Sunday, January 3, 2010

Will the Doctor and Patient Lose Under a New Healthcare Plan? You Decide

Recently, the WSJ ran the article "What Doctors and Patients have to lose under Obama Care." Since this summer, the current healthcare reform bill has been inspected, injected, detected, and rejected, by every special interest group and lobbyist along K Street. Yet the question still remains how does the U.S. manage to contain the cost of delivering medical care when it is forecasted that by 2012 we will be spending $4 trillion dollars annually on delivering it.

Depending on your tenure, cost containment in healthcare has been a concern for a minimum of thirty years if not longer. This article touches upon salient arguments made about the penalties and regulations that are aimed at surgeons in the current bill. A major concern is whether the Center for Medicare Services (CMS) should be given the ultimate authority in deciding when and how medical devices and drugs should be used and dispensed with, and how they should be priced on Medicare patients. Contrary to what some commentators have written, TSB is not a socialist considering that no government agency should have the right to dictate what the surgeon can do, but considering that CMS is the federal agency responsible for Medicare, they should have a right to say how much they are willing to pay for products, especially commodity products that really are not bettering the outcomes. It comes down to supply and demand. The economic model of price determination concludes that a competitive market price will equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in equilibrium of price and quantity. Quod erat demonstratum (QED).

What is disconcerting in this article is that the government is attempting to absolve itself from the same protection that it advocates for subscribers of private healthcare insurance, the appeals process. Obviously, Hays vs. Sebelius sets a precedent that Medicare cannot unfairly deny a patient if the treatment in question is deemed "reasonable and necessary." So the question must be posed to our readers whether the government should have the right to control which medical devices spine surgeons can use on Medicare patients? And, if the device does not improve the outcomes, does the government have the right to decide how much it will pay for these devices? Will this discourage innovation? Or, will it create an environment where inventors and investors will be conservative in how they choose to identify real innovation versus pure marketing before investing their capital? Let's use an example, if TSB launched a pedicle screw that really doesn't improve the outcomes, but offers the surgeon some "intra-operative flexibility" can the manufacturer justify charging more than the competition for the screw, considering that most operating room time is a fixed cost? Many of our readers cry out for free-market enterprise, isn't a by product of commoditization lower pricing? That's the free-market at work.

For years the general public has complained about the insurance industry, but what most Americans fail to understand is that United Healthcare, Cigna, Aetna, Oxford, et al, are not in the business of providing healthcare, they are in the business of risk management. Risk management involves the assessment, identification and prioritization of risks followed by coordinated and economical applications of capital to minimize the probability of unfortunate events, or to maximize profitability. Today, much to our chagrin, the government is attempting to address the healthcare crisis like the insurance industry, looking to minimize its risk.

If the author, Dr. Gottlieb of the American Enterprise Institute truly believes that we will inhibit innovation, all he has to do is look at our industry. Some of the small changes in innovation that he does speak of really amount to nothing more than pure marketing in spine. Innovation means introducing something new, but it also can mean introducing something that truly affects the clinical outcomes. Has the glut of "me too" products really changed the outcomes? We constantly hear people ask the question whether is it new, is it true and will it make a difference? Maybe, only one question needs to be asked; "Will it make a difference?" Because that's what really matters. In closing, Dr. Gottlieb makes it sound that the government will be the impetus for private insurers to take its cue from Medicare, yet, haven't private insurance companies behaved in this manner all along? TSB wants to know what our readers think?


  1. Would not the oversight of the CMS lead to a GSA pricing structure? From my experience, government as client leads not only to lower pricing (understandable for commodity product) but creates a large bureaucratic mess through which a small, innovative company can hardly navigate. Take the technology market as an example. I believe it is very arguable that few small players can afford both the process and pricing of a GSA contract. If this happens, the number of “spine” companies will shrink by 80% is my guess.

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