Healthcare Providers Aren’t Greedier than Uber

So why do health care costs rise while ride sharing costs fall?

I just read An American Sickness: How Healthcare Became Big Business and How You Can Take It Back by Kaiser Health News Editor-in-Chief Elisabeth Rosenthal, a fact-filled* critique of the American health system. The author does a marvelous job of describing the Kafkaesque world in which Americans all-too-often find themselves — no fixed prices for procedures or tests, no billing standards; different prices for different payers, unnecessary tests and procedures, different programming languages for electronic medical records, etc. — and lays the blame at two causes: (i) health care is a business and (ii) businesses seek to boost revenues.

But so what? Every business aims to boost revenues yet that doesn’t always translate into higher prices or lousy customer service. Netflix, 24-hour Fitness, GM, Starbucks, Uber and Penguin (the author’s publisher) all seek to charge prices markets will bear. Yet customers know their prices and even long time competitors such as Apple and Microsoft create software that can be read on each other’s system. What’s different about health care?

The difference is crony capitalism.

Think for a moment what the world would be like if government played no role in health care. In that world public health would be at greater risk to contagious diseases and everyone except the rich would be at risk to bankruptcy from a catastrophic medical event. Clearly government has a role in public health and in protecting people from financial distress arising from medical care. But that doesn’t mean government has a role in securing more revenue for health care providers. Yet that’s where we are — a world in which health care providers spend $500 million per year lobbying legislators to get governments to pay for or subsidize their services. They succeed in big ways:

  • Government subsidizes employer-provided health care spending through favorable tax treatment
  • Through Medicare, Medicaid, the VA, Tri-Care and other government programs, taxpayers shower $1.5 trillion on health providers

Everyone focuses on how Congress might address health care but states also matter. In California, politicians court the donations and endorsements of the California Medical Association, the California Nurses Association and pharmaceutical, device, testing and hospital companies that next year will collect $103 billion from the state, twice what it spent just seven years before. $36 billion will come from the state budget, crowding out UC, CSU, welfare, courts, parks and other services. What are we getting for that massive increase in spending? State legislators don’t know. They’ll tell you that more people now have health insurance — another way for government to subsidize or boost revenues for health care providers — but they won’t be able to tell you how public health has improved or explain why emergency room visits are up, not down. But they sure know how to collect donations and endorsements from financial beneficiaries of all that spending and how to campaign for more spending in favor of health care providers.

Government has a very important role in health care but one of those roles is NOT to grow revenues for health care providers. No matter what Congress does about national financing of health care, the state must obtain value for its health care spending.

*Some of the author’s assertions about facts with which I am familiar are not correct. Eg, those who live in San Francisco will know that California Pacific Medical Center wasn’t willing to spend $1.1 billion on concessions demanded by the City of San Francisco in order to “hang on to its tax-exempt status” but rather to gain city approval to build the building.