Health Policy

Charting The Economic History of US Health Reform

By MIKE MAGEE, MD

Adam Gaffney’s recent Boston Review article, What the Health Care Debate Still Gets Wrong”, a landmark piece that deserves careful reading by all, reaches near perfection in diagnosing our health system malady.

Dr. Gaffney is president of Physicians for a National Health Program, and a co-chair of the Working Group on Single-Payer Program Design, which developed the Physicians’ Proposal for Single-Payer Health Care Reform.

A seasoned health policy expert, his article cross-references the opinions and work of a range of health commentators including Atul Gawande, Steven Brill, Sarah Kliff, Elizabeth Rosenthal, Zack Cooper, and Canadian health economist Robert Evans. But his major companion is Princeton health economist, Uwe Reinhardt, whose posthumous book, Priced Out: The Economic and Ethical Costs of American Health Care, was recently published by Princeton University Press.

Gaffney’s affection for Reinhardt is evident as he recounts his desperate upbringing in post-war Germany, challenged by poor living conditions, but made whole by access to health care.  Quoting a 1992 JAMA interview, Reinhardt states, “When we needed medical care, we got it at the local hospital, no questions asked. When you were sick, society was there for you.”

That acknowledgment is not only personal but historically significant, as I outline in my recent book, Code Blue: Inside the Medical Industrial Complex. The services Reinhardt received were part of a new national health care system funded fully by American taxpayers as part of the Marshall Plan. At the very same time, American citizens were denied a national health plan of their own as Truman was effectively branded a supporter of “socialized medicine” by the AMA and a cabal of corporate partners.

As Gaffney recounts, a young Reinhardt at age 19 relocated to Canada just in time to witness the birth of their National Health Care System. He travels next to New Haven to receive his PhD in Economics from Yale, and then settles into a long and distinguished career at Princeton.

In Priced Out, Gaffney finds an evolved Reinhardt, one who acknowledges that the problem is not simply opaque pricing (“It’s the prices stupid.“), and certainly not over-utilization of services as Atul Gawande popularly promoted, but rather the wasteful and rigged privatized system awash in ill-gained profits.

As Gaffney reports, “Reinhardt describes in Priced Out, hospitals and other providers have met insurers’ bloat through profound administrative distention of their own.” And “a cosmic law is that every dollar in expenditures is somebody’s income…(creating) fundamentally a political problem, not a technical one.”

For the solution, Gaffney turns to Canadian Robert Evans rather than Reinhardt, who “described in 1991 the special sauce of cost containment…universalism in conjunction with simple source funding.” In summary, Gaffney writes, “The way we pay for health care has produced a curious but deadly mix of deprivation and excess. There is no great mystery behind it. It’s the financing, stupid.”

As Code Blue’s tracking of the medical history however reveals, this declaration is incomplete without two important additions. The complexity Americans struggle with today was intentional, and the MIC would have been unable to execute their opaque, profit sharing conspiracy without the reinforcement of all sectors (including many patient support groups) reinforced by an integrated career ladder for academic medicine with overflowing and hidden conflicts of interest.

My own mentor, Columbia health economist Eli Ginzberg, cautioned in his 1990 book, The Medical Triangle, “The competitive market is an opponent, not an ally of cost containment.” Eight years earlier, Reinhardt’s Princeton colleague, sociologist Paul Starr, in The Social Transformation of American Medicine, commenting on similar risks with an air of hopefulness, wrote: “A trend is not necessarily fate.”

But my own research, tracking the evolution of the collusive Medical-Industrial Complex over the three quarters of a century following World War II and into the present, suggests that Starr’s fears expressed in 1982 of  “private plans controlled by conglomerates whose interests will be determined by the rate of returns on investments” was well founded.

How and why American medicine arrived at this point is now clear. Instead of embracing a thoughtful approach to strategic health planning following WWII, our nation encouraged a free enterprise and entrepreneurial attack on disease, even as our military built out rational national health systems for Germany and Japan. Along the way, major health sectors—including the medical profession, hospitals, insurers, and pharmaceuticals—infiltrated government bodies, weakening regulatory controls as they pursued self-interest and profitability ahead of the interests of American patients, families, and communities.

Cross-sector leaders like myself helped the various MIC sectors populate and socialize one another’s territories, at times competing, and at other times colluding in the pursuit of career advancement, deregulation, and federal funding. The new information age helped spawn complex insurance and delivery systems focused on mining and monetizing proprietary patient databases. These required expanding nonclinical workforces and encouraged the opaque gaming of the system and diversion of profits. More and more money flowed in to an ever-increasing number of derivative organizations, many flirting at the edges of criminality, that figured out how to gain entry into the increasingly complex pharmaceutical, insurance, hospital, patient care, electronic medical record, medical education, and scientific research supply chains.

As we entered the new millennium, players within the various MIC sectors discovered common political ground with the help of their overlapping lobbyists in Washington and statehouses across the land. But articles like Gaffney’s and books like Code Blue have increasingly exposed these opaque and collusive networks, making it clear that MIC complexity is intentional and conspiratorial, and must be opposed.

The majority of Americans now agree that universal health coverage is a central underpinning of a civilized society, essential to creating a stable government, an empathetic culture, and productive healthy citizens. Implementing such a program requires careful and thoughtful governmental planning and execution with integration of a wide range of other social services. It must be budgeted with careful prioritization, but it is certainly doable.

As Dr. Gaffney suggests, the required corrective action now is far more comprehensive and centers on the 800-pound gorilla we must subdue to truly free ourselves from the MIC syndicate’s stranglehold: our perverse, profit-driven, and incredibly wasteful health insurance system. Could the transformation we need be as simple as removing the age restrictions on Medicare and Medicaid, proposed by some on the left, thereby letting every citizen in on the benefits enjoyed by seniors and the needy during the past half century? Certainly that is one option worth discussing.

But to embrace true reform, we must follow the money and follow the data, and build on progress already made. Clearly the time has come for the US to join the rest of the industrialized world and consolidate health insurance into a standardized single-payer/multi-plan system that provides a secure package of basic benefits for all. The first step should be establishing minimum standards and a centralized control system, which would trigger a cascading series of changes leading to more detailed answers to the question “How do we make America healthy?”

In the Declaration of Independence, our nation’s founders proclaimed that equality was self-evident. Nearly 250 years later, what has become equally self-evident is that there is no equality without reasonable access to health care, and that universal insurance coverage is the only system that truly can provide access that is reasonable. Rather than resisting this approach once seen as “un-American,” our citizens are beginning to see single-payer/multi-plan universal access to affordable and effective care as the essential next step to ensuring what should be every American’s birthright—life, liberty, and the pursuit of happiness.

Mike Magee MD is a Medical Historian and Health Economist at the Presidents’ College at the University of Hartford. He is the author of Code Blue: Inside the Medical Industrial Complex (Grove Atlantic/2019). (www.mikemagee.org)

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7 replies »

  1. Health care is expensive in the U.S. for reasons that go well beyond administrative complexity. In my own extensive experience as a patient, I see defensive medicine everywhere. When the medical specialty societies develop the practice patterns that define the standard of care, those practice patterns reflect the reality of our overly litigious society. Thus, we do lots of non-invasive testing, especially imaging. Second, Americans are much more likely to demand lots of marginally useful and even futile care at the end of life as compared to people in other countries. This is because part of the social compact in other developed countries expects people to not impose unreasonable costs and expectations on their fellow citizens. In America, the prevailing attitude is I want what I want when I want it and I expect someone else to pay for it. Finally, virtually everyone who works in healthcare simply makes more money than their counterparts in other countries. This includes doctors, nurses, technicians, IT specialists, executives, and administrators. None of this would be impacted by a single payer taxpayer financed payment system.

    Moreover, other countries, whether they use a single payer approach or insurance companies, find ways to ration care. These other systems are generally pretty good at primary care and emergency care but if you have a non-life threatening need like a hip or knee replacement or an MRI, you are likely to wait much longer to be seen than you would in the U.S. You can be in pain and not even be able to leave your house, but since forcing people to wait for non-life threatening care doesn’t effect the country’s mortality statistics, they make you wait in order to save money.

    Medicare for all is likely to have significant adverse unintended consequences. These include increased wait times for non-life threatening care, an adverse impact on medical innovation, older doctors choosing to accelerate their retirement because they can no longer make an adequate income and young, aspiring doctors deciding not to go to medical school in the first place because the long term financial payoff is not worth the investment in time and money that it takes to become a doctor.

    In short, what makes the American healthcare system more expensive than those in other countries are largely cultural issues and not administrative complexity. I don’t see any of these cultural issues changing anytime soon.

  2. Your point is valid, which is why I pointed to a couple of more detailed sources. But in short, the answer is the same that has provided us prosperity, high-quality services, and reasonable prices in so many other areas – establishing a consumer market. Today we have a chimera of private-public-monopolistic and non-competitive services that is completely opaque and lacks incentives for innovation and operational efficiency. Were we to have a consumer market, leveraging our vast economy and market, we would be providing healthcare to the same level of efficiency as we provide shoes, iphones and car insurance. But again, I point you to Herzlinger’s vast corpus of research or to my own very humble primer. The concern about “those left behind” can be handled with focused welfare to the 15-20% not serviced by the market.

  3. Appreciate your comment. But with 1 in 5 dollars now devoted to this profit-driven enterprise, and 16 workers (1/2 non-clinical) for every physician in America, simple labeling like “Soviet-style” or “socialist” doesn’t constitute a thoughtful response or substitute for an answer to the question, “How do we make America and all Americans healthy?”

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