Costs Skyrocketing : Health Care Crisis: Less for More

More Americans are finding it more difficult to get the medical treatment they want at a price they can comfortably afford than at any time since World War II.

For the poor and the elderly, reductions in once-generous government health programs have placed an array of medical treatments out of reach. And for the first time ever, benefits for the vast, privately insured middle class are being restricted or trimmed back, often forcing patients to pay a bigger share of medical bills.

This fundamental change in the delivery of medical services is occurring because the demand for health care has grown so large and the cost of providing it so enormous.

Spending on the Rise

In their effort to stay healthy, Americans now spend more than $360 billion a year--$1 billion a day. Spending on health care now represents nearly 11% of the gross national product. A generation ago, it consumed just 4.4% of GNP.

Efforts have been made by government agencies and insurance companies to hold down costs. But the combined effect of cost-cutting efforts and increasing demands for better health care has meant a reduction in prompt, top-quality care for some--and elimination of services for others.

Indeed, one of the first comprehensive studies of American health care consumers, released last year by the National Citizens Board on Inquiry Into Health in America, paints a gloomy picture of the medical system in this country.

Chaired by Arthur S. Flemming, a former secretary of Health, Education and Welfare who served in the Eisenhower, Nixon, Ford and Carter Administrations, the committee concluded that, despite extraordinary medical advances, America’s health care system has become “incapable of meeting ordinary health care needs.”

Best in the World?

It is not a situation most Americans would like to acknowledge. Indeed most people would prefer to believe that health care in this country is the most sophisticated and comprehensive in the world. And in many respects they are right.

Certainly, for the extraordinary patient--the elderly woman who cannot walk without an artificial hip, the middle-age man who needs a heart transplant, the premature baby whose only chance of survival depends on a life-support system--the results of modern medicine have been nothing short of miraculous.

But what of the ordinary patients, the other 99.9% of the population?

In the past, many physicians would have agreed with Samuel O. Sapin, associate medical director of Southern California Permanente Group, when he says that “the heroic care” has trickled down to improve the length and quality of life for all patients “up and down the line” no matter what their income, no matter how extensive their health-care coverage and no matter how sick they are.

But increasingly health-care providers and planners are less sanguine about the health-care delivery system in America.

Many Are Affected

Not surprisingly, the poor and minorities have been the first to be affected. But they are no longer alone, says the National Citizens Board, which is made up of doctors, union representatives and leaders of citizens groups.

The disabled, the elderly and children have all been hurt. So have those homemakers who are no longer covered under health plans because of divorce, death, disability or retirement of an insured spouse. There are estimated to be 4 million to 6 million of these so-called “displaced homemakers,” the Citizens Board said, and most of them are not eligible for the federal government’s two major health-care programs, Medicare and Medicaid.

Perhaps the largest group in this country to be left struggling for health care is the unemployed--61% of whom were shown in a recent study to have family medical problems that are going untreated.

And now, employed, middle-class workers are also showing signs of distress. Although most do not qualify for government health assistance, an increasing number of middle-class families are opting to go without private health insurance. With the average stay in a typical California hospital running by some estimates as high as $781 a day, that can put individuals who get sick in a very precarious financial situation.

Even financially secure, fully insured patients are beginning to experience problems--from hospitals eliminating services once considered routine to insurance companies and Medicare paying a smaller share of the cost of care.

What has caused this situation? In a sense, health planners say, American medicine has become a victim of its own success.

Clearly, medicine has come through an incredible revolution in the past 25 years. Fueled by a boom in technology and wonder drugs, plus generous government and private insurance plans, American practitioners and hospitals have provided a level of health care many believe is unrivaled anywhere in the world.

Consider the results:

The death rate in the United States has declined steadily over the past several years. In 1981, the latest year for which detailed studies are available, the rate at which Americans died was a full 3% below the year before.

At the same time, life expectancy in the United States has also risen sharply and now stands at an all-time high. Two decades ago, Americans could expect to live an average of less than 70 years. Today, the average man will live to age 76; the average woman, age 82.

Some forms of cancer, once considered untreatable, are now controllable and, in many cases, curable.

New anesthetics and computerized coronary and pulmonary monitoring devices have meant that surgery has become routine for patients once considered too old and too feeble even to consider a life-saving procedure.

Transplanted organs, particularly hearts but also kidneys and livers, are rapidly becoming commonplace.

Artificial hips and other body replacement parts are allowing Americans to lead more productive lives and, in the case of items like heart valves and artificial kidneys, longer ones.

And the march of technology continues, almost unabated. On the horizon is a dazzling array of new ways to save lives or improve their quality through chemistry, surgery and genetic engineering.

But such progress has not come without a price, the total of which is only now beginning to be counted up.

$1,500 Per Person

In raw dollars and cents, the United States by most estimates spends more on health care than any other nation in the world. Although comparable data is hard to come by, one recent estimate showed that, last year, Great Britain spent $400 per person on health care, Japan $500, France $800, West Germany $900--while the United States spent $1,500.

There are distribution problems as well.

Unlike education, which Americans have come to view as a public responsibility and available to all people, health care in this country has largely been a private matter, with each person getting whatever he can in whatever way he can.

Health care may be available to everybody, but the amount, accessibility and, possibly, the quality differ widely, said Sylvia Drew Ivie, an attorney who is director of the Los-Angeles-based National Health Law Program. Her organization is a public-interest firm representing low-income health care consumers.

A Disproportionate Share

“Some people,” Ivie said, “get a disproportionate share of the resources, while others get very little, if anything. For example, in Medicaid, which is the chief (government) program for low income, 40% to 50% of all dollars go to support white, elderly women in nursing homes. Many of these elderly women started out as financially independent people but they used up all their available resources to pay for their nursing care, which has become extraordinarily expensive in recent years. . . . The point is: When they begin to qualify for government assistance, they start to compete with poor patients who need basic care. The effect of that pattern is that there is little left over for expectant mothers.

“In effect,” Ivie concluded, “welfare mothers are competing with old folks for limited dollars. . . . And we’re just talking about this one program alone. You see the pattern throughout the system: Patients competing against patients. . . .”

Finally there is the trade-off between “heroic care” and ordinary medical treatment.

Take the cost of a transplant operation. Jean Trueblood, director of the state Medicaid agency in Massachusetts, calculates that the cost of one liver transplant equals outpatient primary care for 11,904 individual patients.

Premature babies, who represent only a fraction of the total patients in this country, consume one of the largest per capita portions of the country’s total medical bill--simply because the cost of the technology and manpower involved in saving young lives is so high. A year-old report by the California Hospital Assn. showed that the average per patient hospital cost for prematurely born infants up to age 4 years is $30,433--the most expensive hospital stay of any age group covered by California’s Medi-Cal program.

Needs of the Elderly

On the other end of life, the elderly, whose bills are paid largely by Medicare, also account for a disproportionate portion of the country’s total medical expenditures--mostly because persons over 65 require care more frequently.

In 1978, according to the Health Care Financing Administration, Medicare spent nearly a third of its entire $26-billion budget on the 6% of its enrollees who died that year. More than six times as much money was spent on the elderly who died as on those who lived.

Similarly, a 1982 Blue Cross and Blue Shield Assn. survey detailing the final six months of life for cancer victims showed expenses escalating quickly as death neared. Nearly half of the last year’s spending came in the patients’ final 60 days and the daily hospital costs were as much as 40% higher than the charges for non-terminal cases.

University of Pennsylvania internist Marion Alessandroni, an author of articles on geriatrics, suggests two ways to interpret the high costs.

“One is, we’re wasting money. People are dying anyway,” Alessandroni said. “The other is you have to be sick to die.

“Is it worth spending $10 million for an extra 10 days?” she asked. “The issue is not easy.”

While physicians and philosophers are debating the ethics of spending millions of dollars on patients who will die anyway, many other patients who are in no imminent danger of losing their lives are simply doing with less, and, in some cases, without any, medical care.

Consider these facts:

Nine-million children in the United States lack routine sources of medical care; 18 million have never visited a dentist.

After nearly two decades of steady decline, the percentage of Americans without health insurance is rising sharply. Although estimates vary, the Urban Institute reported that 33 million Americans had neither private nor government-paid coverage. Today, health-care planners estimate that the figure is even higher.

As medical costs have soared, dramatic cuts have occurred in the federal government’s two largest health-care programs--Medicaid for the poor and Medicare for the elderly. Between 1981 and 1984 under the Reagan Administration, $5 billion worth of cuts resulted in reductions for millions of individuals and the elimination of government-subsidized care for 700,000 children and 567,000 senior citizens. During the same period, Medicare was slashed by $13 billion with the result that elderly people now pay a higher portion of their incomes for health care than before the enactment of Medicare.

Minority groups, because they are more dependent on government programs than are other segments of the population, have been hit particularly hard by cuts in those programs. In this country today, one in four blacks is enrolled in Medicaid.

Premature Birth Rate

One of the results of the cuts in government programs, some physicians say, is that there is now inadequate prenatal care and nutrition for many segments of the population, which may be the reason for the relatively high rate of premature births among some groups.

Although blacks account for only about 16% of all births, they represent more than 33% of the very low birth weight infants, below 2.2 pounds. The fact that these babies are about 20 times more likely to die than babies who weigh 5 1/2 pounds or more partially accounts for the excessive infant mortality rate among blacks--double the rate for white babies.

Health care is further complicated for minorities by the fact that they are less likely than other groups to have private insurance to cover their medical costs. For instance, the National Health Law Program estimates that, while 14% of the entire U.S. population is medically uninsured today, 64% of poor and near-poor Latinos are uninsured during all or part of the year.

But for many people, health insurance is not even the problem. Some simply do not have physical access to medical care.

Needs of Rural Areas

Rural areas, for instance, tend to offer less medical care than urban ones. Today, the National Citizens Board reports, more than 400 counties in the United States have no doctor at all--a serious problem for those who are sick and cannot afford transportation.

In some cities, even transportation has become a problem for those who are ill.

In 1982, when California dropped Medically Indigent Adults (MIAs) from the Medicaid program and told counties that they must assume responsibility for care of the poor, hospitals that once treated these patients were forced to turn them away. The hardship that this can cause is evident, according to the National Health Law Program, in the directions that one Santa Monica hospital gives to redirect patients, many of them physically and mentally disabled, to the nearest county hospital:

“RTD 20 OR 308 EAST ON WILSHIRE BLVD. TO WESTWOOD BLVD. EXIT ON WESTWOOD. TAKE THE 88 SOUTH ON WESTWOOD TO THE LAX TERMINAL EXIT AT 98TH ST. & VICKSBURG (LAX TERMINAL-LOS ANGELES AIRPORT.)

TAKE 232 BUS FROM LAX TO PACIFIC COAST HIGHWAY AND TORRANCE BLVD. EXIT AT PCH AND TORRANCE BLVD. TAKE 3 TORRANCE BUS EAST ON TORRANCE BLVD. TO HARBOR GENERAL HOSPITAL.

APPROXIMATE BUS FARE FOR THE ENTIRE TRIP $1.00

APPROXIMATE TRAVEL TIME 2 1/2 HOURS.”

Except for a brief period in the 1960s when government programs for the poor were prospering, this country has always had a two-tier medical system--one high quality system for the rich, another system of lesser quality for the poor. Today, consumer groups contend, the gap between the two systems is rapidly widening.

One state in which the two-tier approach to medicine has been made explicit is South Carolina. There, the state has cut medical aid to the indigent at the same time that one hospital is issuing credit cards to give “extra special treatment” to their “preferred customers.” The state’s university medical center is also building a new multimillion-dollar luxury facility with the expressed purpose of “attracting the VIPs.”

The less affluent patient is also affected by another trend evident in virtually every state in the country--the conversion of not-for-profit hospitals into for-profit institutions. Over the past 20 years, the National Citizens Board reports, there has been a rise in the proportion of profit-making hospitals from 6% to 16%.

Because for-profit hospitals tend to cater to the middle class and the wealthy who can pay for their care, the situation is “resulting in increased dumping of poor patients into public hospitals,” many of which are already overcrowded, the board said.

Some states, including California, have statutes requiring that, at the very minimum, emergency care be provided to those who are in need of it, no matter what their income. One such state is Texas, which recently passed an emergency-room statute--after officials documented the deaths of five individuals who had been denied access to any kind of care. Hospitals in more than half the states, however, continue to operate without any such basic requirements.

Middle-class working Americans are feeling the squeeze mostly because of changes in insurance policies.

The experience of a middle-age, middle-class Los Angeles woman is perhaps typical. After being diagnosed as having cancer, the woman was told by her insurance company that she could no longer see her family physician if she wanted to continue having her full medical bill paid--or at least the 80% coverage the company had promised when she signed up for the plan.

The reason the company gave was that it was trying to reduce the size of its growing medical payments. Not only did the company insist that the patient go to an “approved” lower-priced physician, it also informed her that her yearly deductible was being raised from $200 to $500 and that her premiums would rise by more than 50%.

Shopping Around

The woman felt the family budget could not bear the additional costs, but she found that it was useless to “shop around” for less expensive coverage: Her pre-existing cancer made her an undesirable candidate for coverage by a new company.

Some health planners have suggested that more Americans should shop around for less expensive health care. Some have. To avoid expensive hospitalization, some are having surgery at outpatient centers. Others are opting for the increasingly popular health maintenance organizations, or HMOs, because they offer full-service medical care at prices lower than traditional health care plans. But these options are not available to everybody.

For people who stick with traditional health insurance, comparative shopping can be nearly impossible when it comes to selecting a hospital, which accounts for a large chunk of many families’ total health bills. Even if they are willing to shop around, patients cannot actually select a hospital unless they also select a doctor who practices at that hospital. And the patients who do try to shop for hospitals face a vast and confusing array of options: for-profit hospitals, not-for-profit hospitals, public hospitals, church-related hospitals, university medical centers.

Government efforts to cut costs also have had some unexpectedly adverse effects on the middle class.

Recently, for example, Congress passed an amendment to Medicare, the chief program for the elderly. The amendment, designed to save $50 million, placed a limit on the fees that doctors who participate in the program can charge.

Basis of a Lawsuit

The restriction provoked the American Medical Assn. to sue the federal government on the ground that the law unconstitutionally applies price controls to doctors. Although most grass-roots health advocates rarely side with the AMA, in this case some have. The reason: many doctors--indeed, nearly 90% of the practicing physicians in this country--are simply not accepting direct payment from the government for Medicare patients. What that means for patients who seek care from “non-participating” doctors is that they must pay the bills first and then try to collect from the government afterward.

As increasing numbers of doctors drop out of the program, consumer groups contend, elderly patients on fixed incomes will find it more and more difficult to cover their medical expenses.

Another controversial money-saving measure is currently being implemented by Medicare for the payment of hospital bills. The measure, based on a system of 467 so-called diagnostic related groups, or DRGs, is aimed at slowing down the drain on the program’s trust fund, which is predicted to run dry by 1990 if the current rate of spending continues.

The change is complex, but essentially it forbids hospitals from charging the government for every service that is rendered or for every day that a patient spends in the hospital. Instead, hospitals are paid a flat rate on the basis of what it ought to cost to treat an average patient with a given diagnosis, or DRG. So, payment for a heart patient who comes in and requires five diagnostic tests and three days in the hospital will be exactly the same as for another heart patient who requires 10 tests and two weeks hospitalization.

Providing an Incentive

Under the old system, the more services the hospital provided for patients, the greater its revenues. Under the new system, the incentive is to provide as few services as are absolutely necessary to maintain quality.

While the DRG system may or may not save money, it is meeting with massive resistance from hospital administrators, who contend that they are not only being told by the government how to deliver health care but also are having to absorb the costs of some of their more complicated cases.

Teaching hospitals and hospitals in the inner city, including county hospitals, are especially threatened by the new system, as are their patients, according to experts. Their expenses are unusually high because they attract patients who generally are sicker than the average patient--but the payment for their care is the same.

The DRG system is having an impact on other patients as well. For example, nursing home administrators say that already they are receiving sicker patients from hospitals sooner than before. The reason, they say, is that the DRG system encourages hospitals to discharge patients as quickly as possible so as not to have the extra expense of a lengthy stay for which they receive no added compensation.

Some say that perhaps the most serious impact of rising costs and shrinking coverage on patients has been the increasing tendency of many to delay visits to their doctors. Those with legitimate illnesses who let them go unattended may find themselves with far more serious and costly problems that they would have had otherwise, doctors say.

In general, some health-care experts argue, U.S. medicine, as compared to that practiced in many European countries, has focused far more on treating diseases in the later stages rather than on preventing them early on. Although difficult to measure, some of these experts argue, the American system is a far more costly approach and may partly account for the United States spending so much more on health care than other countries.

“Less than half of all poor children (in the United States) are immunized against preventable diseases”--a policy that is penny-wise and pound foolish, said Judith Walker, Chicago’s interim commissioner of human services.

Major Cost Savings

“Screening and treating young children under Medicaid saves $8 in later costs for every dollar spent. . . . It costs about $10 to provide a baby with a series of immunizations, compared to from $500,000 to $1 million for a lifetime of institutional care of a child left retarded by measles.”

Even if Americans were to become more rather than less health conscious, there are signs that this country’s health bill would still continue to rise.

Tops on the list of expensive problems facing the health-care system is the aging population--perhaps the prime example of a way in which improved health care has become a victim of its own success.

The AMA reports that although only 11% of the U.S. population is 65 or older, those people account for a third of all health care costs in this country. By the year 2,000, 12% of all Americans will be over 65 and--partly because of improvements in health care--the numbers are expected to grow.

“The sad fact is that people get sicker as they get older,” a recent AMA publication said. “It follows that medical costs in the U.S. can only increase as our population ages. Right now people over 65 go to the doctor approximately four times as often as those under 65.”

Reason for Optimism

Some physicians are optimistic that American medicine will, as it has in the past, find a way to continue to grow and prosper.

But increasing signs of trouble have led many other doctors and health-care planners to predict an inevitable decline in the quality of medicine in America--even for those with good health insurance.

“For now,” said Stuart Venner, a Los Angeles internist, “the fully insured, middle-class patient is in fine shape. He can get all the best quality care that is available. Doctors are actually competing for them, providing what they demand, even offering more convenient office hours in the evenings and on Saturdays. . . .

“But ultimately,” he said, “the demand and expenses will outstrip the resources. For a while, we’ll be more efficient, which is good. Then we’ll start getting bargain medicine, first for the poor, then for the well-to-do, which is . . . dreadful.”

In finally determining what kind of health care they want, medical experts contend, Americans will have to address a variety of issues that many would prefer to avoid--including the rationing of health care and the establishment of a national health-care plan. All other western nations, except South Africa, have adopted some kind of national health plan and many have or are considering rationing.

In England, where rationing has been adopted as a way of allocating limited resources, expensive treatments are provided only to those patients who are most likely to benefit from them for the longest period of time. As a result, transplant operations, kidney dialysis and a number of other high-tech medical advances are denied to certain patients who would have received them in this country.

Not an Appealing Idea

“It’s not an approach to medicine that appeals to Americans . . . but it seems that the only country that has really begun to deal with rising costs is England,” said Stuart Marylander, president of Cedars-Sinai Medical Center in Los Angeles.

If rationing as a method of controlling cost becomes more pervasive, which treatments--and what kinds of patients--will come under closer scrutiny? Will age be the deciding factor? The degree of the patient’s infirmity? His or her ability to pay? The patient’s “social worth”? First-come, first-served?

“The problem is,” Marylander continued, “who should make such decisions in this country? There are conflicting answers. In theory, these are decisions of public policy . . . that should be made by politicians who are responsible to the citizens. On the other hand, many people could reasonably feel more comfortable with those decisions being made by the providers who have as part of their professional credo the patients’ best interest.”

Concluded U.S. Rep. Henry Waxman (D-Los Angeles), who chairs the House subcommittee on health and environment, “The truth is, we already have a kind of rationing in this country. But no one wants to admit to it. We stand by and watch people fall through the cracks. The question is: How much bigger will the cracks have to get . . . and how many more people will have to fall through them, before we start acknowledging what is happening to health care in this country?”