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American Health Care: What it will take to fix the system


Costs keep climbing, and the clock is running on managed care. It&s up to doctors, patients, and employers to take the lead in setting things right, says our panel of medical, ethical, and business experts.


American Health Care

What it will take to fix the system

Jump to:
Choose article section... What's working right What's gone sour Getting a grip on costs Increasing patient responsibility Altering the doctor's role Rationing care

Costs keep climbing, and the clock is running on managed care. It's up to doctors, patients, and employers to take the lead in setting things right, says our panel of medical, ethical, and business experts.

"Is everybody happy?" That was the signature question of showbiz legend Ted Lewis. If he were to ask it today about America's health care system, he'd get a thunderous No!—and maybe a barrage of rotten vegetables, as well.

Poor old Ted. He'd be touching one of the nation's exposed nerves. Never mind that in many or most ways, the US health system is the world's best. The folks who use it, run it, fund it, and work in it just can't stop complaining.

Costs soar, patients are denied coverage for crucial services, and doctors don't get paid what they insist they deserve. Managed care is condemned by the people it covers, the lawmakers who set rules for it, and the professionals it employs and contracts with. The last serious attempt at a sweeping federal remedy—the Clinton health plan—tanked, to the cheers of its legion of critics.

But if folks can't stop complaining about the system, nobody seems able to do anything about it, either. That's why two magazines, whose readers have big stakes in the hunt for a solution, collaborated to explore the country's health-system funk and the proposed cures.

One of the publications was, obviously, Medical Economics. The other was Across the Board, a journal corporate executives turn to for insights on employee relations and management theory and techniques. It's published by The Conference Board, an organization dedicated to furthering the nation's business and industry.

This spring, our two magazines brought together five experts with varied perspectives on health care. They exchanged views on why the system is so troubled and what's needed to make it more efficient and less frustrating for patients, providers, and payers alike. Our report on that exchange begins here and concludes next month.

What's working right

Moderator: Can we all agree, for starters, that no one's happy with today's health care system? If that's true, it seems wisest to start rebuilding it by saving the parts that do work. So, what's worth keeping?

George D. Lundberg, MD: I disagree with the conclusion that nobody's happy. Many Medicare beneficiaries are quite happy. They'd like to have a prescription-drug benefit, but mostly they get to pick the doctor they want, and they get seen on time. Most of them have supplemental insurance to cover the amount Medicare won't pay. There's a bit of bureaucratic hassle, but not a great deal.

Yes, it's smart to rebuild around the best of what we have. That's Medicare—by outcomes, by cost, by happiness of the people.

Moderator: What else is right about today's system?

Lundberg: Fee-for-service medicine, where doctor and patient share authority and responsibility, agreeing up front who's going to do what, why, and how much it's going to cost. And evidence-based medicine—we don't want to throw that out. It gives people the opportunity to decide, when they're given the right advice, what's best for themselves.

Karl Singer, MD: As a small-town family doc, I think the most striking thing today is the lengthening of good-quality life. Now people aren't old at 60, but probably at 80. We have effective treatments for many of the chronic diseases that people used to die of early on.

I've also been struck by the increasing involvement of individuals in their own health care. There's much more of a dialogue now. The patient comes in with a printout from the Internet, and we have a discussion in which I can use my expertise to help him sort through all kinds of things.

Moderator: From the business community's perspective, what's good about the current system?

Alan E. Sefcik: In the last statistics I saw, about two-thirds of Americans had employer-based health coverage. That's a positive. So is the fact that employees—again, about two-thirds of them—rate health coverage as their No. 1 benefit, with pension and savings plans a distant second at 18 percent.

David D. Guilmette: We survey Fortune 1000 companies pretty regularly, and work with others that survey their own employees. Generally speaking, employees are satisfied with the health care programs they're offered. They're satisfied, as well, with the level of benefits provided. By and large, employees are paying less than 20 percent of their health care expenses out of pocket.

What's gone sour

Moderator: So why do we hear constantly that the system is a disaster? What's behind all the frustration and anger?

Singer:Almost everybody's dissatisfied with the way in which we allocate the dollars, primarily through the insurance system. We've developed a crushing bureaucracy, one that has wasted an enormous amount of my practice resources. Almost everybody changes insurance carriers every year; because of managed care, that means they change doctors, too. That's very bad for care. As you get older, you really want to be attached to the doctor who knows your past.

Daniel Callahan, PhD: Everyone's concerned about the upward pressure on costs, and by now it's generally agreed that what pushes up costs are an aging population, new technologies, and popular demand to use that technology. Unfortunately, very few inexpensive things come along.

We're going to do better and better with care of the elderly, but we're not going to find an inexpensive way to do it. Quite apart from the technology, there's the problem of finding caretakers for the chronically ill.

Singer:That relates to another killer issue that I see coming: How are we going to take care of people if we don't have nurses? We can't find nursing staff; they don't exist, and we're not training more. Increasingly, I see physicians' offices, hospitals, and nursing homes being unable to function.

Moderator: What about managed care? Much of the criticism is focused there—in particular, the cost cutting that goes on. Have MCOs denied needed care in order to increase their profits? Will that continue?

Lundberg: For-profit managed care is dead. The only thing now is to decide where to bury the corpse so that it doesn't smell up things too much. Look at the Harris Polls—demographically solid data, collected over years—that asked if various industries and types of companies generally do a good or bad job of serving their customers. In 1997, 51 percent said managed care companies did a good job. By 2000, that was down to 29 percent, exactly one tick above the industry with the worst rating—tobacco companies.

Guilmette: I don't know that managed care is dead. I'm not sure what it will look like in the future, but there will be some form of it.

Dr. Lundberg also said earlier that fee-for-service medicine is one of the good things about American health care. Maybe, but the scenario he painted—of patients discussing and agreeing with the doctor about the kind of care they're going to get and what it's going to cost—is one that folks with employer-provided coverage generally don't experience.

In fact, we've actually seen a high level of satisfaction with the care people receive in managed care settings, quite consistent with what they receive in fee-for-service. And yet the onus has been placed on the managed care system to demonstrate increased satisfaction, whereas in a system where the patient gets to go where he wants and do what he wants, there's no expectation that his satisfaction level should increase.

Moderator: But aren't most patients unhappy about the steps they have to go through under managed care to get services?

Sefcik: You get a lot of anecdotal evidence that people don't like having to go through their primary care physician to get referred to a specialist. But again, that requirement at least does the job of managing and controlling the cost.

Getting a grip on costs

Moderator: Well, does managed care really accomplish that? The latest figures show that health costs are still climbing. Can we come up with anything that will apply the brakes?

Callahan: I'd ask, instead, can we learn to live within fixed budgets in the health care system? Every other sector does it. Certainly managed care is an attempt to live within one—and as it turns out, nobody likes having to do that. It's going to force decisions; it's going to force rationing. People are bound to be unhappy.

Lundberg: A big problem is that in the private sector, no company has really played hardball when it comes to controlling health costs. Hardball would have driven down health care prices and the GDP percentage they eat up. I've been expecting that for years, but none of the benefits managers and none of the companies have done it. I think that was due in part to the bull market and in part to the almost full employment in this country. Companies have had to compete for the best employees, and they competed for them with benefits.

Guilmette: At the beginning of the '90s, big business was prepared to play hardball on health costs. But, to continue the metaphor, they were given a couple of easy pitches to hit. There was a tremendous amount of inefficiency in the old fee-for-service world. So third parties came in to help employers by setting up budgets and doing some rationing.

It was a pretty successful run. We were able to check the runaway per-unit costs of the late '80s and early '90s, and they're still in check. But we'll feel the effect of per-unit increases over the next three to five years as Medicare continues to shift costs to the private sector and providers start to say No to the deals they're being offered by private payers. We've seen evidence recently of quasi-organized medical systems in New Jersey, big hospitals that are willing to step away from bargaining with the Aetna US Healthcares of the world and strike better deals.

Singer: We're also coming to a point where instead of 43 million people who are uninsured, we're going to have 60 to 70 million without health insurance. We're going to have to play hardball because not only do we have a slowed economy, we have new immunological and genetic treatments coming on line. Instead of $1,000 to $2,000, they'll cost $20,000 to $50,000 a pop.

Increasing patient responsibility

Moderator: There's growing support in the business community for defined-contribution health-benefit plans. The employer says: "Here's a fixed sum of money for this year. You decide how to spend it. But any costs beyond this amount will be your personal responsibility." Employers emphasize that defined-contribution plans "empower" the patient. But are such plans really good for patients?

Callahan: I see the attraction in the defined-contribution idea. But in terms of patient satisfaction, it's a dead end. Patients are more educated these days, but they don't start looking for help until they're actually sick. By then, it's usually too late to shop for care; it's time to actually spend the money.

Moderator: Do most patients really want to shop around for doctors?

Callahan: Most don't. It's time-consuming, it's hard to get the information you need, and besides, you may not live in an area where you have a lot of choice. Even within the present system, you as a patient have to spend an awful lot of time trying to get what you want.

Singer: What I don't see in these defined-contribution proposals is a system like the Federal Employees Health Benefits Program, where the government gives the employee a certain amount of money and the employee has a range of choices for coverage—low-deductible, high-deductible, etc. But no patient would want anything to do with the defined-contribution systems I've heard described. Your employer would give you X amount of money; then if your expense runs X times three, there's no way to pay it.

Moderator: But defined-contribution systems appeal more and more to corporate management, right?

Guilmette: What's attractive is that management can say, "Gee, neither the federal government nor the private sector has done a good job of managing the health care budget. Let's try giving it to the consumers in the form of a stipend and a lot of information they need to make informed decisions. Then the shift in buying patterns will really rationalize health care in this country." I believe there's a lot to be said for that model, but it's going to have to play itself out over a long, long time.

Defined-contribution retirement plans make for a good comparison. In the bull market, a defined-contribution plan was what you wanted for investing your retirement money. And major corporations were glad just to give you an amount of money and let you make your own investment decisions. In a bear market, though, some of the luster wears off these plans. People will ask, "What if I make the wrong decisions? Who's going to step in and help me?"

Sefcik: You're absolutely right. Maybe a generation from now—if we have a prolonged recession and people are outliving their life expectancy—"defined contribution" is going to be a bad word, like "managed care" is today.

Moderator: Whatever the funding mechanism, won't patients still want to have the final say on where they go for care?

Lundberg: Yes. We've left the era of paternalism in medical care in this country. We're into patient autonomy; in the long run, that's the best way to bring double-digit cost increases under control. Make the patient decide—with what I call "economic informed consent"—how the money should be spent. And the doctor should be educated in what it costs to do something, so that cost can be disclosed to the patient in a nonemergency situation. In my view, that money should be out of pocket for outpatient expenses, up to a high, means-based deductible per year.

For scientifically valid, proven preventive care, such as immunizations, I think it's in the best interests of the country to pay. Also, no one should go bankrupt because of health care. If you go to the hospital, you should pay up to a deductible, then insurance—employer-paid, self-paid, government-paid, I don't care, as long as it's means-based—should pay the rest.

Finally, everyone should be required, by law, to have health insurance in order to get care, just as every individual has to have a license in order to drive a car.

Altering the doctor's role

Moderator: How does the doctor's role change as patients take more responsibility for their own care?

Singer: My role has been radically changed. Now I educate patients about their options and help them decide what to do. And I love that kind of conversation. I had one last week with a woman who'd fallen and broken her hip. We did a bone scan; she's osteoporotic, and she asked, "What should I take? I don't have prescription-drug coverage." I told her to check with her pharmacist on the cost of hormone replacement therapy compared with another class of drugs. She made her choice on the basis of cost.

We've got to get back to a system that connects people with the cost of their care. Managed care disconnected them by giving them first-dollar coverage. The real question is, who's going to cover the cost over the $2,500 or $3,000 or whatever that people would be given to buy their own care? It certainly doesn't look like the federal government wants to under George W. Bush.

Moderator: Should it be up to doctors to talk patients out of spending money for high-cost services?

Lundberg: Right, because a lot of that stuff is not evidence-based, not scientifically sound. The greatest example going is prostate cancer. The PSA has yet to be shown to save one life. The same is true for radical prostatectomy and radical radiation therapy for prostate cancer. Yet giant amounts of money are being spent on them. And the marketers are getting folks like Dole and Schwarzkopf to say, "They saved my life. Have this test." It's a technology system run amok by marketing gurus.

Moderator: Who says No to that?

Lundberg: The doctor ought to say it. Polling data show that primary care physicians remain trusted at a very high level, and they can be a very positive help in assuring patients that they don't need their prostate whacked out. But the medical profession hasn't accepted that responsibility in a way that isn't driven by its own pocketbook and habit patterns.

Rationing care

Moderator: Some suggest cutting health costs on a national scale, using the Oregon plan as a model. Is rationing a prospect for the immediate future?

Lundberg: We've always had rationing of health care; we do it with a lot of different methods, some sensible and some not. To ration rationally, you start with evidence-based medicine and do the things that the evidence indicates work. Then you take the things that don't really need much care, and you don't give care for them. Then you balance off everything in between.

The Oregon plan did that—an innovative, grassroots effort to take resources that were inadequate and spend them in a rational way. I consider it immoral, however, because it was applied only to Oregon's Medicaid population. Had it been applied to the state's total population, you'd be talking about something ethically as well as clinically sound.

Callahan: Right now we have no very clear sense of what's relatively important and unimportant in our health care system. If you don't have rationing, everything is treated as more or less of equal value. Oregon basically said, "We've got to live with a limited budget for Medicaid, and the only way to do that sensibly is to have a priority system." It made a hell of a lot of sense there, and it would make sense for this whole country.

Sefcik: That presumes we could get the population to accept health care rationing. I don't know if we'd ever be able to get there. The term just connotes something negative.

Moderator: How could we make rationing equitable? Who'd win, and who'd lose? And how could we make sure the fewest people would be losers?

Lundberg: You can't do it equitably, so forget about it. What you need is a basic level of health care available to everybody. Then you can have "business class," with extra stuff for people who are lucky enough to work for AT&T when its stock is selling high. And "boutiques" so Ross Perot can have an MRI every day if he feels like it.

Guilmette: The practical part of me says we won't see rationing in this country in my lifetime. We have aspects of it in place today. Employer-based health plans have things they will and won't cover. We have differences in coverage for the uninsured, the Medicaid population, and those who have the means to get whatever they want. That in itself is a form of rationing.

Do we need rationing? Yeah. Will we get it? Absolutely—but not in the form of the Oregon plan. That's too explicit.

Singer: And too rational.

In next month's installment, our panelists discuss goals for a more efficient health care system, and ways that doctors, patients, and employers can work together to reach those goals.

The panelists

Karl Singer, MD, president of Exeter (NH) Family Medicine Associates, is the medical director of Patient Care, our sister clinical publication, and has served on its board of editors since 1985. He's a board-certified FP and internist and has lectured at Harvard Medical School.

George D. Lundberg, MD, is editor-in-chief and executive vice president of Medscape, an online health information service based in New York City. Former editor of JAMA, he's widely known as a health policy expert. His book, Severed Trust: Why American Medicine Hasn't Been Fixed, was published this year by Basic Books.

Daniel Callahan, PhD, is co-founder of The Hastings Center, a research and educational think tank in Garrison, NY, devoted to ethical issues in medicine, biology, and the environment. He's director of international programs there and a senior fellow at Harvard Medical School. He has written or edited 37 books, and is currently developing one on biomedical research.

David D. Guilmette is market manager for the consulting firm of Towers Perrin in Parsippany, NJ, and practice leader for the firm's East Region Health & Welfare business. In his 18 years as a consultant on health care strategies and employee benefit programs, his clients have included several Fortune 500 companies.

Alan E. Sefcik is human resources vice president for benefits planning and analysis at AT&T headquarters in Basking Ridge, NJ. With more than a decade of experience as an actuarial consultant, he played a key role in developing benefit plans for the 50,000 employees in the company's new Broadband unit.

Co-moderators for the discussion were:

Jeff Forster, until this spring the editor of Medical Economics, and now vice president, editorial strategy and development, for our parent company's Primary Care Group.

A.J. Vogl, editor of Across the Board and a former editor of Medical Economics.


American Health Care: What it will take to fix the system. Medical Economics 2001;12:32.

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