The Doctors’ Lounge
Where scalpels meet systems — and physicians say what they really think.
Co-hosted by Anish Koka, MD & Anthony DiGiorgio, DO. Candid talks on healthcare policy, reform, physician autonomy & patient care.
The Doctors’ Lounge
The Intellectual Case Against Medicare: Buchanan, Tullock, and the Rules of the Game
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The Doctor's Lounge
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Anish and Dr. DiGiorgio dig into the intellectual debate that preceded the 1965 passage of Medicare, focusing on the economists — James Buchanan, Gordon Tullock, Friedrich Hayek, Ludwig von Mises, Milton Friedman, and George Stigler — whose arguments against centralized healthcare proved remarkably prescient. They trace how Buchanan's public choice theory (political actors behave as self-interested economic actors) and Tullock's concept of rent seeking (firms spending capital to capture government wealth transfers rather than create value) explain exactly what happened to American healthcare: runaway costs, regulatory capture by industry, EHR mandates that entrenched a handful of vendors, and the RBRVS/RUC system that keeps physician specialties fighting over a fixed pie. The conversation closes on the Buchanan-Tullock distinction between constitutional decisions (changing the rules of the game) and political decisions (playing within them), and why physicians keep losing by focusing only on the latter.
Chapter Markers
00:00 Introduction and naming the deep-dive series
00:46 Setting up the pre-Medicare debate (1965, LBJ, Great Society)
02:44 The AMA's opposition and the intellectual roots of the debate
04:02 Why Medicare and Medicaid emerged: employer insurance and the uninsured elderly
04:29 James Buchanan and public choice theory
05:30 Gordon Tullock and rent seeking
07:55 Why bureaucrats aren't altruistic either
10:39 Epic, EHR mandates, and regulatory capture in action
12:13 Unproductive spending: lobbying as digging ditches with spoons
13:20 The Moderna flu vaccine case and George Stigler's regulatory capture
16:49 Physicians as just another rent-seeking interest group
20:30 Medicare before the RUC: UCR and the birth of the RBRVS
21:47 The Calculus of Consent: constitutional vs. political decisions
25:12 Direct primary care and doctors opting out of Medicare
27:13 ASCs, Surgery Center of Oklahoma, and breaking the rules of the game
29:40 The employer-insurer link and the tax subsidy distortion
31:32 The Breakup Health Care Act and provider-side consolidation
32:47 Fraud, waste, and the limits of third-party payment
34:38 Wrap-up: the thinkers, the concepts, and why this matters now
Co-Host Handles
@anish_koka and @drdigiorgio
Show Handle
@drsloungepod
Subscribe Links
YouTube: https://www.youtube.com/@TheDoctorsLounge
Resources
Dr. DiGiorgio's Substack graphic novel on the history of healthcare policy: https://www.offlabelideas.com/
The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962), James M. Buchanan & Gordon Tullock — the foundational text on constitutional vs. political decisions. Free full text at Liberty Fund: https://oll.libertyfund.org/titles/buchanan-the-calculus-of-consent-logical-foundations-of-constitutional-democracy
The Rent-Seeking Society (2005), Vol. 5 of The Selected Works of Gordon Tullock, edited by Charles K. Rowley (Liberty Fund): https://about.libertyfund.org/books/the-rent-seeking-society/
Russ Roberts has several episodes covering Buchanan, Tullock, and public choice theory — searchable at https://www.econtalk.org
🔗 Connect with the Hosts:
Anish Koka: Welcome Dr. DiGiorgio. I don't have to actually welcome you since this is your house. I thought, you know, we do some discussions periodically. called them various things in the past, side tables or, I know, deep dives with Dr. DiGiorgio. We should come up with a name for these instructional, ⁓ know, raise your health IQ points with Dr. DiGiorgio. ⁓ I like that.
Anthony DiGiorgio: Hello. I think ⁓ sleep aids for our listeners is a good one.
Anish Koka: Sleep aids for listeners. So, I mean, again, I can't say enough about your graphic novel on the history of healthcare. I mean, it's so good. It's really so good. I wish I had something intelligent to add to it, but I mean, you've done a really great job. It's very well thought out. And I really do think it's probably the single best explainer in a nice...
Anthony DiGiorgio: I appreciate that.
Anish Koka: digestible way, right? I mean, you can go read like five or six books what happened, but ⁓ boy, like you have so much stuff packed in there. ⁓ it's really, really good. ⁓ It's offlabelideas.com, right? And ⁓ you get, you know, for five bucks a month, I mean, it's just, it's a steal. I mean, there's nothing like this out there. So I would urge everyone to subscribe to this stuff so that you can...
Anthony DiGiorgio: Yes.
Anish Koka: have a deeper understanding of where we are in healthcare. as part of this, thought it'd be, we thought it'd be good to delve into some of the discussion that was taking place prior to the passage of Medicare. Medicare passed in 1965, and it was really a mandate that was delivered to LBJ. to extend Great Society vision that FDR had. There's interesting debate about why that was, clearly the the end of the ⁓ 50s, the early 60s, rights movement, there was really a huge shift to the left terms of progressivism and kind of creating these, great society and taking care of your fellow man. ⁓ that kind of was what carried the day and is what, know, ⁓ in part to RFK, RFK, JFK elected. then of course, coming on and yeah, LBJ's signature ⁓ accomplishment. you know, probably one of the biggest things that he did was pass Medicare, ⁓ you know, there was. ⁓
Anthony DiGiorgio: I thought you were going to say the Vietnam War, but go ahead.
Anish Koka: Yeah, right. Well, that's accomplishment, certainly. My God, the Vietnam War. What a mess that was. So sad. Fifty eight thousand. I still can't believe fifty eight thousand young men died in that in that kind of futile war. And, you know, for what? But so there was there was a discussion, you know, it wasn't just that everyone was like, OK, Medicare is there. Let's just pass it. You know, the AMA opposed Medicare. was there was a significant intellectual debate that happened. in the early 60s, prior to the passage of Medicare, that discussion was put out to the public in a variety of different forms. Man, I wish I was there. I wish to kind of see it and see, but we're not. So we're just left to kind of piece some stuff together. But there were some great intellectuals that were arguing on either side. The folks that were arguing against Medicare were... some intellectuals that kind of sourced, that were sourced from Austrian economists, Ludwig von Mises, Friedrich Hayek. And then that next generation of folks that were kind of those fundamental theories and moving them forward were some other intellectuals. There was right? His first name is Gordon Gordon to look ⁓ and then Buchanan was Buchanan's first name. James Buchanan. Right. OK. ⁓ James Buchanan. ⁓ Dr. ⁓ Right. can you give me little bit of a flavor of what the argument was being made against, you know, this
Anthony DiGiorgio: Gordon Tulloch, yes. James, James Buchanan, yes. Unfortunately, the same as the president, but not President James Buchanan.
Anish Koka: government providing, what could be wrong with the government providing Medicare, Dr. Giorgio?
Anthony DiGiorgio: Right. And this is, you look back into the, you know, not the revisionist kind of progressive line of what the debate was, where was, you know, just a bunch of dodgy old men screaming that socialism is bad. There were actually, like you mentioned, some very serious intellectual debates ⁓ over to ensure the most And that's really what it came down to with Medicare, right? Because you had had a growth through the 1940s and 1950s of private health insurance. After the World War II, the soldiers were coming back, economy was booming, and because of the wage controls in World War II, health got tied to employment. And therefore had a large growth in health insurance, employer-based health insurance, and the people who were left out were people who were too old to have a job, so the elderly and then the poor. And so that's what Medicare and Medicaid, which came about at the same time, to alleviate. And it wasn't a bunch ⁓ you know, evil Republicans trying to ⁓ the government from providing benefits. It was a debate over how best to provide benefits to the people who needed it, how best to create a safety net. ⁓ it's, think, a debate we still wrestle with today. James, I, you know, I first got into you know, economics and learning about Hayek ⁓ Mises. And then it took me a while more to really get into James Buchanan and Gordon Tulock I'm a fan of the podcast Econ Talk. And if anyone wants to look up, there's some good episodes that go into the thinking behind these two, these two people. James Buchanan, he was really responsible for a lot of the behavioral ⁓ political choice so ⁓ ⁓ big thesis was that political actors actually behave like economic actors, and they pursue their own self interest. So just because you put control of an into the government, doesn't all of a sudden, the people who are controlling it don't all of a sudden act in an altruistic fashion. They act just as self interested as if it was controlled by a corporation. And Tullock, he was He really talked about rent seeking and how once you move something into the government, it becomes more beneficial for firms to expend capital, not on creating wealth or creating better products, but rather to capture wealth transfers through the government. you know, a classic example is a firm that argues for more regulation and will actually put money into lobbying for more regulations because they realize that will keep competitors out and therefore the ROI on lobbying becomes better than the ROI on actually improving your product and ⁓ wealth creating ⁓ societal So they're two really good economists. And really, you look back at what they're saying about Medicare, it absolutely came true, right? If you look at what happened to Medicare, it grew faster than it was originally projected. It created a huge fiscal imbalance and attracted a huge amount of rent seeking coalitions that we still see today. I how much lobbying goes into the American Hospital Association, the American insurance industry, pharma, the AMA, you have all these different groups putting billions and billions of dollars into into lobbying so that they can try to shift these legislative reforms or legislative initiatives so they can get more money into their own interest group. ⁓ And so it really, they were very prescient, Tullock and Buchanan about what would happen if Medicare was created. And I think history's proven them right.
Anish Koka: Yeah, I mean, it seems like something so obvious, economists some insight to say verbalize that if you ⁓ have... certain ⁓ you're in ⁓ private market, sorry, you're not public citizen, ⁓ you're doing things for your good. And this is thing that physicians get banged on a lot, mean, ⁓ physicians are, ⁓ is why are allowed to own businesses because hey, physicians are gonna do ⁓ what...
Anthony DiGiorgio: You're supposed to be altruistic.
Anish Koka: Yeah, exactly. no, but physicians are going ⁓ do what's going to butter theirown bread and ⁓ can't have that. So, okay, that's the case, then ⁓ why you think that the bureaucrats that are going to manage this are going somehow be altruistic as well? Why would the ⁓ not also be ⁓ and do what's for the bureaucrat ⁓ and not what's for the wider public? So it fundamentally Buchanan and Tullock are tilting against the looming large bureaucracies that are to come, starting in the, and that already existed actually, mean, the 1930s saw, the federal bureaucracy just massively explode. And yeah, were tilting at that and saying, look, this not gonna go well because ⁓ all these are staffed by bureaucrats that are not looking out for you, even though they say they are, ⁓ they're looking for themselves. And they pointed that bureaucrats are... always going to attempt to maximize their budget. They're going to maximize how many people they hire. Right? that, is that always going to be ⁓ line what is best for the citizen? if so, So I think, I think maybe you'll have some exceptions every now and then that show up, ⁓ but the majority of bureaucrats don't. And we've seen that They described, you know, they described what would happen in terms of how it is, you have rent seeking behavior that develops, have regulatory capture that develops where you have regulators that are not making a lot of money, but if they're a nice industry, then they get a nice golden parachute when they leave. So really it was an extension of Hayek's Hayek's arguments, Because Hayek didn't really spend a lot of time talking about why bureaucrat was dysfunctional. His primary thrust was, ⁓ you in the Road to Serfdom and the use of knowledge in society was that the bureaucrat doesn't know what you know, you the physician knows who's in the exam room with the patient, and therefore he's going to make bad decisions. and Tullock are it a step further and saying, not only do they have no idea, they are going to make decisions that... could care less about you in the exam room with a patient. And look what happened.
Anthony DiGiorgio: Yeah. Yeah.
Anish Koka: I mean, Epic is Epic and the HR, right, which you write about ⁓ an exact example of like the bureaucrat does not care. He just wants a wrapper to tell the public that I'm doing a good job. You know, we have EMR. It doesn't what exactly EMR is doing, ⁓ but we an EMR and it's amazing and it's digital and everyone has access to it.
Anthony DiGiorgio: Yeah, I think that's great example. mean, if EMR had truly improved the provision of medicine, would never have needed to be mandated, right? It would have come about naturally. There's no reason you would have to mandate something that makes physicians work easier and more efficient. It would come about through competitive advantage. But once you mandated EHR,
Anish Koka: Thank
Anthony DiGiorgio: Now, all of a sudden, the bureaucrats who are writing the rules around EHR are susceptible to outside influence. And so the EHR companies, instead of spending money on making a better product, are going to spend money on lobbying those bureaucrats to make sure that the rules that are created around EHR are specific to their specific EHR and so no other competitors can come in. And that's exactly what happened. That's why there's only a handful of EHRs in the market. because the meaningful use criteria were specifically written to keep competitors out. It had nothing to do with the public good, had nothing to do with making physicians or patients lives easier, had everything to do with there's now a huge pot of money labeled Medicare physicians need to have access to and to get access to that pot of money, they need to have a Medicare approved EHR and therefore the ROI was in lobbying and not in creating a better product.
Anish Koka: yeah, so Tullock's foundation. So rent seeking that that ⁓ what you described the the the of wealth to influence regulators to give you a ⁓ regular moat, you know, a barrier to entry for other competitors. That is concept that George Tullock introduced in the 19th, ⁓ 1960s. And that exactly what has happened. And also, by the way, ⁓ the other thing that we've talked about not infrequently is the fact that there's all this money being spent in the economy and so much of it is just completely not productive. the equivalent of like ⁓ out teams of people to dig ditches with spoons. ⁓ we are spending money. We're ditches and not ditches that actually do anything. They're not drainage ditches or anything that actually ⁓ will away stormwater or something like that. There's ditches to dig ditches. is because we want employment. mean, think about the massive amount of lobbying dollars that are spent. That is completely unproductive. you know, if we want a vibrant economy, we want an empire that, know, I know, outlasts. outlasts, you know, than, you know, a few hundred, a few hundred. Yeah. A few hundred years. You ⁓ we are going, we are going to have to shift. We're to have to shift into ⁓ spending dollars aren't just completely ⁓ useless. The ⁓ should say what mentioned earlier in terms of regulatory capture, you know, the the and, know, what we were recently talking about in terms Moderna.
Anthony DiGiorgio: Our kids? Yeah.
Anish Koka: ⁓ and their flu vaccine coming, bringing that to market, right? You it's so funny. It's embarrassing say, like, I've gotten a flu vaccine every year for God knows how long, right? ⁓ I almost specifically prescribe a vaccine because I'm a cardiologist. ⁓ I do have small group of primary care folks, but in general, I'll just send people to, because it's such a primary care practice, I don't actually buy the flu vaccine. just send them to the local pharmacy. go get the flu vaccine there. So don't actually prescribe the flu vaccine. I don't have to be like, this is the one to get. So I actually didn't even have an idea before I started delving into this because of this whole Vinay Prasad controversy with Moderna versus Vinay and the FDA, how many flu vaccines there were. And then I started asking a couple of primary care colleagues, I'm like, what flu vaccines do you give? Every single one of them is like, oh yeah, we give flu block, we give HD flu zone, and we give the high dose flu. I was like, okay, what about flu Arix is the Moderna comparator and four of them have been like what? I don't know what you're talking about. I don't know what that one is. And that's the one Moderna chose. And by the way, that's the one that was some regulator in the FDA was like, you know, you should choose something else. And Moderna was like, okay, but we're going to choose this one. And then, you know, there was nothing. And the idea was that, Moderna just kind of rolls over, rolls over this whole regulatory process. Anyway, that whole thing is a nice example, I think, I believe, of regulatory capture, where you have industry that has captured the regulators that are supposed to be regulating industry, right? That is a concept that that concept was introduced by George Stigler also talked about this and he talked about the that you know the regulator ⁓ becomes tool of the ⁓ So yeah, I this ⁓ so ⁓ that's ⁓ you know, took, took, take, Hayek Mises ⁓ on and they were the, ⁓ guess the primary ones. ⁓ there anyone else? Anthony, that was very prominent. I mean, I guess Friedman, mean, Milton Friedman, of course, was, ⁓ was as well.
Anthony DiGiorgio: Right. And it was, it's not like during the Medicare debate, at least, I was obviously neither one of us were around for it. But as far as, as I know, it wasn't like Buchanan, Tullock, Friedman were out really speaking out against Medicare. I think it was more the opponents in Congress, know, get Barry Goldwater, Ronald Reagan were using those arguments. I mean, you had mentioned the AMA opposed Medicare. They actually had a series called Coffee Talk. Ronald Reagan was narrated the argument against Medicare. ⁓ And I think they encouraged housewives to get together and listen to these recordings over coffee and to listen to the arguments against Medicare. it wasn't like ⁓ was writing in the Washington Post on why socialized medicine was bad, but his arguments were ⁓ the ones being
Anish Koka: Yes. Yeah, right. Exactly. Yeah. So they were the kind of the intellectual, you know, springs that the politicians were then, who had the ability to deliver things in charismatic fashion as the old Gipper was, would put out. interestingly, should we mention the fact that Buchanan, Tullock,
Anthony DiGiorgio: Right. Right.
Anish Koka: probably yeah, Buchanan-Tullock-Mises probably would view physicians not as the good guys in this whole thing.
Anthony DiGiorgio: think that's totally worth mentioning and I think it's worth talking about. mean, we physicians are just another interest group and that's what I get upset with when ⁓ AMA or physician groups act like cartels. But I understand it, right? ⁓ We a in a way. But when the ⁓ comes out strongly scope of practice issues, physicians are just another interest group and that's what I get upset with when ⁓ the AMA or physician groups act like cartels. But I understand it, right? ⁓ are a cartel in a way. But when the AMA ⁓ comes out strongly scope practice issues, I think they're acting like a cartel. think, you know, if we really want to stick to first principles, then the physicians shouldn't be scared of, you know, a nurse practitioner hanging a shingle next to Koka cardiology and competing with you. You're going to probably offer a better product, but if people want to shop around, they should have that ability. So when they're against scope of practice, simply for scope of practice sake, ⁓ then totally that with the Hayekian I think they're acting like a cartel. think, you know, if we really want to stick to first principles, then the physicians shouldn't be scared of, you know, a nurse practitioner hanging a shingle next to Koka cardiology and competing with you. You're going to probably offer a better product, but if people want to shop around, they should have that ability. So when they're against scope of practice, simply for scope of practice sake, ⁓ then totally that with the Hayekian Tullock Buchananist view that we are just acting like another, you know, large rent seeking organization. That's what the RUC is, you know, right? Is that it's a bunch of groups basically arguing with each other over whose code should be paid the most. And a brilliant piece of legislation. If you want to keep physicians fractured and fighting amongst themselves as you make a fixed pie and you tell all the subspecialty physician groups to go after it. Tullock Buchananist view that we are just acting like another, you know, large rent seeking organization. That's what the RUC is, you know, right? Is that it's a bunch of groups basically arguing with each other over whose code should be paid the most. And a brilliant piece of legislation. If you want to keep physicians fractured and fighting amongst themselves as you make a fixed pie and you tell all the subspecialty physician groups to go after it. but they can only get paid more if their colleagues and other specialties get paid less. So it was a brilliant, brilliant way for Congress to make sure the physicians were all at each other's throat. But it is a, another classic example of all the money that has spent, know, four RUC meetings a year, four CPT meetings a year, countless towards consultants and making these codes and valuing these codes and how to get the most value of these codes. you know, just a ton of money going into this regulatory capture. but they can only get paid more if their colleagues and other specialties get paid less. So it was a brilliant, brilliant way for Congress to make sure the physicians were all at each other's throat. But it is a, another classic example of all the money that has spent, know, four RUC meetings a year, four CPT meetings a year, countless towards consultants and making these codes and valuing these codes and how to get the most value of these codes. you know, just a ton of money going into this regulatory capture. that is really just a byproduct of legislation. that is really just a byproduct of legislation.
Anish Koka: Right. Buchanan and Tellic did have a. Well, let me first exactly ⁓ you're saying about... It would nice, ⁓ and is one of the reasons we do this ⁓ show. was one of the original reasons I remember calling and being like, hey, ⁓ we to talk about this because a lot ⁓ of solutions that are being put forth by physicians, I find wanting because they're such short-term band-aids. It's like... It's there. They're all solutions within within the game that has been set up for us And it's the game is set up for us to lose. I mean, it's an unwinnable game. We cannot win. Right. I mean, if you, you know, if the game is maximizing compensation for physicians. Right. So and suppose we say that's an OK thing. Say we say we're Ayn Randian and say there's nothing wrong with being selfish. Actually, that is the best thing in terms of human flourishing for everyone to be to be to be selfish. You know, within a within some moral set of rules. But we use that as a framework, ⁓ if you within this game, it is fixed pie. ⁓ So ⁓ if get for ⁓ you Anthony DiGiorgio, Dr. Giorgio are going to get less for neurosurgery. And so we are just constant. So there's no winning there. There's no there's no there's no growing the pie. So the only way to do that to is think different. And I think part of issue is, that we have these ⁓ dedicated ⁓ streams ⁓ that that go to us, that that have been ⁓ working very for physicians. Right. ⁓ So ⁓ an disconcerting for physicians that have known nothing else to be like, wait, you're going to just remove that? Meaning, what do we do if there is no Medicare? It's just not even a thing about like, yeah.
Anthony DiGiorgio: Well, it's it's not even that if I, you know, I've had conversations with people that can't even imagine Medicare without a rock or without an RV use and CPT codes at which forget no Medicare is it but the original Medicare, you know, up until the 80s, it was UCR the usual customary reasonable rate. Right. So then that's how they got doctors on board is they said, hey, you're just going to be able to charge what you normally charge, whatever your standard rate is. That's going to be what we pay you. And that was for
Anish Koka: Right. Right. Right. Forget. Yeah. Yeah. Forget. No Medicare. Medicare without a RUC. Right.
Anthony DiGiorgio: 20 years until they realized that it was costing too much that were acting like rent seeking cartels. Prices were going up, reimbursements for physicians were sky high. so Congress said, we're going to not let you just charge whatever you want. We're going to make it a fixed pie. And you have to divvy that pie up amongst yourselves with this RBRVS, Based Relative Value Scale. And that was the birth of the RVU and the RUC. ⁓ So, but now, like I totally agree with you, that is so ingrained in people that nobody can even fathom non-RVU based Medicare I mean, it's it's permeated into private contracts, it's permeated into every aspect of American healthcare, and nobody can even imagine ⁓ ⁓ traditional market when it comes to healthcare.
Anish Koka: Right. so, And you know, shows you forward thinking ⁓ these folks that in the early 1960s, you know, there's there's a book, there's a book that they wrote called ⁓ The Calculus Consent, right? A legal, you know, logical founded foundations of constitutional democracy. And they lay ⁓ they lay out the solution is. So just like what we're saying, they say that, you hey, you can try to play the rules. ⁓
Anthony DiGiorgio: Mm-hmm.
Anish Koka: you will lose. Or can try to change the rules of the game. ⁓ You change the game. So fundamentally the game ⁓ so you're playing within this construct that is bound to make you lose. ⁓ And so what talked about this distinction between constitutional decisions. Sometimes that's confused because people think you need a constitutional amendment. No, you don't need that's impossible. That'd be bad. You can barely figure out whether or not the executive can can tariff people or not. God forbid. I don't know what it would take to get a constitutional amendment passed. Anyway, so no, it's it's this distinction of constitutional decisions, which is which is essentially choosing the rules of the game and then political decisions and political decisions are playing within those rules. And that's what I see physicians doing constantly, which
Anthony DiGiorgio: Right
Anish Koka: By the way, I don't think that's a bad thing. There are all these folks that arguing, Ed Gaines on IDR, NSA. Obviously, we are very much in the weeds of those type of policy things. But I think if we are not doing both, we should be able to walk and chew gum. we're not... in the short term trying to make changes but but not doing something a long-term view ⁓ the problem and that's what i don't see enough of i don't see enough of ⁓ physicians talking about ⁓ fundamentally changing the the rules of the game and i think anthony it is in large part because there's way too many folks getting back what our original conversation was there are way too many folks that ⁓ through ⁓ lobbying the I know physicians will recoil at that and say, what do mean? Like we are, you know, ⁓ we haven't done It's insurance companies that are bad. Yes, I know we can always point fingers and do whatever, but ⁓ it is the that. We have enjoyed a little bit of a monopoly on certain things and captured revenue. And I think we should be more confident. We are very well, we're well-trained, we're highly filtered generally. we should be confident about ⁓ place ⁓ the marketplace. I see a lot of ⁓ that just have no confidence. And that's why they resort to being like, no, ⁓ must not allow PAs to do this. We must not allow whoever does. mean, who's positioned to create, to kind capitalize on AI and a practice that serves patients but isn't ⁓ practice cost and stuff, right? I mean, there's got to be some bright folks among, you know, particularly bright folks among us, ⁓ more so probably other groups. Yeah, again, I have that confidence in the physician. class because think it's a relatively elite class of folks and I think ⁓ we would do fine ⁓ in market if we had to compete ⁓ against whoever is in the market trying to deliver ⁓ healthcare services. that's, ⁓ yeah, I we as a physician group, of... imbibe that. But I think it's hard to do, Anthony, right? Because I mean, if you're making large sums of money through the current system, asking for change, I mean, I don't know that that's going to happen. Yeah, I don't know how that's going to happen. I don't know if that's going to happen internally. know, what do you do think that's something that physicians as a group are going to be able to get around, get their arms around?
Anthony DiGiorgio: Well, so I think a couple of points there is one, it's there's a little bit of lack of imagination because you're right, a lot of the specialty advocacy groups only exist in the system that we know. Right. If you look at like the AMA's advocacy priorities, it's ⁓ year conversion factor, scope of practice. ⁓ Those are basically the two things. And again, you're just playing within
Anish Koka: Yeah.
Anthony DiGiorgio: the rules that have been set up now for 40 years with the RBRVS. That's the extent, they're always on the defensive, they're fighting the next conversion factor cut. There's no forward thinking. There's no, well, how are we gonna design a healthcare system that works for physicians and patients? The people that are figuring it out are the direct primary care docs, right? They're realizing the rules of the game have not worked. They've lost, they lost with UCR, they lost with the RBRVS, and they're saying, we're out.
Anish Koka: Yes. Yes.
Anthony DiGiorgio: You know, so more and more primary care doctors were the do you know what the latest stats were? I thought I read something like five to ten percent Of primary care doctors have dropped Medicare or have yeah, ⁓ don't and please correct me if I'm wrong, but ⁓ an increasing number You know the total overall percentage only about one point five percent of doctors have dropped but more primary doctors are dropping because they are realizing like our friend Josh Umber says that
Anish Koka: Medicare, Yeah? I don't know what the exact percentage is,
Anthony DiGiorgio: that they need to step away from this third party system, that the whole system is broken and they're not going to win by continuing to play this game. they're going to get back to a real Friedman-esque type for something that really works within a market. And that's primary care. Primary care can completely work within a free market and they don't need to keep playing ⁓ the game that's been set up for them.
Anish Koka: Right, so speaking in nomenclature, those are the constitutional level rules that we must look to kind of disrupt and change. ⁓ you, ⁓ reform focused on that those types of structural changes, that has a much higher chance of long-term meaningful, good outcome. ⁓ you know, ⁓ ⁓ right.
Anthony DiGiorgio: Right. Right, instead of just adjusting the conversion factor up 2%.
Anish Koka: Correct, correct. 100%. So that Buffalo surgery center that is doing in an ASC, they have broken the rules of the game. ⁓ Of course, can I not mention the ⁓ surgery center Oklahoma, right? The OG ⁓ in terms doing that. So ⁓ yeah, no.
Anthony DiGiorgio: Yeah, and we all know, sorry, we all know, you know, centers like that that are operating outside this third party payment space. There's a great spine center in Indiana that is completely physician owned and is outside of Medicare. And those patients want that once they hit 65 are upset that they can't keep going to that clinic. And so I think the patients are starting to come to terms with this, too, and realizing we're paying all this money into Medicare through our lives. Now we reach Medicare age and we can't get the services we want. because the government rules are so restricted and been so captured by large corporations and rent seeking institutions that it's not working for them.
Anish Koka: Right. Right. the other structural rule changes that have been proposed ⁓ ⁓ is, you know, price transparency mandates, right? So that that seems that seems to have not worked. Would you
Anthony DiGiorgio: And again, like EHR in a functioning market, you wouldn't have to mandate price transparency. know, nobody hires a plumber without at least getting an estimate, right? It may be that your pipe is burst on Christmas Eve in the middle of the night and you're going to pay whatever you need to pay to get that pipe fixed. But in the most times you're going to get a price for whatever service you get before you sign up for that service. So why are we having to mandate price transparency?
Anish Koka: Right. Right. But it hasn't, it's been one of those, I think it's one of those, you know, and by the way, you know, it's not that have forgotten who Tulloch and Buchanan were. mean, ⁓ of the, many of the things that we see proposed today come from, ⁓ from that, ⁓ from them. So, know, this price transparency idea ⁓ that everyone just knows prices, we're going to start doing the right things. But, but, you know, it hasn't quite worked because ⁓ it it's almost that you have to ⁓ do things at once. Right. You know, so just, you know, if you don't, if don't fix the insurance market. ⁓ And you have price transparency mandates, nobody, some nobody follows, but the, you know, the, the hospital system is just like, okay, it's $7,000 for this. It's like, all right. and if, employers aren't, aren't, aren't pushed to do something, then, then you don't really get much meaningful change. So ⁓ I think that for whatever, multiple reasons, that hasn't seemed to have that much of an ⁓ impact, though not opposed to prices being transparent. ⁓ what, what about the employer, ⁓ insurer link?
Anthony DiGiorgio: Yeah.
Anish Koka: That an intellectual right-wing. ⁓
Anthony DiGiorgio: I mean, yeah, but so that again, as we mentioned before, came out of World War Two, when wages were frozen, employers could only couldn't offer higher wages, so they offered benefits. And it just so happened that the health benefit was not taxed. So it's actually double tax protected, right? So the employer doesn't pay payroll taxes on the health, the value of the health benefit. The employee doesn't pay taxes on the value of the health benefit. And that essentially acts as a subsidy.
Anish Koka: Yeah.
Anthony DiGiorgio: for healthcare. So this has been a huge subsidy since the 1940s for healthcare in that it is largely untaxed. Now, if you're an ACA beneficiary and you're buying an Obamacare plan on the market, you're using post-tax dollars. you are structurally disadvantaged, right? So you're having to pay post-tax dollars for that plan. So you're structurally disadvantaged and you don't get that subsidy. But it's been a huge distorting subsidy that's put more money into healthcare. And as physicians, we've probably benefited from that.
Anish Koka: Yeah. Yeah. Yeah.
Anthony DiGiorgio: And it's uncomfortable to say that if that was taken away, we may face a little bit of a pay cut there.
Anish Koka: Right. Right. But again, it doesn't seem to like, know, so that was one of the things that was in the ACA, right? The ACA plan that you buy is not, you know, it's not tax. It's a post tax. It's a post tax expense. But we have the ICHRA that comes out, right, under Biden and stuff in an effort to try and it's to solve a problem of massively increasing insurance costs to try to help try to have employers come in and help help this. So ⁓ again, ⁓ I really think that you need to address this at multiple different levels if you want something meaningful. If you try any one thing, it's not going to really work. So sure, mean, break the employer insurance link. And unless you hold firm on some other things, the insurance company is just going be like, right, so that's $1,200. And good luck with winning your elections next year.
Anthony DiGiorgio: Right. Well, and even that's the the the Breakup Health Care Act that's been proposed by Holly and Warren really doesn't get it for me the heart of the problem. It just goes out for insurance companies. But as we as we constantly talk about on this show, the consolidation on the supplier, the provider space is just as bad. So if you if you hamstring the insurance companies in any way, hospitals are going to be thrilled because now they have even more bargaining power. And so they're going to increase their prices and you're really not going to address some of these root causes again We're just talking about things tinkering within the system Just having different interest groups go after each other and like the whole theme of this episode We haven't taken care of these structural things that have got us to this point that there's this huge pot of money sitting in the government and What three trillion dollars of health care spending go through the government? And you don't address the fact that there's three trillion dollars of government money
Anish Koka: Yeah.
Anthony DiGiorgio: to be had via lobbying, you're never gonna fix the underlying problem. You're just gonna have a hip fighting AMA, fighting the AHA until the dollar loses all value.
Anish Koka: for those dollars, ⁓ Of course, the interesting wrinkle to all this, I I'm sure who the, who's the predecessor to Tullock and Buchanan. Maybe it's Anthony Giorgio. The interesting wrinkle to this is I don't think anyone predicted the level of fraud. ⁓ didn't have any idea of the scope of the fraud probably ⁓ abuse, and abuse, I guess. That is what a large percentage that ends up being. mean, as you've said very that you can't not have a program with zero fraud, then there's actually zero waste, I say, not fraud, hopefully is close
Anthony DiGiorgio: ⁓
Anish Koka: to zero but ⁓ but yeah a problem you know program zero abuse is almost impossible to do that's not the goal but i it does really seem like a large chunk ⁓ of say is going is you so ⁓ is going things that are not really giving much of ⁓ a benefit at so I don't know what exactly to call that, meaning, you know, I gave the example of the autism therapist. gave example of the autism therapist who, you know, ⁓ is doing ⁓ stuff, but is really ⁓ meaningful? am not sure. You know, or how do we. ⁓ So you get to back to the original problem of as long as you have a third party person who's paying for this, then ⁓ everyone like, no, no, we have to have this. And it's like, ⁓ there really no other way to do it than to kind of ⁓ wind how much we ⁓ spend. on these these programs so well yeah
Anthony DiGiorgio: Yeah, think I just, you know, to kind of wrap that that point up, the fact that so much of our health care dollars goes through third party payments when it doesn't need to. And again, we've we've come accustomed to this. think that the only way you can take care of a safety net or even the only way that you can take care of your own health insurance is to route it through the government first. This just doesn't make any sense. Ninety five percent of Americans could have their lifetime health care expenses covered without any government involvement. think once people realize that, then we could maybe work towards a system that works for everyone. I don't know, it seems like ⁓ classical economics are waning ⁓ these
Anish Koka: Right. Right. Yeah. And I think there's an opportunity here because the money has seemingly running out. now, I mean, I've never seen this much interest in in in in health care policy and fraud and, you know, waste abuse, how we're spending these dollars because because, you know, we're kind of hitting the point where folks really feel things. So. All right. So so just to summarize, we've talked about, know, the the the intellectual heavyweights in the early 60s who were ⁓ behind many of the arguments against ⁓ massive government intervention to healthcare. know, we'll try to link to some of these folks. know, so it was ⁓ James Buchanan, ⁓ Gordon Tullock, course, Friedrich Hayek. We talked about famous book, The Calculus of Consent, ⁓ by Buchanan Tullock. We talked about signature concept that Tullock which is rent seeking, regulatory capture by George Stigler. yeah, we'll keep trying talk about this stuff. So so much, Anthony, for talking about ⁓ it. All righty.
Anthony DiGiorgio: Thank you. Great job.
Anthony DiGiorgio: Hello. I think ⁓ sleep aids for our listeners is a good one.
Anish Koka: Sleep aids for listeners. So, I mean, again, I can't say enough about your graphic novel on the history of healthcare. I mean, it's so good. It's really so good. I wish I had something intelligent to add to it, but I mean, you've done a really great job. It's very well thought out. And I really do think it's probably the single best explainer in a nice...
Anthony DiGiorgio: I appreciate that.
Anish Koka: digestible way, right? I mean, you can go read like five or six books what happened, but ⁓ boy, like you have so much stuff packed in there. ⁓ it's really, really good. ⁓ It's offlabelideas.com, right? And ⁓ you get, you know, for five bucks a month, I mean, it's just, it's a steal. I mean, there's nothing like this out there. So I would urge everyone to subscribe to this stuff so that you can...
Anthony DiGiorgio: Yes.
Anish Koka: have a deeper understanding of where we are in healthcare. as part of this, thought it'd be, we thought it'd be good to delve into some of the discussion that was taking place prior to the passage of Medicare. Medicare passed in 1965, and it was really a mandate that was delivered to LBJ. to extend Great Society vision that FDR had. There's interesting debate about why that was, clearly the the end of the ⁓ 50s, the early 60s, rights movement, there was really a huge shift to the left terms of progressivism and kind of creating these, great society and taking care of your fellow man. ⁓ that kind of was what carried the day and is what, know, ⁓ in part to RFK, RFK, JFK elected. then of course, coming on and yeah, LBJ's signature ⁓ accomplishment. you know, probably one of the biggest things that he did was pass Medicare, ⁓ you know, there was. ⁓
Anthony DiGiorgio: I thought you were going to say the Vietnam War, but go ahead.
Anish Koka: Yeah, right. Well, that's accomplishment, certainly. My God, the Vietnam War. What a mess that was. So sad. Fifty eight thousand. I still can't believe fifty eight thousand young men died in that in that kind of futile war. And, you know, for what? But so there was there was a discussion, you know, it wasn't just that everyone was like, OK, Medicare is there. Let's just pass it. You know, the AMA opposed Medicare. was there was a significant intellectual debate that happened. in the early 60s, prior to the passage of Medicare, that discussion was put out to the public in a variety of different forms. Man, I wish I was there. I wish to kind of see it and see, but we're not. So we're just left to kind of piece some stuff together. But there were some great intellectuals that were arguing on either side. The folks that were arguing against Medicare were... some intellectuals that kind of sourced, that were sourced from Austrian economists, Ludwig von Mises, Friedrich Hayek. And then that next generation of folks that were kind of those fundamental theories and moving them forward were some other intellectuals. There was right? His first name is Gordon Gordon to look ⁓ and then Buchanan was Buchanan's first name. James Buchanan. Right. OK. ⁓ James Buchanan. ⁓ Dr. ⁓ Right. can you give me little bit of a flavor of what the argument was being made against, you know, this
Anthony DiGiorgio: Gordon Tulloch, yes. James, James Buchanan, yes. Unfortunately, the same as the president, but not President James Buchanan.
Anish Koka: government providing, what could be wrong with the government providing Medicare, Dr. Giorgio?
Anthony DiGiorgio: Right. And this is, you look back into the, you know, not the revisionist kind of progressive line of what the debate was, where was, you know, just a bunch of dodgy old men screaming that socialism is bad. There were actually, like you mentioned, some very serious intellectual debates ⁓ over to ensure the most And that's really what it came down to with Medicare, right? Because you had had a growth through the 1940s and 1950s of private health insurance. After the World War II, the soldiers were coming back, economy was booming, and because of the wage controls in World War II, health got tied to employment. And therefore had a large growth in health insurance, employer-based health insurance, and the people who were left out were people who were too old to have a job, so the elderly and then the poor. And so that's what Medicare and Medicaid, which came about at the same time, to alleviate. And it wasn't a bunch ⁓ you know, evil Republicans trying to ⁓ the government from providing benefits. It was a debate over how best to provide benefits to the people who needed it, how best to create a safety net. ⁓ it's, think, a debate we still wrestle with today. James, I, you know, I first got into you know, economics and learning about Hayek ⁓ Mises. And then it took me a while more to really get into James Buchanan and Gordon Tulock I'm a fan of the podcast Econ Talk. And if anyone wants to look up, there's some good episodes that go into the thinking behind these two, these two people. James Buchanan, he was really responsible for a lot of the behavioral ⁓ political choice so ⁓ ⁓ big thesis was that political actors actually behave like economic actors, and they pursue their own self interest. So just because you put control of an into the government, doesn't all of a sudden, the people who are controlling it don't all of a sudden act in an altruistic fashion. They act just as self interested as if it was controlled by a corporation. And Tullock, he was He really talked about rent seeking and how once you move something into the government, it becomes more beneficial for firms to expend capital, not on creating wealth or creating better products, but rather to capture wealth transfers through the government. you know, a classic example is a firm that argues for more regulation and will actually put money into lobbying for more regulations because they realize that will keep competitors out and therefore the ROI on lobbying becomes better than the ROI on actually improving your product and ⁓ wealth creating ⁓ societal So they're two really good economists. And really, you look back at what they're saying about Medicare, it absolutely came true, right? If you look at what happened to Medicare, it grew faster than it was originally projected. It created a huge fiscal imbalance and attracted a huge amount of rent seeking coalitions that we still see today. I how much lobbying goes into the American Hospital Association, the American insurance industry, pharma, the AMA, you have all these different groups putting billions and billions of dollars into into lobbying so that they can try to shift these legislative reforms or legislative initiatives so they can get more money into their own interest group. ⁓ And so it really, they were very prescient, Tullock and Buchanan about what would happen if Medicare was created. And I think history's proven them right.
Anish Koka: Yeah, I mean, it seems like something so obvious, economists some insight to say verbalize that if you ⁓ have... certain ⁓ you're in ⁓ private market, sorry, you're not public citizen, ⁓ you're doing things for your good. And this is thing that physicians get banged on a lot, mean, ⁓ physicians are, ⁓ is why are allowed to own businesses because hey, physicians are gonna do ⁓ what...
Anthony DiGiorgio: You're supposed to be altruistic.
Anish Koka: Yeah, exactly. no, but physicians are going ⁓ do what's going to butter theirown bread and ⁓ can't have that. So, okay, that's the case, then ⁓ why you think that the bureaucrats that are going to manage this are going somehow be altruistic as well? Why would the ⁓ not also be ⁓ and do what's for the bureaucrat ⁓ and not what's for the wider public? So it fundamentally Buchanan and Tullock are tilting against the looming large bureaucracies that are to come, starting in the, and that already existed actually, mean, the 1930s saw, the federal bureaucracy just massively explode. And yeah, were tilting at that and saying, look, this not gonna go well because ⁓ all these are staffed by bureaucrats that are not looking out for you, even though they say they are, ⁓ they're looking for themselves. And they pointed that bureaucrats are... always going to attempt to maximize their budget. They're going to maximize how many people they hire. Right? that, is that always going to be ⁓ line what is best for the citizen? if so, So I think, I think maybe you'll have some exceptions every now and then that show up, ⁓ but the majority of bureaucrats don't. And we've seen that They described, you know, they described what would happen in terms of how it is, you have rent seeking behavior that develops, have regulatory capture that develops where you have regulators that are not making a lot of money, but if they're a nice industry, then they get a nice golden parachute when they leave. So really it was an extension of Hayek's Hayek's arguments, Because Hayek didn't really spend a lot of time talking about why bureaucrat was dysfunctional. His primary thrust was, ⁓ you in the Road to Serfdom and the use of knowledge in society was that the bureaucrat doesn't know what you know, you the physician knows who's in the exam room with the patient, and therefore he's going to make bad decisions. and Tullock are it a step further and saying, not only do they have no idea, they are going to make decisions that... could care less about you in the exam room with a patient. And look what happened.
Anthony DiGiorgio: Yeah. Yeah.
Anish Koka: I mean, Epic is Epic and the HR, right, which you write about ⁓ an exact example of like the bureaucrat does not care. He just wants a wrapper to tell the public that I'm doing a good job. You know, we have EMR. It doesn't what exactly EMR is doing, ⁓ but we an EMR and it's amazing and it's digital and everyone has access to it.
Anthony DiGiorgio: Yeah, I think that's great example. mean, if EMR had truly improved the provision of medicine, would never have needed to be mandated, right? It would have come about naturally. There's no reason you would have to mandate something that makes physicians work easier and more efficient. It would come about through competitive advantage. But once you mandated EHR,
Anish Koka: Thank
Anthony DiGiorgio: Now, all of a sudden, the bureaucrats who are writing the rules around EHR are susceptible to outside influence. And so the EHR companies, instead of spending money on making a better product, are going to spend money on lobbying those bureaucrats to make sure that the rules that are created around EHR are specific to their specific EHR and so no other competitors can come in. And that's exactly what happened. That's why there's only a handful of EHRs in the market. because the meaningful use criteria were specifically written to keep competitors out. It had nothing to do with the public good, had nothing to do with making physicians or patients lives easier, had everything to do with there's now a huge pot of money labeled Medicare physicians need to have access to and to get access to that pot of money, they need to have a Medicare approved EHR and therefore the ROI was in lobbying and not in creating a better product.
Anish Koka: yeah, so Tullock's foundation. So rent seeking that that ⁓ what you described the the the of wealth to influence regulators to give you a ⁓ regular moat, you know, a barrier to entry for other competitors. That is concept that George Tullock introduced in the 19th, ⁓ 1960s. And that exactly what has happened. And also, by the way, ⁓ the other thing that we've talked about not infrequently is the fact that there's all this money being spent in the economy and so much of it is just completely not productive. the equivalent of like ⁓ out teams of people to dig ditches with spoons. ⁓ we are spending money. We're ditches and not ditches that actually do anything. They're not drainage ditches or anything that actually ⁓ will away stormwater or something like that. There's ditches to dig ditches. is because we want employment. mean, think about the massive amount of lobbying dollars that are spent. That is completely unproductive. you know, if we want a vibrant economy, we want an empire that, know, I know, outlasts. outlasts, you know, than, you know, a few hundred, a few hundred. Yeah. A few hundred years. You ⁓ we are going, we are going to have to shift. We're to have to shift into ⁓ spending dollars aren't just completely ⁓ useless. The ⁓ should say what mentioned earlier in terms of regulatory capture, you know, the the and, know, what we were recently talking about in terms Moderna.
Anthony DiGiorgio: Our kids? Yeah.
Anish Koka: ⁓ and their flu vaccine coming, bringing that to market, right? You it's so funny. It's embarrassing say, like, I've gotten a flu vaccine every year for God knows how long, right? ⁓ I almost specifically prescribe a vaccine because I'm a cardiologist. ⁓ I do have small group of primary care folks, but in general, I'll just send people to, because it's such a primary care practice, I don't actually buy the flu vaccine. just send them to the local pharmacy. go get the flu vaccine there. So don't actually prescribe the flu vaccine. I don't have to be like, this is the one to get. So I actually didn't even have an idea before I started delving into this because of this whole Vinay Prasad controversy with Moderna versus Vinay and the FDA, how many flu vaccines there were. And then I started asking a couple of primary care colleagues, I'm like, what flu vaccines do you give? Every single one of them is like, oh yeah, we give flu block, we give HD flu zone, and we give the high dose flu. I was like, okay, what about flu Arix is the Moderna comparator and four of them have been like what? I don't know what you're talking about. I don't know what that one is. And that's the one Moderna chose. And by the way, that's the one that was some regulator in the FDA was like, you know, you should choose something else. And Moderna was like, okay, but we're going to choose this one. And then, you know, there was nothing. And the idea was that, Moderna just kind of rolls over, rolls over this whole regulatory process. Anyway, that whole thing is a nice example, I think, I believe, of regulatory capture, where you have industry that has captured the regulators that are supposed to be regulating industry, right? That is a concept that that concept was introduced by George Stigler also talked about this and he talked about the that you know the regulator ⁓ becomes tool of the ⁓ So yeah, I this ⁓ so ⁓ that's ⁓ you know, took, took, take, Hayek Mises ⁓ on and they were the, ⁓ guess the primary ones. ⁓ there anyone else? Anthony, that was very prominent. I mean, I guess Friedman, mean, Milton Friedman, of course, was, ⁓ was as well.
Anthony DiGiorgio: Right. And it was, it's not like during the Medicare debate, at least, I was obviously neither one of us were around for it. But as far as, as I know, it wasn't like Buchanan, Tullock, Friedman were out really speaking out against Medicare. I think it was more the opponents in Congress, know, get Barry Goldwater, Ronald Reagan were using those arguments. I mean, you had mentioned the AMA opposed Medicare. They actually had a series called Coffee Talk. Ronald Reagan was narrated the argument against Medicare. ⁓ And I think they encouraged housewives to get together and listen to these recordings over coffee and to listen to the arguments against Medicare. it wasn't like ⁓ was writing in the Washington Post on why socialized medicine was bad, but his arguments were ⁓ the ones being
Anish Koka: Yes. Yeah, right. Exactly. Yeah. So they were the kind of the intellectual, you know, springs that the politicians were then, who had the ability to deliver things in charismatic fashion as the old Gipper was, would put out. interestingly, should we mention the fact that Buchanan, Tullock,
Anthony DiGiorgio: Right. Right.
Anish Koka: probably yeah, Buchanan-Tullock-Mises probably would view physicians not as the good guys in this whole thing.
Anthony DiGiorgio: think that's totally worth mentioning and I think it's worth talking about. mean, we physicians are just another interest group and that's what I get upset with when ⁓ AMA or physician groups act like cartels. But I understand it, right? ⁓ We a in a way. But when the ⁓ comes out strongly scope of practice issues, physicians are just another interest group and that's what I get upset with when ⁓ the AMA or physician groups act like cartels. But I understand it, right? ⁓ are a cartel in a way. But when the AMA ⁓ comes out strongly scope practice issues, I think they're acting like a cartel. think, you know, if we really want to stick to first principles, then the physicians shouldn't be scared of, you know, a nurse practitioner hanging a shingle next to Koka cardiology and competing with you. You're going to probably offer a better product, but if people want to shop around, they should have that ability. So when they're against scope of practice, simply for scope of practice sake, ⁓ then totally that with the Hayekian I think they're acting like a cartel. think, you know, if we really want to stick to first principles, then the physicians shouldn't be scared of, you know, a nurse practitioner hanging a shingle next to Koka cardiology and competing with you. You're going to probably offer a better product, but if people want to shop around, they should have that ability. So when they're against scope of practice, simply for scope of practice sake, ⁓ then totally that with the Hayekian Tullock Buchananist view that we are just acting like another, you know, large rent seeking organization. That's what the RUC is, you know, right? Is that it's a bunch of groups basically arguing with each other over whose code should be paid the most. And a brilliant piece of legislation. If you want to keep physicians fractured and fighting amongst themselves as you make a fixed pie and you tell all the subspecialty physician groups to go after it. Tullock Buchananist view that we are just acting like another, you know, large rent seeking organization. That's what the RUC is, you know, right? Is that it's a bunch of groups basically arguing with each other over whose code should be paid the most. And a brilliant piece of legislation. If you want to keep physicians fractured and fighting amongst themselves as you make a fixed pie and you tell all the subspecialty physician groups to go after it. but they can only get paid more if their colleagues and other specialties get paid less. So it was a brilliant, brilliant way for Congress to make sure the physicians were all at each other's throat. But it is a, another classic example of all the money that has spent, know, four RUC meetings a year, four CPT meetings a year, countless towards consultants and making these codes and valuing these codes and how to get the most value of these codes. you know, just a ton of money going into this regulatory capture. but they can only get paid more if their colleagues and other specialties get paid less. So it was a brilliant, brilliant way for Congress to make sure the physicians were all at each other's throat. But it is a, another classic example of all the money that has spent, know, four RUC meetings a year, four CPT meetings a year, countless towards consultants and making these codes and valuing these codes and how to get the most value of these codes. you know, just a ton of money going into this regulatory capture. that is really just a byproduct of legislation. that is really just a byproduct of legislation.
Anish Koka: Right. Buchanan and Tellic did have a. Well, let me first exactly ⁓ you're saying about... It would nice, ⁓ and is one of the reasons we do this ⁓ show. was one of the original reasons I remember calling and being like, hey, ⁓ we to talk about this because a lot ⁓ of solutions that are being put forth by physicians, I find wanting because they're such short-term band-aids. It's like... It's there. They're all solutions within within the game that has been set up for us And it's the game is set up for us to lose. I mean, it's an unwinnable game. We cannot win. Right. I mean, if you, you know, if the game is maximizing compensation for physicians. Right. So and suppose we say that's an OK thing. Say we say we're Ayn Randian and say there's nothing wrong with being selfish. Actually, that is the best thing in terms of human flourishing for everyone to be to be to be selfish. You know, within a within some moral set of rules. But we use that as a framework, ⁓ if you within this game, it is fixed pie. ⁓ So ⁓ if get for ⁓ you Anthony DiGiorgio, Dr. Giorgio are going to get less for neurosurgery. And so we are just constant. So there's no winning there. There's no there's no there's no growing the pie. So the only way to do that to is think different. And I think part of issue is, that we have these ⁓ dedicated ⁓ streams ⁓ that that go to us, that that have been ⁓ working very for physicians. Right. ⁓ So ⁓ an disconcerting for physicians that have known nothing else to be like, wait, you're going to just remove that? Meaning, what do we do if there is no Medicare? It's just not even a thing about like, yeah.
Anthony DiGiorgio: Well, it's it's not even that if I, you know, I've had conversations with people that can't even imagine Medicare without a rock or without an RV use and CPT codes at which forget no Medicare is it but the original Medicare, you know, up until the 80s, it was UCR the usual customary reasonable rate. Right. So then that's how they got doctors on board is they said, hey, you're just going to be able to charge what you normally charge, whatever your standard rate is. That's going to be what we pay you. And that was for
Anish Koka: Right. Right. Right. Forget. Yeah. Yeah. Forget. No Medicare. Medicare without a RUC. Right.
Anthony DiGiorgio: 20 years until they realized that it was costing too much that were acting like rent seeking cartels. Prices were going up, reimbursements for physicians were sky high. so Congress said, we're going to not let you just charge whatever you want. We're going to make it a fixed pie. And you have to divvy that pie up amongst yourselves with this RBRVS, Based Relative Value Scale. And that was the birth of the RVU and the RUC. ⁓ So, but now, like I totally agree with you, that is so ingrained in people that nobody can even fathom non-RVU based Medicare I mean, it's it's permeated into private contracts, it's permeated into every aspect of American healthcare, and nobody can even imagine ⁓ ⁓ traditional market when it comes to healthcare.
Anish Koka: Right. so, And you know, shows you forward thinking ⁓ these folks that in the early 1960s, you know, there's there's a book, there's a book that they wrote called ⁓ The Calculus Consent, right? A legal, you know, logical founded foundations of constitutional democracy. And they lay ⁓ they lay out the solution is. So just like what we're saying, they say that, you hey, you can try to play the rules. ⁓
Anthony DiGiorgio: Mm-hmm.
Anish Koka: you will lose. Or can try to change the rules of the game. ⁓ You change the game. So fundamentally the game ⁓ so you're playing within this construct that is bound to make you lose. ⁓ And so what talked about this distinction between constitutional decisions. Sometimes that's confused because people think you need a constitutional amendment. No, you don't need that's impossible. That'd be bad. You can barely figure out whether or not the executive can can tariff people or not. God forbid. I don't know what it would take to get a constitutional amendment passed. Anyway, so no, it's it's this distinction of constitutional decisions, which is which is essentially choosing the rules of the game and then political decisions and political decisions are playing within those rules. And that's what I see physicians doing constantly, which
Anthony DiGiorgio: Right
Anish Koka: By the way, I don't think that's a bad thing. There are all these folks that arguing, Ed Gaines on IDR, NSA. Obviously, we are very much in the weeds of those type of policy things. But I think if we are not doing both, we should be able to walk and chew gum. we're not... in the short term trying to make changes but but not doing something a long-term view ⁓ the problem and that's what i don't see enough of i don't see enough of ⁓ physicians talking about ⁓ fundamentally changing the the rules of the game and i think anthony it is in large part because there's way too many folks getting back what our original conversation was there are way too many folks that ⁓ through ⁓ lobbying the I know physicians will recoil at that and say, what do mean? Like we are, you know, ⁓ we haven't done It's insurance companies that are bad. Yes, I know we can always point fingers and do whatever, but ⁓ it is the that. We have enjoyed a little bit of a monopoly on certain things and captured revenue. And I think we should be more confident. We are very well, we're well-trained, we're highly filtered generally. we should be confident about ⁓ place ⁓ the marketplace. I see a lot of ⁓ that just have no confidence. And that's why they resort to being like, no, ⁓ must not allow PAs to do this. We must not allow whoever does. mean, who's positioned to create, to kind capitalize on AI and a practice that serves patients but isn't ⁓ practice cost and stuff, right? I mean, there's got to be some bright folks among, you know, particularly bright folks among us, ⁓ more so probably other groups. Yeah, again, I have that confidence in the physician. class because think it's a relatively elite class of folks and I think ⁓ we would do fine ⁓ in market if we had to compete ⁓ against whoever is in the market trying to deliver ⁓ healthcare services. that's, ⁓ yeah, I we as a physician group, of... imbibe that. But I think it's hard to do, Anthony, right? Because I mean, if you're making large sums of money through the current system, asking for change, I mean, I don't know that that's going to happen. Yeah, I don't know how that's going to happen. I don't know if that's going to happen internally. know, what do you do think that's something that physicians as a group are going to be able to get around, get their arms around?
Anthony DiGiorgio: Well, so I think a couple of points there is one, it's there's a little bit of lack of imagination because you're right, a lot of the specialty advocacy groups only exist in the system that we know. Right. If you look at like the AMA's advocacy priorities, it's ⁓ year conversion factor, scope of practice. ⁓ Those are basically the two things. And again, you're just playing within
Anish Koka: Yeah.
Anthony DiGiorgio: the rules that have been set up now for 40 years with the RBRVS. That's the extent, they're always on the defensive, they're fighting the next conversion factor cut. There's no forward thinking. There's no, well, how are we gonna design a healthcare system that works for physicians and patients? The people that are figuring it out are the direct primary care docs, right? They're realizing the rules of the game have not worked. They've lost, they lost with UCR, they lost with the RBRVS, and they're saying, we're out.
Anish Koka: Yes. Yes.
Anthony DiGiorgio: You know, so more and more primary care doctors were the do you know what the latest stats were? I thought I read something like five to ten percent Of primary care doctors have dropped Medicare or have yeah, ⁓ don't and please correct me if I'm wrong, but ⁓ an increasing number You know the total overall percentage only about one point five percent of doctors have dropped but more primary doctors are dropping because they are realizing like our friend Josh Umber says that
Anish Koka: Medicare, Yeah? I don't know what the exact percentage is,
Anthony DiGiorgio: that they need to step away from this third party system, that the whole system is broken and they're not going to win by continuing to play this game. they're going to get back to a real Friedman-esque type for something that really works within a market. And that's primary care. Primary care can completely work within a free market and they don't need to keep playing ⁓ the game that's been set up for them.
Anish Koka: Right, so speaking in nomenclature, those are the constitutional level rules that we must look to kind of disrupt and change. ⁓ you, ⁓ reform focused on that those types of structural changes, that has a much higher chance of long-term meaningful, good outcome. ⁓ you know, ⁓ ⁓ right.
Anthony DiGiorgio: Right. Right, instead of just adjusting the conversion factor up 2%.
Anish Koka: Correct, correct. 100%. So that Buffalo surgery center that is doing in an ASC, they have broken the rules of the game. ⁓ Of course, can I not mention the ⁓ surgery center Oklahoma, right? The OG ⁓ in terms doing that. So ⁓ yeah, no.
Anthony DiGiorgio: Yeah, and we all know, sorry, we all know, you know, centers like that that are operating outside this third party payment space. There's a great spine center in Indiana that is completely physician owned and is outside of Medicare. And those patients want that once they hit 65 are upset that they can't keep going to that clinic. And so I think the patients are starting to come to terms with this, too, and realizing we're paying all this money into Medicare through our lives. Now we reach Medicare age and we can't get the services we want. because the government rules are so restricted and been so captured by large corporations and rent seeking institutions that it's not working for them.
Anish Koka: Right. Right. the other structural rule changes that have been proposed ⁓ ⁓ is, you know, price transparency mandates, right? So that that seems that seems to have not worked. Would you
Anthony DiGiorgio: And again, like EHR in a functioning market, you wouldn't have to mandate price transparency. know, nobody hires a plumber without at least getting an estimate, right? It may be that your pipe is burst on Christmas Eve in the middle of the night and you're going to pay whatever you need to pay to get that pipe fixed. But in the most times you're going to get a price for whatever service you get before you sign up for that service. So why are we having to mandate price transparency?
Anish Koka: Right. Right. But it hasn't, it's been one of those, I think it's one of those, you know, and by the way, you know, it's not that have forgotten who Tulloch and Buchanan were. mean, ⁓ of the, many of the things that we see proposed today come from, ⁓ from that, ⁓ from them. So, know, this price transparency idea ⁓ that everyone just knows prices, we're going to start doing the right things. But, but, you know, it hasn't quite worked because ⁓ it it's almost that you have to ⁓ do things at once. Right. You know, so just, you know, if you don't, if don't fix the insurance market. ⁓ And you have price transparency mandates, nobody, some nobody follows, but the, you know, the, the hospital system is just like, okay, it's $7,000 for this. It's like, all right. and if, employers aren't, aren't, aren't pushed to do something, then, then you don't really get much meaningful change. So ⁓ I think that for whatever, multiple reasons, that hasn't seemed to have that much of an ⁓ impact, though not opposed to prices being transparent. ⁓ what, what about the employer, ⁓ insurer link?
Anthony DiGiorgio: Yeah.
Anish Koka: That an intellectual right-wing. ⁓
Anthony DiGiorgio: I mean, yeah, but so that again, as we mentioned before, came out of World War Two, when wages were frozen, employers could only couldn't offer higher wages, so they offered benefits. And it just so happened that the health benefit was not taxed. So it's actually double tax protected, right? So the employer doesn't pay payroll taxes on the health, the value of the health benefit. The employee doesn't pay taxes on the value of the health benefit. And that essentially acts as a subsidy.
Anish Koka: Yeah.
Anthony DiGiorgio: for healthcare. So this has been a huge subsidy since the 1940s for healthcare in that it is largely untaxed. Now, if you're an ACA beneficiary and you're buying an Obamacare plan on the market, you're using post-tax dollars. you are structurally disadvantaged, right? So you're having to pay post-tax dollars for that plan. So you're structurally disadvantaged and you don't get that subsidy. But it's been a huge distorting subsidy that's put more money into healthcare. And as physicians, we've probably benefited from that.
Anish Koka: Yeah. Yeah. Yeah.
Anthony DiGiorgio: And it's uncomfortable to say that if that was taken away, we may face a little bit of a pay cut there.
Anish Koka: Right. Right. But again, it doesn't seem to like, know, so that was one of the things that was in the ACA, right? The ACA plan that you buy is not, you know, it's not tax. It's a post tax. It's a post tax expense. But we have the ICHRA that comes out, right, under Biden and stuff in an effort to try and it's to solve a problem of massively increasing insurance costs to try to help try to have employers come in and help help this. So ⁓ again, ⁓ I really think that you need to address this at multiple different levels if you want something meaningful. If you try any one thing, it's not going to really work. So sure, mean, break the employer insurance link. And unless you hold firm on some other things, the insurance company is just going be like, right, so that's $1,200. And good luck with winning your elections next year.
Anthony DiGiorgio: Right. Well, and even that's the the the Breakup Health Care Act that's been proposed by Holly and Warren really doesn't get it for me the heart of the problem. It just goes out for insurance companies. But as we as we constantly talk about on this show, the consolidation on the supplier, the provider space is just as bad. So if you if you hamstring the insurance companies in any way, hospitals are going to be thrilled because now they have even more bargaining power. And so they're going to increase their prices and you're really not going to address some of these root causes again We're just talking about things tinkering within the system Just having different interest groups go after each other and like the whole theme of this episode We haven't taken care of these structural things that have got us to this point that there's this huge pot of money sitting in the government and What three trillion dollars of health care spending go through the government? And you don't address the fact that there's three trillion dollars of government money
Anish Koka: Yeah.
Anthony DiGiorgio: to be had via lobbying, you're never gonna fix the underlying problem. You're just gonna have a hip fighting AMA, fighting the AHA until the dollar loses all value.
Anish Koka: for those dollars, ⁓ Of course, the interesting wrinkle to all this, I I'm sure who the, who's the predecessor to Tullock and Buchanan. Maybe it's Anthony Giorgio. The interesting wrinkle to this is I don't think anyone predicted the level of fraud. ⁓ didn't have any idea of the scope of the fraud probably ⁓ abuse, and abuse, I guess. That is what a large percentage that ends up being. mean, as you've said very that you can't not have a program with zero fraud, then there's actually zero waste, I say, not fraud, hopefully is close
Anthony DiGiorgio: ⁓
Anish Koka: to zero but ⁓ but yeah a problem you know program zero abuse is almost impossible to do that's not the goal but i it does really seem like a large chunk ⁓ of say is going is you so ⁓ is going things that are not really giving much of ⁓ a benefit at so I don't know what exactly to call that, meaning, you know, I gave the example of the autism therapist. gave example of the autism therapist who, you know, ⁓ is doing ⁓ stuff, but is really ⁓ meaningful? am not sure. You know, or how do we. ⁓ So you get to back to the original problem of as long as you have a third party person who's paying for this, then ⁓ everyone like, no, no, we have to have this. And it's like, ⁓ there really no other way to do it than to kind of ⁓ wind how much we ⁓ spend. on these these programs so well yeah
Anthony DiGiorgio: Yeah, think I just, you know, to kind of wrap that that point up, the fact that so much of our health care dollars goes through third party payments when it doesn't need to. And again, we've we've come accustomed to this. think that the only way you can take care of a safety net or even the only way that you can take care of your own health insurance is to route it through the government first. This just doesn't make any sense. Ninety five percent of Americans could have their lifetime health care expenses covered without any government involvement. think once people realize that, then we could maybe work towards a system that works for everyone. I don't know, it seems like ⁓ classical economics are waning ⁓ these
Anish Koka: Right. Right. Yeah. And I think there's an opportunity here because the money has seemingly running out. now, I mean, I've never seen this much interest in in in in health care policy and fraud and, you know, waste abuse, how we're spending these dollars because because, you know, we're kind of hitting the point where folks really feel things. So. All right. So so just to summarize, we've talked about, know, the the the intellectual heavyweights in the early 60s who were ⁓ behind many of the arguments against ⁓ massive government intervention to healthcare. know, we'll try to link to some of these folks. know, so it was ⁓ James Buchanan, ⁓ Gordon Tullock, course, Friedrich Hayek. We talked about famous book, The Calculus of Consent, ⁓ by Buchanan Tullock. We talked about signature concept that Tullock which is rent seeking, regulatory capture by George Stigler. yeah, we'll keep trying talk about this stuff. So so much, Anthony, for talking about ⁓ it. All righty.
Anthony DiGiorgio: Thank you. Great job.