Our Health-Care System Is Sick
Arnold Relman, MD, worries. For years Relman, the respected editor of the New England Journal of Medicine, has fretted that investor-owned health-care companies are corrupting American medicine. Profits and professionalism don’t mix, he argues. It’s a legitimate worry. Should good health care be subordinated to dividends? But now comes a study from the Institute of Medicine (part of the National Academy of Sciences) indicating in effect that these fears are largely irrelevant to the deeper problems of the health-care system.
Controlling one of every eight hospitals, double the level of a decade ago, investor-owned health companies have been portrayed as both the curse and the salvation of U.S. health care. For every Relman there’s a cheerleader shouting that good profit-making managers can provide quality care at less cost. The institute’s report plays down both the fears and the hopes. It doesn’t find that for-profit hospitals provide lower-quality care than do nonprofit hospitals. Investor-owned hospitals aren’t more efficient. On the average, their charges have been higher than the nonprofits’.
In short, the health system’s defects can’t be distilled into stereotypes. The basic problem is that Americans are unwilling either to socialize medicine--turn it over to government--or to abandon it to the free market. The hybrid system of public and private control produces glaring contrasts. Most Americans receive good health care, but one in seven Americans is uninsured.
Essentially we can’t decide what health care is. Government provides hefty health subsidies for the elderly under Medicare, for the poor under Medicaid and for the middle class through favorable tax treatment of private insurance. We don’t consider health care a “public good,” to be provided exclusively by government. Traditionally the doctor-patient relationship has been considered private.
Our health-care system reflects these inconsistent preferences, and even without investor-owned hospitals the basic problems would be the same. We expect the impossible: to have health care on demand, but at a limited cost.
We have reconciled the desire for democratic access with an aversion for government control through a system of open-ended reimbursement of government and private insurance. In 1940 Americans paid more than 80% of their medical bills directly; by 1984 third parties (mostly insurers) paid about 70%. But this system embodied an illusion: that medical needs are relatively fixed and that spreading the costs over the population, through insurance, would simply provide fairer access.
In reality, open-ended reimbursement guarantees skyrocketing costs. It blurs the line between good medicine and the self-interest of doctors, hospitals and patients. Patients equate good medicine with more treatment, in part because it seems “free,” as former Health, Education and Welfare Secretary Joseph A. Califano Jr. writes in “America’s Health Care Revolution.”
The “revolution” heralded by Califano and others, called “prospective payment,” aims to kill open-ended reimbursement. But the needed changes inevitably limit the sovereignty of health-care professionals and ultimately affect individual care. Consider one form of prospective payment, DRGs: In 1983 Medicare began reimbursing hospitals based on 468 diagnosis-related groups. A hospital receives one amount for a heart attack and another for a case of pneumonia, regardless of any patient’s actual costs. For the hospital, severe and mild cases are supposed to balance.
As long as government doesn’t nationalize medicine, it can control costs only by the way in which it reimburses doctors and hospitals. Large employers and insurers are now taking the same approach.
Health-care prices are still rising faster than overall inflation. Even so, downward price pressures make it hard for doctors and hospitals to treat the rising number of uninsured patients.
Ironically, more competition may hurt for-profit companies. Under the reimbursement system they flourished; Medicare paid their costs and guaranteed a profit. Today’s much stingier formula may cripple the ability of for-profit hospitals, which have shareholders and pay taxes, to compete against nonprofit hospitals. But, whatever happens, our hybrid health-care system, with control split between government and the private market, will endure because it accurately reflects Americans’ inconsistent expectations.
The system is so complicated and confusing because it’s always making choices--who will get care, how much and at what price--that we as a society aren’t willing to make explicitly. The system’s basic problem is not that it’s being plundered by profiteers, but that it’s being asked to deliver more than is possible.
