Expanded access to healthcare requires cost controls

Anthem Blue Cross deciding to remove its cap on paying for anesthesiology treatments just after the assassination of Brian Thompson created the unfortunate impression that this was a triumph for expanded access to healthcare for people against rapacious insurance companies who want to deny it. This is not really the case — it’s much more about a cartel of extremely highly compensated professionals engaging in rent-seeking, increasing costs not only for insurers but ultimately for people who pay the premiums:

Americans have many justified grievances with insurance companies, which often refuse to cover necessary care.

But this particular fight was not actually about putting the interests of patients against those of rapacious corporations. Anthem’s policy would not have increased costs for their enrollees. Rather, it would have reduced payments for some of the most overpaid physicians in America. And when millionaire doctors beat back cost controls — as they have here — patients pay the price through higher premiums.

Anesthesia services are billed partially on the basis of how long a procedure takes. This creates an incentive for anesthesiologists to err on the side of exaggerating how long their services were required during an operation. And there is evidence that some anesthesiologists may engage in overbilling by overstating the length of a procedure, or the degree of risk a patient faces in undergoing anesthesia.

Starting in February, Anthem had planned to discourage overbilling by adopting a set of maximum time limits for procedures, inspired by data from the Centers for Medicare and Medicaid Services. If an operation went long for medically necessary reasons, anesthesiologists could appeal for higher payment. But the process of reimbursement would be more arduous.

Critically, contrary to Sen. Murphy’s claims, this policy would not have saddled patients with surprise bills, if their operations went over time. The burden of this cost control would have fallen on participating anesthesiologists, not patients, according to Christopher Garmon, associate professor of health administration at the University of Missouri-Kansas City’s Henry W. Bloch School of Management.

The relatively high administrative costs of the American system generated by for-profit insurance attract a lot of justified attention because they’re particularly indefensible. But as we’ve said before in absolute terms it’s the much higher payments to drug companies and practitioners that are the critical reason healthcare in the US provides so little bang for the buck:

But the avarice and inefficiencies of private insurers are not the sole — or even primary — reasons why vital medical services are often unaffordable and inaccessible in the United States. The bigger issue is that America’s health care providers — hospitals, physicians, and drug companies — charge much higher rates than their peers in other wealthy nations.

In 2021, the US spent nearly twice as much per capita on health care than other developed countries. According to the Kaiser Family Foundation, this gap is mostly explained by higher payments to hospitals and physicians. Americans spend $7,500 per person on inpatient and outpatient care, while other rich nations spend an average of $2,969 per person. This is not because Americans are receiving more medical care than their peers abroad; on the contrary, we make fewer doctors’ visits per capita and have shorter average hospital stays. We just pay much higher prices.

In 2023, the average physician salary in the United States was $352,000. In Germany, that figure was $160,000; in the United Kingdom, it was $122,000; in France, it was $93,000.

This discrepancy is partly explained by the fact that those European nations have more socialized health care systems, in which the government imposes more cost controls on medical providers. In the past, progressives have emphasized that a Medicare-for-all system would reduce overall health care costs by forcing providers to accept lower payments.

With its new policy, Anthem was attempting to do precisely this: force anesthesiologists to accept lower rates of reimbursement.

And the case for forcing down payment rates for anesthesiologists is especially strong. According to Medscape’s 2024 Anesthesiologist Salary Report, the average salary for an American anesthesiologist in 2023 was $472,000. This represented a $70,000 increase over the field’s average salary in 2022. This makes anesthesiologists among the top five highest-earning specialists in the United States.

The European and Canadian models of healthcare are indeed superior to the American system. But too many people seem to think that the former means “people can get as much of any treatment they want for free.” Universal healthcare systems have to control costs, and universal healthcare is just not politically viable in the US given what doctors, hospitals, and drug companies get paid. This is a minor episode but it illustrates just how hard the political lift to a universal system in the US will be.