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Published: Tuesday, February 26, 2013, 12:01 a.m.

Free-market price-gouging in medicine

When folks pan the Affordable Care Act for being nearly 3,000 pages long, here's a sensible response: It could have been done in a page and a half if it simply declared that Medicare would cover everyone.
The concept of Medicare for All was pushed by a few lonely liberals. And it would have been, ironically, the most conservative approach to bringing down health care costs while maintaining quality.
Medicare bringing down health care costs? "Ha, ha, ha," says the program's foes, citing the spending projections for the government health plan serving older Americans.
Unfortunately, the critics confuse spending levels with costs. Total Medicare spending is bound to rise as more older Americans live longer.
Sure, you can curb that increase through a voucher system limiting how much taxpayers will subsidize each beneficiary. But that's not the same as curbing the cost of treating a heart attack or cancer. Without Medicare's cost controls, the size of the bill for each course of care would be larger. Which is exactly what the medical-industrial complex wants.
A Time magazine piece by Steven Brill is must-reading on this subject. For all the waste and perverse incentives in Medicare, the federal program remains an oasis of cost-control in a desert of price-gouging by medical institutions, many parading around as "nonprofits."
Brill writes of Sean Recchi, a 42-year-old Ohioan with lymphoma. Suffering chills, pains and sweats, he rushed off to the famed MD Anderson Cancer Center in Houston. Anderson wouldn't accept the Recchis' bare-bones insurance plan and required $83,900 upfront for an examination and initial doses of chemotherapy. (His mother-in-law wrote the checks.)
How did the bill get that high? Shameless overcharging. For example, the hospital charged Recchi $283 to have a simple chest X-ray for which Medicare would have paid $20.44. Recchi was billed more than $15,000 for blood and other lab tests. Medicare would have paid only a few hundred for the same thing.
"Why does simple lab work done during a few days in a hospital cost more than a car?" Brill asks rhetorically.
Recchi was charged $13,702 for a round of the cancer drug Rituxan. Researching how much hospitals pay for Rituxan, Brill estimated that Anderson had marked up the price 400 percent. And so on.
Janice S., age 64, felt chest pains and took herself to Stamford Hospital in Connecticut. While there, she was given three troponin tests to measure proteins in the blood. She was charged $199.50 for each troponin test. Had she been a year older and on Medicare, the hospital would have been paid only $13.94 for each test. The heart-attack false alarm ended up costing her $21,000.
Where does all this money end up? In the pockets of hospital administrators, doctors and makers of equipment and drugs on which the medical profession can multiply the markups.
Hospitals gripe that they lose money on Medicare patients, but that isn't true. As Jonathan Blum, deputy administrator of the Centers for Medicare and Medicaid Services, told Brill: "Central Florida is overflowing with Medicare patients, and all those hospitals are expanding and advertising for Medicare patients. So you can't tell me they're losing money."
Many Republicans and some Democrats want to cut Medicare spending by raising the eligibility age. That makes minus-zero sense. If anything, the age should be lowered.
This is not to say that Medicare doesn't waste money. Under current rules, for example, it must cover treatments that work, even when another, cheaper means of care does just as good a job.
But the economics of medicine in the private sector bears little resemblance to a real free market. Hospitals routinely put on a magic show designed to bilk ordinary Americans, especially -- and tragically -- the underinsured.
Froma Harrop is a Providence Journal columnist. Her email address is fharrop@projo.com

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Jon Bauer, Opinion Editor: jbauer@heraldnet.com

Carol MacPherson, Editorial Writer: cmacpherson@heraldnet.com

Neal Pattison, Executive Editor: npattison@heraldnet.com

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