Last week ‘health reform’ was in the news because of the three days of hearings in the Supreme Court. I believe the Obamacare law raises some very fundamental questions about the scope and role of the Federal government. I was delighted that the country is finally having a conversation about the core issues raised by the law – a debate that should have happened during the legislative process.
Here are some of my favorite posts:
- George Will on why it violates centuries of contract law.
- Glenn Reynolds on division of powers necessary to protect liberty.
- Grace Marie-Turner cautioning about reading too much into Justice Kennedy’s questions.
- WSJ — on why today’s ‘health marketplace’ is perverse and the need for change
However, I found this WSJ article detailing the nasty battle between UPMC and Highmark to be way more telling about the future of the health delivery system. There are many dimensions to the battle over customers, physicians and dollars that are interesting. One paragraph in the article I found particularly fascinating: “Early talks between the companies hadn’t gotten far. Highmark has said UPMC initially sought a 40% increase in its hospital rates. Mr. Romoff doesn’t dispute that but says it was a fair boost to make up for inadequate payments under the old pact with Highmark.” Pricing power matters a lot in the health economy and having a good brand and substantial market share dramatically increases pricing power – which has been UPMC’s strategy. What is unique about the health marketplace is that there are limited checks and balances to this market power – at either the payer or provider level, because the consumer of the service is not engaged and empowered to ‘shop around’ for value.
My view is – without pervasive price transparency, ubiquitous quality reporting and material economic incentives for consumers to be smart shoppers (where applicable) – ‘health reform’ will unfortunately lead to neither increased ‘value’ in the health economy nor bend the cost curve.
p.s. update — Highmark CEO fired. Not germane to the discussion — but felt the update necessary.