PNHP

The Rise of For Profit Medicine

The Rise of For Profit Medicine

By Uwe E. Reinhardt

FROM THE perspective of someone whose social ethic was forged first in Europe and then in Canada, the current brouhaha over ”boutique medicine” in the United States is amusing.

The critics of boutique medicine deem it un-American to let the individual’s health care experience vary by ability to pay. Yet it seems only natural in a country that countenances boutique education and the enduring tradition of rationing by income the health care of some 7 million uninsured children and 12 million elderly Medicare beneficiaries without coverage for prescription drugs.

The boutique physicians protest that they merely seek to restore the overall quality of health care to the allegedly high level it had before the onset of managed care – which is in itself a hypothesis, not a fact. If they sincerely believe in their theory, they must be arithmetically challenged.

There are, in the Boston area, only so many physicians and so many patients. Suppose half of those physicians switched to boutique medicine and reduced their patient loads to spend more time with patients who can afford their fees. Former patients now price-rationed out of these physicians’ practices would then either have to go without care or be loaded onto the 50 percent of physicians not yet engaged in boutique medicine.

Either way, the quality of these patients’ health care would deteriorate. In effect, boutique physicians do not enhance the overall quality of care. Wittingly or not, they merely redistribute superior quality toward patients thought to deserve it, because they can and will pay for it.

Boutique physicians are perfectly in keeping with certain sacred tenets of normative economic theory. For decades economics professors have drummed into students the ”marginal productivity theory of income,” according to which a person’s position in our nation’s income distribution largely reflects that person’s marginal contribution to society. From that theory it is but a small step to the ethical doctrine that wealthy persons ”deserve” better housing, education, justice, and, yes, health care than do persons of lesser means. It is their reward for their superior social contribution.

This doctrine extends even to a person’s financial wealth, whether inherited or however else begotten. To illustrate, if a person possesses $100 million and invests it in the economy, his or her marginal social contribution is said by economists to exceed by many multiples that of, say, a soldier in the 101st US Airborne Division fighting for America in the mountains of Afghanistan or of a firefighter standing ready daily to risk his or her life for fellow citizens. It is so, say economists, because the marginal social contribution made by the millionaire’s capital is judged by ”the American people” (i.e., the market) to be far above the soldier’s or firefighter’s, whose modest salaries represent the valuations put upon their marginal contributions to society. Consequently, according to economic doctrine, the financier’s family deserves higher quality of the basic things in life.

Nobel Laureate economist Milton Friedman has articulated the implication of this doctrine for health care more clearly than anyone else. During the health reform debate of the 1990s, Friedman proposed the complete abolition of the federal Medicare program for the elderly and the state-federal Medicaid program for the poor. A better approach, in his view, would be for families to have only catastrophic health insurance, with an up-front, out-of-pocket deductible of $20,000 per year or 30 percent of the family’s income during the last two years, whichever is lower. At the time of his writing, the median pretax family income in the United States was $35,000, which means that he had in mind a $10,500 deductible for such a family.

Friedman’s vision for American health care has made substantial inroads into the medical profession – perhaps even to Boston’s boutique physicians. For example, when I questioned in the Journal of the American Medical Association whether, as a matter of national policy, children of low-income families in this country should be offered the same health care experience as that enjoyed by children of well-to-do parents, this was decried as ”socialism” by a good number of irate physicians. Physicians inclined to answer my question in the affirmative remained silent. Friedman’s disciple, Richard A. Epstein, distinguished law professor of the University of Chicago, answered my question with a crisp ”No!” and went so far as to call the very idea of equality ”perverse.”

Recent health insurance reforms embraced by the American Medical Association are in line with Friedman’s vision for health care, as are many of the novel health insurance products now on the drawing boards of the private health insurance sector. Boutique medicine is merely a natural and rather innocent expression of that ethic.

Some folks in Boston may as yet feel uncomfortable with that approach to medicine. Their children and grandchildren will view it as American as apple pie – as we now do boutique education.

Uwe E. Reinhardt is a professor of economics and public affairs at Princeton University.

This story ran on page A15 of the Boston Globe on 3/26/2002. (C)Copyright 2002 Globe Newspaper Company.

http://www.boston.com/dailyglobe2/085/oped/The_rise_of_for_profit_medicineP.shtmlÊ — Boston Globe Online

Health Care for All – Oregon

Folk,Ê

Here in Oregon, Health Care for All – Oregon had collected 74,748 signatures as of May 30, 67,000 signatures of voters eligible to vote are required for the initiative to appear on the ballot in Nov. 2002. Signature collection is going to go on until July 1 to be sure that there will be about 80,000 signatures so that when the state removes the ineligibles that more than 67,000 will be left. History has shown that we can count on the initiative being on the Nov. 2002 ballot with such a surplus of signatures collected. Here is a chance to have the people in our state vote into law and install into law a single payer universal health care system which our legislators can’t prevent. HCAO now has to complete the education of the voters and get out the vote in Nov. 2002. We need help and you can do that by sending money to “Health Care for All Oregon.” Please help us with as much as you can. Please include your address – no PO boxes – and what work you do with your check. NO ONE will solicit you by phone.

Our address is: HCAO, P.O. Box 51422, Eugene. OR, 97405.

You know that this only has to happen in one state and then it will leapfrog from one state to another, to another, and so on, until we have universal health care in America.

Health insurance bill's makeover turns the tide

St. Petersburg Times
March 20, 2002
By Anita Kumar

Rep. Frank Farkas scored a victory Tuesday when the House passed his controversial health insurance bill.

Farkas agreed to… increase coverage to $25,000 annually…

Farkas… said other aspects of the insurance plan would lower the cost, such as flexible deductibles, co-pays and other treatments and procedures not mandated by law but often covered by insurance companies.

The amended bill passed 113-2.

Rep. Eleanor Sobel, D-Hollywood:

“A bare-bones policy has been given meat. It is a great step forward.”

http://www.sptimes.com/2002/03/20/State/Health_insurance_bill.shtml

Comment: One technical criticism of the movie, “John Q,” was that a $20,000 cap on John Q’s coverage was almost non-existent; virtually all policies have much higher levels of coverage. Now we have a bipartisan, 113 to 2 vote that says that John Q’s fictional bare-bones policy is “a great step forward.”

What has happened to the soul of America?

Health insurance bill’s makeover turns the tide

St. Petersburg Times
March 20, 2002
By Anita Kumar

Rep. Frank Farkas scored a victory Tuesday when the House passed his controversial health insurance bill.

Farkas agreed to… increase coverage to $25,000 annually…

Farkas… said other aspects of the insurance plan would lower the cost, such as flexible deductibles, co-pays and other treatments and procedures not mandated by law but often covered by insurance companies.

The amended bill passed 113-2.

Rep. Eleanor Sobel, D-Hollywood:

“A bare-bones policy has been given meat. It is a great step forward.”

http://www.sptimes.com/2002/03/20/State/Health_insurance_bill.shtml

Comment: One technical criticism of the movie, “John Q,” was that a $20,000 cap on John Q’s coverage was almost non-existent; virtually all policies have much higher levels of coverage. Now we have a bipartisan, 113 to 2 vote that says that John Q’s fictional bare-bones policy is “a great step forward.”

What has happened to the soul of America?

CalPERS cuts losses on self-funded health plans Despite improvement over last year, the pension trustees are considering a single statewide program.

The Sacramento Bee
March 21, 2002
By Lisa Rapaport

Some of the biggest changes could come in CalPERS’ two self-insured plans, which provide benefits to 20 percent of its 1.2 million members. The pension plan has seen financial risk grow in its self-insured plans as sicker, costlier patients flock to them as HMOs abandon outlying counties and some unions with healthier members shop for coverage outside CalPERS.

In response, the pension fund might drop all of its HMO contacts in favor of a single, statewide self-insured plan.

Larry Levitt of the Kaiser Family Foundation:

“You have to be very big to even contemplate fully self-funding and taking the HMOs out of the equation completely. It’s hard to imagine many employers besides CalPERS pulling this off.”

http://www.sacbee.com/content/business/story/1913356p-2025433c.html

Comment: If CalPERS, the nation’s second largest provider of health benefit services (next to FEHBP), recognizes the wisdom of excluding middlemen health plans and establishing a single, statewide program for California state employees and retirees, then when will the rest of us finally recognize that a single, statewide, publicly-administered program will better serve the health care needs for all of us? Would CalPERS consider letting us join in on the initial discussions to consider whether it might be wise to establish a single payer system for the entire state? The California Health Care Options Project has established the credibility of this approach. It is time to look at all options, especially those with credibility.

Workers Feel Like Suckers

Los Angeles Times
March 20, 2002
By Ralph Frammolino

The memories will endure, but the factory that turns out 46 billion Life Savers each year won’t. Kraft Foods Inc. is closing the plant and moving its operations to Canada.

Life Savers will pay nonunion workers in Mount Royal about $12.50 an hour–$3 less than their counterparts in Holland (Michigan). With the Canadian government picking up the tab for health coverage, the savings come to about $6.5 million a year.

John Boyd, president of a Princeton, N.J., consulting firm that helps companies select plant locations:

“Labor costs dominate the equation. They account for at least 70% of all operating costs. . . . That’s the real driver in the site selection process.”

http://www.latimes.com/news/printedition/la-000020325mar20.story

Comment: When will businesses in the United States be ready for the government to assist in making American products more competitive by picking up the tab for health coverage? And when will the politicians tire of watching jobs and businesses with their tax revenues move to Canada? The lack of publicly funded health insurance in the United States may not be the only factor in this shift, but it’s a big one.

Jon Oberlander, Ph.D., Assistant Professor of Social Medicine, University of North Carolina-Chapel Hill, responds to Uwe Reinhardt’s comments on Medicare:

I agree with Uwe that single payer is thrown around far too often as a catch phrase. And I strongly believe that too many health reformers are “fundamentalists,” fixated on Canadian style single payer when other international models perform just as well–and may be a better political fit for the U.S. That is a large topic that I leave for another day.

But I do want to take up what Uwe has said about Medicare. He tells us of Medicare (along with Medicaid): “neither program is known for its ability to assure the quality of health care, and both can control costs in only the crudest ways–with a sledgehammer.” He then goes on to criticize Medicare’s regional discrepancies in payment and notes that low cost physicians in Minnesota could be punished under Medicare’s Volume Performance Standard system if physicians in Miami push up their own utilization. Is that a way to run a health system, Uwe wonders?

Judging by international experience, the answer is yes. Medicare’s tools of cost control are indeed crude but so are those in Canada, Germany, and just about any other country you look. Medicare uses the sledgehammer of setting fee schedules (or price controls, depending on your taste) but that, along with global budgets and controlling technological diffusion (which Medicare is not positioned to do) is precisely how other countries have controlled costs. Crude? Yes. Effective? Yes. So exactly what, Uwe, is the point in labeling Medicare as having crude cost control? Is there another system that works in practice rather than theory (judging by the flops at CalPERS and FEHBP, it is surely not managed competition, as much as Alain Enthoven would have us believe otherwise).

As for regional inequities in Medicare payment, I agree these are truly irrational. But it is worth pointing out that other nations such as Canada, also have collective punishment in budgets that “claw back” excess payments across all doctors. Medicare perhaps is worse–at least the Canadians are smart enough to do it on the provincial level–but collective payment reductions is not exactly an original sin. And Medicare doesn’t guarantee quality outcomes, as Uwe says. But who does? Not managed care. For all the talk of disease management and coordinated care, there is no evidence on average that HMOs improve care for Medicare beneficiaries. Too often, this is the stuff of advertising slogans, not real change in health care delivery. And the one group that fares badly under managed care over the years in Hal Luft’s review is chronically ill seniors.

At the end of the day, I’m sure we’re not far apart in agreeing that Medicare has lots of limitations and could stand for major improvement in benefit coverage etc. But I’m not sure what the point of Medicare bashing is, Uwe, if you leave out its similarities in cost control (with its limited capabilities) to other nations and in quality to the private experience here.

Best, Jon

Uwe Reinhardt responds to Rev. Tom Mainor on single payer reform, with an additional comment by Don McCanne:

Uwe Reinhardt, Ph.D., James Madison Professor of Political Economy, Princeton University:

Dear Rev. Mainor:

I am not sure that we are on the same page. We all do agree, I think, (1) that every American should be protected through insurance of some kind from the financial inroads associated with serious illness and (2) that every American, when he or she believes to be in need of health care, should have access to “adequate” health care, where what is “adequate,” however, may be defined by someone other than that person or his or her physician (e.g., it may be defined by the government). I am not sure we all agree even on point (2).

I have gained the impression that, in this e-mail circle, the word “single payer system” stands as a code word for these two guarantees: “adequate” financial protection and “adequate” access to “adequate” health care. What an odd use of the English language that is!

To me, the words “single-payer” evokes the image of an economic arrangement. It is a payment system under which there is only one payer who operates a common payment system, whatever its precise form may be. In lectures I had given in Taiwan some years ago, I called it “single-pipe” systems, to stress that good cost control requires that, at some points, all monies going to providers should flow through a single pipe segment whose throughput could be controlled by government. (Taiwan actually adopted such a system and still calls it “single pipe system.”)

But “single payer” system does not necessarily imply “comprehensive, universal insurance coverage,” nor even payment of providers on a piece-rate basis (fee-for-service). Many students of health care have concluded long ago that piece-rate compensation systems are inimical to good health care, especially to prospective health maintenance.

Medicare is a single payer system. It is almost universal among the elderly, but it is not comprehensive. It has its strength, but also its weaknesses. We now read that it pays physicians fees that do not cover costs (which may or may not be true). Medicaid also is a single payer system in each state. We know that often its fees do not cover a doctor’s costs. Neither program is known for its ability to assure the quality of health care, and both can control costs in only the crudest ways–with a sledgehammer.

To illustrate, Medicare payments per elderly in Miami are over twice the amount Medicare pays for identical elderly in Minnesota (see Wennberg’s famous, Dartmouth Atlas.) Yet, under Medicare’s approach to cost control, if Miami physicians and those in other high cost areas pushed utilization to the point of busting the federal Volume Performance Standard (a global, national budget cap), then physicians in Minnesota will see their fees cut as a punishment for that budget busting. Is that a way to run a health system?

It baffles me that the group on this e-mail circuit holds out “single payer system” almost as a religious mantra, without ever specifying exactly what the term means to them and why they see in a “single payer system” the solution to all our problems.

I believe I challenged the group last summer to come out of the closet on this one. The challenge remains on the table.

Best

Uwe

Don McCanne, M.D., President, Physicians for a National Health Program, responds:

In simple terms, a single payer program would replace the current multipayer system of private insurance companies and HMOs with a single government fund within each state. But the problem with descriptive labels such as “single payer” is that our concept of reform is much more than simply a single pipe or conduit for the flow of funds. So, regardless of whether or not the single payer label is used, we should ask just what form of health care reform do we envision?

Health care coverage and access would be universal, including everyone, even undocumented residents.

Health care benefits would be comprehensive, including all beneficial health care services except those services that should not be funded with public funds such as vanity cosmetic surgery or penthouse hospital suites.

Funding of the system would be equitable, with each individual contributing his or her fair share but with no person suffering a financial hardship. True equity is possible only with a progressive system of public funding. Cost sharing has been used to reduce utilization by erecting financial barriers to care (and is used more now to inappropriately shift risk to patients) and has impaired access for the more vulnerable members of our society. In an equitable system, cost sharing would be eliminated and excess utilization would be controlled instead by mechanisms mentioned below.

Allocation of our health care resources would be equitable. Separate budgeting of capital improvements would be established to assure access for everyone with adequate but not excessive capacity, which would be as close to equitable as logistic and demographic considerations would permit.

Administrative simplification would be achieved by eliminating the fragmented and duplicative system of large, inefficient, private health plan bureaucracies and the administrative burden that this places on the providers of care. This would be replaced with a simplified, single, publicly administered program. If we continue to spend at our current level, this does free up enough resources to pay for the voids in current care, including the uninsured, under-insured, and the deficiencies in Medicare and the private health plans (programs which would be eliminated).

Costs would be controlled by global budgeting. State or regional authorities would allocate the funding, establishing global rates for hospitals and integrated health systems, and negotiated rates for providers. Negotiated rates in a public system would prevent excessive compensation but would be adequate to assure that qualified individuals would continue to be attracted to the health professions. The various health providers would be competing with each other for those finite funds, but would no longer have to compete with passive investors. (Although the draw of passive investors is a small percentage of our system, and would not have much impact, the corporate mentality that creates excess capacity and consequent waste would be removed, thereby allowing the funds to be directed to the public good. The public interest is served better by assuring adequate compensation for providers.) As mentioned, capital improvements would be budgeted separately to optimize capacity.

Quality of care is impaired whenever services are under-utilized or over-utilized. Capacity planning by controlling capital expenditures is an essential measure in quality improvement efforts.

Integrated information systems would identify outliers, which then would initiate an education process to improve resource utilization, or sanctioning for those that remain non-compliant. Information integration would also reduce error, also improving quality.

A stable professional relationship with either individual providers or integrated health systems would be established for each individual. Choice of providers would be returned to the individual. When individuals have choice, providers are motivated to provide quality services, or at least services that have the appearance of quality, usually a move in the right direction.

Many flawed health policies would be reduced or eliminated. Inequitable cost shifting that permeates our system, inadequate funding of welfare programs such as Medicaid, adverse or virtuous selection, financial barriers to access, tiering of services, price gouging, and endless other defective mechanisms would be significantly reduced or even eliminated.

A single payer system would provide a structural framework that would promote the application of the ethical principles of beneficence, non-maleficence, autonomy and justice.

Many single payer supporters would remove all for-profit corporate boards and passive investors from the medical equation. A publicly administered program would automatically replace the private health plans and their investors. (The removal of passive investors from the health care delivery system is a much more complex topic and should be reserved here as a separate topic rather than using it as a diversionary ploy to try to discredit the single payer approach.)

Are there any problems with the single payer approach? Living within a budget is always a problem. But a budget based on our current generous expenditures would be a very comfortable budget indeed. Reducing excess capacity and allowing access to everyone might be perceived as rationing of services and may actually be so if we fail to design into the system surge capacity for epidemics. Those that are able to buy their way to the front of the line in our current system may perceive, somewhat ironically, an equitable system as being “unfair.” If the public at large wanted even more services, those services could be funded by electing legislatures that would support expansion. If a legislature and administration decided to reduce funding for ideological reasons and against the will of the people, then they could be replaced at the next election. (We can let the political scientists and the economists debate just how effective that process would be.)

Of course, I haven’t begun to touch on all of the implications of single payer reform, but that “single pipe” opens up all sorts of possibilities for establishing health care equity and justice that are simply not possible in our fragmented, inefficient system of private plans, public plans, and no plans. The economists may call the system of Taiwan the “single pipe” system, but the more common designation is “NHI” or “National Health Insurance.” Maybe that relatively generic term would be more appropriate than “single payer,” which is a conceptual term that in some minds limits the expansive thinking that we now need, but thinking that cannot allow compromise on universality, comprehensiveness, access, and equity.

Have we found our way out of the closet yet?

Note: The original proposal of Physicians for a National Health Program did not use the term, “single payer.” Single payer was later unofficially adopted as a label for simplicity in communication. It may not be the proper label because of common misconceptions about the single payer model. The original proposal published in the New England Journal of Medicine in 1989, “A National Health Program for the United States: A Physicians’ Proposal” is available at:

https://pnhp.org/publications/NEJM1_12_89.htm

With this information in hand, you can return to Professor Reinhardt’s comments and address each one of his concerns. You might try it as an academic exercise.

Don

Bad Medicine

The New York Times
March 19, 2002
By Paul Krugman

Sunday’s front-page story in The Times on doctors who shun patients with Medicare may have been alarming enough; it seems that recent cuts in Medicare payments are inducing many doctors to avoid treating Medicare recipients at all. But this is just the beginning of a struggle that will soon dominate American politics.

Think of it as the collision between an irresistible force (the growing cost of health care) and an immovable object (the determination of America’s conservative movement to downsize government).

Why don’t we just leave medical care up to individuals? Basically, even in the United States there are limits to how much inequality the public is prepared to tolerate. It’s one thing if the rich can afford bigger houses or fancier vacations than ordinary families; Americans accept such differences cheerfully. But a society in which rich people get their medical problems solved, while ordinary people die from them, is too harsh even for us.

But meeting the public’s expectations for medical care – that is, ensuring that every American, and in particular every retired American, gets essential care – will require a lot of government spending. And the conservative movement in general, and the Bush administration in particular, are not prepared to make the money available; after all, government spending must ultimately be paid for with taxes.

Yet they dare not say openly that they are prepared to deny essential health care to those who cannot afford it.

http://www.nytimes.com/2002/03/19/opinion/19KRUG.html

Paul Krugman, Ph.D., is Professor of Economics and International Affairs at Princeton University.

Comment: “A lot of government spending” does not have to mean more spending. The administrative efficiencies enabled by establishing a publicly administered program of universal insurance would provide enough savings to fund the deficiencies in our current system. The only hurdle has been our reluctance to accept the fact that “public administration” means that the government would collect the “premiums” and distribute those funds equitably and efficiently. That is not a bad thing. We have to get over thinking that it is.

Rev. Tom Mainor Comments on the debate and priorities:

The American public, the Congress and the News Media do not have before them accessible, sense-making comparative costs, figures. Nor do they see/hear/receive/have explained in common sense fashion the elements and considerable benefits to be derived via single payer, regional global budgeting, or the multiple payers that exchange mountains of bills each day, back and forth. Most of the proposals forthcoming are merely the rearrangement of desk chairs on the SS. US HEALTH COSTS DEBACLE.

Health care is too important to be left to the market place. Hopefully not medical and public health academia too.

It is hard enough to find out what one’s insurance pays, how much of the co-payment has or has not been factored in, and whether or not one needs yet another supplementary policy to make certain bankruptcy is not just around the corner.

The ego and energy going into this particular conversation would better be spent on informing the public.

Come on, gentlemen. We are on the same side aren’t we?

Tom Mainor

Uwe Reinhardt again responds to Theodore Marmor:

Ted:

I’m off on a trip over break and have only a few moments to reply, but let me try.

You took a few nice swings at me, which was fair enough, I suppose, but I do not think that you have answered my two fundamental questions I raised in my earlier e-mail, more sincerely than you may surmise:

1. How does democracy work in America? If your life depended on it, Ted, and someone asked you to compress your knowledge on this subject into, say, one written page that might be roughly right, what would you write down?

2. What do the American people, other than the providers or financial intermediaries of health care, want from their health system, and what kind of system would they really like to have?

Do I understand you to say that the people do not have a coherent, logically consistent view on what they want from their health system?

Is it the case that, whatever people may think in this regard at a moment, it takes very little to disinform and confuse them, and to shift their views (as, say, in California)?

Are you saying that, even if people had logically consistent and stable views on health policy, these views would be irrelevant under our system of government in any event, or are relevant only occasionally, in ways that can be predicted only ex post–e.g. by Shields and Brooks?

Having spoken at length on several occasions with Humphrey Taylor of Lou Harris, and having read on the matter, too, I do appreciate that it is very difficult to fathom through surveys what people really think about any issue, if only because the responses given are easily influenced by the way questions are framed. I am not really thinking about that problem. I am after what people actually might be thinking.

Best regards,

Uwe

Victor Sidel, M.D., Co-Founder and Past President, Physicians for Social Responsibility/USA and Co-Founder and Past Co-President, International Physicians for the Prevention of Nuclear War (1985 recipient of the Nobel Prize for Peace), comments on the debate and on our priorities:

Don:

As you know, I’m off to Moscow to try to make a contribution to lessening the threat of use of nuclear weapons. That may be the reason I have little patience with this kind of argument. It’s clear why economics is called “the dismal science.” In a time when untold billions of additional dollars are being allocated to the US military and to “bioterrorism preparedness” while the DoD makes plans to use nuclear weapons (or threaten to use them), policy arguments about the exact percentage of GDP devoted to medical care (or the false predictions that were made about its rise) are dilatory or worse. Let’s devote our time and energy to discussion of the political action needed for the achievement in our lifetimes of an equitable high-quality universal cost-effective medical care system for the United States.

Cordially, Vic

Dr. Sidel will be in Moscow March 24-26, and will deliver the paper, “Instead of Nuclear Weapons: An IPPNW Perspective on Nuclear Security, Human Security, and Global Security.” The concept of human security is very directly related to our efforts on behalf of health care justice. Dr. Sidel has kindly consented to make this paper available to members of this list. Since it is four pages, it is too long to send it out to everyone with this message, but merely reply to this message and it will be forwarded to you as a Word attachment.

Theodore Marmor responds to Uwe Reinhardt:

(The previous remarks are reproduced, and Dr. Marmor’s additional comments are in caps, whereas his original comments are in lower case. Dr. Reinhardt’s comments were made after Dr. Marmor’s lower case comments, but before his caps. Please note that, although messages in all caps are considered to be the e-mail version of shouting, that is not true here.)

Dr. Marmor:

Uwe–I want to start a trend towards brevity in these exchanges, so will have in caps my responses below.

Theodore R. Marmor Professor of Public Policy & Management Professor of Political Science Yale University School of Management

Dr. Marmor:

Uwe–your arithmetic was helpful to see what is at work with projections of future national income and what one scenario forecasts for health expenditures as a proportion of that national income. But arithmetic neither produces plausible predictions (as against conditional forecasts) and, more important, does not provide the grounds for analysis of that future. (Were CBO forecasts in 1993 l8% of GNP for health by 2000? That was their forecast!)

Dr. Reinhardt:

It was projected to be 19.7%, Ted (October, 1993–I still have the paper). How could you err by so much!

Dr. Marmor:

THE POINT DOES NOT DEPEND ON WHETHER IT WAS 18%, WHICH I PULLED FROM MEMORY OR 19.7% RATHER IT IS THAT THE CBO FORECAST WAS VASTLY OFF THE MARK AS A POINT PREDICTION. WE CALL YOUR RESPONSE IN PHILOSOPHY ‘FALSE SPECIFICITY.’ I REGARD IT AS A HUMOROUS ACKNOWLEDGEMENT OF THE POINT.

Dr. Marmor:

I particularly want to contest your claim (repeated often by you) that “Americans have signaled that they don’t want any cost control at all….” Kip challenges your claims about the effects of what is called managed care.

Dr. Reinhardt:

I attach a chart on real health spending per capita (not included in this message). Either you or Kip must explain to us all what caused the trend line to bend. We know it was not Medicare, because that kept right on its growth path until the BBA ’97. So I shall temporarily concede–against superior authority–that managed care had nothing to do with it and await yours or Kip’s explanation.

Dr. Marmor:

I AM NOT IN THAT FIGHT. I LEFT THE DISPUTE UP TO YOU AND KIP AND THINK MANAGED CARE MAY OR MAY NOT HAVE DAMPENED INFLATION (I SUSPECT IT DID), BUT THAT THE MORE IMPORTANT POINT IS THAT IT DID SO IN WAYS THAT COULD NOT BE CONSIDERED ACCEPTABLE BY MOST THOUGHTFUL PEOPLE.

Dr. Marmor:

I want to challenge your interpretation of the connection between what mass American wants and both public and private policy. It is decades too late to continue to repeat the fallacy of revealed preference in politics. It does not follow that because outcome A takes place, the citizens of that jurisdiction ‘wanted’ A. It might be, but the use of the effect to specify the cause is a logical fallacy. Until and unless you can find reason to believe mass opinion shaped events decisively, stop blaming the victim.

Dr. Reinhardt:

Again, I must defer here to superior authority. I am not a political scientist. What I await from you, Ted–perhaps all of us do–is a concise, short explanation of how democracy works in America. As an example, explain to me why the election of 1994 had nothing to do with voter preferences–among others about government’s role in health care.

Dr. Marmor:

THIS IS, I AM AFRAID, A NAIVE READING OF ELECTORAL OUTCOMES. YOU CAN NOT LEGITIMATELY GO FROM THE OUTCOME–THE REJECTION OF CLINTON–TO A READING OF WHAT VOTER VALUES AND PREFERENCES WERE FOR PARTICULAR POLICIES. WHAT YOU CAN SAY IS THAT CLINTON’S FAILURE TO GET A HEALTH CARE REFORM THROUGH–OR TO FRAME AN ALTERNATIVE THAT CLEARLY MOBILIZED AGAINST HIS OPPONENTS IN CONGRESS (AS THE DEMOCRATS DID FROM 1961-64 WITH MEDICARE) MEANT THAT VOTERS WERE TURNED OFF BY WHAT SEEMED LIKE A FAILED DOMESTIC PRESIDENT IN SOCIAL POLICY. HE WAS LUCKY THAT THE REPUBLICANS OVER-REACHED IN 1995 AND THEN HE TURNED INTO A DEFENDER OF TRADITIONAL DEMOCRATIC PROGRAMS IN 1996

Dr. Reinhardt continues:

Throw in a convincing–but concise–explanation of why the referendum in California on a single-payer plan did not work.

Dr. Marmor:

I SUSPECT, BUT DO NOT KNOW, THAT CALIFORNIA VOTERS WERE BAMBOOZLED BY SUPERIOR PROPAGANDA ON THE OTHER SIDE AND MOST HAD ONLY THE VAGUEST IDEA OF WHAT THE POLICY WOULD MEAN IN PRACTICE. THIS IS WHY, BY THE WAY, THAT DEMOCRATIC THEORISTS LARGELY REJECT REFERENDA AS USEFUL MEASURES OF WHAT VOTERS WOULD WANT IF THEY UNDERSTOOD WHAT WAS AT ISSUE. IT IS CALLED PLEBISCITARIAN DEMOCRACY.

Dr. Reinhardt continues:

Always eager to learn.

Dr. Marmor:

START WITH A REVIEW OF THE WORK OF PAGE AND SHAPIRO ON PUBLIC OPINION. TAKE A LOOK AT LARRY JACOB’S BOOK WITH SHAPIRO ENTITLED ‘CRAFTED TALK’, WHICH SHOWS JUST HOW MUCH POLITICAL LEADERS USE POLLS TO CRAFT THEIR MESSAGES RATHER THAN RESPOND TO POPULAR PREFERENCES.

Dr. Marmor:

I don’t for a moment believe the American mass public has any clear idea about the extent to which cost control arguments are true, false, or misleading.

Dr. Reinhardt:

And how do you know that?

Dr. Marmor:

FROM A CAREER OF READING THE WORKS IN POLITICAL SOCIOLOGY THAT I URGE YOU TO CONSIDER. GO BACK TO THE MICHIGAN VOTING STUDIES AND THE WORK BY CONVERSE ET.AL. IT WILL STUN YOU, I BELIEVE.

Dr. Marmor:

Our political system is far too structured against mass majority rule to explain health policy outcomes as the result of their ‘wishes.’ Sure, a different distribution of wants and attitudes might make some policies more likely, but the locomotive conception you use is genuinely misleading and unsupported, as I have mentioned before, by the public opinion literature.

Dr. Reinhardt:

Too vague, Ted. Too vague.

Dr, Marmor:

BALONEY. PICK UP ANY TEXTBOOK ON AMERICAN GOVERNMENT AND YOU WILL SEE THIS VIEW SUPPORTED. I REGRET THIS KIND OF KNOW-NOTHINGISM

Dr. Reinhardt continues:

This is you in your old mode.

Dr. Marmor:

AN IRRELEVANT IN LOGICAL TERMS. WHETHER I AM UP TO SOMETHING NOW OR EARLIER HAS NOTHING TO DO WITH ITS VALIDITY.

Dr. Reinhardt:

As you know, I don’t groove on it. For example, I could simply assert that your statement here is genuinely misleading and unsupported, and leave it at that.

Dr. Marmor:

THIS DOES NOT CONSTITUTE ARGUMENT; IT IS BLATHER.

Dr. Reinhardt:

No, Ted, I would like you to explain to me why voters’ attitudes about the role of government in health care has nothing to do with the demise of the Clinton plan and the ascendancy of Republican rule in the House.

Dr. Marmor:

YOU AGAIN SEEM TO THINK THAT THE DEFENSE OF A BAD ARGUMENT IS AN ASSAULT ON ANOTHER. THE BURDEN OF PROOF LIES WITH THOSE WHO WOULD CHALLENGE WITH EVIDENCE ABOUT VOTER KNOWLEDGE AND OTHER DATA WHAT ARE WIDELY ACCEPTED JUDGMENTS ABOUT HOW AMERICAN DEMOCRACY WORKS. MOST ECONOMISTS DO NOT STUDY SUCH MATTERS AND HENCE THEY SIMPLY EXPRESS CONVICTIONS.

Dr. Reinhardt:

Finally, Ted, since you infer that you may know, please tell me once and for all what the American people really want in health care. I suggest a concise list. In return I shall compose what I think they want.

Dr. Marmor:

THIS IS A LARGE TASK AND ONE THAT IS WELL WORTH TAKING SERIOUSLY. THEY WANT CONTRADICTORY THINGS, HAVE CONFLICTING VALUES ON THESE MATTERS, AND THE FOCUS GROUPS NOT ONLY REVEAL THIS, BUT SHOW HOW THOSE VIEWS CHANGE AS THEY ACQUIRE INFORMATION. I THINK THIS IS A USEFUL CHALLENGE. MUCH OF THE OTHER STUFF IS NOT UP TO YOUR STANDARD.

TED MARMOR

Dr. Ellen Shaffer and Dr. Kip Sullivan follow up on Kip Sullivan’s March 4 comments on oligopolies:

Dr Shaffer, in a March 5 response to Dr. Sullivan’s comments:

Just for the record, a slight wrinkle to Kip’s comments, which are always wonderful: HMOs, and the 1973 Act promoting them, were not destined to become large or competitive. Group practices flourished for over 50 years, including Kaiser, without having this effect. The reason consolidation occurred in the mid-1980s, and not the mid-1970s, was because of laws permitting selective contracting: for the first time purchasers (employers and others) were encouraged and permitted to choose providers based on price, and health plans and other providers were compelled to compete based on price. Hence consolidation, for-profit conversions, the whole ball of wax. HMOs aren’t necessarily a bad idea. and group practice still makes sense. Managed competition, on the other hand, turns out not to work if you leave out the “managed” part. – ES

In the following comments, Dr. Sullivan is responding to Dr. Shaffers’ comments above, and Dr. Shaffer, in turn, is responding to Dr. Sullivan’s comments:

Dr. Sullivan:

I appreciate your comment. I’d like to pursue it with you for an email or two.

What laws permitting selective contracting are you referring to? I’m not aware of any such laws in Minnesota, for example. I am aware that there was a great to do about such a law in California. But did any state other than California pass such a law?

Dr. Shaffer:

Good question. CA’s law was 1982; the turn to selective contracting by MediCal in particular, as well as by private purchasers, greatly accelerated HMO enrollment in the 1980s, and shifted leverage to purchasers. Would have to look back at related legislative history to see if other states or the feds followed, or if the snowball just rolled.

Dr. Sullivan:

A second issue I’d like to raise with you is the question of whether prepaid group practices were any better at providing medical care than fee-for-service docs were. I don’t know of any evidence to indicate they were. I do know the founders of some of the early prepaid practice groups were very altruistic people, and they insisted that their docs emphasize prevention. But that’s evidence only of what a founder, or an altruistic board, can achieve. It’s not evidence that capitation and other managed care tools inevitably lead to better medicine.

Dr. Shaffer:

I don’t think that any reimbursement method leads inevitably to better care, nor would I suggest that managed care has grown because it offers better quality. I think financial incentives have totally distorted clinical practice, and propose in a recent paper that we switch to salaries for all clinicians, and work back to adding in whichever financial as well as organizational incentives seem to make sense. Again, wd. have to go back and see what kind of outcomes research was done on Group Health of Seattle, MN and DC, Mayo Clinic, and Harvard Health Plan (research tools weren’t as good then) before they were corporatized. (I do not include Kaiser in this group, though some would; it was never controlled by patients, as the Group Healths were, nor were the MDs driven by any particular mission). Seem to recall a fair amount of favorable analysis in the 1970s. I think energized professionals practicing in teams, who are accountable to patients, do provide better medicine, and research into QI efforts that rely on this model show promising results (see icsi.com, e.g.). Since early FFS medicine was driven by reimbursement for acute care, in order specifically to finance hospitals and later drug companies, it did make a difference that group models covered prevention. The same thing could be accomplished under FFS or salaried systems, but was not for historical reasons.

Dr. Sullivan:

If I’m right, and the pioneering HMOs were no better at taking care of patients than FFS docs, then, regardless of how widespread selective contracting laws were, I’m back to my original argument, which is, HMOs were destined to “compete” with size rather than “health maintenance” because HMOs couldn’t do health maintenance any better than traditional docs could. And since they couldn’t, they had no way to cut premiums other than to ration and extract discounts, and both of those tactics are much easier to execute for huge HMOs than for little ones.

Dr. Shaffer:

I agree with your central argument that HMOs have grown due to muscle and financial clout, not quality. I was just trying to raise a few historical points of analysis re: how and when that concentration and growth came about. It was not inevitable, nor the result primarily of the 1973 Act, since most growth and consolidation occurred in some areas in the 1980s (CA and MN in particular) and in most of the US after 1994. The intentional shift by purchasers, particularly by employers, was decisive in events after 1994. I agree that larger MCOs have prevailed due to their ability to extract discounts from providers. As premiums rise once again, employers will rely on defined contribution plans to control their costs. Our argument is, however, that this financial finagling is not a long term solution, and that in fact universal coverage is possible and affordable; we may need to reconsider both organizational factors and methods of financial reimbursement, to suggest what will produce good quality of care, as well as affordable care.

Uwe Reinhardt responds to Kip Sullivan's last comments:

Kip:

I think we can put this baby to bed as follows:

1. It is agreed that, relative to keeping the elderly in the traditional Medicare (enhanced by a drug benefit), funneling the same tax dollars through private health plans will either not buy the elderly the same health care services or the elderly have to put extra money on top. Thus, for the health plans or anyone else to sell that idea, they would have to convince us that for the same money, we will get different services that will represent higher quality care (e.g., through disease management). That is a hope but not a reality.

2. On the role of managed care during the 1990s, I agree that there is something to all of your arguments–the insurance cycle, the Hillary effect, and so on–but I am struck that when I plot real health spending per capita from 1965 to 2000, how smooth that line basically has been, in spite of insurance cycles and preemptive lying-low in the face of cost-containment talk in the past several decades. There has never been such a dramatic bending down of that curve as occurred during 1922-1997-8. Furthermore, I find it hard to believe that the discounts the plans wrung out of providers and the reduction in ALOS did not yield at least some savings.

Thus, I conclude that this argument is not settled and that the data allows us each to our maintain hypotheses.

3. As to Luft and Miller, they presented a truly detailed revisit of their earlier study last year at a conference. Once again, the results were inconclusive. I will not accept it as a working hypothesis that managed care lowered the quality of the patient’s health care, although it did probably lower the quality of some providers’ life.

Best regards,

Uwe

Sullivan responds to Reinhardt Kip Sullivan responds to Uwe Reinhardt:

From Uwe Reinhardt’s last message:

<< As to Luft and Miller, they presented a truly detailed revisit of their earlier study last year at a conference. Once again, the results were inconclusive. >>

Kip Sullivan:

Uwe, Do you know if Luft and Miller’s new review excluded studies that didn’t control for coverage differences? If it did not, why do you give its conclusions any credability

The most galling of the studies cited by Miller-Luft in their 1994 and 1997 reviews were studies that compared doctors treating Medicare patients in HMOs with doctors treating patients in FFS Medicare without controlling for coverage differences. The complete scam works as follows:

(1) Taxpayers overpay Medicare HMOs,
(2) Medicare HMOs use the subsidy to pay for better coverage (e.g., cancer screens),
(3) researchers with a fondness for HMOs come along and examine whether Medicare HMO docs are better than Medicare FFS docs on process measures (e.g., use of cancer screens) and outcome measures (e.g., stage of cancer at diagnosis) likely to be affected by the coverage difference and,
(4) lo and behold, the HMO docs come out looking better.

I think the scholars who wrote these studies, the editors who accepted them for publication, and others like Miller and Luft who describe them as unusually good studies, are guilty of thought processes so flabby their behavior rises to the level of malpractice.

Evidence-based medicine is now the new religion within the American health policy community. But the health policy community has yet to apply the same standard to itself. If a group of doctors conducted a study comparing the effectiveness of Drug A to Drug B, and they deliberately set it up so that the group getting Drug A took drug A on schedule because they had excellent drug coverage, while the group getting Drug B took Drug B erratically because they had no health insurance, they would be laughed out of the profession. Not so in the health policy community. Health policy analysts who design such shabby experiments are held up as scientists par excellence.

Do you agree with my statement that studies that compare docs treating un- or under-insured FFS patients with HMO docs treating fully insured patients are studies so flawed they shouldn’t be published, much less held up by Miller-Luft as among the 44 best studies published between 1980 and 1997? Can you tell me if Miller-Luft’s new review examined only those studies that controlled for coverage differences?

Thanks.

Kip

Uwe Reinhardt responds to Kip Sullivan’s last comments:

Kip:

I think we can put this baby to bed as follows:

1. It is agreed that, relative to keeping the elderly in the traditional Medicare (enhanced by a drug benefit), funneling the same tax dollars through private health plans will either not buy the elderly the same health care services or the elderly have to put extra money on top. Thus, for the health plans or anyone else to sell that idea, they would have to convince us that for the same money, we will get different services that will represent higher quality care (e.g., through disease management). That is a hope but not a reality.

2. On the role of managed care during the 1990s, I agree that there is something to all of your arguments–the insurance cycle, the Hillary effect, and so on–but I am struck that when I plot real health spending per capita from 1965 to 2000, how smooth that line basically has been, in spite of insurance cycles and preemptive lying-low in the face of cost-containment talk in the past several decades. There has never been such a dramatic bending down of that curve as occurred during 1922-1997-8. Furthermore, I find it hard to believe that the discounts the plans wrung out of providers and the reduction in ALOS did not yield at least some savings.

Thus, I conclude that this argument is not settled and that the data allows us each to our maintain hypotheses.

3. As to Luft and Miller, they presented a truly detailed revisit of their earlier study last year at a conference. Once again, the results were inconclusive. I will not accept it as a working hypothesis that managed care lowered the quality of the patient’s health care, although it did probably lower the quality of some providers’ life.

Best regards,

Uwe

Sullivan responds to Reinhardt Kip Sullivan responds to Uwe Reinhardt:

From Uwe Reinhardt’s last message:

<< As to Luft and Miller, they presented a truly detailed revisit of their earlier study last year at a conference. Once again, the results were inconclusive. >>

Kip Sullivan:

Uwe, Do you know if Luft and Miller’s new review excluded studies that didn’t control for coverage differences? If it did not, why do you give its conclusions any credability

The most galling of the studies cited by Miller-Luft in their 1994 and 1997 reviews were studies that compared doctors treating Medicare patients in HMOs with doctors treating patients in FFS Medicare without controlling for coverage differences. The complete scam works as follows:

(1) Taxpayers overpay Medicare HMOs,
(2) Medicare HMOs use the subsidy to pay for better coverage (e.g., cancer screens),
(3) researchers with a fondness for HMOs come along and examine whether Medicare HMO docs are better than Medicare FFS docs on process measures (e.g., use of cancer screens) and outcome measures (e.g., stage of cancer at diagnosis) likely to be affected by the coverage difference and,
(4) lo and behold, the HMO docs come out looking better.

I think the scholars who wrote these studies, the editors who accepted them for publication, and others like Miller and Luft who describe them as unusually good studies, are guilty of thought processes so flabby their behavior rises to the level of malpractice.

Evidence-based medicine is now the new religion within the American health policy community. But the health policy community has yet to apply the same standard to itself. If a group of doctors conducted a study comparing the effectiveness of Drug A to Drug B, and they deliberately set it up so that the group getting Drug A took drug A on schedule because they had excellent drug coverage, while the group getting Drug B took Drug B erratically because they had no health insurance, they would be laughed out of the profession. Not so in the health policy community. Health policy analysts who design such shabby experiments are held up as scientists par excellence.

Do you agree with my statement that studies that compare docs treating un- or under-insured FFS patients with HMO docs treating fully insured patients are studies so flawed they shouldn’t be published, much less held up by Miller-Luft as among the 44 best studies published between 1980 and 1997? Can you tell me if Miller-Luft’s new review examined only those studies that controlled for coverage differences?

Thanks.

Kip