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POLICY/QUALITY: Why does Health Care in the USA cost so much? Over-utilization is an important factor by Walter Bradley

Walter Bradley has not only written the shorter piece today, but has sent me a longer piece citing over-utilization as a cause of high health care costs in the US. I’m inclined to agree with him even if Anderson doesn’t. It’s a longer more academic piece and I’ve buried most of it behind the fold.

Introduction

The United States (US) invests a higher proportion of gross domestic product (GDP) on health care than all other developed countries, despite which the US population suffers poorer access, a higher individual financial burden, inefficient care and a higher medical error rate than people in most other developed countries.

 

The
US expenditure on health care in 2004 was 16.0% of the GDP ($1.9
trillion total or $6,280 per capita), and this is forecast to rise to
16.5% ($2.2 trillion) by 2006 and 20.0% ($4.0 trillion) by 2015.1
The annual rate of inflation of expenditure on health care 2002-2004
was about 8.4%, which far exceeded the rate of inflation for all other
items in the US economy. 1,2 By comparison, in 2001, when
the US expended 14.6% of GDP on health care,  the next highest percent
of national GDP spent on health care was Switzerland (11.1%), followed
by Germany (10.7%) and Canada (9.7%); the United Kingdom spent 7.6% of
the GDP on the National Health Service. 3 

Despite
this high expenditure in the US, the 2005 Commonwealth Fund
International Health Policy Survey of sicker adults from six countries
(Australia, Canada, Germany, New Zealand, United Kingdom and US) found
that “(t)he United States often stands out
with high medical errors and inefficient care and has the worst
performance for access/cost barriers and financial burdens.”
4 The US lags behind many other countries in indices of quality of care. In 2006 the US ranked 43rd
among the world’s nations in infant mortality, with 6.43 infant deaths
per 1,000 live births, behind the top performing nations such as
Singapore (2.29), Sweden (2.76), France (4.21), Canada (4.69) and
United Kingdom (5.08), 5 and was 29th among developed countries in maternal mortality. 6 Schoen et al. (2006)7
found that the US lags behind other countries on indicators of
mortality and healthy life expectancy, with the US performance relative
to a benchmark of 100 being 51 for efficiency and 66 across all
domains, the lowest for any comparable country. A 2006 survey of
primary care physicians in Australia, Canada, Germany, New Zealand, the Netherlands, the United Kingdom, and the United States revealed “striking differences in elements of practice systems that underpin quality and efficiency. ….. U.S. physicians were among the least likely to have extensive clinical information systems or incentives targeted on quality and the most likely to report that their patients have difficulty paying for care.” 8

The
US public is becoming increasingly concerned about quality of health
care, rising proportion of premiums and charges that fall on employees
in employment-based health insurance, timely access to urgent care,
availability of physicians and rate of medical errors. 4, 8-11

Several
elements of the current US health care system have been suggested to be
responsible this high cost, including bureaucracy and administration,
malpractice insurance and defensive medicine, high cost of goods and
salaries of health care workers, and over-utilization.

Administrative
costs absorbed 31% of total health care expenditures ($1,059 per
capita, or $294 billion total per annum) in the US in 1999 compared to
16.7% ($307 per capita) in Canada.12 Medical malpractice
premiums have increased greatly in the last two decades and the direct
cost of malpractice losses incurred in the US amounted to $6.5 billion
in 2001. 13 Fear of litigation leads physicians to practice defensive medicine, including doing unnecessary tests. Studdert et al. (2005) 14
found that 92% of practitioners in high-risk specialties practiced
defensive medicine. Extrapolation from their data suggests that
defensive medicine may increase the medical (physician and hospital
services) element of health care expenditure by at least 30%.

On the other hand, Anderson et al. (2003) 15
stated that “It’s the Prices, Stupid”, arguing that the high cost of
health care in the US results from the price of goods and services
(salaries of those that work in the health system, pharmaceuticals
etc.) being much higher in the US than in other countries. They later
presented evidence that supply constraints and cost of malpractice claims are not major factors in the high costs. 16 

 

Over-utilization in the US health care system

Though
there is little reliable information about the extent of
over-utilization in the US health care system, informal discussions
between physicians from the US and other developed countries leave no
doubt that, for the same diagnosis, US patients with health insurance
receive many more medical services than those in other countries. US
physicians tend to order many tests to rule out unlikely or rare
conditions, while those in other countries tend to be more
cost-conscious.

Over-utilization of health care services in the US has many causes. Defensive medicine is one of them, but another is the profit motive. The income of medical facilities and physicians increases when more tests are performed. As Allen (2003)17 pointed out, the US third-party payment system rewards technologically
intense services. Surgical and other procedures are reimbursed at a
higher level per unit of time expended by the practitioner than are
cognitive services. This leads to the tendency for medical students who
wish to make money to select higher paying procedural-based disciplines.
18 

Physicians’
mode of practice and patient expectations are inextricably intertwined.
Patients generally believe that more tests are better than less. For
instance, patients with migraine headaches often request an MRI scan of
the brain because they believe that a doctor cannot exclude a brain
tumor without a thousand dollar test. Patients given a diagnosis like
multiple sclerosis or amyotrophic lateral sclerosis (ALS or Lou
Gehrig’s disease) usually go to several other doctors looking for a
“better answer”, each of whom will do yet more tests.

Neither
physicians nor patients with third-party payment-type health insurance
have any incentive to practice cost-effective medicine. Medical
students do not receive courses in this. The original concept of the
Health Maintenance Organization (HMO) was to make the physician a
stakeholder in cost-containment, but the rigorous application of this
was generally unpopular. More recently, health insurance companies
offer patients a series of plans with graded premiums and deductibles,
the more costly of which allow the patient more flexibility. However,
it has yet to be demonstrated that these reduce the number of services
received by patients.

Patient expectations and national characteristics of medical practice may be important factors in the high cost of health care in the US. Five vignettes from my academic neurology practice illustrate over-utilization in the US health care system.

 

Vignettes of over-utilization

 

Vignette 1: “Do I need a back operation?”

The story.
A friend told me that he was scheduled for back surgery the following
week. His general practitioner had referred him to an orthopedic
surgeon, who had arranged X-rays of his back and hips, a CT of the
abdomen and an MRI of the lumbosacral spine. He was told these showed
discs pressing on the nerve roots going to the sciatic nerve. I asked
him about his symptoms. He had intermittent right leg pain for a year,
but when he said there was no accompanying back pain I suggested he
made an appointment to see me.

In
my office he told me he was 67 and previously in good health apart from
a mild heart attack five years ago. The pain in the right leg started a
year ago in the calf and lately was also in the thigh, and came with
walking. Originally the pain would come when he walked for half an
hour, but gradually the distance had decreased and now the pain would
come after walking a block. It would disappear if he rested for thirty
seconds and again he could walk a block before the pain stopped him
again. He was surprised I asked him all these questions, since his
general practitioner and orthopedic surgeon had not interrogated him
like this.

Examination
showed that there were slight signs of damage of the right S1 nerve
root and absent arterial pulses in the whole of the right leg. It was
clear that the cause of the exercise-induced pain was blockage of the
arteries of the right leg above the groin and that he needed an
operation to open these arteries, not surgery on his lumbar spine to
remove herniated discs.

     The cost.
The medical and surgical consultations up to that time cost about $1000
and the X-rays, CT and MRI scans probably cost about $4000. The total
cost of the unnecessary back surgery would have been at least $10,000
and more if there had been complications. All this could have been
avoided if his doctors had taken the history of his complaints, rather
than saying: “Pain in one leg? Must be a back problem. Get these tests
and we will see what needs to be done.”

 

Vignette 2: “We cannot let the patient starve to death.”

     The story.
The aunt of a friend developed Alzheimer’s disease in her 70s. She went
into a nursing home, progressively deteriorated, became incontinent and
bed-bound, and was eventually totally unresponsive. When the nurses
began to find it difficult to feed her by mouth, the doctor said that a
gastrostomy tube needed to be inserted into her stomach to allow them
to continue her nutrition. The patient had a living will but her niece
wanted everything done to prevent her aunt suffering and gave
permission for the procedure.

     The cost.
The total cost of placing the gastrostomy tube was about $1500. The
patient lived for another two years in the nursing home costing
Medicaid and Medicare over $120,000. The right course of action would
have been to declare further medical care futile and simply provide
comfort care for the patient, allowing her to die peacefully.

 

Vignette 3: “I cannot let my mother die.”

     The story.
A 70 year old lady was standing by the side of the road when she was
hit by a car, thrown thirty feet, and sustained a severe head injury.
She did not have a living will but had told her family that she never
wanted to live “as a vegetable”. She underwent emergency surgery to
remove clots inside the skull and brain, but remained in a coma on a
ventilator. A week later the director of the intensive care unit met
with her son and daughter to tell them that there was no hope of their
mother recovering. The son asked: “Is my mother brain-dead?” The doctor
said that technically she was not. The son then asked: “Are you telling
me that she will not make any recovery?” The doctor said that she would
make a little recovery but would probably never be able to survive
outside a nursing home. The doctor offered to withdraw the ventilator
and keep his mother comfortable, but the son said he wanted everything
done for his mother.

     The cost.
She remained in the intensive care unit for another month, which cost
of about $100,000, and then went to a nursing home. She could live
another five years at a cost of more than $300,000 a year. The best
course for the patient would have been for her to have completed a
living will years before and to have made sure that her children
understood that the ventilator should be turned off if she had such an
accident.

 

Vignette 4: “You need a colonoscopy.”

     The story.
An 87 year old lady was brought by her daughter because of memory
problems. Examination showed that she had early Alzheimer’s disease.
Her daughter said that her doctor was looking after her hypertension
and diabetes, and had arranged a colonoscopy next week because
“everyone needs the test every ten years to prevent colon cancer”.

     The cost.
The total cost of the colonoscopy might have been $1100. However, she
was a frail old lady and might well have suffered complications from
sedation and the procedure, and might even have died. The colonoscopy
was unnecessary in a lady who was already dementing and who probably
had less than two years to live.

 

Vignette 5: “You have Lou Gehrig’s disease.”

     The story.
This is the story of a typical US patient with ALS. He became aware of
some neurological symptom, such as dragging the feet, wasting of a
hand, flickering of muscles, or slurred speech, and consulted a
neurologist. The neurologist found signs that strongly suggested the
diagnosis of ALS but did not tell this to the patient. Recognizing that
at this moment ALS is incurable, the neurologist, according to US
practice, wanted to make absolutely sure that no other condition was
responsible for the symptoms. The patient had a large number of
expensive blood tests, MRI scans of the brain and spinal cord,
electrodiagnostic studies and a spinal tap. The patient kept coming
back to the neurologist for further examinations and tests, while he
gradually develops more disability. About a year later, the neurologist
finally told him he had ALS.

     The cost.
Leaving aside the emotional cost to the patient of being left uncertain
for a year about what is causing the progressive paralysis, the
financial cost to the health system of these tests may be about
$10,000. Additionally, a number of patients undergo unnecessary spine
or nerve surgery as a result of mistaken advice that this may arrest
their condition.

 

 

Discussion

 

Reference
was made in the Introduction to the part that administration,
malpractice insurance, defensive medicine and the price of goods and
services play in the high cost of health care in the US. The five
vignettes above provide examples of over-utilization of medical
services that add to the cost of health care in the USA.

Matters Raised by the Vignettes

The
primary care physician of patient in Vignette 1 failed to make the
right diagnosis and referred the patient to the wrong specialist. This
led to incorrect investigations and could have led to unnecessary
surgery. The answer to this problem might seem simple; we need to train
primary care doctors better. An improvement in the primary care base in
the USA, with everyone having a well-trained family physician, would go
a long way to help.

It
has long been recognized that the US does not have a comprehensive
primary care network and needs to train more primary care physicians.19 The United Kingdom has about 550 family practitioners per million of the population, 20 while Canada has about 740 primary care physicians per million. 21 In comparison, the American Academy of Family Practitioners has about 58,500 active members, 22
or 200 per million of the US population. In the US internal medicine
specialists also provide primary care for many patients, perhaps
without the breadth of training of family practitioners. The American
College of Physicians has about 104,000 full members of whom perhaps a
half (approximately 180 per million of the US population) provide some
primary care. 23 Physician assistants and nurse practitioners, who number about 500 per million of the US population,24 provide primary care but are not as fully trained in diagnosis as are family practitioners.

Vignettes
2 and 3 illustrate different aspects of how society bears the financial
burden of decisions made by physicians and families, since both
patients were covered by Medicaid and Medicare.

The
doctor in Vignette 2 might well have told his wife that he would not
want to be kept alive if he developed advanced Alzheimer’s disease, but
nevertheless he felt unable to tell the niece that continuing care was
futile and that her aunt should be allowed to die peacefully without a
feeding tube. The family of the patient in Vignette 3 could not give up
hope of recovery of their mother despite the strong advice of the
doctor that no useful recovery would occur.

Neither
the doctor in Vignette 2 nor the family in Vignette 3 was a stakeholder
in the financial burden, otherwise they might have made their decisions
taking into account the issue of cost.

The
doctor in Vignette 4 may have been practicing defensive medicine,
making the recommendation for a colonoscopy to prevent himself being
sued if the patient were later to develop colon cancer, or he may have
been “doing things by the book”. However, he was not thinking of the
patient as a whole, nor was he trying to limit health expenditure.

Vignette
5 illustrates the high use of resources in the US for diagnosing
condition for which there is no definitive test and the diagnosis is
based solely on clinical findings. The World Federation of Neurology
published guidelines for the diagnosis of ALS 25 that were
intended for use in clinical research trials, but, as can be seen from
Vignette 5, their use in clinical practice leads to the high cost of
making the diagnosis of ALS in the US.

Comparison of Practice Patterns in the US and other Developed Countries

 

My
personal experience of practicing in both the United Kingdom and US
indicates that practitioners in the US uses many more investigations
and perform many more surgical procedures. One reason for this is that
health care in the US is based on a third-party payer business model.
Physicians treat patients and bill insurance companies or Medicare. The
more procedures the physician performs, the more his income. The
consumer (the patient) does not have sufficient knowledge to judge if
the doctor is investigating and treating the illness in the most
cost-efficient way. As far as the patient is concerned, the doctor
doing twice as many tests is the better doctor. Co-payments place some
of the cost onto the patient’s shoulders but the patient has no basis
for knowing whether he could have been diagnosed and treated for half
the price.

With
regard to cost-containment and cost-efficacy, medical care does not
follow classic market place economics. None of the models that have
been developed to contain costs in the US, such as HMOs, gatekeepers,
fee reductions and regulations imposed to reduce Medicare expenditure
have achieved the goal of bringing US health care expenditure into line
with that in other developed countries. It seems likely that this will
not happen until the business model is changed, at least for a sizable
proportion of the US public.

This
is not to say that the business model of medical care is without
success. The US leads the world in technological advances in the
diagnosis and treatment of disease as a result of entrepreneurship.
However, it is becoming clear that the US cannot support the cost of
the most advanced care for all its citizens unless it is also
cost-effective. The high cost of medical care in the US is responsible
for the ever-increasing number of individuals without health insurance,
46.6 million (15.9% if the population) in 2005. 26

There are few studies comparing the care of similar patients in different countries. Rohde et al. (2005) 27
compared the treatment of patients with decompensated congestive
cardiac failure in Brazil and the US, but did not reference cost. In
2002 Gandjour et al.28 compared cost and outcomes of
treatment of acute myocardial infarction in European countries, and in
2005 they reported a similar study of acute back injury. 29 Neither study presented US data. Asplund et al. (2003) 30
compared health outcomes in a stroke treatment trial in 19 countries
including the US and found a wide disparity in the use of medical
resources, despite there being no difference in health outcomes in the
various countries. They concluded that “(d)ifferences in health care
traditions (treatment pathways) and social context seem to be major
determinants of resource use.”

There is a need for more studies of the type reported by Vader et al. (1997) 31,
who developed criteria for appropriate upper gastrointestinal endoscopy
by presenting about 500 standardized patient-care scenarios to Delphi
panels of physicians from US and Switzerland. Criteria derived from
such studies could be compared with observed patterns. 28-30
Only in this way will it be possible to measure how much of the high
cost of health care in the US is due to practice differences in the
different countries and whether this influences health outcomes. Buto
and Juhn (2006) 32 have argued that a quasi-governmental center would best be able to undertake such comparisons of cost-efficacy.

 

Teaching the Practice of Cost-effective Medicine

We have not trained US doctors in cost-effective medicine.33
However, now the Accreditation Council for Graduate Medical Education
(2006) Outcome Project requires US residency programs to teach and
evaluate six core competencies, including systems-based practice, one
element of which is to "practice cost-effective health care and
resource allocation that do not compromise quality." 34 There is good evidence that teaching and applying cost-effective medicine can reduce patient care costs by about 25%. 35-42

Licensing
and board-qualifying examinations could be used to stimulate the
practice of cost-effective medicine. The candidate could be given a
patient vignette and asked to come to a diagnosis by choosing one from
a series of investigations. The test result would then be revealed and
might or might not be relevant to the diagnosis. A further series of
investigations would now be made available together with those
remaining from the original series. Points would be awarded for
choosing appropriate investigations and deducted for choosing the wrong
(unnecessary) investigations. The goal would be to make the correct
diagnosis using the smallest number of investigations, that is, by
practicing cost-effective medicine.

 

 

 

Recommendations

 

1.   Research
should be directed to compare medical practice in the US and other
developed countries by using standardized patient scenarios.

2.   US physicians should be trained in cost-effective medicine.

3.   A center for
evaluating comparative effectiveness of medical care should be
developed, similar to that recommended by Gail Wilensky, former
administrator of the Health Care Financing Administration.43

4.   An alternative
system for the provision of health care in the US that mandates
cost-effectiveness and cost-containment should be developed. This might
be based on the Massachusetts model of universal coverage. 44-47

5.   The US health
care system should be re-organized to make physicians stakeholders in
the total expenditure on health care in the US.

 

 

References

 

1.   Centers for Medicare and Medicaid Services 2006. (Accessed November 19th, 2006 at

http://www.cms.hhs.gov/NationalHealthExpendData)

 

2.   J. Gabel et al., “Health benefits in 2004: four years of double-digit premium increases take their toll on coverage”, Health Affairs 23(6) (2004):281. 

 

3.   U.E. Reinhardt et al., “U.S. Health care spending in an international context”, Health Affairs 23 (2004):10-25.

 

4. 
C. Schoen et al., “Taking the pulse of the health care systems:
experiences of patients with health problems in six countries”, Health Affairs 3 November 2005. (Accessed November 14, 2006 at http://content.healthaffairs.org/cgi/content/)

 

5.  Central Intelligence Agency, 2006. World Factbook. (Accessed Accessed November 21, 2006 at

https://www.cia.gov/cia/publications/factbook/rankorder/2091rank.html)

 

6.   Centers for Disease Control. 2006. Women’s Health. (Accessed November 21, 2006 at

http://www.cdc.gov/women/owh/motherchild/know.htm#maternal)

 

7. C. Schoen et al., “U.S. health system performance: a

national scorecard,” Health Affairs 25(6) (2006):w457-w475.

 

8.   C. Schoen et
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10.  Kaiser Family Foundation. 2005. Health Poll Report Survey. (Accessed November 19, 2006 at http://www.kff.org/kaiserpolls/upload/May-June-2005-Kaiser-Health-Poll-Report-Toplines.pdf)

 

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13.  Government Accountability Office 2003. Medical malpractice insurance. GAO-03-702. (Accessed November 22, 2006 at http://www.gao.gov/new.items/d03702.pdf)

 

14.  D.M Studdert et al. “Defensive medicine among high-risk specialist physicians in a volatile malpractice environment,” Journal of the American Medical Association 293 (2005):2609-17.

 

15.  G.F. Anderson GF et al., “It’s the prices, stupid: why the United States is so different from other countries,” Health Affairs, 22 (2003):89-105.

 

16.  G.F. Anderson et al., “Health Spending In The United States And The Rest Of The Industrialized World,” Health Affairs, 24(4) (July/August 2005): 903-914.

 

17. D.W. Allen, “Complex reasons for high spending,” Health Affairs, 22 (2003):264-5.

 

18. S. Nicholson, “Physician specialty choice under

uncertainty,” Journal of Labor Economics 20 (2002):816-47.

 

19.  Council on Graduate Medical Education. 2000. Update on the Physician Workforce. (Accessed on November 22, 2006 at http://www.cogme.gov/resource_update.htm)

 

20.  Royal College of General Practitioners. 2006. Profile of UK general practitioners. (Accessed November 23, 2006 at http://www.rcgp.org.uk/pdf/ISS_INFO_01_JUL06.pdf)

 

21.  Canadian Institute for Health Information 2006. Full-time equivalent physicians Report, Canada 2002-2003 and 2003-2004. (Accessed November 23, 2006 at

http://secure.cihi.ca/cihiweb/products/FTE_2003_e.pdf)

 

22.  American Academy of Family Practice. Commission on membership and member services: annual report 2005-2006. (Accessed November 22, 2006 at http://www.aafp.org/online/etc/medialib/aafp_org/documents/about/congress/2006/com-rpts/cmms.Par.0001.File.tmp/Commission%20on%20Membership%20&%20Member%20Services.pdf)

 

23.  American College of Physicians. 2006. (Accessed November 23, 2006 at http://www.acponline.org/college/membership/intro.htm)

 

24.  Robert Graham Center. 2005. Physician assistant and nurse practitioner workforce trends.(Accessed November 23, 2006 at  http://www.graham-center.org/x589.xmll)

 

25. B.R. Brooks et
al., “El Escorial World Federation of Neurology guidelines for the
diagnosis of amyotrophic lateral sclerosis,” Journal of the Neurological Sciences 124 Supplement 1 (1994):96-107.

 

26.  United
States Census Bureau News. August 29, 2006. (Accessed November 20, 2006
at
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/007419.html)

 

27. L.E. Rohde et al., “Health outcomes in decompensated

congestive heart failure: a comparison of tertiary hospitals in Brazil and United States,” International Journal of Cardiology, 102 (2005):71-7.

 

28. A. Gandjour et al., “European comparison of costs and

quality in the treatment of acute myocardial infarction (2000-2001),” European Heart Journal 23 (2002):858-69.

 

29. A. Gandjour et al., “European comparison of costs and

quality in the treatment of acute back pain,” Spine 30

(2005):969-75.

 

30. K. Asplund et
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31. V.P. Vader et al., “Appropriateness of upper gastrointestinal endoscopy: comparison of American and Swiss criteria,” International Journal for Quality in Health Care 9 (1997):87-92.

 

32.
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33.  S.V. Williams et al., “Teaching cost-effective diagnostic test use to medical students,” Medical Care 22 (1984):535-42.

 

34. Accreditation
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36. L.M. Manheim et al.,”Training house officers to be

cost conscious. Effects of an educational intervention on charges and length of stay,” Medical Care 28 (1990):29-42.

 

37. P.G. Nightingale et al., “Effects of a computerised protocol management system on ordering of clinical tests,” Quality in Health Care 3 (1994):23-28.

 

38. J.N. Aucott et al., “Implementation of local guidelines

for cost-effective management of hypertension,” Journal of

General Internal Medicine 11 (1996):139-46.

 

39. G.L. Fraser et al., “Antibiotic optimization. An

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40. A. Larsson et al., “Effects of an education programme

to change clinical laboratory testing habits in primary care,” Scandinavian Journal of Primary Health Care 17 (1999):238-43.

41. K.M. Antioch et al., “Integrating cost-effectiveness

evidence into clinical practice guidelines in Australia for

acute myocardial infarction,” European Journal of Health

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42. R. Englander et al., “Teaching residents systems-based

practice through a hospital cost-reduction program: a "win-

win" situation,” Teaching and Learning in Medicine 18

(2006):150-2.

 

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44.  E.F. Haislmaier and N. Owcharenko, “The Massachusetts Approach: A New Way To Restructure State Health Insurance Markets And Public Programs,” Health Affairs, 25, no. 6 (2006): 1580-1590. doi: 10.1377/hlthaff.25.6.1580

 

45.  J.E. McDonough et al., “The Third Wave Of Massachusetts Health Care Access Reform,”  Health Affairs, 25, no. 6 (2006): w420-w431.

doi: 10.1377/hlthaff.25.w420

 

46.  J. Holahan and L. Blumberg, “Massachusetts Health Care Reform: A Look At The Issues,” Health Affairs, 25, no. 6 (2006): w432-w443 doi: 10.1377/hlthaff.25.w432

 

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2 replies »

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  2. the medical industry has become BIG BUSINESS for all the professionals involved. It’s all about the MONEY. It is disgusting to me that individual physicians, corporations and health insurance companies are becoming filthy rich over the death and disease of their fellow human beings. Everything is more expensive in the United States because we have allowed it to get this way. What do we do to change this? Where do we begin?