Steven Brill on the American Medical Marketplace

THE OPEN MIND
GUEST: Steven Brill
VTR: 04/11/13

I’m Richard Heffner, your host on The Open Mind. And our conversation today centers on a highly publicized and controversial Time Magazine cover story from earlier this year…an extraordinarily long piece about the American medical marketplace titled “Bitter Pill – Why Medical Bills Are Killing Us”.

Its author, also highly publicized and controversial investigative journalist-lawyer-businessman Steven Brill, is my guest today.

And I would note that 30 years ago – almost to the day – when he first joined me here on The Open Mind as the editor and publisher of The American Lawyer, many lawyers thought of IT then as “muckraking”, because in it Steve was revealing so much about what one might have called our American legal marketplace.

Of course, it’s hard to believe my guest is against the very idea of a marketplace … because he has succeeded so well in and at it himself … with The American Lawyer, with Court TV and with his various other business enterprises.

Yet in reading his Time Magazine article – “Bitter Pill – Why Medical Bills Are Killing Us” – I get the strong feeling that ultimately it is negative only about dollars, not sense, only about what medicine in America costs us because of all the greedy fingers in the pie – and not about how much good sense it makes, how good American medicine really is.

And I would ask Steve Brill if in thinking this I’m on the right track.

BRILL: Ah, yeah, I guess you’re sort of on the right track. I think the problem with medicine, with healthcare, unlike the legal marketplace or the, you know, the marketplace for shoes or for clothing or housing, or anything else, is that you really can’t have a free market because the, the buyer never has any leverage and never has any power over the seller.

The most extreme example would be if, if God forbid one of us slipped and fell as we came out of the studio … we’d be taken to the Emergency Room.

It’s not like we woke up this morning and said, “Gee, I wonder what’s on sale at the Emergency Room today?” I think I’ll go take a look.”

And if I don’t like their prices I’ll go to the next Emergency Room, or the one after that. We’re going to get taken to the Emergency Room.

Typically we won’t care what it costs if we have really good insurance. But these days most people don’t have really, really good insurance the way they used. But the market place does not work.

And what this article is all about is why and how the marketplace doesn’t work and it was borne out of the basic curiosity I had that … whereas the debate over Obamacare and everything else really seems to be over who should pay medical bills. It’s never been, yet, about why are the bills so high?

HEFFNER; But, in a, in a … not a word, but a sentence … why are the bills so high?

BRILL: Because the people doing the buying have no market power. And the people doing the selling have been able to set the prices at wherever they want, you know. And, and, you know, we’ve made a decision as a country, unlike every other country in the free world and in the not-so-free world that it’s perfectly okay for a, a drug company CEO to make, you know, $20 million dollars this year as a salary and $25 million dollars next year … while someone who needs the cancer drug that they make isn’t going to get it unless he can fork over, you know, $13,000 dollars, as I say in the article, for one … you know, for one treatment of that drug, when it costs that drug company $300 to make that drug.

We’ve made that decision that we’ll let the marketplace decide that when everybody knows, I mean it just stands logic on its head … everybody knows that if I need a cancer drug to keep living, I don’t have very much market power when it comes to how much I’m going to pay for the drug.

HEFFNER: Steve, does that mean that many people are not getting the drugs they need to extend their lives?

BRILL: It means many people aren’t getting the drugs or the treatment or the tests that they need. But it also means that when they do, they or the rest of us, through our insurance premiums, or through the government programs that supply people with, with healthcare, such as Medicaid or Medicare … it’s bankrupting everybody else.

It’s almost as if in this country in the last half decade, or decade we live in two universes. There’s, there’s the universe you and I live in, which is a place where the economy hasn’t been so good, in case you haven’t noticed. There’s, there’s been high unemployment. People are squeezed on their incomes and they’re really … you know, we’re all sort of, you know, worried about the economy.

Then there’s this alternate universe of the medical economy where everybody just keeps making more and more money, employment is high and getting higher. You can make $150,000, $200,000 with very little experience if you want to sell … you know … CAT scan equipment for GE.

And that’s an alternate universe. Those people haven’t gotten the memo that, that there’s something wrong with the economy.

And the reason that this is really so troubling is that, that alternate universe of the medical economy is really what is … exploiting and sapping the real economy.

HEFFNER: And your solution, sir?

BRILL: My solution is that we have to treat medical care really differently than we treat every other kind of product that is bought in a marketplace. Because what we have demonstrated with our experiment, and our experiment alone … by leaving it to the free market is that the free market doesn’t work. The prices are way too high.

I’m not saying that, you know, the CEO of a drug company shouldn’t make a lot of money. But it really necessary to have a salary of $ 15 or $20 million dollars? Is it really necessary for the CEO of your, you know, your local hospital in, you know, Bridgeport, Connecticut, to have a salary of a million eight ($1,800,000) at year at a supposedly non-profit institution? Is that the way we really need to reward those people?

HEFFNER: Steve, you say, “is it really necessary?”. That sounds like talk from the far Left. And yet I don’t identify you with the far Left.

BRILL: It’s not … well, you don’t have to be on the far Left or, or any place … I mean if you believe in free markets, as I do … than what you believe in …

HEFFNER: But not for medicine.

BRILL: No. You can believe in free markets for medicine, but if you’re going to believe in that, then you have to, you have to demonstrate that it is a free market. That it’s not a stacked deck.

Nobody believes in a marketplace … at least I don’t think anybody should believe in a marketplace, where the buyer has all … has none of the power vis-à-vis the seller. And that’s what we have here. And the way to fix that is to give the seller more leverage in that marketplace.

Now one way to do that is to have what everybody calls the “single-payer” system, where the buyer … in this case, you know, it would, you know, be allowing everybody to enroll in something like a Medicare program … would have lots of power because they’d be doing, you know, so much of the buying.

HEFFNER: The buyer would be the government.

BRILL: Yeah. Now you could, you could take that view or you could say “Well, let’s have nobody have insurance, but let’s have the government, you know, be on the hook to provide all kinds of subsidies for people who can’t afford healthcare on the premise that, you know, we want to live in a society where everybody can get healthcare.

The problem with that is, that again the individual buyer … you going out to buy a CAT scan … you don’t have very much leverage and your leverage is diminished still more as hospitals consolidate all around the country. They keep buying each other up.

And worse is they buy all the doctor’s practices in the communities where the hospital is, so that when you look across the landscape in a typical community, you know, you might only be able to go to one hospital.

So, the government has to intervene, regulators have to intervene. This is what regulation is for when a marketplace is not working.

And if we haven’t done anything else in the last few decades, we have demonstrated that the medical marketplace doesn’t work.

How have we demonstrated it? We pay two or three times as much per capita for healthcare in this country than any other developed country. And that’s adjusting for the relative wealth of the countries. And yet our results are no better. And in, in many respects our results are worse, if you look at life expectancy, infant mortality and all those kinds of things … our results are worse.

HEFFNER: Now, there have been those who’ve picked you up on that end of things. And that’s why I began the program …

BRILL: MmmHmm.

HEFFNER: … by saying that my sense was that you really weren’t poor mouthing American medicine in terms of its results. That you were concerned, essentially, primarily, with the matter of …

BRILL: What …

HEFFNER: … what it is doing to our pocketbooks.

BRILL: … I feel more comfortable and I think it’s, it’s less distracting to this discussion if you just concede and say, “our results are no better”. Because …

HEFFNER: Yeah. But you didn’t stop there.

BRILL: Well, because … well because, because the data is that the results in many respects are worse.

HEFFNER: There you go again.

BRILL: But, but you can, you can ascribe that data to life style habits in this country … you know … obesity … things like that.

HEFFNER: MmmHmm.

BRILL: … As an excuse for the results being worse. But the, the way I can win my argument most easily, is just to say that, you know, we’re spending, you know … lots more and not getting a better result.

HEFFNER: Well, that’s …

BRILL: It’s sort of like the public education system, which is something that I wrote about last time, I think, when I talked to you. And, where … you know, there again we spend much more per capita on, on our K to 12 education system, and there we know the results are worse than …

HEFFNER: But, Steve, I’m glad you brought education up because I was going to, too, and ask whether it, too, falls under the … your rubric of “this is too important to leave it to the marketplace.”

BRILL: No, actually, education is quite the opposite. Education is one place where the marketplace would work. The problem with public education … it’s almost a flip of the problem with healthcare.

The problem with public education is it’s a monopoly foisted on us by the government. And that if you allow that, that anti-trust issue to go away, by allowing people to sponsor, you know, charter schools, as, as we now have, in so many communities around the country … that work, and you monitor them to make sure they work.

They don’t all work, but, but, you know, the majority of them do. You break the monopoly. You know, we’re on Manhattan Island. For people who live on the east side of Central Park and the west side of Central Park … a lot of them have plenty of school choice because they have the money to send their kids to private school.

For the people who live on the north side of Central Park … hmmm, until the Bloomberg Administration … they didn’t have any choice. They had to send their kids to “the” public school and “the” public school in their community is in Harlem … was pretty much always a failure. They didn’t have any choice. I mean charter schools gave them the choice.

Now coming back to healthcare. The problem is that the private marketplace doesn’t allow any choice because at the point in which the consumer is buying, the consumer has no leverage. So it’s actually the same kind of problem, but it’s a different kind of solution.

HEFFNER: What’s been the reaction … and that’s a, you know, a “laugh into my pocket” …

BRILL: (Laugh)

HEFFNER: … question. What’s been the reaction on the part …

BRILL: Well …

HEFFNER: … of your medical friends … in hospitals, in their medical practices … you have a lot of doctor friends …

BRILL: The doctors … you know, doctors are pretty much … are you know, cheering this on. They say … you know, they work in a system that they know is broken. And as I try to point out in the article … the, the irony … the other sort of misfire in the whole system … is that for all the money that I just described, for all the alternate universe of all the people getting rich in the healthcare economy versus all the rest of us …the ones who haven’t gotten that rich … are the people who actually do the care.

The nurses and the doctors, they’re the ones who are getting squeezed by, you know, all these bureaucratic rules, they’re getting squeezed by hospitals who are buying up their practices.

Now, there are lots of doctors who make a lot of money. But if you show me a doctor who’s making, you know, even as much as, you know, a million or a million and a half dollars a year, which, you know, there are a few who do … and I’m not talking about the doctors who own, you know, clinics or other things where they make money on the side … I’m talking about making the money just for practicing.

If you show me a doctor that’s so good that, that he or she is making a million and a half dollars a year … you know, I can show you hundreds and hundreds of thousands of partners at corporate law firms who are making that much and more. And, you know, for my money, you know, before I would attack a doctor for making that much money, I’d say, you know, for what they do, you know, that’s sort of okay.

The bigger problem to me is that you have … you know, you can have a marketing director at a, at a nothing hospital who’s making that much money … let alone the CEO.

You can have, you know, salesmen who, you know, win a regional contest for one of the CAT scan companies who can make that much money. That’s a real issue. And it’s a … it’s a misallocation of our resources.

HEFFNER: Okay, you write this article for … whoever you wrote it for … it’s published by Time magazine …

BRILL: Yeah.

HEFFNER: … tremendous fuss made about it. I mean I’ve … I know of few cover stories that have had the impact or I should say ….

BRILL: Let’s hope.

HEFFNER: … garnered the attention that yours has.

BRILL: MmmHmm.

HEFFNER: But then let’s go to impact. What do you think will happen as a result?

BRILL: Well, I think this article may be, be part of or the, the starting point for, or one of the, the points of encouragement for a real opening up of, of, of the process, you know, to real transparency.

And when I say the starting point or one of , or one of the starting points … you know, what’s going on as this article is being talked about is that people are focusing on their healthcare costs in a way that they never did.

For a lot of reasons. One of them is that its gotten so expensive that its rare that anyone now has an insurance policy where they really don’t care what the stuff costs, because the co-pays are so high, the deductibles are so high, the limits are so high, so, you know pretty much everybody’s focused on it. And certainly, you know, every, every employer in America is focused on it … because they’re looking at, you know, their share of the insurance premium skyrocketing.

As taxpayers we’re focused on it because it’s become such a huge part of the Federal budget and all of that is going to just be accelerated by the opening of the insurance exchanges that come, you know, this fall with … you know, with the coming of the healthcare reforms of the Obama Administration.

So everybody is really thinking about this. And you could argue that, you know, this article that, you know, lit a match and, you know, into a really combustible situation to start with.

So, I think the first part of dealing with any kind of market problem or institutional problem is, you know, the kind of awareness that forces a transparency.

I will predict to you that, you know, a year from now, it will be too embarrassing and just impossible for, you know, the MD Anderson Cancer Center in Houston to charge, you know $77 for a box of gauze pads.

There’s just, there’s just no way that you can hold a microphone in front of the … whoever runs that hospital, you know, and have him explain that with a straight face.

HEFFNER: But we don’t very often … hold microphones …

BRILL: Well, I think the, the … there are all kinds of reporters now, all over the country as a result of this … looking at their local hospital.

There are legislators … I saw some news clip the other day where some legislator in some town has proposed that the CEO of a hospital can’t make more than x times a doctor at the hospital. Or that a hospital that pays a CEO more than this, loses its tax exemption.

I mean there’s all this stuff sort of bubbling and it would have bubbled up anyway. I mean this is not something where, where I sort of, you know, created an awareness and a problem.

I think I spurred … I spurred it by using real stories, real money, instead of just writing, you know, another policy polemic about the problem.

HEFFNER: And reproducing real bills.

BRILL: Yeah. I mean that’s what really did it. Because everybody has seen bills like that.

Everybody’s gotten an explanation of benefits from their insurance company and they’ve looked and said, “Oh my god, I was just in the hospital for a day and a half … and it was, you know, $58,000, but thank god for my insurance company because they got, they got a discount down to $11,000 and my co-pay is only, you know, $1,100. What a deal”.

Until they say, “Wait a minute … I have to pay $1,100 for this? It was, you know, it was a stomach ache. And I was in the hospital for a day and a half. How did that happen?”

Everybody has seen that. And this, I think, really struck a nerve because it explained to them that they’re not stupid … the fact that they didn’t understand the bills or the discount, or the codes or the, you know, the gobbledygook in the bills … they’re just like everybody else. And it’s really hard to understand and the reason it’s hard to understand is that the people writing the bills don’t want you to understand it.

HEFFNER: Steve, I, I understand what you’re saying and, and as I read the piece and re-read it, I think I knew what your motive was … and that your reasoning ….

BRILL: What was that?

HEFFNER: …that your reasoning would be that you were going to change a structure that needed to be changed because of what it was doing.

BRILL: Well, I didn’t start out … no, no … I mean you, you give me either, you know, too much credit … or …

HEFFNER: I would never do that, Steve.

BRILL: … but I started out on this because I was just curious. Which is the way any good journalist should … should think about what a good story is. What are you really curious about?

And I, you know, when I listened to all the debates over Obamacare and all this stuff and at the same time … a relative of a relative of mine … had a … had gotten a huge hospital bill which was totally covered by, by insurance so it wasn’t a hassle for him … but it was $158,000 bill … and he showed it to me and I said “How could it be that much? What’s going on here?”

So my curiosity was “why does healthcare cost so much?”. So I thought well, maybe it costs so much because we’re so meticulous and we’re so good … so much better than any other country … that that’s the cost of really good healthcare. That turned out not to be true.

Maybe … I thought … it’s because, you know, the culprit that I saw when I wrote about the public education system in the United States which is largely union contracts which makes the workers, you know, unaccountable and very expensive and load all these pension costs and everything on.

That’s not the case here. The case is that the prices are just way too high for all the services. And why is that? It’s because it’s not a real marketplace. And nobody, until recently, has cared much about the prices, except the insurance companies and insurance isn’t a terribly competitive industry, anyway, so they really didn’t care and they’re not terribly competent, so they just, you know, they paid what they had to pay and they would just raise their premiums ever year.

HEFFNER: Of course …

BRILL: So I was just curious about … how does something become $158,000 … why does it cost $900,000 or a million dollars if you get cancer?

And the other thing I was curious about or that made me angry, was … all these debates about, you know, end of life care.

And the debate usually goes like this. You know, if someone has a terminal illness and to keep that person alive for an extra six months is going to cost a half a million dollars. Should we spend the half a million dollars to keep that person alive for six months. Now that is an agonizing debate. Right? We could sit here for five shows and talk about that. But …

HEFFNER: Until I die.

BRILL: … when you start that debate … but when you start that debate, you’ve already given in on something which is “why does it cost $500,000?” It would be a different debate … it would be the same debate, but slightly different …the terms would be different if it was … you know, $42,000 for six months. It’s, it’s a different dimension of a debate. And no one ever was asking that question.

HEFFNER: But you know, Steve, what, what puzzles me here is that I would never accuse you of naiveté. But you’re saying that you think holding a mirror up to this marketplace … with all of its gross salaries is going to lead us to bring about change …

BRILL: That isn’t what I said.

HEFFNER: Well, then put it in your own terms.

BRILL: What I believe about in journalism in general …

HEFFNER: Yeah.

BRILL: … is that it can be a real important factor in that, but the first way to change a, an institution, a system, whether its education, legal system, healthcare or just … you know, whether the, the … you know, the supermarket down the road is, you know, screwing it’s customers. The first way to start to change that is to shine a light on it.

HEFFNER: Okay.

BRILL: And then you get people aware and that’s the beginning of a process. I’m not an advocate, I’m not going to go testify in Congress about “Here’s what we should do with the healthcare system”. But what journalists do, when they’re doing their job well is … they shine light on things, they answer questions and in this case, the, the story was just hiding in plain sight.

Everybody in America has bills. When I first started, you know, some of my doctor friends and other people said, “Well, how are you going to get real bills?”

Now, I’ve always operated under the assumption that, you know, if 20 people know something, any good reporter can know it.

Here, there must be 200,000 million people in this country who have a medical bill, so I figured I’d get half a dozen.

HEFFNER: Alright … I didn’t, I didn’t put it correctly. You have put it correctly because you’re talking about your motivation.

I’m puzzled that at the end of a period of time, a quite considerable period of time in which we have learned, thanks to journalism …

BRILL: MmmHmm.

HEFFNER: …to a large extent … about a parallel land of greed, not in a life giving profession, not in medicine … but in Wall Street … when we have learned about amazing incomes, amazing salaries, amazing bonuses … if what I read today is correct, they’re going back up again, even further than they were five years ago.

BRILL: Well, you know, you’re, you’re talking about really, you know, metaphysical issue which is “Have we reached the point in our country … and this applies to Wall Street and it applies to healthcare, where the special interests have so taken over, you know, the making of public policy that, you know, that democracy … you know, it just ain’t working.”

One of the things I point out, you know, if you want to get still more depressed, is that compared to the financial services industry, the healthcare lobby spends six or seven times as much as financial services, four times as much the, the feared military/industrial complex when, when, you know, when it comes to throwing money around Washington.

You know, the, you know the financial services industry is a bunch of homeless people compared to the healthcare industry. Plus they have another big political chip that is the opposite of what happens with financial services … which is … in every community in America, people think of their local hospital as a great institution … which it is … because it does due the sick. It’s the largest employer, they cure sick people and it doesn’t have, you know, the, you know, the demonology associated with it, that, you know, that Wall Street does. I will quarrel with one thing you said, though …

HEFFNER; In a half minute.

BRILL: I don’t think it’s really greed here. I think people tend to fall into maximizing their profit and their incomes when there’s no opposition to it. It just sort of happens. I don’t think people at, at, you know, Sloan Kettering wake up every morning … you know the Administrators saying, “I’m just going to go make as much money as I can today.”

They wake up in the morning saying “I am helping to organize an institution that is saving people’s lives”.

But gradually it just becomes so easy and people are telling you, “Well, you know, the guy at the other hospital’s making $2 million dollars a year? What about you? What are you chopped liver? Why don’t you make $2 million.” And, and it just, it just sort of builds up because there’s no accountability.

HEFFNER: Steve, we’ve come to the end of our time. And I’m shocked to find that you’re so … I’ll have the last word … naïve. I’m glad that you are.

BRILL: (Laugh)

HEFFNER: Thanks for joining me today.

BRILL: Happy to do it.

HEFFNER: And thanks, too, to you in the audience. I hope you join us next time. And meanwhile, as another old friend used to say “Good night and good luck”.

And do visit the Open Mind website at thirteen.org/openmind to reprise this program online right now, or to draw upon our Archive of 1,500 or so other Open Mind and related programs. That’s thirteen.org/openmind.