Jim de Bree | Believe it or Not, Trump May Be on to Something

I am sure many readers can’t believe I am writing this, but Donald Trump is on the right side of an important issue by issuing an executive order requiring greater transparency in hospital pricing.

This is the first step in a long journey on which I hope President Trump will continue.

While the Democrats are arguing over single-payer health care and the Republicans have plans that they don’t want to unveil until after the election, neither party considers the underlying causes of increasing health care costs.

In other countries, programs similar to Obamacare work because they have successfully eliminated the profiteering that occurs in America. Such exploitation exists domestically, in part, because of a lack of transparency, which prevents consumers from understanding the true market value of medical services. As a result, most of us overpay for health care.

Four years ago, my wife had foot surgery and needed a knee scooter for several weeks. At the time, we had a high-deductible medical plan, and the cost of renting the scooter was applied against our deductible. The cost negotiated by the insurance company was about $275 per month. After making several calls, I found that we could purchase the scooter for about $200, but that cost was not covered by insurance.

Clearly market forces were not at work. I called my employer, who referred me to an insurance company representative. I asked why they would pay $275 per month to rent equipment that could be purchased for only $200. I never got a straight answer. But I think that it is a safe assumption that the insurance company was not stupid and was not overpaying for a service. Somehow, they likely profited from the arrangement.

When I went on Medicare, I had my semi-annual blood work performed by the same laboratory that I used before I was on Medicare. Medicare does not cover one of the tests and I had to pay list price, nearly $300, for that test. I looked at the insurance company’s explanation of benefits from my pre-Medicare days when the test was covered, and found that my former insurance company paid only $12 for the same test. I found that I could not negotiate the $300 after the lab work was completed. Perhaps if I had known about this BEFORE I had the blood test, I could have negotiated a better price. 

If President Trump’s executive order works as expected, we will gain a better understanding of the true market rate for hospital services. The insurance companies will benefit because that means they will be in a stronger position when negotiating prices with the hospitals.

The next step, of course, is to provide greater transparency on the profit margins of insurers to ensure that they pass the hospital cost savings onto the consumer. However, to really have an impact on rising health-care costs, Mr. Trump will also have to take on the pharmaceutical industry. He has indicated his intention to do so.

My previous columns discussed supply chain inefficiencies of pharmaceutical products — particularly generic drugs — that are pure profiteering by manufacturers and pharmaceutical benefit managers. A coalition of attorneys general from 44 states have filed a lawsuit alleging that the manufacturers of generic drugs colluded to increase generic drug prices.

President Trump suggested that we should purchase prescription drugs from foreign vendors. (It is interesting to note that this policy contradicts President Trump’s overall policy of encouraging that manufacturing return to America.) The pharmaceutical industry maintains that drugs made in other countries are not safe, but when I checked my prescriptions, those drugs were made in places like Guyana and India.

The prices of my prescription drugs have increased tremendously this year. One nearly tripled. The cost of my prescriptions under Medicare is seven to 10 times what I paid for the same drugs before I was covered by Medicare. 

My daughter’s insulin costs $540/week. In Canada the same drug is priced at about $150/week. I would not be surprised if the insulin sold in Canada is made at the same factory as the insulin that my daughter uses.

Based on what President Trump said in his most recent proposal, he intends to issue an order that Medicare will pay no more than 126% of the average cost paid by other nations. He is onto something. 

President Trump is the first politician who appears motivated to deal with the cost drivers of medical care. If he can stay disciplined and implement actions that curtail health-care costs, he will take a major issue away from the Democrats in the coming election.

I am not a fan of President Trump for a variety of reasons, but I must give him credit for being on the right side of this issue.

Jim de Bree is a semi-retired CPA who lives in Valencia.

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