A conversation on the future of health care.

Fred Wolf, MD, Medical Director of TLC HMO, a large mixed model, is retiring from medicine and medical management. Mark Harrington, MD, the Associate Medical Director, is replacing him. Mark, who will take over tomorrow, is in Fred's office to wish him well. After initial awkwardness, their conversation becomes more relaxed.

"Well, Fred," said Mark. "I hate to see you go. You must be glad to be bowing out before Congress reforms health care, whatever that will bring. What do you think will really happen?"

Fred sat back, looked directly at Mark, and said, "I honestly don't think much of significance. A lot of money is being spent by special interests to make sure their pies are least affected: insurance companies, drug companies, the AMA, even HMOs. Unfortunately, they'll probably prevail."

"Hey, Fred, remember one of those pies is ours. I hope the emphasis on managed care remains; that would be good for us."

"It would be for us and others in what we now call managed care. What bothers me, though, is whether it would be good for the country."

"Of course it will! We make care accessible and provide it at lesser cost. You know that. You've been in HMOs for more than 20 years since your stint in private practice. How can you doubt the good that could come?"

"Mark, I've thought about our health care system a lot, especially over the past few years, and I honestly feel there is not enough thought given to those our profession serves. I think any legislation that would move most people into private insurance and managed care would be unwise."

"You're kidding! With all that we do to provide good care and still keep costs down! You're not making sense, Fred."

Fred paused, then said, "I honestly believe that only by adopting a single-payer system with everyone covered can we have significant change that benefits people - not just vested interests, ours included."

"Are you out of your mind? Government running medicine? I thought you believed that HMOs were the last hope against socialized medicine. You've worked hard for our HMO's success. Were you kidding us? Or yourself?"

Fred stood, walked to the window, gazed at the skyline. "No. In the seventies, even the early eighties, I wasn't kidding. I believed it; I spoke it; I worked for it - the growth of HMOs. But I think something happened along the way, something that has been gnawing at me, causing me to rethink. In the early days, HMOs were, by and large, independent from insurance companies. Why, even their marketing departments took pride in that fact and used it in their sales pitches. My first medical director position was in one of those HMOs, and it was fun. My job was primarily to improve medical care and reduce costs. But something happened; we were too successful. As HMOs grew, insurance companies moved in. Look around. How many HMOs are not owned or run by insurance companies? Even ours, once independent, is now owned by a major insurance company. I think agendas have changed. Medical care is no longer primary; it's only a tool for market share and profits.

"Fred, be careful, you're biting the hand that fed you. Have you forgotten who paid your salary?"

Fred turned, sat down, looked at Mark. "No, I haven't. I am grateful. I'm not saying that our insurance company and others are evil; they're doing what they know and think is best. The question is whether it's the best we can do. I don't think so."

"How can a single-payer system be better? Aren't we, and other managed care entities, keeping down health care costs? What more can you ask?" Mark asked.

"Yes, we're keeping a lid on costs. But whose costs? True, our company works with employers to reduce premiums, successfully I might add. But it's employers' costs that are reduced, not always total care costs. The major reductions now come from a redesign of benefits and premiums resulting in somewhat less coverage and more out-of-pocket costs for patients. Is that progress? Is that reform? I don't think so. And what drives this? Competition. Look at one fairly recent development, the open HMO. That was a marketing decision to permit us to be more competitive. It worked, but it put a significant crack in what HMOs were really about: having the HMO responsible for all the health services of a member. The basis for true continuity has been compromised. Responsibility has been diluted; our ability to ensure high quality has been lessened. I'm afraid too many HMOs are no longer what the original ones aimed for; they're looking like ordinary insurance plans."

"Fred, times have changed. We can't live in the past. We've got to keep up with today. Why, if we hadn't changed, we probably wouldn't be here. We have to keep customers happy."

"You're right, Mark. But it's not today that concerns me; it's tomorrow. I'm dead serious about a single-payer system. I think it's workable and overdue. Whatever changes come out of Washington this year, or next, or the one after, will only be steps along the path to our eventually having such a system. I don't think we can avoid it."

"You sound very convinced. Why?" Mark asked.

"More reasons than we have time to discuss now, Mark, but let me mention a few. First, consider insurance coverage. You know all the limitations and exclusions under our coverage, which is comparatively good; our restrictions are nothing compared to those of others. To provide that coverage, our company has to stay in the black. So what do we do? We do all we can to avoid expensive cases. You've sat in on the underwriting committee meeting in my absence. Have you noticed what happens in account analyses? Utilization information and cost data are used to help decide whether to drop the account or raise the premium so high the employer will seek other coverage. I know that has to be done in our existing system for survival, but is that what medicine is about? If it is, I think the time is overdue for change.

"Then, what happens to employees and their dependents if an employer changes coverage? Fred continued. "Too often, some of them are excluded from coverage or saddled with unrealistic limitations. In companies that self-insure, it's worse; no one regulates their coverage, exclusions, and limitations. Think about the employee with a chronically ill dependent. How can he change jobs if the new coverage won't accept him and his family? He can't. He's stuck!"

"But, Fred, there's talk about preventing exclusions so that won't happen. That should solve that problem. It seems insurance companies would accept that."

"Sure they would. You would, too. That's little to give up to gain a huge market. We now have about 39 million uninsured; by 2000 we may have more than 45 million.[1] If you were an insurance company wouldn't you be thrilled at the prospect of having legislation that drove all those millions into private insurance? Think of the billions in premiums! Think of the potential for increased profits! If a law results in the uncovered being put into private insurance, great sums of money will be consumed that will not buy a band-aid, an immunization, or an office visit. A single-payer system would wipe out marketing and profit totally; with government the insurer, there's no need to market or for profit. That leaves a lot of money that could go for care. There's something else. I wonder why we insist on asking employers to pay for premiums."

"If they don't pay, who will?" asked Mark. "I don't think the average Joe can afford it. Some have problems with premiums for their coverage under COBRA. What would you do? Raise taxes to pay? People don't want more taxes."

"Whether a dollar leaves my wallet labeled a tax dollar or a premium dollar, I'm out a dollar," Fred said. "A lot is spent for medical care in our country - private insurance dollars, Medicare, Medicaid, local and state taxes to support health services, plus out-of-pocket dollars. It seems to me that, by having one source of coverage, we could more easily get a grasp of what is available for care and how it is used. I think people should pay for their coverage. Oh, employers may have to deduct and forward money due from employees, but that is much different from the employer footing the bill. Further, I think what a person pays should be based on his income, not taxable but all income. I'm not sure, but possibly patients should share in the services cost to some degree."

"Those are radical ideas, Fred."

"Not so radical, Mark. Don't we pay for police and fire protection through our property taxes? Those taxes are based on the value of what we own. It seems most people aren't too unhappy with that arrangement. Why not a similar arrangement for medical coverage?"

"But what about the poor?" Mark asked.

"The income developed would have to cover them. If there are copayments, a sliding scale method could be used to determine them."

"It'll never fly!" Mark said.

"Maybe not, Mark, but such a system could finally put cost and clinical information in one database so we could sort out what works and what doesn't in medicine. We have a fine database on patients, but it's limited to the time they're covered by us, which limits our ability to do analyses. Having one payer for the lifetime of a person can also help us afford preventive care. Now, it's limited and gets more press than it deserves. Oh, we do fine on prenatal care, but that's to our financial benefit; the major results are there within a year.

"Think about this: if we invest money in preventive education and services that do not have their payoff for 10 or 20 years, will we benefit from those results? With the turnover of accounts and members, I doubt it; too many will have other coverage by the payoff time to make it cost effective for us. Yet, if you were responsible for care costs for Joe from birth to death, it would make economic sense to make such an investment. Having one coverage for a lifetime that is not job dependent would be a great boon to people; they would no longer have to worry about coverage with a job change or loss. Having employers freed of the costs of coverage should be of great assistance to businesses, small and large."

"Sounds like you want to impose the Canadian system on us, Fred. You know, they have their problems, too."

"Sure they do. There's no system that won't. But with a single-payer system, problem solution would be meaningful; we'd address care, its effectiveness, and its costs rather than focusing on preserving market share, employers' dollars, and profits as we do now.

"Mark, look at what the Congressional Budget Office has to say about the various reforms. If we had had a single-payer system in 1986, we would have saved about $100 billion of the $750 billion plus spent in 1991.[2] Of all the reform proposals, a single-payer system would save the most.[3] That should tell us something."

"I don't know," Mark replied. "That's hard to believe."

"I don't find it all that surprising," Fred said. "When you wipe out the need for profits by insurance companies; reduce the exorbitant amount of administration and paperwork that has been laid on the backs of hospitals and physicians by managed care and insurance companies; and remove the costs for all those billboards, newspaper ads, slick TV commercials, and other marketing costs, the savings are significant. I assume you saw the article on U.S. hospital administrative costs, which are close to 25 percent, twice as high as in Canada.[4]

"Consider one of our most important activities, coordination of benefits. We spend a lot on staff and attorneys to work on it. But it's very cost effective for us; we collect from other companies to offset our costs. If there were just one insurer, there would be no need for COB. I know we need the department, but I believe the need for it reflects the craziness of our present system.

"Mark, the more I think about insurance coverage, the more secure I feel in my belief. Insurance companies want to cover large populations to spread the risk. What happens now? We want a large number covered, but not the risky ones - let somebody else cover them. Worse yet, if they can't get covered, let them pay themselves or go get Medicaid, a coverage system paid for by our taxes.

"Look what we did with the crack babies on our Medicaid contract. Child protective services would not allow discharge, so we finally prevailed upon the state to recognize we should not be responsible for their hospital care after they could be discharged medically. It was a great plan. It saved us thousands. But it did not lower health care costs; it only shifted costs to the taxpayer.

"We don't market to certain businesses because of disproportionate risk. If expensive patients get angry and disenroll, we sigh in relief. If an account is too expensive, we hope it goes elsewhere. I know we have to do it for financial survival, but that goes down hard with me when I think about what our profession should mean to us.

"There's a looming, smoldering coverage problem: genetic testing. As it grows, how will a person's coverage be affected? Some already have been adversely affected.[5] Employers will want to know the potential for illness because of their cost liability for coverage; insurance companies obviously would have the same concern, with an eye to excluding those at risk. With a single-payer system, there would be no coverage problem; there would no longer be employer financial risk.

"Mark, if our whole population were in one insurance pool, all this shifting of people and costs to others would disappear, and, I believe, we'd be better able to address the total costs of only health care. I think coverage should include the concept of responsibility to the patient, responsibility that goes beyond market share and profits. I've concluded that that concept is beyond the grasp of the private insurance mentality."

"Fred, you haven't said anything about controlling providers. Do you think by having a single payer system that savings will pay for their excesses?" challenged Mark.

"No, I don't. But one sure benefit will be significant administrative cost savings for providers. Why, look what happened with Max Rosenberg - the best family physician in our IPA. He left us because of the hassle. Further, he claimed that, by leaving us, even though his capitation income was about five to seven percent of his business, he would be better off financially. I visited his office one day to review his financial analysis and to observe his office staff for about five hours. You weren't in the management meeting when I reported on my visit - too bad. I told the committee that, if I were Max, I would leave our program, too. I was appalled by the time spent on the telephone trying to communicate with us and get authorizations for service. I saw first hand the effect of all our forms on an office. He had to hire extra staff to be able to handle our HMO, the only one he was in. We have done no favors for physicians in private practice. It must be a huge burden for those in more than one HMO, a burden that is costly and does nothing for medical care.

"Mark, I know we had to do what we did, but I think continuing down our present health care financing road, no matter how it is repaved, will be unfortunate. Fee schedules and global budgets will be needed to help control provider excesses. Not a simple job, but one that needs to be done."

Agreed," Mark said. "But that will raise the specter of rationing. How would you handle that?"

"Not sure. We do have rationing now, but, it's not well publicized. You mentioned the Canadian system. Do you know they have a higher rate of organ transplants than we do?[6] That suggests they have a better way to see that those with need are cared for. On my last CME trip, I saw a newspaper article that depressed me.[7] A child needed a liver transplant; the state would authorize one, yet some need two to survive. So, what are the parents going to do? They are tearing up their roots to move to a state that will provide more than one. I give the parents credit. They researched the benefits under Medicaid; for their child's care and their financial survival they are moving. What a wonderful system we have!"

"But, Fred, which state is right? Are you saying that people should have the care they want covered in all instances?"

"Of course not," Fred replied. "Patients can make unreasonable demands on medicine, and some demands should not be tolerated. Only those services that contribute to the health of the patient should be covered, not just what they want. I know that's a tough one; look at the problems we have with it now."

"All this is very interesting, Fred. But I've got to say you aren't convincing me. I still think getting more people into managed care is the way to go. We've got the management and systems to do the job."

"Mark, listen to yourself. Management and systems to do what job? Today, that job has become one for reduction of our costs, not necessarily total cost reduction or improved care. Why, look at what some of our staff physicians have done for themselves and their families. Last month, one of our staff physicians took his wife to an oncologist who left our IPA a few years ago. He opted for the insurance portion of the coverage we have, not the HMO. Not everyone has that option. What have we done? We have designed a system that forces patients to see a limited number of physicians; we've curtailed choice. Why not have a single-payer system that will allow patients to choose physicians with whom they are most satisfied? If it's good for us to have that choice, why not others? Then we could see real competition based on quality of care; choices could be made by the patient, not by an employer who chooses coverage on the basis of price.

"That brings up another thing - continuity of care. I know! We have good continuity. However, we can't forget that, when we gain an account, or lose one, many patients are forced to leave their doctors. That adversely affects continuity. Further, it's not cheap. I have no idea what additional costs are generated by those changes, but they are there and they do not buy one whit of care."

"Fred, it's getting late. You must know you won't convince me. Perhaps we'd better call it a day. Besides, the more you talk about a single-payer plan, the more uneasy I get."

"I apologize for getting carried away and keeping you," Fred said. "Uneasy? That's good. We should all be uneasy about the road we're on and where its going. Permit me one more thought. We in HMOs have made a big point of trying to get physicians to see beyond the individual patient, to see medicine as a service to a large group. That's good, necessary, and still valid. We have had some success. If we really believe in that approach, let's take the next step: seeing that group not just as our enrollees but as the citizenry. The only way I see we can do that is by having everyone in the same insurance pool."

References

[1.] Anders, G., and Stout, H. "Dose of Reform." Wall Street Journal, Aug. 26, 1994, p. A1. [2.] Wellstone, P. "Sounding Board: The American Health Security Act - A Single-Payer Proposal." New England Journal of Medicine 328(20):1489-93, May 20, 1993. [3.] "CBO Studies Find Single-Payer Best." Physicians for a National Health Program Newsletter, June 1994. [4.] Woolhandler, S., and others. "Administrative Costs in U.S. Hospitals." New England Journal of Medicine 329(6):400-5, Aug. 5, 1993. [5.] Rennie, J. "Trends in Genetics: Grading the Gene Tests." Scientific American, June 1994, pp. 88-97. [6.] Himmelstein, D., and Woolhandler, S. "Transplants, U. S. and Canada, 1998." The National Health Program Chartbook. Chicago, Ill.: Physicians for a National Health Program, 1992. [7.] Montini, E. "State Forces Family into Hard Choice." Arizona Republic, Sept. 5, 1994, p. B1.