Before we propose another health policy, let’s focus on the underlying problems

Before we propose another health policy, let’s focus on the underlying problems
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Credit to Sen. Bernie SandersBernard (Bernie) SandersWarren joins Sanders in support of striking McDonald's workers Kavanaugh allegations could be monster storm brewing for midterm elections      Senate approves 4B spending bill MORE (I-Vt.) for bringing the issue of affordable health care for all to the front of the discussion.

However, before we propose another policy solution that may not work, the public and policy makers should have a real handle on the underlying problems in health care. Unfortunately, in the rush to propose solutions, we risk losing this opportunity.

There is no question that health care costs are high in the U.S. One of the major factors driving up costs is market power of our hospital systems. While they may not pay taxes, they often do not resemble charitable institutions. In California, seeing a physician whose practice is owned by a multi-hospital system can cost up to $1,700 more annually than seeing a physician who owns his own practice.


Unfortunately, Medicare has helped encourage this business model. It developed a payment policy that has helped encourage physician-hospital consolidation under the unproven guise of “Accountable Care.” It pays hospitals separate "facility fees" for services provided at acquired practices. And it has constructed a payment model where hospitals that have special access to steep discounts on pharmaceuticals products — under a program called 340 (b) — are allowed to reap enormous profits from high drug prices.

Over the last two decades, Medicare fee schedules have disproportionately benefited specialist physicians over primary care physicians, despite the fact that the current fee schedule was originally intended to benefit primary care physicians when implemented in 1992. A recent study found that only 22 percent of internal medicine residents plan a career in primary care, in part because of low salaries and unattractive job structures that have physicians churning through patient appointments every few minutes.

It is no secret that the business model of most provider systems is based on differential pricing between public and private health plans, with hospitals charging a premium to private health insurers. As a result, mandating universal adoption of the Medicare fee schedule will drive almost all of the hospital systems in the U.S. bankrupt in a single (legislative) act. The political backlash will be enormous.

As an alternative, Congress will likely be forced to phase in payment cuts over time. This will give provider systems plenty of time to fight back to preserve the status quo and maintain their high prices; just look at the proposed cuts to the physician fee schedule over the last decade as a model for such a fight.

Health care is a complex market. We need to consider how markets improve cost and quality over time as we search for answers to today’s issues.

What we find in other sectors is innovation, where novel business concepts are developed that lead to lower costs and higher quality to markets.

Medicare is the opposite of this model. Medicare lacked an outpatient drug benefit for its first 40 years. It lacked a benefit for screening mammography and colonoscopy until the law was changed. Today, in most markets, we lack reimbursement models for tele-consults that could be of so much benefit to seniors and cost-saving to Medicare.

There’s plenty of truth to Sanders’s argument about prices and administrative costs, about complexity and lack of customer service in the U.S. It’s good to keep reminding ourselves of these issues.

Sanders’s proposal has sparked a debate. Although it’s not satisfying from a rhetorical perspective, I fear it’s too early to focus on a single solution to the complex problems of health care. Unfortunately, Medicare is not a panacea.

What should we do now? We can begin Congressional supported studies of the health care markets to try and better understand the total market: Medicare, Medicaid, and the private market (rather than considering each segment of the market separately). We need to examine market structure, market power, non-clinical costs, and innovation models. We can also consider the governance structure for the health sector.

A council of health care systems and services could support ongoing evaluation of programs and health care markets. Keeping such an effort objective would be a critical consideration since there are going to be many vested interests with significant concerns over such an approach. The Federal Reserve Open Market Committee might provide a model for an effective, independent, governance structure that can be implemented in health care and start us on the debate initiated by Sen. Sanders.

Kevin Schulman, MD, is a professor of medicine at Duke University, and a visiting scholar at Harvard Business School.