Below, a guest post by Frank Pasquale, a Visiting Professor of Law at Yale Law School where he teaches Intellectual Property and Health Law. Much has been written about Partners’ high prices, but Pasquale does a particularly good job of showing how, in a market economy, pricing often has more to do with power than with productivity. Moreover, the Partners story underlines the fact that insurers do not bear primary responsibility for the high cost of health care in Massachusetts. Some health care providers have demanded premiums of 30 percent, and insurers have been powerless to stop them. This post originally appeared on Concurring Opinions.

Harvard Business School Professor Regina Herzlinger has long fought
for "consumer-directed health care." She states: "People can choose
from 240 models and makes of cars pretty intelligently . . . .Why do we
assume they can't do the same when it comes to their health?"

A recent Boston Globe series on hospitals in Massachusetts helps answer that question.

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Pay Health Care Aides to Jump-Start the Economy is a guest post by David K. Cundiff, MD

When my elderly and disabled father and stepmother required long-term care, I had the resources to hire compassionate and competent caregivers to keep them in their own home until they died. Considering the wonderful care they gave, they didn’t cost very much ($4,500 per month for 24 hour-7 day care, i.e., about $6.25 per hour). Most Americans are not as fortunate as my parents and me in their options concerning long term care.

Of about 16 million disabled Americans requiring long-term care, only approximately 1.6 million live in nursing homes. The rest remain at home receiving varying amounts of personal care (e.g., bathing, dressing, and preparing meals) delivered by about 835,000 professional home health aides, like those I employed for my parents, and unpaid family members and friends. Professional home care aides, primarily low income women, are themselves unprotected by basic labor standards despite efforts to do so in Congress. Consequently, low pay (averaging $9.62 in 2007), long hours, and high turnover undermine the quality of care, as noted by a recent New York Times editorial.

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This morning I was interviewed by ABC’s Dr. Tim Johnson.  Like many observers, he was concerned that Tom Daschle’s departure has dealt a serious blow to healthcare reform. 

I disagree. On the one hand, Daschle is well-liked in Congress and as the President’s emissary could have brokered some deals. On the other hand, Daschle was expected to compromise with conservatives –which might have meant giving in on issues that more progressive reformers consider essential to reform.

I’ve written about why Daschle’s withdrawal is not a disaster for healthcare reform over at the gurardian.co.uk. Click here to read the piece and comment. (Or come back here with your comment)

Howard Dean?  Kansas Gov. Kathleen Sebelius?  Former NIH director Harold Varmus (now at Memorial Sloan-Kettering Cancer Center)?  Dr. Atul Gawande? Former Oregon Governor John Kitzhaber?  John Podesta, founder and president of the Center for American Progress, formerly chief of staff to President Bill Clinton?  These are a few of the names being floated in the mainstream press and the blogosphere as possible replacements for Tom Daschle as Secretary of Health and Human Services and/or healthcare czar.

But before replacing Daschle, let’s consider why he is stepping out of the game, and what this means for healthcare reform. In announcing his withdrawal, Daschle put his finger on why he must leave: “If 30 years of exposure to the challenges inherent in our system has taught me anything, it has taught me that this work will require a leader who can operate with the full faith of Congress and the American people.”

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This from AP  11 minute ago:

WASHINGTON – Former Senate Democratic Leader Tom Daschle on Tuesday withdrew his nomination to oversee the Health and Human Services Department, just a few hours after another Obama nominee also withdrew.

Both had controversies with taxes and cited distractions over that as their reasons for withdrawing.

In a White House statement, President Barack Obama said he accepted Daschle's withdrawal "with sadness and regret."

Daschle has been battling for his nomination since it was disclosed he failed to pay more than $120,000 in taxes.

Daschle, in his statement, said he's withdrawing because he's not a leader who has the full faith of Congress and will be a distraction."

I'll  be back with further comment.

Apologies  to readers:  In our last “Update” I had promised to post this piece Saturday.  But Friday night I was hit with a bad case of food poisoning, and wasn’t able to travel home from the Families USA conference until Sunday night.  Today, as I sitting here sipping my Gatorade (a very good way to rehydrate), I’m very, very glad to be home, and back to the blog.

Ron Pollack, director of Families USA, has been a key force in organizing what he calls a “strange bedfellows” dialogue among some 20 organizations representing, business, labor and healthcare providers.  The players, which includes PhRMA, the American Medical Association, American Health Insurance Plans (AHIP), the Service Employees International Union ( SEIU), Blue Cross, and Families USA represent a wide  range of ideologies on health care reform.  Pollack stresses that this is not a coalition, but a conversation. The goal is not to establish a consensus, but to see how far the participants can go in to trying to find common ground.  As a result, Pollack told a small group of bloggers and journalists in an interview at the Families USA conference last Friday, “I know where the sharp dividing lines are.”

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Over at Healthhcare Policy and Market Place Review, Bob Laszewski suggests that the elephant in the center of the room is the cost of health care—and I would add, healthcare inflation. The nation’s healthcare bill is rising 6 percent to 7 percent a year—far faster than either GDP or wages. This means that in roughly ten years, your health care bill will double. Even if you have insurance now, do you believe your salary will double over the next ten years?  Do you think your employer will be able or willing to pay twice as much for your premiums?

As I have written in the past, U.S. healthcare is so impossibly expensive because we pay more for virtually everything—drugs, devices, hospitals, physicians’ services. Physicians complain that their incomes are not rising as quickly as their costs—and it is  very true that the doctors at the low end of the income scale (the family docs, pediatricians, internists, general surgeons, primary care physicians, geriatricians and palliative care specialists) need to earn more.

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“What we need is Not health insurance,” Dr, Atul Gawande declared at the Families USA conference in Washington D.C. earlier today. “What we need is health care.”

Gawande, who is the author of Complications: A Surgeon’s Notes On An Imperfect Science, went on to make the point that, “even if a person is on Medicare, that doesn’t mean that he is getting healthier.”

What is fundamentally flawed about our system, he added, is that no one is responsible for making sure that healthcare will be better next year than it is this year. “In 1996,”  he pointed  out, “Americans underwent some 60 million surgeries. In 2008, that number rose  to 100 million. Does that mean that Americans are healthier?” he asked. Or does it simply mean that we are paying for more unnecessary surgeries?  “No one knows,” said Gawande, “because we never measure how well our healthcare system is performing.”

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According to a new working paper by the National Bureau of Economic Research (NBER), as the nation’s hospitals battle for paying customers, they are engaged in a fierce “amenities race.”. What is troubling about the report is that it reveals that many patients seem to care more about rooms with views and pleasant service than just how many patients survive their hospital stays.  (Thanks to Stephen Dubner for calling attention to this report in his Freakonomics column in the New York Times; hat-tip to reader Brad F. for sending me the column.)

In “Hospitals as Hotels” Dana Goldman and John A. Romley, (both of RAND) offer a stunning example of  just how expensive the competition has become: in 2004, a Beverly-Hills-based physician group acquired Century City Hospital in west Los Angeles. The group invested nearly $100 million in improvements to medical care and patient amenities, with "five-star personalized service" including a concierge and nightly turn down; bedside internet portals and.at-screen televisions with movies on demand; and gourmet organic cuisine prepared and served by the staff of chef Wolfgang Puck.” The hospital filed for bankruptcy in August, 2008.

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