The rising cost of health care in the US has become a national emergency.
The fact that 47+ million of this county’s citizens are without insurance and a large number of others are underinsured leaving them bankrupt in the event of a medical catastrophe makes the need for a national health care plan imperative and immediate.
Over the last 45 years the delivery of health care has been hijacked by the Hospital, Insurance and Pharmaceutical industry. Also, the way care is delivered has been a hugely profitable business venture that also has greatly benefited providers (i.e. hospitals, clinics, nursing homes and pharmacies).
I leave physicians out only to the extent that they are held captive to fees set by the parties that control reimbursement of services. But over ensuing years their fees rose largely because of the need to offset malpractice coverage whose exorbitant premiums forced many to give up their practices.
Historically, before the inception of Medicare in 1965, physicians saw patients on as cash or barter basis or accepted reimbursement from those patient’s fortunate enough to have some sort of health insurance (a small number of individuals had coverage through employers).The indigent were either given free care or were seen at city/county funded facilities.
When Medicare was proposed, it was to pay the physician roughly 85% of their usual and customary fee. There were a good number of physicians who did not treat indigent patients so there was no reason for them to sign on to the program Others did not enroll because of personal reasons. But many of those (mainly black) were treating these patient gratis and readily accepted this reimbursement since 85% was better than nothing. It is important to note that the NMA largely supported LBJ’s effort to establish Medicare in contradistinction to the AMA. Within a few short years, the 85% dropped to 60% and eventually much lower. Also, physicians could not set a fee (a violation of the Sherman Act). Fees were arbitrarily set by a formula that did not fairly adjust for the cost of providing the service.
Mind you, fees for services of plumbers, electricians, attorneys, etc., were set by the providers while doctors had no choice but to accept or deny the totally inadequate and fixed Medicare fee. If a surgeon accepted an assignment from Medicare for a hysterectomy billed $700 dollars, he might get $350 dollars. And if there were complications, he might appeal but would likely not be compensated for his services. Tradesmen would not accept a job without guarantee of their full fee.
This reduction in reimbursement led to a great deal of fraud where by providers used laboratory service as a means of billing for unperformed or unnecessary tests or procedures. This greatly increased the cost of providing medical care and led to a disgruntled medical community.
Most of the physicians who chose medicine as a profession did so to provide patient care and had been willing to do so at low or no fees to those who could not pay. I have personally seen many changes in medical education and medical care in the last 50 years. Technology has been a huge factor in the advancement of diagnosis and treatment of disease and has been an equally huge factor in the enormous costs that now threaten the provision of health care to all. I would like to outline what I see as the major problem confronting the health care system and suggest some possible solutions.
The Problem
It is important to understand that man is on this earth for a finite period of time and is likely to be exposed to a myriad of conditions (disease or injury) that could lead to illness or premature death. What was first considered an art, then later a science, and is now called the practice of Medicine, was established centuries ago to cure or relieve man from these conditions. Man’s life span has exponentially lengthened in relation to his knowledge of disease and his ability to treat it. That eventually led to a health industry that is hugely profitable in making longevity possible without cures, especially without cures (“the ideal drug neither kills nor cures”). And that is where the problem lies. Health care will always be a costly dilemma as long as man seeks too avoid the fact that death is inevitable and uses technology to delay it and that is not likely.
The Solution
The solution to this dilemma is complex and is addressed in the topics listed below
1. Medical Education (Physicians)
2. Hospital, Technology and Facilities
3. Pharmaceuticals
4. Insurance
5. Health Plans
Medical Education (Physicians)
Historically, medical education was basically a mentor/student type of learning which gradually evolved into a mishmash of non-regulated medical schools that had no standard curriculum. In 1910, a report (The Flexner Report) was presented that was instrumental in setting a standard for medical school certification which led to (what some believed to be) a better form of medical education. The study included things like facilities, methods of instruction and hands-on training. This study was instrumental in closing a large number of medical schools. Even today there is an organization that accredits medical schools based on strict standards. There was, and still is debate over the value of some of the concepts of teaching such as preceptor- ship, which some feel is invaluable because there is still a certain art to the practice of medicine.
Until recently, teaching hospitals that were staffed by private physicians required that these physicians supervise interns and residents who were enrolled in their graduate medical education program in exchange for the 24/7 care they provided their private patients. It was a quid pro quo, the private physician provided the patients in exchange for the resident gaining experience in care of them under supervision for a modest salary. Years ago the pay was a meager 15-30 dollars a month plus housing, uniforms and food, in exchange for the supervised learning. Later, municipal hospitals had programs that hired full time physicians to supervise interns and residents to care for the indigent at these same low wages. It was not uncommon for a house physician to work 100+ hours a week. This was the norm in training a doctor. It was not considered seriously detrimental to the resident’s welfare or patient care to work these hours since it had long been the traditional practice. Programs, at such prestigious institutions at medical schools as Johns Hopkins or Harvard, or municipal hospitals like Massachusetts General or Homer G. Phillips, were vied for as excellent residency training grounds. Many an antidotal tale of the harsh work experiences endured are retold by those of us who were part of that era.
In the 1960’s some private hospitals established teaching programs that paid residents considerably more to provide clinical care ($35,000+ per year).They then used volunteer attending staff to provide supervision. Clinics were established to care for the indigent and billing was done in the name of the attending physician that supervised care. If the patient had insurance, the payment was billed in the name of the attending physician who signed off on the charges and the payment directed to that physician. In many cases these funds were than returned to the hospital to support the residency program.
This system worked basically because there was a tacit understanding that the house staff provided care to the patient and the attending physician provided supervision to further the resident’s education.
Sometime after Medicare was enacted in 1965, institutions that provided medical care to their patients were reimbursed by a monetary formula based on the number of approved residents in their graduated medical education department. In the 1980’s this amounted to approximately $35,000 per resident with a sliding scale raise for each year up to 5 years. So a program with 120 residents would be paid $35,000 x 120, or 4.2 million dollars yearly. The institution, as I understand it, was under no obligation to use these funds in any specific way (i.e. medical education). They would go into their general fund. Every four years, each accredited residency was evaluated and recertified by the American Council on Graduate Medical Education (ACGME). (I am aware that there was complicated and confidential handling of this income the specifics of which I have no knowledge.) In early 1990, residency programs that did not have full time employed physicians to supervise their residents were being denied reimbursement for medical service that Medicare was being billed for.
This ultimately led to a rule which has increased the cost of care and of resident education enormously. Basically every procedure or service that a resident performed had to be done with a physician who was fully credentialed by the hospital to staff resident cases so that reimbursement could be made. No resident’s service in any clinic, emergency room, or operating room could be billed for unless there was a private physician present at the point of service. This directive on Medicare reimbursement changed the whole paradigm of how graduate medical education would be delivered.
Hospitals have now had to hire FTE physicians to replace the volunteer physician to not only do what residents did 24/7 in the past, at an enormous cost, they could no longer use residents to work more than 80 hours per week ( which is good). The problem is now a no win situation for medical education. Can the system now in place be justified when to educate doctors it pays those who teach them based only to comply with reimbursement requirements?
This system of requiring the provider of the service being present started with Medicare and is now part of every insurance provider’s documentation of presence for payment. This one requirement has made the cost of graduate medical education almost unaffordable if not modified in some way.
In the past, medical knowledge/skill was passed down from Attending physician, to Chief Resident, to Resident, to Intern . The term resident meant just that….the physician was in residence (in the hospital); the draconian always “on call” From a practical teaching basis the supervision that is required to be reimbursed does nothing to improve or provide better skills or decision making. All it does is make sure that the institution gets paid.
A simple example of learning a skill is no matter how long or how close you sit to the student (your child) in a car they cannot really drive until you let them do it alone. There is a point in training that the resident must be left to make decisions without staff present, but if I have taught you how to make decisions my presence is not necessary. It makes no sense that to be paid for the service of a specific person’s presence is a requirement as proof of delivery of care.
The staggering cost of medical education is a major and continuing factor in this health care dilemma not being specifically addressed and it must be.
Hospitals, Technology, and Facilities
I reside in a Midwestern City with a city-county population of roughly 1.7 million in a state that has only one medical school for a population of
6.3 million. The 2009 medical school class admitted 335 students.
The city boasts 5 major hospital groups that strategically and geographically cover the city. Via the interstate beltway, there is no patient more than 30 minutes from any of these in an emergency. The problem is that duplication of services is costly and each of these hospitals built state-of-the-art heart centers with an investment of millions of dollars that they have to justify based on the population. So how many diagnostic tests or facility charges are generated to pay for this investment?
The Da Vinci Robotic operating apparatus is a unique and useful adjunct to performing cutting-edge surgical procedures but can the cost be of making it available in every hospital be justified? MRI units are being run 24/7 to justify and recoup the cost since an idle unit is not profitable. Technology drives up costs for the more sophisticated the equipment, the more costly to the hospital and the greater the need to use it. The cost of MRIs, CT Scans and PET Scans includes a professional fee for interpretation that can be equal to or more than the cost of performing the test. It may sound cynical, but a good diagnostician can be of more value, and can treat the patient more effectively, than a panel of studies ordered for screening.
Usually, as soon as a patient arrives in an emergency room, a battery of tests is ordered to rule out a condition often before a thorough history and physical exam are done. That is one of the reasons why ER care is so expensive. Most of the visits are for non emergency conditions. So the service is misused and over utilized. I have had patients go to an ER and have tests done before I was called to tell me that they were being seen when the diagnosis could have been given by me. It is a fact that technology has advanced medical diagnosis and treatment in the last 50 years but it has also been a major factor in the astronomical costs that we are presently encountering.
In the early 1970’s, Blue Cross and Blue Shield made a major change in how reimbursement would be made to hospitals. Payments were made on a formula of how many days a patient was allowed to be hospitalized. Each diagnosis was allowed a specific length of admission. This resulted in a reduction of in patient beds and a surge in outpatient facilities to provide
profitable surgery, lab, and x-ray fees. The whole delivery of care changed and corporations like Humana bought up hospitals and consolidated services to reduce cost, forcing those that were not profitable to compete or close.
This led to some areas being without service and required patients to travel to facilities that Humana owned (basically controlled delivery of care ).
These facilities were essentially for profit….huge profit. The original owners of Humana became multimillionaires from these mega-hospital sites strategically located across the country.
The system fed on itself and since profit was enormous there was no reason to control cost until Medicare realized that it was being charged exorbitant fees and that there was no way to equate the delivery of service with its quality. In the 1990’s an elaborate coding system was developed to standardize identifying diseases *(ICD9) and procedures *(DRG) in order to process reimbursement.
* International Statistical Classification of Diseases and Related Health Problems (most commonly known by the abbreviation ICD) provides codes to classify diseases and a wide variety of signs, symptoms, abnormal findings, complaints, social circumstances and external causes of injury or disease. Every health condition can be assigned to a unique category and given a code, up to six characters long. Such categories can include a set of similar diseases.
*The Diagnosis Related Groups (DRG) were developed for the Health Care Financing Administration as a patient classification scheme which provides a means of relating the type of patients a hospital treats (i.e., its case mix) to the costs incurred by the hospital. While all patients are unique, groups of patients have common demographic, diagnostic and therapeutic attributes that determine their resource needs. The DRGs form a manageable, clinically coherent set of patient classes that relate a hospital's case mix to the resource demands and associated costs experienced by the hospital. Each discharge in the UHDDB was assigned into a DRG based on the principal diagnosis, secondary diagnoses, surgical procedures, age, sex, and discharge status of the patient.
During this period, electronic data recovery (Information Technology) was being developed and it made possible the ability to collate to some degree the quality of service. Hospitals nationwide formed quality assurance committees to study the performance of individual physicians as well as the institutions themselves. The statistical data from these studies were then used to set up reimbursement schedules. In many cases, hospitals and physicians that were in the upper percentile of efficiency were rewarded by higher payments. One of the major ways that hospitals reduced cost and increased income was to build outpatient surgical facilities. These centers could efficiently perform the most profitable services at the lowest overhead. Some of these facilities became for-profit sub-corporations of the not-for profit major hospital and also co-ventures with private physician investor groups.
One can easily see how many procedures (eye, ortho, urology, gyn, plastics, etc.) could be done in large volume with efficient, rapid, profitable turn over.
Every hospital in any community that wanted to compete for market share
set up their strategically placed centers and marketing to the public became as solicitous as car dealers. Patients now became customers and treatment became known as services and physicians became providers. I do not condemn this concept of care delivery but do question how it led to the costly mega health delivery system we now are paying for. Multibillion dollar giants in the health industry such as HCA (Hospital Corporation of America) were the spin-off from the take over of hospitals by Humana mentioned before.
It would seem that the proliferation of facilities would have made health care more accessible to the general population but, to attract private insured patients, most of these free-standing centers were built with expensive appointments on beautiful grounds with the costliest equipment.
Naturally, all this must be calculated into the cost of providing service.
These extras can also be profitable as depreciation write-offs.
If health cost are going to be reduced and care provided universally in the United States, then the huge profit-making facilities have to expand their services to a larger patient population and suffer reduced reimbursement.
Pharmaceuticals
The history of treating diseases with some sort of medication dates back to antiquity and basically little has changed. The clans and tribes that roamed the earth gathered plants, roots, bark and minerals and by trial and error learned that they had medicinal properties. Many of the medicines in use over the past 100 years were present in those same sources and have only been refined by man’s knowledge of the chemistry from which modern day pharmacy evolved. As the science of chemistry advanced, medicines were artificially developed and an industry was born. Whenever a medicine is discovered to treat a human disease with an acceptable mortality rate, it is highly profitable. The secret of the pharmaceutical industry’s profitability as stated earlier is for a drug not to cure and not to kill. One of the most frequent justifications of the high costs of drugs is the cost of their research and development. I feel that that what is spent in media advertising
may also be an unreasonable cost.
One of the basic flaws in man’s approach to living is denying the fact that death is inevitable and any thing that can prolong life is worth the cost.
We are living in a society in which technology preserves the lives of many premature infants that would not have survived in the past. Yet, they often live with developmental conditions only long enough to be enormously costly. The argument can be made that we are #37 in infant mortality world wide but that does not factor in the quality of life of those that survive. And at the other end of the spectrum, diseases that chronically ended life are now being treated by costly interventions that prolong the inevitable.
We live in a time when medical technology offers unheard of survival just as antibiotics and blood transfusions did several generations ago
There is a moral issue that has to address the ethics of the costs of health care vs the desire to live under any and all circumstances. Addressing this may be the ultimate dilemma in healthcare.
Insurance
The health insurance industry starting in the 1950’s basically was a spin-off of life insurance. Actuaries were established based on an individual’s probability of dying or contracting a disease within a pool of others, factoring in age, sex, race, environment with a risk-based index of those more likely to live than die. The benefits were based on the number of members in a particular plan that would always insure the company made a profit. Naturally those at high risk were uninsurable or their premiums were higher based on that risk. Originally, the health insurance was a package that the auto industry offered its employees in the union contract that gradually spread to union benefit packages in other industries Health insurance companies began to emerge that used risk as a basis of benefits and marketed their policies to individuals who were enrolled as part
of a specific risk profile.
One of the pioneers in the industry was Blue Cross/Blue Shield which was at first, only in selected states, and later, nationwide.
Because physicians originally were on a cash basis they could charge any fee that they wanted and reject anyone who did not want to accept that fee. Once patients had insurance, physicians had the option to accept what the insurance would pay for the service, or to refuse service to the patient. This was called “accepting assignment”. This gradually resulted in physician’s fees being set by the insurer. Once this occurred the insurer was able to make the industry highly profitable. The whole paradigm shifted to include hospitals, with the insurer controlling the reimbursement of services. Since physicians had to utilize hospitals in caring for their patients, they were forced to admit their patients to institutions that accepted their patient’s insurance. What evolved was a monopoly that dictated payment for care, and since it was illegal for physicians to organize or set fees, the physicians were no longer in control of in their patient relationship. Eventually patient services were dictated by the insurer based on contracts with hospitals that accepted their payments. Hospitals enacted staff privileges that closed their staffs. These privileges involved credentialing and the agreement to admit insured patients. It is clear that the insurance industry’s profits are directly related to what they are willing to pay to reimburse patient care. Generally, fees for services are quoted, and the individual has the option to pay or not receive the service.. With health care, it was considered unprofessional for physicians to advertise or set fees themselves, thereby violating the Sherman Act (antimonopoly).
With the major source of physician’s fees controlled by Health Insurer’s the doctor/patient relationship was fractured because a 3rd party was involved in health care delivery. In 1965, an attempt to provide healthcare to the aged and the uninsured a government funded program called Medicare was established. This program, for all intents and purposes, put the government in the insurance business. Uninsured patients began to show up in the emergency rooms of hospitals nation wide. In the 1990’s a law was enacted that forbade hospitals from denying them medical care. This placed a huge financial burden on a system that was being bankrupted. Between the marked reduction in reimbursement by private insurance payers and the inadequate Medicare payments, hospital struggled to compete and exist. This has been a major cause of the health care dilemma
A huge secondary insurance cost that must be factored into healthcare is malpractice coverage that physician must maintain. This is passed thru to the patients and fuels a demand for tort reform in the health industry.
It must be acknowledged that medical accidents occur and some are truly the result of gross negligence that definitely be adjudicated. Unfortunately the legal cost of defending these claims has not only been exorbitant because the laws they differ state by state with no standard for award at settlement. Also many of these claims are frivolous which burdens the courts and drags out for years their resolution. Ideally, Medical Review Committees, which many states have adopted can and do weed out the claims that have no merit. And in the case of catastrophic damages a panel of judges could resolve the payment not a jury. No physician can continue to practice with the threat of a malpractice suit needing to maintain insurance that cost upwards of $85k in some states and for some specialties.
Heath Care Plans
In the 1973, the Health Maintenance Organization Act was passed and plans developed to control the spiraling cost of health care.
The two most popular were HMOs (health maintenance organizations) and PPOs (preferred physician organizations)*
*A health maintenance organization (HMO) and a preferred provider organization (PPO) have several differences. However, many of them offer quite similar services. Often the PPO will cost a little more because it provides greater flexibility in choosing doctors and seeing specialists than does the HMO.
With a PPO, one can see any doctor one wishes, or visit any hospital one chooses, usually within a preferred network of providers. Depending upon the terms of coverage, a doctor or hospital outside the preferred provider list will cost more and the PPO will pay a range of 70-80% of expenses. Conversely, an HMO requires one see only doctors or hospitals on their list of providers.
The basic idea for these plans arose from the Kaiser Permanente Plan which is described below:
Kaiser Permanente is an integrated managed care organization, based in Oakland, California, founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield. Kaiser Permanente is a consortium of three distinct groups of entities: the Kaiser Foundation Health Plan, Inc. and its regional operating organizations, Kaiser Foundation Hospitals, and the Permanente Medical Groups. As of 2006, Kaiser Permanente operates in nine states and Washington, D.C., and is the largest managed care organization in the United States. Kaiser Permanente has 8.7 million health plan members,[4] 156,000 employees,[2] 13,729 physicians,[3] 37 medical centers, 400 medical offices, and $34.4 billion in annual operating revenues and $1.3 billion in net income.[1] The Health Plan and Hospitals operate under state and federal not-for-profit tax status, while the Medical Groups operate as for-profit partnerships or professional corporations in their respective regions.
This plan, with some modification, could be the model for a Universal Health Plan now being crafted in the Congress. Two of the premier Medical Centers in the country ( Mayo and Cleveland Clinics ) have instituted innovative plans to deliver care to their patients that have drastically reduced cost.
Conclusion
The essay that I have written outlines the five major issues that need to be addressed to remedy the dilemma in Health Care. The major factor is not just cost but how these issues affect it.
Medical Education (Physicians)
The cost of training a physician from college through medical school is astronomical from the stand point of out of pocket and student loans (200K-250K). Post graduate stipends paid by hospitals to residents are largely subsidized by government programs that in the last 5 years require full time physicians to supervise their training when they provide patient care; such as being present the operating room when the resident is performing the surgery. From a teaching or quality of care standpoint this does not make for a better outcome. These requirements were adopted by Medicare, and later private insurers, so as not to reimburse for resident services, as the hospital cannot submit a bill with the resident as the provider. The provider must be an active member of the hospital staff. Unfortunately medical training has not been improved by this costly change in how graduate education is now supervised. Instead, it has increased the cost five-fold. In the past, a residency program had a ratio of 1 to 4-5 faculty to resident. Now, it’s 1 to 1. That means institutions are paying a proportionate number of FTEs salaries of 200K or more to do the supervision that one faculty FTE previously did.
Hospitals, Technology and Facilities
The trend towards competitive hospitals with duplication of services, especially with satellites facilities that market to a fixed population, has literally forced them to build beyond need. This in turn has led to long term debt, necessitating an increase in fees to offset this expense. The same is true with the need to install state of the art technology ( i.e. MRI, CT scanner, De Vinci robots, etc ) at every site, rather than have designated centers for specialized tests and procedures. Clearly, every hospital can’t do everything and control costs. All hospitals don’t need helicopters just as all hospitals can’t be Level 1 trauma centers. When medical care was merchandized and the patients became customers, the competition quickly escalated cost. It became a Coke vs Pepsi race for market share. There was a time that doctors and hospitals didn’t advertise, but now, it’s a huge part of their operating budget.
Pharmaceuticals
One of the largest expenses in health care is the cost of prescription and over the counter drugs. Granted the research and development of new drugs is a major expense, the profits exceed by far the initial investment. I remember in 1958, my senior medical school class visited a Pharmaceutical company. We chose Lederle, in Pearl River, NY, for a comped [?] trip. Their major product, which they had exclusive patent rights to, was their new tetracycline….Achromycin. During a tour of their manufacturing facilities we were shown how Achromycin was being packaged. A yellow powder was being poured into 55 gallon barrels labeled for animal consumption and I asked what the difference was from the one for humans. I learned that it was the identical product, though the price for humans was ten times that for the animals. Even back then, I realized that the pharmaceutical industry was making a tremendous profit on prescription drugs and extracted every bit of profit out of the proprietary product until the patent expired. Their explanation was the cost of research and development. And once patents expired, the generic equivalents reduced cost and profit significantly.
One has only to look at the compensation that the executives in the leading companies are paid and the dividends paid to stock holders for proof of the huge profits. Presently, large sums are set aside by the industry to lobby Congress to enact legislation favorable to them. The average patient is taking three or more prescription drugs that do not cure their disease but ensure constantly increasing profits for the industry.
Insurance
As previously stated medical health insurance is a spin-off of life insurance which is based on the risk of a particular event happening. With life insurance, it’s when death will occurs to an individual in a pool of those not likely to die based on a set of parameters (i.e. age. family history, job, etc).The same risk based management is used to calculate health insurance premiums and it has been a highly profitable business. What has made the profit so enormous is that the industry has carved out high risk patients and used preexisting disease to eliminate groups of patient that are outliers in their risk formulae. Congressional legislation is taking a step towards correcting this by making health care universal and mandatory and ideally single payer.
Health Plans
Health plans were created on the premise that they would structure how care was delivered. The two models were PPOs (preferred physician organizations) and HMOs (health maintenance organizations). Each has been of value. Unfortunately, costs have sky rocketed because of over utilization or a patient payee base unable to be supported by the plan.
The concept of “one stop shop” or “buy here and be serviced here” is basically a valid one. One of the faults is that the members have to be realistic in what services are available and not insist on over utilization.
It is unreasonable to believe medicine can make all people well and automatically reduce cost, because there are perinatal, chronic diseases and afflictions that are debilitating with many ending in death. These can essentially bankrupt any health care system.
And lastly, I believe the Insurance Companies, Hospital Corporations and Pharma are willing to compromise and bargain to save on health care, because they are fearful of losing control to exact their enormous profit
In this essay, I have tried to give my overview of the Health Care Dilemma
as I see it, realizing that a solution involves both medical and moral issues.
We, as humans, must accept that men are mortal and death is inevitable.
Whether it comes prematurely or at an old age, or at the end of an artificially sustained life (realizing that a person dependent permanently on artificially sustained life is already dead.) we will all die.
When society can determine and accept the difference between premature and inevitable death, it can rationally address this element of the cost of health dilemma. Further more, the current approach of crafting legislation based on how care is paid for rather than remedying the factors cited causing the dilemma.
Submitted by;
Earle Robinson, Jr. M.D.(retired)
Director of Gyn/Surgery Ed
Assoc. Director of OB/GYN Residency(1986-2002)
Methodist Hospital Indianapolis, IN
Assoc. Clinical Prof of OB/GYN
Indiana University School of Medicine
