It was refreshing to see Eduardo Porter, in his Economic Scene column last week in The New York Times, call for widening the debate on the social safety net, particularly healthcare. Porter moved away from what has become a dreary discussion about how much to slice away from Medicare and Social Security, and posed a different question: How can the country best serve social needs, which include healthcare, at the lowest possible cost?
He answers it by discussing whether the profit motive—which increasingly permeates US healthcare—is the best approach in that realm:
These profit-maximizing tactics point to a troubling conflict of interest that goes beyond the private delivery of health care. They raise a broader, more important question: How much should we rely on the private sector to satisfy broad social needs?
Porter built his column around some of those conflicts, beginning with an anecdote about pharmacy researchers at the University of Wisconsin-Madison who discovered 30 years ago that patients in for-profit nursing homes received, on average, more than four times the dosage for sedatives than patients at nonprofits received. As any reporter who has covered nursing homes knows, it’s easier and cheaper to use “chemical restraints” on residents than hire expensive staff to interact with them. When I was evaluating nursing homes for Consumer Reports in the mid-1990s, I found that the nonprofit facilities—often run by religious organizations—received fewer critical deficiencies for poor care from regulators than the for-profits. Yet it is the for-profit companies that have come to dominate the industry.
Porter moved from nursing homes to hospitals, noting that “hospitals run for profit are also less likely than nonprofit and government-run institutions to offer services like home health care and psychiatric emergency care, which are not as profitable as open-heart surgery.” The push for profitable hospital services is something we know about. In 2007, CJR published “The Epidemic,” exposing how hospitals, regardless of their kind of ownership, use working journalists to help promote their most lucrative services, like cardiac surgery and cancer care, while giving short shrift to others, such as care for pneumonia patients, who don’t bring in big bucks. Many experts believe this phenomenon has spawned a destructive and wasteful medical arms race that unnecessarily boosts the cost of care. Unheard of 15 or 20 years ago, it has become the norm.
“A shareholder might even applaud the creativity with which profit-seeking institutions go about seeking profit,” Porter argued. “But the consequences of this pursuit might not be so great for other stakeholders—patients for instance.” And he’s right: more medicines and medical interventions in nursing homes, hospitals, or in the doctor’s office are not always good medicine.
When it comes to hospitals, however, Porter doesn’t consider that not-for-profits often copy the for-profits. Think about all the advertising going on for emergency room services—with both types of hospitals fighting among themselves for more ER patients by aggressively promoting their short wait times in order to reel in more customers, a.k.a. patients, through the door. This seems out of whack with a major rationale for Obamacare, which was to give people insurance so they would stay out of emergency rooms, which provide some of the costliest care around.
Porter explained that if additional private spending on healthcare were considered
as a form of tax—an indispensable cost to live a healthy life—US tax rates would rise to levels of other Western countries:
The nation’s tax bill would rise to about 31 percent from 25 percent of the nation’s G.D.P. the US tax bill would increase to about 31 percent of GDP from 25 percent today. That would be closer to the 34 percent average across the countries in the O.E.C.D [Organization for Economic Co-operation and Development.]
“In a way, private delivery of health care misleads Americans about the financial burdens they must bear to lead an adequate existence,” he argued. In other words, Americans don’t consider the extra money spent as an additional tax they must pay to remain healthy.
Porter tackled Medicare, where a battle royal will soon be fought over how much to privatize a government system of social insurance. He presented some well-known evidence that debunks some of the supposed virtues of private insurance arrangements. One study, he wrote, showed that HMOs did not save Medicare money as their advocates had promised. Indeed Henry Aaron, a Brookings Institution senior fellow, told CJR that “private plans cost more than traditional Medicare does,” even if you ignore the excess payments they’ve been getting, and that are now prohibited under Obamacare.