The system lets existing hospitals block new clinics, keeps qualified foreign doctors from practicing, and gives specialists control over pricing, which made independent primary care less viable.
I would add the ban on physician-owned hospitals in the Stark Law, the 340B drug program, the Inpatient Only list, the lax enforcement of the nonprofit tax status of hospitals, and Any Willing Provider laws in the provider rent-seeking bucket. It's more of a stretch to call either of these 'NIMBY' but our incredibly strict health privacy laws inhibit digitalization in the healthcare sector and bioethical concerns about compensating kidney donors is partly why ESRD is 1% the federal budget.
However the insurer side of the equation is important too given that healthcare spending is dominated by catastrophic episodes of care (shoppable services are only ~40% of spending) and most research has shown that patients are pretty bad at shopping for cost or quality on their own vs an insurer channeling them to higher value care through reference pricing, tiered copayments, managed care networks, etc.
The insurance problem defies a straight-forward YIMBY solution though. The fact insurance is regulated by the states under McCarran-Ferguson makes them uniquely vulnerable to local rent-seeking by the provider lobby (as manifested in burdensome state benefit mandates), and the types of insurance that are regulated at the federal level and thus have a much freer hand in benefit design (self-funded ERISA plans, Medicare Advantage) tend to be much more popular with policyholders as a result. But without some backstop for those with pre-existing conditions, unlimited freedom in benefit design just results in insurers explicitly or implicitly selecting for lower risk and we get the adverse selection death spiral of the pre-ACA world.
My own preference is for a national insurance charter akin to the OCC's banking charter which can allow for long duration, guaranteed renewable plans that can be bundled with life insurance to best align insurer incentives towards high-value care. Germany allows for insurance contracts like this and it hasn't caused any disruption in their subsidized, community rated market.
Wow, I have so much to learn from you! I just saw your post on YIMBY for healthcare. Thank you for your work on this issue! Has someone made a clear list, like a bullet point list yet? Perhaps we can make one? It could be like a checklist for abundance advocates. Also, how did you learn so much about all these angles of health care issues?
Many of these ideas have been floating around for a while. There was a Brookings report from 2017 that had many of these suggestions! Sadly most of them remain unimplemented but there has been some progress (IIRC the recommended Medicare Part D reforms were almost entirely implemented in the IRA)
There are really two big issues that contribute to so much distortion in the healthcare market, and they're only kinda NIMBYish:
(1) Emergency care is a quasi-public service that hospitals are legally obligated to provide. Hospitals aren't directly compensated for this, but they use the problem of uncompensated emergency care to justify greater anticompetitive intrusions into the outpatient sector.
(2) If health insurers are given unlimited freedom of benefit design, those with pre-existing conditions will not be able to afford actuarially fair premiums. We can either cross-subsidize via premium subsidies (aka taxpayers) or via micromanaging insurance markets (aka other policyholders). The latter results in more deadweight loss than the former.
IMO this is why GOP healthcare efforts have been so doomed. The more market friendly, pro-competition approach only works if you're willing to foot the bill for these two big market failures. I'd rather we just spend the money on these problems directly so the provider & insurance industries can be otherwise free to innovate and respond to price signals.
I’m not pretending providers are pure saints who never do anything wrong. But most people don’t realize the Rube Goldberg insanity that even small providers have to go through to document, bill, appeal, and support claims just to get paid. It’s not uncommon for a small provider to have a billing department equal in size to their actual clinical team. Not because they’re overbilling - because it takes that much work to get claims paid. And when they are paid, it’s often months after the fact and a minuscule fraction of the billed charges (think 15-25%). Insurers complain about this as a provider overbilling problem, but they’re the ones who explicitly set payment methodologies like “60% of billed charges.”
It’s also catastrophically unpredictable. The same plan will pay the same recurring procedure for the same patient, but last week paid at $X and this week paid at 1/4th $X - you don’t know why, and the insurers won’t tell you. Try managing budgets, reducing costs, or improving care when your best financial models basically say “and then we’ll get paid a random number between $0-$5000 per claim for the random percentage that actually pay at all, sometime within 30-1,000 days after service.” Or when you might see a 30%+ drop in revenue from month to month with no discernible explanation.
I’ve seen claims pending >18 months where a biller is e.g. on attempt #6 to send the insurer-requested medical records. The ones sent by USPS Priority Mail, with tracking and delivery confirmation. That have been delivered 5 times already. That the insurer just “can’t find” and needs you to send again.
It’s insanity. It’s almost impressive how we’ve managed to come up with a system so hated by every side - patients, providers, payors, and regulators.
Whoa, Aaron. Your comment deserves to be a full length post of its own! No wonder some doctors have been opting out of insurance/per-service-billing for a monthly membership model. That’s a pretty big overhead cost to have to have an actual clinical team. I’m glad you wrote this and hope it’s okay that I reference it in later posts!
The average consumer seems to think that all of our healthcare problems come down to the word “greed”. Too many journalists push that idea because their politics tell them that medical care should be immune to crass market forces. In a just world, NPR and PBS would be telling the world what’s presented in this post.
Thanks so much Walter. This comment really means a lot to me. I've started to notice that tackling these topics without assuming greed as the root is even seen as contrarian or controversial because it goes against the greed discourse! I'm really grateful for your comment. :)
This is interesting, I didn't know about the limits in healthcare at that level. Something I kept thinking about during the peice is definitely that quality of healthcare point though. It reminds me of the argument for charter schools and the less than optimal outcomes we get in that space. I am generally a pretty YIMBY person so I wonder what a good framing could be for overcoming that, I think the "forgotten middle" is a very good counterpoint, as well as the point that urgent care is an inefficient entry point.
Imagining the potential new healthcare providers as a "cheap" way to keep people closer to the healthcare system in general is super interesting though. Thanks for writing this!
Thanks for your really thoughtful comments! The quality of healthcare is a super important question - and also hard to get at here. Right now, I don't have a good sense of how good of a job our current payment systems incentivize quality healthcare. The current pay-per-service structure means that if one provider is much better at the same service, they'd still get paid the same. I'm hoping to do some follow ups that get at these types of questions. A lot of tradeoffs with different models though. A pay-per-member might incentivize more preventative care than pay-per-service, BUT might mean that "expensive" patients will have a harder time getting signed on as patients. :) Great questions you bring up!!
This problem has been written about for *years*. The job for the Niskanen Center is to foster the political coalition that drags solutions into reality.
I think I'm going to save this comment somewhere so I can post it every time someone mentions the lack of increase in medicare-funded residency spots, because so far, no one has ever given me any answer at all, let alone a satisfactory one:
Where is the market breakdown that is preventing other funding sources? Why don't hospitals in regions that need more doctors fund slots with contracts that guarantee X years working in the hospital? Why don't doctors take out loans to fund their own residencies (yes, yes, they already have a ton of medical debt, but A) yes they do and if they don't get a residency the lucrative career meant to pay it off is closed off and B) the lifetime earnings of even lower-paying careers obviously dwarf those medical bills even if you added in the cost of residency and C) the high cost of medical school is absolutely another thing that should be addressed, but in my opinion, it's not enough to explain this problem).
I've only come up with a couple of options, but I'm sure that there are a myriad of ways to pay for a residency slot. Why have none of them materialized? If medicare funding residency slots _forbade_ alternative funding methods, I would understand it (and would become extremely radicalized about the badness of that law/program), but as far as I'm aware, it does not. The federal government _also_ funds a limited (less so, but still not infinite) number of regular college educations, and yet there are still a lot of other ways to pay for college _other_ than federal grants. Why is this different?
Additionally, how were these positions funded before medicare funding?
More physicians will probably not have any signficiant effect on primary care. States which have the greatest number of residency programs and greatest number of MD's have primary care problems as severe as anywhere else. This is usually ascribed to financial incentives but might be due to any number of other issues one can imagine. Increasing MD's is also a very long term issue, taking 7-10 years. Increasing supply of mid levels (APRN, PAs) is commonly proposed as an alternative which is faster and cheaper, but has its own issues including diploma factories for APRN's (documented by ProPublica).
I would add the ban on physician-owned hospitals in the Stark Law, the 340B drug program, the Inpatient Only list, the lax enforcement of the nonprofit tax status of hospitals, and Any Willing Provider laws in the provider rent-seeking bucket. It's more of a stretch to call either of these 'NIMBY' but our incredibly strict health privacy laws inhibit digitalization in the healthcare sector and bioethical concerns about compensating kidney donors is partly why ESRD is 1% the federal budget.
However the insurer side of the equation is important too given that healthcare spending is dominated by catastrophic episodes of care (shoppable services are only ~40% of spending) and most research has shown that patients are pretty bad at shopping for cost or quality on their own vs an insurer channeling them to higher value care through reference pricing, tiered copayments, managed care networks, etc.
The insurance problem defies a straight-forward YIMBY solution though. The fact insurance is regulated by the states under McCarran-Ferguson makes them uniquely vulnerable to local rent-seeking by the provider lobby (as manifested in burdensome state benefit mandates), and the types of insurance that are regulated at the federal level and thus have a much freer hand in benefit design (self-funded ERISA plans, Medicare Advantage) tend to be much more popular with policyholders as a result. But without some backstop for those with pre-existing conditions, unlimited freedom in benefit design just results in insurers explicitly or implicitly selecting for lower risk and we get the adverse selection death spiral of the pre-ACA world.
My own preference is for a national insurance charter akin to the OCC's banking charter which can allow for long duration, guaranteed renewable plans that can be bundled with life insurance to best align insurer incentives towards high-value care. Germany allows for insurance contracts like this and it hasn't caused any disruption in their subsidized, community rated market.
Wow, I have so much to learn from you! I just saw your post on YIMBY for healthcare. Thank you for your work on this issue! Has someone made a clear list, like a bullet point list yet? Perhaps we can make one? It could be like a checklist for abundance advocates. Also, how did you learn so much about all these angles of health care issues?
I tried to make a bullet point list a couple days ago haha https://nonv.substack.com/p/the-next-step-for-healthcare-reform
Many of these ideas have been floating around for a while. There was a Brookings report from 2017 that had many of these suggestions! Sadly most of them remain unimplemented but there has been some progress (IIRC the recommended Medicare Part D reforms were almost entirely implemented in the IRA)
I will check these out!! Are you a health policy researcher???
I wish! I'm just a random enthusiast (to the extent anyone can be 'enthusiastic' about our mess of a healthcare system lol)
There are really two big issues that contribute to so much distortion in the healthcare market, and they're only kinda NIMBYish:
(1) Emergency care is a quasi-public service that hospitals are legally obligated to provide. Hospitals aren't directly compensated for this, but they use the problem of uncompensated emergency care to justify greater anticompetitive intrusions into the outpatient sector.
(2) If health insurers are given unlimited freedom of benefit design, those with pre-existing conditions will not be able to afford actuarially fair premiums. We can either cross-subsidize via premium subsidies (aka taxpayers) or via micromanaging insurance markets (aka other policyholders). The latter results in more deadweight loss than the former.
IMO this is why GOP healthcare efforts have been so doomed. The more market friendly, pro-competition approach only works if you're willing to foot the bill for these two big market failures. I'd rather we just spend the money on these problems directly so the provider & insurance industries can be otherwise free to innovate and respond to price signals.
Say it louder
Excellent piece, thank you
Thank you!!! :)
I’m not pretending providers are pure saints who never do anything wrong. But most people don’t realize the Rube Goldberg insanity that even small providers have to go through to document, bill, appeal, and support claims just to get paid. It’s not uncommon for a small provider to have a billing department equal in size to their actual clinical team. Not because they’re overbilling - because it takes that much work to get claims paid. And when they are paid, it’s often months after the fact and a minuscule fraction of the billed charges (think 15-25%). Insurers complain about this as a provider overbilling problem, but they’re the ones who explicitly set payment methodologies like “60% of billed charges.”
It’s also catastrophically unpredictable. The same plan will pay the same recurring procedure for the same patient, but last week paid at $X and this week paid at 1/4th $X - you don’t know why, and the insurers won’t tell you. Try managing budgets, reducing costs, or improving care when your best financial models basically say “and then we’ll get paid a random number between $0-$5000 per claim for the random percentage that actually pay at all, sometime within 30-1,000 days after service.” Or when you might see a 30%+ drop in revenue from month to month with no discernible explanation.
I’ve seen claims pending >18 months where a biller is e.g. on attempt #6 to send the insurer-requested medical records. The ones sent by USPS Priority Mail, with tracking and delivery confirmation. That have been delivered 5 times already. That the insurer just “can’t find” and needs you to send again.
It’s insanity. It’s almost impressive how we’ve managed to come up with a system so hated by every side - patients, providers, payors, and regulators.
Whoa, Aaron. Your comment deserves to be a full length post of its own! No wonder some doctors have been opting out of insurance/per-service-billing for a monthly membership model. That’s a pretty big overhead cost to have to have an actual clinical team. I’m glad you wrote this and hope it’s okay that I reference it in later posts!
I think the healthcare abundance link is broken? I found a working one here but idk if it's the same one https://www.niskanencenter.org/healthcare-abundance-an-agenda-to-strengthen-healthcare-supply/
Thank you Harjas! That is the same one. I've fixed the link. :) I am really glad you flagged this.
The average consumer seems to think that all of our healthcare problems come down to the word “greed”. Too many journalists push that idea because their politics tell them that medical care should be immune to crass market forces. In a just world, NPR and PBS would be telling the world what’s presented in this post.
Thanks so much Walter. This comment really means a lot to me. I've started to notice that tackling these topics without assuming greed as the root is even seen as contrarian or controversial because it goes against the greed discourse! I'm really grateful for your comment. :)
This is interesting, I didn't know about the limits in healthcare at that level. Something I kept thinking about during the peice is definitely that quality of healthcare point though. It reminds me of the argument for charter schools and the less than optimal outcomes we get in that space. I am generally a pretty YIMBY person so I wonder what a good framing could be for overcoming that, I think the "forgotten middle" is a very good counterpoint, as well as the point that urgent care is an inefficient entry point.
Imagining the potential new healthcare providers as a "cheap" way to keep people closer to the healthcare system in general is super interesting though. Thanks for writing this!
Thanks for your really thoughtful comments! The quality of healthcare is a super important question - and also hard to get at here. Right now, I don't have a good sense of how good of a job our current payment systems incentivize quality healthcare. The current pay-per-service structure means that if one provider is much better at the same service, they'd still get paid the same. I'm hoping to do some follow ups that get at these types of questions. A lot of tradeoffs with different models though. A pay-per-member might incentivize more preventative care than pay-per-service, BUT might mean that "expensive" patients will have a harder time getting signed on as patients. :) Great questions you bring up!!
This problem has been written about for *years*. The job for the Niskanen Center is to foster the political coalition that drags solutions into reality.
Thanks Sam! I think I’m just late to the party. 😅😅😅
YES THE YIMBY FOR HEALTHCARE HAS FINALLY ARRIVED!!!
YIMBY FOR HEALTHCARE!! I couldn't believe how similar the dynamics were!!!
I think I'm going to save this comment somewhere so I can post it every time someone mentions the lack of increase in medicare-funded residency spots, because so far, no one has ever given me any answer at all, let alone a satisfactory one:
Where is the market breakdown that is preventing other funding sources? Why don't hospitals in regions that need more doctors fund slots with contracts that guarantee X years working in the hospital? Why don't doctors take out loans to fund their own residencies (yes, yes, they already have a ton of medical debt, but A) yes they do and if they don't get a residency the lucrative career meant to pay it off is closed off and B) the lifetime earnings of even lower-paying careers obviously dwarf those medical bills even if you added in the cost of residency and C) the high cost of medical school is absolutely another thing that should be addressed, but in my opinion, it's not enough to explain this problem).
I've only come up with a couple of options, but I'm sure that there are a myriad of ways to pay for a residency slot. Why have none of them materialized? If medicare funding residency slots _forbade_ alternative funding methods, I would understand it (and would become extremely radicalized about the badness of that law/program), but as far as I'm aware, it does not. The federal government _also_ funds a limited (less so, but still not infinite) number of regular college educations, and yet there are still a lot of other ways to pay for college _other_ than federal grants. Why is this different?
Additionally, how were these positions funded before medicare funding?
More physicians will probably not have any signficiant effect on primary care. States which have the greatest number of residency programs and greatest number of MD's have primary care problems as severe as anywhere else. This is usually ascribed to financial incentives but might be due to any number of other issues one can imagine. Increasing MD's is also a very long term issue, taking 7-10 years. Increasing supply of mid levels (APRN, PAs) is commonly proposed as an alternative which is faster and cheaper, but has its own issues including diploma factories for APRN's (documented by ProPublica).
Thank you Robert! This is a great flag! I’ll check out that ProPublica article. I appreciate your expertise here. :)