James C. Robinson is a professor of health economics and the
director of a center for health technology. He is a man who knows what he is
talking about when talking healthcare, and so he wrote an article that was
published in the Wall Street Journal on October 28, 2013 under the title:
“Comparison Shopping for Knee Surgery” and the subtitle: “The same procedure
might cost $20,000 or $120,000. Here's one way to bring down prices.”
Robinson calls such a way “reference pricing” which he
describes in detail, then concludes that “Reference pricing won't be the
solution to all the ills of the U.S.
health-care system. But it can make a contribution.” This is great stuff
because the man who knows what he's talking about made a discovery that is
based on the study of a real experiment, and found that the method works if not
fully, at least partially. So the question is this: What if he were told that
by tweaking the experiment only a little, it could be made to work not
partially but fully and universally? Would he go for that?
Here is a condensed version of the way he describes the
experiment: “An example of reference pricing is the initiative by the
retirement organization Calpers, for orthopedic knee and hip replacement. It
was upset after noticing it paid between $20,000 and $120,000 for the same
procedure without commensurate differences in outcomes. In January 2010, it
established a $30,000 reference-price limit on what it would pay, and
identified hospitals that charged less than the limit while scoring well on
quality criteria. I recently completed an evaluation of the initiative … Half
of the high-price hospitals cut their rates, many by a considerable amount.
Across all hospitals, prices declined in the first year, even more in the
second.”
So you ask: Who set the reference price that made this
near-miracle possible? Obviously, it wasn't the patients that underwent the
operations, and it wasn't their doctors. Most probably it was the bureaucrats
who worked for the retirement organization. They did not choose the minimum of
$20,000 but chose a number that is 50 percent higher; they chose to pay $30,000
for the surgery; and this is still only a quarter of the $120,000 that some
hospitals were gouging out of their clients.
So then, why not have trained bureaucrats make that same
sort of determination not only for knee surgery but for everything that a
universal healthcare system such as ObamaCare would cover? In fact, this is
what we have here in Canada ,
and the system has been working well for half a century. Tweak it a little if
you must, and you can make it work in America too. But that's not what
James Robinson is suggesting because of something in America he calls the “impossibility
theorem.” Huh, what's that?
He explains the beast this way: “The impossibility theorem
maintains that … the arrangement underlies the innumerable rules, subsidies,
entitlements, mandates and prohibitions that collectively make health care the
least efficient part of the economy. ObamaCare makes it worse.” What? What is
Robinson saying? For one thing, ObamaCare is just starting and has not had the
time to make anything better or worse. But what is worse than bad in what he is
saying is that nobody will understand his gobbledygook. Moreover, if healthcare
is the least efficient part of the economy in America ,
it is not that healthcare cannot be made efficient; it is that healthcare is
not compatible with a dogma market economy such as the one that he and some
other people wish to implement in America . And let me tell you why
this is so.
Dogma capitalism is based on the principle that the supplier
will charge the consumer a price that is as high as the market will bear. Only
competition from multiple suppliers will put a check on what they will all charge
for a product of the same quality. And that's the only efficient mechanism by
which the ultimate price for any product should be determined, say the
disciples of dogma capitalism.
But as they discovered in America , a knee and hip replacement
used to cost $20,000 in one hospital and as much as $120,000 in another
hospital of the same state. Why? Because when you are in pain, you don't shop
around; you do anything to relieve the pain as soon as possible. Now imagine
what parents will do when they have a sick or dying child. They will not get on
the internet or the phone to shop around; they will call an ambulance to take
the child to hospital as soon as possible. They will ask the questions later.
What this says is that some things in life do not obey the
forces of the marketplace, therefore must be regulated. On top of the list
would be healthcare because the well-being if not the life of the individual
depends on it – and in many cases on the speed of its delivery. This is what
the advanced nations, including Canada ,
have discovered after undergoing long studies and long philosophical
deliberations. The time has come for the Americans to accept this simple
concept and join the civilized world.
James Robinson is better placed than anyone else to lead America in that
direction. Instead of doing this, however, he seems to champion a system that
is based on reference pricing, but one that is married to something that sounds
like marketplace economics. For a mysterious reason, he does not want to come
right out and say so, but what he describes is a two-tier system.
I had a personal experience with this system, so let me tell
you about it. Looking at an X-ray I had done for the chest, the technician saw
a growth in the pancreas and thought it might be cancer. He recommended that I
undergo an MRI as soon as possible. When my doctor explained all this to me, I
told him too bad I just came back to Ontario
from Quebec
where it is said that a two-tier system was creeping into the Province. For a
fee, I could have an MRI in a few days rather than wait a few weeks. He said
not to worry because he was putting RUSH on the order for the MRI. He asked me
if I wanted to take it to the hospital myself rather than wait for a messenger
to come and do so. I said I'll go.
I took the order to the hospital and asked the clerk when
will I get the call that will give me an appointment. She looked into the
scheduling book and asked if I could be there at four thirty this afternoon
because she could squeeze me in at the end of the technician's shift before the
next one starts at five. I said sure I'll be there, and I had my MRI on that
same day – no fuss, no muss and no charge. That was eight years ago, and I am
alive to tell you about it.
I believe that every human being on this planet, including
the Americans, should be served in this way. What do you say James C. Robinson,
will you do that for your country, your people?