REFORM FOR A HEALTH CARE SYSTEM, IN CRISIS OR NOT
By Charles F. Quest, Jr. MD
While the
For each of us, our personal health and that of our loved ones can be a very emotional issue. Those emotions have clouded our judgment during the evolution of our current system, leading to excessive cost, serious inefficiencies, misappropriation of resources, and severe encumbrances to business, the economy as a whole, and personal freedom.
Whether or not the system is in crisis is a matter of perspective. Politically, the perception of a crisis may be expedient. Those who can afford any care that money can buy, and who elect to travel to our country and purchase the care available, may find “crisis” a peculiar term to describe our system. Certainly insurance companies, which enjoy twenty to sixty-five per cent of the health insurance premiums, from which to comfortably administer their programs and extract profit, can only perceive crisis in the threat to change the system. The poorest segments of society, who receive at no charge essentially the same care by the same physicians and allied health providers in the same institutions that wealthy people travel around the world to purchase, should not perceive crisis. However, and perhaps of greatest concern, there exists a practical exclusion from adequate health care of a significant and most deserving segment of our society, the working poor. These are hard-working people. They support by their taxes the health care of the poor and of the elderly, many of whom are wealthy. However, they cannot afford to purchase health insurance for themselves or their families. They have the most legitimate perception of crisis. It is unwise for a nation as great as ours to allow this injustice to be perpetuated on this working foundation of our society. For this reason alone, health reform should be carried out.
There are, however, numerous other goals that can be achieved via health reform. These include: an enhanced business climate, a more competitive economy in the world arena, greater personal freedom, and, most desirable of all, IMPROVED HEALTH for all segments of society through the promotion of preventive medicine. Once again, these goals can be achieved at no additional cost and, most likely, for significantly less than what is already being paid for health care today.
PROBLEMS OF THE EXISTING ADVERSARIAL HEALTH CARE SYSTEM:
--> Uninsured members of our society, such as (a) the working poor, and (b) people with preexisting conditions
--> High cost of medical care
--Sub-optimal employment of preventive medicine
--Negative public health consequences secondary to excluding some segments of the society from affordable health care
--Encumbrances to business and the economy, such as (a) employee health care increasing the cost of products competing in the world market, and (b) cost of coverage, or fear of loss of coverage, obstructing startup of new or innovative enterprises.
--Limitations to personal freedom: lack of freedom to select the doctor of your own choice, with whom you achieve the greatest rapport and most effectively interact, and lack of freedom to develop your career, or to move about the country for family or health reasons, due to loss of health coverage, especially with preexisting conditions
--Encumbrances to open communication within the health care system, which slow the detection, understanding, remedy, and prevention of disease or problems in health care delivery. This is the product of fear of litigation or loss of practice privilege or opportunity. (This is a problem for health care, but its cause is societal and external to the system. It will not be dealt with here.)
--Underserved sections of the society due to maldistribution of health resources
-- Progressive erosion of personal freedom in health care under the system of managed care. This is particularly manifest in the inability of the patient to select the physician of personal preference, either as primary care physician or as consultant specialist.
--Disruption of continuity of care, with all the medical and emotional penalties entailed, as the fiscal motives of the insurance company or the employer dictate a change in the provider panel
--Iimposition of "cookbook medicine" as practice guidelines become practice dictates in order to fill the needs of bureaucracies of managed care and "quality care" overseers, ahead of those of the individual patient
Lest we should destroy it in the process of reform, it is important to identify what is right in our health care system. Most noteworthy here is that research and innovation are driven to a significant degree by the capitalist system. We have produced techniques, interventions, technology, and pharmacology which have earned us the gratitude, respect, and envy of the world. One struggles to identify substantial contributions from the non-capitalistic societies of the world.
In preparing to design a new health care system, it is paramount to recognize that no one has designed a system based on rules and regulations that is not inefficient and mired in a massive and costly bureaucracy. To ensure optimal and enduring success, a revision of the system in any society, but especially in a free society, must be centered on establishing the appropriate incentives. If it is wisely done, with positive incentives for both providers and recipients, we can create a health care system that will provide excellent care to all members of our society at a cost significantly lower than that we are currently paying.
We cannot place the whole cornucopia of medical services on the table and tell the populace, "Take whatever you want; someone else will pay for it". There would be wasteful, inappropriate, even counterproductive or injurious employment of medical services and interventions. And the cost of health care would soar from 14% of the GNP to perhaps twice that. Initially it is necessary to identify a set of health services that are basic, essential and/or prudent to be included in a package for universal health coverage. Some mechanism needs to function to control cost. The free market has been employed with great success in other arenas and can be equally successful in health care.
The premium for this package should be set by today's prevailing actuarial methods and rates. This premium should be collected via a tax (graduated income tax, sales tax, or other). Some degree of sin tax may be appropriate. Although taxes are seldom popular, when the people understand that they are receiving a valuable and desirable return for their tax dollar, that tax receives broad support. If we are to have universal health coverage, a tax is unavoidable. Any other collection method is only a hidden and regressive tax which is palatable only for its political expedience.
One third of this premium will be dedicated to shared risk. Three per cent of the premium will be the fee to the insurance companies for administering the program. Two per cent of the premium will fund medical research and experimental medicine. The remainder of the premium is refundable to each citizen. Those citizens who choose to follow a healthy lifestyle and who use medical resources wisely and economically will be rewarded with sizable refunds. Half of their refund will be returned to them in the following year, perhaps with their tax refund. The other half will be maintained for them in an income-generating medical savings account. When the balance of this medical savings account exceeds a certain level, such as $20,000, all of the amount above that level will be refunded to that participant. All medical care will be funded from the refundable portion of the premium and the medical savings account. The shared risk portion of the premium is reserved for those whose medical needs exceed their refundable premium and medical savings account.
Citizens will need advice and guidance in using the system wisely. Their advisor will be their primary care physician (PCP). Each person's PCP, as a cost control incentive, may receive a percentage of the individual's refund. The physician will not automatically receive a portion of the patient's refund, but must demonstrate overall cost effectiveness for the population he/she serves.
All covered services will be available to patients upon consultation with and referral by their PCP. Referrals will not require prior authorization; rather, they will be controlled by educating patients and PCPs in cost-effective medicine. PCPs may form alliances (these need not be large and difficult to manage) which can contract with other providers to achieve savings in the purchase of health care goods and services for their patients. Individuals may purchase elective health services or supplemental insurance outside of the national plan.
The government will act solely as a collecting agent. It will distribute the premiums to the insurance companies as dictated by the consumer's choice. All companies which can demonstrate soundness and viability may participate, with the proviso that they may reject no one. Each family, or each individual not a member of a family unit, will select an insurance company, based on his/her own personal judgment. The individual may change companies on the anniversary date of the policy, but perhaps not more than three times in ten years. Those who do not select a company will be assigned in a distribution which equals that of the previous year. An individual already with a company, who does not designate a company for the following year, will be assumed to be electing to remain with the same company. All insurance claim forms will be standardized.
THE EFFECTS OF THIS SYSTEM
1. First and foremost, this system funds preventive medicine. Not only can we reduce health care costs, but we can significantly enhance the quality of life in the
2. Immediate universal coverage is achieved.
3. Incentives are created for physicians to enter primary acre medicine.
4. Incentives are created for physicians to serve under-serve populations.
5. No new bureaucracy is created, and an existing one, the Medicaid system, can be eliminated. Other government health agenciec, such as the
6. There will be great savings from the elimination of administration overhead.
7. Individuals will have incentives to select cost-effective interventions and avoid tests or procedures of questionable value.
8. Insurance companies wlll no longer spend health care dollars trying to eliminate people from the health care system.
9. Insurance companies will have incentives to teach individuals and physicians about what is cost-effective in medicine and what is not. The physicians and the populace will in turn have incentive to learn.
10. Businessses will no longer be burdened by health care expenses, and their products will cost less and compete better in the world market. Companies currently providing health insurance to their employees as part of their compensation should return half of the cost to the employees in wages or earnings. The other half will be savings for the company and can be retrieved by employees by the desired health behavior.11. Individuals will be free to follow career opportunities or to move about the country for their personal needs or rewards.
12. Primary care physicians will have lower administrative costs and can reduce their fees. They will also have diminished delinquent and uncollectible accounts.
13. There will be no need to regulate allied health industries such as the pharmaceutical industry. This will be replaced by free market influences. PCPs and patients will demand to know costs and will pay higher costs only when they are justified by added value.
14. Poor people who pay no income tax will still be eligible for refunds. This will transfer wealth from the rich to the poor; however, it will not be a handout, but rather a reward for prudent and responsible behavior.
15. There will be freedom from the encumbrances of health care issues in the start-up of new and innovative businesses
16. Health insurance companies will not have to be forced out of business, a task which society may not have the resolve to accomplish in order to achieve health reform. Rather the system will give them a new product and essentially sell it for them, greatly reducing the cost which they would have to pass on to the consumer. Their traditional products will continue to have some value, and they may continue to market them.
17. This system preserves individual freedom and promotes personal dignity by placing health decisions in the hands of the individual, rather than having them imposed by the government, or by some government-supported authority such as insurance companies, which cannot be sensitive to the unique situation presented by each person.. The thrust of the health insurance industry must then be on education, which is the foundation upon which a free society must ultimately depend.
18. Rapport between patients and their freely-chosen PCPs will be improved. The PCP will have the incentive to be more freely available and responsive to patients' questions, and to make the effort to instruct the patient to the necessary level of understanding. This will contribute significantly to overcoming the greatest obstacle physicians face in achieving a successful health intervention. That obstacle is the failure of patients to comply with medical instructions or directions. An impersonal delivery system, in which the patient feels he/she has no choice, aggravates the noncompliance problem. This leads to failure, waste, confusion, and even injury from well-designed disease interventions. If a patient has been able to develop rapport and trust with his/her physician, and is invested in the treatment, financially and intellectually, compliance will be greatly improved. This will function both in the treatment of existing disease and for preventive medical interventions. Thus, financing health care with patients' refund or medical-savings-account dollars not only controls costs but also stimulates better outcomes.
How can all this be delivered at a cost lower than what is currently being paid? At the present time, comprehensive health care is provided to large groups of people, below Medicare age, by provider entities at a cost of less than $100 per member permonth, while insurance premiums vary between $150 and $500 per month. There is clearly massive administrative waste or unreasonable profit which can be eliminated. The $100 current cost includes more administrative waste at the provider end and is being achieved without incentives to be cost-effective. "Cost-effective" does not mean denial of necessary care. Denial of care only delays and increases cost. A stitch in time can save nine. Cost-effective means the elimination of wasteful care.
The value of preventive medicine must not be underestimated. The only entities with a vested interest in preventive medicine to date have been large employers. Their focus has been rather limited, being primarily on saved sick time and avoided disruption of production. The alleged gains from higher quality and more efficient work from a healthy work force are viewed with greater skepticism. Only the largest companies could perceive the gain to be large enough to justify the investment. However, where well-employed the gains far exceeded expectations. It is difficult to estimate the impact that a trillion-dollar industry, with its principal players motivated to achieve disease prevention, might have on both the health and the prosperity of this country.
There are those who would condemn certain entities in the health care industry for not having the best interests of the populace in mind. Chief among these they would include insurance companies that rake in unconscionable profits and physicians, hospitals, and allied health professionals who make use of people's becoming ill rather than promoting health. This condemnation is wrong-minded. These are not evil entities; rather, the undesirable components of their behavior are the result of the failure of the society to adjust the incentives it had created. It is as foolish to think that a society can set incentives and never adjust them as it is to believe that you could aim your car down a highway, even a very straight stretch of road, and never adjust the steering wheel. The health care system is ripe for reform; however, to be successful that reform must be based on adjusted incentives. If the reform is merely a set of rules and regulations, it will be as successful as the Russian experiment in communism. It is the universal foolishness to think that one can make the perfect set of rules that will make the society run best. Societies run on shared attitudes and values, not on rules. Attitudes and values must be taught, not legislated. Incentives are tools for teaching attitudes and values.
Incentives have driven the evolution of medicine. The last half of the nineteenth century witnessed the birth and early growth of modern medicine. After World War II, our nation turned its attention toward domestic matters with a confidence in technology to solve our problems. Medicine was particularly open to this approach. The appropriate incentives were established and the results were outstanding. During the 1970s and 1980s it became apparent that the cost of the evolving technology was becoming too burdensome without justifiable benefits, particularly when employed indiscriminately. With the evolution of health insurance placing increasing burdens on employers, they developed an incentive to see costs contained. Their voice was strong enough that insurance companies were obliged to comply. The loudest voice was that of the
Since the insurance companies have the incentives, they get the profits. They achieve this by placing restraints on providers and recipients of health care. This is an onerous and injudicious process. It is injudicious because it treats the individual as an average rather than as unique. This leads to "cookbook medicine" with its known inherent risks of waste and delay.
To achieve optimal and cost-effective medicine, which must be tailored to individually unique needs, we must employ incentives at the point where the individual encounters and exercises within the health care system.
This existed early in medicine but was lost when third-party payers entered the equation. At the beginning of the twentieth century, the majority of physicians were PCPs, and individuals were responsible for their medical costs. The physician with knowledge, concern and rapport with the patient employed the available remedies with judgment, compassion, and ingenuity to fit the patient's needs and resources. As technology evolved and greater weapons at commensurate greater cost became available, the cost of health care in serious illness threatened to bankrupt individuals. The benefits of shared risk became undeniable and imprudent not to employ. As insurance coverage expanded, individual and physician lost the incentive to be cost-conscious. The affection for and trust in technology, and the dwindling individual cost-consciousness, have fueled inflation in medical care costs. When this reached a critical level, restraints had to be employed. These restraints are institutional and relatively crude, and they cannot easily, if at all, be tailored to individually unique disease presentation.
The current problems perceived in our health care system, and an evolved understanding of what a health care system could do or what we would like it to do, dictate that it is time to change the incentives within the industry. The recent decision of Blue Cross to change from a nonprofit to a for-profit company tells us that health insurance is a business with considerable profit for the insurers. This is not surprising, as that is where the financial incentives are currently directed. Nor is the decision of Blue Cross an evil one. Rather it is a consequence of our failure to appropriately adjust the incentives in the health care industry. The result is an already burdensome and confrontational bureaucracy, which will only grow more troublesome and wasteful. Under managed care one chief executive of a health maintenance organization earned $120,000,000 in 1992. This is the tip of the iceberg of institutional profits in managed health care. This is the result of current incentives. It is wasteful of health care resources. By adjusting incentives we can redistribute resources to the delivery of health care and disease prevention.
We need not and should not discard health insurance companies, as some have proposed. Rather, we should transform them into what their name implies. Health insurance companies do not insure health; they insure wealth. They insure that your ill health will not consume your wealth. They do little, however, to assure the preservation of your health. With the changes outlined in this reform proposal, health insurance companies will be changed from companies that profit from your risk of ill health to a powerful industry, seeking profit by dedicating itself to the preservation of your health through preventive medicine.
To be both humane and effective, health care reform must employ positive incentives where they will create cost-consciousness in the patients and their primary health care advisors. The system outlined above does this, for a cost which is less than our current health care expenditure, while creating universal health insurance, recovering a degree of personal and societal freedom, shrinking the size of government, and funding preventive medicine. This last item is critical, as it is the greatest means for enhancing the health of our nation and achieving true health reform.
POSTSCRIPT TO HEALTH CARE REFORM
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life,
The
The current health care delivery system is the product of evolution, with many of the best rewards, of the capitalistic system. Among the rewards of the system are those fine medical institutions and technologic development that lead the world and evoke its envy and admiration. There are, however, significant shortcomings.. These include:
1. Unreasonably high cost of health care
2. Number of uninsured members of our society, secondary to cost or exclusion
3. Sub-optimal employment of preventive medicine
4. Underserved segments of the society
5. Encumbrances to
6. Limitation of personal freedom in choice of health care providers
7. Limitation of personal freedom in career development and quality-of-life
choices, secondary to fear of loss of coverage if moves are undertaken
8. Depersonalization of medical care
9. Disruption of continuity of care
10. Imposition of "cookbook" medicine, or the failure to tailor care to the
specific needs of the individual patient
Clearly our behavior demonstrates that item #1 in this list produces our greatest concern. Thus, our remedies employed to date have involved cost containment almost exclusively. These attempts at health reform have been characterized by complex rules and regulations. This is embodied in managed care plans both for private care and Medicare. There have been some significant financial savings achieved.. However, the secondary costs of these reforms may dwarf the financial savings. Of the ten items in this list of problems wth health care delivery in the
Lawmakers perpetually perceive that they can legislate prudent behavior. This proves to be as efficient as legislating morals. It is particularly likely to generate discontent and conflict in a free society such as we have and revere in the
The cost of health care today embodies a great deal of waste and unreasonable profit. That certainly deserves our attention. It exists primarily because patients and physicians have no reason to be cost-conscious. The tools developed thus far to deal with this are rather blunt and are often injurious. While achieving some cost reduction, they either ignore or aggravate all the other problems of health care delivery. This will always be the case when cost controls are exercised without an intimate understanding of the specific medical problem. In order to achieve optimal utilization of a health care system, the individually unique character of medical problems dictates that incentives be employed where the individual encounters the system. This is in the relationship of patient and primary care physician. We must utilize appropriate incentives to create a cost-consciousness in both patient and physician. Then the patient, guided by a highly-trained professional (eleven years of college and postgraduate training in highly competitive programs) with unlimited consultation resources, will be able to make the most appropriate health decisions, while demanding justifiable value for each added increment of cost. If weel done, we can also resolve or dramatically improve all of the other health care delivery problems identified earlier.
The above are the basic elements of a health care system which will provide instantaneous universal health care and for the first time adequately fund preventive medicine. This essay describes how health reform through the mechanism of establishing appropriate incentives can achieve the desired goals for substantial savings over our current national health expenditure, while enhancing the economic climate in the