The Healing American Healthcare Podcast
The Healing American Healthcare Podcast

Episode 13 · 1 year ago

The Economics of Healthcare in the US


Ed Eichhorn, co-founder of The Healing American Healthcare Coalition™, sits with neurologist, biophysicist and co-author of Healing American Healthcare Mike Hutchinson to discuss the economics of the healthcare industry. They analyze how America’s bureaucratic systems have held healthcare back and how the market could be geared towards benefitting both patients and practitioners alike.

Want to join our mailing list? Text HEALHEALTHCARE to 22828 to get started. And be sure to go to to learn more about The Healing American Healthcare Coalition™


"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 at Ikorn. I'm the founder of the healing American healthcare coalition and our goal is to provide our listeners with timely information on healthcare research and developing universal healthcare plans for America. Our coalition is not a political action committee. We are 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 in the future. Our guest today is Dr Michael Hutchinson, my Co author for 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 a 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 practice in Manhattan. In addition, he teaches and conducts research, including fundamental MRI theory and it's application to neurodegenerative conditions. He is recently also published a theory of ultra fast MRI and it's been awarded to patents in this area of research. Thanks for joining us today, Mike. I look forward to our discussion. I know you're interested in economics and I'm happy to discuss economics with you, especially as it relates to the practice of medicine. Well, a lot of people wonder why is it that we can have capitalism apply to everything except healthcare? Why is it breaking down in healthcare? And in my opinion the answer is because we don't have capitalism at work in healthcare. We have socialization and and handouts to lodge enterprises like hospitals, pharmaceutical companies and insurance industry. You know, you might ask yourself why capitalism work so well for the order industry enough for healthcare? So I'll give an example. Suppose you're the CEO of Mercedes Corporation. You produce a product and high demand and the more of that product you ship, the more money you make. So the interests of the CEO and the shareholders and the customer are all aligned. They said, well, that's obvious. But it's not obvious because here we have an industry with chips are product and high demand the insurance industry, but the more of that product is ships, the less money it makes. So it has a perverse disincentive to provide the demanded product and the rules of capitalism breakdown. There's no free enterprise, there's no competition between different payers and so on. The insurance industry is run rather like it oligarchy, with local monopolies. Now the insurance industry applies a bureaucracy to prevent the demanded product being shipped, and everyone is familiar with you have to get pre certification, you have to do this, you have to do that, this isn't cover that, and so on. And Christopher Hitchens, I think, put it really rather well when he said modern medicine combines the worst aspects of capitalistic greed with the worst aspects of bureaucratic socialism. It's not working because it's not free enterprise.

The hospitals are one thing, the pharmaceutical industry is obtained a sweet deal from the George W Bush administration, whereby they didn't have to go shake drug prices with the insurance companies, as a result of which, I give a concrete example. I'm an errologist and we use a lot of botox, not for cosmetics but for things like headaches and muscle spasm. It's a tremendously effective medication, very safe and it really a great drug, if you will. It's a muscle relax and which is why it works for wrinkles, believe it or not. But wrinkles is only three percent of the market and there's a lot of conditions that involve muscle spasm, for example spastic bladder. The urologists are using this to help people have frequent urination because it bladder is too small. I use it for my grain headaches and six other indications, so it's good stuff. Now Alegan, who makes bow trucks, charges two hundred for a viole of boat ups, but if you go to Europe they charge two or fifty dollars. So what's the difference? The difference is the Europeans go to them, they say we like your product. We think Bo trucks are great product. It could help a lot of people. How much do you want for it? And Alegan presumably says, well, how about twelve hundred US dollars? And they say get out of here. We've done our homework, we know it costs you fifty bucks to brew it up in Ireland. Will Give you two hundred and fifty bucks on that's plenty. I'm speculating a bit, but that's basically what I mean. Is that so? Now that it gets worse, because now the insurance coumary doesn't want to pay for it. So they put all these roadblocks in the way of giving people relief from the chronic migrain headaches and and that introduces tremendous bureaucracy that my office has to deal with. You'll very often talking with people in the Philippines who know nothing about the product. The left hand doesn't know what the right is doing. It's a bloody mess. Oh Mike, in Europe, as you know, all of the countries in Europe and negotiate drug prices on a national basis, whereas in the United States we don't do that. And, as you mentioned, when George W Bush brought part D Medicare into being that paid for pharmaceuticals. Pharmaceuticals are paid for by part D at list price. There's no negotiation on those prices. So I you know in the United States several studies have pointed out that we pay two and a half, two four times more for specific patented drugs then people do in other nations that actually negotiate on a national basis for the medications for their citizens. And even when the drugs go off patent, very often the generic is built up by the drug manufacture which had the patent which is expired, but they'll buy up the other covert and they're allowed to do that and they keep the prices up. Yes, that occurs, especially when other generic manufacturers do not choose to make the drug. And very similarly to the oligopolistic aspect of the companies that you mentioned earlier. If two generics make the same drug, the price remains a little higher. If five generics make the same drug, the price is dropped dramatically because of the price competition. And that's why big farmer does, or what you just describe to have divisions that engineerings of their patent cover drugs from the patents expire so that they can maintain price pressure on the market. Now consider this a the insurance industry is already and Oligopoli. They have local control in most markets. So oligopolies are bad because there's no free enterprises, no competition between them driving down costs. But the insurance industry is made even worse because they have to know they have to accept these high drug prices, which cuts into their profits.

So they make the life of the physician miserable. It doesn't do any good except to create all kinds of headaches for both the patient and the physician. So this is all bad. We're talking about Oligopolis, not free ender price, price fixing and so on. This is not the American way. This is not what made America a great economy. Now, if you turn the clock back about forty years, you realize we actually had a pretty good system. Everybody was in short, who had a job, and if you insured, you're insured to a high standard. So the doctors were happy, the patients were happy because ten percent of GDP. What's happened? Well, we have all these oligopolies, we have hospitals putting up expensive wings, we have CEOS of hospitals making six hundred and eight ten million dollars a year and for every CEO's all kinds of many deans and many CEOS. This bureaux sel has to be paid for. It's not clear to me how this bureaucracy enhances the provision of medical care. Quite the opposite. So how do we end up with this system? It's been a long road and I think began with the insurance industry and then the pharmaceuticals got involved and then the hospitals got involved. The hospitals are themselves and oligopoly. They set their own prices. You could find a hospital in one city doing a spine surgery for a hundred and Twentyzero dollars. Another city you might fund it doing for twenty Fivezero, and if you go to Amsterdam you can get the same surgery for Tenzero. So we don't have free markets. Michael, listen to a very important issue. Hospitals have been combining into mega hospital systems. When they do that, they have a leverage in negotiating power with insurance companies. While you know, we are critical of insurance companies because of their attempt to minimize the medical loss ratio, which is the amount of money they pay for care. On the hospital side, when they form these mega nonprofit corporations. Over the last several years they've increased their prices between twelve and seventeen percent a year because they could. If you are a hospital that it is a standalone hospital in a state like New Jersey, where I live, you're negotiating capability with a rising blue cross or other payers is quite limited, so when they choose to try to lower their rates, you are in a position to accept it or be out of network. However, if you are a large conglomerate, a nonprofit conglomer and even you can dictate pricing because you have a lot of leverage over the pair. And that's the problem you're talking about. But but the hospital industry in our country is one with very different problems in different places. There's about five thousand hospitals in the United States. Three thou of them break even or lose money and are not the mega hospital that you're referring to that you deal with from time to time. And on top of that, there are six hundred of those three thousand hospitals that are in rural markets. Know, their primary payers are Medicaid and Medicare or catch. Two of them go bankrupt to a close every month and that and that's another issue that needs to be addressed. And of those hospitals that you know are profitable and most of which are nonprofits, two years ago their actual nonprofit profit was seventy eight billion dollars. So there are different sections of this market that worked very differently, and I think we need to figure out how to both lower the cost of the expensive hospitals and find ways to maintain hospitals in rural America and in the inner city that are not well financed as the ones you've it's grin. Well, I think we can make a stab in the right direction for correcting this by focusing on the doctors. And you make doctors the agents of Free Enterprise, so they competing with each other for patients. So in principle, the more patients you see,...

...the more revenue you have, and so the better doctors are going to be highly motivated to see patients and provide quality healthcare. That's what free enterprise about. That's not what we have now. We have doctors on salary working for oligarchy's known as hospitals, and very often you have to wait months to get an appointment. So if you said two doctors, by the way, if you see more patients, you're going to make more money, would be very motivating, and that's what we call free enterprise. Also, the quality of care would go up because doctors would have to compete with other doctors. So right now we do not have a system of free enterprise and that, I think, is a fundamental problem with modern US healthcare. Ironic since this country is, you know, perhaps the most capitalist who all countries in the world, but it's true, and I think by putting doctors back in the driving seat you can make big inroads. You also have to go to the pharmacyland industry and, by executive order or whatever, say it is no longer the case that you no longer have to negotiate. You have to negotiate. That's what Caplan's all about. We can't have a pharmaceutical industry like this. So political decisions can be made at a high level to make the pharmaceutical industream more compliant with the rules of capitalism, and you and I have suggested that perhaps we could start this by having money made available by the government rather in the same way as Medicare so that doctors can compete for a pool of money. So you say, well, that socialisms is government rod medicine. No, it's not. The way I look at it is rather like the way I look at the defense industry. Now, I'm not a big fan of defense spending. However, when the government supplies x amount of dollars for a particular fighter plane or so on, you get tremendous competition from defense corporations and the result is you get the finest weapons in the world. Now, again, I'm not terribly excited about having so much weaponry. But here's the point is that when the government puts money in, they're not controlling industry. They are saying there's some money, compete for it, and that's the way I look at it. If you had all cares we've talked about, is something that anybody with a job would have access to as part of his repertoire of insurance corporations to choose from, whether it's Oxford or at their or blue cross. Here he has something called all care. All care would have minimal input from the government. It would simply be a, you know, a large sum of money for which doctors could compete. Just for our listeners who have not read our book yet, when you're talking about is the ICHORN Hutchinson all care plan yet and and the all care plan is one that is a little bit modeled on the German system. And basically all employers would have to provide insurance for their employees and they can be self insured, they could buy private insurance or they could buy the all care option, which is designed based on Medicare and would have a fee structure similar to medicares and, from our calculations, with cost about thirty percent less than private insurance. So it would create competition in the marketplace, especially because ninety percent of private insurance company business, or their book of business, is with employers. So we would be expanding the insurance base, which means people would seek care in a normal way and positions like yourself could compete based on the quality of their services, for the opportunity to provide care to people who need the services that they can provide. And when we talk about Medicare as a source for for planning the all care public option, you know we think of Medicare. Many of us in the...

United States think of that as socialized medicine and what Medicare actually does is it sets a peace schedule, it monitors how those fees are paid, but physicians decide how the money is paid. It's not. You know, true socialistic system would say you are a physician, here's what the government is going to pay you monthly to be a position when you see patients are not. That's the way a true, a hundred percent socialistic system of work. But Medicare doesn't do that. It allows you to compete for patients and I think that's an important causitive aspect of Medicare. And in surveys around the country, when patients are asked about their health insurance, medicare usually comes out as the most confers system. Yes, I have to say Medicare, the way it was set up and structured, as almost the opposite of socialism, because it does allow doctors to compete with each other and it sets the stage for free enterprise and the doctors become the agents of free enterprise. Now the problem with Medicare is a creeping bureaucracy. The beginning now to imitate the private insurance companies, and I think that's a huge mistake. Doctors are the most burned out profession. Fifty percent of doctors described themselves as burned out. This is not a good situation. Once you have to stop pre certifying for everything, it changes the landscape in such a way that you almost don't want to come in to work to see patients. So the old Medicare actually work pretty well. Now. How do you prevent people exploiting Medicare? Let me give you a concrete example. Full I know physicians who have a whole bunch of tests in their office and every patient gets every test. It's totally fraudulent and it's the sort of thing that could be easily flagged by computer. So, for example, let's suppose I'm a neurologist. I see I read a lot of MRI scans. Suppose I want to own an MRI scanner and make it readily available to my patient populations. They don't have to wait a week, get a pre certified and so on. How do you prevent me from cheating? Very simple, you say. For each discipline you have a menu and the men you would be for neurology will be something like for every new patient you see, you get one point two emer scans. After that you're scanning for free for every repeat patient. It's point a weight scans per repeat patient. After that you're scanting for free. You eliminate fraud, you eliminate all these other silly tests that doctor send the patients for because you don't allow them. So we could automatically regulate doctors without all this top down pre certification and manipulation and searching through records and all the things that makes the modern medical practice very difficult. The thing would run automatically and the beauty of it is the system would encourage doctors to be politive and what they do. Michael, I had a question to ask that you and I have really never talked about in our efforts to write our book and other discussions we've had. I understand what you said about the idea of having a set number of tests you could provide per patient and controlling the fees in that way. And there are a number of no tests or procedures ordered by physicians where the preauthorization approval rate is above ninety seven percent, which begs the question of why do you have to do presearchs? But I was wondering what you thought of replacing pre certification in in the current market place with post payment review, not auditing, but a report that says what you order versus what the standard average is. And you know, ask you to think about your ordering patterns of tests, like you just suggested a payment plan with, well, the main the main expense is testing. You actually...

...thinking about adding another layer of bureaucracy? I think you'd be done much better automatically and it would vary. You know, cardiologists would well. One thing I can predict is that the MRI scan is just going to take over just about all of medical diagnosis. The scans are getting quicker and quicker and quicker. There's a theoretical reason, which is you know, I've been involved with for supposing we can do a whole brain or a whole body MRI scan and a fraction of a second one of high quality. And when that happens, Amuri is going to take over everything. That couty cologists will get involved, the pomenologists and I think you know, if we have these restrictions on the number of scans you can order, you still order in proportion to the number of patients you see. So it's not like bundling, which doctors hate, but it's better than that it's saying that, and every year the numbers that you're allowed to send on an emorze scanner will change according to relative valued committees that could be set up with minimum bureaucracy. So I think that certainly, I know my own field very well and I'm aware of a lot of doctors ordering a lot of unnecessary tests for the purposes of income. And you can restrict that and you say, you know, you spend more time talking to the patient and less time doing tests on them, and a lot of these tests are pretty useless anyway. They don't add anything. And I believe that computerized systems can regulate the referral patterns of doctors, so we don't need look backs and, you know, further layers of bureaucracy. But you know you have a point. I think that's another possibility that will get rid of this onerous requirement for pre certification. Incidentally, pre certification of botocks is now so crazy that not only you tony summer in Philippines, he may switch you to somebody in India. Nobody knows what they're doing. The pharmacies are even worse. They say they shipped the stuff when they didn't ship it the pay it's a nightmare, and I'm sure it's true in other aspects of medical care as well, but that's something close to my heart. We could easily by going to the corporations and the pharmaceutical corporate so you can no longer charge whatever you want for these drugs. The eight hundred dollar epipen is a classic example. It's like it's now rageous reversal of capitalism. There's no free enterprise, is no competition. You got it's like amy of monopoly. You have to take what we give and you have to pay for it, and that's not capitalism. So I say restore capitalism and start with the doctors. Get the doctors out of the hospitals free, as we used to be forty years ago, and no longer on salary. The the good old days can come back and we can do medical practice for far less than it's costing right now. Remember, doctors cost only ten percent of the dollars that are spent on healthcare and make ninety five percent of the choices. So we're cheap, we're good value for the money. Just let us run the thing. No More Hospital administrations, MBA's accountants, get them all out well, Michael, I think you have a very, very strong opinion about where we ought to go and I think you laid out a lot of things in our conversation that will cause people to think about the future. And you know, I think it's a debate worth having. And as someone who owns an NBA, you're making me nervous. HAH. Well, look, NBA's have uses to as just too many of them in hospital menisination. Now I do say return to capitalism, return to what made this country great, and you have a great system, and that means handing power back to the doctors. Well, Mike, I want... thank you for taking the time to chat with us today. I'm sure our listeners will have a lot of opinions about the approach you'd like to take to medicine in the future. They can contact us. They can send me an email with questions if they like, at Ed Dot icorn at many link Groupcom. They can join the our mailing list by texting heal healthcare at two to eight to eight, or they can visit our website at healing American healthcare dot Org to learn more about our coalition and to receive our newsletter. The three minute read and lastly, they can get our book to learn more about what we think about healthcare and the all care plan that's healing American healthcare, and it's available at Amazon, Barnes and noble and at our website. So thanks a lot everyone and have a great rest of your day and remember return us to capitalism and save a trillion dollars a year.

In-Stream Audio Search


Search across all episodes within this podcast

Episodes (23)