Economics of health care
system flawed, says Kuttner
Perfect economic markets are profit-centered. Demand is based on individual
purchasing power, supply is unrestricted and the consumer is king. Buyers
armed with adequate information and adequate choice "regulate"
producers by knowledgeably shopping around for products and services. These
ideas have been the cornerstone of the recent explosion of for-profit health
maintanence organizations (HMOs) and hospitals such as the Columbia-HCA
chain, said BusinessWeek and Boston Globe contributing editor Robert Kuttner,
at Emory Feb. 16 for a Sawyer-Mellon Seminar lecture.
Although Americans must figure out a way to use health care dollars as
efficiently as possible, medicine serves as a noteworthy exception to these
economic principles, said Kutt-ner. "We're being told that the solution
to the crisis of medical costs, access to coverage, and reliability and
quality of care is to somehow make medicine more like a market," he
said. "Most of the problem today is that medicine is already too much
of a market.
"When one set of players decides that medicine is just an ordinary
business and decides to expunge the unprofitable aspects and to profit-maximize
the way an ordinary business does, it destabilizes and fragments the entire
system," Kuttner explained. These practices set the health care industry
on a determined "race to the bottom," a term Kuttner frequently
invoked during his lecture.
First of all, he explained, the ability to obtain health care is not
simply a matter of private purchasing power. "We have made a decision
as a society that we're not going to let people die on the street just because
they can't afford to pay a doctor," Kuttner said. This decision was
partly altruistic and partly self-serving. "Epidemics can afflict rich
people as well as poor people," he said.
Secondly, because doctors and hospitals are licensed and credentialed,
"we have decided-rightly or wrongly-that medicine is simply too complicated
to let anybody simply hang out his or her shingle as a medical doctor and
hope that the sovereign consumer can tell the difference between the physicians
and the quacks," Kuttner said.
"Europe, which has slighly lower-tech medicine and doesn't have
the crazy payment system we have here, only spends about 9 percent of its
gross national product on health care and we spend 14 percent," he
explained. Still the average number of inpatient hospital stays per capita
and lengths of stay are greater there than here. U.S. hospitals have a strong
financial incentive for early patient discharge and outpatient procedures.
Rather than actually cutting costs, as the industry promises, the current
predominance of managed care only adds to health care's fiscal woes, Kuttner
said. "Much of what calls itself 'managed care' is managed costs,"
he said. "Increasingly the game has become one of more and more middle
men taking a few cents off the premium dollar and passing the rest to the
physician. This is not exactly efficient."
HMOs and for-profit hospitals also shift the cost-and burden-of treating
the sickest patients and the indigent onto other parts of the health care
system. "It's also appropriate, I think, being at Emory, to point out
that for-profit hospitals tend to avoid contributing to all of the cross-subsidies
in health care, from research to education of physicians to the necessary
treatment of money-losing cases and expensive teritiary care facilities."
To be fair, Kuttner pointed out, the health care industry direly needed
to trim excessive costs and reduce waste. "I have heard leaders of
teaching hospitals in my own community say that if Columbia hadn't been
around, something like it would have had to be invented because to some
extent they needed the competitive discipline to squeeze out unnecessary
costs," he said. But the aggressive-and sometimes unethical-measures
adopted by some HMOs and for-profit hospitals put "terrible pressures
on the more ethical hospitals to operate in the same way," Kuttner
Kuttner, whose most recent book is titled Everything for Sale, made no
secret of his preference for a single-payor health care system, which has
its detractors. The post-World War II U.S. economy spawned the current system
of employer-sponsored health care that leaves 40 million Americans uninsured,
he said. Now the idea is that the cure for this is "to perserve essentially
the same structure but to add on entrepreneurial managed care," Kuttner
noted. "And we often overlook the fact that there are whole other paths
other countries pursue where you don't have consultants and marketers and
lawyers and shareholders taking more and more out of the premium dollar.
"It makes you wonder," he added. "Countries that have
universal systems, and much worse demographics than we do, are somehow managing
to keep a lid on health costs because everybody's in the same system. In
the United States we have revolutionized our health care delivery system
to preserve its payment structure, while other countries have reformed the
payment structure to keep the health care and provider system intact."
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