Government is propping up healthcare monopolies that are driving up costs. Here's how we can level the playing field
Raise your hand and pull up a chair if you’re sick and tired of hearing people blame ‘capitalism’ for exorbitant healthcare costs in the US. I’m going to take you behind the scenes and show you what’s really causing the problem, as well as how we can address it right now.
Did you know that the government has an astounding number of laws and regulations governing the healthcare sector? You probably did. But while such policies always make services more expensive (because companies have to spend money on oversight that gets passed onto you and because regulations are often meant to keep prices high and competitors out) you’re probably less aware how often these laws are giving some providers in the healthcare sector a monopoly while also boxing out the actual doctors.
If you follow my work, you’ve seen me rant and rail against Certificate of Need (CON) laws which are on the books in 35 states. These corrupt laws block people from opening new hospitals, adding beds to facilities, and even from purchasing new medical equipment without the permission of a government- appointed board. Business owners must go before the board and argue why they “need” to add these items, and their competitor(s)—which is typically the large hospital association in the state that owns most of the facilities (and that usually donates a lot of money to politicians in the state) gets to come in and argue against them. I’ll let you guess who usually wins out.
CON laws have essentially granted and guarded the monopolistic control of healthcare in these states to one central entity—a private one, but one that could never have gotten so big or maintained its control of the market without significant government help. That is not capitalism folks.
Both myself and a whole host of others in the liberty movement have been working to overturn these laws at the state level and finding some success! Last year, South Carolina repealed all but one of their CON laws with unanimous consent. That’s a massive victory! You have no idea how hard it is to persuade lawmakers to vote against wealthy and powerful hospital associations.
But as it turns out, these aren’t the only laws giving the hospital associations an unfair advantage.
(Get ready to get mad.)
Did you know that between 2013 and 2018, the share of physician practices that were hospital-owned more than doubled, from 14% to 31%? Or that by 2020, over half of all physicians worked directly for a hospital or at a physician practice that was owned by a hospital rather than in independent practice?
People often complain about the decrease in the quality of care they receive, the long waits to get into a doctor, and of course the prices to see a physician. But this trajectory explains a lot of that. Doctors who work for hospital associations are cogs in a machine. They’re given quotas, corporate demands for care, and as a whole have a lot less time to spend per patient and much less to say in the kind of care they provide. They also can’t control their own schedules or workload—a luxury many expected after the grinding years and hundreds of thousands of dollars in medical school. The reward was supposed to be a high degree of autonomy, a good salary, and of course, the ability to help people. But all of those things are being taken from them as they’re increasingly being bought up by the hospital associations.
This is leading to what many have dubbed “moral distress” in the field. Rates of suicide and depression amongst doctors are higher than amongst the general population, and in 2021 62.8% of respondents reported burnout symptoms. That’s leading some to retire early or cut their hours, a constriction on supply that is already stretched thin, which naturally leads to higher prices. Others are foregoing the field altogether, and the country is facing physician shortfalls as we fail to replace doctors with the next generation.
And that’s not the only way this arrangement is making healthcare costs skyrocket.
As Charlie Katebi reported in National Review, “Once a hospital group takes control of the facilities in a community, it can use its monopoly power to raise prices for patients. A 2018 analysis by the University of California at Berkeley found that when hospitals merge, the price of hospital stays increases by 11% to 54%. In addition, the price of physician services increases by 14% after a hospital purchases a physician practice.”
So what do we do about all this? Good news! There are currently some really good reforms being proposed in Congress.
First, the Patient Access to Higher Quality Health Care Act of 2021 would get rid of a 2010 federal law that has prohibited doctors from opening new hospitals and prevented existing physician-owned hospitals from adding new beds and operating rooms. Passing this bill would end that ban and allow physicians to offer their communities a low-cost and high-quality alternative to hospital monopolies. This should be common sense. The only reason to oppose it is if someone is bought and paid for by the hospital associations.
And then there’s the Consumer Choice of Care Act that would allow ambulatory surgery centers to deliver more outpatient services. Currently, these centers charge 60% lower prices than hospitals for surgical procedures but they are banned by the federal agency overseeing Medicare from offering patients over 1,700 important surgical procedures, such as hip replacements. Infuriating, I know.
Lastly, there’s a proposal on the table to end yet another corrupt Medicare practice. For some time, Medicare has paid hospitals significantly higher rates — between 106% and 217% more — than they pay to physician practices for exactly the same services. Just another way the government is rigging the market for the hospitals. That must be stopped.
According to the Committee for a Responsible Federal Budget, these subsidies cost patients and taxpayers nearly $700 billion. It also creates an enormous incentive for physician practices to merge with hospitals in order to charge patients higher prices. It also leads to some funny business on the part of hospitals where they pretend outpatient facilities within their network are the hospital itself when they bill Medicare in order to obtain higher payments and charge patients hospital prices for a routine doctor visit
To eliminate this, Medicare must equalize payment rates between hospitals and physician practices to prevent large hospital groups from further monopolizing our healthcare system. This is known as “site-neutral payments” and there’s a bill to do just that called the SITE Act.
The government is currently actively involved with propping up corrupt monopolies in our healthcare sector and we all pay the price. So the next time someone tries to blame capitalism for the problems in our healthcare system, point them to the true culprits instead—and then demand Congress fix them.
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