Community For Better Health Care

Vol IV, No 23, Mar 14, 2006


In This Issue:

1.                  Featured Article: Employer-Managed Health Care – What It Really Means

2.                  In the News: The Witch Hunt

3.                  International Medicine: The Incentive Plan

4.                  Medicare: Trust the Customer

5.                  Medical Gluttony: A Patient's Phone Call Tells It All

6.                  Medical Myths: Giving Rewards Improves Health

7.                  Overheard in the Medical Staff Lounge: Nothing Succeeds Like Failure

8.                  Voices of Medicine: Government Pays for Compliance, Not Medical Care

9.                  Bookshelf: Healthy Competition - What's Holding Back Health Care and How to Free It

10.              Hippocrates & His Kin: The Man-Wife Perspective that Doctors See

11.              Related Organizations: Restoring Accountability in HealthCare, Government and Society

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The 3rd Annual World Health Care Congress, co-sponsored by The Wall Street Journal, is the most prestigious meeting of chief and senior executives from all sectors of health care. Renowned authorities and practitioners assemble to present recent results and to develop innovative strategies that foster the creation of a cost-effective and accountable U.S. health care system. The extraordinary conference agenda includes compelling keynote panel discussions, authoritative industry speakers, international best practices, and recently released case study data. The 2006 conference will be held from April 17–19, 2006, in Washington, DC. For more information, visit

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1.      Featured Article: Employer-Managed Health Care – What It Really Means

Breaking Free From Employer-Managed Health Care, by Daniel Weintraub – Bee Columnist
Tuesday, February 21, 2006

Imagine for a moment that your employer was required by law to buy a plan to manage your nutrition needs - rather than simply paying you a wage, out of which you buy the food you want to eat.

Or suppose the government required your employer to pay for a housing plan, rather than paying you and letting you decide where and how to live.

Finally, consider what it would be like if the company you work for was mandated to design and finance a transportation plan for you, with a list of options for how you could get to work and back home each day.

Each of these scenarios brings a few things to mind.

First, you'd probably get paid a lot less than you do today, because your employer would be diverting much of your current wages to pay for these plans instead.

Second, you would have less choice than you do now, because your employer would have to standardize these food, housing and transportation plans to fit the needs of many workers.

Third, the service you would get from your local grocery store, landlord or automobile dealer would probably be worse, since your relationship with each of them would now be muddled through the entry of a third party, your employer. Your local grocer would have a greater incentive to try to satisfy his real customer - your boss, or worse, the food management company your boss chose - than to serve your needs.

Fourth, the costs of each of these goods would tend to rise over time - especially if you and your fellow employees were able to eat as much as you liked, or live in any size house or drive as far as you wanted within the choices provided. While large employers might be able to use their superior bargaining power to drive down costs a bit, their power in the marketplace would be outweighed by the increased cost of providing food, housing and transportation in quantities unlimited by the discipline that comes when a consumer pays for something out-of-pocket.

Finally, as the costs did start to rise, you would feel less secure about where your next meal was coming from, or whether you'd have a place to live tomorrow or a car to drive to work. With the management of these essential items in the hands of a third party, you'd feel vulnerable, worried about whether they might cut back on your choices or on the quality of the offerings in order to save money.

Sound like a good deal? Well, that's exactly the kind of health care system we have today. While individuals once managed their health insurance themselves, paying for it out of their wages, employers began doing that for them during World War II as a backdoor way to increase compensation in an era of government-imposed wage and price controls. The custom stuck, the government rewarded it with tax breaks and today more than 60 percent of us have our health care managed through work.

Not coincidentally, health care is the one essential in our lives that is most often described as being "in crisis." While some people have access to better food than others, nobody in America goes without food today, thanks largely to food stamps, which give people a chance to obtain essential nutrition without involving employers or the government (too much) in managing their choices.

Some of us certainly live in better housing than others. But that's no business of our employers. To the extent that the government has decided that some people need help paying for their housing, we have provided vouchers for rent, with minimal regulation on how those stipends can be spent. The housing the government provides directly, in contrast, is mostly in lousy neighborhoods, crime-ridden and poorly maintained.

Finally, while some of us drive nicer cars than others, our employers are not responsible for this, and neither does the government inject itself into the equation. The state does provide public transit and subsidizes it from tax revenue in part to enable the poor to have access to transportation.

Now comes a national movement to require employers, especially large ones, to spend a certain amount of money on health insurance for their workers or pay a tax to the state to cover their care. In California, a state senator says she plans to introduce a version of this bill.

It's odd that just when the informal system of having employers managing their workers' health care is in danger of collapsing from the weight of the problems it created, some politicians want to lock that system, with all its flaws, into place with a new law.  To read the entire original Op-Ed article, please go to

About the writer: The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at Readers can see his daily Weblog at

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2.      In the News: Witch Hunt By THOMAS P. STOSSEL, WSJ February 21, 2006; Page A18

"The belief that there are such things as witches is so essential a part of the faith that obstinately to maintain the opposite opinion manifestly savors of heresy." So begins "Malleus Maleficarum" ("The Hammer of Witches"), a book commissioned by Pope Innocent VIII and published in 1484. For three centuries "The Hammer" was the principal reference for witch hunters determined to punish sorcerers and rid them of the world.

A no less sweeping manifesto recently appeared in the Journal of the American Medical Association (JAMA). It called for total extermination of contemporary witchery -- "financial conflicts of interest" -- caused by the malign influence of pharmaceutical and device manufacturers in academic health centers. It argues that these companies pervert altruism, misinform physician education and cause breaches of scientific integrity in medical research. While these debatable allegations are not new, the JAMA piece received widespread and enormously favorable attention in the press. Academic health centers are reportedly rushing to enact the recommendations.

Although separated by over 500 years, these two recipes for societal improvement have striking similarities. Both address an imperfect world beset with pain, want and disease. And both highly value appearances in defining good and bad behavior. The church saw witches as moral deviants. The sponsor of the JAMA article, the American Board of Internal Medicine (ABIM) Foundation, espouses "professionalism" and "just distribution of finite resources" and also judges its witches, financial conflicts of interest, as immoral. The ABIM Foundation, like the medieval church, liberally taxes without consent to fund its crusade against "profit-seeking in medicine." The churches tithed; the ABIM Foundation is a derivative of the ABIM, which charges physicians large fees for examinations it administers for compulsory certification to practice. The foundation now has an endowment approaching $60 million.

In their zeal, both "The Hammer" and the JAMA cited scripture selectively. "The Hammer" trolled the Bible and ecclesiastical works for references to support the existence of witches and witchcraft, which remained uncontested until the retraction of anti-witch doctrines centuries later. The JAMA article baldly states that "a systematic review of the medical literature on [industry] gifting . . . found that an overwhelming majority of [commercial] interactions had negative results on patient care," although the source it cites explicitly says: "No study used patient outcome measures." The JAMA piece reminds us that industry marketing influences the prescribing habits of physicians. But it repeatedly neglects documented evidence that physicians frequently fail to prescribe appropriate drugs according to evidence-based guidelines for nearly all diseases.

The witch hunters of "The Hammer" and of the JAMA paper propose extreme remedies that promise great but practically unattainable rewards. "The Hammer" recommended torture to elicit confessions from witches and severe punishments following conviction. The JAMA authors want all commercial contributions removed from academic health centers – education grants, gifts of any size to physicians, meals during conferences and free drug samples. The authors concede that we need academic-industry interactions to obtain new medical technologies. But they want industry sponsorship of academic education and research divorced from any specific purposes and placed under the control of the administration of the academic institution, not the individual researcher.

"The Hammer" predicted that eliminating witches would cleanse the world of ills inflicted by them. But witches burned, and the problems persisted. The JAMA article says that abolishing the commercial interface in academic health centers will lower the cost of drugs by encouraging prescriptions of cheaper ones. Since physicians not in academic health centers write by far most prescriptions, the basis of this hypothetical cost savings is unclear. Even stranger is the idea that companies would sponsor research of no direct benefit to them. Since they won't, we will have less corporate sponsorship and therefore translation of academic work into benefits for patients. . . . To read the entire article, please go to (Subscription required)

Dr. Stossel is American Cancer Society Professor at Harvard Medical School and Co-Director of the Division of Hematology at Brigham and Women's Hospital.

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3.      International Medicine: Incentive Plan   In South Africa, Insurer Gives Points For Healthy Living, By RON LIEBER, WSJ, February 21, 2006; Page A1

Frequent-Flier-Style Program, Rewards Diligent Members; Model for U.S. Overhaul? A Diabetic Wins Elite Status

JOHANNESBURG, South Africa -- Taking care of your body should have its own rewards. But a South African health-insurance company is adding some new lures: discounts on travel, movie tickets and electronics.

Just as frequent fliers accumulate miles, South Africans covered by Discovery Health can collect points for doing such healthy things as quitting smoking, exercising or getting an annual Pap smear.

In South Africa, one of the few countries whose health-insurance system resembles America's, Discovery is the biggest player in the industry. The company specializes in a type of insurance that is just beginning to take off in the U.S. -- a "high deductible" plan in which people have to foot the bill for much of their basic care themselves.

By combining those plans with incentives for healthy living, Discovery founder and Chief Executive Adrian Gore says he has found a model for the U.S., where President Bush is touting a consumerist approach to restraining health costs.

Critics call Discovery's points system a marketing gimmick designed to attract healthy people to the company while leaving the sick for someone else to cover. They say average people, if forced to spend their own money on health care, are apt to make penny-wise, pound-foolish choices such as forgoing treatment in the early stages of an illness.

Whatever Discovery's advantages, they are available only to a small sliver of South Africans. About seven million people in this nation of 47 million have private insurance, entitling them to use a system of private doctors and hospitals that is considered on a par with Western nations in quality. The rest -- including most of the estimated five million people infected with the AIDS virus -- are stuck with the public system of hospitals and clinics, which are mostly underfunded and overwhelmed.

Niel Uys, a 46-year-old technical support manager for International Business Machines Corp. in a Johannesburg suburb, says he and his family have "done virtually everything you could do" to earn points in what Discovery calls its Vitality program.

In 2005, that included logging on regularly to Discovery's Web site, getting a flu shot, not smoking, maintaining his goal weight and getting graded for fitness. He received extra points for being fit. "We are all more healthy and hopefully our life expectancy will be a little bit better," he says.

Thanks to his "gold" status in Vitality, Mr. Uys has received deep discounts on hotel and resort stays. Last year, his wife spent four weeks in a hotel near Durban for nearly $26 a night, a quarter of the usual price. This year, however, he says he is disappointed that the discounts don't seem to be as large.

Discovery has a 26% share of the private-insurance market in South Africa, at least twice that of its nearest competitor. The majority of insured South Africans have high-deductible plans and have put aside some of their income in a savings account with tax advantages to spend on medical care. That is the combination President Bush is promoting in the U.S.

Most of Discovery's rivals in South Africa have tried to copy its points program, and the idea is making some headway in the U.S., too. In 2003, PacifiCare Health Systems (now part of UnitedHealth Group Inc.) introduced a HealthCredits program that gives people points for taking part in such programs as smoking cessation and weight loss.

In the next two months, Humana Inc., Louisville, Ky., will be adding a rewards program created by Virgin Group's Virgin Life Care unit to certain new insurance plans. The new plans, which the companies will introduce in San Antonio and Tampa, are called HealthMiles Plus. Discovery itself has started a U.S. subsidiary offering South African-style plans in several states . . .

Mr. Gore, an actuary by training, had started Discovery Health in 1992 with a different approach. His insurance plans required individuals to pay their own bills up to a fairly high amount by South African standards. Today that deductible is around $1,800 annually for a family of three in a comprehensive plan. Mr. Gore coupled the stick with a carrot: Employees could put aside money in a tax-advantaged medical-savings account. If they didn't spend it all in one year the money would carry over to the next.

Battling UnitedHealth, Mr. Gore searched for a marketing hook. He says he dreamed one up sitting in the bathtub one night in 1997. A chain of local health clubs had approached him asking whether Discovery wanted to market its insurance to club members. Thinking it over, Mr. Gore hit upon a better idea: giving a free health-club membership to those who signed up for Discovery's insurance. From there the idea expanded. Those who lived a healthy lifestyle and got their checkups would get points for discounts on airplane flights and the like.

Today, about 1.9 million people are covered by Discovery, and 70% of those eligible to join the Vitality points program do so. Membership in Vitality costs about $13 a month for a single person, although employers sometimes subsidize those fees. The rewards include cheap flights within South Africa on British Airways and a discount of as much as 70% on movie tickets.

Gym memberships are free after a one-time sign-up fee for people who go at least 24 times a year. Vitality gives 150 points for each workout. A full set of cholesterol, glucose, HIV and blood-pressure tests can yield thousands of points. Those with 100,000 points achieve the highest status and the steepest discounts. Everyone starts over again each year.

Skeptics in South Africa, including officials at the nation's health-insurance regulator, say Discovery's rewards program isn't the win-win situation the company claims. They believe the real goal of the program is to attract a vigorous, health-conscious clientele and discourage older and sicker people from signing up for Discovery's insurance plans.

"You discount things that younger and healthier people tend to like," says Alex van den Heever, a senior technical adviser at the regulator, which is called the Council for Medical Schemes.

A Familiar Problem

The problem of cream-skimming by insurers is a familiar one to health economists, and recently South Africa has taken steps to prevent it. Starting in about a year, companies whose insured populations are disproportionately filled with the young and healthy will have to pay a penalty. Discovery says its customer base is close to average now, and it doesn't believe its success is the result of cherry-picking healthy people . . .

In the U.S., insurance plans combining a high deductible with a medical-savings account often are referred to as "consumer-directed" or "consumer-driven" plans. About 4.6 million Americans are covered by a plan combining these two elements, according to estimates by and the trade publication Inside Consumer-Directed Care. Only a handful, however, have a rewards program for healthy behavior.

Advocates of the plans believe consumers are apt to overuse health care when they don't have to pay much out of pocket for it -- and that they spend money from their own pockets more wisely. Critics question those assumptions, saying people are prone to hurting their long-term health by skimping on preventive care. "High cholesterol takes 20 years to make its mark, and hypertension takes 25 years," says Tony Behrman, a doctor who heads an association of general practitioners in South Africa.

Amid that debate, Discovery says its unpublished data offer some evidence that people forced to consider their medical spending more carefully can make good decisions and avoid hurting their health . . .

Changing Costs

Another measure of the Vitality program's value is how members' health-care costs change over time. The insurer measures this using the "loss ratio," which is the cost of paying a member's annual health claims divided by the annual premium. If the insurer receives $5,000 in premiums and pays out $2,500 to cover claims, the loss ratio is 50%.

Discovery examined 1,467 insured people age 50 to 54. From 2000 through 2003, those with elite status in Vitality saw their loss ratio fall to 70% from 73%, while the loss ratio for nonelite members rose to 80% from 72%. In the 30-34 age bracket, members in both the elite and nonelite categories saw loss ratios rise but the ratio rose faster for nonelite members . . .

In the U.S., Destiny Health members are automatically enrolled in the points program without charge. As in South Africa, participation can lead to discounts on gym memberships, movies and the like. If many workers achieve elite status, employers can get a premium discount when they renew their insurance. J. Scott Spiker, Destiny Health's chief executive, says it can be a tough sell when he tries to tell potential customers about the South African experience. Nonetheless, he says, "we're quite confident that the same patterns will emerge here in the U.S.A."

To read the entire article, please go to (Subscription required)

Write to Ron Lieber at

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4.      Medicare: Trust the Customer! By VERNON L. SMITH , WSJ, March 8, 2006; Page A20

Health-care costs doubled over the decade ending in 2004, in fact reaching an all-time high measured as the share – 16% - of GDP; and they continue to greatly outpace inflation. Similarly, education costs from primary levels up through college continue to grow faster than other categories of national spending. Why?

Here is a bare-bones way to think about this situation: A is the customer, B is the service provider. B informs A what A should buy from B, and a third entity, C, pays for it from a common pool of funds. Stated this way, the problem has no known economic solution because there is no equilibrium. There is no automatic balance between willingness to pay by the consumer and willingness to accept by the producer that constrains and limits the choices of each.

In the U.S., you go to see your physician, who says you need to buy X from her. You pay a part of the price, and, if you are employed, your health-insurance company reimburses the physician for the remainder. Next year all rates in the insured pool have to be increased to pay for the rising cost. In most foreign countries you wait in line for the provision of the service (surgery, an MRI scanner, etc., if they are even available), and after the service is delivered, the government reimburses the provider. Next year the government increases taxes on the pool of taxpayers.

Another example. You want to get a college degree in field X. The college says: Here is the tuition price and this is the program of study in X. If it's a public university the price you pay is perhaps 20% of the cost to the college, and the college collects the difference from the state budget levy on the taxpayers. If it's a private university, the tuition you pay is closer to the cost of service, but most private universities still rely heavily on donors and public sources for the support of education costs.

In these examples, if third-party deep pockets pay whatever is the price B charges A this year, the effect is to reinforce the incentive to raise the price next year. Spending escalates, which leads to a demand for cost control. In health care there is increasing control over access to medical services. Insurance companies disallow patient free choice of physicians, clinics and hospitals outside their approved network. Physicians and medical organizations face escalating administrative costs of complying with ever more detailed regulations. The system is overwhelmed by the administrative cost of attempting to control the cost of medical service delivery. In education, university budget requests are denied by the states who also limit the freedom of universities to raise tuition.

If there is a solution to this problem, it will take the form of changing the incentive structure: empowering the consumer by channeling third-party payment allowances through the patients or students who are choosing and consuming the service. Each pays the difference between the price of the service and the insurance or subsidy allowance. Since he who pays the physician or college calls the tune, we have a better chance of disciplining cost and tailoring services to the customer's willingness to pay.

Many will say that neither the patients nor the students are competent to make choices. If that is true today, it is mostly due to the fact that they cannot choose and have no reason to become competent! Service providers are oriented to whoever pays: physicians to the insurance companies and the government; universities to their legislatures. Both should pay more heed to their customers -- which they will if that is where they collect their fees . . .

Would some one please just trust the customer? To read the entire editorial, please go to (Subscription required)

Mr. Smith, a 2002 Nobel Laureate in Economics, is a professor at George Mason University.

 Government is not the solution to our problems, government is the problem.

- Ronald Reagan

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5.      Medical Gluttony – A Patient's Phone Call Tells It All

We received a call from a patient concerning statements of charges she was receiving from our office. She wanted to remind us that she has the ultimate in free healthcare, Medicare and Medicaid. She did not want us to remind her of what it costs to take care of her. She felt entitled to her free care and we should not make her feel guilty about her entitlement to healthcare.

This is why government healthcare will never work.

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6.      Medical Myths: Giving Rewards Improves Health

Insurance companies that give incentives (See International Medicine, Section 3 above) for doing such healthy things as quitting smoking, exercising or getting an annual Pap smear, remind me of a smoking withdrawal program that I gave in my younger and more foolish days. About half way through the recruitment process, a patient told me that she was going to sign up with Smoke-Quitters-Anonymous rather than join my program.

Her explanation? If I join your program, I have to stop smoking. By joining Smoke-Quitters-Anonymous, I don't have to stop smoking. And they give me a free gift.

Giving Rewards Takes Healthcare Out of Context and Doesn't Change Unhealthy Behavior.

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7.      Overheard in the Medical Staff Lounge: Nothing Succeeds Like Failure

A group of Hewlett-Packard Co shareholders is suing the company, alleging the board broke its own rules by awarding more than $42 million in cash, stock and other benefits to Carleton "Carly" Fiorina after she was fired as CEO last year. The suit depicts the payments to Fiorina as a blatant violation of a board policy adopted in 2003 that limits the company's severance payments to 2.99 times an executive's company salary and annual bonus and therefore should not have exceeded $16.7 million. The attorney for the shareholders described Fiorina's severance package as a prime example of corporate America's penchant for over indulging top executive at the owner's expense. HP is in an uncomfortable position of defending the lucrative package given to Fiorina as its new CEO Mark Hurd strives to cut more than 15,000 jobs to boost the company's profits.

Meanwhile, Warren Buffet, 75 year-old CEO of Berkshire Hathaway Inc where fourth quarter income is up 54% over last year, wrote his annual letter to his shareholders. He devoted nearly two pages to his criticism of CEO pay, which can be especially heinous when executives are dismissed. "Getting fired can produce a particularly bountiful payday for a CEO," Buffett wrote. "Indeed, he can 'earn' more in that singe day, while cleaning out his desk, than an American worker earns in a lifetime of cleaning toilets. Forget the old maxim about nothing succeeding like success: Today, in the executive suite, the all-too-prevalent rule is that nothing succeeds like failure."

Did you know that South Africa also has about 40 million uninsured? About seven million people in this nation of 47 million have private insurance. Could we have some volunteers to sponsor some of our agitators for universal health care to go South Africa? Their mission field is even larger over there.

A lovely, well-dressed, 94-year-old lady came to our office for a complete evaluation of her hypertension and hypercholesterolemia. She also had some increased shortness of breath, a couple of pound weight gain, with ankle edema (water level rising above her ankles) which is a manifestation of more fluid going into her body than her heart and kidneys can accommodate. When her daughter came in at the end of the exam, she explained that she was making sure her mother drank about 8-10 glasses of water a day – on the advice of her previous physician, who had also been increasing her diuretics, trying to get rid of the excess fluid she was accumulating (from over drinking).

Everyone Knows You Should Drink 10 Glasses Of Water A Day To Flush Your Kidneys.

An Old Guide, Obey Your Thirst, Seems to Have Gotten Lost in the Bottled Water Craze.

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8.      Voices Of Medicine:  Government Pays for Compliance, Not Medical Care

The Medicine Men, by MichaelArnold Glueck, M.D., and Robert J. Cihak, M.D., Feb. 28, 2006

Two years ago, the University Of Washington School Of Medicine paid the government $62 million to settle a Medicare billing dispute. In addition to its legal expenses, the medical school paid more than $750,000 for a high-powered, outside committee to review what happened and write up a report.

Obviously, the medical school learned an expensive lesson. But will the lesson help improve patient care?

We doubt it.

The title of the 111-page report summarizes the emphasis: "Achieving Excellence in Compliance." The document uses the word "compliance" 620 times, and recommends a new objective for the school: achieving "a culture of compliance" in addition to the more traditional medical school goals of research, teaching and patient care.

To implement the recommendations of the report, the school is spending money for more layers of staffing, re-educating physicians and more oversight of who bills for what and how.

Unfortunately, the process is eerily like that for many businesses where the Sarbanes-Oxley law has created complicated, expensive and difficult-to-comply-with rules.

Once upon a time, an organization could be successful by ethically providing goods and services to customers and clients. The ethical guidelines for this behavior were ultimately based on underlying and universal moral rules, such as those prohibiting stealing or cheating. Understandable and enforceable laws and contracts often reflected these ethics.

Over time, many lost sight of the underlying moral code but still followed the ethical codes set up by business or professional organizations.

More recently, complicated laws governing business and professional behavior are creating increased emphasis on compliance to arbitrary rules, sometimes leaving common sense and ethics behind. Judges agreeing with new ideas put forth by trial lawyers or government prosecutors often defeat rather than fulfill justice.

Many enterprises, probably now including the UW medical school, visualize these exceedingly complicated rules as an impenetrable briar patch. Many now concentrate their compliance resources in the areas the government enforcers focus on. Because it's impossible to consistently comply with all the myriad rules, the goal becomes damage control; the modus operandi becomes risk management.

Instead of being a uniform and solidifying bedrock underpinning civilization, law enforcement has become an unmarked minefield destroying lives and enterprises almost willy-nilly.

In medicine, Congress is now considering "pay for performance" and "best practices" incentives that would reward doctors for following government guidelines (i.e., rules) on how to treat patients with particular conditions or diseases.

One difficulty with this government micromanagement is that the scientific studies used to establish the "best practice" rules typically include patients with a given condition, such as congestive heart failure and a narrow range of possibly complicating factors. Researchers do not further analyze patients with a significant complicating factor because it would take a large number of such patients to have a statistically significant result. For these patients, there's no "best practice" experiment or science to unerringly guide the doctor in treatment.

For example, a patient with heart failure might have a past history of a previous stroke and also come down with pneumonia on top of the heart failure. It would be rare for an up-to-date scientific study to account for even this relatively simple set of complicating factors.

And, medical advances quickly outdate these studies.

In addition, research funds for promising but politically-incorrect treatment methods, such as chelation therapy and hyperbaric oxygen therapy, is cut off by the medical-political complex controlling research grants.

Most people want doctors with experience in treating their condition rather than a technician treating them exactly the way the best practices computer printout directs.

There's a huge disconnect between the goals of compliance and excellent patient care. "Compliance" implies there's something to comply with, such as government billing and practice rules. But successful patient care often depends on creative insight. The practice of medicine is as much an art as a science.

If it were only science and technique, we'd have high school-graduate technicians trained following computer printouts taking care of patients rather than medical doctors who have spent five to ten years or more in medical training, after college.

We agree that doctors should be moral, honest and ethical. But "compliant" as a primary motivation? Ethical should cover that base.

The more energy and costs expended on compliance, the less is left over for patient care. The alternative is for increased costs of medical care, without any added patient benefit. Ironically, although the government insists that Medicare recipients get first class medical care at the same time it clamps down on medical costs, the result of more compliance efforts will be decreased access and higher costs.

If the University of Washington succeeds in "achieving excellence in compliance," it may avoid further government penalties, but patients will ultimately pay the price, both in the quality of care and dollars. Editor's Note: Robert J. Cihak wrote this week's column. Robert J. Cihak, M.D., is a Senior Fellow and Board Member of the Discovery Institute and a past president of the Association of American Physicians and Surgeons. Michael Arnold Glueck, M.D., is a multiple-award-winning writer who comments on medical-legal issues.

Contact Drs. Glueck and Cihak by e-mail.

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9.      Book Review: Healthy Competition - What's Holding Back Health Care and How to Free It by Michael Cannon & Michael D Tanner, Cato Institute, Part III: Chapter 6 - Government Health Programs.

Government subsidizes medical care for nearly 77 million Americans through Medicare, Medicaid, and other programs. Rather than subsidize beneficiaries directly, government typically subsidizes them indirectly by delivering subsidies to health care providers when the beneficiary receives care. Government health programs exhibit all the negative effects of overreliance on health coverage, including moral hazard, reduced sensitivity to price and quality, and less competition. In addition, government sets payment rates for providers who treat beneficiaries in these programs. These government price controls create additional waste and obstacles to competition and innovation. As the Federal Trade Commission (FTC) and Department of Justice (DOJ) recommend, government health care subsidies should be delivered directly to the intended beneficiaries.  Allowing these patients to control their own health care dollars would secure them higher-quality care, minimize the harmful effects of excessive coverage, and obviate the need for government price controls.

Price Controls

Market prices convey information to producers and consumers about the cost of providing billions of items, how highly the items are valued by others, and how the available supply compares with existing need. Even with the most sophisticated tools conceivable, bureaucracies cannot replicate market prices because they cannot capture the information that producers and consumers reveal when they buy and sell items at unregulated prices. Even if a bureaucracy could capture all the necessary information for a point in time, conditions like supply, technology, and consumer preferences change too rapidly to update that information accurately.  When setting prices for services under government health programs, governments err in one of two ways: setting prices too high or too low. Setting prices too high results in resources being wasted on services that provide less value than their cost. Setting prices too low results in shortages. As the FTC explains, "Paying too much wastes resources, while paying too little reduces both output and capacity, lowers the quality of the services that are provided, and diminishes the incentives for innovation." Though intended to be a cost-containment tool, price controls may actually increase costs.  Moreover, "Government-administered pricing . . . inadvertently can distort market competition." According to the Commission, "One unintended consequence of [Medicare's] administered pricing systems has been to make some hospital services extraordinarily lucrative and others unprofitable. As a result, some services are more available (and others less available) than they would be in a competitive market." As Columbia University law professor William Sage notes, "Public purchasing distorts prices, overbuilds capacity, and skews the development and dissemination of technology." For example, until 2003, Medicare payments to ambulatory surgery centers (ASCs) were based on a 1986 survey of ASC costs.  Despite advances that increased productivity and reduced costs at such centers, Medicare's payments were not readjusted for 16 years (other than for inflation). As a result, Medicare's overpayments encouraged growth and utilization of ASCs beyond the value they provided. Productivity gains in the provision of cardiovascular care quickly rendered Medicare payment rates excessive and encouraged overreliance on these services as well. "This pricing distortion creates a direct economic incentive for specialized cardiac hospitals to enter the market; such entry reflects areas that government pricing makes most profitable, which may or may not reflect consumers' needs and preferences." Thus, taxpayers were billed more for these services than a competitive market would charge.

Government price controls also drive pricing for private payors. As former Medicare administrator Tom Scully has remarked,

Medicare and Medicaid are such dominant players that the private sector has been forced to follow along—shadow pricing [Medicare's price controls] in recent years . . . In the long run, government price fixing for services has never worked in any system in any society, and I don't think it can work here, either. Having federal price fixing, no consumer information or pricing sensitivity, and no measurement of quality has led to predictable results: artificially high prices and uneven quality.


Specialty Hospitals

Such price distortions also lead to further government obstacles to competition. Many large hospitals use excessive payments from public purchasers - notably Medicare - to subsidize other costs.  These other costs can include legal requirements to provide care to those who cannot or will not pay, underpayments for other services, or the hospitals' own inefficiencies.

As a result, smaller specialty hospitals have emerged to capture those excessive payments. Since 1990, the number of specialty hospitals in the United States has tripled. These smaller hospitals compete by performing a smaller number of services at greater volume, and thus tend to be more efficient. A study by the Lewin Group of one chain of cardiac care hospitals found they had lower mortality rates, shorter lengths of stay, and lower rates of medical complications than their larger competitors, despite caring for a less healthy patient mix. The specialty hospitals "discharged a higher proportion of their Medicare cardiac patients to their homes and transferred fewer discharged cardiac patients to other facilities,'' which may actually have reduced Medicare spending. However, at least some of their growth can be attributed to excessive payments from public purchasers. Since specialty hospitals do not need to subsidize other costs, they can apply overpayments to higher staff compensation and superior service that pulls patients away from larger hospitals.

In response, large hospitals have responded by lobbying for regulatory barriers to protect their position. Larger hospitals have even persuaded Congress to prohibit the creation or expansion of new specialty hospitals. In December 2003, the Medicare Modernization Act effectively imposed an 18-month moratorium on the construction of new specialty hospitals by denying Medicare reimbursements to such facilities. The moratorium also forbids existing specialty hospitals to add new physician investors, expand or change the hospital's specialty, expand beyond their existing campus, or expand the number of beds beyond specified limits. Such restrictions reduce healthy competition and harm patients. The Medicare Modernization Act also required the Medicare Payment Advisory Commission (MedPAC) to study the effect specialty hospitals have on patients and larger hospitals. MedPAC's preliminary findings indicate that specialty hospitals increase competition and improve care not only for their own patients, but for those in larger hospitals as well. MedPAC found that specialty hospitals serve as a "wake-up call'' for larger hospitals, and spur the latter to become more efficient and improve their services. Moreover, MedPAC found that most large hospitals remain profitable in spite of competition. Nonetheless, in March 2005, MedPAC recommended extending the moratorium until 2007 to allow further study of the issue. MedPAC also recommended fixing Medicare's pricing system to bring payments closer to what market prices would be.

Nonetheless, larger hospitals, led by the American Hospital Association, are lobbying for a permanent ban on specialty hospitals. As the FTC and DOJ observe, "Competition . . . does not work well when certain facilities are expected to use higher profits in certain areas to cross-subsidize uncompensated care.'' Specialty hospitals are an example of competition attempting to break through a highly regulated market. Competitors whose position is threatened respond with the coin of the realm. . .

To read the rest of Part III, Chapter 6 - Government Health Programs - please go to the Cato Bookstore: The price is only $10. At that rate, consider purchasing two or three and surprise those friends, who don't understand that government involvement in health care is destroying affordable health care, with a gift that keeps on giving. There are other excellent recent titles you may want to consider.

For Next month, read Part III: Chapter 7 - Choice and Competition, or Controls?

To read some of the other book reviews that are available, please go to

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10.  Hippocrates & His Kin: Men and Women in Consultation with Their Doctor

The Man-Wife Perspective that Doctors See – The Envy of Sociologist and Psychologists

Mr. & Mrs. Roberts, who have been married for 61 years, came in for their annual exam. Mrs Roberts, who is 84, stated that she had a nodule in her right breast. She was unable to locate it for me and turned to Mr Roberts, "Could you show the doctor where it is? You know, Doctor, Bob always finds these things. I've had two nodules that have been removed and he found both of them. After all, isn't that part of a husband's job? He checks them every day for me."

Mr Roberts, who is 82, was next. Checking him over from his retina to his prostate, Mrs Roberts watches me very carefully. Her attention becomes very acute when I check his phallus, testicles, inguinal canal, and do a rectal exam checking his prostate and making sure the hematest on the stool on my finger is negative. (Isn't that how President Reagan found his cancer of the colon?) She seems to be somewhat tense until I announce that his prostate feels normal and there's no blood on my finger.

After writing the prescriptions, lab requisitions, Mrs. Roberts turns to me and says, "Doctor, I really appreciate your checking out my husband's male equipment so thoroughly. You know, I want you to keep that working as long as possible because that's what keeps our marriage so young."

Don't Lose Sight of What's Important in Life.

Don't Knock It. Being Homeless May Be the Road to Success?

The first William Wrigley Jr., founder of the Wrigley's Gum Dynasty, the family that helped build Chicago, was 11 years old when, in 1872, he ran away from Philadelphia to New York, where he hawked newspapers and slept on the street, according to a 1920 article in American Magazine. Years later, he went to Chicago to peddle soap, then baking powder, to shop owners. To entice them, he gave away two packages of chewing gum with each can of baking powder. When the gum became more popular, he started selling that instead. The rest is history.

See Someone Sleeping On the Street? Give Him an Incentive: A Stick of Wrigley.

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11.  Restoring Accountability in HealthCare, Government and Society:


•                      The National Center for Policy Analysis, John C Goodman, PhD, President, who along with Devon Herrick wrote Twenty Myths about Single-Payer Health Insurance, which we reviewed in this newsletter the first twenty months, issues a weekly Health Policy Digest, a health summary of the full NCPA daily report. You may log on at and register to receive one or more of these reports.

•                      Pacific Research Institute, ( Sally C Pipes, President and CEO, John R Graham, Director of Health Care Studies, publish a monthly Health Policy Prescription newsletter, which is very timely to our current health care situation. You may subscribe at or access their health page at This month, be sure to read Three Strikes for Health Freedom: A Review of Recent Books on Health Reform by Diana M. Ernst at

•                      The Mercatus Center at George Mason University ( is a strong advocate for accountability in government. Maurice McTigue, QSO, a Distinguished Visiting Scholar, a former member of Parliament and cabinet minister in New Zealand, is now director of the Mercatus Center's Government Accountability Project. Join the Mercatus Center for Excellence in Government. This month, The "Primer on Regulation" provides an overview of regulation, from theoretical issues of why we see regulation where we do, to analytical questions of how to write a good regulation at  

•                      The National Association of Health Underwriters, The NAHU's Vision Statement: Every American will have access to private sector solutions for health, financial and retirement security and the services of insurance professionals. There are numerous important issues listed on the opening page. To answer all your questions on Medicare, go to To review a 52 page PPT presentation on Medicare and You, you may go directly to Be sure to scan their professional journal, Health Insurance Underwriters (HIU), for articles of importance in the Health Insurance MarketPlace. The HIU magazine, with Jim Hostetler as the executive editor, covers technology, legislation and product news - everything that affects how health insurance professionals do business. Be sure to review the current articles listed on their table of contents at To see my recent column, go to

•                      The Galen Institute, Grace-Marie Turner President and Founder, has a weekly Health Policy Newsletter sent every Friday to which you may subscribe by logging on at Read Grace-Marie's March article: The need for price transparency is the hottest conversation right now in the world of consumer directed health care, which can be found at

•                      Greg Scandlen, an expert in Health Savings Accounts (HSAs) has embarked on a new mission: Consumers for Health Care Choices (CHCC). To read the initial series of his newsletter, Consumers Power Reports, go to To join, go to  Read Greg's article on Medicare is in crisis and to date little has been done to address it. Old strategies, such as cutting provider payments, will do little to solve the problem, and may make it worse by driving the best physicians out of Medicare altogether. Ironically, the Medicare Modernization Act of 2003 authorized all Americans, except those on Medicare, to try a "consumer directed" approach that has the potential to lower costs by changing patient behavior. It is time for Congress to allow Medicare beneficiaries to join the movement to consumer empowerment.

•                      The Heartland Institute,, publishes the Health Care News. This month please read the president Joseph Bast's column. Who is paying the pundits is in the news because Jack Abramoff, a lobbyist and briber, is spilling his guts to the feds about all the politicians he bought and sold over the years. Abramoff revealed he had paid Doug Bandow, who until a few weeks ago was a Cato Institute senior fellow and syndicated columnist, to write columns on topics of interest to his clients.  Bandow's mistake was to submit those bought articles to Copley News Service as installments of his syndicated column, still identifying himself only as a Cato senior fellow. He failed to disclose the payments to his readers, Copley News Service, or the Cato Institute. When news of the payments appeared in the press, Copley News promptly fired Bandow and Cato asked for his resignation. Read the details at

•                      The Foundation for Economic Education,, has been publishing The Freeman - Ideas On Liberty, Freedom's Magazine, for over 50 years, with Richard M Ebeling, PhD, President, and Sheldon Richman as editor. Having bound copies of this running treatise on free-market economics for over 40 years, I still take pleasure in the relevant articles by Leonard Read and others who have devoted their lives to the cause of liberty. I have a patient who has read this journal since it was a mimeographed newsletter fifty years ago. FEE turned 60 last week. Read Dr Ebeling's review of the founder, Leonard Read's First Principles: The philosophy of advancing freedom is grounded in the idea that changing the world begins with changing ourselves.

•                      The Council for Affordable Health Insurance,, founded by Greg Scandlen in 1991, where he served as CEO for five years, is an association of insurance companies, actuarial firms, legislative consultants, physicians and insurance agents. Their mission is to develop and promote free-market solutions to America's health-care challenges by enabling a robust and competitive health insurance market that will achieve and maintain access to affordable, high-quality health care for all Americans. "The belief that more medical care means better medical care is deeply entrenched . . . Our study suggests that perhaps a third of medical spending is now devoted to services that don't appear to improve health or the quality of care–and may even make things worse." To read the latest on health insurance mandates, go to

•                      The Health Policy Fact Checkers is a great resource to check the facts for accuracy in reporting and can be accessed from the preceding CAHI site or directly at This week, read the Daily Medical Follies: "Woeful Tales from the World of Nationalized Health Care."  

•                      The Independence Institute,, is a free-market think-tank in Golden, Colorado, that has a Health Care Policy Center, with Linda Gorman as Director. Be sure to sign up for the monthly Health Care Policy Center Newsletter at  Read Jon Caldera on disciplining a bad teacher. Unlike private-sector employees, Colorado schoolteachers are, by law, innocent until proved guilty, making it near impossible to fire them. That is, it takes wading through a process of appeals and delays, similar to that of a death-row inmate, to discipline a bad teacher, much less get him out of the classroom.

•                      Martin Masse, Director of Publications at the Montreal Economic Institute, is the publisher of the webzine: Le Quebecois Libre. Please log on at to review his free-market based articles, some of which will allow you to brush up on your French. You may also register to receive copies of their webzine on a regular basis. Be sure to read Ezra Levant's The War on Fun. In it, Ezra clearly shows how big health lobbies, politicians, do-gooders, busybodies and lawyers are attacking personal liberties, destroying the long Canadian tradition of freedom, turning rational grown-up adults into children, wanting to replace parental responsibility by bureaucratic programs and creating a victimhood mentality.

•                      The Fraser Institute, an independent public policy organization, focuses on the role competitive markets play in providing for the economic and social well being of all Canadians. Canadians celebrated Tax Freedom Day on June 28, the date they stopped paying taxes and started working for themselves. Log on at for an overview of the extensive research articles that are available. You may want to go directly to their health research section at Be sure to read the review on their latest publication, Solutions for Health Care Issues, at

•                      The Heritage Foundation,, founded in 1973, is a research and educational institute whose mission is to formulate and promote public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values and a strong national defense. The Center for Health Policy Studies supports and does extensive research on health care policy that is readily available at their site. This month, Stuart M. Butler, Ph.D., writes about The Crucial Elements of an Acceptable Medicare at

•                      The Ludwig von Mises Institute, Lew Rockwell, President, is a rich source of free-market materials, probably the best daily course in economics we've seen. If you read these essays on a daily basis, it would probably be equivalent to taking Economics 11 and 51 in college. Please log on at to obtain the foundation's daily reports. Be sure to read the current essay, State Science is Bad for Your Health by Brad Edmonds at He reminds us that medical research, technology in general, indeed any human endeavor, can be a wonderful avenue for human progress provided it exists within the framework of freedom as versus state control. You may also log on to Lew's premier free-market site at to read some of his lectures to medical groups. To learn how state medicine subsidizes illness, see; or to find out why anyone would want to be an MD today, see

•                      CATO. The Cato Institute ( was founded in 1977 by Edward H. Crane, with Charles Koch of Koch Industries. It is a nonprofit public policy research foundation headquartered in Washington, D.C. The Institute is named for Cato's Letters, a series of pamphlets that helped lay the philosophical foundation for the American Revolution. The Mission: The Cato Institute seeks to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets and peace. Ed Crane reminds us that the framers of the Constitution designed to protect our liberty through a system of federalism and divided powers so that most of the governance would be at the state level where abuse of power would be limited by the citizens' ability to choose among 13 (and now 50) different systems of state government. Thus, we could all seek our favorite moral turpitude and live in our comfort zone recognizing our differences and still be proud of our unity as Americans. Michael F. Cannon is the Cato Institute's Director of Health Policy Studies. Read his bio at Be sure to read about Over-Criminalization in an Age of Corporate Scandals: Since Enron's collapse in 2002, the federal government has stepped up its campaign against white-collar crime. In doing so, contemporary federal criminal law has created a "Catch-22," in which businesspeople are forced to act either unethically or illegally. In the new Cato book Trapped: When Acting Ethically Is against the Law, Cato Institute senior fellow and Georgetown University business professor John Hasnas examines the ethical dilemmas raised by over-criminalization.

•                      The Ethan Allen Institute,, is one of some 41 similar but independent state organizations associated with the State Policy Network (SPN). The mission is to put into practice the fundamentals of a free society: individual liberty, private property, competitive free enterprise, limited and frugal government, strong local communities, personal responsibility, and expanded opportunity for human endeavor.

•                      Hillsdale College, the premier small liberal arts college in southern Michigan with about 1,200 students, was founded in 1844 with the mission of "educating for liberty." It is proud of its principled refusal to accept any federal funds, even in the form of student grants and loans, and of its historic policy of non-discrimination and equal opportunity. The price of freedom is never cheap. While schools throughout the nation are bowing to an unconstitutional federal mandate that schools must adopt a Constitution Day curriculum each September 17th or lose federal funds, Hillsdale students take a semester-long course on the Constitution restoring civics education and developing a civics textbook, a Constitution Reader. You may log on at to register for the annual weeklong von Mises Seminars, held every February, or their famous Shavano Institute. You may join them to explore the Roots of American Republicanism on a British Isles cruise on July 10-21, 2006. Congratulations to Hillsdale for its national rankings in the USNews College rankings. Changes in the Carnegie classifications, along with Hillsdale's continuing rise to national prominence, prompted the Foundation to move the College from the regional to the national liberal arts college classification. Read President Arnn's comments at Also, read his comments on Ronald Reagan, RIP, at Please log on and register to receive Imprimis, their national speech digest that reaches more than one million readers each month. This month, read Mark Steyn on America and the United Nations at  The last ten years of Imprimis are archived at

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Please note: Articles that appear in MedicalTuesday may not reflect the opinion of the editorial staff.

ALSO NOTE: MedicalTuesday receives no government, foundation or private funds. The entire cost of the website URLs, website posting, distribution, managing editor, email editor, and the twenty hours per week of writing is solely paid for and donated by the Founding Editor, while continuing his Pulmonary Practice, as a service to his patients, his profession, and in the public interest for his country. Time constraints may delay the publication of some issues.


Del Meyer

Del Meyer, MD, Editor & Founder

6620 Coyle Ave, Ste 122, Carmichael, CA 95608

Words of Wisdom

Earl Nightingale, 1921-1989: Creativity is a natural extension of our enthusiasm.

Will Rogers: I don't make jokes. I just watch the government and report the facts.

Some Recent Postings

Medicare Reform: Pharmacy Benefit Program—What Must Be Done – A Clinician's Point of View          

In Memoriam

Madeleine Pelner Cosman, PhD, Esq, a medical attorney, President of Medical Equity, and national medical law consultant since 1980 in San Diego, has died. She began writing articles and books on medical law and related subjects in the 1960s. One of Madeleine's 15 published books was nominated for the Pulitzer Prize, the National Book Award, and was a Book of the Month Club Dividend Selection. Medical law and medieval culture were her intellectual passions. Her book Women at Work in Medieval Europe was published in New York in 2000, as was her dictionary of medieval culture, Medieval WordBook (1996). We have enjoyed our association with her in the Health Benefits Forum, at meetings of the AAPS, and in her contribution of articles published on our websites. She was a clear thinker on what's wrong with American Medicine and our best ally in improving American Healthcare. She will be missed by many of us at MedicalTuesday. Here are a few of her articles and publications.

On This Date in History – March 14

Albert Einstein was born in Ulm, Germany, in 1879.  He received the Nobel Prize in Physics in 1921 for his theory of relativity. This man of peace helped forge the key to the world's most terrible weapon having escaped from Nazi Germany.

Eli Whitney received a patent for the cotton gin in 1794, which reduced the need for hand labor, and fathered the idea of mass production. The next time you go to your mechanic to have the car fixed, you might stop and think of how much more that repair bill might be if Whitney hadn't come up with the concept of interchangeable parts.