#68 - Marty Makary, M.D.: The US healthcare system—why it's broken, steps to fix it, and how to protect yourself
Dr. Marty Makary, Johns Hopkins surgeon and NYT bestselling author, discusses the broken U.S. healthcare system, its drivers of inflated costs, and the money games involved. He shares practical advice to fight predatory pricing and expresses optimism about exciting trends in healthcare.
Deep Dive Analysis
16 Topic Outline
Marty Makary's Background and Surgical Checklist
Origins of 'Unaccountable': Medical Mistakes and System Failures
Patient Trust, Medical Errors, and the 'Deny and Defend' Mentality
Physician Burnout, Medical Education, and Student Activism
The US Healthcare Cost Crisis and 'The Price We Pay'
The Role and Impact of Pharmacy Benefit Managers (PBMs)
Insurance Company Incentives and Medical Loss Ratio
The True Cost: Who Pays for Healthcare and the Medical Debt Crisis
Single-Payer vs. Free Market Solutions for Healthcare Costs
The Problem of Secret Pricing and Lack of Transparency
Strategies for Fighting Outrageous Medical Bills
Disrupting Healthcare with Transparent Pricing Models
Drivers of Healthcare Costs: Unnecessary Tests and Malpractice
Drug Pricing, Kickbacks, and Antitrust Exemptions
Catalyzing Change: Grassroots Movements and Physician Advocacy
Hospital Accountability and Community Engagement
9 Key Concepts
Science of Delivering Healthcare
A field of study focused on understanding and improving the processes of healthcare delivery, including identifying medical mistakes and system failures that harm patients, rather than solely focusing on infectious diseases or cancer.
Medical Care Gone Wrong
A patient-centered term used to describe medical mistakes or adverse events, shifting the lexicon from blaming individual doctors to acknowledging that patients experienced a negative outcome due to systemic issues. This encourages open discussion and learning from errors.
Deny and Defend Mentality
An approach often adopted by hospitals and their risk managers when medical errors occur, characterized by shutting off communication with patients, denying responsibility, and preparing for legal defense. This contrasts with the patient's desire for honesty and understanding.
Physician Burnout / Mortal Wounding
The emotional exhaustion and detachment experienced by doctors, often stemming from internalizing traumatic experiences and the relentless demands of medical work. This can lead to a coping mechanism of becoming emotionally robotic, impacting bedside manner and personal well-being.
Globally Capitated Primary Care
A healthcare model where a clinic or organization receives a lump sum payment for the entire care journey of a patient population, assuming downstream financial risk. This incentivizes long-term patient well-being, prevention, and reduced unnecessary utilization, as seen in models like Chen Med or Iora.
Pharmacy Benefit Manager (PBM)
Middlemen in the drug supply chain who negotiate drug prices between pharmaceutical manufacturers and health plans/employers, and manage prescription drug formularies. They often engage in complex 'money games' like rebates (kickbacks) that can inflate drug costs for the end payer.
Medical Loss Ratio (MLR)
A provision from the Affordable Care Act that mandates insurance companies spend a certain percentage (e.g., 80%) of premium revenue on medical care and quality improvements. While intended to limit profit, it can perversely incentivize higher payouts to increase the total revenue base, leading to higher premiums.
Markup Discount Game
A widespread practice in healthcare where providers set artificially high 'sticker prices' for services, then offer large, secret discounts to insurance companies or employers. This creates an illusion of savings while obscuring the true market value and inflating overall costs, with the patient often bearing the brunt of the inflated base price.
Safe Harbor (Antitrust Exemption)
A legal provision, specifically from a 1987 law, that exempts Pharmacy Benefit Managers (PBMs) and Group Purchasing Organizations (GPOs) from certain antitrust regulations. This allows them to accept rebates (kickbacks) from pharmaceutical and device companies in exchange for favorable placement, contributing to inflated prices and supply chain issues.
10 Questions Answered
Medical mistakes, often stemming from system-wide issues rather than individual blame, can lead to significant patient harm. The lack of open discussion and learning from these errors, coupled with a 'deny and defend' mentality from institutions, prevents systemic improvements and can cause emotional distress for both patients and providers.
Traditional medical education often beats down highly compassionate and altruistic students with rote memorization and a militaristic culture, discouraging questioning and open emotional expression. This can lead to physician burnout, a loss of empathy, and a tendency to internalize traumatic experiences, turning doctors into 'robots'.
The US healthcare system's inflated costs are not due to a single factor, but a combination of pricing failures (e.g., the markup-discount game), an overtreatment crisis (unnecessary services), and administrative waste driven by middlemen like Pharmacy Benefit Managers (PBMs) and brokers who often operate with misaligned incentives and lack of transparency.
Insurance companies may not always negotiate the best prices due to factors like the Medical Loss Ratio (MLR), which allows them to keep a percentage of premiums as profit. Higher payouts can lead to higher premiums in subsequent years, potentially increasing their overall profit. Additionally, a lack of long-term risk ownership for individual patients reduces the incentive to invest in long-term health outcomes.
Despite the common misconception that 'insurance companies' or 'the government' pay, it is ultimately individuals who pay for healthcare costs through various means, including insurance premiums, deductibles, copays, and taxes. This often results in significant medical debt, even for insured individuals.
PBMs are criticized for engaging in 'money games' and shell games with drug pricing, often accepting rebates (kickbacks) from pharmaceutical companies in exchange for favorable formulary placement. This practice inflates drug prices, making it difficult for employers and patients to understand the true cost of medications.
A single-payer system is appealing because it could immediately cut out waste from complex billing and middlemen. However, historical evidence suggests that governments, over time, cannot resist the temptation to make across-the-board cutbacks, potentially leading to dilapidated systems and reduced quality of care.
The lack of price transparency, often enforced by secret discount agreements and complex billing, prevents true market competition. This allows hospitals and providers to set arbitrary, inflated prices and engage in the 'markup discount game,' where different entities pay vastly different amounts for the same service.
While medical malpractice concerns can lead to unnecessary testing and defensive medicine, studies show that the actual cost of malpractice (insurance, litigation, etc.) is an inconsequential fraction (less than 0.3%) of overall healthcare spending. It's an emotional issue for doctors but not a primary driver of the cost crisis.
Kickbacks, often disguised as 'rebates' paid by pharmaceutical and device companies to middlemen like PBMs and Group Purchasing Organizations (GPOs), are a major driver of inflated prices. These payments secure placement in formularies or supply catalogs, forcing companies to build these costs into the product price, ultimately paid by the patient.
16 Actionable Insights
1. Challenge Predatory Medical Bills
If concerned about predatory billing, sign ‘did not read’ on any consent forms presented at a vulnerable time. If collectors pursue an egregious bill, demand to see the legal contract obligating you to pay, as such a contract often doesn’t exist.
2. Negotiate Medical Bills
Always remember that medical bills are negotiable. When you receive a bill, you can often negotiate the amount down with the provider or collections agency.
3. Use GoodRx for Prescription Prices
Before filling a prescription, use GoodRx to compare cash prices at local pharmacies. The cash price is often lower than your insurance copay or what your employer is charged, potentially saving you money.
4. Seek Second Opinions & Ask Questions
When facing medical decisions, get a second opinion and ask specific questions to ensure you understand your care options and minimize potential medical errors.
5. Recognize True Healthcare Payer
Understand that ‘your insurance company paid’ or ‘your employer paid’ for healthcare actually means you paid through your premiums, wages, or benefits. This shift in perspective highlights personal financial impact.
6. Report Predatory Billing to Authorities
If you receive an egregious medical bill, contact your state’s attorney and local news networks to report the predatory billing practices.
7. Engage Local Hospital Boards
As a community member, get involved with your local hospital, especially if it’s a non-profit. Ask board members about their policies for uninsured patients, bill management, average markups, and whether they pursue aggressive collections against low-income individuals.
8. Adopt Honest Healthcare Lexicon
Use patient-centered language in healthcare discussions, referring to ‘prices’ instead of ‘costs’ and acknowledging that ‘you’ ultimately pay for care, not just insurance or employers. Identify egregious bills as ‘predatory billing practices’ to foster clearer communication and accountability.
9. Hire Independent Healthcare Brokers
Businesses should seek out independent healthcare brokers who do not receive kickbacks from insurance companies or PBMs. This can lead to significant cost savings on health insurance and pharmacy benefit plans.
10. Adopt Globally Capitated Primary Care
Businesses should consider partnering with globally capitated primary care clinics like Iora, ChenMed, or Oak Street. This model assumes long-term risk for beneficiaries, aligning incentives for better patient outcomes and reduced costs.
11. Disclose Medical Mistakes Immediately
If you are a medical professional and something goes wrong, reach out to the patient immediately and disclose the mistake. This fosters honesty and can prevent lawsuits, as patients are often forgiving when there is transparency.
12. Process Traumatic Medical Experiences
Medical professionals should actively address and talk about traumatic experiences to cope with them, rather than internalizing emotions and becoming desensitized, which can negatively impact bedside skills and personal life.
13. Advocate for Transparent Pricing
Physicians should channel their advocacy efforts towards championing fair, honest, and transparent pricing in healthcare to restore public trust and address the cost crisis.
14. Find Transparent Healthcare Brokers
Businesses seeking independent and ethical healthcare brokers can consult Health Rosetta (healthrosetta.com), which vets brokers committed to transparency and a code of conduct, helping avoid kickbacks and secure better deals.
15. Utilize Healthcare Reform Resources
For more information on healthcare reform, predatory billing, and patient advocacy, visit restoringmedicine.org and martymd.com for resources and guidance.
16. Support Podcast for Exclusive Content
Consider becoming a member to support the podcast directly. In exchange, you will receive full access to exclusive show notes, participate in AMA episodes, and get deals on products the host loves.
11 Key Quotes
The implementation science of medicine is more challenging than the discovery science.
Marty Makary
People are hungry for honesty in medicine.
Marty Makary
We internalize too much at the hospital. And it's important to have these honest conversations.
Marty Makary
The patients did not come to the hospital administration or billing department for medical care. They came to us, the doc.
Marty Makary
If you're a VIP, do not tell anybody. Do not get VIP care.
Marty Makary
It's not necessarily in the financial interests of all insurance companies in all areas to really negotiate the best rate.
Marty Makary
The joke is on us, right? You've paid in so many different ways.
Marty Makary
One in five Americans has medical debt in collections.
Marty Makary
The business model relies on some people just saying, ah, screw it. I'll pay.
Marty Makary
We need to eliminate all kickbacks in healthcare. It's time we ban all kickbacks.
Marty Makary
This is the property of humanity. I want as many people to get this as possible.
Marty Makary
2 Protocols
How to Fight Outrageous Medical Bills
Marty Makary- Argue to collectors and courts that there is no legal contract obligating you to pay the specific amount.
- If signing forms in the emergency room or at a vulnerable time, write 'did not read' in the signature box to nullify any implied contractual agreement.
- Contact your state's attorney general to report predatory billing practices.
- Reach out to local news networks or health news organizations (like Kaiser Health News or Vox) that investigate medical billing issues.
- For prescription drugs, use apps like GoodRx to compare cash prices, as they are often lower than insurance copays or what your employer is charged.
- Negotiate your medical bills; they are often negotiable, with providers willing to reduce the amount by 20-50% or more.
- For egregious cases, seek legal help; pro bono lawyers are increasingly available through movements like 'Restoring Medicine' to challenge bills in court.
Community Engagement for Hospital Accountability
Marty Makary- Get involved in your local hospital, especially if it is a non-profit with a public mission.
- Ask hospital administrators and board members about their policies for managing patients who cannot pay due to high deductibles or lack of insurance.
- Inquire about the hospital's 'average markup,' defined as how much they charge above the Medicare allowable amount for services.
- Investigate whether your local hospital is suing low-income patients for unpaid medical bills by checking with your local courthouse.
- Reach out to hospital board members (often local business leaders) and engage them on issues of fair pricing and ethical billing practices.
- Advocate for a hospital code of conduct that includes providing one honest, transparent bill, never suing low-income patients for basic medical care, and using Medicare allowable amounts for direct patient billing.