In May 2008, Chicago Public Radio teamed up with National Public Radio (NPR) to produce an episode of the show This American Life called “The Giant Pool of Money.” The episode garnered widespread praise and won several awards for explaining the subprime-mortgage crisis with clarity and concision. It was such a success that NPR created a podcast, Planet Money, featuring the same team of reporters and producers. Planet Money covered the financial collapse last fall and continues to file jargon-free reports on the economy three times a week.
A few weeks ago, that crew put together another big project, this time a two-parter of This American Life and several subsequent podcasts devoted to the subject of health care. As in “The Giant Pool of Money,” the reporting was clear and even-handed. The team’s correspondents sought out industry professionals, economists, and patients. (They ignored politicians, by and large.) They surveyed the history of the American health-care system and drew some conclusions about why it has so many problems. And, if you’re someone who expects a certain amount of leftishness from NPR, those conclusions might surprise you.1. Medical-malpractice lawsuits drive up the cost of health care.
The first episode began by defining the problem: The average cost of a health-insurance policy for a family of four doubled between 2000 and 2007, host Ira Glass said, and it is projected to double again in the next seven years. Health-care costs are spiraling out of control, eating into the wages of those who have insurance and making it harder for the uninsured to buy it. Why? The answer is complex, but one of the problems the NPR team identified is that doctors practice what’s known as defensive medicine. That is to say, they order tests and perform procedures that their patients might not need, out of fear that otherwise they might get sued.
The NPR team produced several stories on how defensive medicine drives up costs, including one about a doctor named Dan Merenstein. As a third-year resident, Merenstein counseled a 53-year-old man on the benefits and risks of getting a PSA screening (a common test for prostate cancer). Merenstein told his patient that he thought the risks outweighed the benefits: False positives are common, follow-ups invasive and potentially harmful. The man declined the test.
The man was later diagnosed with a fatal prostate cancer, a kind that early detection probably would not have helped. He nevertheless sued Merenstein and his residency program. The plaintiff’s lawyers argued that Merenstein shouldn’t have given the man a choice on whether to have the test. “The jury . . . rejected the idea of following the guidelines based on evidence,” Merenstein said. “They took this approach that this thing called evidence-based medicine is just a way to save money, just a way to ration care.”
The verdict left Merenstein alone, but found his residency program liable for $1 million. He told NPR that it’s hard not to see patients as potential plaintiffs. He says he still counsels patients on the potential drawbacks of the expensive, not-always-necessary screening, but he admits that he gives patients a little push by telling them that most people do get the test.
2. Insurance companies are not evil. This summer, amid all the town-hall pushbacks against Obamacare, Nancy Pelosi lashed out at private insurance companies: “They are the villains in this,” she said. “They’ve been immoral all along in how they have treated the people. . . . You know, the litany of it all.”
Many mainstream reporters know the litany of it all, or at least they think they do. But NPR actually probed this received wisdom, and found a lot of holes. For instance, a former insurance executive named Wendell Potter had a conversion experience and now goes around the country talking about all the bad things insurance companies do to save money. Potter is fond of telling one story about how Aetna purged 8 million people from its insurance rolls and subsequently saw its stock price go up. Taking away people’s coverage for profit: proof positive of insurance-company greed.
“The truth of the story,” producer Sarah Koenig explained, “is a little more complicated, a little less Machiavellian.” In 2001, Aetna was losing $1 million a day. Aetna did two things to turn the company around: It raised premiums, and it pulled out of markets where it did not have a large presence. It turns out, the less competition an insurance company faces in a particular market, the cheaper it can price its products, and the lower premiums are for the insured. Why? Because insurance companies have to wield a lot of clout in order to bargain effectively with the large health-care provider groups in a given area.
Obama says, “One of the best ways to bring down costs, provide more choices, and assure quality is a public option that will force the insurance companies to compete and keep them honest.” But if the public option would actually weaken dominant players in the insurance market and concentrate more pricing power in the hands of provider groups, it would drive health-care costs up.
3. Our reliance on third-party payers is at the heart of the problem. So if insurance-company greed isn’t to blame, what does ail our health-care system? NPR’s reporting points to what economists call the “third-party-payer problem.” As David Goldhill pointed out in a must-read article for The Atlantic earlier this year, you don’t get the bill for your medical care. Someone else gets the bill, and that distorts incentives for payers, providers, and consumers of health care.
The NPR team put together a couple of stories that illustrated this problem, but the most succinct explanation came from Adam Davidson and Alex Blumberg in a segment on the history of American health care. “We the consumers are totally separated from the cost of what we’re consuming,” Davidson said. “We get tests and procedures we don’t need because, well, why not? We’re not paying for it a la carte. Our employers are paying for part of it, our government is paying for part of it through . . . tax incentives.”
How did we end up with such an inefficient system? Prior to World War II, health insurance existed, but most people paid for medical care out of their own pockets. The government instituted price and wage controls during the war, but placed no controls on benefits, so companies turned to benefit packages as a means of competing for workers.
Wage and price controls made the third-party-payer system possible, but a different policy set it in stone: a change in the tax law allowing employers to deduct the cost of health benefits from their taxes. After the IRS ruled that employers did not have to pay taxes on health benefits for their workers, the proportion of the population getting health insurance through their employers went from 9 percent in 1940 to 63 percent of the population in 1953.
4. Obamacare won’t fix it. The NPR team did not come right out and say it, but its reporting points to this conclusion. Alex Blumberg put it this way:
Markets are usually really good at controlling costs. When they work best, products come into existence like cell phones or stockings, they start expensive and then they get cheaper and better. But markets don’t guarantee that everyone can afford the things they need. Government can be good at that, ensuring universal access. But when you’re paying for everybody, it’s hard to control costs.
For [economic historian] Melissa Thomasson, she says that either extreme — a competitive market system where consumers know what price they’re paying and what they’re getting, which would drive the cost of health care down, or a government-run system which would cover everyone — would be better than the accidental mixture that we have today: a really expensive system that doesn’t cover us all.
Obamacare would pour even more cement over this broken system. It’s not a single-payer system that would cover everyone and control costs through price controls and rationing. Nor is it a market-oriented reform that would empower consumers by equalizing the tax treatment of health insurance and reducing the role of government in the market. Instead, it makes health insurance mandatory for everyone. It bends the cost curve up by subsidizing insurance without putting any real cost-control measures in place. And it creates a public option that would weaken the power of insurance companies to bargain with hospitals for better rates.
Democrats have accused conservatives of spreading fear and misinformation about their health-care legislation. They might want to look into this new and most insidious propaganda arm of the conservative movement: NPR.
– Stephen Spruiell is an NRO staff reporter.