Physicians, Business, Professional and Information Technology Communities

 Networking to Restore Accountability in HealthCare & Medical Practice

 Tuesday, January 14, 2003

Welcome to Winning in the “Health Care” Business on Behalf of our Patients.
In last month’s issue of Fast Company, Gary Hamel's article, “Innovation Now! It’s the Only Way to Win Today,” states: “Conventional wisdom says to get back to basics . . .  cut costs. [But] conventional wisdom is doomed. The winners are the innovators who are making bold thinking an everyday part of doing business.” The prevailing world sentiment is that governments must control health care. But that control has produced most of the problems we face today, such as rationing, years of waiting, loss of quality of care, with resultant third world health care in developed countries. Many nations are making attempts to privatize–to get the government out of health care. But humans, despite our rational capabilities, continue irrationally. Thus, there is growing sentiment to follow this apocalyptic course. We have witnessed the State of Oregon’s attempt to implement a single-payer initiative with a 4:1 loss in the voting booth. There is a move in the State of California to implement a single-payer socialistic initiative despite the fact that the State’s finances are in the toilet. There is an undercurrent to retry the disastrous HMO system of the past two decades with even stricter regulations. Last week, an editorial in The Wall Street Journal warned that if we add pharmaceutical coverage to Medicare without a major overhaul to introduce market incentives during this Republican controlled Congress, we will miss an opportunity to make it workable during our lifetime. The WSJ states that by 2030, the present Medicare will consume one-fourth of our entire tax revenue, double the present ratio, and a drug benefit will add an additional $500 billion every decade. If reform fails, the single-payer government medicine may succeed in controlling the entire health care industry by some irrational fluke; but it will fail to improve the health of humankind in this country, repeating the disasters the rest of the world has experienced.

The Case for Innovation and Radical Thinking
Paraphrasing Hamel, “If there is one thing we need to understand about our bruised [health care] environment, it’s this: Yesterday’s [failure] has never mattered less. Today’s success has never been more fragile. Tomorrow has never been more uncertain. And the courage to lead the kind of change that it takes to survive–or, even more important to win–in this world has never been in such short supply.” For instance, when I interviewed prospective business partners for MedicalTuesday about what they surmised the health care environment needed, those who insisted that we needed more laws and regulations were easy to dismiss. What we need is innovation and radical thinking. As Hamel states, most executives choke on the word radical as being high-risk, ill-conceived and speculative. But he defined it as meeting three standards. 1) A radical idea has the power to change customer expectations. Doctors and patients should be empowered to be innovative, not compressed into bureaucratic molds. 2) A radical idea changes the basis for competition. Doctors, the business, professional, and information technology communities should be allowed to invest in new technology without bureaucratic restrictions. 3) A radical idea is one that has the power to change industry economics. If once again doctors competed with their colleagues for patients and hospitals competed with other hospitals for the best medical staff, the quality of the health care industry would rise to even greater heights than we already experience, at prices that would be affordable. This would change the entire HealthCare economics equation, bringing health care to everyone since the social net of welfare and Medicaid already gives the less fortunate an outstanding level of service, except perhaps in California, exceeding that of most other countries.

The Gap: California’s $35 Billion Hole
In recent weeks nearly every major paper in the US and UK featured articles about California’s Budget Mess. I believe the Wall Street Journal had the clearest thinking on the matter. As I recall, our governor inherited a $57 Billion budget with a $58 Billion revenue stream. With the wealthy 0.3 percent paying one-fourth of the tax revenues, the state income mushroomed to about $75 Billion. Meanwhile, by the time our governor bought all the votes possible by various new entitlements (which is not only unethical, but fraudulent if perpetrated by the business and professional community), the expenses soared to $78 Billion. However, when 44,000 millionaires lost much of their income because of the economic downturn, this revenue source dropped by three-fourths leaving an adjusted $35 Billion deficit. In this country Independence Day has achieved a double meaning. July 4 is not only the day we achieved our national independence, it is approximately the day that many American workers begin working for themselves and their families–having completed their annual servitude to the government on behalf of national, state and local taxes. However, these exorbitant taxes did not dissuade our governor from adding even more taxes to cover his mismanagement of tax funds, thereby jeopardizing the health safety net while he reduces health care funding to welfare and eliminates Medicaid to the near poor; and reduces funding for education and increases tuition at the state colleges and universities and more than doubles tuition at our community colleges.

The Biggest Frauds Continue to Be Government Frauds
Rep Ron Paul has stated that the biggest frauds continue to be government frauds, not those produced by Enron, World Com, and others. Why aren’t the CEO, COO and CFO of the government prosecuted and risk jail terms like the CEO, COO and CFO of corporations? The moneys of all taxpayers entrusted to the state are certainly of equal (or more) relevance than that entrusted by a group of shareholders to their Board of Directors. One OpEd piece in The Sacramento Bee observed that while there is an increasing push to further tax the wealthy, California needs about 50,000 additional wealthy citizens to pay taxes. Or, according to the National Taxpayer’s Union, what we really need is a flat tax like the state of Massachusetts which started with a 5 percent flat income tax on everyone. People began working together to control the costs of government, gradually reducing the tax to 4.2 percent. With a progressive income tax, citizens are pitted against each other which produces a caste discrimination system. When it’s obvious that a government cannot manage health care for the poor and can’t teach our children basic reading and writing skills, we must continue our efforts to prevent government, which now has the assistance of many of our professional organizations, from destroying our entire health care industry by an impersonal, single-payer socialistic system.

Medical Gluttony (Excessive HealthCare Costs)
This week, an 88-year-old patient, whom I’d seen several months earlier, developed some chest discomfort that lasted for several days. She chose to go to an urgent care clinic instead of coming to my office as required by her insurance protocol. She elected to see another unfamiliar physician even though I was available. This is a common misconception by patients: that any doctor should be able to treat a patient without the knowledge of the medical history. The repeat electrocardiogram at the urgent care center revealed no acute changes to suggest a myocardial infarction. However, she had some premature beats and was advised to have a cardiology consultation. She mentioned her hemorrhoidal bleeding and a gastroenterology consultation was also recommended. She mentioned her aching shoulders and multiple x-rays were obtained, which revealed some arthritis. Several days later, she came to the office requesting that these consultations recommended by the urgent care center be implemented. During the course of my initial 1½-hour consultation, I had developed a significant medical record on her in which all the above had been discussed. Had she come to me, none of the tests would have been required based on these records. On my reexamination, her chest pain was localized to the left fifth costochondral junction (where the rib meets the sternum). She verified that this pain duplicated the pain she complained about at the urgent care center. Hence, a few minutes of interview and examination confirmed this as musculo-skeletal rather than cardiac in origin, and no repeat ECG or cardiology consultation was warranted. When reviewing her record, we noted that we had discussed further evaluation of her hemorrhoidal (possibly rectal) problem which she had declined since she did not want to subject herself to a colonoscopy. I felt this was a reasonable decision on her part considering her age. Her insurance carrier called inquiring why the urgent care visit was necessary since it was duplicative and even more expensive than my initial 1½-hour evaluation. When they where informed of my findings, they refused to pay the bill. She would have to pay over $600 for the unnecessary urgent care visit. And had we subjected her to the diagnostic studies recommended by an otherwise uninformed physician, who failed to do even a perfunctory medical history and minimal chest examination, we would have increased her health care costs by five or even ten fold. They were not medically indicated and would not have resulted in an improvement in quality of life or life expectancy. The patient’s husband commented that consumers are not informed about the cost of their health care and felt such information would modify behavior. What a rational and obvious observation.

Excessive Costs May Not Always be the Patient’s Fault
This excessive cost was the result of a combination of errors made by the patient and her husband, the urgent care physician, and the insurance carrier. There is not a rule or regulation (even with penalties) that would have changed this sequence except a competitive Medical MarketPlace in which full disclosure occurs prior to care being rendered–just as in any other purchase that we make. Because the Medical MarketPlace places the patient in control, this patient would most likely have opted for a $60 office call instead of a $600 urgent care call, avoiding a 1000 percent increase in costs. Furthermore, she would not have considered multiple consultations and procedures associated with those consultations that would easily have added another $6,000, a 10,000 percent increase in costs. A Medicare bureaucrat sitting in the middle of the urgent care center observing this entire sequence would not have understood the problem or known how to reduce costs in a health-sensitive manner. The Medicare or national health plan bureaucrat sitting in Washington, D.C. or Ottawa or London or Stockholm would have even less of a clue.

National HealthCare Systems in the English-speaking World  (No 10)
In his recent update of the “Twenty Myths about National Health Insurance,” John C Goodman, PhD, president of the National Center for Policy Analysis (www.ncpa.org), states that ordinary citizens lack an understanding of the defects of national health insurance and all too often have an idealized view of socialized medicine. For that reason, Goodman and his associates have chosen to present their information in the form of rebuttal to commonly held myths. See previous issues or the archives at www.MedicalTuesday.net for the summary of the first nine myths, or go to www.ncpa.org for the original 21 chapters of the book.

Myth Ten:  Single-payer Health Insurance Would Reduce the Administrative Costs of the US Health Care Systems.
A frequent claim by advocates of single-payer health insurance, according to Goodman, et al, is that private health insurance is inefficient because of the administrative cost associated with multiple insurance firms. By one estimate, health care costs with the same level of care could be reduced by close to one-third by introducing a Canadian-style single-payer insurance system. Marcia Angell, Spokesperson for The Physicians’ Working Group on Single-payer National Health Insurance, and former Editor of the New England Journal of Medicine, has touted estimates of cost savings from a single-payer health care system of $150 billion a year. This reduction in costs supposedly could be obtained “by eliminating the high overhead and profits of the private, investor-owned insurance industry and reducing spending for marketing and other satellite services.” This argument, Goodman continues, is based on three mistaken assumptions: a) that low administration costs and efficiency are synonymous, b) that the higher administrative costs of private programs result in worse outcomes, and c) that the relatively low administrative costs of public programs result in better outcomes. He then illustrates how the administrative costs of pubic programs are two-thirds higher than private programs.

Administrative Costs and Efficiency
According to Goodman, conventional wisdom holds that the less a health care system spends on administration as a proportion of total costs, the more efficient it must be. By this measure, the US health care system, which spends 16 percent of its total budget on administration, would appear to be less efficient than the Canadian system, which allegedly spends about 5 percent. However, when analyzing competing health care models, no one knows how to measure administrative costs in ways that allow fair comparisons. The real goal is not to get administrative costs as low as possible but to make the overall system perform as efficiently as possible. To measure the net cost or gain to society from administrative procedures, one has to compare them with the benefits they produce. For example, the East German car, Trabant, had lower administrative costs than the Honda or Ford. This did not make the East German Trabant superior. Indeed, the opposite is the case. While competition promotes the production of excellence, government decreases efficiency and provides less consumer satisfaction, which are characteristic of the socialist systems. If socialism had worked, the economies of communist countries would not have collapsed.

Goodman agrees that the administrative costs and paperwork burdens of the US health care system are much too high. However, these are not consequences of private health care but  of federal policy which include the excessive burdens of Medicare and Medicaid that distort the health care market, shifting procedures to high cost centers such as hospitals, including their outpatient departments, and shifting paper and clerical costs to physicians' offices. Also, the cost of levying and collecting taxes and lobbying for additional funding would not be considered an expense of a public program, whereas collecting premiums and marketing would count toward the cost of a private insurer. Goodman contends that a public insurer must perform essentially most of the same functions found in private insurance. They must reimburse providers for services rendered, collect “premiums” in the form of taxes, control utilization. These costs are often difficult to analyze using traditional cost-accounting methods. However, a study funded by private insurance companies that attempted to estimate these hidden costs inclusive of taxes found:
1. Medicare and Medicaid spend 27 cents for every dollar of benefits.
2. Thus government spends 66% more than the private sector per dollar of benefits paid.

 * * * * *

MedicalTuesday Recommends the Following in Restoring Accountability:

• The weekly Health Policy Digest is a health summary of the full NCPA daily report. You may log onto NCPA (www.ncpa.org) and register to received these reports. 

The Mercatus Center at George Mason University is a strong advocate for accountability in government with Nobel Laureate Vernon L Smith, PhD, on its faculty. You may log onto www.mercatus.org and register your email address or read their government accountability reports as well as information on Dr Smith’s economic experiments which helps us understand health care issues. 

Martin Masse, Director of the Montreal Economic Institute, is the publisher of the webzine: Le Québécois Libre. His enlightening free market-based articles can be found at www.quebecoislibre.org/apmasse.htm. This week he is joined by Professor Jean-Luc Migue on the financial problems of socialized health care. Be sure to read his article on the Webzine this Saturday. 

• We also recommend the market-based reports of Lew Rockwell, President of the Ludwig von Mises Institute. Please log on at www.mises.org to obtain the foundation’s reports, or log onto Lew’s premier free market site at  www.lewrockwell.com.

 * * * * *

MedicalTuesday Recognizes These Efforts in Restoring the Doctor & Patient Interface: 

PATMOS EmergiClinic - www.emergiclinic.com, where Robert Berry, MD, an emergency physician and internist, provides prompt care for many of the injuries and illnesses treated in Emergency Rooms at a fraction of their cost as well as an internal medicine practice; 

Dennis Gabos, MD, President of the Society for the Education of Physicians and Patients (SEPP), www.sepp.net, for his efforts in Protecting, Preserving, and Promoting, the Rights, Freedoms, and Responsibilities of Patients and Health Care Professionals, with a special page for our colleagues in nursing; 

Drs David MacDonald and Vern Cherewatenko for their success in restoring private based medical practice which has grown internationally through their SimpleCare model network, www.simplecare.com

HealIndiana as a supporter of market-based medicine, www.HealIndiana.org

Association of American Physicians & Surgeons representing physicians in their struggles against bureaucratic medicine and loss of medical privacy. The AAPS midyear one day conference concerning these critical issues will be held in San Antonio on Saturday, February 1, 2003. You may register online at www.AAPSonline.org.

 * * * * *

Del Meyer

Del Meyer, MD, CEO & Founder