Reluctance to Blame the System

Presidential candidates shouldn't vilify big business for high healthcare costs.

Posted Feb 26, 2016

 Republican presidential candidates, Sen. Marco Rubio (R-FL) and Donald Trump argue during the Republican presidential debate at the Moores School of Music at the University of Houston on February 25, 2016 in Houston, Texas. The debate is the last before the March 1 Super Tuesday primaries. (Photo by Michael Ciaglo-Pool/Getty Images)
Source: HOUSTON, TX – FEBRUARY 25: Republican presidential candidates, Sen. Marco Rubio (R-FL) and Donald Trump argue during the Republican presidential debate at the Moores School of Music at the University of Houston on February 25, 2016 in Houston, Texas. The debate is the last before the March 1 Super Tuesday primaries. (Photo by Michael Ciaglo-Pool/Getty Images)

When asked what enemies she was proud to have made during her political career, Hillary Clinton mentioned, in order, “the NRA, the health insurance companies, the drug companies [and] the Iranians.” Pretty villainous company to place healthcare industries into. But Clinton is not alone among presidential candidates in vilifying pharmaceutical and insurance industries for, as Bernie Sanders puts it, “ripping off the people.” Donald Trump called pharmaceutical profiteering “disgusting” and claimed that “insurance companies are making a fortune because they have control of the politicians.” Marco Rubio blamed high drug prices as “pure profiteering” by pharmaceutical companies. It is a strange world when Republicans join Democrats in vilifying people and companies who pursue profits through the marketplace.

Even stranger, neither party is taking aim at a group of people in the healthcare industry who have been making a fortune by exerting enormous influence over healthcare spending. No one seems to be vilifying physicians.

Yet if candidates are looking to blame someone for high healthcare costs in the United States, they should include physicians, whose decisions--to order tests or treatments--are responsible for the bulk of healthcare spending. Yes, pharmaceutical companies are charging exorbitant prices for many of their products. But patients do not receive expensive medications unless physicians prescribe them. True, insurance premiums are very expensive and rising rapidly. But those premiums reflect the cost of paying for all those services that physicians order for their patients. And some of those services reflect physician fees, which for some subspecialists are quite high. Many American physicians are extremely well paid for their work, with the median allergy doctor making almost $300,000 a year, and the median gastroenterologist making almost $400,000. Indeed, American physicians often take home 50 to 100% higher annual incomes than their peers in Europe or Canada.

So why aren’t politicians vilifying physicians? Because when they turn their attention to the role of physicians in driving up healthcare costs, candidates shift from blaming people to blaming the system. When laying out her healthcare plans, for example, Clinton remarks that “we need to shift away from the fee-for-service payment system that rewards providers who prescribe excessive tests and unnecessary procedures.” Jeb Bush also criticizes the reimbursement system, complaining that “providers are not being held directly accountable to patients for the value of the care they deliver.”

When pharmaceutical and insurance companies drive up healthcare costs, they are villainous. When physicians drive up costs--it is the system that is to blame!

Time to de-vilify healthcare debates. People working in the pharmaceutical and insurance industries are no more to blame for our high healthcare costs than physicians (or hospital executives, or device company CEOs, etc). All these folks are responding to systemic incentives. Most are trying to do well by doing good, and it is the system--the rules of healthcare reimbursement--that determine what they must do to do well. When pharmaceutical executives price new drugs, their corporate boards expect them to select prices that will maximize profits. Price otherwise, and they won’t be pharmaceutical executives for long. Similarly, healthcare executives expect surgeons to maximize clinical revenue by providing highly reimbursed services. Physicians who fail to bring in enough revenue can expect a pay cut.

When politicians vilify the pharmaceutical and insurance industries, they draw attention away from the policies and systems that drive economic behavior. Such vilification misleads us into thinking that the problem is a few bad actors--PR-challenged CEOs who raise prices on rare drugs, for example--and draw our attention from more general behavior. Did you know that 11 of 12 cancer drugs brought to market in 2014 were priced at more than $100,000 per patient? This is not the behavior of a few bad actors. This is a systemic problem. As Jeb Bush could put it, but doesn’t: “Drug companies are not being held directly accountable to patients for the value of the care they deliver.”

I am glad that politicians are not vilifying physicians for their role in promoting high healthcare expenditures. They should show similar restraint when talking about other folks working in the healthcare sector.

If presidential candidates really want to curb our nation’s healthcare spending, they need to turn their attention away from corporate villains and start laying out specific policies that will curb the use of low-value healthcare services. Republicans and Democrats should lay out what will no doubt be contrasting views on how to reform healthcare reimbursement. They should debate how, or whether, to regulate healthcare prices--not just drug prices, but also the cost of many healthcare procedures, which are reimbursed in the United States at rates often more than double of the prices in Western Europe. They should discuss whether we need federal legislation to promote price transparency. They should debate whether, and how much, patients should pay out-of-pocket for marginally beneficial healthcare services.

When it comes to high healthcare expenditures in the U.S., there’s plenty of blame to go around. But if we voters don’t demand that candidates lay out specific ideas of how to change our healthcare system to promote more efficient healthcare spending, we will have no one to blame but ourselves.

***Previously Published in Forbes***