The Medicine in Our Future

1.

Ten years ago, 95 percent of the Americans who had health coverage at their place of work received close to full repayment for services provided by doctors and hospitals personally chosen by themselves. Today, half of them no longer have that freedom; they must use the doctors provided by the health maintenance organizations that their employers have selected. “Faster than almost anyone expected,” George Anders says in Health Against Wealth, “managed care has become the de facto national health policy of the United States.” And “managed” means that plans specify the scope of treatments:

—One prominent plan recently told its pediatricians to cut back routine examinations to 10 minutes.

—A national corporation reduced its employees’ in-patient mental health coverage for such disorders as depression and schizophrenia, with the result that the length of a patient’s average hospital stay fell from thirty-four days to ten days.

—Many plans use “formularies,” limiting the drugs that may be prescribed, even if their own physicians feel that there are others that would be more effective.

—HMOs contract with hospitals willing to accept low payments, and then send patients there, even if they lack full facilities and doctors experienced in the requested procedures.

—In emergencies, almost all plans require using hospitals with which they have contracts, even if others are closer. Only three of Chicago’s twenty-five HMOs let their members know that they might use 911 in urgent cases.

In Anders’s analysis, managed care is based on a new pattern of mutual benefit within the corporate world. On the one hand, under traditional fee-for-service plans were thousands of companies upset that the costs of the health coverage for their employees were rising by as much as 20 percent a year, largely because medical providers were submitting lavish bills. Sentiment began to grow, Anders writes, that “doctors and hospitals, unsupervised, simply couldn’t be trusted anymore.” On the other hand, ready to furnish the needed discipline were insurance providers, some non-profit but most of them commercial enterprises. They made clear to their corporate clients that, in Anders’s words, “managed care works only if administrators say no to some forms of care that patients or doctors request.”

Much of Anders’s book describes erroneous diagnoses by HMOs, as well as their failure to provide the kinds of advanced treatment available elsewhere. He describes how managers override the recommendations of HMO doctors. HMOs call such reports “anecdotes” taken from among millions of unremarkable cases and cite the high satisfaction rate reported by their patients.

It is not hard to depict HMOs as heartless. We are all aware of their refusal to pay for more than one-day hospital maternity stays. Anders wants his title, Health Against Wealth, to be taken literally: in his view virtually every dollar allotted to profit in the managed care industry imperils the well-being of those under their plans. A Consumer Reports study found that commercial plans spend only 79 percent of their revenue on care, with much of the rest allocated to advertising, courting investors, and paying dividends. Non-profit plans devote 91 percent to patients, but there will be fewer of them since many are transforming themselves into businesses.¹ Last year, United HealthCare recorded $356 million in profits, a 16 percent return, and over the past five years its CEO has received more than $32 million in compensation. Presumably, some of that profit and pay could have given mothers another day of hospital rest.

Still, we should recall that medicine in America has largely been a private enterprise. Doctors have run their practices as small businesses, taking home the profits. According to the most recent American Medical Association survey, cardiologists net a median income of $295,000 and, after all expenses, orthopedic surgeons have $304,000 left for themselves. These have been and are the counterparts of HMO profits. What is happening, meanwhile, is that doctors’ incomes are dropping, largely because HMOs are hiring salaried staffs and curtailing what they pay to those in private practice.

Since managed care is cutting down on treatment and devoting the savings to dividends, does this mean that more of us are remaining ill longer, feeling more pain, even dying sooner? David Rothman, in his carefully argued and illuminating Beginnings Count, argues that since managed care’s goal is cutting costs, it necessarily “rations medical technology.” He found that compared with insured people who are not limited to a list of physicians, those in HMOs ended up with “22 percent fewer procedures, tests, or treatments that were expensive and/or had less costly alternative interventions.” Does this mean they are “getting second-rate care”? Rothman cites studies of several serious conditions, including congestive heart failure, colon cancer, hypertension, and diabetes. Their findings were that “outcomes for patients are roughly equivalent between HMOs and fee-for-service.” Yet even with this record, almost a quarter of those enrolled in managed care complain about their limited access to specialists, a problem cited by fewer than 10 percent of patients in fee-for-service plans. Similar differences were found in the levels of satisfaction concerning choices of physicians and on waiting times for getting appointments. While their health was no worse, people who have shifted to HMOs feel they no longer receive the attention which they once took for granted and to which they feel entitled. Rothman ends his book by wondering whether American medicine “was so bloated with interventions that a 22 percent cutback did not have a negative impact.”

2.

Americans have long opposed “socialized medicine.” In responding to surveys over the years, they have said they wish to make their own choices rather than have medical relationships overseen by government agencies. Routinely cited as what we do not want is anything akin to Britain’s National Health Service, a target that was briefly replaced a few years ago by President Clinton’s Health Security Plan. Yet the irony is that each year growing numbers of Americans are having to accept a regimen much like the model they have rejected as alien or restrictive. For most of them, it is an HMO with which their employer has contracted. Indeed, they cannot be said to have “joined” a plan on their own, since they are enrolled in one made available through their place of work.

As hardly needs recalling, the Clintons’ effort to install a national health program was a complete failure. In their books on how this happened, both Theda Skocpol and Jacob Hacker suggest the Clinton plan was doomed from the start, and they are probably right. The system to be reformed was and is America’s largest industry, absorbing almost every seventh dollar of the gross domestic product. Clinton himself was a minority president and new to national politics, lacking a firm constituency for his plan in Congress and the country. Skocpol observes how few “loyal Democrats” were and are out there to be mobilized. The party has few committed followers, and nothing like a counterpart of the GOP’s conservative core. The Clintons were not able to make an urgent national issue out of their plan. Nor did they try to organize a bipartisan core of support for it.

Nor did anyone stop to ask to what extent the public felt that health care was in need of fundamental change. Hacker (so far as I know, not a relation of mine) describes how the experts assembled by Hillary Clinton met in dozen of sessions, presuming that whatever they hammered out would get a grateful reception. Indeed, no one felt obliged to explain what was meant by technical terms like “single payer” or “managed competition.” Still, it was to Clinton’s credit that his plan would have insured every American, a much-needed reform since many jobs no longer carry health benefits and even an $18,000-a-year job makes workers ineligible for Medicaid. Four years ago, as now, some 40 million adults and children, about 15 percent of the population, had no coverage.

To ensure universal inclusion and give consumers bargaining power, the Clinton plan would have grouped most Americans in “alliances.” In Skocpol’s summary, “One or more of these new quasi-governmental institutions would have been established in each state, and they would have undertaken all sorts of revenue-collection, data-collecting, information-dispersing, and legal tasks.” Some alliances would have included groups of small firms. Very large companies might have been alliances in their own right, while others would have taken in individual members, including persons who had not previously had coverage.² The alliances would have solicited competitive bids from doctors, hospitals, and other care providers.

Another feature of the plan, salutary if painful, would have been strict cost controls. Outlays for Medicare and Medicaid were then growing at 13 percent per year, and for private coverage the increase was often higher. The plan was based on the expectation that competition for contracts would bring charges down. In addition, a National Health Board was to set budgets that the alliances could not exceed, which might well have meant setting limits on certain kinds of services. The prospect of new competitors and government regulation was seen as threatening by both old-line firms like Cigna and Aetna, and new managed care companies such as Health Net and United Healthcare. They joined in sponsoring the “Harry and Louise” ad campaign to discredit the Clinton plan.

Skocpol and Hacker agree that in the face of such predictable opposition, there was no adequate base of political support for what Clinton offered. The uninsured tend to be non-voters, and even less apt to write their congressmen. And those on Medicare and Medicaid were already “haves,” in no urgent need of an entirely new system, although Medicaid is badly in need of reform. Also, most middle-class families, who get their coverage at work, had no desire to share it with the working poor, especially if the result of cost controls would bring fewer choices for them and more spartan treatment. They didn’t need the “Harry and Louise” commercials to make them apprehensive. And, as Skocpol notes, the Republicans in Congress, as well as many Democrats, saw no reason to support a plan in whose formulation they had taken no part and in which they saw no clear political advantage for themselves. Not to have drawn on members of Congress, including some Republicans, as well as a greater variety of interested groups in drawing up a plan was, in retrospect, a major political blunder.³

3.

[TABLE]

Health care costs currently absorb 13.7 percent of our gross domestic product—2.7 times the 1960 figure of 5.1 percent. The table on this page suggests some reasons for this explosive growth. In 1960, it shows, almost a third of all medical costs were paid by patients. Since these costs included surgeons’ fees and bills for hospital stays, there was reason for a patient to think twice about expensive procedures. Because of the growth of Medicare and Medicaid and more generous private coverage, outside agencies now pick up almost 94 percent of all costs, which is an obvious inducement for the 85 percent of Americans with coverage to obtain the many different kinds of medical care that are available to them.

Robert Blank’s The Price of Life raises troubling questions about the rise in demand for treatment. In the past, the major causes of poor health were tainted food, polluted water, and substandard sanitation, and this remains so in much of the world. In the United States today, however, these factors are peripheral, even among the poor. Yet we seem to require as much medical attention as ever. One reason is that many new treatments are available, ranging from neonatal care for two-pound babies to laser ophthalmology, not to mention costly diagnoses and tests. But Blank makes a different argument. “A spoiled American public,” he writes, abuses its bodies and then calls on medicine to repair the damage. By his reckoning, tobacco, alcohol, and “voluntary obesity” bear large responsibility for 40 percent of American deaths and the illnesses preceding them. He also cites skydiving and sexual promiscuity, and could have added drugs and reckless driving, not to mention the use of firearms.

Blank has much of interest to say on “the social determinants of health.” The United States has a greater gulf in income between its well-off and its poor than any of the nations with which we choose to compare ourselves. Even worse, all too many at the bottom are so dispirited and ill-informed that they give scant thought to their physical well-being. Thus, to cite only one of the sadder consequences, they have more than their share of addicted infants, whose first few weeks of care under Medicaid can cost $100,000 or more. As often as not, treatment for poor people requires long waits in clinics or emergency rooms, after which they may then get to see a resident who has never met them before. The biggest beneficiaries of public programs are hospitals and pharmacies and equipment suppliers, which send the government large—and sometimes fraudulent—bills.⁴

Better-off Americans also raise medicine’s share of the GDP when they ask for advanced technologies and other services such as in vitro fertilizations, cosmetic surgery, and hair transplants, even if few such procedures are covered by insurance plans. Blank reminds us that, in hospitals,

color TVs, stereo systems, bedside phones, electrical beds, wide menu choices, private and semiprivate accommodations, and fancy lobbies and decorated rooms add substantially to the costs of care without any appreciable impact on health.

Insofar as many of our maladies result from freely made choices, Blank says that the rest of us may reasonably object to financing lung and liver transplants for heavy smokers and chronic drinkers. This sounds persuasive, until we recall that lung cancer and liver failure can have other causes. Nor does Blank dwell on the fact that denying transplants will mean that some people who might otherwise have been given another decade or more of life will thereby die in middle age.

4.

Before the 1960s, health experts were arguing that the nation needed more doctors. In retrospect, this seems a curious conclusion. It was not as if physicians were so thoroughly overwhelmed with patients that people could not get appointments. Nor were specialists in such short supply that patients had to wait for long periods to get treated. Nevertheless, universities started new medical schools; students who weren’t accepted by American programs studied abroad, while foreign physicians were recruited to staff hospitals and then opened practices of their own. No doubt there were shortages in inner cities and rural areas, but the increase in doctors did not remedy that condition. One reason is that most of the new doctors became specialists, who went into practice where they would find insured patients. The result is that the United States now has 675,000 working physicians, more than the adult population of Indianapolis, and twice as many per capita as there were in 1960.

Those with their own practices net a median of $176,000 after office expenses. While six-figure incomes are probably partly responsible for the increase in medical bills, a more consequential reason is that each new physician orders one more set of tests, treatments, and procedures. Doubling the number of doctors also means roughly twice as many prescriptions. The multiplier effect also results in more physical facilities and medical workers, ranging from hospital cooks and billing clerks to pharmaceutical salesmen and lobbyists for nursing homes.

A report released in 1994 by the Johns Hopkins School of Public Health said that at current rates of graduation, the United States will have 165,000 superfluous physicians by the end of the century. Or, to put it more precisely, there will be no positions for them, given the changing structure of the health-care delivery system. In particular, less money will be available for specialists, since managed care will allow fewer of the operations, tests, and other procedures they prescribe. And not all who keep their jobs will be able to count on the forms of practice they are familiar with. Some, for example, may be hired by HMO units that are beginning to provide medical services for prison inmates.

Physicians now spend some $130 million on advertising, largely in the Yellow Pages in metropolitan areas. In the Manhattan directory, while their listings occupy 79 pages, in fact 56 are devoted entirely to display advertisements, many of which fill an entire page. If doctors had their appointment books filled, they wouldn’t be pleading for more customers. Even so, few are inclined to take their skills to underserved areas. US Healthcare, one of New York’s largest HMOs, can send patients to only two family practices in the South Bronx.

In David Rothman’s view, “technology bears the heaviest responsibility for the costliness of American medicine.” Current per capita expenditures on medical instruments and supplies are almost eight times what they were in 1960. Since then, hospitals have come to look like aerospace laboratories, as they now compete to have the latest tissue plasminonogen activators and noninvasive pulse-oximeters. In just six years, between 1989 and 1995, sales of “electromedical equipment” rose by 70 percent. While scalpels are still indispensable, digital readouts and monitors now vouch for what physicians can do. “The feature of technology that is most fundamental to the argument here,” Rothman writes, “is the degree to which the public, most notably the middle-class public, is fascinated and attracted to it, and determined to enjoy unlimited access.” Nor are innovations kept secret. On the contrary, physicians join with manufacturers to publicize the latest machines. This should not be surprising, since the more arcane the equipment, the higher the allowable fees.⁵

The day I was reading Rothman’s book, my local newspaper devoted half a page to a report on a huge new imaging device, big enough to hold a patient and two surgeons, giving the doctors a detailed view of what is happening as they operate.⁶ The result is more effective surgery for breast cancers and brain tumors. The cost of development was $50 million, with each machine priced at $3 million. Of course, most of us would also want our surgeon to use it and would also expect our insurance to pay the bill for his doing so.

Thus far, most discussions of restrictions and rationing have centered on treatment of the terminally ill. Rothman quotes one writer who says we have a “duty to die cheaply” rather than consume resources that could aid the living. Currently, close to a third of Medicare’s budget is spent on the last year of patients’ lives. Rothman also cites a medical school professor who has devised a mathematical program which estimates the survival chances of patients in intensive care. If the odds fall too low, the respirator would be detached. Of course statistical odds often cannot predict particular cases. How are we expected to react on hearing that a parent aged seventy-five has, say, “only” a 12 percent chance of pulling through?

We are told, particularly by the new profession of “ethicists,” that there should be more discussions of issues like these. In fact, who shall live (or get one of a limited supply of livers) has long been a subject for debate. But it is not clear how a wider discussion will bring us closer to a consensus on which people are the most deserving of unusual or expensive treatments.

5.

Richard Epstein, a law professor at the University of Chicago, derives his health- care prescriptions from classical economics. Two postulates underpin his analysis. The first is that all government actions are coercive, and so should be held to the barest minimum. Second, a truly free market can best provide health services, both efficiently and equitably. He allows that public agencies may start with good intentions, but in his view they inevitably turn bureaucratic and oppressive. For this reason, he advises “limitations on public expressions of compassion.”

From this ground, he attacks state laws requiring that private health plans accept people with preexisting conditions that could become costly to treat. You might think he would be an advocate of the traditional self-employed physician, who is basically a small business owner and whose success hinges on attracting a clientele. Instead, he prefers corporate HMOs, the more of them the better. As they compete for dollars and members, he believes, patients will get optimal care as competition brings down prices and costs. And if government keeps its distance, “the bargains that they reach will not be blown out of the water by legislative decree or judicial fiat.”

One such deal might be a lower fee for coverage that does not permit malpractice suits. In another, members would pay less if they agree to forfeit a right to appeal when certain treatments are denied them. Epstein asks us to acknowledge that “it is not as though HMOs can open up their checkbooks at the demand of desperate patients.” Unlike government programs, his HMOs have investors to satisfy; enrolling high-cost members could jeopardize their dividends. He assures us that antitrust laws would prevent companies from conspiring to exclude specific patients or procedures. But he has difficulty giving a convincing solution for patients who are seriously ill and poor and are turned down for insurance. He does not show, for example, how plans that welcome people who are HIV-positive could possibly make a profit. Merely on the rather questionable presumption that some will, he opposes government interference: “There is no need to prescribe terms for firms that operate in competitive markets.”

Our health is in “mortal peril,” Epstein believes, not because of lack of adequate care but because of lack of choice imposed by “our system of state regulation.” Of course, instead of facing rules made by public agencies, growing numbers of Americans must accept restrictions imposed by private providers. According to free-market theory, they should be able to move to an HMO more to their liking. The catch, which Epstein never addresses, is that, of the persons covered by private insurance, over 90 percent are insured at their place of work and must accept the plans their employers have installed. Personal policies tend to be held by people who are self-employed or are over sixty-five and want supplemental “Medigap” coverage. Epstein shows his concern for poor people by noting how they could profit if they were encouraged to sell their body organs and provide surrogate pregnancies. So strong is his animus to any government aid that he ends his book by calling for a return to “charitable care,” and hopes that doctors may take off a few hours to “fill in at a storefront run by a local church or neighborhood group.”

Regina Herzlinger, a professor at the Harvard Business School, shares Epstein’s premises and adds details on how proposals based on them might be implemented. “Only the market,” she says, “can provide the health care that the American people want at a price they are willing to pay.” The first problem, she writes, is that our health industry has become a dinosaur, thanks to decades of insulation from competitive demands. So she begins with a tour of successful companies—McDonald’s, Perdue, Federal Express—to show how they attract and keep their customers. For McDonalds’ consistency is central: every french fry is 9/32 of an inch wide and cooked for 170 seconds. This survey leads Herzlinger to examine medical facilities that have been set up to deal in consistent ways with strictly limited categories of patients. She describes, for example, a Toronto hospital that does only hernia operations, and optometry centers offering same-day service and “styles ranging from $50 for a store brand frame to more than $200 for an Armani design.” Such treatment she sees as the wave of the future.

Free-market theory also posits fully informed buyers, who have ample information on sellers, prices, and quality. Herzlinger does not see this as a problem with medical care. If people were more aware that their choices could make a sharp difference, they would, she believes, be more discriminating. To illustrate how an informed patient controlled her treatment, she cites a woman who

custom-designed the types of incisions that removed her breast cancer tumor, faxed questions that rose from her research about cancer to her surgeons, and even selected the classical music to be played in the operating room.

She proposes a “consumer-controlled health insurance system” to replace the employer-provided benefits now the norm for most Americans who have coverage. Like Epstein, her ideal is a market where efficiently organ-ized practices compete for everyone’s health dollars. We don’t, she writes, authorize others to choose our food and houses. “So why should we en-trust others to buy our health care for us?”

Herzlinger would have employers hand over to their workers the sums now spent on health benefits each year, which she computes as currently between $4,900 and $6,600. With all that cash in so many hands, more satisfactory providers of health care would inevitably emerge. Some would have offices in shopping malls or be open during non-working hours. But she does specify one control. Individuals and family heads would be required to use the money for some kind of health coverage, even if they would rather use the money elsewhere and pay for each medical treatment out of their own pockets.

What we call free markets generally benefit people with enough money to purchase what they need. Thus in an example of how her system might affect a household, Herzlinger starts by asking us to “…suppose this family earns more than $100,000 a year.” Needless to say, at no point does she suggest that the members of such a family will end up sharing waiting rooms with Medicaid recipients. Epstein notes that even now with public programs, the better-off “possess the access, talent, and determination to extract every possible benefit” (as can be seen in getting their children into “gifted” classes). And since they would be able to add, say, another $3,000 of their own to the $6,600 from their employer under Herzlinger’s plan, they are likely to find a medical plan with a congenial clientele.

Herzlinger devotes less than two pages to people who are currently uninsured. Most do have jobs, but at marginal pay. Because their employers do not provide health benefits, they would not be able to claim the cash payments that are central to her plan. Still, in her view, they would actually benefit from free-market medicine, since competition would drive prices down. Yet her own figures show that 70 percent of uninsured households have incomes under $25,000, which doesn’t leave much for buying a family policy. So she concludes by urging schools in poor neighborhoods to do more to help their students to “manage their health.” Indeed, her fondness for choice appears not to apply to the very poor. For them she would keep Medicaid services, rather than give them money so they could choose coverage on their own.

6.

Curiously, all of the books under review sidestep two issues close to the heart of the health care debate. The first is the desire to preserve choice, here the freedom to pick one’s own physicians, including specialists. The second concern is quality: we should but seldom ask how much of a difference there may be between the finest doctors and those who are at the margins of medicine. In theory, the two issues are connected: we want choice in order to obtain access to the better practitioners.

To start with quality, most of us have no objective information on its range among the 670,000 licensed physicians in America. Every doctor I have spoken with says the spread is great. One, whom I believe to be highly competent, told me there are only four urologists in the New York area whom he would trust to perform a reliable prostatectomy. How does he know? He cannot have monitored thousands of operations himself. No one does. He is relying on peer group reports and gossip among doctors he respects. In my own talks with many doctors while writing this review, I was told that all too many practitioners lack a truly informed understanding of how the body works, and they probably never will since they lack a capacity for attaining that understanding. Others, I was told, fail to keep up with their fields, or seldom consult with colleagues, or undertake procedures for which they are not qualified. True, few are so egregiously incapable that they will have their licenses revoked, or even become notorious through malpractice cases. Still, going to them could result in receiving a less effective or even harmful prescription that is inadequate—or a misdiagnosis that would prove damaging or fatal.

While no one with whom I spoke would give estimates for a proportion or a number, one suggested that the incompetence quotient was probably about the same as among lawyers or professors. But here, too, no one is willing to say just what the proportion may be. Another told me to keep in mind that half the doctors were in the bottom half at medical school, and one in five was in the bottom fifth. That does not mean they could not have become proficient practitioners; but it is hard to escape the conclusion that millions of Americans are receiving less than optimal treatment without knowing it. I should add that no one linked the problem of incompetence to the doubling of the profession. I was assured that a generation ago there were just as many physicians who should have chosen other careers. Again, all such talk is worth listening to only in the absence of more reliable information; but it is clear that the medical profession itself is vulnerable for not taking more initiative in organizing peer reviews whose results are open to the public.

Does the freedom to pick one’s own physician—including the freedom to surf the Yellow Pages for specialists—result in receiving better care? Recall Rothman’s studies showing essentially the same outcomes for managed care patients and those able to select their doctors, even if many are troubled by their lack of options and the impersonal air of consultations and waiting rooms. Indeed, it might be the case that if each of us had to use doctors and hospitals to whom we were assigned for a medical insurer, the odds of efficacious treatment would be no worse than they are now, particularly for the high proportion of cases that do not present special difficulties of diagnosis and treatment. So it is worth emphasizing that even now many people are choosing physicians who are not very good. Most of us go to doctors who were suggested to us, frequently by friends or another doctor, and we then grow accustomed to them. If not all doctors are strong on charm, most are pleasant enough so we stick with them. And since, for most of us, they have a quasi-priestly access to apparently arcane knowledge, and we are entrusting our bodies and intimate problems to them, we accept their authority over us more readily than we do that of most other people we deal with.

Of course, there are cases where a physician may fail to cure an ailment, leading a patient to search for someone who can. Indeed, sharing impressions about doctors is a national pastime, at least among the middle class. How many Americans in fact get better treatment because they are allowed to choose? Is it worth sharply increasing our medical bills so as to have the satisfaction of picking the doctor we want? We are far from having any confident basis for answering those questions, and we may never have one. Meanwhile HMOs will expand, the medical profession will adapt to them, more and more patients will accept them as the conventional pattern for health care. Alternatives to them will be available mainly to the well-to-do, not only because they can pay their own bills, but because they have benefits allowing them to use their personal doctors. Those below the poverty line still have Medicaid, but with welfare being phased out their medical care could go the same way. And the near-poor who are uninsured will have to wait until their health begins to concern the rest of society—if it ever does.