PNHP

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

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.”

Physicians' Group Condems AMA Support for GOP Medicare Plan

October, 1995

Chicago — “The American Medical Association shamelessly put physician and corporate interests over the health of their senior patients today in endorsing the GOP’s Medicare proposal,” said Dr. Quentin Young, an internist in Chicago and national spokesperson for the 7,000 member Physicians for a National Health Program. “The AMA has bitterly opposed Medicare since its creation, and now is endorsing a plan that would lead to its demise. Many of the worst features of the GOP plan are, in fact, straight out of the AMA’s own Medicare proposal. If this bill passes, they will have blood on their hands.”

“Preserving Medicare and improving patient care for the frail elderly is not on the AMA agenda. They are willing to pit physicians directly against their patients in a battle for the dollar. They are collaborating with the Republicans to cap malpractice awards, repeal protections against physician fraud and abuse, and give the newly emerging for-profit physicians’ groups equal access to the $100 billion plus windfall the GOP plan creates for private insurers/HMOs. Private insurers take 15 to 30 percent of premiums for overhead, CEO salaries, and profits, compared with just 1.9 percent in traditional Medicare. The AMA is also seeking the right to price-gouge seniors for more than Medicare pays.”

“We believe that most Americans, and most physicians, support health care reform based on principles of social justice and medical need, not the current reforms driven by Wall Street and the AMA’s greed. With fewer than 50% of physicians in its ranks, and having sunk to a new low, the AMA has forfeited the right to speak for American physicians.”

STATEMENT OF DR. STEFFIE WOOLHANDLER ON THE HOUSE REPUBLICAN PROPOSAL ON MEDICARE

September, 1995

“The House Republican proposal on Medicare released today sets in motion a death spiral for Medicare. The proposal is a blueprint for funneling $84 to $189 billion over the next seven years to private insurance companies and for-profit HMOs for their exorbitant overhead costs, profits, and executive salaries. Medicare’s administrative costs are just 1.9 percent, compared with 15 to 30 percent at HMOs such as U.S. Healthcare.”

“The proposal will unleash a frenzy of risk selection by insurers/HMOs, who will pick out the healthiest seniors to market to and enroll, leaving sicker patients who are less willing to change physicians concentrated in the traditional Medicare program. Medical savings accounts will further shrink the funds available to care for frail elderly, as they will attract only the healthiest seniors, and end up costing Medicare funds that otherwise would not have been spent. As provider reimbursement is ratcheted down by the Republicans to meet their budgetary “fail-safe”, traditional Medicare will be left looking a lot like Medicaid, where measures of access to care are no better than for the uninsured.”

“Quality, access, and choice of physician are on the chopping block for seniors. Studies by the Rand Corporation, the Robert Wood Johnson Foundation, and by the HHS’ inspector general’s office show that sick and disabled patients do poorly under managed care. The previous incentives to overtreat in the Medicare program are being replaced by incentives to undertreat in the HMOs and the newly emerging for-profit physicians’ groups.”

“In addition, the proposal will subject seniors to the same kinds of massive fraud and abuse going on in Medicaid HMOs, in the Medigap sector, and in managed mental health care. In Florida, Medicaid patients were told by insurers that they would lose their coverage if they failed to sign up with an HMO, and administrative costs and profits ate up 50 to 77 percent of program costs at some plans.”

“Managed care won’t save Medicare, and contrary to earlier reports, managed care has not saved money for the non-elderly either. The consulting firm Foster Higgins, which reported a 1.1% decline in employers’ health benefit costs, reexamined its data and found an increase of per-employee HMO costs of 10% in 1994. Costs fell in PPOs, but only because this form of managed care shifted more costs onto employees directly.”

“The bottom line is that this is a proposal to augment corporate welfare, not Medicare. Seniors should beware. The only way to control costs while improving access, quality, and preserving choice of doctor is a single-payer system covering all Americans.”

Why Congress Did Not Enact Health Care Reform

By Vicente Navarro, Johns Hopkins University
Journal of Health Politics, Policy and Law, Summer 1995

Many explanations are given for the failure of the 103rd Congress to enact health care reform. The most frequent explanation in the mainstream media and academic press is that people were not ready and were confused. Congress, it is said, merely reflects the voice of the people because the U.S. political system represents the population. Thus the roots of health care reform’s failure can be found in people’s ambivalence: They wanted health care reform but were not quite ready; they were confused or misinformed.

I believe this view is wrong. The American public certainly has a voice in its political system, but it is not one of the most important voices that shape the federal government’s decisions, including those about federal health policies. Most people agree with this perception. Seventy-four percent believe that the U.S. Congress does not represent their interests but rather the interests of what they call the “rich,” the popular term for the corporate and upper middle classes.1 And much evidence supports the accuracy of this perception. The gap between what people want from their government and what they get is substantial and growing, which may explain citizens’ increasing anger with the political establishment. Since 1954, whenever polled on whether they favor a universal health care program, large pluralities or majorities have supported it.2 Even during the 1980s and early 1990s, when concepts such as the “greed” of the privileged few and austerity for the many were supposed to be fashionable, most Americans supported a government-run national health care program (Shapiro and Young 1986).3 Yet Congress has failed time after time to enact such a program.

Another proposed explanation for Congress’ failure to pass health care reform is that government experts have not yet got it right. In this scenario, professionals and experts are primarily responsible for establishing public policies and convincing key political actors of the merits of various proposals. But this scenario is clearly insufficient to foster an understanding of the failure of health care reform. It ignores the sociopolitical context in which these “experts” operate and the interests with which they are identified or represent. Hillary Rodham Clinton’s Health Care Task Force, for example, was not merely a group of experts. Its key members were persons identified, for the most part, with some of the primary forces (including the insurance industry) responsible for the current predicament of the U.S. health care system. I offer just one example: The chairman of the Governance Committee, a critical committee of the task force, was for many years a high-ranking official of the Health Insurance Association of America. The task force was a predominantly white, male, upper middle class group in which the interests of insurance companies (large and small) and other components of the medical industrial complex were well represented. Obviously, these persons were not on the task force as “representatives” of these groups, but their positions were, for the most part, the same as those of the industries in which they worked and with which they were identified. Others who had no professional association with these interest groups accepted the theoretical framework dictated to them by their spokespersons — the Jackson Hole Group. Indeed, the primary objective of the task force initially was to achieve a synthesis of the major interests at work in the health care sector, to develop a blueprint — managed competition — that could be approved by the major players in this sector.

Similarly, the members and staff of key committees of the House and Senate that craft health care-related legislation have long-standing relationships with these health sector interests. The list of recipients of donations from insurance and professional groups reads like a Who’s Who of federal health policy circles (Kemper and Novak 1992). Of course, part of the official discourse is that such intercourse between politicians and lobbyists does not influence policy makers. None other than Congressman Thomas Foley, then Speaker of the House (and himself a recipient of health care industry funds), has denied the existence of such influence. Empirical evidence shows, however, that lobbyists and their financial contributions do influence the behavior of congressional recipients (New York Times 1994). Common Cause has also documented how most Washington lobbyists for the medical industrial complex previously worked within the U.S. Congress, with which they retain close ties (Kemper and Novak 1992).

This link between the medical industrial complex and the legislative and executive branches of government offers better grounds for understanding the failure of health care reform than does simply examining what the “experts” recommended. Who those experts represent is far more important. The relationship between the components of the medical industrial complex, the large and small insurance lobbies, the large and small employer associations, the representatives of professional associations, and other interest groups, on the one hand, and the U.S. government, both the executive and legislative branches, on the other is crucial to our understanding of that failure. Many authors writing in the “interest group” theoretical tradition have provided useful information on the key relationship between the medical industrial complex and political power (Marmor 1994). Yet this approach, however helpful, is insufficient to explain why health care reform failed. We cannot understand the behavior of U.S. political institutions by focusing only on the interplay of groups and actors while failing to analyze the social, political, and economic contexts in which these political institutions and interest groups operate. In other words, we cannot understand the nature of the tree — the existence or absence of health care reform — without understanding the forest — the structure of power in the United States and how these power relations are reproduced through the state.

In the United States, power is distributed according to race, sex, and, most importantly, class. Alain Enthoven, the principal theoretician of managed competition, the dominant framework in the health care debate, recognized as much when he wrote “The U.S. political system is incapable of forcing change in such power institutions as the insurance industry, the hospital industry, organized medicine, the medical devices industry and the pharmaceutical industry” (Marmor 1994). What these components of the corporate and upper middle classes have in common with the other components, the large and small employers, is not only their composition of race and sex but, most importantly, their class composition: corporate class for large employers, large and small insurers, and the medical industries, and upper middle class for small employers and professionals. Conventional wisdom now dictates that the single-payer proposal, the only proposal that clearly threatened that class dominance, was politically unfeasible because it was unacceptable to those classes.

The reality is that the United States lacks a national health care program because of its specific class relations. The focus on interest group behavior without understanding class behavior leads to wrong conclusions. For example, why did the major associations representing large employers oppose the single-payer proposal when they would most likely benefit from this proposal by paying considerably less in fringe benefits for their workers? According to their short-term interest group interests, they should have supported it, but the overwhelming majority of large employers and their trade associations did not. As employers, members of the, corporate or capitalist class, they most value control over their own labor force, and employment-based
health benefits coverage gives them enormous power over their employees. The United States is the only country where the welfare state is, for the most part, privatized. Consequently, when workers lose their jobs, health care benefits for themselves and their families are also lost. In no other country does this occur. This is why the corporate class and its instruments in the United States oppose establishing government-guaranteed universal entitlements: They strengthen the working class and weaken the capitalist class. The staggering power of the capitalist class and enormous weakness of the working class explains why health care reform failed again. The United States, the only major capitalist country without government-guaranteed universal health care coverage, is also the only nation without a social-democratic or labor party that serves as the political instrument of the working class and other popular classes. These two facts are related. In most advanced countries, the establishment of universal entitlement programs has been based on the political alliances of the working class with the middle classes, through the election of social-democratic governments or through their pressure on non-social-democratic governments (Navarro 1989).

The Democratic party has traditionally presented itself as the party of working people and of the disenfranchised. And during and after the New Deal, most of the working class supported the Democratic party, largely because of the identification of the party with the popular New Deal programs such as Social Security, the most popular insurance program in the United States. Such an identification, however, has been diluted considerably, and for many decades the Democratic party leadership has distanced itself from the New Deal. In fact, the anti-New Deal measures taken by Reagan and Bush were supported by most Democrats in Congress.4 This situation is responsible for discrediting the two parties, which are now seen as very similar, and has been greatly facilitated by money’s growing influence in politics. Both the Republican and Democratic parties now depend heavily on moneyed interests. As William Greider, author of the best analysis of the Democratic party, concludes, “Anomalous as it may seem, Wall Street is a major source of financing for the party of working people” (1993: 259). Not only is the United States the only capitalist country without a national health program and without a social-democratic party but it is also the country where democracy is most limited by the overwhelming power of money, the milk of U.S. politics.

This situation explains the anti-establishment mood in the country and why all 1992 presidential candidates, Clinton, Perot, and Bush, had to run as anti-establishment candidates, a difficult position for Bush to sustain because he had been part of the Washington establishment for two decades. Clinton (unlike Carter, Mondale, and Dukakis) ran as a left-of-center, anti-establishment populist, with a New Deal platform (which the New York Times called “a Roosevelt platform”) and with a class war campaign, the type of campaign Republicans most fear. As noted by conservative Republican strategist Kevin Phillips, “class war was the strategy most feared by Republicans since they were highly vulnerable (particularly after the pro-rich and pro-business policies of the Republican administrations) to be presented as the party of the rich” (1994), that is, the capitalist and upper middle classes. A clear class polarization occurred during the 1980s and early 1990s. For the upper 20 percent of the population, incomes increased by 125 percent; for the lower 60 percent, incomes declined by 6 percent.

Despite the class discourse Clinton used to mobilize alienated voters, he was a “new Democrat” who did not believe in class confrontation but rather in the development of consensus policies. Clinton’s desire to please was not a personal character flaw, as is often reported. It was part of a political strategy to create consensus among forces with very uneven power and some of these forces were pleased more consistently than others. The Health Care Reform Task Force was an example of this strategy. It was supposed to develop a blueprint that would be acceptable to the principal interest groups in the medical sector, and to large and small employers. These compromises defined the terms of the subsequent debate, moving it farther to the right. Predictably, the compromises did not satisfy the major players — large employers and large insurance companies, which developed their own proposals (Cooper and others) — nor did they satisfy the major grassroots constituencies of the Democratic party, such as labor, civil rights, and other social movements. These constituencies felt increasingly alienated from the Clinton administration, which was increasingly perceived, since the North American Free Trade Agreement debate, as aligned too closely to corporate America. As Mrs. Clinton indicated, the problem faced by the Clinton administration was the strong mobilization of those who opposed health care reform and the lack of support and mobilization by those who supported it. There is growing disenchantment of the working and middle classes, the New Deal coalition, with the Democratic party, which is responsible for its electoral defeat on 8 November 1994. Only 33 percent of Democrats voted, compared with 82 percent of Republicans.

Another alternative strategy, never considered, would have been the mobilization and development of alliances between the working class and the lower middle class, which represent most of the U.S. population. Clinton could have put forward a single-payer, left-wing position at the start of the debate, which would have been diluted in Congress, eventually reaching a center position as the final outcome. After wasting several months, however, Clinton began the debate from a center-right position that moved so far to the right that he could no longer mobilize popular support, the grass roots of the Democratic party. Clinton’s plan was very complex and cumbersome because of his commitment to leave unchanged the current system’s major partners of financing and organization. He was actually stimulating a process already occurring in the medical care sector: the corporatization of medicine in the United States. A key element of Clinton’s plan was control by the large insurance companies over the medical care sector. As stated by Starr and Zelman (1993), two of Clinton’s advisors, “the integration of health insurance companies and health care provision into the same organization, i.e., health plans” would be the key element of managed competition.

In the debate, the major media and academia (also heavily influenced by the hegemonic ideology of corporate America) systematically excluded alternatives that would have had a stronger effect on the core of the corporate and upper middle classes: the large employers, large insurance companies, and the medical industrial complex. Not only the New York Times (whose editorial board includes several CEOs of insurance companies) but also The Washington Post and the major television networks marginalized and ridiculed the single-payer position, presenting it as “fundamentalist,” “extreme,” “utopian,” and the like (Brundin 1993). As Miliband (1969) has eloquently written, “Class dominant value generating systems contribute to the fostering of a climate of conformity, not by total suppression of dissent, but by the presentation of views which fall outside the consensus as curious heresies, or, even more effectively, by treating them as irrelevant eccentricities, which serious and reasonable people may dismiss as of no consequence.” This is how class power is reproduced in the United States. Strengthening the exclusion of alternative proposals was the absence not only of a mobilizing discourse but of an instrument that could facilitate such a mobilization. The Democratic party was not such an instrument. The conditions for establishing a national
health care program include active mobilization to democratize the political, institutions, with the formation of political instruments that better represent the interests of most of the working population. Such mobilization cannot occur without a substantial confrontation with the pattern of not just race and sex but also primarily class-dominant relations in the United States.

Vicente Navarro is professor public policy, The Johns Hopkins University, and professor of political science, Pompeu Fabra University, Spain. He can be reached at vnavarro@jhsph.edu.

Notes

1. These are the electorate’s views of the U.S. Congress, as determined by a Gallup poll in November 1992.
2. For an analysis of popular support for a universal health program since the 1950s, see Navarro (1994).
3. See also polls conducted by NBC (National) in 1989; the Los Angeles Times (National) in 1990; CBS/New York Times (National) in 1990; the Associated Press (National) in 1990; and Roper (National) in 1990.
4. Within a few months of Reagan’s election, Senator Daniel Patrick Moynihan of New York told his colleagues on the Senate Budget Committee that, responding to what they mistakenly defined then as a popular mandate, “we have undone thirty years of social legislation in three days” (Navarro 1994).

References

Brundin, J. 1993. How the U.S. Press Covers the Canadian Health Care System. International Journal of Health Services 23(2):275-77.
Greider, W. 1993. Who Will Tell the People? New York: Basic Books,
Kemper, V., and V. Novak. 1992. What Is Blocking Health Care Reform? Common Cause Magazine 18(1):8-13, 25.
Marmor, T. 1994. Understanding Health Care Reform. New Haven: Yale Univer¬sity Press.
Miliband, R. 1969. The State in Capitalist Society: An Analysis of the Western System of Power. London: Weidenfeld and Nicolson.
Navarro, V. 1994. The Politics of Health Policy. Oxford: Blackwell Publishers.
______. 1989. Why Some Countries Have National Health Insurance, Others Have
National Health Services, and the U.S. Has Neither. International Journal of Health
Services 19(3):383-404.

Journal of Health Politics, Policy and Law, Vol. 20, No. 2, Summer 1995.
http://jhppl.dukejournals.org/content/20/2/455.citation

Consumer interest and health reform: The logic of withdrawal from managed competition and the Clinton health plan

By Gordon Schiff, M.D.
The Journal of Consumer Affairs, Winter 1994

We will talk about truth-in-mending–mending broken bones, broken budgets, and broken bargains. Mending our ailing health system is, according to a Harris poll, the number one issue on consumers’ minds.

At Cook County Hospital, I have encountered mothers who will not let their kids go out and play, lest they break a bone for which they had no health insurance coverage. I took a cab to the airport in Chicago yesterday. When I told the cab driver I needed to stop at Cook County Hospital he said, “I hate Cook County Hospital. You go to the Emergency Room early in the morning and don’t get out till late at night.”

While coming as no surprise (I began working at Cook County in the Emergency Room as a volunteer 25 years ago) such comments nonetheless always strike a painful chord; a reminder of shortcomings that are hard not to take personally. The cab driver told me he now goes to a private hospital and uses a false name to avoid being billed. I have met mothers who have to go to court to get legal custody of their own children: they delivered their babies under a false name using a neighbor’s Medicaid card.

In my clinic, the General Medical Clinic, there are over 10,000 people on the waiting list, all sick people with medical problems referred from our emergency room (and contributing to the delays there). We hear stories about supposed waiting lists in Canada for high tech procedures. In the United States, we ration primary care.

Mending broken bones and helping to heal diseased bodies–what I was trained as a physician to do, in theory the simplest and most straightforward of tasks–has turned out to be a much more complex and challenging job than I was prepared for in medical school. What a physician quickly learns, once he or she tries to apply medical skills to effectively impact patients’ and populations’ health, is that the interrelationships among medicine and the social science disciplines represented in this room ultimately have more influence on our citizens’ health than 99 percent of what was learned in medical school.

This realization has led me down a variety of paths that you as consumer advocates and academics have cleared for us to meet and travel together. And for that reason, it is with a great deal of honor and trepidation that I speak on subjects highly relevant to my day-today work, but subjects for which my expertise is inferior to many in this audience.

Broken budgets refer to the crushing burden of health care costs on governments especially the states (their leading and fastest growing costs), corporations (whose expenses for health costs in 1965 equaled only 14 percent of their profits, whereas 1990 health expenses exceeded total profits) (Himmelstein and Woolhandler 1994, 41), and most importantly consumers for whom health bills are an important cause of personal bankruptcies, poor credit ratings, and financial hardships. The average household now spends 10 percent of its household income on out-of-pocket health expenses, up from 6.6 percent in 1965. For seniors this portion approaches 20 percent, rising to the same level as before Medicare was enacted (Himmelstein and Woolhandler 1994, 35).

The broken bargains are the failed promises of our political leaders to bring about meaningful and effective national health reform, to accurately weigh and portray the alternatives, and to give leadership toward optimal solutions. The broken promise I fear is again being repeated in Washington, unless we can educate and activate consumers, and thereby break the political gridlock that appears to block real reform this year.

MENDING OUR AILING HEALTH SYSTEM

How should we mend our ailing health system? The simplest approach for a consumer might be to turn to Consumer Reports for the answer. And it’s right here in last month’s issue (Karpatkin 1994). I hope they won’t sue me for citing what Rhoda Karpatkin CU President rates/advocates as our best buy–“the single-payer plan cosponsored by 98 members of Congress.” The reason I fear not being sued is the same reason we are unlikely to have single-payer reform this year. Single payer is not a product consumers can go out and buy. Single payer is not even a particular piece of legislation to be voted up or down, although that is clearly one important aspect of its implementation. Rather, as I will argue, it is an expression of a commitment–to efficiency, to fairness, to quality, and to consumer empowerment. It entails a deepening of our understanding of the problems, so that we may help educate consumers and thereby permit them to better evaluate and implement health reform as a means to these ends.

How would Colston Warne have approached this question? Based on my reading of his writings, especially a newly published collection of his lectures on the history of the consumer movement (Warne 1993), I believe he would urge a six-part mission in evaluating health reform (Table 1).

SKEPTICISM ABOUT ADVERTISED CLAIMS

We are in the midst of the largest advertising and lobbying campaign in the history of the United States. While Colston Warne felt that advertising rarely served a useful social purpose, he was particularly scornful of ads that blatantly misrepresented corporate interests and activities. As noted by Richard Morse (in his postscript to Colston Warne’s book (Warne 1993)), the very companies that fought successfully, at the cost of many lives, against air bags are now taking out full-page ads lauding their dual air bags. Likewise we are witnessing full-page ads from insurance companies warning consumers of restriction of their choices if health reform is enacted. Restrictions on patients’ choices, to choose a physician or follow through with physician treatment recommendations, have been the mainstay of mechanisms private insurers have used to control costs.

Especially confusing and pernicious is the fact that there is not one but two insurance industry contingents. One contingent is the 270 small-and middle-sized insurers, represented by the Health Insurance Association of America (HIAA). These insurers are the source of the Harry and Louise ads, which have been the target of Bill and Hillary Clinton’s counterattacks. The $6.5 million HIAA advertising campaign disguised as a message from “concerned farmers, consumers, seniors, and businesses,” the so-called Coalition for Health Insurance Choices, has lured 228,000 consumers to call a toll-free number of whom 18,000 have filled out response cards asking to become supporters of the coalition (Health-Care Hucksters…1994). However, this is really a sideshow, deflecting understanding from the role of the larger private insurers. Meeting in Jackson Hole, Wyoming over the past several years and pitching in up to $100,000 apiece to sit at the table with no consumer input, this second contingent representing the larger insurers drafted the managed competition plan which is the basis for the Clinton health plan (Priest 1993). It is a plan that gives private insurers a central and ultimately controlling role, rather than moving them to the sidelines as a single-payer system would. The managed competition plan channels 300 billion additional dollars to the private insurers’ revenue streams.

The Clinton administration and private insurers make a number of claims that must be seriously examined. The first is that the current employment-based private insurance system is working well for most people, and thus we should (in the President’s words) “build on what works today in the private sector to expand employer-based coverage.” It is well known that 37.4 million people are uninsured, a jump of nearly two million from 1991 to 1992. However this is just a snapshot of one point in time. This number rises to 63.3 million if we look over a 28-month period studied by the Census Bureau. Furthermore, 50 million American
s are underinsured with such inadequate coverage that a major illness would lead to financial ruin (Himmelstein and Woolhandler 1974, 25 and 33).

A recent statistic exposes not just cracks but gaping holes in this employer-based private insurance foundation. In 1991 only 52 percent of American workers were employed in jobs that provided private health insurance (Iglehart 1994). Because one in seven of these employer-provided insured workers works in the public sector (AFL-CIO Public Affairs Office 1994), their “private” health insurance is actually provided at public expense. Thus the notion of a publicly funded single-payer alternative, as opposed to trying to patch a private employer-based system, appears to be a much less radical suggestion. Also, this statistic helps us understand why resistance to “employer mandate” is so sizable.

A second claim of managed competition advocates is the ability of competition among managed care plans to hold down costs. If one compares the rate of premium increase from 1982 to 1991 for traditional indemnity plans versus HMOs (health maintenance organization), we see no evidence to support this claim (in fact the cumulative increase in HMOs’ premiums was slightly higher) (Himmelstein and Woolhandler 1994, 216). Contrary to the Clinton administration’s attempt to put a rosier spin on potential savings from competing managed care plans is the managed competition’s architect, economist Alain Enthoven (whose theories were originally developed for and faced in the military) (Waitzkin 1994). Enthoven’s recent article, “Why Managed Care Has Failed to Contain Health Care Costs,” urges stricter free market measures to address this failure (Enthoven 1993).

The Boston University School of Public Health Access and Affordability Monitoring Project plotted the relationship between the proportion of a state’s residents in HMOs and the per capita health cost rise during the 1980s. Rather than demonstrating that HMOs hold down costs, there was the opposite relationship. States with the highest HMO penetration had the highest cost rise (Himmelstein and Woolhandler 1994, 217). Such findings are consistent with other findings that competition raises rather than lowers hospital costs (in addition to increasing aggregate costs for the community), as hospitals engage in “medical arms races” duplicating expensive services as they try to compete with each other to market their services (Himmelstein and Woolhandler 1994, 126).

A third set of claims centers around alleged failures of alternate systems such as the Canadian system. Canadians are grappling with many bona fide problems, such as how to decrease persistent social class health disparities, overreliance on fee-for-service providers reimbursement, how to maintain a life-saving tobacco tax in the face of tobacco industry abetted smuggling and a black market, and the economic impacts of a serious recession. But, by almost every measure the Canadian system is superior at achieving high quality care for all of its citizens at a cost 40 percent (and recent data suggest perhaps 50 percent) per capita less than the United States.

Canadian consumer satisfaction with their health is the highest among the ten nations surveyed by Harvard’s Robert Blendon with a Harris poll; the United States was the lowest (Himmelstein and Woolhandler 1994, 117). Contrary to perennial rumors that the system is in crisis and that consumer satisfaction is plummeting, a recent Gallup poll showed Canadians’ satisfaction with their care increased from 71 percent in 1991 to 89 percent in 1993, Tales of dissatisfied doctors are likewise contradicted by a 1992 survey of more than 3,000 Canadian physicians. Eighty-three percent rated the Canadian health care system as good or excellent, and 85 percent preferred their system to the U.S. system. A study of 147 physicians (75 Canadian and 72 American) who had worked in both systems, with an average of ten years practicing in each country, showed physicians currently practicing in Canada were three times more enthusiastic about their system as physicians working in the United States were about ours (Hayes, Hayes, and Dykstra 1993).

Finally, real outcomes data refute erroneous claims about delays in care and unavailability of care and high tech procedures. Patients from both the United States and Canada enrolled in a joint breast cancer registry were compared. U.S. patients experienced longer delays from symptoms to diagnosis and from diagnosis to surgery (Himmelstein and Woolhandler 1994, 100). In 1990, Paul Tsongas, when running for President, dismissed a Canadian-style single-payer option saying that his life-saving bone marrow transplant would have been unavailable in Canada. Ironically such transplants were pioneered in Toronto and the citizens of Canada have comparably equal or better access to transplantation technology (Himmelstein and Woolhandler 1994, 99).

NEED FOR TESTING AND CREDIBLE. INDEPENDENT APPRAISAL

While there is obviously no way you can haul managed competition, or single payer for that matter, into an independent test lab, Warne might be distressed to learn that the managed competition approach is completely untested. As opposed to the demonstrated workability of single-payer financing for ensuring universal coverage along with cost control, we must rely on the best guess judgments and calculations of independent expert sources.

Although, unknown to most consumers and probably even to the consumer-minded academics here (and contrary to the message that the AMA has tried to project), two of the most respected medical journals, The Lancet and the New England Journal of Medicine, have editorially endorsed single-payer reform. In February after months of study, the leadership of the American College of Surgeons courageously risked the ire of their conservative members in concluding that single payer was the best way to preserve patient choice and physician professionalism. A recent issue of Business Week offers an amazingly favorable review of single payer (Symonds 1994).

Even more impressive are the consistent conclusions from nonpartisan governmental studies. Six recent studies, two apiece from GAO (General Accounting Office), CBO (Congressional Budget Office), and the OTA (Office of Technology Assessment) and related to the managed competition versus single-payer approach, have been released. As shown in Table 2 the message from these reports is that managed competition is uncertain to hold down overall costs, inferior in coverage afforded, and unable to approach the administrative savings achievable under a single-payer system. (Table 2 omitted)

MINIMIZING BARRIERS TO CONSUMER ACCESS, UNDERSTANDING, AND CHOICE

I would like to tell you about three patients’ problems I recently encountered.

PATIENT #1

An elderly woman I was evaluating for medical risks before a scheduled surgical operation appeared visibly upset. When I asked her why, she told me that “the doctors at that private hospital used up all of my Medicare, so I won’t be able to have the operation.” I tried to reassure her that this could not be the case, Medicare insurance did not work like that. She then took out a letter she had received from Medicare which stated “You have used up all of your Medicare deductible for 1993.” She had obviously misunderstood the meaning of the term “deductible.” So, I turned to the four medical residents working with me to share the example with them. All of them, although more highly educated than our patient, understood the letter exactly as she had: each interpreted it as meaning she had used up her insurance benefits.

PATIENT #2

A middle-aged woman I had been following for ten years developed worrisome chest pain. Although she was reluctant, I convinced her to be admitted to the hospital. As a result (1) she refuses to return to my clinic, stating “they are going to put a lien on my house” (which turns ou
t is not true, but was her interpretation of the requirement to disclose this asset), and (2) a supervisor from the Illinois Department to Public Aid is manually searching records in the County Assessor’s Office to look up the value of her home, because this is required by the Medicaid application form. The amazing thing is that such assets are not even used in calculations for eligibility related to acute hospitalization (only income counts). When I asked why spend taxpayer dollars needlessly looking up property records, the Medicaid supervisor could only reply, “this was required.”

PATIENT #3

A 71-year-old woman came to our General Medical Clinic with a letter from Medicare. It stated she was not eligible for Medicare. Again I reassured this patient that this was not possible, all citizens 65 and over were eligible for Medicare. It turns out that I was wrong. The patient, due to not unusual, although somewhat complicated circumstances related to nonmarriage and being on disability did not have enough “units” from Social Security to qualify for Medicare Part B. I confess that I still do not completely understand this, but our clinic social worker insists that little can be done to remedy her situation and Medicare was not in error to exclude her.

What do these three examples have in common? Superficially one might view them as illustrating the complexities, inefficiencies, even absurdities of public bureaucracies, providing yet another argument for privately administered health insurance. This would be a mistake. What they illustrate for me are problems inherent in cost barriers, means testing, and multiple and separate programs for different types of patients. All of these mechanisms are features of both the current system and the proposed reforms (with the exception of the single-payer proposal).

The Clinton, Cooper/Breaux, and Republican plans all rely primarily on two mechanisms to hold down costs–competition, particularly among competing managed care plans, and so-called patient “cost sharing.” Cost sharing means additional patient fees for insured patients such as copays, coinsurance, and deductibles. Unlike managed competition, there is good evidence that cost sharing requirements can decrease costs by reducing the rate of medical encounters by as much as 40 percent.

Critics note however that such “taxes on the sick” have been shown to have little effect on expenditure decisions once a person enters the system, where physician decisionmaking drives the major costs in health care. This, along with the substantial administrative costs associated with collecting these illness tolls, led the OTA panel, on which I participated, to conclude in its report that there is no evidence cost sharing will decrease overall medical costs (U.S. Congress, OTA 1993).

Such financial barriers to access, without technically complex adjustments for income, disproportionately affect poor people. There is evidence from the Rand Health Insurance Experiment, a randomized controlled trial which compared different types of insurance coverage, that low income, chronically ill patients experience poorer health outcomes when randomized to a copay or HMO rather than to a free plan (Himmelstein and Woolhandler 1994, 227). The more widely cited conclusion of the Rand study, namely that the copay cohort’s costs were decreased with no measurable adverse health outcomes on the average, overlooks not only this worrisome side effect of cost sharing on the sick poor subgroup, but also what I consider the most profound and important finding of the study. Cost sharing is not effective for sorting needed from inappropriate care. Visits for serious symptoms such as loss of consciousness, involuntary weight loss of more than ten pounds during the past month, serious bleeding, etc., decreased as much as visits for what Rand called “discretionary” less serious symptoms (Shapiro, Ware, and Sherbourne 1986).

Thus the OTA report concluded “that the conventional wisdom, that cost sharing reduces utilization by promoting the use of more cost effectively appropriate care and by discouraging the use of unnecessary services” has “no supporting evidence.” The evidence instead suggests this is a crude and ineffective instrument for matching health care services with health needs. For these reasons the Canadian and the Wellstone/McDermott single-payer plans reject cost sharing for acute and preventive care. Instead they rely on the mechanism most households use to fix their personal expenditures and most countries successfully use to control their health costs. They set a budget and figure out how to live within it. They therefore avoid complex and intrusive bureaucracies. Providers are given both incentives and the flexibility to maximize services within a negotiated and predictable budget. Each provider simply submits one floppy disk to the provincial government each month; each hospital is sent a check for one-twelfth of its annual global budget.

The issues raised by our three patients, related to the administrative complexities associated with means testing and fee collection, financial barriers to access, and multiple confusing types of patients and programs multiplied by millions of similar experiences each year, should lead consumers to seek the simplest and most efficient mechanism for health insurance. Again contradicting conventional wisdom, the most efficient method for collecting and dispersing health insurance dollars is a publicly administered program such as the Canadian system (0.9 percent overhead) or even Medicare or Medicaid (2.1 percent) as opposed to U.S. private insurance (13 percent–a figure that would be even higher if it also included investment credits) (Himmelstein and Woolhandler 1994, 128; McDermott 1994).

I would like to propose and test what I call the 60/60 rule. Can the financing of the health plan be explained to and easily understood by the average consumer (or an employer) in 60 seconds, and can they then calculate exactly what their costs will be in another 60 seconds? As I am already running short of time and you are better informed than the average consumer, I will give you only 30 seconds for each using H.R. 1200/S. 491 (McDermott Wellstone). All employers pay a payroll tax or premium of 8.4 percent, all employees pay 2.1 percent of their income (in most cases a simple payroll deduction). That’s it! Try doing that with the Clinton plan. The only small print is that the 8.4 percent employer contribution is reduced to four percent for small businesses (less than 75 employees earning an average of $24,000 or less) plus a $2 per pack cigarette and 50 percent handgun and ammunition taxes. According to Jerry Anderson, economist at the Johns Hopkins Center for Hospital Finance and Management, 75 percent of people would pay less for better coverage than they currently have.

MAXIMIZING QUALITY

Canadian health economist Robert Evans (1989) presents a culinary parable about what is happening in U.S. health care today. Let us imagine that a group of us decide to go eat at a restaurant after the meeting. Evans asks, what is the most economical way to order and pay for the meal? If each person orders and pays for his own meal, standard economic wisdom suggests that each of us will be more prudent in our ordering. On the other hand if the bill is pooled, each person would be less cost conscious as everybody is sharing the expenses. Thus, if each person has to pick up her own tab, there will be less champagne and steak, more chicken and Sprite. But what if, when the bill arrives at the end of the meal we get into a fight. Each person, concerned about not paying any more than he/she has to, argues about his or her proper share. And what if in order to resolve the dispute I bring in my accountant, and then you bring in your lawyer, and others do the same. Maybe the restaurant owner brings in a lawyer and even a security guard when we start questioning the charges. Now, which way of ordering is more cost effect
ive?

Much of what is going on in health care today is arguing about who will pay the bill. Everyone tries to minimize their costs by shifting them to someone else, sometimes another third-party payer, sometimes back to the provider, more often to the patient. Total costs inflate. The cost of arguing over the bill comprises much of the 25 percent administrative costs in the U.S. system. The need to account for and bill separately for each aspirin given in the hospital and accommodate each payer’s aspiration to outsmart the others and minimize risks wastes conservatively 10 percent of our nation’s $1 trillion annual health bill (Woolhandler and Himmelstein 1991). One hundred billion dollars could be saved simply by reaching an agreement in advance that we simply order next year’s health fare as they do in Canada.

We are spending so much time arguing about the bill that we are overlooking the fact that we are all paying for a suboptimal system. Overlooked during our argument (to extend Evans’ parable) is the fact that food is of uneven quality, served inefficiently, and lacking in basic nutritional value. The following gives you a taste of some of these quality deficiencies.

DISCONTINUITY-PRIMARY CARE

We hear talk about the impact health reform has on the deficit. Here is another deficit statistic. In Chicago, the Health Summit reported that there is an annual deficit of two million ambulatory care visits from the number predicted for the city’s population–patient encounters that have simply disappeared from the city’s health care (Summary Report 1990).

PRENATAL CARE

The percentage of African-American women with no prenatal care before the third trimester exceeds 10 percent and has been rising in recent years (Himmelstein and Woolhandler 1994, 62). Such a phenomenon is beyond comprehension to maternal and public officials in most European countries where early prenatal care is a given.

IATROGENIC ADVERSE EVENTS

Product safety has always been an important concern of the consumer movement. Reliable evidence from the California Medical Insurance study in the late 1960s and the Harvard Malpractice Study of hospitalized patients in New York State in the 1980s suggests a 1 percent incidence of serious negligent adverse events (Weiler et al. 1993). This translates into almost 100,000 deaths or serious injuries, making it the leading cause of potentially preventable injury in the United States.

FAILURE TO PROVIDE NEEDED PREVENTION

Many recommended interventions (e.g., flu shots, mammograms) are given to less than 50 percent of eligible persons. A complex result of consumer and provider education and behavior issues, coupled with cost and system barriers, these statistics portray a sobering level of disorganization in our health system (Burack et al. 1993).

DIAGNOSTIC ERRORS

While a few small studies show rates as high as 20-50 percent, the most disconcerting fact is that we lack any formal mechanisms to track and learn from errors (Williamson, Walters, and Cordes 1993). Even the time honored autopsy, for centuries the source of the profession’s learning about missed diagnoses, has atrophied (rate has fallen to less than 10 percent of deaths nationally) due to public and professional indifference and competing concerns (Hill and Anderson 1988). How useful are databases tracking patients’ outcomes with patients giving false names or providers being given financial inducements to give a more complex billing diagnosis label (Schiff 1994)?

UNNECESSARY PROCEDURES/SURGERY

Health services’ research from large financial claims’ databases shows as much as three-to tenfold variations in rates of certain procedures. However when the Rand Health Services Utilization study looked at high volume versus low volume geographic areas they found, to their amazement, the same rate of inappropriate procedures (i.e., 32 percent for endarterectomy) (Chassin et al. 1987). How can we explain this? Many, such as John Wennberg (1987), have suggested the “underevaluated theory.” We simply lack the knowledge base to know precisely how and when to optimally use such interventions, in a flexible way consistent with patient variations and values.

SUBOPTIMAL MEDICATION PRESCRIBING/INFORMATION/USE

Speaking as an internist and Chair of the U.S.P. (United States Pharmacopoeia) Panel on Consumer Interest/Patient Education, this is an area of great importance requiring a more detailed discussion (Schiff 1992). We simply note here that probably half of medications are either ordered or used incorrectly.

INATTENTION TO QUALITY OF LIFE ISSUES

According to reports recently released by the Agency for Health Care Policy and Research one-quarter of patients have their postoperative pain inadequately treated.

Finally, one last quick look at customer satisfaction. The defenders of the status quo are correct when they argue that the majority of patients are satisfied with their care. Unfortunately, the data show that dissatisfaction is rising with 25 percent of people somewhat or very dissatisfied with their care, a number that doubled from 1987 to 1992 (Himmelstein and Woolhandler 1994, 260).

I offer this list as neither a consumerist doctor-basher nor a defensive physician, the two perspectives from which such issues are usually discussed. Rather, I present these problems to impress upon you the serious work we all have ahead of us once we can stop arguing about the bill.

Cost effective health reform requires thinking about the improved quality that is both required for and created by fundamental change. A shortsighted-consumerist take on this might be to merely call for better inspection and hail the current rush to “quality report cards.” However, as Don Berwick (Harvard pediatrician who introduced industrial (Japanese) quality improvement theories to medicine) has warned better quality cannot be inspected or selected; it must be induced and produced (Berwick 1989).

Improved quality must originate with and be designed to maximize the intrinsic values of health workers to help patients, to build on their desires to work with health care consumers to better meet their needs. I contrast this approach to the current reality of oversight of medical care.

There has been a 180 degree shift from what was previously a “more is better” mentality to a “less is better” paradigm, what I believe are two sides of the same coin, with not even a thin rim dedicated to the idea that maybe “better is better.” Thus in the past decade the quality oversight of medical care has been predominantly focused on monitoring and limiting utilization of health care services.

There has been an unprecedented growth in the number of organizations that perform so-called “utilization review” from about 125 private organizations in 1989 to almost 350 in 1992. In 1983, 14 percent of corporate benefit health plans required prior approval for nonemergency admissions, by 1988 this number had risen to 95 percent. According to a policy paper just issued by the American College of Physicians almost all of these review organizations are for-profit, freestanding, and lack any formal relationship with health care providers. They generally use “unilaterally developed, secret criteria to evaluate care” (American College of Surgeons 1994). These review organizations boast they can deny ten to 35 percent or more of claims for procedures by applying their proprietary criteria either before or after the fact. For example, the current issue of Business and Health describes the efforts of benefits managers at Harris Corporation, a Florida-based manufacturer, who hired Health Economics Corp., a data analysis firm based in Dallas, to perform detailed review of each service received by their employees in an effort to “micromanage the networks to find the
source of suspected problems at the level of the individual provider…” (Torchia 1994). When provider or specialty profiles show higher than average costs, feedback and if necessary provider contract termination is implemented.

What is wrong with this? Is not monitoring and weeding out inappropriate care, thereby getting more value for our health dollars, something consumers should welcome? W. Edwards Deming, who died last December, was the American statistician whose quality theories are considered by Japanese to be the source of their ability to produce the highest quality autos, electronics, etc. Deming used to cite an article on a study of 970 historians’ ratings of U.S. presidents. The study researchers were pleased to find “we’ve been remarkably lucky considering the haphazard way we select a president” that one-fourth were considered great and at least half were above average. (Being great was defined as being in the top 25 percent.)

Finding resource utilization outliers via the widespread practice of “economic profiling” is like finding great presidents in Deming’s example. Chopping off tails from practice variation curves does little to improve overall quality. Deming’s ideas, as I am sure many of you are aware, go beyond simple statistical common sense. He taught the importance of moving from downstream inspection of end results of the production process (where defective items were reworked and the workers responsible were sought out for blame) to focusing upstream, redesigning the production process to build in quality.

One last example illustrates this point. I recently (in the capacity as co-chair of our hospital’s quality assurance committee) contacted and reviewed demonstration software from a firm engaged in monitoring physicians’ treatment decisions (Quality FIRST). The company claims to have developed guidelines for 450 diagnoses, representing over 97 percent of medical practice. Using the guidelines, up to two-thirds of selected procedures can be flagged as unnecessary or inappropriate. I was interested in whether we might use their protocols further upstream, as decisionmaking aids for clinicians, rather than as inspection tools for insurers. The answer was a bewildered and unequivocal no–the guidelines were not developed to be used for that purpose. (Frankly, I am not sure how much added value such canned protocols would be anyway for a knowledgeable specialist physician who grapples daily with the difficult individualized patient management decisions.) Rather than improving quality, such approaches to improve appropriateness by denying claims, become merely another variant of arguing over the bill.

How can quality be promoted through national health reform? The Quality of Care Task Force of Physicians for a National Health Program has developed ten quality enhancing principles, which I urge you to critically examine (Schiff, Bindman, and Brennan et al. 1994). Each one invites your criticisms and research to better define and apply it to health reform and quality improvement.

IS IT FAIR?

In Washington, each interest group trying to preserve a piece of the status quo argues that proposed health reform legislation is not fair, that they will have to pay more. Highly regarded by Colston Warne was a 1963 Consumers Union subsidized publication entitled The Poor Pay More by David Caplovitz. The current highly regressive reality of U.S. health care financing will probably worsen under the Clinton plan because it charges, with some complex adjustments, essentially a fixed amount regardless of income (for all employers 80 percent and all employees 20 percent of fixed cost of the cheapest plan). A flat percentage of income (e.g., 10 percent, comparable to the 8.4 percent employer plus 2.1 percent employee contribution proposed by McDermott/Wellstone) can be seen to be a much fairer approach. Going even further the Canadians can look in the mirror (on the wall) and see who is the fairest of them all. The actual data from the Province of Alberta illustrates the progressive financing there (Himmelstein and Woolhandler 1994, 176-180).

The term “fairness” in health insurance takes us beyond simple financing formulas. Many of you are familiar with the concept of “actuarial fairness,” which is the basis for our present system of experience-rated private health insurance premiums. Actuarial fairness is the notion that “each person should pay in accordance with the quality of his risk,” as it would be unfair were there “a forced subsidy from healthy to the less healthy.” (As Deborah Stone (1993) points out, insurers almost always use pejorative words like “forced,” “unfair,” or “coerced” in front of subsidy to mask the obvious fact that that is what insurance is about–a subsidy from the lucky to the unlucky.)

Achieving actuarial fairness requires the practice of medical underwriting, the science of rating, predicting, and selecting (and excluding) risk (Bodenheimer 1990). On the positive side we owe the discovery of high blood pressure as a risk factor for cardiac death to the insurance industry. They performed measurements on tens of thousands of life insurance applicants during the 1930s-1960s and calculated the attendant excess risk, thereby laying the basis for what I spend most of my time doing in my outpatient clinic–treating hypertension (Lew 1973). On the other hand, the underwriting insurance principle strikes at the hart of our current health care crisis. Selectively insuring low risk people and avoiding those with “pre-existing” conditions lead to the distribution of insurance and medical care in inverse relation to need (Light 1994).

Many physicians prefer the challenge of caring for sicker and more complex patients. The same cannot be said for any insurance company. You will not see television or subway ads urging patients with AIDS to join a particular health plan. Seventy percent of AIDS patients lack private health insurance. Put yourself in the shoes of the CEO of a for-profit health plan and ponder the following statistics: the top two percent of people account for 41 percent of health expenditures, the top 10 percent account for 72 percent (Rice, Brown, and Wyn 1993). What is the most cost effective way to keep your plan in the black? If you didn’t answer–find some way to predict who these 10 percent of people are and exclude them–you’re fired.

Competition among private insurers is thus focused on finding ever smaller pools of healthier people to insure. Stone (1993) warns us that this “logic of actuarial fairness is so deeply embedded in the structure of competitive markets, and so deeply consonant with social divisions in American society that eradicating it will take more than any current reform proposals contemplate.” Actuarial fairness ultimately means fragmenting communities into more and more homogeneous groups, each charged rates to insure profitability based on their own experience. Ultimately this undermines the “mutual aid” function, the original social purpose of health insurance. To quote Lawrence Brown:

Insurance as a social institution, invented to spread and pool risk, has degenerated into an industry devoted to shedding and fragmenting risk….Insurers like other occupants of social roles maximize utility with the rules of the game; and if one does not like the way the game is played the answer is not to impugn the sincerity or integrity of the insurance executives or brokers, or urge them to consume heaping bowls of moral fiber, but rather to rewrite the rules of the game (1992, 188).

CONSUMER EMPOWERMENT/MAKING IT POLITICALLY FEASIBLE

How do we do this? I suggest that we have to begin with a commitment to putting the consumers not the insurers back in the driver’s seat. Whether you are a strong single-payer advocate, as I obviously am, or believe that the Clinton plan is the best possible solution at this point in time, you must be concerned with the way the special interests have effectively shaped health reform des
ign and debate.

Only an informed and activated consumers movement can get health reform moving through the current gridlock. The Clinton plan (to quote an article from this Sunday’s New York Times) “was so misshapen by polling and political considerations, in pursuit of some magical middle group that it became a bureaucratic nightmare” (Toner 1994, Sect. 4, 1). In ruling out “a Canadian-style system of national health insurance, a fairly straightforward means of achieving universal coverage,” pollsters’ predictions of public antipathy to taxes and government, the Times suggested, were permitted to overrule best judgments about the optimal system. Such perspectives underestimate consumers’ intelligence. Numerous polls in fact show consumer readiness to support tax-financed Canadian-style solutions.

In the fall of 1991, Senate candidate Harris Wofford shocked the Washington and media establishments and changed the political landscape for health reform by overcoming a 40-point deficit in the polls when he called for unspecified “national health insurance.” In the fall of 1993, President Clinton also (according to Harris pollsters) “gave his presidency a big lift and altered the political landscape” by appealing directly to the public on the need for health reform (Taylor 1993). Unfortunately, the Clinton Health Security Act once unveiled can clearly be seen to be a compromised and flawed approach, the result of concessions made at the outset to the private insurers (Woolhandler and Himmelstein 1994; Working Group on Managed Competition 1994). Ironically these large insurers have now double-crossed Clinton and are supporting the Cooper/Breaux Managed Competition Act, which does not even include universal coverage.

The erroneous premise was that “political feasibility” lays in quietly hammering out congressional bargains among the major players in the current system, rather than providing a plan and leadership around which consumers and concerned professionals could best be mobilized. Any plan passed in 1994 is likely to be quickly eviscerated if the public is not actively involved. Theda Skocpol sounded this warning to the “advocates of inside the beltway bargains”:

Reformers need to engage the U.S. citizenry as a whole in democratic discussion about the ideas of government-sponsored health care. Advocates of single-payer plans can do this more readily than supporters of complex public-private schemes such as pay or play or managed competition, but all those who want inclusive and effective reforms during the 1990’s must face the challenge of democratic dialogue (1993, 532).

As Colston Warne used to say, “it will be interesting to see how it all turns out.” As sadly he will not be around to see, I hope we can dedicate ourselves to seeing that it turns out the way he would have wanted.

REFERENCES

AFL-CIO Public Affairs Office (1994, February).

American College of Physicians (1994), “Position Paper: The Oversight of Medical Care: A Proposal for Reform.” Annals of Internal Medicine, 120: 423-431.

Berwick, D. M. (1989), “Continuous Improvement as an Ideal in Health Care.” New England Journal of Medicine, 320(1): 53-56.

Bodenheimer, T. (1990), “Should We Abolish the Insurance Industry?” International Journal of Health Services, 20(2): 199-220.

Brown, L. D. (1992), “Policy Reform as Creative Destruction: Political and Administrative Challenges in Preserving the Public-Private Mix,” Inquiry, 29: 188-202.

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Gordon D. Schiff, M.D., is Director, General Medical Clinic, Cook County Hospital, Chicago, and President, Physicians for a National Health Program.

The title is from a book entitled Vietnam: The Logic of Withdrawal by Howard Zinn published by Beacon Press in 1967. Had the logic of his arguments been heeded then by President Johnson, many thousands of lives would have been saved.

Slides presented during the Colston Warne Lecture taken from charts prepared by the Center for National Health Program Studies, Harvard Medical School/Cambridge Hospital are referenced. Primary data sources can be found in the Source Guide (Himmelstein and Woolhandler 1994).

TABLE 1

WHAT WOULD WARNE WANT?

SIX STEPS COLSTON WARNE MIGHT URGE OF CONSUMER ADVOCATES

1. Skepticism about Advertised Claims

2. Need for Testing and Credible, Independent Appraisal

3. Minimizing Barriers to Consumer Access, Understanding, and Choice

4. Maximizing Product Quality

5. Evaluation of Whether It Is Fair

6. Assess Potential for Consumer Empowerment/Make Politically Feasible

The Corporate Compromise: A Marxist View of Health Maintenance Organizations and Prospective Payment

By David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H.
Annals of Internal Medicine, Sept. 15, 1988

Corporate providers’ request for increasing revenues has brought them into conflict with corporate purchasers of care, whose employee benefit costs have skyrocketed. This intercorporate conflict powerfully shapes health policy and has caused the rapid proliferation of health maintenance organizations (HMOs) and other forms of prospective payment.

For full article, click here.

Profit-making: Bad medicine?

By Quentin D. Young
Chicago Tribune, May 4, 1985

It would seem a thankless task indeed to convince a group of successful businessmen and women that making a profit in the delivery of medical services may be dangerous to the nation’s health. But consider the central problem addressed by George Bernard Shaw in 1909, in the preface to “The Doctor’s Dilemma”:

“That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair of political humanity. But that is precisely what we have done.”

A little too crisp, perhaps, and even a tad simplistic, yet that master of human motivation and incentive comes very close to identifying the cause of today’s dilemma of soaring health costs.

It is a costly irony of history that it has taken the better part of a century for Shaw’s aphorism to emerge in the United States. An example of this is the fascination with the power of health maintenance organizations to fix up everything. It could be a costly tragedy for the future if the public’s rejection of the physicians’ handling of the health-care system leads to a mindless reliance on market forces organized by corporate medical conglomerates.

Of course, the fee-rewarded health professions and their nonprofit institutions come to the table with anything but clean hands. Under their stewardship, the history of health-care distribution for most of this century has been one of unplanned expansion. The resulting casualties litter the landscape. The locus of service moved from the physician’s office to the hospital and, within the hospital, to high-technology, high-cost activities. Physicians poured into specialties, with but 20 percent remaining in primary care.

These profound shifts generated unanticipated negative effects exemplified by the overall decline in public confidence in the system, poorer patient-physician relationships and rising malpractice insurance costs.

Another belatedly understood cause of disarray was the mode of reimbursement in both the government and private sectors. In a burst of liberal optimism, the government treasury was plugged into fee-for-service and cost-plus payment arrangements, with inevitable results: Medicare and Medicaid expenditures grew out of sight even though the health-care needs of the elderly and the medically indigent continued to be fulfilled inadequately.

The most ill-starred folly of this epoch was the collaboration of business and labor in collective bargaining contracts that kited hospital insurance costs by offering the maximum rewards for expensive hospital-based services of surgeons but virtually excluding payment for cheaper outpatient care.

At this juncture, investor-owned, profit-seeking corporate enterprises are moving into health services. There are nonprofit health corporations, too, and the differences between them and the for-profit companies are diminishing. Nevertheless, a crucial distinguishing factor remains: the distribution of profits to investors.

Unquestionably, the shaky economy of the last five to 10 years made the chaotic health-care industry vulnerable and extremely attractive to the wise investor, comparatively and absolutely. The appreciation in the market price of public holdings in the major health-related enterprises, as well as stock splits and generous dividends, stands out in sharp relief from the performance of the rest of the economy until quite recently.

From all indications, this corporatization process, already encompassing 80 percent of nursing homes, 20 percent of acute-care hospital beds, growing portions of psychiatric hospital beds, home health care and health maintenance organizations, is not nearly completed. Within a decade, the preponderance of health services may well be in the command of corporate managers.

Mobilization of capital from private investors has yielded fresh rewards for investors, but it also has aggravated the historic problems of access to care and of imbalance between overswollen therapeutic activities and undernourished prevention endeavors.

The impact on the public sector has been even more grievous. The public sector is given those health responsibilities that are not lucrative. Care for the poor is shunted to chronically underfunded city and county hospitals. The recent increase in private hospital dumping of unfunded patients has inevitably worsened the plight of public hospitals.

The large hospital corporations have of late offered to local governments Faustian pacts of a one-time bonanza. First a city or county sells its financially strapped hospital to a private corporation. But thereafter the new owners, as prudent managers, raise per diem charges, justified by the very costs of financing the capital investment and renovating the hospital. These corporate-run hospitals quite naturally limit the indigent care they give.

Another aspect that has received little attention is the growth of horizontal and vertical conglomerates. This raises concerns about the hazards inherent in monopoly situations: control of price, product and quality, and exclusivity of distribution or access. In the field of health care, the market idea of prudent consumer choice does not apply; the sick person’s goal is to get physician-recommended care immediately rather than to undertake comparison shopping.

The growth of for-profit shares of medical markets has generated serious problems that, if unbridled, can only worsen. Vital health services will face ever greater jeopardy. Consider the following:

— “Inefficient customers,” that is, those in need with inadequate resources, are excluded.

— Unprofitable services, which may be important to a community, are phased out.

— Profitable services are inappropriately emphasized or overused.

— Teaching hospitals that offer training, research and community service cannot be price-competitive with for-profit hospitals that do not provide these unprofitable entities.

— Voluntary, philanthropic home health agencies, which serve all in need, face unequal competition from for-profits, which rarely seek national accreditation of their standards of practice.

— The capacity of for-profit institutions to shape the behavior of the hitherto nonprofits in their own image further destroys the nonprofit hospitals’ historic humane service mission.

— When economic adversity strikes a for-profit conglomerate in some future recession, corporate imperatives might well require closures and retrenchments that are sound business decisions but catastrophes for the communities abandoned.

The radical restructuring of the health system is being generated by new federal government policies and by corporate business interests necessarily obsessed with an annual health-care expense in excess of $100 billion. Government policies are looking with increasing favor at the for-profit model, ostensibly disciplined by competitive market forces. This is, at best, a tragic miscalculation if traditional goals of equity, quality and humane values are to be retained. The resultant rationing of care in favor of the affluent and the productive has grave social and political consequences. Because the nation is evolving a new health policy, the option of corporate dominance must be examined for the booby traps below the surface of marketing promises.

The new resolve of government, business and consumer constituencies is to receive something better and less expensive in the way of health care. This is the precise circumstance for a popular consensus to be achieved, based upon broad debate. What is needed is a critical review of the strengths and mistakes of the present system. The experiences of other nations must be examined carefully, with a readiness to in
corporate the good things in accord with the realities in the U.S. today. What is happening instead is that the whole operation is being handed over to an army of promoters and speculators, pell-mell and willy-nilly.

Dr. Quentin D. Young is president of the Health and Medicine Policy Research Group in Chicago and a former medical director at Cook County Hospital.