Treatise on Health Care Reform: Part 3 of 3

My final thoughts on the health care debate are focused on one specific type of "cost." Most of the things you buy when you purchase health care items are not things at all, but are services. MRI scans, doctor visits, surgeries, and the like are things that you have done for you, not things that you take home. There are certain goods, however, that fall under the category "health care costs." These things fall under two basic categories, the first being equipment (known in the medical world as "durable medical equipment" or DME) such as wheelchairs, walkers, elbow braces, CPAP machines, etc. The second category is medication.

Because these items are "goods" rather than "services" it is easier to focus on them and compare them to similar items in other sectors; it is much easier to place intuitive value on an actual thing than on a service.

Take pills, for example. Never has a society paid so much for so little. To understand this, consider the cost of most generic medications these days, which can be purchased for $4 for a month's supply at WalMart. This price includes the wholesale cost, plus markup, plus a standard "filling fee" that goes to the pharmacy. Many people don't realize it, but the actual production cost of that same medication is probably less than $1. The manufacturer, and the pharmacy, are probably each taking a 100% or so markup, still a killing.

Now, consider the cost of your average, new, branded drug. Most of these now cost in the neighborhood of $100-120 for a month's supply. Some are less, some are much more. The actual production costs of these drugs isn't any higher, usually, than drugs that are available generically. The pharmacy typically makes the same on the sale whether the drug is generic or not. So, all that money in the margin is going straight to the manufacturer.

How can this possibly be justified? Drug reps will tell you that the answer is simple: R&D. It costs so much to bring these drugs to market that they need to charge that much to recoup. There is always the risk that, once the manufacturer has expended all those research dollars on a drug, it doesn't make it through the FDA approval process, so they need to charge that much to recoup the costs of the "duds" they test but can't bring to market because they flunk out somewhere in the testing and approval process.

Well, I see somewhat of how much money these corporations throw away on stupid, frivolous things, and so I don't fully buy that explanation. Plus, the system as it is does not encourage companies to develop drugs that I need, it encourages them to develop drugs that will make the most money. What kind of drug will make money? Let's see, a "golden goose" drug will be intended to treat (not cure) a lifelong, chronic illness. No wonder my sample closet is chock full of hypertension and diabetic drugs! No wonder we haven't had a significant new antibiotic in 15 years: those are too good at curing the conditions they treat!

As I have outlined previously, I believe strongly that allowing free market principles to take hold in health care would go a long way toward "fixing" the system. I'm not sure this axiom fully applies to pharmaceuticals; all the competition in the world isn't going to encourage companies to develop drugs that we need. These people went to college, and it doesn't take a rocket scientist to figure out which types of drugs, for which types of conditions, will sell.

So, if the government is so intent on socializing something, why not the pharmaceutical industry? It irks me that probably 90% of the biochemical research done to develop a drug is done in the academic realm, mostly funded by the NIH and other government organizations, from my tax dollars. A pharmaceutical company then takes that knowledge base, built on the backs of the taxpayers, tweaks a chemical a little bit, patents it, and laughs all the way to the bank. They, literally, get us coming and going.

Why not make it illegal to patent a chemical intended for human consumption (a drug)? Pharmaceutical companies could still battle it out to produce better drugs than each other, they just couldn't own exclusivity.

True, this would stop private-sector R&D in its tracks and remove most of their incentive to develop new drugs. That's okay, in my view, since the new drugs they're researching aren't necessarily the ones we need anyway. As a physician, I don't need one more hypertension drug, I need the ones that I already have to be affordable. I need to not spend half my day figuring out how my patients are going to afford the treatment they need.

Let a governmental organization decide where research dollars are directed, based on public health needs. Let them assume the costs associated with FDA approval, and then pass those costs on to the consumers. Drugs would start out generic! Insurance premiums would plummet.

While I am, by nature, loathe to voluntarily trust the government to run stuff if it doesn't need to, I really do wonder if this would be one area more suited to that. What private entity can decide where to best direct drug research? If there is one that can do it fairly and rationally, let them do it. I would not completely socialize pharmaceuticals; I would hope that pharmaceutical companies would still produce, market, and distribute drugs; they would simply do so in a much smaller market, in terms of dollars. Americans don't need, or want, to see drug commercials during the Super Bowl.

Keep watching for the fourth (and final) installment in this series; this will be my own "healthcare bill," the one I would put into law if I were King, guaranteed to be considerably less than 2,400 pages long.

Treatise on Health Care Reform: Part 2 of 3

I want to put forth here a philosophical discussion of healthcare funding in America. Before meaningful, long-lasting reform can be accomplished, Americans need to decide as a people whether the responsibility to pay for health care lies with the individual citizen, or should be shouldered by society as a whole.

There are definitely some things, in any society, that are simply better to be paid for collectively. For example, having each individual pay for and build the roads that he wants to travel upon simply would not work; there are obvious benefits to sharing the streets, and sharing the costs involved.

On the other hand, history has proven that when a society tries to have all things in common (as in the case of communism) dysfunction of all kinds tends to ensue. Although desirable in theory, the imagined equality under these types of systems rarely materializes in real life. A case in point is the former USSR and its communist system of government that eventually collapsed in on itself. Hitting closer to home, even covenant-bound Latter Day Saints couldn't pull this off effectively, on a relatively small scale when they attempted to live the united order.

We are a capitalist society (at least for the time being). Capitalism is, in part, governed by the principle of laissez-faire, which means, literally, "let it be," or "let it alone," (ironically enough, in French). With capitalism, it is generally accepted that, for the most part, people and markets should be free of government interference or control. Laissez-faire is by no means absolute, however; many industries are regulated by the government, to ensure quality or stability, or to prevent monopolization. Although there are some who think there should be absolutely no government regulation of commerce, etc, most reasonable people agree that some oversight is needed and helpful, particularly in certain sectors, like those that involve the basic safety, well-being, and yes, health, of the people. My dad, as a relevant example, worked for many years in a utilities sector, where the government has a certain involvement in ensuring that folks in rural areas have access to adequate, high quality telecommunications services on a more-or-less equal basis with those living in more urbanized regions.

These economic issues aside, there are other philosophical issues at stake with regards to health care funding. For example, while it is generally not considered unjust for grocery stores to deny people food because they can't pay for it, there is a sense that an injustice has occurred when a person in need of health care, particularly lifesaving health care, can't afford it and is, therefore, unable to obtain it. Of course, food is equally necessary for that person's existence, but is not necessarily considered something the person should be entitled to have when in dire need.

For a real-life but hypothetical example of this, consider a destitute person, about to starve, who walks into a grocery store and demands a meal; he likely would not get anything from the store's inventory without making payment (although a compassionate grocer might direct them to a food bank). On the other hand, the same person could walk in to any emergency room of any hospital in America at any time, and the law requires that the person be treated, regardless of ability to pay. Even I was irked the other day when I heard an uninsured patient's story about having been diagnosed with pre-cancer of the cervix, and then being told by her unapologetic gynecologist to raise enough money to pay for the surgery, and then come back. By the time she saved enough and returned, the cancer had advanced and spread, and was much more difficult and risky to treat.

Therein lies the dilemma for me. I am, in a way, of two minds. On one hand, I don't believe that providing every needed service is an appropriate undertaking for a democratic republic with a capitalistic economy. Nor, for that matter, do I trust our government enough to feel confident turning over health care to it. On the other hand, I don't quite feel right about denying health care to folks who can't afford to pay for it, particularly lifesaving care. If I had lived 150 or 200 years ago, I probably wouldn't have had a philosophical problem with it. But, in my heart of hearts, being who I am in the year 2009, I do.

This interesting shift in the collective thinking of Americans has been shaped over the years, without doubt, by the way health care has been paid for in America (see installment 1 in this series). In short, most of us have gotten used to somebody else paying the costs of our care; our employers pay for it while we work, and the government takes over when we retire. As a whole, we haven't needed to include health care costs in our personal budgets very much; once our basic needs for food, clothing, shelter, and the like have been met, we have been free to spend our surplus on things we wanted, like vacations, vehicles, cell phones, and other luxuries. We don't tend to "save up" for medical care, or include those costs in our planning. I see this every day in my practice when patients who "can't pay their bills" make me wait while they talk on their cell phones.

While there is definitely a certain percentage of Americans who simply could not afford insurance no matter what financial adjustments they made, I believe there is another group, probably a larger group, who choose not to purchase insurance. If asked, most in this group would, undoubtedly, say that they don't have it because they can't afford it. And, in their own minds, they honestly can't. A review of their budgets, however, would reveal that, with a shift in priorities, they could afford the premiums, although this would require that they sacrifice some things that they have come to view as essential "needs."

At certain points in my own life, I, by the way, have fallen into this group. I chose that approach during college, for example. At times, when my wife and I were first married, we went without insurance. We didn't try too hard to prevent pregnancy, knowing that if she became pregnant, she would qualify for Medicaid, and that the government would pick up the tab. Why did we do it this way? Well, we were all healthy, and not likely to incur major medical expenses. (All insurance is, after all, a gamble, and when one is young and healthy, the odds are a lot longer.) Plus, looking back, I think I knew in the back of my mind that if something catastrophic happened, there was an adequate safety net there. I didn't have to live in fear that I wouldn't be treated; I knew that, when push came to shove, I would be, regardless of my ability to pay. If I wanted to have health insurance, I would have needed to work more hours, and cut back on the credits I was taking in school. This would, of course, have resulted in a significant delay in my career track, probably by 2-3 years, at least.

Although I never spent much energy investigating the implications of "going bare," in the back of my mind I also knew that medical bills really couldn't ruin me financially, because I didn't own anything of value. I had a good sense that, in the end, if some unanticipated thing happened to me or my family, we would qualify for government aid because we had no significant assets that could be taken away to pay the bills. Was that the wrong approach for a responsible citizen to take? Perhaps. (Ask not what your country can do for you...) Was it a good decision, purely in terms of finances? Sure! In a health care system funded mostly by insurance dollars, is it going to work if very many people choose that approach? Not on your life!

So, at this crossroads in the history of American health care, one major decision we should be making is whether we believe, deep down, that health care funding is an individual or a public responsibility. It is a difficult question, and, unlike the issue discussed in the first article I wrote on this subject, I don't think this issue necessarily has to be answered in "either/or" fashion. Perhaps this one can have it both ways; I'll elaborate my own ideas on this further in the fourth installment.

Treatise on Health Care Reform: Part 1 of 3

I can't help it. I need to sound off on "health care reform" since the whole argument is driving me crazy. It seems like you can't watch the news, pick up a newspaper, listen to the radio, or read anything on the Internet without hearing about how we need to reform the healthcare system.

Well, I have a few thoughts on the subject, so here's one physician's current view on the debate. Actually, it is more than a few thoughts; this will probably rival the stimulus package bill in length, so I plan to present it in four parts: 1) Controlling Costs & the Concept of Employer-Funded Health Insurance, 2) Rights vs. Expenses, 3) Pharmaceuticals and Equipment. The fourth (much shorter) installment will succinctly outline what direction I think reform should take for the best good of all concerned; I plan to call this last one my "Proposal For Health Care Reform 2009." Lest you think I am suffering from 'delusions of grandeur,' let me say up front that I don't think for one minute that my opinion counts one whit in this debate. Still, it makes me feel better to put it out there, so here goes:

Controlling Costs & the Concept of Employer-Funded Health Insurance
One one hand, some politicians today think we should let the government finance the system entirely, turning it into something akin to the public school system, available to all at no direct cost. Increased governmental control will reign in costs (somehow). On the other hand, some think that the insurance industry just needs to be deregulated and allowed to sell plans across state lines. Fostering increased competition between those who pay for health care will reign in costs (somehow). And, of course there is every conceivable variety of opinion in between.

What nobody seems to want to talk about in the whole debate, is why medical services cost so much in the first place. Why is it that the cost of evaluations, treatments, supplies and equipment are so quickly outstripping society's ability to pay for them?

During my short career as a physician, I've seen a remarkable transformation occur. We have always had people who lacked health insurance entirely and were burdened with heavy bills when they got sick, but when I started practice as a resident in 2001, most people with health insurance rarely thought about the costs of health care at all. They had low deductibles, low or no copayments, and their employers usually picked up the tab for the insurance premiums, entirely. There were few, if any, restrictions on which physicians they could choose or which treatments they could have.

Now, many employers have limited how much of the premium they will pay, passing the rest on to the employee in an effort to have some control over the cost of these benefits. Yearly deductibles are increasing, and copayments for drugs, a relatively new concept, have risen from around $3 to $60 or more monthly for many meds. Additionally, insurance companies are increasingly involved in the doctor-patient relationship; the question for many patients has changed from "which treament is best?" to "which treatment is covered?" And, more recently, I have noticed an increasing number of patients with average incomes who can't begin to afford their medications, even with their insurance paying its portion.

Why? This is what nobody seems to be asking right now. While they squabble back and forth about how we can possibly pay for the "skyrocketing costs of healthcare" things, nobody wonders how the heck we got here in the first place. Perhaps part of the solution lies in identifying and correcting the underlying cause of the cost increase.

Let's review a short course in American Healthcare History, from a funding perspective. Health insurance as we know it didn't exist until around 1930; prior to that people were on their own to pay, in cash or in kind, for medical services. Those who couldn't pay simply did without, unless they could find a charitable physician or hospital, or some other generous group to pay for medical services for them. Many of these "uninsured" patients died of potentially curable conditions, simply because they couldn't afford treatment; this was not considered unusual or cruel, or in any way unfair. It was, simply, a fact of life.

Early insurance "cooperatives" were set up by large employers as a way to provide low or no-cost medical services for their employees, usually for the treatment of on-the-job injuries or illnesses. These groups evolved over the years into large conglomerates we know today as Blue Cross, CIGNA, and the like. As other, smaller players entered this market, they began to stratify patients into various risk categories, using an underwriting process like that employed in the life insurance business; patients likely to cost the company more were charged higher premiums, or were denied insurance altogether.

The next major evolution in healthcare funding was the HMO; these organizations were different in that, rather than trying to control costs simply through risk stratification, they began to focus on the supply side of the cost equation. They negotiated with hospitals, physicians, and other suppliers of healthcare using this basic bargaining phrase: "we have a ready supply of insured patients for you, if you agree to the conditions of our contract." The original HMO concept was that cost management through time-tested business principles, combined with an emphasis on prevention, could produce lower premiums for patients and higher profits for insurers. To an extent, the HMO concept works as a business model, although much of the envisioned cost savings gets swallowed up by the vast 'middle management' required to administer such plans effectively. Initially, these groups only attempted to control how much they would pay for each service recommended by physicians, not which services could be offered; the doctor-patient relationship was considered independent and sacred.

More recently, though, as costs have continued to spiral upward and profits have become more and more difficult for insurers to realize, even this boundary has been crossed and, in many cases, obliterated. Many physicians in HMO arrangements feel like simple puppets of the organization; every decision they make with respect to their patients is influenced by the mandates of the insurance organization. The historical doctor-patient relationship as we know it has, for many, ceased to exist, supplanted by the doctor-patient-payer relationship.

Another important historical element is the introduction of Medicare in 1965. Patterned after Social Security, this fund basically takes money collected from working Americans in the form of a payroll tax to pay for health care costs for retired people. This fund was a godsend not only for many elderly people, but for the medical industry in general, which, along with the rest of the world, had undergone a technological explosion that had greatly expanded what medical science could offer patients. Now, able to offer lifesaving and life-prolonging treatments previously unavailable, and with a virtually unlimited federal fund from which to draw for payment, physicians and hospitals across the country became wealthy beyond their wildest imaginations. Life expectancy for the elderly increased accordingly, and this placed an additional demand on the fund. In time, Medicare learned and began to apply HMO principles like the rest of the insurance community, and introduced strict limits on covered services in an attempt to control spiraling costs. Today, Medicare is not appreciably different from any other insurer in most respects.

Around the same time Medicare was introduced, the government instated certain tax incentives for businesses supplying health coverage for their employees; special laws were introduced governing "group health insurance," which gave special protections to individuals covered by group plans. These special protections took away many of the risk stratification strategies insurance companies used to determine who they would and would not cover. For example, insurers were prohibited in many cases from denying coverage for preexisting conditions. These same protections were not afforded people who weren't covered under group policies, and the difficulty those with health problems have in obtaining "individual insurance" persists even today; this disparity is one thing that some politicians are targeting as part of the reform being considered this year.

With that historical context, consider the original question. Why does healthcare cost so much in America, particularly compared with what it used to? For sure, there is no single, all-inclusive answer to this question. I believe, though, that most of the reason has to do with the way insurance has removed costs out of the consumers' eyes. For too long, patients knew nothing of what their medical services were costing them. Not only were they not paying the bills, they weren't even paying the insurance premiums.

Without incentive or motivation for patients to shop around, the providers of medical services have for years had basically no free-market control over rising prices, and they have acted accordingly in the pricing of their services. Rather than set their prices based on competition and what the market would tolerate, providers simply set their prices "higher than the highest payer's allowed cost," leaving all cost control in the hands of payers alone, who don't actually consume the 'goods.' Of course, competition among payers for patients then drives costs up, instead of down, like competition among providers would do. Not experiencing the costs themselves, patients as a whole have gotten in the habit of demanding nothing but the best, latest, greatest, most convenient, and, of course, most expensive care; this behavior is a natural by-product of the system we created. Not surprisingly, this handcuffing of free market principles in the healthcare market has led to the price explosions we continue to see. We have, unwittingly, created a system that is a perfect recipe for price inflation.

Of course, the lucrative nature of this service sector as a whole has encouraged more and more research, innovation, and development of new technologies for diagnosis and treatment, each more expensive than the one before. Of course, once a new modality for treatment or diagnosis is available, it becomes part of the "standard of care," and insurers have to cover it; premiums, then, rise accordingly as the insurers' cost burden increases.

When you think about it, the surprising thing is not that this has happened. The surprise is that the problem has taken so long to reach critical mass, which I believe it has. I see it every day in my practice, where the 'standard of care' comes head to head with its associated costs, which more and more patients simply can't afford, even if they have insurance.

So, what to do, then? Well, I'll offer my opinion on that in part 4, straight up. But before we can meaningfully reform the health care system for the long term, I think we need to decide one thing as a country: should health care services be available to Americans as service market items, like catering, carpet shampooing, or window-washing? Or, should they be purchased by the public collectively, through taxation, and provided to the people as a "right," of citizenship like we have decided primary education should be? In my opinion, you can't have it both ways and also have a system that will work for the long term, and that is what Americans have come to expect.

Two important legacies have been created with Medicare and the employer-funded health insurance concept, which are important to recognize. The first of these legacies is government involvement in health care. As with any program supplied by federal funding, Medicare has federal strings attached; the introduction of Medicare and its sister program, Medicaid, introduced government regulation of medical services. Most insurers now piggyback their own regulations and reimbursement rules on to those of Medicare so that, in a very real sense, the government controls funding for the entire healthcare industry. In effect, the doctor-patient-payer relationship has now further evolved into the doctor-patient-payer-government relationship, even for those who aren't covered by "governement insurance." Too often, people and their various medical problems are treated as just another football in the great political game. The introduction of politics into the mix has further complicated the delivery of health care in America.

The second legacy is that patients across America have come to view access to health care services as a public "right," like access to education has become, rather than as an individual "expense," like food or housing. While not specifically granted either by the Constitution or by any existing act of a governing body, this alleged right has, nonetheless, become very real in the minds of many Americans. This dichotomy will be explored more fully in part 2; stay tuned.