Silver is the Roy W. and Eugenia C. McDonald Endowed Chair of Civil Procedure at the University of Texas at Austin School of Law. Hyman is the Scott K. Ginsburg Professor of Health Law & Policy at Georgetown University Law Center. Cannon is director of health policy studies at the Cato Institute, where Silver and Hyman are adjunct scholars.
Mainstream policy analysts are convinced that government, and only government, can save us from the monster the U.S. health care system has become. That's why their recommended solutions to the system's many problems all have government at their core.
Consider the first set of recently published recommendations of a star-studded panel assembled by the National Academy of Medicine for its quadrennial Vital Directions report:
"We propose eliminating all medical debt; Congress should enact legislation prohibiting the pursuit of medical debt collection from any US household with gross income less than 400 percent of the federal poverty level. Public and private health insurance should be required to provide comprehensive coverage for primary, specialty, and behavioral health care services; dental care; hospital services; services to address health-related social needs (that is, connections to housing navigation or Supplemental Nutrition Assistance Program enrollment); and postacute care. Obstetrical and newborn care should be added to the preventive health services required to be covered with no coinsurance.
"To increase access to affordable coverage, Congress should create a Medicare-Plus public option available to all Americans, including those with employer-sponsored coverage. It would provide patients with full access to providers who participate in Medicare and would use a moderate markup of Medicare payment levels, such as 20 percent above current Medicare rates. Premiums, deductibles, and copays would be set on the basis of household income, with no family paying more than 5 percent of their income on health care annually. All Medicare-participating providers would be required to participate in this new option. The public option would increase consumer choice while also increasing competition in the health insurance market.
"Congress should take action to improve access to care in the Medicaid program by requiring and supporting an increase in all Medicaid payment rates to Medicare levels as well as legislating more uniformity in Medicaid eligibility and benefits across the country -- standards currently left largely to the states."
Obviously, a Republican Congress won't do any of these things.
But the deeper problem is that the failures of the past seem not to have taught mainstream health policy thinkers anything. They keep pitching the same, tired ideas that got us into this mess: more government spending and programs; more insurance mandates; more insulation of patients from financial responsibility; and more public control of the health care sector. If the past teaches us anything, it is that no one should expect the government to get health care right.
Yet undying faith in government is the rule in health policy circles. The American Medical Association wants Congress and the states to enact laws prohibiting "[t]he time-wasting, care-delaying, insurance company cost-control process known as prior authorization." The need for prior authorization exists because doctors often prescribe treatments whose efficacy is unproven, that cost more than available alternatives, or that are inappropriate for other reasons. A real fix would recognize this underlying problem and address it, perhaps by altering physicians' compensation in ways that make over-prescribing and mis-prescribing unprofitable. But the AMA wants the government to protect physicians' control of the delivery of health care and their incomes, so it lobbies for legislation that will require insurers to pay for everything doctors recommend.
Public interest groups' faith in government knows no limits, either. When Patient Rights Advocate (PRA), a nonprofit, studied 2,000 hospital websites, it found that "only 21.1%" complied fully with the Hospital Price Transparency Rule, a 2021 regulation that requires hospitals to post their prices. PRA's recommendation? More regulation. PRA wants stricter requirements, greater use of CMS's power to impose fines, and the imposition of liability under the False Claims Act on the senior officers of noncompliant hospitals. Every regulatory failure generates a call for more regulation.
Why are mainstream commentators so enamored of government? Not because of the facts. The history of public control should not lead anyone to think that government can deliver health care efficiently.
Consider Medicare, which Congress enacted in 1965. Medicare frees health care providers to plunder taxpayers' wallets. As economics professor Uwe Reinhardt put it, when Congress created the program, it handed providers the keys to the U.S. Treasury. That's why the annual rate of increase in prices for physician services more than doubled, rising from 3.2% to 6.8%, after the program was introduced. Hospitals jacked up their prices, too. In 1965, the House Ways and Means Committee predicted that, in 1990, Medicare subsidies to hospitals would total $9 billion. The actual amount was $67 billion.
Medicare's profligacy hasn't shaken mainstream health policy thinkers' faith in government. To them, excessive spending merely shows that profit is evil. The fact that government intervention reduced market constraints on industry greed, and turned socially beneficial profits into socially harmful plunder, is irrelevant to these Solons of health policy.
Nowadays, mainstream health policy thinkers identify private equity (PE) investors as the latest manifestation of industry greed. Some resort to argument by invective, labeling PE "health care's vampire[s]" and "a cloud of locusts." The National Academy of Medicine panelists want "Congress [to] forbid private equity firms from acquiring, owning, or controlling established health care delivery organizations."
Have the critics forgotten that health care was a mess decades before PE got involved? PE wasn't responsible for the explosion in health care prices after Medicare began operations. That was government (with lots of help from self-interested doctors and hospitals).
The fact that one-third of Medicare spending is pure waste is not the fault of PE investors either. It's the result of government loosening or eliminating the market constraints that prevent providers from using asymmetric information to take advantage of patients.
Nor is PE responsible for the health care system's dismal safety record. In 1999, the Institute of Medicine estimated that each year, medical errors killed 44,000-98,000 patients and injured more than 1 million. Back then, PE investments in health care totaled "less than $5 billion per year," a trivial sum. The health care industry failed to invest in safety because government paid more for low quality care, subsidizing worse outcomes for its beneficiaries.
Like all zealots, mainstream health policy thinkers don't allow facts to shake their faith in the belief system they have constructed. They know the profit motive is evil. They know governments can direct providers to deliver medical care according to the rules of medical ethics. They know that health care is "a human right." They know that their ideas could not have caused the suffering they are witnessing. The problem must be PE or some other convenient scapegoat.
To improve health care, we must jettison cargo cult-like beliefs. We must stick to what works. We must start treating health care like an ordinary service that people buy and sell through ordinary market mechanisms.
You read that correctly. To create a health care system that keeps people reasonably happy by delivering high quality services at affordable prices, we must pay for most medical care the same way we pay for food, clothing, transportation, and most other things: directly, at the point of sale, with our own dollars. Instead of compelling people to funnel their money through Medicare, Medicaid, employer health plans, and other insurers, we must free people to do their own shopping in free markets that subject providers to serious competition and price discipline.
No more protecting high-cost, low-quality doctors and hospitals from competition. No more tax preferences for dollars that go toward health insurance or that favor businesses that are nominally nonprofit. No more mandates that force people to buy insurance coverage they don't want. No more certificate-of-need or scope-of-practice regulations that inflate prices by restricting supply. No more tort "reforms" that let providers deliver shoddy care by insulating them from the cost of mistakes. No more restrictions on the "corporate practice of medicine" that prevent efficient businesses from whipping high-cost hospitals and physicians' practices into shape.
Because such a system would impose greater discipline on providers than government does, it would have many desirable effects. Prices that are lower and more transparent. Higher quality. Better service.
This approach is working already in the United States' vibrant and growing retail health care sector where patients purchase services directly, including complex surgeries, fertility services, LASIK, and many other diagnostic procedures and treatments. There is no cost crisis in the retail sector. Prices are transparent and reasonable. And get this: Prices often fall. Quality is high. Surprise bills and prior authorization requirements are never-events. There is little evidence of fraud, waste, or abuse -- problems that cost government-run programs hundreds of billions of dollars a year.
To make money in the retail health sector, sellers must treat customers well. Retail producers bundle services into convenient packages, price services competitively, and tell patients in advance what their charges will be. The fear of losing patients prevents them from using underhanded tactics like upcoding, phony chargemaster prices, facility fees, site-of-service differentials, and incomprehensibly complex medical bills. Research shows the same principles work for services that insurance covers.
To fix the health care system, we need to stop wasting time wishing for better regulations, better enforcement, Medicare For All, a moratorium on PE ownership, and other things that aren't going to happen and that wouldn't work if they did. We must shift as much health care as possible to the retail model. Then, we must let competition do what it does best: pressure sellers to offer high-quality services at prices consumers can afford.
That's the path to universal health care. Poor people, being the most price-sensitive consumers, would benefit the most. And after reforming Medicare and Medicaid, there will be plenty of cash left over for the ever-shrinking population who still cannot afford the medical treatments they need.