Health Reform- the transition

I have been reviewing the details of the French health care system, as it was established in 1945, and how it has evolved in a history somewhat similar to our own. The Second World War marked the divergence between the two countries. Wartime labor shortages left us with an employer-based system that has become too expensive and rigid. France, in the social upheaval of defeat, had the chance for radical reform and took it. Britain took a similar opportunity and went another way with single payer, tax supported health care in the NHS. The pre-war differences in the three countries made some of this probable, if not inevitable.

What do we do now ? Why is it necessary to reform the US system ?

Our system is very expensive and does not have universal coverage. Those are the two features most listed by critics. People who are covered are largely satisfied with the care they receive but are often uneasy about the cost and the possibility of being left without coverage if they develop a serious chronic illness or lose a job. Our system has evolved away from community rating, in which everyone paid the same premium based only on age and sex. Now we have experience rating, in which a history of illness can make us uninsurable.

One of my patients 20 years ago had had a thyroid cancer, a form of cancer that is 100% curable when properly treated. A couple of years later, she needed a breast biopsy for what was almost certainly a benign lump. Her insurance excluded coverage because she had had thyroid cancer, totally unrelated to the present condition.

Recently, it has been reported that almost all medical groups in California are financially insolvent. For decades, the American system relied on cross-subsidies as insured patients paid for those without insurance by funding hospitals and doctors’ practices, which, in turn, cared for the poor and uninsured for free. The development of managed care and HMOs has eliminated the cross subsidy by squeezing out of the system the resources to provide uncompensated care. No one ever went without acute care in our system. Chronic illness has been another matter, but many of the patients who rely on emergency rooms and charity hospitals would probably not have availed themselves of chronic care anyway. Now, acute care is in jeopardy as public health systems, like that of Los Angeles County,  are being bankrupted by the demand from illegal aliens.

How do we proceed ?

The United States is much larger than France with a much larger population, 300 million compared to 64.5 million. Our economy is much larger and healthier with an unemployment rate of 5% vs 10% or higher in France. Our people tend to work longer hours and produce more per worker. Some of the French problems with health care are, in fact, problems with their economic model, which is more protectionist and less productive with huge agricultural subsidies (even larger than ours) and excessive vacation time and early retirement. The French health care system would fit our economy better than a British or Canadian model and the relative cost would be tolerable. Ours is already based on payroll deductions rather than general tax revenues and this could be continued. Workers already pay FICA taxes to fund Social Security and Medicare. In addition, they pay health insurance premiums. Combining the two would allow some cross subsidy for the Medicare deficit we face in the next few decades as “Baby Boomers” retire.

The US has 50 states and there have been a few attempts to use states as “laboratories of democracy” to test health care reform experiments. These do not work (except, perhaps, for Hawaii, which is relatively isolated) because states are not large enough and people will move around to acquire benefits. Any real reform has to be national. What I propose is to move to a universal Medicare program which would pay 80% of health care costs. The co-payment would be paid by private insurance, just as is done in France. Costs would be subject to “Evidence-based Medicine” criteria for reimbursement. If people want chiropractic treatment or acupuncture or massage, let them pay for it without subsidy. This may, in fact, be the most difficult part of the problem to solve as our state regulation is highly politicized and influenced by lobbies of various health care organizations.

I would also strongly recommend that the Workers Compensation system be integrated into the health plan, as is done by France. I work with the Workers Compensation programs in multiple states, reviewing claims,  and find that many of these workers have no private insurance. Integrating workplace injury treatment would avoid costly duplication and help reduce fraud, rampant in workers comp.

What do we do with illegal aliens ? They dominate public care in Los Angeles and fill emergency rooms of private hospitals. Since the Federal Government chooses to allow them to come into the country, they should pay for care of illness and injury. They are already eligible for workers compensation care.

What about nursing homes and treatment of the disabled? Medicaid is already the principle source of funding for care of the elderly and disabled poor. Integrating this into a national health plan would relieve a huge burden on the states and might reduce some of the gamesmanship in state-federal relationships.

What about a fee schedule, like that of France ? Doctors’ incomes have been eroding steadily the past 30 years as HMOs gained power and the FTC has prosecuted doctors’ groups for any attempt to negotiate fees with them. They should be allowed to represent members as a union and negotiate fees and terms. The Los Angeles County Medical Association has disappeared as members found themselves without the means to support it and it was dissolved with its magnificent library dispersed.

New doctors are heavily burdened with debt. USC medical school, where I teach, now has a tuition rate of $40,000 per year. The average medical student leaves with loan balances of $250,000. New young doctors must earn enough to repay loans. The problem has become so severe that a new medical school organized by the Cleveland Clinic and Case Western University has decided to grant 100% scholarships to all students accepted, in hopes of encouraging more to choose academic medicine. The military services offer full scholarships to medical students who agree to serve a minimum time as military physicians. What if we offered all new doctors, who agreed to accept the national fee schedule as payment in full (after co-payment), a full scholarship to medical school ? If later, they decided to shift to the equivalent of Sector 2 in the French system and charge higher fees, they would have to repay their scholarships. A system to forgive existing loans could even be introduced. Each year a new doctor participated in the Sector 1 equivalent, part of the loan was forgiven.

There are many permutations of a program like this and I offer these suggestions only for discussion. What about it ? One additonal advantage of a system like this is adminsitrative savings. Doctors offices have severe overhad problems trying to deal with the many HMO and IPA contracts plus Medicare paperwork. When I was in practice 13 years ago, I had 246 different contracts with various insurance groups, most with different requirements for pre-authorization and the like. I finally bought a computer system for the office to deal with the complexity. A card reader system like the carte vitale would be a godsend to doctors’ offices. The savings alone would make a lower fee schedule more acceptable. I know pediatricians whose capitation payment for HMO patients is no higher than the French Sector 1 fee. I am not an accountant but I think this could work. Something has to.

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11 Responses to “Health Reform- the transition”

  1. […] unknown wrote an interesting post today onHere’s a quick excerptI have been reviewing the details of the French health care system, as it was established in 1945, and how it has evolved in a history somewhat similar to our own. The Second World War marked the divergence between the two countries. … […]

  2. Health says:

    […] Continue Reading […]

  3. […] unknown wrote an interesting post today onHere’s a quick excerptI have been reviewing the details of the French health care system, as it was established in 1945, and how it has evolved in a history somewhat similar to our own. The Second World War marked the divergence between the two countries. … […]

  4. allan says:

    Leave it to you to make sense of all this. But as you pointed out, the splintered factions within the medical and political industries will do their damnedest to obfuscate and block the way out of this overly expensive and inefficient medical insurance system that we’ve built up over history. Mostly to protect their domains and personal security.

    I have to believe the current stresses upon our healthcare industry will lead to solutions similar to what you outlined. The domain defenders will give way, or be shunted aside. May take a while would be a gross understatement though. And although the illegal alien burden might be in the process of being reduced via recessionary-inflationary forces (The Big Bye-Bye ongoing now), that burden will likely be handed over to the acutely and chronically unemployed in the US. So that stress is here to stay.

    Your proposal for a new financial format for medical education built around an option for physicians to pay their way out of a public tier to a private tier is elegant. But great problem solving winds all through your suggestions. You put a lot of work into this series. Masterful.

  5. Eric Blair says:

    Dr. K.? May I make a suggestion? I think that you should create a PDF with the entire series. In fact, have a look at…they have something called “Amazon Shorts” which are essays and stories that can be downloaded for a small fee to one’s computer.

    I think your essay would be a great addition….

    Let us know. In fact, where I teach, I would love to have your essay available in a format where the premeddies can see the whole series in one place.

    Just a thought.

  6. allan says:

    Coincidently, I just came across a similar two tier approach to Social Security reform, courtesy of one of my financial newsletters. This was excerpted from an interview of Jose Pinera, Labor Minister of Chile during the 80’s. I know…¿Chile? But here’s what the 20-something grad of U of Chicago and Harvard came up with for salvaging an insolvent pension system:

    “My system is very simple. The worker makes exactly the same contribution as he did before. But it’s his own money and he knows it. And he has some control over how it’s invested. And if he dies, it goes to his family. He’s an owner of it, not just a recipient of government handouts.

    “So, when I had finished laying all of this out, over a 9-month period, I then admitted that I could be wrong. ‘Maybe this won’t work as well as I think it will,’ I said. And I said I didn’t want to force anyone to go with my system. So, we decided that anyone who wanted to stick with the old system – which is the system you still have in France…and America – could do so. Or, they had the option of getting into the new system with individual retirement accounts than they could manage themselves. Now, guess how many people went with the new system? We thought 51% would be a victory. Instead, 95% signed up for private retirement accounts.

    “And here’s something interesting. About a third of the population of Chile are leftists…socialists, communists, or Hillary Clinton liberals. Even these people – when it came to their own money – preferred to have it in their own retirement accounts, invested in stocks and bonds, rather than in some black hole in the government accounts.

    “And the best thing about this is that it turns the whole country into capitalists. Even the leftists think twice before they vote for higher business taxes or more regulations. They worry how their retirement account will be affected. And that’s why Chile is now the richest country in Latin America.”


    Doncha just hate it when the old Red Chinese are becoming better at capitalism, and the Chileans have already “privatized” social security by creating private accounts?
    We’ll get our reforms of healthcare and social security either by enlightened politicos, or by collapsed systems. I’d recommend puts on the politicos and calls on the collapses.

  7. That’s an interesting idea, Eric. Macs have an option to save documents as pdf files. I’m hoping to get a few comments and corrections. There is a young French MBA equivalent who is working with a relative for a year. I may ask him to critique it for errors in how the French system works. The report that I link in the first post has vignettes of encounters for different people to show how it works but those are 7 years old.

  8. doombuggy says:

    Good ideas.

    I think we should bill the country of origin for the cost of illegal aliens.

    It seems at some point we need to grapple with the rising cost of heroic end of life measures.

  9. DM, there are some misunderstandings about the cost of care of the elderly. End-of-life and the elderly are not the same issue. I did a study a few years ago leading to a grant proposal (which didn’t get funded for reasons that are interesting) to change the care of what are called “the frail elderly,” usually people over 85 years old. The peak cost of care is about the age of 70. After 80, it falls off quite sharply. Elderly people do not want expensive care, like joint replacement and so on. They want to be comfortable. Also, there is a selection process that goes on. Bad genes and bad lifestyles result in death around the age of 70 to 75. People who live to 80 and up tend to be healthy people. There is a trend to excessive spending on end-of-life care but that is changing. The hospice movement, for example, has had a lot to do with it.

  10. university hospitals of cleveland…

    This is similar to comment spam but avoids some of the safeguards designed to stop the latter practice. The term is used colloquially…

  11. […] turns to stateside experiments in the US. The US has 50 states and there have been a few attempts to use states as “laboratories of […]