The Cost of Living, Part II

A shout-out to the San Francisco Chronicle

Containing the runaway cost of medical care is the thorniest of all the thorny issues in the health-reform debate. There’s been tons of talk from politicians, advocates, and even health-care stakeholders about the need to reduce the nation’s rate of spending on medical treatment and keep a lid on price increases. Yet many policy experts say that the “acceptable” cost-containment options in the House and Senate bills are weak and will actually lead to more health-care inflation, which would mean that even more people could not afford insurance or care. It is a complicated, charged, and crucial issue; the press needs to dig in and own it. This is the second in a series of periodic series that will scrutinize how well it does that. The entire series is archived here.

Last Sunday, an article in the San Francisco Chronicle finally brought some balance to the health care cost story. For months and months the problem with health care costs has been laid at the doorsteps of the big insurance companies; in the last two weeks, the storyline has centered on the very large rate increases proposed by Anthem Blue Cross. While insurers play a very real role in this drama, Campaign Desk has continued to point out that the main actors are the health care providers—doctors, hospitals, drug companies, and biotech firms that supply the increasingly expensive services and products.

Yet the media continue to take their cues from pols and advocacy groups that have advanced reform and gotten a lot of ink for demonizing insurance companies. Never mind the illogic of painting insurers as the devil incarnate while advancing reform that gives those very devils thirty million new customers. If insurers are the devils, then the providers are saints—and the media, for the most part, have refrained from attacking their practices.

Chronicle reporters Carolyn Lochhead and Victoria Colliver have begun to change that. Sunday’s piece got right to the point, saying that Anthem’s planned rate increases were “just the tip of a Titanic-size iceberg of exorbitant price creases, secret pricing and consolidation not only by insurers but by the hospitals, doctors and medical device makers that send the bills to the insurers.” They wrote:

With doctors and hospitals sprinkled in every congressional district and wielding their clout, a year of health reform in Congress has overlooked some of the biggest cost drivers in American medicine.

Indeed it has. Their piece described an “inscrutable medical-industrial complex,” with stakeholders organizing themselves into cartels that aim to keep prices as high as they can. “It’s an insider’s game in health care,” Jeffrey Lerner, the CEO of the ECRI Institute, told the Chronicle. ECRI is a non-profit organization that evaluates health care technology. Carnegie Mellon economist Martin Gaynor told the reporters that while questions about insurance company practices were not entirely misplaced, “I think market power on the part of providers, doctors and hospitals is a bigger issue.”

The reporters had some trouble getting the providers, doctors, and hospitals to talk, because they didn’t want to anger the medical groups whose business they need. Not surprising, is it? One who did was Keith Smith, an anesthesiologist and founder of a surgery center in Oklahoma City. Smith posts his center’s prices online, and claims that they’re usually 70 to 80 percent less than what a not-for-profit hospital across town charges for the same procedure. Yet he says that the area’s insurers, including Blue Cross, don’t want to contract with his group:

We’re not fly-by-night. We’ve been in business 13 years and have the top physicians in the city. All I know is something smells.

It so happened that Jeff Lerner was speaking to my class the other day, and he talked about this very problem. “Doctors and technology companies are working in tandem,” Lerner explained. “The doctor has no idea of what the cost is and the consumer has no say in what products are chosen, for example, for hip and knee replacements.” He said doctors don’t care about the prices, and hospital CEOs don’t want to fight with their medical staffs, who can take their business elsewhere if fees are reduced. One student, who works as an operating room nurse, piped up and said that she had observed doctors threatening to do just that—take their cases to another hospital.

Lerner noted that health care consumers can’t bargain and find out the price of the devices and things that were implanted during surgery. Are they really getting the highest quality, lowest price artificial knee? Contracts are secret, and hospitals or doctors can be sued if they reveal what’s in them. “The laws are being used by companies against the consumer,” he said.

Lerner cited a fine story, written by New York Times reporter Barry Meier in November, that talked about medical device makers, pricing, profit margins, and deals between manufacturers and hospitals. Meier wrote:

A cardiologist or an orthopedic surgeon has little if any comparative data when choosing a device. Also many doctors are unlikely to shop around, because they tend to stick with a single producer—either because they have been trained on a particular maker’s devices or because they have financial ties to the company.

Bottom line: the doctor is both the buyer and seller of medical services for the patient. It seems to us that this is an area ripe for media exploration, especially since the president is now claiming that the reform proposal “puts American families and small business owners in control of their own health care.”

From what Meier, Colliver, and Lochhead have told us, patients won’t really be in control of their health care. They won’t be shopping around for the lowest-price knee implants any time soon. Nor will they see the cost of medical care come down any time soon.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.