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Healthcare Continues to Confound Trump Administration

One of my favorite memescame from one of the telling absurdities uttered by Donald Trump:

“Nobody knew healthcare could be so complicated.”


In a functional administration (of any sort) when the top administrator becomes aware of their ignorance in an area, they would rely upon experts who can provide background, information, and guidance. It seems that this has not happened yet with the Trump administration. Two recent moves demonstrate an ongoing basic ignorance of our current healthcare system: one demonstrates a naive understanding of hospital billing, and the other a naive understanding of how international markets work.


First, the Trump administration is floating the mandate that hospitals post online what they will bill patients for procedures. Only a hopelessly naive understanding of hospital billing would expect this to help consumers. So long as one is ignorant of the basics of health care billing, one could believe this will allow consumers to decide which hospital to go to based on what they will be billed. But, as even pedestrian consumers of health care know, the amount a hospital (or other medical provider) bills has little to do with what their insurance company or they, as the patient, will end up paying.


Insurance companies and hospitals enter contracts that allow the insurer to cap the amount that a patient (or the insurance company) will pay for particular service. And these caps do not rise and fall with what the hospital plans to bill. The hospital could raise the billed price by 10 fold, and yet the insurance company's allowed amount would typically stay the same. This is one of the greatest tangible benefits of having insurance—the negotiated lower cost. Even consumers with high deductible health plans, in which they never meet the deductible, are usually far better off with the insurance coverage because of the negotiated lower payment for the services provided.


For patients, this means that their insurer has as much, if not more, to do with what they will pay for the health care services they receive. Every insurer and plan has different negotiated amounts that will be paid for particular procedures. And so, even if every hospital posts what they will bill patients, this will not tell the patient what they will actually be required to pay. Only administrators who don’t understand how billing for medical services works would think that this would do anything more than burden hospitals with additional work.


Second, Trump himself laid out the general outlines of how his administration will bring down drug costs in the U.S. One prong of this approach, according to his remarks, is for trade representatives to fix the “injustice” of other countries who put into place price regulations that limit how much pharmaceutical companies can charge for medications. It’s well known that non-U.S. countries pay far less for medications than we do here in the U.S., and apparently getting these non-U.S. consumers to pay more will lower prices here in the U.S.


Again, as anyone who has even a pedestrian understanding of market economics will point out, just because a business (in this case pharmaceutical companies) makes more money in one area of the market (non-U.S. countries), this will not put pressure to lower prices in another area of the market (in the U.S.). Put another way, fixing this “injustice” will lead to more profits for pharmaceutical companies in non-U.S. countries, but will not lower the prices for consumers in the U.S.


When administrators determine that an area is more complicated than they expected, one would hope they would work to take advantage of the expertise of individuals and groups who can help them serve the interests of their constituents. At the very least, the administrator should avoid insulting the intelligence of their ardent supporters by offering solutions that are obviously ignorant of the basic realities of the problem they are trying to address.