Bureaucrats, not doctors, are making healthcare so expensive

Republican leadership emerged from their Camp David policy retreat earlier this month announcing that significant healthcare reform is not on their 2018 agenda. That’s bad news for the one-quarter of Americans who put off or postpone getting the healthcare they need each year because of its costs, which have doubled since 2013.

To meaningfully address these skyrocketing healthcare costs, bold reforms are needed. Rather than simplistic assertions that blame doctors, legislators must tackle healthcare’s stultifying bureaucracy consisting of federal and state government agencies, big insurance companies, and, yes, the American Medical Association.

Consider the reporting requirements that this bureaucracy foists on physicians. Doctors now spend roughly two-thirds of their professional time on paperwork – mostly filling out the never-ending fields that are part of Electronic Medical Records requirements — rather than attending to patients. Because paperwork doesn’t pay, this means patients are essentially spending three times more than they should have to for their doctors’ time. Simply halving doctors’ paperwork could halve physicians' costs, because they’d have more time for productive, patient-centered work.

This bureaucracy also distorts necessary healthcare price signals at best, and engages in outright price fixing at worst. Clear and unfettered price signals would help keep prices down because they convey vital information for patients and providers. In a free market, a high price for avocados sends the message that first, avocados should be economized and put to their highest value uses, and second, that farmers should grow more avocados to profit, fill consumer demand, and bring down prices.

This dynamic is largely absent from healthcare, where prices are hidden through CPT codes, Relative Value Units, and the secret dealings of the AMA's Relative Value Update Committee. This price opacity prevents doctors, insurers, and hospitals from effectively allocating their resources where they're needed most, creating inefficiencies and higher costs.