Senate Passes Health Reform Bill, Republicans Challenge Constitutionality

The Senate has passed its version of a Health Reform bill, 60-39. The votes were cast, with Vice President Joseph Biden presiding, at 7:00 am on Thursday, December 24th. The Washington Post reports that

Sen. Robert C. Byrd (D-W.Va.), who is 92 and ailing, bellowed when his name was called: “Mr. President, this is for my friend Ted Kennedy. Aye.”

Aye indeed.

Washington Monthly notes that a number of Republican Senators, many of whom in recent months had formerly brushed aside the issue of constitutionality for the provision for insurance mandates, have experienced a change of direction– if not heart– and have openly challenged that which they formerly embraced.

For an explanation of the mandate’s constitutionality, Washington Monthly cites this article, “Is it Unconstitutional to Mandate Health Insurance?” by Professor of Law and Public Health, Wake Forest University, Mark Hall–which originally appeared here on Health Reform Watch, and was later cited by the Washington Post’s Ezra Klein among numerous others.

We Are Pleased to Introduce Professors Mark A. Hall & Carl E. Schneider

Mark A. Hall, Professor of Law and Public Health, Wake Forest University

Carl E. Schneider, Professor of Law and Internal Medicine, University of Michigan

We are very pleased to welcome Professors Mark Hall and Carl Schneider to the blog today.

Mark A. Hall, J.D., is the Fred D. & Elizabeth L. Turnage Professor of Law at Wake Forest University School of Law. He is one of the nation’s leading scholars in the areas of health care law and policy and medical and bioethics. The author or editor of fifteen books, including Making Medical Spending Decisions (Oxford University Press), and Health Care Law and Ethics (Aspen), he is currently engaged in research in the areas of consumer-driven health care, doctor/patient trust, insurance regulation, and genetics. He has published scholarship in the law reviews at Berkeley, Chicago, Duke, Michigan, Pennsylvania, and Stanford, and his articles have been reprinted in a dozen casebooks and anthologies.

Professor Hall also teaches in the MBA program at the Babcock School and is on the research faculty at Wake Forest’s Medical School. He regularly consults with government officials, foundations and think tanks about health care public policy issues, and was recently awarded the American Society of Law, Medicine and Ethics distinguished teaching award.

Carl E. Schneider, J.D. is the Chauncey Stillman Professor of Ethics, Morality, and the Practice of Law at the University of Michigan School of Law. He is also Professor of Internal Medicine at the University of Michigan. He was educated at Harvard College and the University of Michigan Law School, where he was editor-in-chief of the Michigan Law Review. He served as law clerk to Judge Carl McGowan of the United States Court of Appeals for the District of Columbia Circuit and to Justice Potter Stewart of the United States Supreme Court. He became a member of the University of Michigan Law School faculty in 1981 and of the Medical School faculty in 1998.

Professor Schneider has written extensively on bioethical issues, the law of bioethics, family law, constitutional law, professional training, and professional ethics. He is the author of The Practice of Autonomy: Patients, Doctors, and Medical Decisions (Oxford University Press, 1998), a study of the way the authority to make medical decisions is and should be allocated between doctors and patients, and is the co-author of The Law of Bioethics: Individual Autonomy and Social Regulation (West, 2003, 2006), a law school casebook. His family law casebook, An Invitation to Family Law (West), is entering its third edition. He is currently writing a book on the law regulating medical decisions of all kinds — especially contemporary and prospective decisions and decisions by competent patients and for incompetent patients. He is also engaged in research on consumer-directed health care, research supported by a Robert Wood Johnson Investigator’s Award.

Professor Schneider has lectured, taught, and published in several countries. He has been a visiting professor at Cambridge University, the University of Tokyo, and Kyoto University, has taught for many years in Germany, and was a visiting professor at the United States Air Force Academy in the winter of 2007. In addition, Professor Schneider has recently been reappointed for a second two year term on the President’s Council on Bioethics.

Price-Gouging by Doctors and Hospitals

Mark A. Hall, Professor of Law and Public Health, Wake Forest University

Carl E. Schneider, Professor of Law and Internal Medicine, University of Michigan

[Ed. note: As noted above, we are very pleased to welcome Professors Mark Hall and Carl Schneider to the blog today.]

We cannot reform health care intelligently unless we understand the medical marketplace well. Debates about reform have scrutinized the health-insurance market, but they have neglected a crucially defective feature of the medical marketplace — the way doctors and hospitals charge patients when prices are not set by regulation or by negotiation with insurers.

The Problem

When patients are not protected by large private or public insurers, doctors and hospitals charge them astonishingly more than patients with Medicare or managed-care insurance.  Some price difference would make sense, because insurers offer providers large volume and economies of scale.  But we are not talking about discounts of 10, or 20, or even 30 percent.  Providers routinely double, triple, or even quadruple prices for unprotected patients.  Such huge mark-ups can only be regarded as price-gouging — exploiting market power to charge prices virtually unrelated to actual cost or market value.

A comprehensive analysis of data hospitals report to Medicare shows that, on average, hospitals charge uninsured patients two-and-a-half times more than they charge insured patients and three times more than their actual costs.  In some states mark-ups average four-fold.

Data for physicians’ prices are less comprehensive, but information from office management systems is disturbing.  Across a range of diagnostic and invasive specialty services (echocardiography, coronary catheterization, liver biopsy, upper GI endoscopy, circumcision, flexible sigmoidoscopies, hysterectomy, appendectomy, gall bladder removal, and arthroscopic knee surgery), many physicians in 2003 charged uninsured patients roughly two to two-and-a-half times what insurers paid.  Only primary care physicians appear to be staying within plausible bounds.  They typically charge uninsured patients only one-third to one-half more for basic office or hospital visits than they received from insurers.

Some Excuses

Providers defend themselves in several ways.  First, they call these price differences steep discounts rather than huge mark-ups.  This is almost laughable.  Most providers charge “list prices” to only a small minority of patients (10-20%), so these are hardly a genuine baseline.  Second, providers argue that because they often cannot collect list prices, they are on balance receiving little more than they would receive from insurers.  However, when patients cannot pay inflated bills, doctors and hospitals regularly send them to collection agencies, ruining patients’ credit and bankrupting millions of them.

Third, providers blame the government by claiming that program and accounting rules require them to bill this way.  But governmental agencies have declared that this is not true, and while some rules may still be irksome, rules about billing certainly do not require providers to set their prices as high as they do.  Many tax-exempt (non-profit) hospitals recently wilted under scrutiny and adopted sliding-scale policies for low-income uninsured patients, but these policies do little to help insured patients who are receiving care out-of-network or uninsured patients from the broad middle class.

The Solution

Insurers’ attempts to stop price gouging have failed.  Some large insurers have refused to reimburse out-of-network providers for the full amounts they charge on the grounds that those amounts are not “usual, customary, and reasonable.”  But New York’s Attorney General called this “consumer fraud” because patients were left owing the full bill.  Courts have been little help.  Consumer class-action lawsuits have attacked price gouging by non-profit hospitals, but courts have dismissed most of these cases on various technical grounds.

Government regulation has inhibited price gouging, but only for people covered by government programs.  Medicare, for instance, prohibits doctors from charging Medicare patients more than about 10% over Medicare-approved rates.  But inflated pricing still afflicts the uninsured and privately insured people buying care out of network.  Some reformers simply advocate greater price transparency so that patients know better what to expect when seeking care without the protection of insurers.  But transparency will not fix the structural dynamics of market power that allow providers to charge almost whatever they want.

To help medical markets work better, the government should cap what doctors, hospitals, and other providers may charge patients who are not protected by regulated or negotiated discounts.  The details can be debated and refined, but one approach is to cap charges at, say, 150% of a normal reference rate.  The reference rate could be what Medicare pays, or a weighted average of what larger private insurers normally pay across a region.  Doctors with boutique practices could still charge what they wished for extra concierge services, or perhaps doctors who don’t accept any insurance should be exempted.  Design features are important and tricky, but they should not keep us from setting reasonable bounds within which markets can function.