An American Sickness: How Workers’ Compensation Fell into the Same Abyss as Health Insurance

By Richard B. Rubenstein, Esq., Rothenberg Rubenstein Berliner Shinrod LLC

Stakeholders in the Workers’ Compensation community can proudly proclaim that our system was quite literally the first form of health insurance in America, preceding Blue Cross of the 1930’s by more than two decades.  The cynical among us can also feel great shame in the fact that our system was quite literally the first form of health insurance in America, preceding Blue Cross of the 1930’s by more than two decades. The ironic truth in the latter statement becomes painfully clear after reading, An American Sickness, a recent best-selling book by Dr. Elisabeth Rosenthal. Her ten Rules describe the pernicious forces that have emerged in the last century to make our entire healthcare system “sick.” While not all the Rules are pithy, or peculiar to our workers’ compensation system, they do illuminate how and why the delivery of medical care in America went spectacularly awry.

As Dr. Rosenthal points out, the economic model and the medical culture that followed the availability of health insurance have combined disastrously. More than three trillion dollars a year are doled out for medical care in America, and the results are waste, inequity, frustration and our ignoble place in the developed world as the 37^th best healthcare system (according to the 2012 World Health Organization’s 2012 ranking), despite individual components that are perhaps the most advanced and available in the world. Americans take pride in our biomedical research: The best in the world; our biomechanical engineering:  the best in the world; our access to healthcare without quotas or waiting lists: among the best in the world; our Medicare program for seniors, comprehensive and universal: among the largest in the world; our vast array of medical choices among specialists, hospitals, labs, and practitioners: among the most varied in the world. Rosenthal’s thesis is that the American system no longer focuses on quality care, but rather the monolithic pursuit of profit, regardless of patient outcomes. The writer’s Rule #1: More treatment is always better. Default to the most expensive option.

Every lawyer, adjuster, Judge, and case nurse in the Workers Compensation community sees glimmers of the Rosenthal thesis in our everyday work: The over-treated patient who is made worse. The surgical extravaganza that leaves a worker debilitated or addicted. The delay or denial of treatment that turns a life upside down. The inexplicable decisions made by committees or non-physicians, which profoundly affect medical treatment. The insanely complex—or simply insanely priced--- hospital bills which seem grotesquely out of proportion to the problem presented. The lack of partnership between doctor and patient in the recovery from illness or injury. Rosenthal’s book is the prose equivalent of a disaster film, a tour-de-force in case studies of a system grown so complex, with so many competing financial interests and processes, no one person can begin to understand it. In recent months, Members of Congress have spoken about “fixing” the health insurance system by “increasing competition” among insurance companies, “across state lines.” Even a cursory reading of “An American Sickness” will disabuse anyone of the notion that these tactics are the right answer to any relevant question about cost-containment or quality care.

Dr. Rosenthal walks us through the daily lives of patients who take useless medications and undergo questionable surgeries, only to be confronted by cascades of bills from doctors and labs they have never seen or heard of before. A woman arises from a coma, confronted by a bill for $57,000 for ambulatory surgery, as part of a $357,000 course of treatment for which she is not insured. (See: Rule #8: There is no such thing as a fixed price for a procedure or test. And the uninsured pay the highest prices of all.) The hospital suggests she sign her house over to them, to satisfy the bill, in part.  Problem: She never underwent any ambulatory surgery in the first place. We are told of the patient prescribed a Remicade infusion, whose insurance is billed $98,575.98 for a three-hour infusion at NYU Hospital. Precisely the same procedure is performed a month later, by the same personnel in the same hospital, and $110,410.82 is billed. One month following, the very same procedure, facility and dosage: $132,791.04. The wholesale price of the drug? $1,200. (NYU has a financial interest in Remicade, and shares in royalties for its use, a fact unknown to the patient) The inexplicable is followed by the absurd, when we are informed that a branded prescription nasal spray sells for $250 a month in the USA, while $7 purchases it off the shelf in London. We are treated to a litany of absurdities, from the insane markup on defibrillators ($40,000 for a battery, two wires, and pads) to $4,000 for pedicle screws. How did we get here? Many reasons, not the least of which is an oligopoly of manufacturers that limit distribution, and legislation and regulation that respond more to campaign contributions than consumer considerations. It is a toxic stew of lobbying, negative incentives, and consumer ignorance----some enforced, and some a product of a culture where the consumer is not the likely payor.

The story of An American Sickness is the tale of rampant conflicts of interest. It is warped picture of not-for-profit hospitals and insurance companies transformed into profit centers where quality of care is secondary to confusion of mission and elimination and absorption of competition. We read of the Providence Portland Medical Center, a system founded by Sisters who took a vow of poverty. Its CEO made more than $4,000,000 a couple of years ago, and Rosenthal describes the character of the system as “a weird mix of Mother Teresa and Goldman Sachs.” And not in a good way.  The book is the account of medical practitioners who are both the victims and the accomplices of a system so fixated on revenue and profit, ethical and medical barriers are molded to fit the balance sheet. The body of the narrative is anecdotal, with stories of individual patients and physicians, and the effects of our system on the course of treatment, the ultimate recovery, and the cost of the illness or injury. Dr. Rosenthal strings together the anecdotes artfully, creating a coherent argument for the universality of her examples. The culmination of the stories Rosenthal weaves together results in her final Rule: Prices will rise to whatever the market will bear.

Our workers’ compensation system is only one component of the many-armed hydra that prevents market forces from acting efficiently to govern the provision and pricing of healthcare, but it is nonetheless a useful example: Injured workers are seldom partners in their recovery. They seldom develop a trust relationship with the providers or payors of their care. In states with physician choice, the physicians are not paid by outcome, but by amount of care given. In states where employers choose physicians, the relationship between physician and patient can be positively adversarial. Insurance carriers simply raise rates when the cost of medical treatment rises, and the employer, and ultimately the consumer, bear the cost.  Workers’ compensation payors and other systems for payment or reimbursement do not exploit markets or networks efficiently to generate savings. States lack the resources to adequately regulate the providers of medical care within the system, and depend on adversarial litigation to do the job, usually poorly.

All is not lost:  If we can just untangle the morass of negative incentives, conflicts of interest, lobbyist-created legislative and regulatory hand-outs, anti-competitive rules about distribution of devices and medications, and refusal to disclose actual prices of goods and services, we can start to have a national conversation about healthcare animated by useful data. As Dr. Rosenthal points out, it starts out with the medical consumer. If they have no stake in this process, if it is made too complicated, and if the facts are kept from them, no positive change can occur. If there is one certainty to be drawn from An American Sickness, it is the fact that bland clichés from politicians about unleashing market forces won’t save anyone a dime or extend a human life one day. There is no healthcare market. A market is an actual or nominal place where forces of demand and supply operate, including mechanisms or means for determining the price of the traded item, communicating the price information, and facilitating deals and transactions and effecting distribution. Healthcare in America won’t be reformed by allowing insurance companies to compete across state lines, or creating cheaper policies that don’t cover pressing medical needs. We now have ten Rules that help explain why, three discussed herein. For the other seven, consult Dr. Rosenthal and “An American Sickness.”

An American Sickness: How Healthcare Became Big Business and How You Can Take It Back, by Elisabeth Rosenthal, Penguin Press, 2017. ISBN 9781594206757

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