No industry in America spends more on lobbying than health care.
In 2016, the health care industry spent half a billion dollars on lobbying, with pharmaceutical companies, hospitals and health professionals making the largest contributions. In 2009, the year the Affordable Care Act was debated, health care lobbying exceeded $550 million. (Last year, by comparison, defense lobbying totaled $129 million, and the gun lobby spent just $10.5 million.)
Closely related to industry lobbying is the political maneuvering that congressional leaders use in an effort to pass legislation — specifically, targeted provisions known as earmarks, “sweeteners” or pork barrel spending.
The final version of the Graham-Cassidy health bill, for example, would have sent extra money to Alaska and Maine for the crucial votes of senators from those states, Lisa Murkowski and Susan Collins. In 2010, Democrats hoping to secure votes from reluctant rural state senators added the “Frontier States” provision to the A.C.A., which increased Medicare payments to five states with low population densities.
We all know earmarks and lobbying influence policymakers and policy. In health care, this has critical implications: who gets care, how much they get, how we pay for it. But there’s little hard data on exactly who benefits and how large the effects can be. A new study illuminates the ways these political dynamics can change congressional and hospital behavior — and how they can increase health care costs for the rest of us.
That’s when Section 508 was added.
The rate at which Medicare pays individual hospitals is determined largely by a hospital’s location and the labor costs, or wage index, in its area. Hospitals can, however, request to be reclassified into a different wage index area to raise their payments. Sometimes there are good reasons for this: Two hospitals might be competing in the same region, and because they’re separated by an arbitrary bureaucratic line, one gets paid more than the other.
But Section 508 waivers created new, more ambiguous ways that hospitals in specific districts could appeal their assigned wage index, and gave the executive branch considerable discretion about which requests would be granted and how big the pay increases would be.
The Section 508 waivers had large effects on how both politicians and hospitals operated. About 400 hospitals applied for a Medicare pay increase, and 120 waivers were granted. Hospitals in districts represented by a Republican member of Congress who voted for the M.M.A. were seven times more likely to receive a waiver compared with those in districts of members who voted against it. On average, these hospitals saw a 6.5 percent increase in Medicare payments, but the 29 hospitals with the biggest payment increases — “high 508 recipient hospitals” — received a 10 percent boost.
How did hospitals spend the extra money? Perhaps unsurprisingly, they started treating more Medicare patients — about 8 percent more per year. They also expanded nursing staffing by roughly a third, and invested in new technologies. But extra cash also meant big raises for hospital C.E.O.s: nearly half a million dollars per year at each hospital. Over all, “high 508 recipient hospitals” had $1.25 billion in additional spending from 2005 to 2010 — about 25 percent more than they otherwise would have. There was no evidence of improved quality or outcomes.
“If you told me in advance that we’d find this tight a link between Congress and hospitals, I would have been very surprised,” Mr. Cooper said. “We knew there was some connection, of course, but the more we kept digging, the stronger and more precise the link became.”
Section 508 payment changes were supposed to expire after three years. But hospitals with lucrative waivers had considerable interest in seeing the program extended, and worked together to form the Section 508 Hospital Coalition.
Pork, it seems, is as bad for budgets as it is for waistlines.
“Every time you pass legislation, big or small, these elements are added in,” Mr. Cooper said. “It’s not that any single one is hugely offensive. It’s their accumulation and continuation over time.”
Although Mr. Cooper’s research offers perhaps the clearest empirical glimpse of the links between lobbying, earmarks and medical spending, this political maneuvering is not new — and Medicare hospital payment seems to be a particularly susceptible target.
Both Democrats and Republicans have won pay increases for hospitals they represent. In the 1999 budget, the House Republican whip, Tom DeLay, and House Speaker Dennis Hastert reclassified hospitals in their districts into other regions, leading to hundreds of thousands of dollars of extra funding per year.
About a dozen years later, in what was called the Bay State Boondoggle, John Kerry, then a senator, succeeded in lobbying for Medicare to pay Massachusetts’ urban hospitals at the same rate it paid the state’s rural hospitals. The catch: There was only one hospital that qualified as “rural” in Massachusetts — on the wealthy island of Nantucket.
None of this is surprising. A primary motive of elected representatives is getting re-elected. Passing expansive legislation — like Medicare Part D or the A.C.A. — is hard, especially when legislators can’t point to specific benefits for their constituents. But a critical flaw in our current system is that payments are hugely influenced by politicians who have every incentive to increase them for their own districts.
“You can’t get upset at a snake for having fangs,” Mr. Cooper told me. “We need to design a system that takes payment decisions out of the hands of elected representatives. We think of interest rates as so important and complicated that we’ve tried to remove politics and give the responsibility to the Fed. The same argument holds for health care. When the government spends a trillion dollars on health care, it’s too easy for members to direct funds to their districts.”
We’ve been close to a possible solution. The A.C.A. called for establishing an Independent Payment Advisory Board, a 15-member panel charged with making changes to Medicare to control costs. The proposed reforms would have been put into effect unless Congress introduced alternate policies to achieve the same savings. But the advisory board faced fierce bipartisan opposition and was never created.
Often these costs are borne by all of us, while the benefits — if any — go to a favored few. Excess medical spending, then, is driven not only by inefficiencies in our health system, but also by those in our political system. Our solutions, it seems, must confront that uncomfortable reality.
Dhruv Khullar, M.D., M.P.P., is a physician at NewYork-Presbyterian Hospital and a researcher at the Weill Cornell Department of Healthcare Policy and Research. Follow him on Twitter at @DhruvKhullar.