Freeman

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Let's Not Throw American Medicine into Boston Harbor

Both the Type of Insurance and the Payment Mechanism Are at Fault in American Health Care

JULY 01, 1998 by JANE M. ORIENT M.D.

Filed Under : Health Care

Jane Orient, M.D., is the executive director of the Association of American Physicians and Surgeons and a member of the FEE Board of Trustees. She is the author of Your Doctor Is Not In: Healthy Skepticism About National Health Care and a new novel about where the money is in medicine, Sutton’s Law.

The ongoing battle over “health-care reform” may be portrayed as a war between the American Medical Association and the Good Guys. The AMA is supposed to stand for Corporate Greed, and the Ad Hoc Committee to Defend Health Care, headquartered at Harvard University, is supposed to be on the side of Social Justice and everything good. The latter group (called “Doctors Against Profits” in the Wall Street Journal) recently dumped boxes of annual reports from investor-owned hospitals and health plans into Boston Harbor.

In reality, the issue is Managed Care versus Single Payer, even though neither group openly acknowledges its ultimate political goal.

While the two groups appear to be at odds, it is interesting that the AMA gives the Ad Hoc Committee a lot of column inches in its publications. The truth is that the two have much in common–and they both have the wrong answer to the problems with American medicine. So do Congress and the Clinton administration, which are likely to pass still more bad laws that will push us further down the yellow-brick road to the Single Payer Wizard (despite their advertised intentions, as in the Patient Access to Responsible Care Act, sponsored by Representative Charles Norwood of Georgia).

To get it right, we have to change the focus from doctors’ incomes (and the politics of envy and class warfare) to patients’ well-being, both medical and economic. Yes, profits are involved in medicine–as in every human activity. But remember that government and managed-care bureaucracies (which are more similar than different) are both focused on the bottom line: their budgets and their concept of the collective good. The AMA is ineffective at fighting them because its bureaucracy has the same problem and is in bed with the others.

Medicine is supposed to serve patients. If patients are served well and at an affordable cost, then doctors should be well rewarded (and rewards are not all financial). If doctors are rewarded for reasons that are largely unrelated to good service to patients, as opposed to corporate or government masters, then patients will surely suffer.

Patients have succumbed to one terrific sales job by insurers and the government, which were aided and abetted by physicians out for easy money from third parties. They all want patients to believe that happiness is a rich insurance plan that covers everything.

Such “insurance,” with first-dollar coverage or minimal out-of-pocket expense, is really prepayment for consumption and is definitely not a good deal. As one consumer, who happens to be a doctor, said, “I have sent about $75,000 to Blue Cross in the past ten years and have absolutely nothing to show for it.” Had he had a serious illness, he might still have had nothing to show for it. These days the covered services are “covered” by a gatekeeper and layers of committees.

If this sounds like a pitch for medical savings accounts, it is and it isn’t. MSAs are a kind of gimmick, a partial answer to the basic problem, which is the abuse of the concept of insurance–in large part due to tax discrimination against true medical insurance and in favor of prepayment for consumption.

Faulty Insurance

Both the type of insurance and the payment mechanism are at fault. By “payment mechanism” I mean the “assignment of benefits,” or payment, to the “provider” rather than to the supposed beneficiary. This is an invitation to fraud and abuse. (Nonetheless, Medicare does everything to encourage it.) Moreover, it tends to disguise the wastefulness and absurdity of processing huge numbers of claims for trivial sums of money.

Bureaucracies with a lust for power, insurers with a lust for profit (they get paid for all that ridiculous paperwork), doctors with extravagant tastes (who know they get more from the third party than they could ever get directly from patients), and patients with a distaste for personal responsibility–they all have a vested interest in the status quo. Moreover, everyone fears, and with good reason, that the first one to get off this merry-go-round will take a financial beating.

Probably the only way out is to stop the merry-go-round, all at once, for everybody. No more tax preferences for employer-provided “health benefits”: pay the workers with real money, not HMO money, and give an across-the-board tax cut from which all profit (not just those with employer-provided “health benefits”). No more “assignment of benefits”: pay all claims directly to the beneficiary, with a dual-payee check if that is considered necessary. And no more government mandates that prevent insurance companies from offering low-cost benefits suited to what patients want rather than what special-interest lobbies demand.

If this is done, there will be winners: insurance companies that offer no-nonsense, patient-tailored coverage at a reasonable cost; employers who can offer workers the equivalent of a raise without sacrificing competitiveness; workers who can have more money under their own control (rather than that of an insurance bureaucrat); patients who can buy the medical care they want instead of insurance that they don’t want; and doctors who are best at satisfying their patients.

There will also be losers: Those who profit from managing or gaming the present system—whether they are managed-care or insurance executives, government bounty hunters, bureaucrats, overpriced doctors and hospitals, insurance salesmen, and even patients who are constantly demanding more medical care (often of dubious value) as long as it is at someone else’s expense. Some of these folks can better themselves by finding useful, soul-satisfying work. And the congenital thieves can go back to robbing banks.

Such a system would be correctly called a free market. The transactions that occur there would be peaceful and voluntary.

The system that we have now may be called a market, but it is truly anything but. It is best described as a system of legal plunder, marked by class warfare and increasingly draconian coercion.

The way out is to take back our freedom, not to turn back the clock to old methods rightly called fascism, serfdom, or mercantilism, even if dressed up in new names like managed competition or single payer, and even if advocates stage a perverted version of a stunt (the Boston Tea Party) once pulled by real Sons of Liberty.

Remember, that historic event was about throwing out British mercantilism. How ironic that the actors in the recent parody would destroy American free enterprise and import British or Canadian socialism.

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July 1998

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