Items filtered by date: September 2013

Institutional Fraud: The American Medical System

Tuesday, 17 September 2013 04:37
The American medical system is perhaps the largest, "free-market" fraud being perpetrated on an otherwise, unassuming populace. This parasitic model continues to undermine our business competitiveness.

If I described a market with little to no transparency in its pricing mechanism, purposeful price manipulation, extraordinary barriers to entry created by market participants themselves, little competitive bidding, severe influence peddling by lobbyists and pricing that has no relationship to the underlying costs, I would essentially be describing a market severely manipulated by anti-competitive cartels and likely subject to antitrust regulation by federal and state authorities.

In fact, these characteristics describe the institutionally corrupt and highly manipulated “free-market” of the American medical system. In a series of articles published by the New York times, here, here, and here, the Times outlined the dirty secrets characterizing this purportedly free market system, and the severe disparities in costs to the consumer between the United States and the rest of the world.

As outlined below, what emerges is a portrait of an institutionally corrupt medical cartel that purposely distorts pricing, making meaningful evaluations between providers nearly impossible. Rather than going down, as prices invariably do as markets become commoditized, medical costs in the United States typically escalate over time.

Medical manufacturers dole out hundreds of millions of dollars annually for consulting, royalties and other activities to physicians in an effort to buy loyalty. The Justice Department has, in the past, accused medical manufacturers of paying kickbacks, and has assessed hundred of millions of dollars in fines.

While the government targets overt fraud perpetrated by criminals on the Medicare and Medicaid entitlement programs, it has failed to even acknowledge the presence of the institutional fraud that has been “baked” into the system by the pharma-medical device complex. As a result the United States has the highest medical costs of any established country, and essentially subsidizes the entire world, most of which has enshrined cost constraints and price caps into their medical systems.

The United States has long refused to acknowledge that price constraints, enacted by every major first-world country, are necessary and vital in controlling costs. Instead, the pharma-medical device and insurance industry complex continues to advocate and push for “denial-of-care” or service limitations as the primary tool in controlling costs. Denial of care has essentially become the only cost cutting tool available in the arsenal, while medical cost inflation continues unabated. The federal government has consistently refused to intervene directly, as Medicare has never negotiated directly with manufacturers, but offers instead all-inclusive payments for surgeries to hospitals to prompt them to bargain harder for better prices.

The extreme undesirability of imposing price constraints and caps on medical devices and drugs reflects the quaint notion that the American medical system is somehow a “free-market” and market driven. As the Times illustrated, the entire system is essentially manipulated and pricing is artificially inflated through coercive intrusion and pricing irregularities.

Category: The Economy