The Healing American Healthcare Podcast
The Healing American Healthcare Podcast

Episode 18 · 1 year ago

Capitalism & Monopolies In Healthcare


Ed Eichhorn speaks with Mike Hutchinson about how monopolization has made healthcare more complicated and less accessible to patients and the solutions to consider. They also touch on how capitalism has strayed from its original blueprint, using hospital bueracracies as an example. 


"The Discovery" 

by The Lemming Shepards 

Exzel Music Publishing ( 

Licensed under Creative Commons: By Attribution 3.0 

Hello and thanks for joining us today. My name is Ed Ikorn. I am the founder of the healing American healthcare coalition. Our goal is to provide our listeners with timely information on pandemic research and developing universal healthcare plans for America. The coalition is not a political action committee. We are also not affiliated with any political party. Our mission is to be a trusted, objective source on the current national discussion on healthcare initiatives that will impact the health and wellbeing of all Americans. Our guest today is Dr Michael Hutchinson, my coauthor of our book healing American healthcare, a plan to provide care for all while saving one trillion dollars a year. Dr Hutchinson is a neurologist and biophysicist. He is senior faculty at the ICON School of Medicine at Mount Sinai in Manhattan, New York. He is certified in neurology and neuroimaging and is the past president of the American Society of neuroimaging. Dr Hutchinson holds a Ph d in molecular physics and he invented parallel imaging in one thousand nine hundred and eighty seven that is now the standard for clinical MRI. Dr Hutchinson has a large private practice in Manhattan. In addition, he teaches and conducts research, including fundamental MRI theory and it's application to neuro the general conditions. He has recently also published a theory of ultra fast MRI and has been awarded to patterns in this area of research. Thanks for joining us today, Mike. I would you like to talk about? I feel it that we should have a change of tack and perhaps discuss the economics underpinning the health industry. So I go all the way back to Adam Smith and when I think about capitalism, he was a philosopher in the late eighteen century but is now known as the father of capitalism.

But he was much more than that actually, and what he wanted to have as a congenial society, and he invented this form of economic enterprise we now call free enterprise or capitalism as a way of getting there. What Smith advocated forwards free markets, which means elimination of tariffs, for example between countries, and everybody competing free with everybody else in a marketplace. So he therefore advice has to reject anything that destroys the free market will get to that. So he said, do you think the butcher, the baker, the brewer, maker evening meal, because they like you? Of course not, that pursuing their selfish interests. So, ironically, out of everybody pursuing the selfish interests, you have a comfortable and congenial society. And, and he called this the invisible hand. Ironically, how you get from people competing for their own self interests? How you get a Continui of society? Well, let's look at America as an example. In from one thousand nine hundred forty eight to about nineteen eighty, we had such an economic society where there was free enterprise and the government did fear a little with corporations and the corporations didn't seek favors of any great extent from the government. And so we actually had a Smithian society and it was brilliantly successful. If you recall, for about thirty years the American economy was the MB of the world, the American standard of living. And what happened in nineteen eighty was that rating came in and said let's cut text on rich people, something, incidentally, that Adam Smith had advocated because he realized if you allow anybody to get particularly wealthy, then you invite them to monopolize and control things. And so Adam Smith, ironically this isn't widely known, Adam Smith, invented progressive taxation, meaning that the rich would not only pay more than the less rich, but they're paid very much...

...more. They would pay a high percentage of their income than the less wealthy. And he did this, I believe, because he realized that if the wealthy were allowed to become exceptionally wealthy, we go back to plutocracy also eliminate much of the middle class. When you like you were, you have a society of extremely wealthy people and peasants, and that's called aristocracy. And he foresaw there's over two hundred years ago. And so what happened in one thousand nine hundred and eighty was that Milton Friedman produced Reaganomics, which stood Adam Smith on its head and said that's cut taxes on wealthy people. And the result, ironically, is that we have a form of socialism in this country, but it's not socialism for the common man as socialism for the corporations and the wealthy, and I think that's very damaging, and I'm willing to Bet Smith would have thought so also. So how does this apply to healthcare? Well, Remember Smith said reject anything that destroyers the free market, that is, corporations colluding to form monopolies and corporations getting into bed with government. And what do we see here? Exactly those two things. For example, let's consider the three temples of healthcare, which are the pharmaceutical industry, the insurance industry and the hospital industry. And yes, the hospitals do form an industry. They have their own union, the American Hospital Association, which lobbies the government. All three temples lobby the government. For example, since two thousand and six it has become impossible for Medicare to negotiate drug crisis of the pharmaceutic bolt companies. Why is that? Because they lobbied the George W Bush government and they got their way. They have eight hundred and eighty seven lobbyist permanently in Washington. That's to lobbyists for every kindsman and Senator Smith would be spinning in...

...its grave to hear this. This is not capitalism, is chrony socialism for a large corporation. So Obama attempted to reverse this, but instead of push back from the farm super industry, who would not sign off on the Affordable Care Act, Aka Obamacare, until he relented, and the result was that the epp pain went from eighteen dollars to six hundred dollars. But it's true, across the board, drugs cost far too much and from suital corporations have become immensely wealthy as a result of this lobbying of government. Now take the insurance industry, the Second Temple of Healthcare. To understand how bad the insurance company is, consider a successful corporation operated along catalistic lines, and that I choose Mercedes. They provide a product in high demands, and the more of that product they shift, the more money they make. That's quarter market. That competing with Audi and BMW, run, Bentley and whatnot. As result of this, the interests of the CEO, the shareholders and the consumer are all aligned. The consumer wants a product and the corporation is only two happy to provide him with a product at the price. Now consider the insurance industry, which Christopher Hitchens pissily described as showing the worst aspects of capitalistic greed and the worst aspects of bureaucratic socialism. I would contend it's more the socialism and the capitalism. So Mercedes wants to provide a product in demand. The insurance company also produce the product in it demand, healthcare. But ironically, the more of that product they ship, the less money they make, and so the interests of the corporation, the CEO and the shareholders are aligned against the interest of the customer, in this case the patient. So they're in the business of not providing the demanded product, again a violation of Smithian free markets.

And finally, the hospital industry lobbies aggressively and hospitalism really becomes Silas your patiently go to one hospital, they encourage you to go to darkers in system and as a result of this they become an uplistic. As a result of that, you can take a very simple spinal surgery, say lumbar Lemon hectory, which most people are fairly familiar with, even if they have not had it performed. In this country, it costs upwards of a hundred thousand dollars to take a little piece of bone out of somebody's spine and in Amsterdam, because tenzero dollars for the same surgery. How is that possible? Monopolistic? Hey, you by the hospitals. So what's the solution to all list? Well, I would say I've become something of a capitalist. I would leave. A solution is to restore free entine prise, and we do that using old care. Yeah, I like to go back to your pharmaceutical example for a moment because there was a very interesting House of Representatives Oversight Committee meeting earlier this week. Congresswoman Katie Porter from California goes to these meetings with a big whiteboard and they had a pharmaceutical executive, you know, being interviewed by the committee, and she would say to him, okay, you've told me that we can reduce drug prices because of research costs, and she has a series of circles she puts on this white board that are sized against each other. So he said how much you spend on research and he said about two billion dollars. She says that's right and she puts a Little Red Circle on the board and they'd go through this and at the end of this she says, how much do you spend on stockholder vivid ends and Stock Buybacks? And he said, Gee, I don't know. She's why I know it's fifty billion dollars, since she puts a big Blue Circle on this white board and the CEO's got nothing to say because he wasn't prepared to discuss all the numbers that she was prepared on. And I think that's part of the monopolistic behavior of...

...pharmaceutical company. Is clearly they spend money on research, but they spend more money on advertising that, spend more money on marketing and significantly more money on compensation and stock buybacks. Another thing, too, is that modern farmer is not really in the business of doing experimentation and developing product or not. You can think of a fun student corporation to some extent as being like a hedge fund. They will bet on ten startups and they'll get fifty million dollars to week start up every year. It's that's five hundred million dollars a year, and one of the out of those ten is going to produce a blockbuster drug from which they will make billions. So they're investing tiny amounts of money in research in comparison to, as you said, the amount of money they're spending on stock buybacks and corporates compensation. We all know this. The problem is how to get around it. You know it's not going to be through legislation. Is going to be, I think, because of the lobbying, it's going to be setting up something like all care. There's an alternative insurance scheme to you know, Medicare and the commercial insurance schemes. But I think that what that does like is that creates competition, which is what we believe is important in health care economics. I mean, I think the same thing is true of hospitals because of all of the mergers they do so that the profitable hospitals become bigger and stronger and their leverage against insurance companies is a strong determinant in what prices because in many markets they are a monopolistic so if you are a large hospital chain in a specific market, you can control the negotiations and for that reason they're charges to insurance companies in those markets have got up by twelve to seventeen percent a year. That takes the whole hospital market out of balance because the very wealthy, often nonprofit hospitals are doing quite well, but at the same time inner city hospitals and rural hospitals are losing money or going...

...out of business, for lack of a better term. We need to change the operating envelope for these markets. You know, by introducing a public option we balance the insurance market a little bit because ninety percent of the business done by private insurances with employers, and employers are going to do their best to reduce costs, which will make a public option attractive. So the private insurance companies that would like to stay in the business will have to determine how to compete with the public option, which means they're going to have to lower their prices in order to do that. You know, I think hospital mergers, they also governmentally talk about anti competition in mergers and when mergers occur, the CEOS often say we are going to reduce our costs and improve efficiency, but they don't say they're going to lower their prices. I think if we have had a way of standardizing pricing among hospitals, it would create more need to be competitive below that price structure. So I agree with you. There's an issue of terms. You like the terms chrony socialism with respect to the way the markets have evolved, and others might choose chrony capitalism or monopolistic or allcopolistic competition. But I think what happens is you arrive at the same point. There's limited competition, prices go up and there's no competitive pressure for these organizations in insurance and in hospitals and in the pharmacy will industry to be more competitive. Would you agree with that? I'd agree with and I think you know we can summarize it. Whether it's chronic capitalism or pronti socialism, is Anti Smith ISM. This is what we have. This white price is so high. Why? Everybody's unhappy, patients, doctors. It's solution, I think, is to restore smithian principles, meaning restore free enterprise. Now, how do you get hospitals out of their silos? They have to compete and that means we have to have things like universal electronic health records, where any health...

...record of any individual patient can be seen at any hospital. We can no longer afford to have these silos, because these silos are also known as monopolies and that leads to monopolistic pricing. So that's one thing. Another thing is to put doctors back in charge, as the agents of free enduprise us. So doctors are now competing with each other to see patients. Right now, the majority of doctors are on salary in one of these silos, and when you put people on salary they often get lazy, and this is why I can take six months to see a doctor in a hospital. It was never that way twenty years ago. You could always get to see an excellent doctor up front, quickly, without any fuss. Another problem I think that we should address in our discussion is pre authorization. I think you and your colleagues and healthcare go to school for an extended period of time, come practicing physicians. Then it takes a long time for you to become an expert in dealing with patients in the field. You go through all of that for a number of years and then an insurance company tells you, Oh no, you can't do that yet, we have to approve it. Oftentimes preauthorization is approved ninety seven percent of the time. I think it takes the practice of medicine away from you right and not only that, and the doctors are very unhappy with it. But not only that, but there was an enormous apparatus of bureaucratic apparatus that the insurance companies impose in order not to provide the demanded product. Now, is it the cases some doctors over utilized testing? HMM, yes, it is. So how do we get around both problems allowing doctors their freedom to cast people appropriately? Let's take the case of the MRI scanner. Hear me now, believe me later. MRI scanning is going to take over every aspect, almost every aspect, of diagnostic imaging. So the pressure is going to be on doctors who own scanners. For example, let's say I'm...

...a neurologist, I own a scanner, I'm permitted to own a scanner and you come in with a headache and I said, well, it sounds a little worse and let's get a brain mrii to make sure that there's nothing serious. So we get the MRI scan, you come back within an hour. It's done because the MRI scanners on the premises, and you say this is probably a migrain and here's what the treaty is going to be. And the treatment takes a couple of weeks to kick in and the patient calls to say I still got a headache. And said, well, why do we do another MRI scan of the brain to be sure you don't have another brain tumor and of course that's the way a physician could scan the system. Does it happen that often? We think not. But here's how you get around it. It's very simple. You say, for each discipline, whether it's cardiology or neurology, orthor beat, it's for that discipline. At seniurologists are able to on their own scanner, but they can order only one point two MRI scans per new patient and something like whatever. Zero Point, zero eight scans for a repeat patient who needs repeat studies, people with brain tumors, people with models gross as, for example. So you say you'll have put one point to a new patient, point away, repeat patient. Problem solved. After that you're imaging for free. So the the problem of fraud is stopped immediately and automatically, and we can apply that to other techniques. It will be particularly simple to apply to MRI scanning and, as I said, believe me later if you wish, but MRI scanning is going to take over all of diagnostic imaging practically. So that's one example. So the doctors are now free, unfettered to own their scanners and to scan people, and the more people they see, the more money they make. So are incentiviized not only in pursuit of their trade, so to speak, but they're incenti bates also financially, and that's a base of camplysm but it has to be regulated. You can't just allow a doctor to own a scanner and scan as many people... you want anytime. That has to be regulated. The free market, with certain regulations, can act very efficiently. Now you go to your doctor and he says go down the corridor, wait time as get us can and come back, whether it's a cardiologist or neurologist or an orthopedic surgeon, is one stop shopping. MRIs are certainly the best example, but but any test modality for any specialty should have the same sort of guideline that you're using. MRI's an example of when you absolutely as I gave it as a complete example, but apply to everything. Now you eliminate a need for an insurance company. Actually, so you go to all care providing the money. You say, well, wouldn't that have to be back by the government? And isn't that socialism? And the answer is no, it's not socialism. I regard it again in analogy to the defense industry. The government says we want healthcare for our people. He is the money, he is a trilling dollars and you have to compete for it, just like defense contractors will compete to build a new jet and the result is the superlative product. And the same can be true medicine. To right now, doctors don't want to go to work. That demoralize they have the highest burnout rate of any group of professionals. Is Not a good situation. Well, that's you know, that's always saying earlier. You go to school for a long period of time, you get into practice, you become very good at what you do and then an insurance company tells you you can't order this strung or that drug or whatever. And I think we should put, you know, medicine back in the hands of physicians and make insurance companies be providers of funding sources more than controlling how those funds are spent. The physicians on a control how they're spent, because even today the actual salary of physicians is about ten percent of what we spend on healthcare, but you and your fellow professionals order eighty percent of what we spend...

...on health year. So you ought to be able to control how you order whatever you order for your patients, based on your expertise, not based on the guidelines of Insurance Company. Well, and indeed, in fact, thirty years ago, doctors were in charge and we had healthcare system that was the envy of the world, and now it's a shambles, is a bureaucratic shambles. So I think yes, this summary of this podcast should be put doctors back in judge and less unleash campilism the way it used to be thirty years ago. Well, Michael, we are coming to the end of our podcast, so I think you've categorized it quite well. I agree. You guys are to be in charge and we want to figure out how to pay the bill for everyone so that they can get the coverage they need, get the services they need, and it all want to be done at a relatively fair price when compared with the rest of the world, and that's what all care does. So want to thank you, Mike, for sure. Thank you for inviting me. I want to remind everyone that if you want to text heal healthcare to two, two eight, two eight, you can join our mailing list or you can visit our website at healing American healthcare dot Org to learn about our coalition and to sign up to receive our newsletter, the three minute read, or to buy our book healing American healthcare, which is available on our website and Amazon and Barnes and noble. So thanks everyone and have a great rest of your day.

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