#gresham's law

A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new coin ("bad money") is assigned the same face value as an older coin containing a higher amount of precious metal ("good money"), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.

INVESTOPEDIA EXPLAINS 'GRESHAM'S LAW'

Years ago,  a hospital at which I took obstetrical anesthesia call, made a move that at the time I didn't understand.  They built a brand new obstetrical unit (it looked like something Frank Lloyd Wright designed) and began aggressively promoting this new facility to the Medicaid population. They simultaneously hired family practitioners and started a residency training program.  

Medicaid reimbursement for anesthesia services was very low, so I found this troubling that more and more of my time would be spent working for a fraction of what I considered fair compensation.  I also saw the private practice physicians with "paying" clientele (these experienced doctors also took care of the Medicaid patients) leave this hospital, sort of a Gresham's law demonstration.  To keep the anesthesiologists from walking out, the hospital began subsidizing our services.  I simply couldn't understand why the hospital was doing this.  They had chased the good business out with the bad business...at least that's what I thought.  

With the private practice obstetricians gone, later understood to be part of the hospital's design, the new department of family medicine could take over the new obstetrical unit.  Now keep in mind this was a large, urban hospital near downtown Oklahoma City and no stranger to the most complicated, sick pregnant patients, some walking in having had no prenatal care.  They were now face to face with interns, kids just days out of medical school, with no experience, whatsoever.  Backing them up was a family medicine doctor who had completed a course in the performance of Cesarean sections.  

Needless to say, there were problems.  I had a difficult time with this as you can imagine, for several reasons.  It didn't seem right for 18 year olds having their third child to have the taxpayers pay for them to have an epidural anesthetic so the experience would be completely painless at 3 am.  It didn't seem right accept this money.  And I felt like an accomplice, enabling inadequately trained folks to "practice" on these poor women.  I was also very concerned about the liability involved.

One day, a new administrator appeared at this hospital, whose wife was a certified registered nurse anesthetist (CRNA), nurses who do extra training so they can provide anesthesia care.  I had hopes that this new administrator would grasp the insanity of this new setup in the obstetrical unit, thinking that perhaps his spouse could translate what this all meant to him.  Two of my anesthesia partners and I were summoned to the administrator's office and asked a simple question:

"Can you tell me that your anesthesia services for the next fiscal year will cost the hospital no more than this last year?"

My partners, overjoyed at hearing that their hospital income subsidy was safe, quickly said, "Yes."  My misgivings were intensified.  Two weeks later, the hospital administrator awarded the obstetrical anesthesia contract to his wife, for the amount we were paid the previous year.  She hired young nurse anesthetists and paid them poorly, doing little of the work herself, but keeping the lion's share of the money.  

This is how Medicaid works for the poor.  This is how Soviet-style central planning in health care always works.  Bring in all the money, then ratchet down the quality and access so it functions as the cash cow it was intended to be, after all.  With the hospital in charge of distributing the money (to the resident Coolie labor and the administrator's wife), this was a guaranteed money-maker.  This "bundled payment by Medicare to hospitals" is a central provision of Obamacare, by the way.  I thought my experience was a good example showing the hospital greed that drives this "Medicaid expansion" craze, and part of the reason that outcomes for Medicaid beneficiaries are not as good.  

Now before you go off and accuse me of bashing family medicine doctors hear this.  My brother is a family medicine doctor.  My best friend from medical school is a family medicine doctor.  Neither of them would dream in a thousand years of running an inner city, giant hospital obstetrical unit, including provision of emergency Cesarean sections on women who can present with some of the most life-threatening conditions ever seen.   

While the hospitals want this Medicaid expansion so badly, I think that after a short time, many of those absorbed into this Medicaid system in states embracing the expansion of this disaster will wish to once again be uninsured and out of this mess.  Expanding Medicaid is not unlike cramming more folks on the Titanic, paying attention only to the amount of ticket revenue generated.  Charity to the poor is always more compassionate than groveling before the almighty state.