Volume 6  Number 5  July 30, 2009
Second Opinions

Health Care: Reform vs. Change

Congress defers to the metaphor "market forces" in their attempt to reform the financing of health insurance in the United States. This concept suggests, much like our experience with the banking system that with some legislative assists from the Government, entrenched economic interests, will be up to the job of reforming themselves. Among these players I include virtually all the special interests involved in providing health care: Insurers, HMOs, drug and medical device companies, professionals, non-professionals, including doctors, caregivers, hospitals-the list goes on... In other words, reform in the present context suggests repairing, not eliminating, models we have enshrined in our present system whereby the profit motive is often in conflict with appropriateness of need.

The Medical Marketplace and the FTC: Death of a Profession

Why indeed are care of the sick (and maintenance and promotion of health!) – now lumped together as "health care," – defined as a marketplace? The history of this important development is superbly described by Ameringer, in his landmark article: Organized Medicine on Trial: The Federal Trade Commission vs. the American Medical Association: Journal of Policy History. "The pivotal confrontation was the FTC's administrative action... commenced in 1975, against the AMA. According to the FTC, ethical restrictions on physician advertising, solicitation, and contract practice bore no reasonable relationship to procompetitive concerns, the touchstone of the FTC's public interest calculus...". *

So it seems that medical care is like consumer items dispensed in stores and shopping malls where goods and services are exchanged merely on the basis of supply and demand, and each store selling cucumbers, clothing, or cars is in competition for different customers. Thus we have health care consumers. Then how do you segment all the customers for health care into discrete markets? Moreover, unlike hamburgers or any other goods or services, medical care is not an optional purchase. The demand for diagnosis and treatment is not elastic; it can't wait or be deferred when the outcome might be suffering, disability or death. That is why so many with and without health insurance remain in grave peril.

The Demand Factor

Health care costs, often sheltered under the rubric "intensity of service" has many components, including the need for appropriate care, and the demand for care, which includes both appropriate and inappropriate care. What drives this demand? First are patients who, seeking reassurance, feel entitled to the latest technology, damn the expense, "My insurance covers it."

Patient: "Doctor, shouldn't I have an MRI for this back?"
Doctor: "No, you just twisted your spine lifting that package yesterday; it's only an ordinary back strain, and you don't need any special tests."
Patient: "Yes, but what if you do an MRI and you find something?"
Doctor: "I probably will find 'something;' over a quarter of normal patients without back pain have some abnormality on MRI. But this won't affect your need for simple treatment. Like 90% patients with acute muscular back strain, you'll be fine in a few days."
Patient: "Sounds OK to me."

(Alternately, some patients might go home and call another doctor. Some doctors fearing this possibility, rather than lose a patient, order the study.)

On the other side of the equation stands fee-for-service, the way most doctors are paid in the U.S. For many physicians, the tests they order can affect their income, often significantly, especially if they own their own imaging equipment or self-refer in the case of certain specialties like GI or cardiology. To some extent, physicians behave like other suppliers: The way they are paid will have an unpredictable, even unconscious effect, on their diagnosis and therefore decisions regarding testing and treatment, and in rare cases, even the performance of surgery. Fee-for-service also drives unnecessary, inappropriate hospitalizations and referrals, screening tests, etc.

Other Major Cost Factors

Other key factors driving up health expenditures are the prices of prescription drugs, generally double that of other advanced countries. While this expenditure is claimed to represent 10% of our national health bill, there are additional, unexamined costs relating to Big Pharma. I have previously referred to the avalanche of consumer advertising which floods our media. Prescription drug marketing directly to the consumer, can include virtually any class of prescription drugs, and is routinely permitted under U.S. law. Notable, is the profoundly different regulatory environment in the European Union (EU), Australia, and Canada where pharmaceutical manufacturers are forbidden to advertise prescription drugs directly to the public. The U.S. and New Zealand are the only major industrial countries which permit promotion of prescription drugs to the public.

Other key factors include inadequate, poorly coordinated care of the aging population and the overuse of new technology, plus excessive screening for disease (most without measureable benefit – see my blogs here and here).

A major cost factor is the staggering administrative expenses of our mostly private health care, accounting for 7% of overall expenses, more than six times the comparable costs of other industrial countries. Contrast this with 2% administrative costs for the Medicare program.

Dare We Hope to Reform the System?

My own guesstimate of the savings resulting from extensive Reform, is in the neighborhood of $600-$800 billion a year-and counting. This would require major changes in the delivery and reimbursement for health care. We desperately need changes such as restrictions on advertising drugs to the public, significant changes in the fee-for-service models of payment for doctors and hospitals, restrictions on the placement of additional imaging centers, elimination of unnecessary administrative costs, rational control of inappropriate medical testing-especially of fancy imaging and invasive studies. Many of these changes-call them reforms now-could be implemented by expanding the present Medicare model to cover 80%-90% of all Americans, leaving room for private insurance to cover special demands and "boutique" medicine.

We Can save the system, though it won't happen overnight, and it won't be easy fighting the opposition.

*Ameringer further wrote, "By eliminating these restraints, FTC commissioners and attorneys cut the ties that bound rank-and-file physicians to their national, state, and local medical societies, thereby undermining the structure of organized medicine. Stripped of its organizing principles and enforcement mechanisms, the medical establishment weakly resisted the formation of large-scale provider networks and the integration of insurance products and delivery systems, known as health maintenance organizations or HMOs. The FTC proceeding signaled a fundamental shift in the federal government's relationship with the medical profession." (My emphasis.)

Martin F. Sturman, MD, FACP

Copyright 2009, Mathemedics, Inc.

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