Reactions: Time Magazine On The 10,000-Percent Hospital Tylenol Mark-Up

Time's "Bitter Pill' cover

Time’s “Bitter Pill’ cover

After Rachel and I put on a presentation about CommonHealth at an MIT conference recently, an older man came up to us and said something like, “It is a disgrace — a disgrace — that health care in America is a business that milks the sick for money. That’s what you should be writing about.”

I thought: “Everybody already knows that.” But also, “He’s right.” And this week’s media flurry around Time magazine’s recent cover story, “Bitter Pill: Why Medical Bills Are Killing Us,” shows that even if everyone does know it, we can never be reminded too often, or stop exposing the system’s concrete harms and discussing how they should be fixed.

The piece runs 24,105 words and was penned by uber-journalist and Court TV founder Steve Brill. If you don’t have a 24,000-word chunk of time, here’s a bit of Time managing editor Richard Stengel’s introduction:

“It’s a $5.8 trillion market, but it’s not a free one. Hospitals and health care providers offer services at prices that very often bear little relationship to costs. They charge what they want to and mostly – because it’s a life-and-death issue — we have to pay…[Brill] employs a classic journalistic practice: He follows the money, and he does it right down to the 10,000% mark-up that hospitals put on acetaminophen.”

…If the piece has a villain, it’s something you’ve probably never heard of: the chargemaster, the mysterious internal price list for products and services that every U.S. hospital keeps. If the piece has a hero, it’s an unlikely one: Medicare, the government program that by law can pay hospitals only the approximate costs of care. It’s Medicare, not Obamacare, that is bending the curve in terms of costs and efficiency.”

Indeed, one of Brill’s central takeaways is that it would save money to lower the age of Medicare eligibility, rather than cutting Medicare as some propose. That’s an entertainingly counter-intuitive idea, but commenters on his piece offer some far bolder thoughts.

In The New York Times today, the economist Uwe E. Reinhardt proposes, “Why not make it illegal for hospitals to charge uninsured people more than X percent of what Medicare pays for a procedure?”

On Wired.com, science writer David Dobbs responds with a health-cost horror story of his own under the grabby headline “Actually, Mr. Brill, Fixing Healthcare Is Kinda Simple.”

But mostly he gives credit to Slate’s Matt Yglesias for a superb response, and I second his vote. The full Slate piece is here. Yglesias points out that the “analytic core” of Brill’s opus is that “when it comes to hospital prices, who pays determines how high the price is.” Hospitals price-gouge, particularly when patients are uninsured, and insurance companies use their bargaining power to push back, though that’s hard when the hospitals have more power. Medicare, given its huge size, can bargain hardest against hospitals and thus keep costs lowest. Yglesias writes:

I can see two reasonable policy conclusions to draw from this, neither of which Brill embraces. One is that Medicare should cover everyone, just as Canadian Medicare does. Taxes would be higher, but overall health care spending would be much lower since universal Medicare could push the unit cost of services way down. The other would be to adopt all-payer rate setting rules—aka price controls—keeping the insurance market largely private, but simply pushing the prices down. Most European countries aren’t single-payer, but do use price controls. Even Singapore, which is often touted by U.S. conservatives as a market-oriented forced-savings alternative to a universal health insurance system, relies heavily on price controls to keep costs down.

For reasons I do not understand after having read the conclusion twice, Brill rejects both of these ideas in favor of meaningless tinkering around the edges. He wants to alter medical malpractice law, tax hospital operating profits, and try to mandate extra price transparency. That’s all fine, but it’s odd. His article could not be more clear about this—health care prices are high in America because, by law, we typically allow them to be high. When foreigners force prices to be lower, they get lower prices. When Americans force prices to be lower (via Medicare), we get lower prices. If we want lower prices through new legislation, the way to get them is to write laws mandating that the prices be lowered.

Readers, did anybody else have the feeling that when it came to solutions, Brill was just “tinkering around the edges”?

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