The author has chosen to use a question-answer format in order to make the often complex subject matter, easier and more enjoyable to read. Q and A is not a dialogue bewteen real people -- the author has provided the dialogue for both Q, standing for Quaero, which is Latin means "I search for" and A, Auctor, which in Latin means "person responsible."
Q-Today, when so many politicians are calling for some form of government provided universal health insurance, I understand that you are advocating a different approach to this country's health-care woes. To get us started, I'm going to ask you to be perhaps unreasonably concise, and to give one sentence answers to three vital questions:
First, who should provide and pay for care?
Second, who should receive care?
And third, how can health-care costs be controlled?
A-Concise answers to complex questions can easily be misconstrued, but I'll try if you allow me to amplify my position as we proceed.
Q-Agreed.
A-First, health-care is the responsibility of individuals, not the government nor their employers.
Second, everyone who can afford to pay for it, or can attract a charitable group or individual to voluntarily provide it, should receive care.
Third, care will become affordable only under a free market system where consumers, rather than third parties, such as government and employers, pay directly for the care they receive.
Q-I'm afraid you'll have trouble getting people to accept your first and second premise unless the third is realized first. And even if consumers were able to use the competition of a free market to make health care affordable, you would still have the problem of the free-loaders and dead beats. Too many people fear the other guy is not going to voluntarily purchase health insurance and so when he gets sick or has an accident he will be a burden on the rest of us.
That takes us right back where we started; with a need for universal health insurance.
A-I don't have a problem with universal health insurance as long as government doesn't provide it, or force employers or any other group to provide it. Health care should be provided voluntarily and ideally by self-determining individuals.
I applaud employers and other groups who voluntarily provide health insurance for others, either out of self-interest or altruism, but I emphasize voluntarily.
Although in a utopian world, individuals would not need policing, I am willing to stipulate the role of policeman to government in order to make market-based health-care a reality. I would endorse a plan where consumers do the shopping comparisons necessary to bring prices under control and consumers are the primary payers.
I would reluctantly agree to allow government to police the purchase of health insurance and to require employers to submit proof of insurance on behalf of themselves and their employees.
Q-In past writings you have criticized the practice of having employers act as tax-collectors for the government via payroll taxes and withholdings and here you are suggesting a similar role for the already overburdened employer.
A-You're absolutely right, and as I said, in a utopian world, individuals could be counted on to take care of themselves without overseers. However, showing proof that an employee has purchased his own health insurance is less of a burden for an employer than having to purchase it for him If an employee fails to purchase health insurance, an employer would be expected to deduct money from wages, but it would be the employee's responsibility to shop and provide health insurance for himself with the dollars set aside for that purpose.
I agree, this may not be an ideal plan, but it is closer by far, to the American ideal of self-determination than all the elitist propsoals beding discussed that wrest control from the individual.
Q-And what about insurance for those that are not employed?
A-For the time being, those people would be taken care of by the government's many social programs; most specifically medicaid. Dispensing charity is not a role government plays well and I would hope that eventually, caring for needy dependent individuals would be taken over completely by the private sector. Resources are limited, and because they have to be rationed, needs should be targeted and carefully prioritized, something government has shown itself incapable of doing.
Q-How do you feel about rationing health-care?
A-Rationing is a common response when demand exceeds available services. Rationing is unnecessary in a market system, however, because when freed from government restrictions and regulations, the supply naturally adjusts to increases in demand. Demand in a capitalist society is evidenced by ability to pay, and in most other societies by need. There is no doubt that health care in the United States has to a large extent been socialized. Government, through its immense programs and regulations effectively sets prices and determines service.
Under a pure free-market system, anybody can have all the health care he can afford, or receive as a gift from others. Under such a system, prices would fall and unnecessary tests and useless procedures would be discontinued. It is the idea that everybody has a right to health care, regardless of his or her ability to pay for it, that is responsible for the unlimited rise in the cost of health care. The ultimate end of such a system is rationing. In the end, the free market is a more humane system.
Q-Families in Oregon with children needing organ transplants have felt the inhumanness of rationing. A few years ago these families began moving to California in order to qualify for California's $7 billion medicaid program, which still covers some transplants for uninsured patients. How did Oregon change its medicaid program?
A- Oregon's plan required a waiver from Congress so that the usual medicaid requirements could be suspended. Instead of paying for everything for people up to fifty percent of the poverty level and nothing for those between fifty and one hundred percent, under the new plan Oregon pays for procedures for everyone below the poverty level on a prioritized basis.
A list was made of all medical interventions and arranged according to the public's priorities. That information was culled from town meetings across the state and 1,000 detailed phone interviews. The most cost-effective and long-lasting benefits were given top priority. Whatever portion of the list the legislature decided to fund was to represent the minimum benefits package in a special state insurance pool for the uninsured above the poverty line. who are now uninsured. It represents the minimum benefit package that private insurers can offer in the state.
Q-Since Oregon's medicaid program pays for prenatal care but not for organ transplants, wouldn't you call that rationing?
A-Of course it is rationing but it is rationing by logic rather than by waiting list. Medicaid is supposed to be for the poor, but poor adults without dependent children have never been eligible. Others loose their eligibility according to the number of parents in the household or the age of the children and so forth. The federal government dictates who must be covered, a practice which has been referred to as "redefining the poor for accounting purposes."
Q-What do you think of critics who claim because the elderly, the blind and the disabled would be exempt from any rationing, the plan would discriminate against poor women and children?
A- Nonsense! More than half of all medicaid reimbursements in all states go for elderly patients in nursing homes. In Oregon, medical care for the elderly, the blind and disabled is covered by medicare, which is a federal program.
As for the disabled, they account for only five percent of those who fall under Oregon's new plan. The disabled receive medicaid only because of the rules that make it hard to qualify for medicare; rules which hopefully will be changed if the Bush administration has its way. Disabled persons are not eligible for medicare until they have been disabled for two years and then only if they have paid Social Security taxes for a sufficient number of years.
Q-Presidential hopeful, Al Gore, charged Oregon with waste and inefficiency in the use of its medicaid budget, and admonished that excessive bureaucracy should be cut before rationing took place. Do you agree with that assessment?
A-The bureaucracy in Oregon's case is due to the cost of all the case managers that are necessary to make that state's exemplary long-term assisted living at home care for the elderly the best in the nation, and which incidentally saves money over nursing-home care.
Q-Isn't the politician behind Oregon's plan a physician?
A-John Kitzhaber, president of the Oregon Senate is a medical doctor, and one who looks beyond medicine for causes of poor health. He claims in the quest for a healthy population medical care cannot be separated from social factors. For instance, he recognizes that the country's high infant mortality rate reflects housing problems, environmental problems, teenage pregnancy and substance abuse. He agrees our health-care crisis is not so much a lack of money as it is a flawed health care system.
Q- What do you mean by a "flawed system"?
A-There is an illusion that resources are unlimited, that all medical interventions are of equal value and effectiveness, that we can satisfy the public demand for health care without paying for it.
Providing health care for people without insurance or adequate funds of their own is not a new idea. In the past the cost of their care was just shifted to others via increased insurance premiums or padded bills. The effect was to insulate both providers and consumers from the true cost of treatment. The result of cost-shifting and third-party insurance coverage was that public expectations and practice patterns were disconnected from the economic realities of funding them, and decision makers were insulated from the consequences of their decisions.
Dramatic escalations in health-care services and prices were encouraged by hiding the true costs. Costs were simply shifted back to providers and third-party payers while expenditures continued to escalate. Accountability for both fiscal and health decisions retreated further and further into the background and nobody ever had to accept or reject the principle of universal access.
Q-With the average medicaid eligibility at less than 50 percent of the federal poverty level we can't claim to have universal access. A family of three making more than $5, 000 a year is considered too wealthy to qualify for publicly subsidized health care in some parts of the country.
A-That's where targeting, rationing and prioritizing comes into play. Too many people are left out of our present system entirely. Additionally, many physicians refuse to see medicaid patients and those who do often shift the uncompensated costs to employers, driving up insurance premiums.
President Reagan tried in 1983 to have the elderly or disabled medicare beneficiaries pay higher out-of-pocket costs for most hospital stays in exchange for protection against catastrophic illnesses. Now the government picks up most of the tab for a set number of days and that's it.
I would like to see medicare patients shoulder a greater share of the cost for the early days, and then have Uncle Sam pick up the tab when the burden becomes too great. In 1983 the Reagan administration figured that kind of peace of mind would have only cost the seven million medicare patients hospitalized each year about $294 more than they were paying at that time.
Q-A plan like that would be a disaster without first instituting incentives for health care providers to curb costs. Otherwise there would be less reason than under the present failing system, to make rational economic choices and, since everything is on Uncle Sam, more reason to use excessive measures to prolong a patient's last year of life.
A-I agree. That brings us back to the marketplace once again. The primary reason health costs are out of control is that they are presently immune from the forces of the marketplace. On top of that, a mass of regulations stifles the entrepreneurship and innovation the health industry might otherwise use to cut waste and generate efficiencies. Policies to encourage price competition among health-care providers were advocated by the Reagan administration, but hospitals and consumer groups, who claimed such policies would have a negative effect on the quality of care and force hospitals to either sacrifice quality or turn non-paying patients away, blocked legislation.
Q-Do you think such legislation would have been effective?
A-I do. I know it's possible to solve the problem of soaring health-care costs without arbitrary regulation, draconian belt tightening or increased taxes. All we have to do is subject health care to market forces---something that should be natural in a capitalist economy.
Q-You may be one of a very few who think the United States should function as a true capitalist nation. Do you remember a few years back, a poll where people were asked to identify the phrase, "From each according to his ability, to each according to his need"?
A-I remember. A good percentage of those polled placed it as a part of the United States Constitution. It makes you stop and wonder just what it is they're teaching in our schools. Need has become such an entrenched determinant of demand that a professor of medicine at Tufts University seemed surprised and disillusioned that ability to pay should have anything to do with the distribution of health care. He was quoted in the March 27, 1990 issue of the Wall Street Journal, "The issue of money is lurking in the background. You have to ask whether the decision (to approve or deny) treatment is tainted by cost concerns."
As a probable tenth generation pure blooded American capitalist, I could hardly contain myself when I read "lurking in the background". Money has always been the means of distribution in this country---not "lurking in the background", but with no holes barred and up front---to each according to his ability to pay, not according to his need. I could imagine the good professor wrinkling his nose in disdain when he spoke of treatment being "tainted by cost concerns". I could hardly believe we were citizens of the same country.
Q-I suppose then you would say that policymakers in Oregon are heading in the right direction in deciding who is to get what care on the basis of cost-effectiveness rather than need?
A-To tell you the truth, with policymakers making all these decisions for American citizens I feel like I have tuned into the middle of Dr. Zhivago and government officials are dividing up the housing and other resources. As far as I'm concerned politicians, bureaucrats or whatever you want to call them, have no business making such decisions, no matter how they do it!
The ultimate question, which has been debated continuously for well over 200 years, concerns the role of government. That role was purposely limited by our constitution. But there have been such far fetched interpretations of the meaning of the Constitution over the years, that I think the role of government is still an open question as far as most Americans are concerned.
Q-I think you're right. William Link of Prudential Insurance Company, addressed the Commonwealth Club in San Francisco in March, 1991 saying that freeing the health care marketplace was not enough, that government had a responsibility to the poor. "Such care is the hallmark of a civilized society" he said. Agree or disagree?
A-I don't believe ensuring the health of its citizens is a proper role for government. American is not the motherland or the fatherland. Americans are self-determining individuals and should not be at the mercy of their government. That was the uniqueness of the American ideal. I think the American people still believe in their own abilities, but leaders treat them as incompetents requiring coddling. To make the coddling more palatable they call it "safety nets" or "basic rights". Hog wash! The majority of Americans were able to plan for and take care of their own health before government's meddling changed relationships and drove prices sky high. Now, however, it's become a different ball game and I want to change that. I want people to gain control of their own lives and their own destinies once again.
There have always been, and always will be, people who can't or won't help themselves and helping the less fortunate is something that should be done. But it must be done voluntarily in order to nourish the humanity and enhance the spiritual growth of both giver and recipient, something that is not accomplished by government mandate.
Q-If, as you say, government doesn't have the responsibility, then what is the answer to our health-care problems?
A-It's more than not having the responsibility. Helping the poor, the sick, the needy is not something that government, any government, can do well. What is needed is people helping people--one to one. The human touch, found only on the community level, is required. The long lines and paperwork of a bureaucracy won't do it.
The answer might be modeled along the lines of CHIP, the Comprehensive Health Investment Project started three years ago as a cooperative effort of private doctors working with the support of existing social welfare agencies and health departments in the state of Virginia. Although many Virginia doctors would gladly give time at the twice-a-week free clinics throughout the state, only about one doctor in ten would accept medicaid patients because of the paperwork and frustrating regulations that go along with it.
Starting with six pediatricians and one hundred patients, the program flourished and at the end of its first year had attracted more doctors and was serving three hundred patients. The program's success attracted private foundation funds (private foundations like to see good use made of their dollars) and before long it had expanded to serve almost a thousand patients with all of Roanoke Valley's doctors offering to donate time.
When the associated press ran their story at the end of 1990, the administrators had identified 4,800 potential patients and hoped to entice all of them into the friendly non-bureaucratic program. It had become a real community project. When prescriptions couldn't be filled after hours at the discount rates offered by the public health office, the community's largest 24- hour drug store provided the service at even lower prices. A church donated a van to pick up patients who needed transportation to keep their appointments.
This type of community volunteer effort, coupled with private foundation funds and those of already existing government programs, may be a viable solution to part of our national health-care dilemma. I believe people helping people in a personal way is a giant step towards utopia.
Q- Well, I've got to agree that many people, not just Virginia's doctors, are fed up with impersonal, frustrating, incompetent bureaucracies running their lives. But you've got to admit government had a hand to play in CHIP's success.
A-That's true, I just think in too many cases government has played far too large a role. For instance, New Jersey has set up a fund with public money to help families facing financial disaster due to a child's medical bills. A touching and worthy cause made to order for private philanthropy. But an already financially strapped state government has usurped the role. New Jersey's program, which generates about $5 million a year, is funded by a surcharge on all employers who are required to make payments into the state's unemployment compensation fund.
Why not set up a fund to help young families where the mother is dying of cancer? How about a fund for families who have a brilliant teenager that wants and could benefit from a first rate college education but where there is also an elderly family member that requires nursing care? Why not raise a little money for the mother with six kids whose husband is in prison for a murder he didn't commit? How about a fund for the murder victim's family? Better still, since we are making employers provide the money, how about a fund for a vacation trip for the self-employed couple who have worked 14 hour days for years and have managed to put their three kids through school but are struggling under a mountain of debt?
Maybe its time our legislators took a tip from Davey Crockett who as a member of Congress is said to have voted against a bill authorizing funds for a widow of a recently deceased colleague. "It is not our money to give", he told his fellow legislators, " but I will be only too happy to contribute some of my own funds to the good widow and suggest we take up a collection here and now." But some things never change and I believe Representative Crockett's suggestion was ignored. It is apparently much more satisfying to distribute other people's money.
Q-I've heard people say the tax code discourages a market solution to the health-cost problem. Do you know what they mean?
A-Health and Human Services Secretary Louis Sullivan said at a 1990 speech at Stanford University, that because health benefits are not taxed the tendency has been for employees to demand that this untaxed compensation be used for ever more costly health coverage. He said that tax-free health benefits would cost the government (in lost revenue) an average of almost $59 billion in 1990, or over $550 for each insured employee. He brought up the fairness issue, asking whether government should subsidize high-salaried employees more than those on low-wages, which is what we are doing.
Q-That doesn't make sense.
A-A Washington DC based think tank came up with a study that concluded that taxing employer-provided health coverage and allotting tax credit to those who buy their own health care plans would save the government money and lower the nation's health care costs.
Q-Do you think that is feasible?
A- Unions, dominated by older members who place more emphasis on health benefits than do younger members, would have to be won over with something more---perhaps tax credits to an individual for incurred medical costs. To discourage overconsumption one might link a tax credit to a high deductible and allow the tax code to blunt catastrophic expenses but not basic health care expenses. This would certainly be an improvement over the present system which shifts the responsibility and costs of health care onto third parties and is a breeding ground for excesses. Perhaps we could get closer to a marketplace in health care if we tax all employee compensation, including health benefits, and couple this sure to be unpopular move with rate reductions.
As far as I'm concerned, the best answer is individual consumer choice and responsibility. If we stop expecting government to do the job for us, and if we begin doing what we can to foster independent research and to promote a free flow of information, and if we above all, have faith in ourselves and our neighbors, we may be able to lick this problem.
Q-What do you think of California Governor Pete Wilson's idea (early 1991) of shifting responsibility for mental and public health care from Sacramento to the various counties?
A-I like the idea of bringing authority and decision making closer and closer to the ultimate user, but the funding source may be a problem. The proceeds from increased alcohol, tobacco and vehicle-license taxes have been coveted for many programs. Even if the Governor gets his way, since the new tax money would not be earmarked for mental health programs but would go into a county's general fund, some lawmakers are fearful that the money might be diverted from health. They would like to see restrictions on the funds written into the Governor's legislation.
Q-Do you know anything about legislation which is supposed to reverse a lot of the regulations that have made life miserable for doctors?
A-I'm not sure if this is the legislation you are referring to, but many medical groups, including the American Society of Internal Medicine and the American Medical Association, are behind legislation sponsored by Representative Roy Rowland of Georgia and Senator Max Baucus of Montana. Their Bill, which would reverse recent medicare rulings, has 248 House sponsors and 31 Senate sponsors.
Q-That sounds like it.
A-I'll give you some examples of rules that could be rolled back and gripes the doctors want addressed by the legislation:
(1) Medicare runs patient records through a computer to see whether the number of treatments by any doctor exceeds a "normal" range. Doctors want the threat of penalties removed if evidence suggests patients are being asked to come in too frequently and are receiving unnecessary treatments.
(2) Medicare has upped the paper work on physicians by requiring that if one doctor covers for another, the covering doctor must submit the billing. Doctors used to be able to informally trade favors among colleagues without encountering such bureaucratic hassles.
(3) There are too many guidelines. Physicians feel their professional judgment and competence is always open to second guessing by bureaucrats not on the scene.
(4) Doctors can't freely shift patients from one hospital to another.
(5) They dislike limits on what hospitals are paid per patient.
(6) They want to be able to charge medicare patients more than 15 percent above government guidelines, if patients are willing to pay.
(7) They resent the recent cutting back on fees for cataracts and certain other surgeries.
(8) They dislike restrictions on in-house laboratories and doctor-run outside laboratories.
(9) They are dissatisfied with peer reviews to oversee competency.
(10)They would like to block establishment of a data bank harboring doctor's offenses, mal practice suits and loss of license and other nasty stuff.
Q-InterStudy is a Minneapolis health policy think tank that is trying to set up a national data bank which would track millions of patients treated by thousands of doctors. Do you think that's the data bank those medical groups would like to block?
A-I don't know about that, but I do know that Dr. Paul Ellwood of Interstudy calls his tracking system "outcomes management", a new approach to cost cutting.
The idea is to study the effectiveness of various medical procedures used to treat everything from heart disease to back pain and to eliminate procedures that don't seem to help. Early data suggest that as much as 25 percent of the nation's health care bill goes for procedures that do no good and that perhaps some procedures are not being used that would do some good.
Research would allow doctors to constantly adjust their procedures in response to feedback on what works best, just as other businesses adjust their buying according to a survey of what is selling and what is not. Food companies know the impact of a redesigned mayonnaise bottle on sales but doctors have only patchy information about the pay offs from their work.
The effectiveness of half of what the medical profession does is unverified. There's no problem something as straight forward as setting a bone or treating pneumonia but the murky area is chronic ailments where there is a real need for data. If the pros and cons of alternative treatments were better known, patients would be better consumers.
Q-I thought the HMOs, Health Management Organizations like Kaiser Permanente, did that already.
A-They try to know what works, but many have been lax in managing the content of medical care. I've heard it said that the first revolution in medical care was the spread of health insurance, the second was the revolt of those who pay for that care and the third will be in assessing care.
In one instance, a panel of doctors was asked to estimate the effect of a particular test and the answers ranged all the way from a five percent reduction in deaths to ninety-five percent.
To know what works requires a follow up on how patients are doing at least a year after the procedure. Some researchers have found that some so-called preventive surgery actually decreases life expectancy. A patient-consumer would like to know things like that, and so would physicians. Thanks to the prevalence of computers it is now possible to bring the health care industry under a market system.
Q-I thought the insurance companies were already pretty well computerized.
A-Probably so. I know Aetna Life Insurance Company saved over $2 million a month after installing GMIS Clinical Information Services which developed a database of health procedures and costs that allows it to evaluate claims quickly and eliminate expensive manual review. Another small entrepreneurial firm provides an electronic network that links doctors to insurers and eliminates paper claim forms. The health-care industry needs efficient access to information and those that get it will be able to cut costs and will have a leg up on their competitors.
Q-Could a computer generate information so that consumers could compare health-care costs and choose doctors and hospitals accordingly?
A-Eventually. But first we have to change the system so that health-care costs matter to consumers. Now, as a rule, consumers don't care what anything costs because someone else pays anyway.
Q-Well, the payers-- government and employers-- care in a big way right now! Have they been able to get cost and effectiveness comparisons?
A-They've tried. For example, the 35 hospitals in the Pittsburgh, Pennsylvania area were scrutinized by the state's legislature and it was found that in 1988 ten of seventy-three patients admitted for heart failure died at one hospital whereas only four of ninety-one died at another hospital. The first hospital charged each of the seventy-three $11,015 whereas the luckier ninety-one were charged only $5,845 which made them doubly lucky. Of course the hospitals claim age and severity of conditions weren't considered in the study so it is not clear just what can be drawn from the study other than there are definite differences between hospitals and more information should be made available to the public.
Q-Why doesn't the government make hospitals provide that kind of information to the public?
A-Don't talk to me about make---but aside from philosophical problems, it's just not as simple as that. Prior to the 1980s, most hospitals received their revenue based on costs, not on the prices they charged. Many hospitals do not even know close enough to estimate for a patient-consumer what the actual price is likely to be for an illness or procedure. Room rates differ from one hospital to another by a factor of two to one, but hospital bills can differ as much as ten to one for the same procedures. Faced with medicare limits, some hospitals simply jack up their bills to other patients rather than work on efficiencies.
In 1990 a study was done of the Chicago area, with its fifty hospitals, and 600,000 prices were compared. Besides finding that hospitals used different accounting systems, the definition of service differed from hospital to hospital as well. A Wall Street Journal article printed the following range of charges reported in 1988: $13 to $127 for a mammogram, $59 to $635 for a CT scan, $125 to $3,365 for a tonsillectomy and $125 to $4,279 for cataract removal.
Q-Can't any hospital quote definite prices for medical procedures?
A-The Cleveland Clinic Foundation is one of the few institutions with sufficient competence in cost accounting to be able to quote fixed prices for twenty-two different procedures.
Q-But didn't you say computers will eventually bring the health-care industry under a market system?
A-It will take more than easy access to computers. The market system has not been allowed to work because, as I'll continue to point out until something is done about it, bills have, for the most part, been paid by third parties rather than the actual consumer with his own funds. Consumers have had no reason to restrict their consumption of health services, and in many cases have not had the ability to shop for quality.
Q-Just when did health-care costs begin to get out of hand?
A-Health care bills began to soar when the federal government became the big third-party payer in the sixties and the disciplines of a normal market were discarded. Many states required that all health policies cover a vast array of services without realizing that such mandates amount to regulation of the supply side. For instance, Florida and Nevada require insurers to cover acupuncture, Arkansas and Connecticut want naturopaths (specialists in prescribing herbs) covered, Massachusetts says insurers must cover artificial insemination and embryo transfer and Minnesota insists that wigs and hair transplants be covered. There are at least 800 state mandated benefits which drive up costs. Supply is better regulated by letting individuals choose and pay for the coverage they want and not what government demands.
Q-It seems like so many of the decisions that effect our lives are now in the hands of government.
A-You're right. If government fails to obtain adequate information it harms everyone. Departments and agencies are disbursing billions of dollars, in many cases based on obsolete statistics and poor guesstimates, because good current accurate information is not easily available. The collapse of the information structure could well do more damage than the more widely known neglect of physical facilities.
Q-I can't believe the government, with all its agencies, doesn't have adequate information gathering capabilities.
A-There are loads of agencies that gather information, but that information is too often conflicting and inaccurate. It needs to be coordinated and objective. In the fifties the Advisory Commission on Intergovernmental Relations was created to monitor the working of the federal system. It had 37 staff members as late as 1978 but in 1991 was down to 19. Conflicts that were built into the constitutional system of overlapping and competing governments have increased as more federal grants have been funnelled through the states. The state ACIRs were created to foster cooperation and perform a variety of roles, the main one being to act as a clearing house for the exchange of information, statistics and data necessary and depended upon for the shaping of public policy. Unfortunately the ACIR in California became a victim of budget cuts.
Q-I want to get your opinion on something. I heard that competition doesn't work in the health-care industry. Apparently it was shown that when two hospitals competed for patients, prices rose faster and higher than in places with only one hospital.
A-First of all, that's not always true. Let me see if I can explain it.
After enactment of legislation in California in 1982--legislation which encouraged the state tax-supported program for the poor (medicaid), as well as private insurers and employers to negotiate lower medical costs with individual hospitals-- it was found that hospital charges continued to rise in areas where there weren't many hospitals but fell in urban areas where several hospitals competed for patients.
A study involving 5,490 hospitals in 48 states found that between 1982 and 1986, while the charges at California hospitals increased, they did so at a lower pace than in the rest of the nation, with the exception of New York, Maryland and Massachusetts which have regulated fees for everyone who pays hospital bills. This suggests that competition and stringent regulation are both effective means of controlling hospital costs.
What you heard was the result of competition based on service without regard to cost. Who wouldn't choose the newest most expensive equipment, nicest rooms, most nurses, best menu if price didn't matter?
Q-You mean where price is no consideration, two hospitals would outdo themselves in trying to attract patients by offering more and better services and equipment instead of improving efficiency.
A-Doctors have been known to do the same thing. They have proven themselves the equal of politicians at practicing sleight of hand. They found ways to get around the initial cost controls of the early 1980s. They raised outpatient fees when they were required to do more surgeries at outpatient clinics and their wages rose 39 percent compared to the 18 percent average wages rose between 1985 and 1989. Don't worry about the doctors.
Q-Speaking of doctors I heard somewhere they were being forced into silence on some issues by the government. Wouldn't that be a violation of their first amendment rights?
A-I imagine you're talking about the Family Planning Services Act which Congress passed in 1970 and which now provides $140 million a year in grants to 4,000 clinics serving 4.3 million women. Under the Act, abortion is not considered a method of family planning. This means no counsel, referral or mention of abortion can be made by professionals working in any clinic that takes government money. A participating physician may not lobby for abortion, pay dues to Planned Parenthood of America or disseminate in any way material that advocates abortion. These rules have been challenged as abridging the free speech guarantees of participating physicians.
Q-Well don't they?
A- The issue is not whether every doctor has a right to advocate abortion, of course he or she does, but the issue is whether there is a right to advocate abortion on the taxpayers' time with the taxpayers' money. A physician's speech is no more abridged than is the ability of a Christian to worship if all either has to do to exercise his rights is move off property funded by taxpayers.
Q-Ok, I have another situation for you to comment on. It seems the Mayo Medical School in Minnesota as well as Johns Hopkins in Maryland are working towards providing scholarships and grants to cover every one of their students in the future. The idea is to remove the incentive for making money to pay off debt. Young debt-free doctors would then be able to give free rein to their natural altruistic tendencies.
A-Altruism is natural to youth and it is practical to follow that bent before one takes on the expenses of a family and home mortgage. The Peace Corps. provides opportunities and so does the National Health Service Corps, a federally funded program to entice young doctors to serve in poor rural areas.
In the summer of 1990 legislation was passed that would expand the funds for scholarship and loan repayment forgiveness ($65 million in 1991) of the National Health Service Corps. I'm not sure where the increased funding is coming from, but it shows the program is active and policymakers are thinking along the lines of the medical school administrators, or vice versa.
What do I think? I think government funded programs are not needed. Opportunities and funding for altruistic instincts are plentiful in the private sector.
Q-Have you heard of something called the "Relative Value System"?
A-Have I?! It's a variation on "comparable worth". In December 1989 Congress approved a massive overhaul of the $47 billion medicare physician reimbursement plan. The intent was to bring the incomes of higher paid specialities in line with lower paid doctors.
To accomplish their purpose, bureaucrats will "rationalize" over 7,000 services, assigning more weight to office visits and the like and less to more complicated medical procedures, just as one might arbitrarily assign more weight to sweeping and emptying the trash and less to teaching in order to bring the salaries of janitors and teachers into line. Instead of using a market system and letting consumers decide worth, planners do it for us under a Relative Value System.
This new bureaucracy doesn't even purport to save money, it only redistributes it differently among doctors. The reason you heard no debate on this outrageous idea is that the American Medical Association approved it, not on principle, but because the members that stood to gain from the implementation outweighed the would-be losers. Although there is some truth to the allegations that certain medical specialties are "overpaid", the reason is due to past political meddling by government. Government offered incentives for one kind of service over another. Now we have this new misguided and dangerous attempt by government to solve the problem it first created by adding one more layer of bureaucracy.
As I will continue to say over and over, the market system has not been allowed to work because bills have, for the most part, been paid by third parties rather than the actual consumer with his own funds. Consumers have had no reason to restrict their consumption of health services, and in many cases have not had the ability to shop for quality.