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Health Care in America The Good, the Bad, and the Ugly  James E. Dalen, MD, MPH THE GOODSome Americans have optimal health care. They have a well-trained primary care physician of their choosing who provides continuity of primary and preventive care. When the need arises, they are referred to a specialist and/or hospital chosen by them and their primary care physician. They have ready access to all available diagnostic and therapeutic procedures, including newer medications that may be very expensive. In the 1970s and 1980s, most Americans with employer-provided indemnity insurance or Medicare had access to optimal health care, as defined above. Some Americans still have access to this optimal health care with minimal out-of-pocket expense. THE BADDuring the 1990s, the number of Americans with optimal health care has
diminished such that they have become an "endangered species." The payers
of health care, employers and the government, found the cost of providing
health care to be unacceptably high. Health care costs skyrocketed in the
1980s and early 1990s. By 1998, health care costs in the United States
were $1.2 trillion, 15% of the gross national product One reason for the acceleration of health care costs in the 1980s was the success of biomedical research, which led to the introduction of new, highly effective but very expensive diagnostic and therapeutic procedures. Furthermore, the aging of our population has increased the number of Americans with an expensive chronic illness. However, other industrialized nations use the same very expensive, new diagnostic and therapeutic procedures, and they also are faced with the aging of their citizens. Why then are health care costs so much higher in the United States than anywhere else in the world? Some of the unique reasons for the excessive US health care costs are shown in Table 1. The essence of indemnity health insurance was fee-for-service, that is, physicians and hospitals were paid their charges. There was no incentive for physicians or their patients to be concerned with the acceleration of health care costs. Patients wanted a complete workup, that is, every available diagnostic test as long as it did not hurt and they did not have to pay for it. Physicians were happy to comply and were reimbursed accordingly. This fee-for-service model of health care delivery broke the bank. It is unlikely that it will return to center stage. As a result of the rapid acceleration of health care costs, many employers and employees found they could no longer afford health insurance. The number of uninsured began to increase. By the early 1990s, we recognized that we faced a health care crisis in the United States. Health care costs were out of control and an increasing number of Americans (the uninsured) lacked access to health care. The Clinton health care plan was proposed to control health care costs and to increase access to health care. However, nearly every special interest group (businesses, hospitals, and physicians) found something in the highly detailed, 92-page Clinton health care plan that was not in its best interest. As a result, the Clinton plan was soundly rejected. Instead of the Clinton plan, employers and the government turned to the marketplace, in which they embraced "managed competition."2 They believed that for-profit managed care organizations would lower health care costs by competing in the marketplace. Many if not most employers stopped offering indemnity plans and directed their employees to managed care plans. The federal government followed the lead of businesses and encouraged Medicare beneficiaries to join health maintenance organizations (HMOs). Many Medicare patients switched to HMOs to have access to their necessary medications at reduced costs. State governments also directed their Medicaid patients to HMOs. This massive move to managed care in an attempt to control health care costs has had many side effects, one of which is that many Americans have exchanged their optimal health care for suboptimal health care. Managed care did, at least initially, dampen the escalating health care costs. Managed care organizations reduced health care expenses by reducing "medical loss," that is, the portion of the health insurance premium that is actually spent for health care. The remainder of the premium pays administrative costs and generates profits for the managed care organization. The initial attempts to lower medical loss were centered on reducing hospital days. In some cases, hospitalization could be avoided by performing surgery and other procedures as outpatient procedures in ambulatory surgical centers. Intravenous therapy and other procedures normally performed in hospitals could be done much cheaper in the patient's home by home health care services. Rates of hospitalization could be decreased in some cases by requiring preapproval for hospitalization. The length of hospital stay could be reduced by the use of review nurses. In many cases, the reduced number of hospital days was appropriate and was in the best interest of patients. In other cases, drive-through deliveries and drive-through mastectomies were not in the patients' best interests. Reducing hospital days clearly decreased health care costs and clearly reduced the managed care organizations' medical loss. By the late 1990s, it became difficult to further reduce hospital days. Managed care organizations quickly found other methods to further reduce medical loss, thereby increasing their profits:
Who Benefits From the Reduction of Medical Loss? The Bad Outcomes of For-Profit Managed Care The ability of primary care physicians to refer patients to the specialist or hospital of their choice is dependent on which specialist and which hospital their HMO has a contract with. If hospital A or specialist A is less expensive than hospital B and specialist B, the plan switches to the lower-cost provider. The patient's access to diagnostic and therapeutic modalities as well as to some expensive medications is compromised by the fact that the plan, not the patient's physician, may make the decision. The Physician In addition, physicians face an incredible "hassle factor." The managed
care plan monitors their decisions As their compensation steadily decreases, physicians must see more and more patients to maintain their income. The time spent per patient encounter decreases. Consequently, physician and patient satisfaction also decreases. THE UGLYThe shift to for-profit managed care in the 1990s has greatly decreased the number of Americans who have optimal health care. Far worse is that a steadily increasing number of Americans have lost access to health care because they lack health insurance. By 1996, more than 43 million Americans had no health insurance and millions more were underinsured.6 What Happens to the Uninsured? As shown in Table 3, the uninsured are far more likely to postpone
needed health care and are less likely to have a prescription filled than
those who have health insurance.7
In addition, the resources to have certain conditions or diseases (for
example, hypertension) treated may not be available to them, but they can
be hospitalized if they have a stroke. The lack of preventive primary care
for the uninsured further escalates US health care costs. The high cost of
treating premature infants of mothers who do not receive prenatal care is
a clear example that as a society, we can pay now or we can pay (much
more!) later. Care in the emergency department is usually twice as
expensive as care for the same illness in a physician's office8
Who Are the Uninsured? Welfare reform has further increased the number of uninsured in America. As Americans move from welfare to full-time, but low-paying, jobs, they lose their Medicaid insurance, only to find not only that many small businesses do not provide health insurance but also that they cannot afford health care insurance.6 The probability of being insured also depends on where you live and your race. The percentage of medically uninsured varies from 8.4% in Wisconsin to 24% in Arizona.10 In 1996, the percentage uninsured was 11% for whites, 22% for African Americans, and 34% for Hispanics.6 Who Are the Insured? The Ugliest Let's look at the efforts to save Medicare. Saving Medicare means
decreasing federal expenditures for Medicare at the very time that the
number of Americans eligible for Medicare is increasing. How can we cut
the cost of providing health care for an increasing number of Americans
with chronic illness? In 1999, we did it! For the first time since its
inception, the estimated federal expenditure for Medicare failed to
increase.11
How was this feat accomplished? Very simply, the federal government
followed the leadership of for-profit managed care organizations As physicians are paid less and less for each patient they see and for each procedure they perform, they will need to see more and more patients to maintain their income. For capitated physicians, the size of patient panels will increase. The inevitable result is less time for each patient encounter, which greatly increases the likelihood of mistakes in diagnosis and treatment. The probability of erosion of quality care is even greater for hospitalized patients. The reduction in payments to hospitals for the care of Medicare patients that was contained in the Balanced Budget Act of 199712 has led to a very significant deficit in many hospitals (especially teaching hospitals). Many hospitals were already losing money on their managed care patients. Medicare payments had kept them afloat. Also in the next 3 years, the progressive reduction in payments contained in the Balanced Budget Act of 1997 will lead to ever-increasing deficits for hospitals, especially teaching hospitals.12 To keep their hospitals open, CEOs will have to reduce their expenses further, since they cannot increase their charges. Many hospital expenses, such as utilities and supplies, are beyond the control of the CEO. The major expenses that the CEO can control are for personnel. The principal way to decrease hospital expenses is to reduce the number of personnel. Very difficult decisions will have to be made. How many nurses do we really need for each occupied bed? How many highly trained and high-salaried nurses do we really need in our coronary care unit and our intensive care unit? Do we really need registered nurses? Why not employ lesser-trained (and lower-paid) nursing assistants instead? Do we really need medical technologists in our laboratories, or will lower-paid technicians do just as well? Do we really need social workers? The list goes on. Instead of reducing the number of nurses and other direct caregivers, why not reduce the number of personnel in our business offices? Because if the number of business staff is reduced, it may impair billing and the documentation that is required to avoid investigation for Medicare fraud. These are very difficult decisions. It will be extremely difficult for hospitals to decrease their expenses without impairing the quality of care of their patients. We may win the war to control health care costs, but at what price? When speaking about nuclear war, John F. Kennedy said, " . . . the fruits of victory would be ashes in our mouth."13 Author/Article Information James E. Dalen, MD, MPH Editor, Archives of Internal Medicine Arizona Health Sciences Center 1501 N Campbell Ave Tuscon, AZ 85724 REFERENCES1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. |
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