If you are really sick, do regular market rules apply?
There have been some great posts recently along with a working paper from the National Bureau of Economic Research taking a look at high-deductible health plans (HDHP). Then Dr. Ashish Jha from Harvard went out on a limb and convinced his family to enroll in a new HDHP provided by Harvard in which he would have a $6,000 deductible before his insurance would kick in. The Washington Post also covered the story and described the struggle and you can read more about it here.
While I am thankful for my fellow health policy nerds for demonstrating these issues through research, I am still worried that the result will be the same: our health care system will continue to exploit sick patients.
Some argue that transparency is the key to reducing health care costs. I would certainly agree that transparency is a good step and has potential in the case of reference pricing. But did anyone think Martin Shkreli was being “sneaky” about his price increase of a life-saving drug for an opportunistic infection commonly seen in HIV patients? This guy screamed his intentions from the Twitter mountain top and what could really sick patients do? Transparency is not enough.
Some argue for capping out-of-pocket costs for patients which definitely is a win for patients…and for anyone selling health care products or services to patients. The insurance companies opposed this (and rightfully so) because it does nothing but shift costs to insurers and juice that ole “moral hazard” that we have when patients are shielded from the true costs.
Some argue for the government exercising eminent domain (sorry – a shameless plug) in order to show drug companies that gouging can backfire. However, I don’t believe eminent domain is a long-term solution or would do anything to reduce the expenditures in other health services. I think the Takings Clause should be used sparingly and only in egregious situations.
A major problem with focusing on price-lowering alone is the threat to innovation. Folks like Dr. Joe DiMasi have studied success rates for investigational drugs and some of the costs that go into new drug development. I must confess that I fear Alzheimer’s when I get older so I personally don’t want drug companies to stop innovating! I want funds to be invested into research. I want scientists to pursue cures and treatments to alleviate suffering. I work with folks in the pharmaceutical industry and I don’t see them as the “bad guy” because of drug pricing. Instead, I see them as operating in a system that is conducive to price fixing, price gouging, anchoring, and exploitation – so when a company uses the tools at its disposal to increase profits it is hard to blame them. For-profit companies aren’t built to save the world; they are built to maximize profits.
So what do we do? Can our system evolve into one that utilizes the free market to incentivize rational behavior but also has safeguards to protect situations where a sick patient is helpless? I don’t think this can be a 1-size-fits-all solution as I think that from an economic perspective, disease prevention and disease treatment are very different. By the same token, I also think chronic disease and acute suffering are very different. I’m going to leave it here and go teach an 11am class…these poor students now have to deal with me after I’ve spent the last hour thinking about health services pricing.