From: jpr1@ns1.cc.lehigh.edu (James P. Reynolds)
Newsgroups: talk.politics.misc
Subject: Busting Conservatives' Myths re Healthcare
Date: 28 Jan 93 15:23:41 GMT
Organization: Lehigh University

One of the nicest things about USENET is that, by virtue of the demographics
of its audience, it's a neat way to put a dose of reality into the lives of
white rich young right-wing men.  Let's see if you all (and you know who you
are) can get your noses out of your Ayn Rand books long enough to read this
posting in its entirety.

This problem is more complicated than just blindly telling yourself that if
the evil left-wing government regulators will just go, go away, that the
invisible hand of Adam Smith will come down from the heavens and destroy
what's wrong with the health-care system.  Nice try, but it isn't that simple.

Here's an excerpt from the Consumer Reports series on the US health care
crisis.  I recommend it as a good starting point to getting acquainted with
what's wrong with the system.  It's in the July, August, and September 1992
issues.  This excerpt explains why competition among providers does not mean a
capitalist-style shakeout of the inefficient and expensive.

- - - - - - - - - - - begin quote - - - - - - - - - - - - - - - - - - - - - -
Attracting patients to a hospital isn't the same as attracting customers to a
new restaurant or hardware store.  Consumers decide on their own when and
where they want to eat or buy some drill bits.  When they're sick, their
doctors decide when and where to hospitalize them.  So hospitals must market
on two fronts:  They must appeal directly to privately insured patients, and
they must keep their admitting doctors happy.

To induce physicians to admit patients, hospitals resort to everything from
first-year guaranteed incomes to subsidies for initial practice expenses.  The
effort pays off.  In 1990, according to an annual survey by Jackson and Coker,
an Atlanta physician-recruiting firm, the average doctor generated $513,000 in
in-patient hospital revenue.

Another way to keep doctors happy is to provide them with state-of-the-art
medical equipment.  As a bonus, hosptials can thentout their up-to-date
tehnology directly to consumers.  Uwe Reinhardt, a Princeton University health
economist, likes to paint the following scenario in his lectures:

"Imagine that you're a young couple in Chicago, stuck in a traffic jam in the
Loop, and you see a billboard that says:  'Mount Sinai:  The Cheapest Place in
Chicago, Havbe Your Baby Here.'  Then you go on and you see another billboard
that says, 'Holy Mercy:  The Only Place with a Glandular Schlumpulator, Have
Your Baby Here.'  Where are you going to go?"

Some regulatory efforts were made inthe 1960s and 1970s to restrain hospitals
from acquiring excessive amounts of expensive technology, with mixed success.
In any case, Federal support for that effort was discontinued during the
Reagan years.  The rationale was that "unleashing competition" among hospitals
would allow the free market to operate and help keep the cost of medicine down.

The irony, though, is that competition actually drives costs *up* where
hospitals are concerned.  The hosptials gain no competitive advantage by
controlling costs, since their customers - doctors and patients - don't pay
for their services anyway.  Instead, hospitals compete only on the basis of
perceived quality, and end up vying to see which one can secure and promote
the newest well reimbursed technology, whether the tachnology is needed or
not.  Several hospitals in an area may have their own neonatal intensive care
units, MRI machines, or cardiac care centers, when only one would serve the
population equally well (see "The Cardiac Money Machine," page 446).  This
year, despite the recession, hospitals plan to increase spending on new
equipment by 15 percent, according to a survey by Shearson Lehman Brothers.

To attract the well-insured population, hospitals also provide amenities that
have nothing to do with actual health care but do add to the bill, including
cable TV, private rooms and baths, gourmet menus, and the like.  Baylor
University medical Center in Houston spent $18 million on the Tom Landry
Sports Medicine and Research Center, complete with 7000-square foot dressing
rooms lines with oak lockers, and a 10-lane pool with underwater computerized
video cameras used to analyze its patrons' swimming strokes.

Hosptials have also become more and more consciously concerned with projecting
an upscale image that they hope will bring in an affluent clientele.  Entries
in a recent contest held by the Academy of Health Services Marketing, an
organization of hospital marketing executives, reveal the new focus.  For
instance, the Southern Regional Medical Center in suburban Atlanta got
Rosalynn Carter to endorse its maternity service after her grandchild was born
there - as part of a successful campaign "to increase gross revenue ... by
marketing to a target market of insured, higher-income women, ages 25 to 49,"
according to the contest submission.

The trend is troubling, because there's clear evidence that the total cost of
health care rises in areas where many hospitals begin to compete for the same
pool of well-insured patients.  Health economists James C. Robinson and Harold
S. Luft of the University of California, Berkeley, examined data from 5732
hospitals nationwide, and found that costs per admission were 26 percent
higher in hospitals that had more than nine competitors within a 15-mile
radius.  In a smaller-scale study of 747 hospitals, they found that those in
competitive areas allowed patients to stay in the hospital longer after
surgery - something that tends to please both patients and doctors, but with a
high cost and no clear medical benefit.
- - - - - - - - - - - - - end quote - - - - - - - - - - - - - - - - - - - - -


So you see, "unleashing competition" among providers does not mean lower costs,
since the person who gets the health care is not the same person who directly
foots the bill, like if you went out to buy some drill bits or something.
That's where your competition model breaks down.

So, if you want to get it back, you have two choices:  You can do away with
insurance companies entirely and just have people pay for their own bills, or
have the insurance companies decide for you who your doctor will be, what
tests you will undergo, what treatments you'll accept and where, etc.  Neither
is a pretty picture, is it?

Also, starting more insurance companies (somebody complained it's illegal)
doesn't mean more efficient, or less, bureaucracy due to competition among
those companies, either.  Here's another excerpt:


- - - - - - - - - - - - begin quote - - - - - - - - - - - - - - - - - - - - -
Ultimately, our cumbersome, inequitable system of reimbursement raises the
costs for all of us - insured and uninsured alike - and causes problems for
physicians as well.  "In order to preserve the mirage of a private system,
we've created the most bureaucratic, regulated system of any in the world,"
says David Mechanic, director of the Institute on Health Care Policy at
Rutgers University.

A key characteristic of the U.S. system is its obsession with making sure that
patients get only what their insurance entitles them to, and nothing more.
That means, for instance, that hospitals must keep meticulous trank of
everything used by a particular patient, down to individual gauze sponges or
aspirin tablets - all adding to administrative costs.  More important, the
burden of dealing with multiple forms from a huge number of insurance
companies requires a lot of clerical manpower.

[ ... ]

Hospitals in the U.S. spend fully 20 percent of their budgets, on average, on
billing administration - compared to only 9 percent for Canadian hospitals.
To run a health plan covering 25 million people, Canada employs fewer
administrators than Massachusetts Blue Cross, which covers 2.7 million.

Our nation's more than 1200 private health-insurance companies add to the red
tape by the necessary maintenence of their underwriting, marketing, and
administrative staffs.  This overhead consumed an average 14 cents out of
every premium dollar in 1990, according to the Health Care Financing
Administration.

Private physicians, too, have been forced to hire extra office help to cope
with the ever-enlarging demands of third-party review, regulations, and
paperwork.  Drs. David Himmelstein and Steffie Woolhandler, internists at
Harvard Medical School who are prominent critics of the U.S. health-care
system, have calculated that the average office-based U.S. physician employs
twice as many clerical and managerial workers as the average Canadian doctor.
Dealing with the bureaucracy has become so intrusive that doctors have
developed a name for it:  the "hassle factor."

[ ... ]

Drs. Woolhandler and Himmelstein, who favor a Canadian-style system, have
calculated that about 20 percent of U.S. health-care spending goes for
administrative costs:  insurance overhead, hospital and nursing
administration, and physicians' overhead and billing expenses.  Not
surprisingly, the private health insurance industry says this estimate is too
high.  However, industry representatives decline to offer their own figure.

Universal coverage and uniform fee schedules enable other countries to avoid
most of the administrative expense of the U.S. system.  The single-payer
Canadian system, where all health-care costs are ultimately paid by the
Government, devotes about 10 percent of expenditures to administration.  The
General Accounting Office calculates that if the U.S. were to adopt a
single-payer Canadian-style system, we would ave about $70 billion a year in
insurance overhead and the administrative costs to doctors and hospitals.
- - - - - - - - - - - end quote - - - - - - - - - - - - - - - - - - - - - - -


So, do you want to create even *more* different sets of forms and requirements
for physicians to deal with, all in the name of competition?  To have doctors
need even more insurance clerks?  Wouldn't it be wider just to have one
standard claim form that could be submitted electronically?  To have one payor
which negotiates a set fee schedule (adjusted for the cost of doing business
in each city) directly with the providers?

*Think*, instead of just bashing government.  We spend nearly twice the money
(as a percentage of GNP) on healthcare than nearly all the countries with
those national health insurance plans for basic care that you hate so much.
Western Europe, Japan, Canada ... they've all gone to universal coverage and
they are doing BETTER than us both in terms of spending less and having better
general public health.

Doesn't that make you as frustrated as it makes me?  How can we deal with the
deficit if we keep encouraging our hospitals and doctors to traffic in
superfluous equipment and our administrative system to get bloated with more
and more sets of rules and paperwork?

It's time to face up to reality.  Let's do it *now*, not four or five years
down the road when health care has swollen to 20 percent of our GNP.  It'll
just erode the financial health of our government, industry, and consumers
even more.

And I'm not even asking for the whole system to go public, a la Britian.  Just
the basic health coverage pool.  Let the doctors, hospitals, medical supply
companies, etc. stay private ... I think that's where they belong.

Please, just think about it.  Save this posting and sleep on this matter, then
come back and read it again.  Get the Consumer Reports series and read it.
Start informing yourselves.  This is the most important domestic matter we'll
be facing this year.


Jim Reynolds

-- 
James P. Reynolds       (that's Jim to you and me.)     jpr1@lehigh.edu
     Lehigh University Materials Science Rules          jreynolds@igc.org
Newsgroups: talk.politics.misc