A Brief History…

In my book on the history of medicine I included a chapter on the history that led to the present crisis in health care economics. Basically, there are three general causes of the problem. One is technology. When I was a medical student 40-some years ago, there were no coronary care units, no coronary bypasses, no total hip replacements and life expectancy was about 72 years. When Bismark first established the retirement age at 65 in Germany, that (age 65) was also the average life expectancy. Now it is over 80 years and rising, which leads to the second cause. We have an aging population. Everyone outside of the Muslim world does. Old people need more care and technology has provided the nexus between high technology and age that is breaking the bank.

The third cause is more complex and varies from area to area, depending on the financing of health care. The United States has a mixed system for financing health care. Medicare and Medicaid are government single payer systems for care of the elderly, disabled and the poor (mostly women, children and nursing home residents). In recent years, the mechanism of paying in these systems has changed to the Health Maintenance Organization in many cases. The HMO, as it is abbreviated, is a creature of sociologist and rehabilitation physician, Paul Ellwood.

It would appear that Dr. Paul Ellwood, and his subsequent InterStudy organization, did not expect that the control of their HMOs would be by business executives and corporate shareholders committed only to their own fiduciary motives rather than medical professionals committed to a higher ethic.

The Achilles heel of the HMO system has been the role of perverse incentives. When Paul Ellwood coined the term HMO, he had in mind the fact that fee-for-service medicine creates an incentive for the doctor to do “more” care than the patient really needs in order to increase his own income. John Wennberg, of Dartmouth Medical School, calls this “supplier induced demand.” They did not seem to consider that a powerful HMO has an incentive to do the opposite. In the days before health insurance, the doctor and the patient had a more balanced relationship. Yes, there was a gap in information greater than that between, for example, a car owner and mechanic. Yes, the stakes were higher for the patient than having to buy a new car. Still, the transaction was easier to understand and the incentives were in better balance. Health insurance removed the transaction from the cost-benefit analysis of the patient and doctor to a remote, impersonal third party that, in the early days, had little incentive to interfere. Premiums were often paid by yet another, fourth party, the employer or the government. It is only recently that cost became the driving force it is today.

In his book, “Comeback”, David Frum attributes the distress of the middle class in the US today to the erosion of incomes due to the double whammy of FICA taxes to support programs for the elderly and health insurance premiums deducted by the employer.

In 1992, as President Clinton took office, anticipation was high that a solution was at hand. The Dartmouth people were heavily involved with designing the Clinton Health Plan but the political process went off the rails in an example of how not to do legislative action.

Since the failure of the Clinton attempt at reform, the HMO process has evolved and the only winners appear to be the corporate entities that found how profitable for-profit HMOs could be. They have done this by victimizing both doctors and patients. There has to be a better way.

I’ll post more about this in days to come.

This entry was posted on Tuesday, January 29th, 2008 at 8:23 am and is filed under health reform, History, medicine, politics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.