Belgium Treats Medical Care Like a Public Utility – Privately Owned and Operated – Regulated to Provide Reasonable Profits and Reasonable Costs

The United States Treats Medical Care as an Opportunity to Gouge Patients, Insurance Companies and Hospitals

The economic basis for regulating an industry  is pretty straight forward.  If the industry is a monopoly where competition will not control pricing, such as electric utilities, or the industry is a critical one with very little competition then economic theory says its prices and profits should be regulated.  No this does not mean pricing and profits so low as to drive the companies out of business, it means regulating the industry so that it earns a reasonable and normal profit, not an excessive one.

Medical care, if privately provided fits this definition.  And regulation to allow a reasonable but not excessive profit in private practice is what is done in Belgium.  In a NYT article highlighting the reasonable cost of joint replacements in that country versus the United States, here is how Belgium operates (no pun intended).

The pricing system in Belgium does not encourage amenities, though the country has among the lowest surgical infection rates in the world — lower than in the United States — and is known for good doctors. While most Belgian physicians and hospitals are in business for themselves, the government sets pricing and limits profits. Hospitals get a fixed daily rate and surgeons receive a fee for each surgery, which are negotiated each year between national medical groups and the state.

While doctors may charge more than the rate, few do so because most patients would refuse to pay it, said Mr. Boussauw, the hospital administrator. Doctors and hospitals must provide estimates. European orthopedists tend to make about half the income of their American counterparts, whose annual income averaged $442,450 in 2011, according to a survey by the Commonwealth Fund, a foundation that studies health policy.

Gosh, half the income of American doctors.  But half is over $220,000 a year, not too shabby.

And as for the costs in Belgium, well there is this.  Michael Shopenn needed a hip replacement

“Very leery” of going to a developing country like India or Thailand, which both draw so-called medical tourists, he ultimately chose to have his hip replaced in 2007 at a private hospital outside Brussels for $13,660. That price included not only a hip joint, made by Warsaw-based Zimmer Holdings, but also all doctors’ fees, operating room charges, crutches, medicine, a hospital room for five days, a week in rehab and a round-trip ticket from America.

Well he could have gotten good ole American care, but at a price.

 he reached out to a sailing buddy with friends at a medical device manufacturer, which arranged to provide his local hospital with an implant at what was described as the “list price” of $13,000, with no markup. But when the hospital’s finance office estimated that the hospital charges would run another $65,000, not including the surgeon’s fee, he knew he had to think outside the box, and outside the country.

Why the big difference?  Well the device makers have a quasi monopoly and charge big bucks,  And of course they have to “reward” the doctors for using their products.

Device makers have used some of their profits to lobby Congress and to buy brand loyalty. In 2007, joint makers paid $311 million to settle Justice Department accusations that they were paying kickbacks to surgeons who used their devices; Zimmer paid the biggest fine, $169.5 million. That year, nearly 1,000 orthopedists in the United States received a total of about $200 million in payments from joint manufacturers for consulting, royalties and other activities, according to data released as part of the settlement.

What about Research and Development?  Not so fast.

Officials at OrthoWorx say the device makers do not discuss “competitive issues” among themselves, including the prices of implants, even as employees stand together watching their children play baseball. Still, it is in everyone’s interest not to undercut the competition. In 2011, all three manufacturers had joint implant sales exceeding $1 billion and spent about only 5 percent of revenues on research and development, compared with 20 percent in the pharmaceutical industry, said Stan Mendenhall, the editor of Orthopedic Network News. They each paid their chief executives over $8 million.

Free enterprise and capitalism is a great system, but it doesn’t work all the time for every situation.  But the United States will have none of that “European” regulation thingee, so this country has the most expensive care in the world.  Not the best, just the most expensive.