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The Price We Pay by Marty Makary
đ The Book in 3 Sentences
- The two root causes of the current state of the American healthcare cost crisis are 1) the appropriateness of care (predatory screening) and 2) pricing failures (e.g., Chargemaster marked up prices, no price transparency)
- American healthcare is not a free market, primarily because it is extremely difficult to discern the actual price of care - therefore the consumer has difficulty shopping around (leads to surprise bills and predatory billing practices)
- To fix (and restore trust in) healthcare, we need to enable price transparency, end kickbacks to middlemen (PBMs, insurance brokers, GPOs, etc.), and reduce inappropriate care (e.g., screenings, medical imagining, etc.)
đ¨ Impressions
A must-read for anyone who wants to better understand the current state of American health care. Makary does a tremendous job interspersing personal anecdotes and stories of real impacted Americans with the facts/studies showing the root causes of the current cost crisis.
- Makary distills the macro issues regarding a broken healthcare system by telling the stories from real Americans devastated by it
- Accessible language and no jargon. Even though I may be tainted as someone who has worked across healthcare, the stories and concepts are easy to understand for someone who knows nothing about healthcare
- The three parts are very structured: part 1 (Gold Rush) shows all of the symptoms/impacts of a broken healthcare system, part 2 (Improving Wisely) diagnoses the root causes, part 3 (Redesigning Health Care) sheds light on solutions and what we can do about the situation
- Mix of stories (told as personal anecdotes) to relay the human side of the crisis and then followed by studies or more broad explanations that shows the macro problem that is exemplified by the story. Most chapters start with a personal anecdote.
- At the end of the book, even after learning about how broken our healthcare system has become, itâs hard not to feel optimistic about the future. The whole system is clearly headed toward a reckoning, aided by technology and common citizen sentiment. The only question is how fast will the tide shift? And how many more Americans will get caught in the crossfire?
How I Discovered It
I found this book as a popular item in the New York Public Library's catalog.
Who Should Read It?
Anyone who is angry, confused, or generally disdainful towards the American health care system would benefit from reading this book.
Business owners would also benefit from reading this book, as there are many strategies that they can employ to create a better health care coverage for their employees (e.g., Self-Funded health care pools).
âď¸ How the Book Changed Me
How my life / behavior / thoughts / ideas have changed as a result of reading the book.
- I now better understand the 2 main root causes of a broken American health care system - unnecessary care and pricing failures
- How the incentives ($$$, surprise!) within the health care industry explain how weâve gotten here: Doctors are incentivized to order and complete certain care based on how well they are reimbursed by payers or the government (Medicare)
- The qualities of an effective performance improvement plan for doctors: get their input/consensus on whatâs acceptable, donât be punitive to the outliers, have it be endorsed by the leading professional association of the specialty
- When people say employers or the government is paying more for health care, it isn't really true. We (yes, all of us) pay for the exorbitant costs of healthcare, either in the form of taxpayers (Medicare) or as employees (health insurance comes out of employee compensation pools
âď¸ My Top 3 Quotes
- "our methods of measuring quality are flawed. We focus on the results of a procedure, not on whether the procedure was appropriate."
- âInsurers fight for a bigger discount every time they renew a contract with a hospital. Then hospitals go around and inflate their prices. Itâs a game.â
- "Sixty percent of medical care is shoppable, representing a large opportunity for competition to reward centers with high quality and fair prices."
đ Summary, Highlights, and Notes
Kindle Highlights
The doctors replied that, on average, they believe 21% of everything done in medicine is unnecessary.4 Breaking it down further, the doctors in that survey estimated that 22% of prescription medications, 25% of medical tests, and 11% of procedures are unnecessary. Literally billions of dollars are spent on care we donât need.
Doing a procedure pays well, but taking time to explain the importance of exercise, which increases leg circulation, pays poorly.
Patients make decisions based on how we present options to them. We just give them a nudge.
the two root issues driving health careâs cost crisisâthe appropriateness of care and pricing failures
The politicians debated how to fund health care, but what we really need to talk about is how to fix health care.
Hospital officials confessed that they inflate bills more and more each year to generate more revenue since their insurance companies pay only part of the sticker prices. Insurers confessed they demand bigger and bigger discounts in their contracts with hospitals in order to keep up. Both acknowledged that they pass on higher hospital bills to the public in the form of higher insurance premiums.
âInsurers fight for a bigger discount every time they renew a contract with a hospital. Then hospitals go around and inflate their prices. Itâs a game.â
Hospitals use software called the âchargemasterâ that automatically inflates prices to achieve a desired margin.
Then there are the âsurpriseâ billsâbills for costs a patient presumed were covered by insurance but were not.
Surprise bills are common. In 2015, the Consumer Reports National Research Center estimated that 30% of Americans received a surprise medical bill. But just three years later, another study found it was about double that figure. The University of Chicago reported that 57% of Americans received a surprise bill in the previous year.
One study found that for every ten doctors, the average U.S. hospital has seven nonclinical full-time-equivalent (FTE) staff working on billing and insurance functions.
The absence of real prices also fuels the problem of surprise bills and predatory billing. Conversely, predatory billing practices are rare in the few health care sectors that have already adopted real price transparency, including cosmetic surgery, in vitro fertilization, and LASIK surgery. In these markets, true competition has resulted in a global reduction in prices over time and has appropriately rewarded high-quality physicians.
Sixty percent of medical care is shoppable, representing a large opportunity for competition to reward centers with high quality and fair prices.
Smith is a free market champion. His convictions about transparent pricing stem in part from studying free market competition. He and his colleagues have treated hundreds of people from outside the United States, including patients from Canada, Mexico, and Japan. What would make a Japanese person fly to Oklahoma City for treatment? Itâs American medicine with price transparency. Furthermore, because his surgery center is honest with their pricing, Smith believes patients are more trusting and satisfied.
Centers that initiated full price transparency saw a 50% increase in patient volume, a 30% increase in revenue, and an increase in patient satisfaction. People are sick and tired of the game.
The Funeral Rule,18 enacted by the Federal Trade Commission in 1984, requires funeral providers to offer itemized pricing information to consumers before they purchase any services.
âIn-hospital care is not health care,â Mike explained. âIn-hospital care is about 14% of health care. The rest is determined by social determinants of health, behaviors, and choices.â
As I thanked Mike and his wife, Colette, for hosting me during my stay in Columbus, Nebraska, I realized that his hospitalâs success had huge implications for health care. A well-run hospital can be profitable even when half its bills are paid by Medicare and Medicaid. It doesnât have to overcharge its patients. And it doesnât have to sue them when they canât pay. When people ask me if Iâm optimistic about the future of health care, I say âyes,â and I think about hospital executives like Mike and places like Columbus Community Hospital. Itâs a reminder that there are a lot of inspiring people who are keeping hospitals true to their great mission.
We need to restore trust in health care services starting with more honest, transparent, and fair billing practices. It may take an act of Congress to end kickbacks and institute patient protections in the air ambulance business. But state lawmakers could take immediate action to protect consumers. If they canât control the prices, at the very least they could publicize them. How about a law requiring air ambulances to tell patients how much their flight is going to cost? Or a database that would track and publicly report each companyâs charges per flight? The database could also name the person who made the decision to summon the air ambulance company, so that hidden conflicts of interest could be revealed. If patients are going to be taken for a ride, at least they have a right to know how much the ride will cost them.
our methods of measuring quality are flawed. We focus on the results of a procedure, not on whether the procedure was appropriate.
performance data at the group level may have no effect on an employee whoâs causing problems. Yet thatâs what we do in health care every dayâwe feed group data to individual staff, then wonder why itâs not having an impact.
peer benchmarking: they compared doctors to one another.
They hypothesized that these doctorsâ competitive nature would kick in and they would probably reduce their overuse on their own. From my own observations in medicine, I couldnât have agreed more. People respond well to competition.
But why do some performance improvement programs work so well while others struggle? I attribute part of the success to civility. By including practicing doctors early and by using a peer-to-peer method of sharing data in a way that is nonpunitive and confidential, we were highly effective. Moreover, the project focused on what doctors believe to be important.
To be effective, a method of measuring care must be developed and endorsed by the doctors and clinicians who work in that specialty.
Iâve examined hundreds of quality metrics over the years and developed my own. Iâve come to believe many of them need context to be meaningful. The metrics must zero in on what it means for a patientâs quality of life and potential disability. The criteria should focus on significant harm or waste by extreme outliers rather than small variations in practice. The metric also must be measurable and designed so it canât be tainted by bias or gaming. And finally, a sound metric should be highly actionable for the physician.
The opioid crisis is another manifestation of the broader problem of overtreatment in medicine. It is essentially an issue of appropriateness.
We used a consensus-building process called the Delphi method. Everyone on the expert panel voted, then listened to one another explain their votes, then revoted. The average of the revote would become the consensus guideline.
Last year, physicians prescribed a record 4.5 billion medications.2 Thatâs about double the number we prescribed just a decade ago.
For people wondering why insurance premiums are going up, one of the leading drivers is the doubling of prescription medications our country has witnessed over the last decade.
What we need is a grassroots change to put the patient back at the center of health care. We need to tackle the problem of inappropriate medical care. These are self-inflicted wounds.
How do we fix the health care system? Addressing the epidemic of too much medical care (which doctors believe represents 21% of all medical care delivered) is a practical solution.
Most say they would highly recommend the clinic to a friend, according to the companyâs net promoter score, which gauges customer satisfaction.3 Ioraâs score is over 90, meaning that 90% of customers would recommend Iora to a friend. A score that high is rare in health care. By comparison, United Airlines has a net promoter score of 10, and most primary care doctors have net promoter scores around 30.
âWe hire for empathy and teach for skill,â
In the words of senator and physician Tom Coburn, getting price transparency right is the first step in fixing health care because it ushers in quality transparency. We need to see prices, so patients and health plans can determine which facilities are operating in a way thatâs efficient, and which are just trying to maximize their profit. Itâs common sense.
Employers have similar problems understanding the health insurance products they purchase. They are designed to be complicated so employers wonât try to figure out where their money is going.
Nearly half of the nationâs businesses buy insurance from brokers.
In most cases, bypassing traditional health insurance and self-funding is the best value for employers.
Next time your business buys health insurance, ask if the broker is âHealth Rosettaâcertifiedâ or if it follows the principles of full disclosure and fair trade that Health Rosetta outlines on their website.
American employers spent an estimated $738 billion on health benefits in 2018, a figure that has been rising about 5% annually in recent years.3 The average premiums for a family reached almost $20,000, according to the Kaiser Family Foundation.4 If employers could provide their excellent benefits for less, it would save billions.
âThe spreadâ is the difference between what the PBM pays a pharmacy for a medication and what they invoice an employer or health plan for that same medication.
pharmacists are gagged under their PBM contract to not disclose what they are paid by the PBM.
Today, approximately 80% of Americans get their medications through a PBM.2 American businesses financing the coverage and the employees paying for their medications are usually oblivious to the price gouging. When people get frustrated that drug prices keep going up, they often point the finger at pharma bad boys like Martin Shkreli. More often, though, the price spikes are taking place right under their noses.
If we could slash the spread, it would make a tremendous difference for thousands of businesses. According to a recent analysis in the journal Health Affairs, reducing generic reimbursement by $1 per prescription would lower health spending by $5.6 billion annually.
Health insurance companies direct their business to their own PBMs, which increases their margins. For example, OptumRx, one of the big three PBMs, is owned by Americaâs largest health insurance company, UnitedHealth Group. Insurers may offer less expensive health insurance premiums. But then they use their PBM to achieve a greater profit margin.
The PBM Express Scripts is now owned by the insurance company Cigna, and as I write this book, a merger between the PBM CVS Caremark and the insurer Aetna is being finalized. Together, the big three PBMsâOptumRx, Express Scripts, and CVS Caremarkâcontrol approximately 85% of the U.S. market and manage medication benefits for most people in the United States.
Consumer Reports recommends three steps to shop around: (1) Use online discounts. (2) Donât always shop at the same old places. HealthWarehouse.com is an online pharmacy and had some of the lowest prices. Costco and Samâs Club also consistently had good prices. Independent pharmacies and grocery store pharmacies also had some of the best prices. (3) Push the pharmacy to honor online discount coupons. The Consumer Reports shoppers found they almost always honor them, but the shopper had to be persistent.
If you are a patient, you should use an app like GoodRx before filling any prescription to make sure you are not being gouged. Avoid mail order medications unless you are disabled, unable to go to a pharmacy, or are positive that you are medically dependent on a particular medication for the long term. Support independent pharmacies whenever possible, tell your representatives in Congress and your state legislature to make PBM spreads transparent, and ask that state governments audit the PBMs of government health plans regularly. Pharmacies may be gagged, but you can speak up.
According to the American Hospital Association, the percent of U.S. hospitals that purchase through a GPO went from 68% in 2000 to 98% by 2014.
GPOs are like PBMs in how they operate in a fog of transactions, making value difficult for any buyer to ascertain. In the case of GPOs, hospitals may simply pass on high costs to patients in the form of a hospital bill.
To create a more transparent supply chain and to address avoidable drivers of price inflation, pay-to-play payments should be ended, or, at a minimum, disclosed to hospitals and the public. Hospitals can play a lead role in changing the business model of medical supplies by refusing to work with GPOs that charge pay-to-play fees to manufacturers. For starters, hospitals should avoid exclusive contracts with GPOs so they can purchase products outside the GPO directly from manufacturers.
Itâs important for patients to understand the screening-industrial complex.
They concluded that any evidence of a positive economic impact of workplace wellness programs was limited and inconsistent.
One entrenched problem in health care is that medical education has traditionally espoused individualism. Doctors are attracted to medicine by a deeply felt mission to help others, yet if a hospital has only two doctors in any one specialty, chances are they are at each otherâs throats.
We need to start fixing health care by switching to a more honest lexicon.