Category: Incentives

S.B.A. “Forgives” Most Covid “Loans” Even Though at Least 17% Were Issued to Fraudsters

We used to handle suffering during crises by mutual aid societies or by giving philanthropy to those we know best–our friends and neighbors. The potential fraudster is less likely to defraud their brother or neighbor, than some unknown taxpayer in a distant state. And the local philanthropist is more likely to be able to judge which relative or neighbor will benefit from aid. Giving billions to fraudsters fueled the future inflation that ordinary decent citizens would latter struggle with.

If the federal government wanted to reduce the pain from the pandemic, the best way would have been to reduce the number, and shorten the length, of mandates. Handing so much money to fraudsters, with so little due diligence, is outrageous.

[Admission: I was the victim of identity theft when the S.B.A. gave a fraudster, using my name, tens of thousands of dollars for a potato farm supposedly run by me. Then the S.B.A. had the audacity to start sending me threatening letters about my alleged failure to pay back the loans they had given to the fraudster.]

(p. A1) When J. Bryan Quesenberry first learned that the federal government was sending out hundreds of billions of dollars to help businesses survive during the Covid-19 pandemic, he thought: “There’s going to be fraud here. There just has to be.”

A few months later, Mr. Quesenberry started sifting through a list of businesses that received Paycheck Protection Program loans, which were intended to help small businesses ravaged by the pandemic continue paying their employees. The Oregon lawyer said he knew businesses were not allowed to receive more than one loan during a single round, so he searched for “double dippers.”

He soon found dozens of businesses across the country that appeared to improperly obtain P.P.P. loans. During the summer of 2020, Mr. Quesenberry started suing those firms to try to help the government recover funds.

“It just blows my mind,” Mr. Quesenberry said. “That’s tax money that comes out of your pocket and that comes out of my pocket.”

As federal officials try to retrieve billions in stolen pandemic relief funds, private citizens are scouring public data, company websites and social media pages to help identify potential cases. Those who have filed suits say they are motivated by the desire to root out wrongdoers and expose corporate fraud.

But there is also a strong financial incentive. Under the False Claims Act, private citizens can file lawsuits on behalf of the federal government against those who may have defrauded the United States. If the government recovers funds, those citizens can typically earn between 15 and 30 percent of that amount.

. . .

(p. A15) The armchair sleuthing highlights how widespread pandemic fraud was and how federal investigators have struggled to keep up with it. In its haste to stave off an economic crisis and provide immediate aid to Americans, Washington distributed billions of dollars with few strings and little oversight. The Small Business Administration’s inspector general has estimated that more than $200 billion — or at least 17 percent of the pandemic loans the agency distributed — was awarded to “potentially fraudulent actors.” The majority of P.P.P. loans have been forgiven by the federal government.

While federal investigators have gone after some of the biggest perpetrators of fraud, limited resources have hindered their ability to go after the estimated thousands of people who improperly took government money.

. . .

Some private citizens said that it often took hours to investigate leads, and that they were unearthing cases that might otherwise slip through the cracks. Although Mr. Quesenberry said he relied primarily on information available on the internet to build cases, he said it was a time-intensive process that often required combing through government websites, Yelp pages, news articles and LinkedIn profiles. He said he thought he added value because he was pulling together evidence to “paint the picture of fraud.”

Mr. Quesenberry has earned more than $400,000 from 10 cases that have helped the federal government recover more than $3 million, according to a review of documents from U.S. attorney’s offices. Mr. Quesenberry said he had been investigating pandemic fraud for about four and a half years and was now working on his cases full time.

. . .

Hadar Susskind, the president and chief executive of Americans for Peace Now, said officials thought they had qualified for the loan because they did not consider the nonprofit to be a political organization. He said they had settled because it could have been costlier to go to court.

Mr. Susskind said he had never met Mr. Abrams, but he believed the complaint was “very much ideologically motivated” because of the nonprofit’s work to promote Israeli-Palestinian peace.

In an email, Mr. Abrams said: “In America these anti-Israel organizations have the right to spin, distort or even outright lie about Israel. However, they do not have the right to subsidize their activities with government monies for which they were not eligible.”

Mr. Abrams said he had long done other activist work, including recently representing a Jewish high school student who was the victim of antisemitic bullying. He said that he did not charge fees in those matters, and that the “whistle-blower cases do generate significant revenue so things more or less balance out.”

For the full story see:

Madeleine Ngo. “Fraud Hunters Earn Windfalls Tied to Covid.” The New York Times (Monday, November 25, 2024): A1 & A15.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Nov. 23, 2024, and has the title “They Investigated Pandemic Fraud, Then Earned Thousands.”)

Healthcare Innovations Can Be Effective AND Cheap

Many are resigned to accept our current mess of a healthcare system because they fear that if the system was changed into a fully free market system they would not be able to afford anything approaching their current level of healthcare. But they do not understand what would change. If patients paid for their own healthcare there would be competition to provide cheaper healthcare services to the many. Henry Ford got rich finding ways to make cars better and cheaper. Bill Gates got rich mainly by making adequate operating systems cheaper.

If we made healthcare a free market, then healthcare would find its Henry Ford and Bill Gates. If patients directly paid for healthcare, then healtcare services would be more consumer oriented–for instance the value of patients’ time would be respected. Medical entrepreneurs would compete to bring us more cures and cheaper cures.

The problem is not that we are “fixated on profits” as is suggested in the last paragraph quoted below. The problem is that our non-market healthcare system creates perverse incentives and perverse regulatory constraints, so that simple frugal innovations are not rewarded.

[Below I first quote a few passages from The New York Times obituary of Cash, and then from The Wall Street Journal obituary of Cash.]

(p. A21) Richard A. Cash, who as a young public-health researcher in South Asia in the late 1960s showed that a simple cocktail of salt, sugar and clean water could check the ravages of cholera and other diarrhea-inducing diseases, an innovation that has saved an estimated 50 million lives, died on Oct. 22 at his home in Cambridge, Mass. He was 83.

. . .

Dr. Cash, the son of a doctor, arrived in East Pakistan, today Bangladesh, in 1967 as part of a project through the U.S. Public Health Service. There he worked with another young American doctor, David Nalin, to respond to a cholera outbreak outside the capital, Dhaka.

The two had already been researching a simple oral rehydration therapy and knew of other, previous efforts, all of which had failed. But they believed that the therapy held promise, especially in the face of mounting deaths.

They realized that a main problem was volume: Past efforts had resulted in too little or too much hydration. Dr. Cash and Dr. Nalin conceived a trial in which they carefully measured the amount of liquid lost and replaced it with the same amount, mixed with salt and sugar to facilitate absorption.

They divided 29 patients into three groups, with one group receiving an IV drip, another an oral treatment through a tube, and the third an oral treatment by drinking from a cup.

Other doctors and nurses found their experiment bizarre and tried to stop them. But Dr. Cash and Dr. Nalin persisted, splitting the work between them in two 12-hour shifts, to ensure the integrity of the trial.

The results were definitive: Only three of the tubed patients — and only two who drank the solution — needed additional IV treatment.

. . .

“We’re enamored by high technology,” he said at the Council on Foreign Relations. “And we’re not in love with low-tech. Low-tech is always seen in our eyes as second-class. Why would you do this, when you could do that? And I would argue just the opposite.”

For the full obituary from The New York Times that is quoted above, see:

Clay Risen. “Richard A. Cash, 83, Who Saved Millions From Dehydration, Dies.” The New York Times (Monday, November 4, 2024): A21.

(Note: ellipses added.)

(Note: the online version of the obituary has the date Nov. 2, 2024, and has the title “Richard A. Cash, Who Saved Millions From Dehydration, Dies at 83.”)

(p. C6) Half a liter of water, plus a pinch of salt and a fistful of sugar. As scientific insights go, it can’t compare to the intricate equations developed to split the atom or map the planets’ paths. But its simplicity was crucial to its monumental impact.

That simple solution—the cornerstone of Oral Rehydration Therapy, or ORT—has proved extraordinary in staving off and reversing the devastating consequences of dehydration caused by cholera and other diarrheal diseases, saving tens of millions of lives since its development nearly six decades ago. In 1978, an editorial in the Lancet called ORT “potentially the most important medical advance of the century.”

. . .

Cash saw this ethos of simplicity and accessibility as instructive for a western medical system that’s infatuated with high-tech solutions, dismissive of low-tech ones and fixated on profits—and where, consequently, an overnight stay in the hospital for dehydration can result in a four-figure bill. “A solution that can’t be applied,” he told Harvard Magazine, “is really no solution at all.”

For the full obituary from The Wall Street Journal that is quoted immediately above, see:

Jon Mooallem. “A Doctor Whose Simple Treatment Prevented Millions Of Cholera Deaths.” The Wall Street Journal (Saturday, Nov. 9, 2024): C6.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date November 7, 2024, and has the title “Richard Cash, Whose Rehydration Therapy Saved Millions of Lives, Dies at 83.”)

Some Heavily Subsidized Hospitals File Liens Against Poor Patients, Rather Than Bill Medicaid

Laws that were once well-intentioned but are now outdated often remain on the books. The laws that allow hospitals to take out liens on the property of poor patients are an example. Some policy experts have proposed that each law or regulation should have a “sunset clause” that gives a date on which they expire unless they are passed again. Another solution to the lien practice would be if all hospitals were managed on the basis of ethical side-constraints. They would then not take advantage of the perverse incentives that the lien laws create.

Even without ethical side-constraints, exploiting the outdated lien laws would be harder if greater competition between hospitals created greater transparency about shady practices–the reputation of unethical hospitals would suffer, and they would lose patients.

(p. A1) When Monica Smith was badly hurt in a car accident, she assumed Medicaid would cover the medical bills. Ms. Smith, 45, made sure to show her insurance card after an ambulance took her to Parkview Regional Medical Center in Fort Wayne, Ind. She spent three days in the hospital and weeks in a neck brace.

But the hospital never sent her bills to Medicaid, which would have paid for the care in full, and the hospital refused requests to do so. Instead, it pursued an amount five times higher from Ms. Smith directly by placing a lien on her accident settlement.

Parkview is among scores of wealthy hospitals that have quietly used century-old hospital lien laws to increase revenue, often at the expense of low-income people like Ms. Smith. By using liens — a claim on an asset, such as a home or a settlement payment, to make sure someone repays a debt — hospitals can collect on money that otherwise would have gone to the patient to compensate for pain and suffering.

They can also ignore the steep discounts they are contractually required to offer to health insurers, and instead pursue their full charges.

The difference between the two prices can be staggering. In Ms. Smith’s case, the bills that Medicaid would have paid, $2,500, ballooned to $12,856 when the hospital pursued a lien.

“It’s astounding to think Medicaid patients would be charged the full-billed price,” said Christopher Whaley, a health economist at the (p. A19) RAND Corporation who studies hospital pricing. “It’s absolutely unbelievable.”

The practice of bypassing insurers to pursue full charges from accident victims’ settlements has become routine in major health systems across the country, court records and interviews show. It is most lucrative when used against low-income patients with Medicaid, which tends to pay lower reimbursement rates than private health plans.

. . .

Hospitals have come under scrutiny in recent years for increasingly turning to the courts to recover patients’ unpaid bills, even in the midst of the coronavirus pandemic. Hospitals, many of which received significant bailouts last year, have used these court rulings to garnish patients’ wages and take their homes.

But less attention has been paid to hospital lien laws, which many states passed in the early 20th century, when fewer than 10 percent of Americans had health coverage. The laws were meant to protect hospitals from the burden of caring for uninsured patients, and to give them an incentive to treat those who could not pay upfront.

. . .

When states have permissive hospital lien laws, some hospitals take advantage in ways that hurt patients. These hospitals tend to be wealthier, The New York Times found, and many of those that received hundreds of millions of dollars in federal bailout funding during the pandemic are among the most aggressive in pursuing payment through hospital liens.

Community Health Systems, which owns 86 hospitals across the country, received about a quarter-billion in federal funds during the pandemic, according to data compiled by Good Jobs First, which researches government subsidies of companies.

One of its hospitals in Tennessee refused to bill Medicare or the veterans health insurance of Jeremy Greenbaum after a car crash aggravated an old combat wound to his ankle. Instead, the hospital filed liens in 2019 for the full price of his care, records show.

For the full commentary, see:

Sarah Kliff and Jessica Silver-Greenberg. “The Upshot; Waiting for Insurance Payout? A Hospital May Collect It First.” The New York Times (Tuesday, February 2, 2021 [sic]): A1 & A19.

(Note: ellipses added.)

(Note: the online version of the commentary was updated Feb. 12, 2021 [sic], and has the title “The Upshot; How Rich Hospitals Profit From Patients in Car Crashes.”)

Warren Buffett Said Obamacare Is “Two Thousand Pages of Nonsense”

Our health system is a mess. The latest major effort to “fix” it was Obamacare (the so-called “Affordable Health Act”)–two thousand pages cobbled together by lobbyists, deep state staffers, and legislative log-rolling that resulted in high costs, opaque rules, perverse incentives, and unintended consequences.

(p. A15) Medicare doles out reimbursements for services that may or may not be real, helpful to the recipient, or reasonably priced. It’s very hard to know. Congress doesn’t want doctors and hospitals back home closely policed. Result: Medicare controls spending, perversely, with blanket low reimbursement rates for necessary and unnecessary services alike.

. . .

. . . government programs are born in chaos—with congressional horse trading and payoffs to appease interest groups. That’s why government programs make so little organizational sense. Remember when we had to pass Obamacare to find out what was in it? (“Two thousand pages of nonsense,” said Warren Buffett at the time. “The problem is incentives.”)

For the full commentary see:

Holman W. Jenkins, Jr. “Business World; Elon Musk’s Useful Experiment.” The Wall Street Journal (Wednesday, Feb. 12, 2025): A15.

(Note: ellipses added.)

(Note: the online version of the commentary has the date February 11, 2025, and has the title “Business World; DOGE Is Elon Musk’s Useful Experiment.” In both the online and print versions, the phrase “born in chaos” appears in italics for emphasis.)

Feds Set Up Perverse Incentives in Healthcare; Health Insurance Companies Do Not Rise Above the Incentives

Vertical integration is admirable when it results in efficiencies of production that in the end benefit the consumer. But the federal government has set up an opaque healthcare system with unintended perverse incentives for health insurance firms to vertically integrate–where the firms own pharmacies, pharmacy benefit managers (P.B.M.s), hospitals, and doctors practices. Reimbursement rates for drugs are set by P.B.M.s. So the insurance company’s in-house P.B.M. reimburses its in-house pharmacy generously, but reimburses outside independent pharmacies stingily–often so stingily that the outside independent pharmacies go bankrupt, increasing the customer flow to the insurance company’s in-house pharmacy. Consumers do not benefit.

I mainly blame the government. But I do not praise the insurance firms. Libertarian philosopher Robert Nozick in Anarchy, State, and Utopia argued that profit maximization was ethical and served the common good, as long as it was done subject to ethical side-constraints. The three big health insurance firms, and especially United Health, have NOT set a conspicuous example of following Nozick’s advice.

What a pitiful, frustrating, inefficient, unfair mess.

(p. D3) The small-town drugstore closed for the last time on a clear and chilly afternoon in February. Jon Jacobs, who owned Yough Valley Pharmacy, hugged his employees goodbye. He cleared the shelves and packed pill bottles into plastic bins.

Mr. Jacobs, a 70-year-old pharmacist, had spent more than half his life building his drugstore into a bedrock of Confluence, Pa., a rural community of roughly 1,000 people. Now the town was losing its only health care provider.

Obscure but powerful health care middlemen — companies known as pharmacy benefit managers, or P.B.M.s — had destroyed his business.

This has been happening all over the country, a New York Times investigation found. P.B.M.s, which employers and government programs hire to oversee prescription drug benefits, have been systematically underpaying small pharmacies, helping to drive hundreds out of business.

The pattern is benefiting the largest P.B.M.s, whose parent companies run their own competing pharmacies. When local drugstores fold, the benefit managers often scoop up their customers, according to dozens of patients and pharmacists.

The benefit managers’ power comes from two main sources. First, the three biggest players — CVS Caremark, Express Scripts and Optum Rx — collectively process roughly 80 percent of prescriptions in the United States. Second, they determine how much drugstores are reimbursed for medications that they provide to patients.

Pharmacies buy those drugs from wholesalers, in the hope that P.B.M.s will reimburse them at a profit when the medications are provided to patients. But the largest benefit managers have strong incentives to set those rates as low as possible. A key reason: They make money in part by charging employers more for certain drugs than what the P.B.M.s pay pharmacies for them.

P.B.M.s frequently pay the pharmacies at rates that do not cover the costs of the drugs, according to more than 100 pharmacists around the country and dozens of examples of insurance paperwork and legal documents.

To take just one example: For a month’s supply of the blood thinner Eliquis, several pharmacists in different states said, the big three P.B.M.s routinely paid them as much as $100 less than what it cost the pharmacies to buy the medication from a wholesaler.

By contrast, the P.B.M.s sometimes pay their own pharmacies more than what they pay local drugstores for the same medications.

Independent pharmacies are powerless to fight back. As the unprofitable transactions pile up, some are unable to stay afloat.

. . .

(p. 26) The evidence that P.B.M.s pay their own pharmacies more than independent drugstores for the same medications is not just anecdotal. One study, paid for by a pharmacy association, found that the markup that P.B.M.s were charging on brand-name drugs was 35 times higher when the drugs were sold through their own mail-order pharmacies than when the drugs were sold by independent drugstores.

Government studies have identified a similar phenomenon.

Those extra costs are borne by taxpayers or employers and can be passed on to patients in the form of higher premiums — at odds with the benefit managers’ mandate of lowering drug costs.

. . .

(p. 27) In Mississippi, . . ., the state board that regulates pharmacies said this month that Optum Rx paid independent pharmacies less than it paid itself to dispense generic drugs. On a single day in 2022, Optum Rx paid itself 22 times what it paid six independent drugstores to fill generic Prilosec, a heartburn medication. Optum Rx declined to comment on the audit.

For the full story see:

Reed Abelson and Rebecca Robbins. “Powerful Firms Driving Out Local Pharmacies.” The New York Times, First Section (Sunday, October 20, 2024): 1 & 26-27.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Oct. 19, 2024, and has the title “The Powerful Companies Driving Local Drugstores Out of Business.” Where the wording of the two versions differs (sometimes considerably), the quotes above follow the online version.)

The academic article co-authored by Evans is:

Wu, Lingfei, Dashun Wang, and James A. Evans. “Large Teams Develop and Small Teams Disrupt Science and Technology.” Nature 566, no. 7744 (Feb. 2019): 378-82.

Otherwise “Savvy Consumers,” Mistakenly Trusting the F.D.A., Let Down Their Guard on Drug Quality

(p. 6) In the fall of 2012, a young consumer safety officer at the Food and Drug Administration volunteered for a job that few of his colleagues wanted: inspecting the Indian manufacturing plants that make many of America’s low-cost generic drugs.

In a world of drab auditors, Peter Baker stood apart.

. . .

America needs generic drugs. They make up 90 percent of the American drug supply. Without them, every large-scale government health program — the Affordable Care Act, Medicare Part D, the Veterans Health Administration, charitable programs for the developing world — would be unaffordable.

. . . what Mr. Baker uncovered in six years of doing foreign inspections exposed the dangerous compromises behind the production of generic drugs, and the F.D.A.’s limits as a global regulatory agency.

. . .

. . ., first in India and then in China, he uncovered fraud or deceptive practices in almost four-fifths of the drug plants he inspected. Some of the plants used hidden laboratories, secretly repeated tests and altered results to produce fake data that fundamentally misrepresented drug quality, then submitted that data to regulators.

. . .

The F.D.A. declares that “Americans can be confident in the quality of the products the F.D.A. approves.” Because of that reassurance, even savvy consumers — the sorts of people who are well versed in the quality distinctions between Velveeta and artisanal Cheddar — don’t think about how and where their drugs are made when they head to a pharmacy. Their only question usually is: Can they afford, or will their insurance cover, the drug being dispensed?

The F.D.A., which approved more than 1,000 new generic drug products last year, faces a vast challenge in safeguarding these medications. Nearly forty percent of all our generic drugs are made in India. Eighty percent of active ingredients for both our brand and generic drugs come from abroad, the majority from India and China. America makes almost none of its own antibiotics anymore.

. . .

In the United States, F.D.A. investigators typically show up unannounced to inspect plants. But overseas, the F.D.A. has opted to announce the vast majority of its foreign inspections in advance. Overseas plants even “invite” the F.D.A. to inspect; the investigators then become the company’s guests and agree on an inspection date in advance. Plant officials have served as hosts and helped to arrange local travel.

The F.D.A. has defended this system as the best way to ease the complex logistics of getting visas and ensuring access to the plants. But the resulting inspections are largely “staged,” say a number of F.D.A. staff members. With advance notice and low-cost labor, the plants can make anything look like anything. “You give them a weekend, they’ll put up a building,” as one F.D.A. investigator put it.

. . .

And there was an additional negative consequence to the F.D.A.’s system of advanced notice. With the companies serving as travel agents, F.D.A. investigators spoke of inappropriate perks: hotel upgrades, for which the investigators would never see a bill; golf outings, massages, and trips to the Taj Mahal. The result was what some F.D.A. employees referred to as “regulatory tourism.” The F.D.A. said in response that “any allegations of improper conduct by F.D.A. personnel are investigated.”

A new head of the F.D.A.’s India office, Altaf Lal, arrived in mid-2013. To tame the twin problems of company fraud and compromised investigators, Mr. Lal made a novel pitch to agency officials. He proposed a pilot program to make all inspections in India either on short notice or unannounced. By December 2013, he had a green light. The results were instantaneous.

In January 2014, the F.D.A. was planning an unannounced inspection at a plant in northern India on a Monday. Fearing that plant officials had heard they were coming, Mr. Baker and his colleague went a day early, unannounced. They proceeded to the quality control laboratory, expecting it to be quiet on Sunday morning. Instead, they were stunned to see a hive of activity. Dozens of workers hunched over documents, backdating them. On one desk, Mr. Baker found a notebook listing the documents the workers needed to fabricate in anticipation of the inspectors’ arrival. There were Post-it notes stuck to some surfaces, noting what data to change.

In large swaths of India’s generic drug industry, the pilot program uncovered a long-running machinery dedicated not to producing perfect drugs but to producing perfect data. At one plant, Mr. Baker went straight to the microbiology laboratory and found the paperwork for testing the sterility of the plant in perfect order: microbial limits testing, biological indicators, all the samples with perfect results. Yet most of the samples didn’t exist. The plant was testing almost nothing. The laboratory was a fake.

At the vast majority of the unannounced inspections, the investigators found things the plants no longer had time to fix: Infestations of birds and insects. A pile of critical manufacturing records, tossed in a trash bin. An employee bathroom near a sterile manufacturing area in one plant lacked drainage piping, so urine puddled directly onto the floor.

(p 7) Under the pilot program, the rate of inspections resulting in the F.D.A.’s most serious finding, “official action indicated,” increased by almost 60 percent, according to my own analysis of F.D.A. records. Before long, drugs from numerous plants in India had been banned from the United States market. Given these results, it seemed logical for the F.D.A. to make unannounced inspections or short notice the norm around the world. But in July 2015, F.D.A. officials decided to terminate the program and return to largely pre-announced inspections in India. When asked why, the agency declined to explain its reasoning and stated that “after evaluation of the pilot a decision was made to discontinue the pilot.”

For the full essay see:

Katherine Eban. “Can You Trust Generic Drugs?” The New York Times Sunday Opinion Section (Sunday, May 12, 2019 [sic]): 6-7.

(Note: ellipses added.)

(Note: the online version of the essay has the date May 11, 2019 [sic], and has the title “Americans Need Generic Drugs. But Can They Trust Them?” In the original of both print and online versions, the word “anything” is in italics both times it appears. In the quotes above where the online and print versions differ, the quotes follow the somewhat more detailed online version.)

The essay quoted above is adapted by Eban from her book:

Eban, Katherine. Bottle of Lies: The inside Story of the Generic Drug Boom. New York: Ecco, 2019.

F.D.R.’s Wage Controls Created a Wedge Between Patients and Doctors, With Awful Unintended Consequences

Under F.D.R.’s wage controls, firms competed for workers through perks, like healthcare benefits, since they could not legally compete by offering higher wages. That resulted in the first middlemen (in this case firms) between the customers (patients) and the suppliers (doctors). The result of adding the middlemen, and also adding a variety of regulations, is a “market” that is opaque, inefficient, and slow to innovate. Rather than drain the swamp, the response has been to add more middlemen (Medicare, Medicaid, Obamacare, and Pharmacy Benefit Managers, aka PBMs), that have only thickened the mire.

(p. B11) The roots of today’s fragmented system can be traced back to a quirk in U.S. history. Unlike most high-income countries, which created centralized government systems to ration care in the 20th century, the U.S. followed a different path shaped by historical circumstances. During World War II, wage controls prompted employers to offer health insurance as a tax-free benefit to attract workers.

Medicare and Medicaid, followed decades later by Affordable Care Act exchanges, were added over time to cover those who couldn’t get insurance through their job, creating a highly decentralized and convoluted system.  . . .

. . . the pressure to increase their earnings means insurers have looked for ways to overbill the government and skimp on patient care, always staying a step ahead of regulators. In recent years, they have become vertically integrated conglomerates, controlling doctors, pharmacies and payment-processing systems.

. . .

One of the most frustrating aspects of the system is a tactic called prior authorization, a process requiring providers to obtain insurer approval before delivering certain services. While that might be disagreeable, there is little public data on how often insurers deny care. This lack of transparency allows insurers to wield prior authorization aggressively, particularly when expensive treatments are recommended.

For the full commentary see:

David Wainer. “How to Fix Health Insurance.” The Wall Street Journal (Saturday, Dec. 21, 2024): B11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date December 20, 2024, and has the title “How American Health Insurance Got So Infuriating.”)

Allow Those with Skin in the Game to Help Find Quicker Cures

The New York Times devoted more than two and half full pages to the article that I quote from below. Very very few articles receive that much space. The story is meant to inspire and it does. Linde has a terrible genetic disease, as did her mother and grandmother, as do her two sisters, and as might her two daughters. She is uncredentialled, but determined. She reads scientific articles, gives talks at scientific meetings, creates a foundation to raise funds, and with her sisters gave samples from her skin to create cell lines that can be used for research to find a cure. Linde, both literally and figuratively, has skin in the game.

In the article, victims of the disease wish that there were more clinical trials to test more possible cures. If the price of clinical trials were lower, more of them would be supplied. One way to reduce the price would be for the F.D.A. to only mandate testing for safety, not to mandate testing for efficacy. After all, it was concerns over the safety, not the efficacy, of thalidomide, that first accelerated the F.D.A.’s clinical trial mandates. Testing only for safety (Phase 1 and Phase 2 clinical trials), would hugely reduce the price, resulting ultimately in more and quicker cures.

(p. A1) Linde Jacobs paced back and forth across her bedroom, eyeing the open laptop on the dresser and willing the doctor to appear. Her husband was dropping off their older daughter at school. Their younger daughter was downstairs, occupied by a screen. Linde wanted to be alone when she learned whether she carried the family curse.

Linde’s mother, Allison, had died just four weeks before, after a mutant gene gradually laid waste to her brain. In her 50s, Allison transformed from a joyful family ringleader into an impulsive, deceptive pariah. She drove like a maniac on cul-de-sacs. She pinched strangers, shoplifted craft supplies and stole money from her daughter.

Now, on this morning in September 2021, Linde would find out if she had inherited the same vile genetic mutation.

. . .

The doctor finally popped up on the computer. Wasting no time on pleasantries, she shared her screen and zoomed in on one line of laboratory paperwork: POSITIVE.

. . .

Soon, Linde’s husband, Taylor, pulled into the garage and opened the car door. He could hear her sobbing.

. . .

Linde looked at Taylor. “I don’t want you to feel stuck with me,” she said.

(p. A12) Leaving had never crossed his mind. Allison’s miserable experience, he told Linde, did not have to be hers. “You have all this time,” he said. “Do something about it.”

Even as they spoke, scientists were working on projects that might one day help her. Some had discovered how to cure grave conditions with gene editing. Others were tinkering with patients’ skin cells to test experimental drugs. And pharmaceutical companies were developing new Alzheimer’s therapies, one of which happened to target the rare defect in Linde’s brain.

Linde didn’t know any of that yet. But she decided to take Taylor’s advice. She would use the time she had, somehow, to find influential scientists and make them care about what was happening to her — and what might happen to her girls.

Linde and Taylor scoured the internet for any scrap of hope about treating frontotemporal dementia, or FTD. There was little to read.

Taylor remembered a Netflix documentary about a new way to edit genes. The method, called CRISPR, had cured some children with sickle cell disease. He searched “FTD treatment CRISPR” and found the website of Dr. Claire Clelland, a neurologist at the University of California, San Francisco. She had collected skin cells from patients with FTD, reprogrammed them into neurons and tried to edit the faulty genetic code within.

The website listed a phone number. Taylor called and left a message — a Hail Mary, he figured.

Within a day, Dr. Clelland responded by email. “Happy to help if I can,” she wrote.

. . .

(p. A13) “Could I ask a question?” one young scientist said. How much risk, she wondered, was Linde comfortable taking on an experimental treatment? Editing genes with CRISPR was new, after all, and could come with serious side effects.

“Sign me up, patient zero, sounds good,” Linde said.

“What choice do I have,” she added, “if I don’t want the same future for myself as my mom had, and her mom?”

When she wasn’t working or coaching her daughter’s soccer team, Linde threw herself into the scientific research on MAPT — a niche but growing subfield. The gene provides the instructions for cells to make tau, a protein in the brain.

One day she came across news of a project investigating how tau can go awry. She wrote to the scientist leading the work, Dr. Kenneth Kosik of the University of California, Santa Barbara, describing her family and asking to talk.

Dr. Kosik was sitting in his home office when her note landed in his inbox. “It was the second time in my life that I realized, I’ve got to get back to this person in, like, a nanosecond,” he recalled.

. . .

Dr. Kosik told Linde that an elite group of researchers, known as the Tau Consortium, would gather in Boston in a few months for its annual meeting. Dr. Clelland would be there, as would other “Michael Jordans” in the field. We should try to get you there, he said, so the scientists can be reminded of the human toll of tau-related diseases.

A few weeks later, Linde received an invitation to be the keynote speaker. Jenica and Ashlyn could come, too.

She texted her sisters, “Holy shit.”

One morning in Boston in June 2023, Linde and her sisters got all dolled up, only to arrive in a grand hotel ballroom filled with 100 scientists in oxfords and sneakers.

Dr. Kosik introduced Linde to the members of the Tau Consortium. Too nervous to look anyone in the eye, she stared at a screen showing her slides and read from her prepared remarks.

“You will notice the lack of credentials following my name,” she began. But she said her life had brought her other titles: Caregiver. Jail-Bailer. Carrier. She was the heartbeat, she said, of the cells they studied.

. . .

After the Boston talk, Linde received a flurry of invitations to tell her story. She was interviewed on YouTube by Emma Heming Willis, the wife of the actor Bruce Willis, the most famous person known to have frontotemporal dementia. She came face to face with monkeys that carried MAPT mutations in Madison, Wis. And though she detested the crowds and grime of big cities, she flew to places like Philadelphia and Washington, D.C., to at-(p. A14)tend scientific meetings.

Linde, who by then had moved to River Falls, Wis., always returned home exhausted. But the trips were also fortifying. Learning about the latest research quelled her anxiety — and her husband’s.  . . .

During her travels, Linde met other families with MAPT mutations. They were all frustrated by the lack of clinical trials for their genetic glitch, especially because several promising treatments were in the pipeline for other dementia genes. Linde and the others started a global survey of people with MAPT mutations. If an opportunity came along for a clinical trial, they would make it as easy as possible for scientists to find volunteers.

. . .

A few months later, Linde and the group started a nonprofit, called Cure MAPT FTD. They have since found more than 500 people with confirmed or possible MAPT mutations in 10 countries, all of whom have expressed interest in participating in future clinical trials.

In March of this year, Linde got an astonishing offer from Dr. Clelland. Along with collaborators at Washington University and the Neural Stem Cell Institute in New York, she wanted to collect skin cells from Linde and her sisters and turn them into clusters that divide infinitely, known as cell “lines.”

“We propose to make new lines that can be shared with academics and also with industry so that people can do drug screening” and CRISPR projects, Dr. Clelland wrote.

. . .

Based on what happened to Allison and Bev, Linde figures she has at least 10 more years before she starts showing symptoms. But there’s no guarantee; some MAPT carriers begin to change in their 20s. Whenever Linde tells a joke a little too loudly, or has a dulled emotional response to a dramatic event, she worries: Is this tau?

That anxious metronome never shuts off. It compels her to fill any moment of downtime reading the latest study or sending another email. She has spent thousands of dollars and hundreds of unpaid hours on travel. But sometimes, like when she finds herself alone in a hotel room, FaceTiming her daughter about a rough day at school, she questions whether these scientific pursuits are really the best way to run out the clock.

. . .

Dr. Clelland said designing a CRISPR molecule that could precisely excise the MAPT mutation from a cell’s genome was not the hard part. The major unsolved challenge is delivering those molecular scissors into the brain. Still, she and her colleagues at U.C.S.F. have set an ambitious goal of getting MAPT therapy into clinical trials within four years.

For the full story see:

Virginia Hughes. “A Mother’s Race to Beat a Genetic Time Bomb.” The New York Times (Wednesday, December 25, 2024): A1 & A12-A14.

(Note: ellipses added.)

(Note: the online version of the story was updated Jan. 2, 2025, and has the title “Fighting to Avoid Her Mother’s Fate, for Her Daughters’ Sake.” I have omitted a few subhead titles that appear in both the online and print versions.)

Surgeons Respond More to Individual Incentives Than to Group Incentives

Medicare introduced a new billing code that reimburses surgeons more for repairing hernias that are at least 3 cm long. As a result the percent of repaired hernias that were less than 3 cm dropped from 60% to 49%. It is probably not too hard for surgeons to justify this change. Probably surgeries on hernias just under 3 cm, are just as hard to do as surgeries on hernias that are just above 3 cm. So probably it seems arbitrarily unfair to reimburse more for the slightly larger ones. So look at the close calls closer until you find an angle where one that on first glance was less than 3 cm, now appears to be more than 3 cm.

On the other hand, consider the response when Blue Cross Blue Shield in Michigan offered to pay more to urology group practices that had more patients on active surveillance for prostate cancer. (A growing consensus suggests that most low-risk prostate cancer patients would be better off with active surveillance, rather than quick prostate surgery by urologists.) The response by Michigan urologists–no change in the percent of prostate cancer patients on active surveillance.

Why the difference? I suggest that surgeons, like other people, respond more to individual incentives than to group incentives. A person who responds to group incentives bears the costs themselves, but shares the benefits with others who may be free-riders. If the incentive is individual, no one free rides.

I became aware of the recent academic articles on how incentives do or don’t influence surgeons by reading:

Millenson, Michael L. “It’s Money That Changes Everything (or Doesn’t) for Surgeons.” Forbes.com, Jan. 26, 2025 [cited Jan 27, 2025]. Available from https://www.forbes.com/sites/michaelmillenson/2025/01/26/its-money-that-changes-everything-or-doesnt-for-surgeons/ .

The academic article showing that individual incentives matter to some surgeons is:

Hallway, Alexander, Erin Isenberg, Ryan Howard, Sean O’Neill, Jenny Shao, Leah Schoel, Michael Rubyan, Anne Ehlers, and Dana Telem. “Medicare Coding Changes and Reported Hernia Size.” JAMA (published online on Jan. 16, 2025).

The academic article showing that group incentives don’t seem to matter to surgeons is:

Srivastava, Arnav, Samuel R. Kaufman, Addison Shay, Mary Oerline, Xiu Liu, Monica Van Til, Susan Linsell, Corinne Labardee, Christopher Dall, Kassem S. Faraj, Avinash Maganty, Tudor Borza, Kevin Ginsburg, Brent K. Hollenbeck, and Vahakn B. Shahinian. “Physician Payment Incentives and Active Surveillance in Low-Risk Prostate Cancer.” JAMA Network Open 8, no. 1 (Jan. 8, 2025): e2453658-e58.

Patients Are Too Patient About the Time They Waste in Worthless Healthcare

Healthcare appointments are often too numerous, too time-consuming, too stressful, and too harmful. Journalist Paula Span, often citing the words and research of MD Ishani Ganguli, presents this as an outrageous revelation. Dr. Ganguli tells us “there are opportunity costs” and “you don’t have infinite time, energy and attention” (Ganguli as quoted in Span 2024, p. D3). Outrageous it is, but to few of us is it a revelation. Patients know because they experience. If they are smart (I am often stupid) they will stifle their complaints so they do not annoy their care-givers. But care-givers know also. Those implementing the time-wasting or onerous practices are not evil. But they often do not have the incentive, or sometimes even the power, to change.

Every time I go into a doctor’s office, I am weighed. I always ask, “Do you want me to take my shoes off?” The nurse or medical assistant always shrugs and says they do not care. If my weight mattered, shouldn’t it be taken consistently, either always with shoes on or shoes off? I have had my weight taken countless times but I cannot remember a single time when the doctor mentioned the weight measure from earlier in the appointment. Prescription lists are endlessly requested, even by those who do the prescribing. Many lab tests are done out of the inertia of routine. In many hospitals sleeping patients are interrupted by a “care-giver” who comes in and performs a routine task, like asking them how much pain they are feeling. The “care-giver” records the answer and departs, taking no other action, but in the meantime diminishing the healing sleep of the patient. Tasks of this sort must be damaging to the morale of the care-giver. They signed up to do good, not to do harm. But they must do harm to follow the mandated protocol, or they risk being punished.

Why do these practices continue? Because they have been done in the past. No one will be rewarded for dropping them, and the care-giver who fails to do them is at risk of being criticized or punished. In a non-entrepreneurial, litigious, and highly regulated system, much that is done is not done for the benefit of the patient. It is done for CYA (“Cover Your Ass”).

But hope abides. We could deregulate healthcare. Then doctors could tell their nurses to only take the patient’s weight when it is actually needed. Hospital entrepreneurs could tell staff to only ask patients of their pain when they are awake and complaining of pain. Options in healthcare would be more diverse. But some of the options would actually make sense. Care-givers providing options that make sense would expand their own practice and be imitated by others. We would have better care and less wasted time.

The commentary by Paula Span, mentioned above, is:

Paula Span. “Too Much Time Spent on Doctors.” The New York Times (Tuesday, November 26, 2024): D3.

(Note: the online version of Span’s commentary has the date Nov. 23, 2024, and has the title “So Many Days Lost at the Doctor’s Office.”)

An academic article co-authored by Ganguli presents empirical evidence on how much time patients spend in healthcare activities:

Ganguli, Ishani, Emma D. Chant, E. John Orav, Ateev Mehrotra, and Christine S. Ritchie. “Health Care Contact Days among Older Adults in Traditional Medicare: A Cross-Sectional Study.” Annals of Internal Medicine 177, no. 2 (Feb. 2024): 125-33.

In an academic op-ed piece, Ganguli justly laments how the healthcare system often wastes patients’ time, sometimes even resulting in worse health. She uses the example of the severe cardiac side-effects from the eight weeks of Monday through Friday radiation that her 81-year-old father was given for his recently discovered prostate cancer:

Ganguli, Ishani. “How Does Health Care Burden Patients? Let Me Count the Days.” New England Journal of Medicine 391, no. 10 (Sept. 7, 2024): 880-83.

L.E.D. Pioneer Akasaki’s “Perseverance — Sheer Doggedness — Paid Off”

(p. B10) Isamu Akasaki, a Japanese physicist who helped develop blue light-emitting diodes, a breakthrough in the development of LEDs that earned him a Nobel Prize and transformed the way the world is illuminated, died on Thursday [April 1, 2021] in a hospital in Nagoya, Japan. He was 92.

. . .

Bob Johnstone, a technology journalist and the author of “L.E.D.: A History of the Future of Lighting” (2017), said in an email, “The prevailing opinion in the late 1980s was that, because of the number of flaws in the crystal structure of gallium nitride, it would never be possible to make light-emitting diodes from it, so why would you even try?”

Dr. Akasaki, he continued, “was willing to stick at what was almost universally recognized to be a lost cause, working away long after researchers at RCA and other U.S. pioneers of gallium nitride LED technology had given up.”

“Eventually,” Mr. Johnstone said, “his perseverance — sheer doggedness — paid off.”

. . .

Dr. Akasaki was awarded hundreds of patents for his research over the years, and the royalties from his groundbreaking work with Dr. Amano eventually funded the building of a new research institute, the Nagoya University Akasaki Institute, completed in 2006.

. . .

When asked in a 2016 interview with the Electrochemical Society to summarize the philosophy guiding his many years of single-minded research, Dr. Akasaki replied, “No pain, no gain.”

“I say this to younger people: Experience is the best teacher,” he continued. “That is, sometimes there is no royal road to learning.”

For the full obituary see:

Scott Veale. “Isamu Akasaki, 92, Nobel Laureate Whose LED Breakthrough Rippled Around the World.” The New York Times (Wednesday, April 7, 2021 [sic]): B10.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the obituary has the date April 6, 2021 [sic], and has the title “Isamu Akasaki, 92, Dies; Nobel Winner Lit Up the World With LEDs.”)

The book by Bob Johnstone mentioned above is:

Johnstone, Bob. L.E.D.: A History of the Future of Lighting. Scotts Valley, CA: CreateSpace Independent Publishing Platform, 2017.