PNHP

Britain’s NHS: An American view

Britain’s NHS: An American view

By David U. Himmelstein and Steffie Woolhandler
The Lancet (U.K.), July 4, 1998

Demons are useful. The NHS as Lucifer used to lurk at the fringe of US health policy, shielding us from the evil of “socialised medicine”. Even an American physician whose list of British prime ministers would stop after Churchill could recite chapter and verse of NHS horrors: no-one over 50 could be dialysed, hospitals had long since crumbled, doctors were nearly starving, government dictated examining-room decisions, and the waiting-list for obstetric care stretched to 10 months.

Today it is hard to sustain this Manichean view. By most measures Britain’s health outcomes have surpassed those of the United States; hence the curiously widespread endorsement by US physicians of Thomas McKeown’s thesis that good medical care has no perceptible impact on health. British colleagues commonly encountered, widely respected, and apparently well-fed-seem oddly reluctant to renounce the NHS and convert to the American worship of market-driven care. And US examining rooms have been invaded by bureaucrats sent not by government but by corporate “big brothers”.

Lately, the madness of our medical market has driven even solidly Republican US physicians to question antigovernment dogma and Wall Street’s greed-is-good approach to health reform. Physicians face pressure to shun the sick, who have been made unprofitable by new financial arrangements that penalise their doctors (and the hospitals and clinics which employ them). A university hospital chief has admonished faculty: “[We can] no longer tolerate patients with complex and expensive-to-treat conditions being encouraged to transfer to our group”. In one health maintenance organisation the “primary care physician of the month” for July, 1997, had been fired by the autumn after he accumulated sick and expensive patients.

20 years ago doctors’ hallway conversations turned to interesting cases, recent journals, or football. Now financial matters dominate discussion. Financial acumen is the main criterion for clinical leadership. Office practice is conducted amidst a blizzard of HMO paperwork. Physicians pine for a kinder and simpler practice, unencumbered by business. Income aside, life in the NHS no longer looks bad.

Meanwhile, US news media feature a torrent of patients’ complaints of care denied or delayed. The main outcry now emanates, not from the 42 million medically uninsured, but from the middle and upper classes whose insurers refuse payment, citing loopholes in contracts. Remote executives close vital community health services, devoting the savings not to more pressing health needs but to shareholders’ profits. Hospital chains’ profits reach $100 per patient per day, and one HMO entrepreneur has netted $990 million in a takeover deal.

Even the vaunted efficiencies of the market have failed to appear. Health costs and uninsurance are both on the rise again even as bureaucracy mushrooms, recalling Charles Dickens’ tale of six poor travellers relegated to outbuildings when the hostel built for them was fully occupied by its charitable administrators. “. . . a thirtieth part of the annual revenue was now expended on the purposes commemorated in the inscription over the door; the rest being handsomely laid out in Chancery, law expenses, collectorship, receivership, poundage, and other appendages of management.” For-profit hospitals are more expensive and less efficient at most everything except billing and public relations. HMOs contracting with the government Medicare programme for the elderly have actually raised costs; plans compete to recruit healthy patients, who bring hefty premiums paid from the public purse, while avoiding (and even evicting) the sick.

Mired in our own market-driven health-policy disaster it is hard for Americans to fathom the recent British flirtation with market medicine. Margaret Thatcher’s reliance on the health-policy advice of a Vietnam-era Pentagon war planner adds to our disquiet. Disclaimers that it would be just tiny doses of competition, not US toxic levels, underestimate the market’s erosive, self-expanding power. Predictably, the UK’s first step was to hire legions of administrators charged with assembling a paper financial replica of medicine. This monetarisation of care is the precondition for turning care into a commodity, not for greater service efficiency. The reproduction of every clinical act in shadow form on paper creates the instrument needed for remote control of the clinical encounter. Separating medicine’s brain from its hand, dividing concept and control from day-today work at the bedside, creates a recognisably corporate organisation. Public officials, under the umbrella of public accountability, claim the new executive prerogatives. The concepts of care, comfort, and collegiality appear fuzzy next to the seductively precise financial accounts. Soon, only quantities are allowed into management discourse; care must be reduced to throughput, comfort to QALYs, colleagues to their credentials. As one HMO chief put it, “It doesn’t count unless you can count it”. Once medicine is reorganised as a business, businessmen are the logical leadership. The splintering of the NHS into competing units creates bite-sized chunks amenable to sale.

Competition implies reward for winners (and punishment, even extinction, for losers), based on quantitative measures of success. Unfortunately, tying financial reward to good work is harder than theorists portray. Cheating is a sure winner when doctors and hospitals create the data that must be used to judge them. Too often, those who fail to cheat are driven from the market. For the largest hospital chain in the US, the secrets of success apparently included exaggerating the severity of patients’ illnesses (thereby boosting revenues and creating the appearance of good outcomes), filling wards by rewarding doctors for referrals, and falsifying bills. The second largest virtually kidnapped psychiatric patients to fill beds. Venal hospices sign up non-terminal patients. Meanwhile, competition drives not-for-profit hospitals to curtail money-losers like research, teaching, and charity, or face bankruptcy. Can Britain’s medical competition be immunised against such perverted incentives?

To us it looks like the NHS’ main problem is a small budget, a disabling constraint despite the British knack for great accomplishment with sparse resources. (The Spice Girls, much admired by our schoolgirl daughters, perhaps exemplify this knack, having manufactured extravagant success from meagre talent.) The $1300 (English pound 800) spent per head in the UK on NHS medical services in 1996 was only one-third of US spending and not much more than the US dissipated for healthcare administration and profits alone. Such underfunding of the NHS is tolerated, even encouraged, because the affluent can exit to private care. A lifeboat shared by rich and poor is likely to be better maintained than one intended only for passengers in steerage.

Seen from New England, the NHS seems–despite many shortcomings–fundamentally efficient, competent and caring, a testament to the advantages of solidarity and cooperation. Marketeers offer tempting promises of effectiveness and efficiency but pave the path towards American-style Satanic vices.

For-Profit Hospitals Costlier and Less Efficient

October, 1997

Washington, D.C. A special article in the March 13th New England Journal of Medicine, “Costs of Care and of Administration at For-Profit and Other Hospitals in the U.S.,” finds that for-profit hospitals are costlier and less efficient than public or non-profit hospitals, and that hospital paperwork costs are rising.

“The study shows that administrative costs in for-profit hospitals are soaring. In 1990, the average for-profit spent 31.8% of its budget on administration. By 1994, that figure had jumped to 34%. In medicine, market pressures are breeding inefficiency,” said Dr. Steffie Woolhandler, co-author of the study, Associate Professor of Medicine at Harvard and co-founder of PNHP.

Administration consumed 26% of total hospital spending nationwide. For-profit hospitals spent 34.0% of their budgets on administration, compared to 24.5% at not-for-profits and 22.9% at public institutions. The data, covering 6,227 U.S. hospitals were obtained from the U.S. Health Care Financing Administration through a Freedom of Information Act request.

According to the study, a day in the hospital cost 35% to 57% more at for-profit general hospitals than at comparable non-profit or public facilities. Paperwork costs per general hospital stay averaged $2,289 at for-profits, versus $1,809 at non-profit and $1,432 at public hospitals, and all of these figures exclude hospital profits which average $123 per patient day at Columbia/HCA hospitals, the nation’s largest chain of for-profit hospitals.

The study also found that administration costs rose from 24.8% of total hospital costs in 1990 to 26.0% in 1994 — $61.8 billion. Hospitals in 7 states devote more than 29% of total spending to administration. States with more HMOs and for-profit hospitals had higher administrative costs. In contrast, Canadian hospitals spend only 10.4% on paperwork.

“Bureaucracy costs jumped sharply when non-profit and public hospitals were purchased by for-profits. If all U.S. hospitals became for-profit, hospital paperwork would rise by $14.8 billion annually,” noted Woolhandler. She continued: “It’s a myth that for-profit hospitals are efficient. They save money by laying off nurses, then hire consultants and bureaucrats to figure out how to avoid unprofitable patients and maximize revenues. For-profits increase costs, decrease care, and generate windfall profits, like the $359.5 million pocketed by Rick Scott of Columbia/HCA in 1996. They’re fat and mean.”

Study co-author Dr. David Himmelstein noted that “non-profit national health insurance like Canada’s could save the U.S. $157 billion each year on bureaucracy and profits, more than enough to cover the uninsured and to upgrade coverage for the rest of us.”

Dr. Quentin Young, an internist and National Coordinator for Physicians for a National Health Program added, “For-profits promised us efficiency, but instead they’re wasting millions on bureaucracy. They’re more expensive and less efficient. How much longer before we end the failing experiment with market medicine?”

Washington, D.C. Doctors Endorse Single Payer Health Care

Washington, D.C. The organized medical society for the District of Columbia has decisively passed a resolution in support of “single payer”-style health insurance as an option for health reform. The Medical Society of D.C.which is an affiliate on the state level of the American Medical Association (AMA), thus becomes the first state-level medical society in the United States to do so. Numerous other medical societies have narrowly defeated similar resolutions. The AMA is the historic leader of the opposition to national health insurance.

“By endorsing single payer, the D.C. Medical Society has shaken up the house of medicine,” said Dr. Quentin Young, national coordinator of Physicians for a National Health Program (PNHP). “After a long repudiation of ‘government medicine,’ American doctors are having a wake-up call from the ravages of for-profit corporations upon their cherished profession. In that light, the pioneer action of the DC society is a bellweather of additional movement in the this direction,” added Dr. Young.

The recent action taken by the Medical Society of D.C. is one of several events around the country indicating a possible sea change in the medical establishment towards national health insurance. The Massachusetts Medical Society has commissioned a study to determine the feasibility of single payer health care. A few months ago, Dr. Robert Tenery Jr., the former president of the Texas Medical Association, wrote in the AMA American Medical News that a single payer health care system is the preferred alternative to the disintegration of the health system as a result of managed care takeover.

“The passage of this resolution by the Medical Society of D.C. reflects physicians’ growing frustration with increasing corporate-domination of the practice of medicine and growing awareness that a single payer national health insurance plan is the only viable option. It is our hope that this option will be seriously considered and debated by the nation’s policymakers,” said Sara Nichols, PNHP’s Washington Director. “The society should be applauded for taking a bold step in the right direction.” added Ms. Nichols.

The resolution passed by a decisive margin at the yearly Medical Society of the District of Columbia’s House of Delegates meeting held October 5, 1996. The resolution supported single payer national health insurance as one option for health reform as long as certain predetermined criteria are met. The actual text of the resolution has not been released to the public but PNHP has obtained a copy of it which is attached to this press release.

ER Care Is Not Cause of High Health Care Costs, Harvard Study Says

October, 1996

A study by Harvard researchers and leaders of Physicians for a National Health Program published in this month’s American Journal of Public Health punctures the myth that costly emergency room visits by uninsured patients are driving health costs. President Clinton and other policy leaders have spotlighted ER overuse as a major concern, and managed care plans often deny coverage for ER visits as a cost-saving measure. The study found that uninsured patients use no more emergency care than insured people, and often pay out-of-pocket for their ER visits.

The study, based on data from the 1987 National Medical Expenditure Survey, found:

ER care for the uninsured totaled only $1.1 billion, or 0.23% of all health care costs; the entire ER bill for all Americans amounted to 1.9% of all health spending.

The uninsured averaged $37 per capita per year in ER care, vs. $38 for those with insurance.

The uninsured paid 47% of their ER costs themselves; only 10% was free care that hospitals cost-shifted to other patients.

While the uninsured got no more ER care than insured Americans, they got much less of other kinds of care. Hence, restricting ER access would take away a critical health care resource for the uninsured.

Children and black men also received much of their care from ERs.

Study author Patrick H. Tyrance, Jr., a senior student at Harvard Medical School and Kennedy School of Government commented: “Too often, minorities, the poor and the uninsured are blamed for high health care costs. Restricting ER visits will save little money, but will cut the care of people who need it most. We need to minimize ER care by making other care available, not by penalizing patients.”

Dr. Steffie Woolhandler, Associate Professor of Medicine at Harvard and study co-author said: “HMOs often refuse to pay ER bills, which shifts costs to the patients and increases HMO profits. Policymakers want us to believe that we must curtail further care to bring down costs. But compared to Canadians we pay 40% more for care and get less: fewer ER visits, fewer doctor visits, shorter hospital stays, even fewer high tech procedures like lung transplants.”

Dr. Woolhandler is a co-founder and spokesperson for Physicians for a National Health Program, a 7,000 member organization that supports universal access to health care under a single payer national health insurance program. PNHP has 59 state and local chapters.

Democrats Retreat on Health Care; Doctors Hold Down Fort

August, 1996

Chicago: Over the entire course of the Democratic National Convention, doctors, health care workers and activists maintained a round-the-clock vigil sponsored by Physicians for a National Health Program (PNHP). Hundred of advocates from many organizations, deeply concerned by the Democrats decision to remove universal coverage from the party platform, kept the vigil for more than eighty hours.

“On Tuesday, Democrats disappointed the nation by passing their party platform unanimously despite eliminating their previous commitment to universal health care coverage,” said Dr. Quentin Young, National Coordinator of PNHP. “Where does America turn now to get relief from the uncertainty and fear of tenuous economic and health security. Neither party is prepared to take on the corporations and respond the American public’s wishes or the practice in the rest of the industrialized world and commit to providing quality health care for everyone.”

After the federal court lifted the city’s restrictive protest guidelines on August 23, Dr. Young returned to the court to ask for relief from the physical arrangements which sharply limited the vigil from even communicating with convention delegates, contrary to the judge’s initial order. “The city did not succeed in suppressing dissent, but it certainly did limit its impact,” said Dr. Young.

On the last nights of the vigil, Dr. Gordon Schiff, past-president of PNHP, and Dr. Peter Draper, Chairperson of the Illinois PNHP Chapter, both stayed at the site of the vigil all night to demonstrate their commitment to national health insurance. “In 1996, the city employed every device to restrict speech, in sharp contrast to their abusive confrontation in 1968. By some standards this is progress, but far short of the American tradition of vigorous free speech. We view the vigil as a success. It has energized large numbers of activists and advocates to look beyond the election for broad based strategies to reform the health care system and provide all Americans with the health care they deserve,” said Dr. Schiff.

Doctors Oppose the Democrats' Retreat on Health Care

August, 1996

On Sunday, August 25 at 7:00 P.M. the Rev. Jesse Jackson, Sr. will join a group of doctors, nurses, labor leaders and citizens at Pasteur Park, near the Cook County Hospital, to challenge the Democratic Convention Delegates to reinsert universal health coverage in the party platform. The language was recently removed by the platform committee in Pittsburgh.

“The Democrats had a long and proud history of trying to deliver health care to all Americans, but in a moment of great cowardice they reversed their course and are only ensuring health care for the few,” said Dr. Quentin Young, National Coordinator of Physicians for a National Health Program.

The Democratic commitment to universal coverage began in the Truman Administration, over forty years ago. “After President Clinton’s attempt to pass a broad, if misguided, overhaul of the health care system, his signing of the welfare and minimalist health reform packages are a national shame and a blight on the party,” said Dr. Susan Steigerwalt, President of PNHP. “As the President rends social safety nets, his party seems prepared to abandon even the hope of universal health coverage,” she added.

Following Sunday’s rally, Physicians for a National Health Program and many community leaders and activists, will hold a four-day, round-the-clock vigil across the street from the Democratic convention. The initial city plan had a three-block cordon around the convention. As a result of the successful suit in Federal Court, filed by the ACLU on behalf of Dr. Young, the city will have to allow the vigil. The activists will have access to the Democratic delegates and urge them to reaffirm their commitment to universal coverage.

“The Democrats seem willing to condemn large numbers of people to a life without insurance. America’s health care crisis will not be served by patchwork help at the margins, as exemplified by the Kennedy-Kassebaum bill that the President signed into law on Wednesday. The party leadership has long ignored the obvious solution to America’s health crisis — to cover all Americans equally and equitably through universal health insurance program,” said Dr. Young. “Further, all polls show that this is precisely what the American people prefer.”

Rosa Parks revisited

By Ida Hellander, M.D.

[Note: The following essay was a “spoken word performance piece” presented at a vigil for single payer on July 30, 1996.]

“Of all the forms of inequality, injustice in health is the most shocking and the most inhuman.”
— Dr. Martin Luther King Jr. (1929 – 1968)

“When I dare to be powerful — to use my strength in the service of my vision, then it becomes less and less important whether I am afraid.”
— Audre Lorde (1934-1992), who struggled bravely with breast cancer and inspired a whole generation of African American women health activists

When Rosa Parks refused to sit in the back of a bus in Montgomery, Ala., on Dec. 1, 1955, didn’t she want more than a law that allowed her to sit in the front? When black students braved sitting down at lunch counters in Greensboro, N.C., on Feb. 1, 1960, didn’t they want more than a hamburger?

So why should anyone think the widespread complaints of patients and the terrible injustice sick people face in this country — insured and uninsured, working and unemployed alike — will be resolved by this or that piecemeal bit of legislation? We have bills that give, for example, mastectomy patients in Maryland the right to spend the night in the hospital or, as in the current proposals floating around Congress, suddenly ill patients the right to go to an emergency room. Oh, boy. This is health care reform?

Personally, I can’t figure out why a patient shouldn’t be able to go to any hospital, to any doctor, or to any clinic that can help them. I mean, public money pays for the lion’s share of all health care, if you include Medicare, Medicaid, VA, Champus/Tricare, public funding for private health insurance for government employees, and the massive tax breaks we give theoretically not-for-profit health institutions and to employers who buy insurance for their employees (a dwindling breed).

If you add all of those programs up, it works out that taxes (i.e. you and me) pay for over half of all health care.

Individuals (that’s you and me again) pay the second-largest share directly (about a third of a trillion dollars). That’s what all that money we spend on stuff the insurance companies refuse to cover adds up to, like the revolting surgery I had to have for a receding gum line (I can’t have receding gums, I’m only 35!) and had to pay $500 in cash for, because my “managed dental care company” refused to cover the procedure even though, the way I read it, the policy explicitly said it would cover “periodontal surgery.” Go figure.

So that just leaves, well, not much is left for non-public employers to pay for private insurance coverage, less than one-fifth of the whole shabang.

If it seems like your insurance isn’t covering much these days it’s because, well, it isn’t. Even so, your boss just deducts the cost of the premiums out of your paycheck, so really you and I are paying again. Cute, huh?

You should also know, because its important that you have this type of information when you start fighting for your right to health care, that besides paying for most of the health care for regular people (like everybody over 65) in this country, taxes also fund all the health care benefits for all legislators, something that should be taken into consideration when they complain that we can’t afford health care for everyone. In fact, legislators are the only occupational class with 100 percent coverage besides judges; ministers and family farmers are near the middle and bottom of the ranks of the uninsured, respectively.

But that’s not all. Since the turn of the century, public money has been used to train every one of this country’s health professionals as well as for almost every brick of every hospital and clinic ever built. Even the hospitals in for-profit hospital chains like Columbia/HCA, currently under investigation for overcharging Medicare millions, were almost entirely built with Medicare and tax-free charity money. Even most of their day-to-day operations (as well as profits) come from the public purse in the form of Medicare.

So why should patients, you and I, the very people who financed the whole building of the health care system, theoretically the “best in the world” (although if I hear that one more time I am going to puke because it is not even close to true), have to sit in the back of the bus and accept the Kafkaesque and, in many cases, life-threatening intrusion of over 1,000 different insurance plans into who can get medical care, and when and how and for how long and how much? In fact, why do we need private insurance companies running health care at all?

No other industrialized country allows private corporations to make health care decisions for its precious residents: industrialized democracies the world over have national health insurance systems that cover everyone. (Even American tourists who fall ill on their whirlwind European vacations get covered by these national health plans; most don’t even bother trying to collect on U.S. insurance plans – it’s too much hassle.) In general, they cover everybody, provide more doctors visits, more hospital days, more procedures, even more bone marrow transplants for less money than we do.

Perhaps most shocking of all, particularly to those of us in HMOs who are accustomed to getting about 2 minutes (or 2 seconds) of a doctor’s attention during a typical visit, physicians in most countries still make house calls!

How do they do it? Well at least partly because they don’t have private insurance companies that make us waste at least a quarter of every dollar on stuff people don’t even want, like piles of insurance paperwork, incomprehensible 1-800 systems, rich CEOs, billboards and ads in the paper, 40-page itemized hospital bills with surreal prices for Tyenol and sanitary napkins, and the latest outrageous insult, a campaign against the meager “patient bill of rights,” a flimsy document that doesn’t even include the only right patients really need: a right to health care!

The only other wealthy country in the world I can think of that allows its public resources to be used in such a discriminatory fashion is, well, I can’t think of any. Maybe South Africa before the end of apartheid? Anyway, the last time I checked, apartheid was over, and today, the new constitution of South Africa says that all its citizens have a right to health care.

In 1995 and 1996 alone, according to the Centers for Disease Control’s Dr. David Allen, South Africa built over 300 free health care centers for its population, and more are on the way. They don’t have anything like our trillion dollars a year to spend on health care (13.6 percent of our total economy), but they are doing their best. We aren’t.

It is time to end medical apartheid in the United States. Remember that poor, frustrated, HIV-positive man in L.A. who stopped six lanes of traffic and killed himself on the freeway? He had a big, hand-scrawled sign that he rolled out on the pavement before he shot himself (and started a wave of media handwringing over broadcasting a suicide over live TV). His sign said, “HMOs are in it for the money,” and you know what? He was right.

It’s time to politely but firmly eject venture capital and for-profit HMOs and other providers (hospitals, physicians’ groups, nursing homes, etc.) from the driver’s seat on health care policy. The movement for health rights is just getting started, and this time we have to succeed.

This time we must not let the insurance companies and politicians who act like the paid staff of for-profit HMOs write the plan like Clinton did (but I digress). This time the public must write the health plan with their feet. It’s time to march in the streets and push, if we must, the health care bus towards the
Promised Land: a health system that serves everybody.

So we are all on the same page this time around, the plan we need is called “single payer” by policy wonks, “single prayer” by me. Why? Because my single prayer is that within the next four years, there won’t be any Rosas or students or blacks or whites or Latinos or gays or children or seniors or disabled people or people with serious mental illnesses or HIV or cancer victims or documented or undocumented immigrants or artists or musicians or waitresses or janitors or bus drivers or day-care workers or ministers who won’t have health care.

There won’t be anybody who has to go without the care they need so that stockholders, for-profit companies, and health industry CEOs like Leonard Abramson, who personally took home $967 million from the sale of one HMO’s patients (U.S. Healthcare HMO) to another HMO (Aetna), can profit. What Leonard Abramson did and what is routinely happening in the medical-industrial complex every day now, the buying and selling of human lives, was banned over 100 years ago, but no freedom lasts forever if you don’t fight for it.

“Health care is an essential safeguard of human life and dignity, and there is an obligation on the part of society to ensure that every person is able to realize this right.”
— Joseph Cardinal Bernardin

The author would like to acknowledge the assistance of Nancy Wooten, Ph.D., an American History scholar.

Dr. Steigerwalt's Letter to New York Times

Letters to the Editor
The New York Times
229 W. 43rd St.
New York, NY 10036

The editorial “When Big is Good” (Editorial, April 3) is dead wrong about the merger between U.S. Healthcare and Aetna. The market rewards companies that deliver health care the least efficiently — companies that spend less on health care and more on overhead.

U.S. Healthcare typifies this profitable inefficiency. In 1994, U.S. Healthcare took 25% out of every premium dollar for its executive salaries, profits, and bureaucracy. CEO Leonard Abramson made $20 million in cash and stock options in a single year. Furthermore, every time U.S. Healthcare’s overhead has bumped up, so has its stock price.

U.S. Healthcare pays doctors huge bonuses for denying patients referrals to hospitals, specialists, and emergency care, according to a recent article in the New England Journal of Medicine. Meanwhile, until a public scandal recently forced U.S. Healthcare to change their policy, they forbade any criticism of their plans by physicians (the so-called “gag clauses”).

Aetna found this ability to scrimp on care and splurge on shareholders so appealing that it paid nearly 25 percent more for U.S. Healthcare than its stock market valuation.

Wall Street defines efficiency as maximizing the profit squeezed from each premium dollar. Patients and physicians, however, want to maximize the resources that actually provide needed health care. The best option for providing efficient, humane, and patient oriented care for all of our citizens is a not-for-profit single payer health care system.

Dr. Steigerwalt’s Letter to New York Times

Letters to the Editor
The New York Times
229 W. 43rd St.
New York, NY 10036

The editorial “When Big is Good” (Editorial, April 3) is dead wrong about the merger between U.S. Healthcare and Aetna. The market rewards companies that deliver health care the least efficiently — companies that spend less on health care and more on overhead.

U.S. Healthcare typifies this profitable inefficiency. In 1994, U.S. Healthcare took 25% out of every premium dollar for its executive salaries, profits, and bureaucracy. CEO Leonard Abramson made $20 million in cash and stock options in a single year. Furthermore, every time U.S. Healthcare’s overhead has bumped up, so has its stock price.

U.S. Healthcare pays doctors huge bonuses for denying patients referrals to hospitals, specialists, and emergency care, according to a recent article in the New England Journal of Medicine. Meanwhile, until a public scandal recently forced U.S. Healthcare to change their policy, they forbade any criticism of their plans by physicians (the so-called “gag clauses”).

Aetna found this ability to scrimp on care and splurge on shareholders so appealing that it paid nearly 25 percent more for U.S. Healthcare than its stock market valuation.

Wall Street defines efficiency as maximizing the profit squeezed from each premium dollar. Patients and physicians, however, want to maximize the resources that actually provide needed health care. The best option for providing efficient, humane, and patient oriented care for all of our citizens is a not-for-profit single payer health care system.

Statement of Dr. Susan Steigerwalt on the Merger of AETNA and U.S. Health Care

April, 1996

“The proposed merger of insurance giants Aetna Life and U.S. Healthcare will create an entity that controls access to health care for one in every 12 Americans. This merger provides further evidence of a race towards oligopoly in our health care system, by firms organized to value shareholder profits over patient care.

“Aetna knows that U.S. Healthcare has the proven formula for recouping their purchase price of $8.9 billion, nearly $3,200 per patient. U.S. Healthcare rewards doctors for giving skimpy care and penalizes them for referring patients to specialists, emergency rooms or hospitals. They’ve generated higher profits in 1995 than nearly any other for-profit HMO. What Aetna is getting for this immense sum is not hospitals, clinics, or other tangible facilities, but the exclusive right to control and profit from the relationship between patients and the health system.

“The track record of these giant for-profit firms bodes ill for patient care. In 1994, U.S. Healthcare took 25% out of every premium dollar for its outrageous CEO salaries, profits, and bureaucracy. U.S. Healthcare CEO Leonard Abramson made $20 million in cash and stock options in a single year. Meanwhile, until a public scandal recently forced U.S. Healthcare to change their policy, they forbade any criticism of their plans by physicians (the so-called “gag clauses”). But even without gag clauses, U.S. Healthcare retains the right to fire any physician without cause.

“As revealed in an editorial in the New England Journal of Medicine by PNHP co founders, Drs. David Himmelstein and Steffie Woolhandler (Extreme Risk: The New Corporate Proposition for Physicians, December 12, 1995), U.S.Healthcare places almost all of the financial risk for patient care on its physicians. Pitting patient interests against the doctors, U.S. Healthcare pays a primary care physician with 1500 patients a net income as low as $0 or as high as $150,000 depending on how willing he or she is to meet their rock bottom standards on use of hospitals, emergency rooms, and specialty visits. Meanwhile, “gag clauses” keep hapless patients in the dark.

“Aetna also has shown its willingness to lower costs by lowering quality of care. Aetna once fired their own “primary care physician of the month” when he exceeded Aetna’s cost per patient guidelines a few months later.

“We call the Aetna-U.S. Healthcare way of paying physicians `fee-for-non-service,’ but paying physicians to withold care is not simply the opposite of Aetna’s old fee-for-service system; it’s the mirror image of illegal kickback schemes that reward doctors for referring patients to health services in which they have a financial interest. Unbeknownst to their patients, Aetna and U.S. Healthcare doctors get a kickback from the HMO for denying care.

“Under the guise of letting the marketplace work and increasing competition in the health industry, we are galloping towards an oligopoly in which a handful of companies will control everyone’s access to health care. If this merger-mania continues, Americans will soon have their health care options limited to a choice between McDonalds and Burger King. With the Republican Congress planning to open up the Medicare program to corporate raiding by for-profit HMOs, giant HMOs such as Aetna will reap a windfall.

“U.S. Healthcare’s founder and Chairman, Leonard Abramson and his family will make nearly $1 billion in profit from the merger, money that could and should be going into direct patient care, including care for the uninsured.

“Corporate consolidation is undermining our nation’s health status. We propose an alternative that restores patient care as our highest priority: a not-for-profit system of single payer national health insurance.”

U.S. Health System Has More Paper Pushers, Fewer Nurses, Study Says

January, 1996

Journal Article Shows U.S. Health Bureaucracy Skyrocketed by Close to 700% Over Past 25 Years
Proportion of Medical Workers Giving Care Has Fallen Dramatically

Over the past 25 years, the percentage of U.S. medical care workers doing mostly paperwork skyrocketed from 18.1 percent to 27.1 percent of total health employment, while the proportion of nursing and physician personnel fell from 51.4 percent to 43.7 percent, according to an article in the February issue of the American Journal of Public Health released today. The study demonstrates that between 1968 and 1993, the number of health care administrators grew by 692 percent. In contrast, over this same period, the number of doctors grew by only 77 percent and registered nurses by 164 percent. Physicians’ offices added 550,000 fulltime administrative personnel, almost one per doctor, to deal with the burgeoning requirements of managed care and other complexities of our market-based system.

The study, entitled “Who Administers? Who Cares? Medical Administrative and Clinical Employment in the U.S. and Canada,” was authored by Harvard doctors Steffie Woolhandler and David Himmelstein, founders of Physicians for a National Health Program, with J.P. Lewontin. The research was supported by a grant from the Robert Wood Johnson Foundation.

Dr. Woolhandler, an associate professor of medicine at Harvard, says “managed care squeezes doctors, nurses and patients but eats up most of the savings with bureaucracy. In 1993, administration accounted for 57 percent of health sector job growth and all of the growth in hospital employment.” “As the proverb says, there’s no use going to bed early to save candles, if the result is twins,” added Dr. Woolhandler.

“Instead of the health system being primarily a patient care service, as it was several decades ago, it has rapidly become much more of a business–by far the biggest business and the number one employer in the United States,” said Dr. Sidney Wolfe, director of the Public Citizen Health Research Group. “Each year, a larger and larger percentage of the more than 10 million employees in this one trillion dollar industry are business people, not health care providers,” added Dr. Wolfe.

“Our nurses have less time to spend at the bedside, while health care companies make enormous profits and reward their CEOs with outrageous compensation,” said Kit Costello, R.N., president of the California Nurses Association.

The study also found that the U.S. allocates far more of its health budget to paper-pushing and administration than does Canada. While total health care employment per capita is 7 percent higher in the U.S. than in Canada, all of the extra U.S. employment is due to administration. Canada actually employs more nurses per capita despite spending one third less on health care per capita. Hospitals employ more clinical staff in Canada, while nursing home staffing is strikingly better. If U.S. hospitals and outpatient facilities adopted Canada’s 1986 staffing patterns, we would save more than $100 billion this year alone and employ 1,407,000 fewer health managers and clerks.

“The U.S. could vastly reduce medical costs and actually increase medical care by switching to a Canadian single payer system,” said Dr.Quentin Young, National Coordinator of PNHP. “The resources saved by trimming paperwork would be sufficient to cover the 40 million uninsured Americans and improve care for many Americans with insurance as well,” added Dr. Young.

Statement of Dr. Quentin Young on the Republican Conference Report on Medicare

November, 1995

“The Republican proposals on Medicare and Medicaid reported out of Conference Committee late last week would abruptly destroy these vital programs which provide the only health care safety net for more than 60 million Americans. The GOP proposals are a tax-financed windfall to private insurers/HMOs, who will be allowed to raid the programs, reaping enormous profits at public expense.”

“For-profit HMOs will target the healthiest seniors for enrollment, leaving sicker patients in traditional Medicare. In an average year, 19% of Medicare enrollees cost the program nothing and 53% cost less than $500 each — equivalent to just one month’s premium in a Boston Medicare HMO. Medical savings accounts will attract only the healthiest and wealthiest seniors, further shrinking the funds available to care for the frail elderly by costing Medicare dollars that otherwise would not have been spent. While private plans cash in on healthy seniors who don’t use their services, traditional Medicare will be underfunded and sick seniors will languish without adequate care.”

“Moreover, as provider reimbursement is ratcheted down to meet GOP budgetary “triggers,” fewer providers will take Medicare patients, leaving the traditional Medicare program looking more like Medicaid, with benefits that exist on paper but not in the doctor’s office. This should be a wake up call to America’s seniors and their children — as Medicare is gutted, access to health care for the elderly will be little better than for those without any health insurance at all.”

“Proponents of managed care believe the market can increase efficiencies in Medicaid and Medicare. Yet according to HCFA-commissioned studies, Medicare HMOs cost the government nearly six percent more per patient than traditional Medicare because of cherry-picking. They have also denied Medicare patients needed home care. Several Florida Medicaid HMOs spent more than half of their Medicaid dollars on their administrative costs and lavish profits. Moreover, contrary to earlier reports, managed care has saved little money in the private sector: the consulting firm Foster Higgins found that per-employee HMO costs increased 9.7% in 1994 for large employers.”

“The GOP’s cuts guarantee a dramatic increase in the number of Americans without health insurance. Between 1989 and 1993, Medicaid enrollment increased by 10.5 million, and the ranks of the uninsured still grew by 6.3 million. According to a study for the Robert Wood Johnson Foundation, cutting Medicaid by $170 billion will increase the number of uninsured from about 40 million now to over 65 million by 2002.”

In addition:

The proposal will expose seniors to the same kinds of massive fraud and abuse rife within Medicaid HMOs, the Medigap sector, and managed mental heath care. In Florida, Medicaid patients were told by HMOs that they would lose their coverage if they didn’t enroll. In Tennessee, Medicaid HMOs padded their rolls with prisoners and non-existent homeless people, illegally collecting premiums from the state. New York’s auditors found inadequate access to care in most of that state’s Medicaid HMOs. In Ohio, most of the $14 million paid to Biodyne for managed mental health care for state employees went for profits and overhead.

The GOP Medicare proposal is a windfall to entrepreneurial physicians, providing an anti trust exemption for physician-owned HMOs, and repealing restrictions on self-referrals to physician-owned labs and other health facilities. These measures, shamelessly endorsed by the AMA, pit physicians directly against patients in a battle for the dollar.

At the same time Republicans are recklessly slashing Medicaid funding and turning the program over to the states, they are proscribing state oversight of health care quality. For example, Rhode Island, which has prohibited financial incentives for providers to deny care, and New Jersey, which is moving in that direction, would be prohibited from regulating Medicare HMOs.

The proposal would lower federal standards for nursing homes which addressed earlier scandals. Medicaid is by far the largest payer for nursing home care, and in most states the federal Medicaid rules are the only nursing home standards. The rules have halved the number of people who are tied down, greatly reduced the sedation of non-psychotic patients, and set decent standards for staff training. Even so, this summer’s inspections of nursing homes found two-thirds were not in “substantial compliance,” and 18% were providing substandard care.

“The Republican proposal will accelerate the denial of health care to millions more Americans and divert billions of health care dollars from clinical care into corporate profits. We need to expand Medicare to everyone, not destroy a successful program. The only way to control costs while improving access, quality, and preserving choice of doctor is a single-payer system covering all Americans.”