetry as one of the key problems that differentiates the healthcare market from other markets. This aspect is hardly unique to healthcare and happens with goods as diverse as legal advice to automotive repairs. In healthcare, information asymmetry is usually framed as a lack of information on the patient’s behalf, which puts them in a disadvantaged position., However, information asymmetry is shared by both the patient and practitioner.  Furthermore, with the growth of health information available on the Internet, patients’ increased health literacy and support groups for particular conditions, a patient may now be better informed about their condition than their doctor. As there is more information available now on treatment input and outcomes, due in large part to the breadth of content and global reach of the Internet, the consumer’s position can be strengthened, providing a basis for better decision-making. For example, people with chronic conditions who constitute a population that consumes a large proportion of healthcare resources, have increasingly more information about their health issues rather than less. Even Arrow has had cause to reconsider his position, conceding that contemporary improvements in the availability of health information may have helped to mitigate the consumer’s lack of information.