1. Featured Article: Employer-Managed Health Care What It Really Means
Breaking Free From Employer-Managed
Health Care, by Daniel Weintraub
Bee Columnist
Published Tuesday, February
21, 2006
Imagine for a moment that
your employer was required by law to buy a plan to manage your nutrition needs
- rather than simply paying you a wage, out of which you buy the food you want
to eat.
Or suppose the government required
your employer to pay for a housing plan, rather than paying you and letting you
decide where and how to live.
Finally, consider what it would be
like if the company you work for was mandated to design and finance a
transportation plan for you, with a list of options for how you could get to
work and back home each day.
Each of these scenarios brings a few
things to mind.
First, you'd probably get paid a lot
less than you do today, because your employer would be diverting much of your
current wages to pay for these plans instead.
Second, you would have less choice
than you do now, because your employer would have to standardize these food,
housing and transportation plans to fit the needs of many workers.
Third, the service you would get from
your local grocery store, landlord or automobile dealer would probably be
worse, since your relationship with each of them would now be muddled through
the entry of a third party, your employer. Your local grocer would have a
greater incentive to try to satisfy his real customer - your boss, or worse,
the food management company your boss chose - than to serve your needs.
Fourth, the costs of each of these
goods would tend to rise over time - especially if you and your fellow
employees were able to eat as much as you liked, or live in any size house or
drive as far as you wanted within the choices provided. While large employers
might be able to use their superior bargaining power to drive down costs a bit,
their power in the marketplace would be outweighed by the increased cost of
providing food, housing and transportation in quantities unlimited by the
discipline that comes when a consumer pays for something out-of-pocket.
Finally, as the costs did start to
rise, you would feel less secure about where your next meal was coming from, or
whether you'd have a place to live tomorrow or a car to drive to work. With the
management of these essential items in the hands of a third party, you'd feel
vulnerable, worried about whether they might cut back on your choices or on the
quality of the offerings in order to save money.
Sound like a good deal? Well, that's
exactly the kind of health care system we have today. While individuals once
managed their health insurance themselves, paying for it out of their wages,
employers began doing that for them during World War II as a backdoor way to
increase compensation in an era of government-imposed wage and price controls.
The custom stuck, the government rewarded it with tax breaks and today more
than 60 percent of us have our health care managed through work.
Not coincidentally, health care is the
one essential in our lives that is most often described as being "in
crisis." While some people have access to better food than others, nobody
in America goes without food today, thanks largely to food stamps, which give
people a chance to obtain essential nutrition without involving employers or
the government (too much) in managing their choices.
Some of us certainly live in better housing
than others. But that's no business of our employers. To the extent that the
government has decided that some people need help paying for their housing, we
have provided vouchers for rent, with minimal regulation on how those stipends
can be spent. The housing the government provides directly, in contrast, is
mostly in lousy neighborhoods, crime-ridden and poorly maintained.
Finally, while some of us drive nicer
cars than others, our employers are not responsible for this, and neither does
the government inject itself into the equation. The state does provide public
transit and subsidizes it from tax revenue in part to enable the poor to have
access to transportation.
Now comes a
national movement to require employers, especially large ones, to spend a
certain amount of money on health insurance for their workers or pay a tax to
the state to cover their care. In
It's odd that just when the informal
system of having employers managing their workers' health care is in danger of
collapsing from the weight of the problems it created, some politicians want to
lock that system, with all its flaws, into place with a new law. To read the entire original Op-Ed article,
please go to www.sacbee.com/content/opinion/v-print/story/14214344p-15040397c.html.
About the writer:
The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at dweintraub@sacbee.com. Readers can see
his daily Weblog at www.sacbee.com/insider.
* * * * *
2. In the News: Witch Hunt By THOMAS P. STOSSEL, WSJ
"The belief that there
are such things as witches is so essential a part of the faith that obstinately
to maintain the opposite opinion manifestly savors of heresy." So begins
"Malleus Maleficarum" ("The Hammer of Witches"), a book
commissioned by Pope Innocent VIII and published in 1484. For three centuries
"The Hammer" was the principal reference for witch hunters determined
to punish sorcerers and rid them of the world.
A no less sweeping manifesto
recently appeared in the Journal of the American Medical Association (JAMA). It
called for total extermination of contemporary witchery -- "financial
conflicts of interest" -- caused by the malign influence of pharmaceutical
and device manufacturers in academic health centers. It argues that these
companies pervert altruism, misinform physician education and cause breaches of
scientific integrity in medical research. While these debatable allegations are
not new, the JAMA piece received widespread and enormously favorable attention
in the press. Academic health centers are reportedly rushing to enact the
recommendations.
Although separated by over
500 years, these two recipes for societal improvement have striking
similarities. Both address an imperfect world beset with pain, want and
disease. And both highly value appearances in defining good and bad behavior.
The church saw witches as moral deviants. The sponsor of the JAMA article, the
American Board of Internal Medicine (ABIM) Foundation, espouses
"professionalism" and "just distribution of finite
resources" and also judges its witches, financial conflicts of interest,
as immoral. The ABIM Foundation, like the medieval church, liberally taxes
without consent to fund its crusade against "profit-seeking in
medicine." The churches tithed; the ABIM Foundation is a derivative of the
ABIM, which charges physicians large fees for examinations it administers for
compulsory certification to practice. The foundation now has an endowment
approaching $60 million.
In their zeal, both
"The Hammer" and the JAMA cited scripture selectively. "The
Hammer" trolled the Bible and ecclesiastical works for references to
support the existence of witches and witchcraft, which remained uncontested
until the retraction of anti-witch doctrines centuries later. The JAMA article
baldly states that "a systematic review of the medical literature on
[industry] gifting . . . found that an overwhelming majority of [commercial] interactions
had negative results on patient care," although the source it cites
explicitly says: "No study used patient outcome measures." The JAMA
piece reminds us that industry marketing influences the prescribing habits of
physicians. But it repeatedly neglects documented evidence that physicians
frequently fail to prescribe appropriate drugs according to evidence-based
guidelines for nearly all diseases.
The witch hunters of
"The Hammer" and of the JAMA paper propose extreme remedies that
promise great but practically unattainable rewards. "The Hammer"
recommended torture to elicit confessions from witches and severe punishments
following conviction. The JAMA authors want all commercial contributions
removed from academic health centers education grants, gifts of any size to
physicians, meals during conferences and free drug samples. The authors concede
that we need academic-industry interactions to obtain new medical technologies.
But they want industry sponsorship of academic education and research divorced
from any specific purposes and placed under the control of the administration
of the academic institution, not the individual researcher.
"The Hammer"
predicted that eliminating witches would cleanse the world of ills inflicted by
them. But witches burned, and the problems persisted. The JAMA article says
that abolishing the commercial interface in academic health centers will lower
the cost of drugs by encouraging prescriptions of cheaper ones. Since
physicians not in academic health centers write by far most prescriptions, the
basis of this hypothetical cost savings is unclear. Even stranger is the idea
that companies would sponsor research of no direct benefit to them. Since they
won't, we will have less corporate sponsorship and therefore translation of academic
work into benefits for patients. . . . To read the entire article, please go to
(Subscription required) http://online.wsj.com/article_print/SB114048890388778705.html.
Dr. Stossel is American
Cancer Society Professor at Harvard Medical School and Co-Director of the
Division of Hematology at Brigham and Women's Hospital.
* * * * *
3. International Medicine: Incentive Plan In South Africa, Insurer Gives Points For Healthy Living, By RON LIEBER, WSJ, February
21, 2006; Page A1
Frequent-Flier-Style
Program, Rewards Diligent Members; Model for
Just as frequent fliers
accumulate miles, South Africans covered by Discovery Health can collect points
for doing such healthy things as quitting smoking, exercising or getting an
annual Pap smear.
In
By combining those plans
with incentives for healthy living, Discovery founder and Chief Executive
Adrian Gore says he has found a model for the
Critics call Discovery's
points system a marketing gimmick designed to attract healthy people to the
company while leaving the sick for someone else to cover. They say average
people, if forced to spend their own money on health care, are apt to make
penny-wise, pound-foolish choices such as forgoing treatment in the early
stages of an illness.
Whatever Discovery's
advantages, they are available only to a small sliver of South Africans. About
seven million people in this nation of 47 million have private insurance,
entitling them to use a system of private doctors and hospitals that is
considered on a par with Western nations in quality. The rest -- including most
of the estimated five million people infected with the AIDS virus -- are stuck
with the public system of hospitals and clinics, which are mostly underfunded and overwhelmed.
Niel Uys, a 46-year-old
technical support manager for International Business Machines Corp. in a
Johannesburg suburb, says he and his family have "done virtually
everything you could do" to earn points in what Discovery calls its
Vitality program.
In 2005, that included
logging on regularly to Discovery's Web site, getting a flu shot, not smoking,
maintaining his goal weight and getting graded for fitness. He received extra
points for being fit. "We are all more healthy
and hopefully our life expectancy will be a little bit better," he says.
Thanks to his
"gold" status in Vitality, Mr. Uys has received deep discounts on
hotel and resort stays. Last year, his wife spent four weeks in a hotel near
Discovery has a 26% share of
the private-insurance market in
Most of Discovery's rivals
in
In the next two months, Humana
Inc.,
Mr. Gore, an actuary by
training, had started Discovery Health in 1992 with a different approach. His
insurance plans required individuals to pay their own bills up to a fairly high
amount by South African standards. Today that deductible is around $1,800
annually for a family of three in a comprehensive plan. Mr. Gore coupled the
stick with a carrot: Employees could put aside money in a tax-advantaged
medical-savings account. If they didn't spend it all in one year the money
would carry over to the next.
Battling UnitedHealth, Mr.
Gore searched for a marketing hook. He says he dreamed one up sitting in the
bathtub one night in 1997. A chain of local health clubs had approached him
asking whether Discovery wanted to market its insurance to club members.
Thinking it over, Mr. Gore hit upon a better idea: giving a free health-club
membership to those who signed up for Discovery's insurance. From there the
idea expanded. Those who lived a healthy lifestyle and got their checkups would
get points for discounts on airplane flights and the like.
Today, about 1.9 million
people are covered by Discovery, and 70% of those eligible to join the Vitality
points program do so. Membership in Vitality costs about $13 a month for a
single person, although employers sometimes subsidize those fees. The rewards
include cheap flights within
Gym memberships are free
after a one-time sign-up fee for people who go at least 24 times a year.
Vitality gives 150 points for each workout. A full set of cholesterol, glucose,
HIV and blood-pressure tests can yield thousands of points. Those with 100,000
points achieve the highest status and the steepest discounts. Everyone starts
over again each year.
Skeptics in
"You discount things
that younger and healthier people tend to like," says Alex van den Heever,
a senior technical adviser at the regulator, which is called the Council for
Medical Schemes.
A
Familiar Problem
The problem of
cream-skimming by insurers is a familiar one to health economists, and recently
In the
Advocates of the plans
believe consumers are apt to overuse health care when they don't have to pay
much out of pocket for it -- and that they spend money from their own pockets
more wisely. Critics question those assumptions, saying people are prone to
hurting their long-term health by skimping on preventive care. "High
cholesterol takes 20 years to make its mark, and hypertension takes 25
years," says Tony Behrman, a doctor who heads an association of general
practitioners in
Amid that debate, Discovery
says its unpublished data offer some evidence that people forced to consider
their medical spending more carefully can make good decisions and avoid hurting
their health . . .
Changing
Costs
Another measure of the
Vitality program's value is how members' health-care costs change over time.
The insurer measures this using the "loss ratio," which is the cost
of paying a member's annual health claims divided by the annual premium. If the
insurer receives $5,000 in premiums and pays out $2,500 to cover claims, the
loss ratio is 50%.
Discovery examined 1,467
insured people age 50 to 54. From 2000 through 2003, those with elite status in
Vitality saw their loss ratio fall to 70% from 73%, while the loss ratio for nonelite members rose to 80% from 72%. In the 30-34 age
bracket, members in both the elite and nonelite
categories saw loss ratios rise but the ratio rose faster for nonelite members . . .
In the
To read the entire article,
please go to http://online.wsj.com/article_print/SB114048591562678630.html. (Subscription required)
Write to Ron Lieber
at ron.lieber@wsj.com.
* * * * *
4. Medicare: Trust the Customer! By
Health-care costs doubled
over the decade ending in 2004, in fact reaching an all-time high measured as
the share 16% - of GDP; and they continue to greatly outpace inflation.
Similarly, education costs from primary levels up through college continue to
grow faster than other categories of national spending. Why?
Here is a bare-bones way to
think about this situation: A is the customer, B is the service provider. B
informs A what A should buy from B, and a third
entity, C, pays for it from a common pool of funds. Stated this way, the
problem has no known economic solution because there is no equilibrium. There
is no automatic balance between willingness to pay by the consumer and
willingness to accept by the producer that constrains and limits the choices of
each.
In the
Another
example. You want to get a college
degree in field X. The college says: Here is the tuition price and this is the
program of study in X. If it's a public university the price you pay is perhaps
20% of the cost to the college, and the college collects the difference from
the state budget levy on the taxpayers. If it's a private university, the
tuition you pay is closer to the cost of service, but most private universities
still rely heavily on donors and public sources for the support of education
costs.
In these examples, if
third-party deep pockets pay whatever is the price B charges
A this year, the effect is to reinforce the incentive to raise the price next
year. Spending escalates, which leads to a demand for cost control. In health
care there is increasing control over access to medical services. Insurance
companies disallow patient free choice of physicians, clinics and hospitals
outside their approved network. Physicians and medical organizations face
escalating administrative costs of complying with ever more detailed
regulations. The system is overwhelmed by the administrative cost of attempting
to control the cost of medical service delivery. In education, university
budget requests are denied by the states who also limit the freedom of
universities to raise tuition.
If there is a solution to
this problem, it will take the form of changing the incentive structure:
empowering the consumer by channeling third-party payment allowances through
the patients or students who are choosing and consuming the service. Each pays
the difference between the price of the service and the insurance or subsidy
allowance. Since he who pays the physician or college calls the tune, we have a
better chance of disciplining cost and tailoring services to the customer's
willingness to pay.
Many will say that neither
the patients nor the students are competent to make choices. If that is true
today, it is mostly due to the fact that they cannot choose and have no reason
to become competent! Service providers are oriented to whoever pays: physicians
to the insurance companies and the government; universities to their
legislatures. Both should pay more heed to their customers -- which they will
if that is where they collect their fees . . .
Would some one please just
trust the customer? To read the entire editorial, please go to (Subscription
required) http://online.wsj.com/article_print/SB114179336901692343.html.
Mr. Smith, a 2002 Nobel
Laureate in Economics, is a professor at
Government
is not the solution to our problems, government is the problem.
- Ronald Reagan
* * * * *
5. Medical Gluttony A Patient's Phone Call Tells It All
We received a call from a patient concerning
statements of charges she was receiving from our office. She wanted to remind
us that she has the ultimate in free healthcare, Medicare and Medicaid. She did
not want us to remind her of what it costs to take care of her. She felt
entitled to her free care and we should not make her feel guilty about her
entitlement to healthcare.
This is why
government healthcare will never work.
* * * * *
6. Medical Myths: Giving Rewards Improves Health
Insurance companies that
give incentives (See International Medicine, Section 3 above) for doing such
healthy things as quitting smoking, exercising or getting an annual Pap smear,
remind me of a smoking withdrawal program that I gave in my younger and more
foolish days. About half way through the recruitment process, a patient told me
that she was going to sign up with Smoke-Quitters-Anonymous rather than join my program.
Her explanation? If I join your program, I have to stop smoking. By
joining Smoke-Quitters-Anonymous, I don't have to stop smoking. And they give
me a free gift.
Giving Rewards Takes Healthcare Out of Context and Doesn't Change Unhealthy Behavior.
* * * * *
7. Overheard in the Medical Staff Lounge: Nothing
Succeeds Like Failure
A group of Hewlett-Packard Co shareholders is suing
the company, alleging the board broke its own rules by awarding more than $42
million in cash, stock and other benefits to Carleton "Carly"
Fiorina after she was fired as CEO last year. The
suit depicts the payments to Fiorina as a blatant
violation of a board policy adopted in 2003 that limits the company's severance
payments to 2.99 times an executive's company salary and annual bonus and
therefore should not have exceeded $16.7 million. The attorney for the
shareholders described Fiorina's severance package as
a prime example of corporate
Meanwhile, Warren Buffet, 75 year-old CEO of
Did you know that
A lovely, well-dressed,
94-year-old lady came to our office for a complete evaluation of her
hypertension and hypercholesterolemia. She also had some increased shortness of
breath, a couple of pound weight gain, with ankle edema (water level rising
above her ankles) which is a manifestation of more fluid going into her body
than her heart and kidneys can accommodate. When her daughter came in at the
end of the exam, she explained that she was making sure her mother drank about
8-10 glasses of water a day on the advice of her previous physician, who had
also been increasing her diuretics, trying to get rid of the excess fluid she
was accumulating (from over drinking).
Everyone Knows You Should Drink 10 Glasses Of Water A
Day To Flush Your Kidneys.
An Old Guide, Obey Your Thirst, Seems to Have Gotten
Lost in the Bottled Water Craze.
* * * * *
8.
Voices
Of Medicine: Government Pays for Compliance, Not Medical
Care
The Medicine Men, by MichaelArnold Glueck, M.D., and Robert J. Cihak, M.D.,
Two years ago, the
Obviously, the medical school learned
an expensive lesson. But will the lesson help improve patient care?
We doubt it.
The title of the 111-page report
summarizes the emphasis: "Achieving Excellence in Compliance." The
document uses the word "compliance" 620 times, and recommends a new
objective for the school: achieving "a culture of compliance" in
addition to the more traditional medical school goals of research, teaching and
patient care.
To implement the recommendations of
the report, the school is spending money for more layers of staffing,
re-educating physicians and more oversight of who bills for what and how.
Unfortunately, the process is eerily
like that for many businesses where the Sarbanes-Oxley law has created
complicated, expensive and difficult-to-comply-with rules.
Once upon a time, an organization
could be successful by ethically providing goods and services to customers and
clients. The ethical guidelines for this behavior were ultimately based on
underlying and universal moral rules, such as those prohibiting stealing or
cheating. Understandable and enforceable laws and contracts often reflected
these ethics.
Over time, many lost sight of the
underlying moral code but still followed the ethical codes set up by business
or professional organizations.
More recently, complicated laws
governing business and professional behavior are creating increased emphasis on
compliance to arbitrary rules, sometimes leaving common sense and ethics
behind. Judges agreeing with new ideas put forth by trial lawyers or government
prosecutors often defeat rather than fulfill justice.
Many enterprises, probably now
including the UW medical school, visualize these exceedingly complicated rules
as an impenetrable briar patch. Many now concentrate their compliance resources
in the areas the government enforcers focus on. Because it's impossible to
consistently comply with all the myriad rules, the goal becomes damage control;
the modus operandi becomes risk management.
Instead of being a uniform and solidifying
bedrock underpinning civilization, law enforcement has become an unmarked
minefield destroying lives and enterprises almost willy-nilly.
In medicine, Congress is now
considering "pay for performance" and "best practices"
incentives that would reward doctors for following government guidelines (i.e.,
rules) on how to treat patients with particular conditions or diseases.
One difficulty with this government
micromanagement is that the scientific studies used to establish the "best
practice" rules typically include patients with a given condition, such as
congestive heart failure and a narrow range of possibly complicating factors.
Researchers do not further analyze patients with a significant complicating
factor because it would take a large number of such patients to have a
statistically significant result. For these patients, there's no "best
practice" experiment or science to unerringly guide the doctor in
treatment.
For example, a patient with heart
failure might have a past history of a previous stroke and also come down with
pneumonia on top of the heart failure. It would be rare for an up-to-date
scientific study to account for even this relatively simple set of complicating
factors.
And, medical advances quickly outdate
these studies.
In addition, research funds for
promising but politically-incorrect treatment methods, such as chelation therapy and hyperbaric oxygen therapy, is cut off
by the medical-political complex controlling research grants.
Most people want doctors with
experience in treating their condition rather than a technician treating them
exactly the way the best practices computer printout directs.
There's a huge disconnect between the
goals of compliance and excellent patient care. "Compliance" implies
there's something to comply with, such as government billing and practice
rules. But successful patient care often depends on creative insight. The
practice of medicine is as much an art as a science.
If it were only science and technique,
we'd have high school-graduate technicians trained following computer printouts
taking care of patients rather than medical doctors who have spent five to ten
years or more in medical training, after college.
We agree that doctors should be moral,
honest and ethical. But "compliant" as a primary
motivation? Ethical should cover that base.
The more energy and costs expended on
compliance, the less is left over for patient care. The alternative is for
increased costs of medical care, without any added patient benefit. Ironically,
although the government insists that Medicare recipients get first class
medical care at the same time it clamps down on medical costs, the result of
more compliance efforts will be decreased access and higher costs.
If the
Contact Drs. Glueck and Cihak by
e-mail.
* * * * *
9. Book Review: Healthy
Competition - What's Holding Back Health Care and How to Free It by Michael
Cannon & Michael D Tanner, Cato Institute, Part III: Chapter 6 - Government Health
Programs.
Government subsidizes medical care for nearly 77
million Americans through Medicare, Medicaid, and other programs. Rather than
subsidize beneficiaries directly, government typically subsidizes them indirectly
by delivering subsidies to health care providers when the beneficiary receives
care. Government health programs exhibit all the negative effects of overreliance on health coverage, including moral hazard,
reduced sensitivity to price and quality, and less competition. In addition,
government sets payment rates for providers who treat beneficiaries in these
programs. These government price controls create additional waste and obstacles
to competition and innovation. As the Federal Trade Commission (FTC) and
Department of Justice (DOJ) recommend, government health care subsidies should
be delivered directly to the intended beneficiaries. Allowing these patients to control their own
health care dollars would secure them higher-quality care, minimize the harmful
effects of excessive coverage, and obviate the need for government price
controls.
Price Controls
Market prices convey information to producers and
consumers about the cost of providing billions of items, how highly the items
are valued by others, and how the available supply compares with existing need.
Even with the most sophisticated tools conceivable, bureaucracies cannot
replicate market prices because they cannot capture the information that
producers and consumers reveal when they buy and sell items at unregulated
prices. Even if a bureaucracy could capture all the necessary information for a
point in time, conditions like supply, technology, and consumer preferences
change too rapidly to update that information accurately. When setting prices for services under
government health programs, governments err in one of two ways: setting prices
too high or too low. Setting prices too high results in resources being wasted
on services that provide less value than their cost. Setting prices too low
results in shortages. As the FTC explains, "Paying too much wastes
resources, while paying too little reduces both output and capacity, lowers the
quality of the services that are provided, and diminishes the incentives for
innovation." Though intended to be a cost-containment tool, price controls
may actually increase costs. Moreover, "Government-administered
pricing . . . inadvertently can distort market competition." According to
the Commission, "One unintended consequence of [Medicare's] administered
pricing systems has been to make some hospital services extraordinarily
lucrative and others unprofitable. As a result, some services are more
available (and others less available) than they would be in a competitive
market." As
Government
price controls also drive pricing for private payors.
As former Medicare administrator Tom Scully has remarked,
Medicare and Medicaid are
such dominant players that the private sector has been forced to follow
alongshadow pricing [Medicare's price controls] in recent years . . . In the
long run, government price fixing for services has never worked in any system
in any society, and I don't think it can work here, either. Having federal
price fixing, no consumer information or pricing sensitivity,
and no measurement of quality has led to predictable results: artificially high
prices and uneven quality.
Specialty Hospitals
Such price distortions also lead to further government
obstacles to competition. Many large hospitals use excessive payments from
public purchasers - notably Medicare - to subsidize other costs. These other costs can include legal requirements
to provide care to those who cannot or will not pay, underpayments for other
services, or the hospitals' own inefficiencies.
As a result, smaller specialty hospitals have emerged
to capture those excessive payments. Since 1990, the number of specialty
hospitals in the
In response, large hospitals have responded by
lobbying for regulatory barriers to protect their position. Larger hospitals
have even persuaded Congress to prohibit the creation or expansion of new
specialty hospitals. In December 2003, the Medicare Modernization Act
effectively imposed an 18-month moratorium on the construction of new specialty
hospitals by denying Medicare reimbursements to such facilities. The moratorium
also forbids existing specialty hospitals to add new physician investors,
expand or change the hospital's specialty, expand beyond their existing campus,
or expand the number of beds beyond specified limits. Such restrictions reduce
healthy competition and harm patients. The Medicare Modernization Act also
required the Medicare Payment Advisory Commission (MedPAC)
to study the effect specialty hospitals have on patients and larger hospitals. MedPAC's preliminary findings indicate that specialty
hospitals increase competition and improve care not only for their own
patients, but for those in larger hospitals as well. MedPAC
found that specialty hospitals serve as a "wake-up call'' for larger
hospitals, and spur the latter to become more efficient and improve their
services. Moreover, MedPAC found that most large
hospitals remain profitable in spite of competition. Nonetheless, in March
2005, MedPAC recommended extending the moratorium
until 2007 to allow further study of the issue. MedPAC
also recommended fixing Medicare's pricing system to bring payments closer to
what market prices would be.
Nonetheless, larger hospitals, led by the American
Hospital Association, are lobbying for a permanent ban on specialty hospitals.
As the FTC and DOJ observe, "Competition . . . does not work well when
certain facilities are expected to use higher profits in certain areas to
cross-subsidize uncompensated care.'' Specialty hospitals are an example of
competition attempting to break through a highly regulated market. Competitors
whose position is threatened respond with the coin of the realm. . .