Philadelphia Reflections

The musings of a physician who has served the community for over six decades


Philadelphia Medicine
Several hundred essays on the history and peculiarities of Medicine in Philadelphia, where most of it started.

New volume 2012-07-04 13:34:26 description

New volume 2012-07-04 13:46:41 description

Health Reform: A Century of Health Care Reform
Although Bismarck started a national health plan, American attempts to reform healthcare began with the Teddy Roosevelt and the Progressive era. Obamacare is just the latest episode.

Health Reform: Children Playing With Matches

Health Reform: Changing the Insurance Model
At 18% of GDP, health care is too big to be revised in one step. We advise collecting interest on the revenue, using modified Health Savings Accounts. After that, the obvious next steps would trigger as much reform as we could handle in a decade.

Second Edition, Greater Savings.
The book, Health Savings Account: Planning for Prosperity is here revised, making N-HSA a completed intermediate step. Whether to go faster to Retired Life is left undecided until it becomes clearer what reception earlier steps receive. There is a difficult transition ahead of any of these proposals. On the other hand, transition must be accomplished, so Congress may prefer more speculation about destination.

A New Era in Politics: Clinton, Obama, and Trump
New forms of communication made the party system largely obsolete.

Working Volume
New volume 2018-11-13 00:38:16 description

Clinton Health Plan of 1993 - Part One

Mistaking Senate re-election of Harris Wofford to mean the country demanded reform of the medical system, newly-elected President Clinton announced he would create one. When stakeholders surmised he was making it up as he went along, they deserted him.

The health industry of America contains many professions and businesses in continual conflict for power and control; at 15% of the Gross Domestic Product, there is much to fight over. For more than fifty years, struggles and frictions have generally taken the form of proposals to change the system to someone's advantage but the disadvantage of others. By 1990 the systems had reached an equilibrium of sorts. Ninety percent of the public was covered by some insurance or government program, most of the remainder were not seriously sick, some who were sick and uninsured were illegal immigrants, charity seemed to take care of the rest. Most dissatisfaction voiced was not so much related to serious hardships that the public could notice, but rather to reimbursement, bureaucratic fumble, and fairness to providers of care. Almost everyone could see some feature to be improved, but no one's protest could be entirely trusted. The mood of the public was one of uneasy grumbling.

We can see today that even eight years of William Clinton's presidency would surface very little personal ideology about the medical system. It seems reasonable to conclude he wanted to be President because he had unusual talents for getting elected and managing quarreling legislatures; he wanted to use those talents for something. For reasons which were not quite adequate, Clinton chose to make his mark as the man who reformed Health Care, a topic about which he knew little.

The approach adopted was to convene a large committee of everybody with a major complaint or proposal about health care, hoping thereby to construct a coalition of proposals which might represent the votes needed in Congress to get the package adopted. Opposition by the Republicans was assumed, resistance by the people currently in charge of health care delivery was expected. A few people would have to be bullied, a few would have to be bribed. Normal politics indeed.

In general, that was a system which worked successfully many times when he was Arkansas governor. It didn't work this time because the national scale is so much larger than the scale of a small agricultural state. Major revision of the medical system cannot be sneaked through, nor can you stampede the public on a subject where everyone has something to say.

Nobel Prize: Michael Brown, MD

Michael Brown

The College of Physicians of Philadelphia annually sponsors a lecture by a winner of the Nobel Prize in Medicine or Physiology. There is never any doubt of the high quality of any such lecture, but it does add an element of local pride whenever the Nobel Laureate comes from Philadelphia, as he did this year. Michael S. Brown, MD graduated from Cheltenham high school in 1958, received a B.A. from the University of Pennsylvania in 1962, and his M.D. degree in 1966. Nineteen years later, he was awarded the Nobel Prize in Medicine for his work in describing the cholesterol pathways, and the human defects in it which lead to heart attacks, strokes and other consequences of atherosclerosis. Almost immediately, Japanese investigators found the so-called stain drugs being produced by relatives of the penicillin mold for no particularly obvious purpose. The patents have not yet expired on most of these drugs, but many millions of people have already been spared death or disability from hardening of the arteries, the commonest killer in modern life.

The speaker, now a gastroenterologist practicing in Texas, chose to organize his talk around the manner in which biochemical discoveries are currently being made. Physicians in medical research endure news media presentations, usually in silence, of scientific research performed by basic scientists with PhD degrees, with MDs then merely dispensing the drugs. It sometimes happens that way, but in general the basic scientist is too highly focused on the techniques of the scientific cutting edge to be well positioned to see the direction that should be taken next. The physician scientist, on the other hand, is aching to find a solution to current problems, but often lacks the necessary technical skills to perform the experiment. James Shannon, one of the early directors of the National Institutes of Health, recognized this mutual deficiency was impairing progress and set about establishing training programs for cross-fertilization between the scientific approaches. Dr. Brown was one of the early trainees of that program, and now describes its glories, going from the patient bedside to the scientific laboratory bench, and then back to bedside to test the results. Competition has morphed into collaboration.

Some day, someone will conduct a study of Nobel Laureates, seeking out the traits which characterize them. The next step after that would probably be cloning them, although public opinion will first have to catch up with that thought. From an observers point of view, Nobel prize winners all seem gifted with the ability to give a logical, entertaining and succinct description of a complicated matter. Almost all of them are located in very large research environments, where news of small scientific discoveries in obscure scientific journals is quickly picked up by a hundred eyeballs, filtered for the benefit of the local enthusiast of the topic, and often fitted together with something which that enthusiast has discovered but not published, or published too recently to be well known. Research is not just expert marksmanship, it is marksmanship within a boiling cauldron of undigested facts. One other thing about Nobel Laureates: as a group, they tend to drive over the speed limit, even when going to the local supermarket.

Anyway, it's real nice to take the statin drug and watch your cholesterol go down, secure in the knowledge that invisibly your longevity is improved. There's just nothing more attractive than having more longevity. At least, it's hard to imagine what would ever replace it in attractiveness.

Clinton Health Plan Starts at the Union League

Meeting of the Minds

Senator Harris Wofford

and I should be in conflict. He seems like a charming person I might like for a friend or a dinner companion; so far as I know, neither of us bears any ill will. Nevertheless, the strange circumstances of the Clinton Health Plan pushed the two of us forward to explain or debate its merits in adversary battle, and attack each other. In fact, Wofford had no particular interest or experience in the topic of health insurance, while I was uncertain just where the proposal intended to go. In retrospect, everyone can see that at the moment we were in debate, the plan didn't exist even in the broadest outline, and eventually never did develop into anything definable, even after it had been defeated in Congress.

Bill Clinton

Nevertheless, President Clinton had appointed his wife to lead a commission to refine what was supposed to be Wofford's proposal to give everyone healthcare; Wofford was expected to get out in public and promote it. One form this took was to have debates with organized Medicine, and somehow I got picked to oppose him in two debates, one at Haverford College later at the College of Physicians of Philadelphia. Since Senator Wofford had once been president of Bryn Mawr, Haverford's sister college, the audience was presumed to be somewhat favorable to him. However, I had ties to the two colleges, too. In fact my older daughter was a student at Bryn Mawr when Wofford was president. It's likely I remember better than he does the time when he called me up. As he introduced himself, my first thought was, "Ye Gods, whatever has she done?" Nothing. It turned out he was calling my wife, a Bryn Mawr alumna, for a fund raising committee.

Haverford College

It would be interesting to hear from some of the Haverford students in that audience, just what their expectations had been. Presumably, they wanted to see a famous Senator in person, and perhaps they were looking for the amusement of a gladiator combat. No doubt, the main founder of the Peace Corps would appeal to their sense of fairness and willingness to sacrifice for the common good. And no doubt they expected a representative of Medical Societies to attack the complexities and unworkability of some government scheme. But I could expect them to be disappointed in his description of the plan, because there was no plan. And, looking out at that audience of college students who chose to attend an optional evening program of information, I surmised that many or most of them were pre-medical students. They were looking to me to help them decide whether they were making a good career choice. How should they comport themselves, if thrust into my position? It is, in short, hard to say who won this friendly debate, but I doubt if I lost. As demonstrated by Ho Chi Minh, George Washington, and Osama be Laden -- you win by not losing.

And one more thing emerged. If members of Congress knew nothing about this topic, and members of the medical profession were bewildered about what the proposal was -- who did know what it was all about?

Picking Up the Usual Suspects

The federal government directly controls about half of health care spending, and makes rules affecting most of the rest.

Claude Rain

Every group or business which receives some of this money is alert not to lose it. Many other groups are alert for openings to get more of it. All employ sentries in Washington. False alarms are frequent, stealth attacks are a constant threat, constituents paying the bills demand immediate reassurances. Members of Congress seldom initiate a disturbance unless someone from inside an industry brings it to them. Consequently, when proposals do surface, and seem to be serious, the question to be immediately answered is -- who's behind this? If you know who starts something, you can readily imagine the motive, assess the political strength, decide how to respond. With what little was generally known about the Clinton Health Care Plan of 1993, it was easy to imagine a host of people with some motive, but very hard to say who was actually pushing one. Must be a Democrat, obviously, but not immediately obvious which of several possibilities was the real agitator.

Health insurance companies would always seem likely to have proposals about national health insurance. Blue Cross dominates the market in large geographical markets, mainly East Coast, and would seem fearful to lose that dominance in a major upheaval. But other market areas of the country are dominated by commercial insurance companies who might seek to upend the Blue Cross monopoly, but whose form of business would be even more seriously threatened by health insurance innovations. Most commercial health insurance was written by large life insurance companies who regard health insurance as a small sideline for the convenience of their industrial customers. Blue Cross was somewhat more comfortable with government work, particularly since the 1965 Medicare and Medicaid programs were patterned after them. However, Blue Cross was non-profit, thus lacking in incentives, and historically controlled by health care providers. That is, Blue Cross was formed by and dominated by the hospital associations, and Blue Shield was formed by and dominated by medical societies. Since doctors and hospitals were very prompt in announcing their deep concerns and uncertainties about the Clinton Plan, Blue Organizations seemed unlikely to make daring proposals so likely to provoke trouble at home.

Not that some doctors and some hospitals didn't try to see what might be made of this opportunity. At the American Medical Association, certain leaders known to have Blue Shield involvement offered conciliatory remarks about waiting for further details before taking a stance, but were abruptly halted by a general opinion that things had apparently already gone too far for substantive negotiation. Much the same thing occurred at the Hospital Association; the winners had too much to lose, the losers had too little influence to matter, and nobody stepped up to claim an inside track. Hospital trustees didn't know what was going on, strongly suspected something was going on, and didn't like either situation. If the doctors got mad enough at a hospital, they could ruin it, and if hospitals got mad enough at Blue Cross, it too was ruined. The main strength behind the Blue Cross monopoly position was the secret discount provided to them by hospitals, which was refused to competitor insurance companies, but could easily be extended in the interest of fairness. If need be. The commercial competitors wanted that discount much more than they wanted new insurance models.

There is one subset of doctors and hospitals that might be suspected of generating a sweeping revision of the medical system -- academia. Medical schools think of themselves as the appropriate source of vision about the profession they are training, and they run large prestigious hospitals. Their heavy dependence on government research grants, teaching subsidies, and tuition support programs puts them in constant contact with Washington bureaucracy and politics; propinquity is a great match-maker. Their style of salaried faculty creates estrangement from making a living by being paid fees for specified services, and they are reasonably comfortable with the flaws and techniques of professional promotion within a large organization. So, a slogan which has been attributed to Wilbur Cohen himself does not greatly jar on their ears. The author of the Medicare Act is said to have announced that the entire medical system of America could be accommodated by thirty or forty Mayo Clinics. Twist that just a little, and you are imagining he said forty or fifty medical school teaching hospitals. The briefest contemplation and rebuttal will knock down that proposal, such as pointing out that we have several times that many teaching hospitals at present without achieving anything like the nation-wide coverage envisioned. After absorbing the administrative chaos of readjusting to that model, you would confront the old repeated history of grossly overestimating, and then grossly underestimating, the future manpower needs of a medical system in the process of constant scientific turmoil. Supppose you built the fifty Mayo Clinics and found you needed two hundred? Suppose you built two hundred and found you needed seventy? And then, finally, remember that each big city could expect to contain one of these organizations, but the fewer of them there are, the longer the distance everyone else would have to travel to get to them. No one has even ventured to speculate how you could go about doing such a thing, let alone doing it three or four times to get it right. But, but. The infeasibility of academia at the center of medical care delivery does not eliminate the possibility that the idea underlying the Clinton Health Plan may have originated in academia, or that academia might support some similar proposal with something else at its center.

Since it was soon clear that the traditional "players" in the health policy arena were unlikely to be sponsoring some self-serving policy that might masquerade as the Clinton Health Plan, the search went on. There were a number of professional groups within the medical community who had traditionally chafed at domination of the hierarchy by physician leadership. Nurses, hospital administrators, pharmaceutical companies, druggists, corporate human resources officers, public health officials, social workers, biology teachers all represented groups who derived status with the public by displaying inside knowledge of medicine. But all of them fell silent when a physician entered the room, and tended to shift their emphasis to faults of the "system" or the "industry". Their Washington representatives placed their emphasis on changes in the existing system which might elevate the prestige and income of the members, and were particularly vigilant for system modifications intended for other purposes which might nevertheless create advantageous loopholes for the members. All of this is normal striving in the good ole' American way, a polite variant of the mixture of bellicosity and restraint usually seen in the Union movement. These people wanted to improve their income and working conditions, but were ultimately quite hesitant about radical proposals that might sink the ship. A quick survey showed they were not supporting any particular reform project, even though they could be counted on to support any reform project. Furthermore, they consistently injured their political strength by extending beyond economic goals to issues like radical feminism in the case of nurses, or direct advertising to the public as in the case of the drug companies, or practicing medicine without a license in the case of limited-license practitioners. These people had votes, influence and lobbyists, but they did not have a national project for health care reform of their own devising, and they surely were not the people behind the Clinton Plan.

During the six months before The Plan was presented to Congress and the Public, a White House task force said to consist of five hundred secret members was meeting under the direction of President Clinton's wife Hillary. No doubt part of their purpose was to give Hillary a public platform on which to show her stuff, with the idea of someday succeeding her husband as President sort of in the back of her mind. But most of it was also quite practical; somebody had to figure out what this proposal was going to be, and newly elected Bill had to spend most of his time learning how to run the rest of the country. Buried in here was an efficiency principle too; the staff members of every important congressman and senator were involved in the process, making the deals and surfacing the political angles before things had to come down to votes and filibusters. Meanwhile, the rest of the country had to wait outside closed doors, fed by rumors and spin.

How well I remember one public seminar on the subject during this period of suspense. The audience was filled with people thought to be influential with the public, the usual suspects in that sense, too. Representatives of various interest groups were seated up front at a table, and for some reason I had been picked to represent doctors. Next to me was a druggist who had made a billion dollars starting an HMO; it was intriguing to watch how many well-dressed women with no interest in health care paraded up to the table to show their stuff to the billionaire, while we waited for the meeting to begin. All of the usual suspects of Philadelphia medical care were at the table, each of us wondering what the other was going to say. When some last Very Important Person had wandered in and taken a seat, it was time to begin. The moderator told a funny story or two, and then asked each one of us what we thought of the Clinton Health Plan. One by one, to the utter amazement of us all, we each explained how we were opposed to it.

So obviously this proposal was not coming from the usual agitators. But, remember, somebody was surely behind it. Before we take a stab at that mystery, let's humanize the usual suspects by describing a few of them.

Equal Pay for Equal Work

American Medical Assocation

The House of Delegates of the American Medical Association holds a five day convention twice a year. The meetings last from 7 in the morning until midnight, although the main sessions in the auditorium only last eight hours a day during three days. The rest of the time is consumed with meals, committee meetings, geographical caucuses, and even cocktail parties. Newcomers often object to the numerous parties until they come to see that these are merely committee meetings in a different form, with different subsets of the organization picking up the necessary costs. This group of workaholics has to vote on several hundred issues each session, and most Delegates have little advance opinion when they enter the headquarters hotel on the first day. But after meeting with their specialty in one committee, and members of their geographical region in another, and members of their medical school alumni association in yet another, and with issue oriented groups, political allies, and other layers of an overlapping matrix day after day -- by the time the vote is actually called for, most Delegates could safely predict the correct outcome with very few exceptions. The AMA works at its similar job with far greater intensity than Congress does, because Congress has all year to do it, while the doctors have to go home to make a living. Don't worry about the parties, they are really work sessions for everyone except rank newcomers, outsiders, visitors, and wives. What is perhaps more worrisome is the rare occasion when just about every delegate arrives with one opinion, and is persuaded by the leadership to adopt the reverse. That can only happen if new information is suddenly revealed, with little time to check its accuracy.

There are usually fifteen or so parties every night, hosted by large state delegations, large specialty assemblies, and coalitions of smaller groups. Fifteen drinks a night would be quite a bit for most folks, and some newcomers are duped into trying to be polite about it. The rest of us take the proffered drink, walk over to a nearby plant stand and dump it. I hate to think how many potted palms I have fried that way. Each delegation has its own system of organizing these minuets, and I'll try to describe the Pennsylania system.

Nobody will come to your party if you don't go to theirs, so we make a list and divide the group into those who "travel" to the parties of other states, and those who remain to host our own party, "at the door". Everyone is expected to wear a name tag, containing your name in large type underneath which is your caucus designation, in my case "Pennsylvania". The older members instruct the newer ones to put the name tag just under their right shoulder. That way, you can seem to be looking at the hand you are shaking, while freshening your recollection of who in the world you are meeting. You can of course do anything you please, but time is short for a the transaction of a lot of business, and it's just easier to do routine things the regulation way, and get on with it.

On the evening in question, I was "at the door". The formula, repeated many times, was to extend a hand of greeting and recite, "Welcome to Pennsylvania. Are you looking for some friend in particular? Let me see that you have a drink. Come on in and meet my fellow delegate, Scotty Donaldson." You can shepherd a lot of people more or less gracefully if you reduce the formalities to a routine. After several people had been brought in under the tent, a man with highly polished shoes came up, wearing a name tag that said, "Blue Cross of America". He was greeted, his hand pumped, a drink procured, and was introduced to Scotty, our most famous extrovert. I quickly turned to the next person at the door.

Well, this lady was six inches taller than I am, and fifty pounds lighter. She wore a name tag, identifying her as President of some Nurses Association, "Welcome to Pennsylvania! Is there someone from Pennsylvania you know or would like to meet? Can I......" The apparition didn't even look at me as she brushed past through the door. Heading straight for the gentleman from Blue Cross, she poked her index finger into his chest, stopped him in mid-sentence as he talked to Scotty.

"What I want to know, " she announced to this startled man, "Is when are you people in Blue Cross going to pay nurses as much as you pay doctors?" And here I must admit I have to give this guy credit for unperturbability.

"Well, maam," he said cheerfully, "I think that's going to be quite some time."

A New Gorilla in the Cage

{William Clinton}
William Clinton

News reports began to surface that big business was talking to Democrats in the White House about major revisions in the national health delivery system. That in itself was news, because big business normally forbids its employees to talk with regulators, and does not commonly welcome any new regulations. But the the Clinton Administration was looking for political allies, while the business community was willing to examine proposals to lighten the burden of employer-based health insurance. The discussions soon probed whether a common system might reduce government costs of Medicare and Medicaid, and simultaneously reduce the costs of employer-paid health insurance. For years, big business had been suspicious that the health community had somehow forced employers to pay an unfairly large share of other people's health costs, through some arcane manipulation of hospital cost accounting. Their term was cost shifting.

The administrators of government programs believed the same thing was happening to them. Since the only group left to benefit were the uninsured, the arithmetic was somehow wrong. A 7% population group, most of whom are young and healthy, could not account for annual premium jumps far in excess of the cost of living, occasionally as much as 30% in one year. In both governmental and business minds, the main beneficiaries of cost shifting must be the hospitals themselves, and the doctors who control them. Somehow, it seems not to have occurred to them that this news was brought to them by their fiscal agents, the health insurance companies, and was therefore likely slanted to avoid attention to middle-man costs. Whenever major negotiations are to be held, CEOs and top politicians take over to make the deals, necessarily basing their judgments on filtered information. Since this is a familiar situation, they employ high-priced consultants.

Clark Havighurst

The five hundred secret members of Mrs. Clinton's task force were willing to listen to the ideas of anyone who had political clout, especially staff members of Congressional committee chairmen. But these people had been struggling with the problem for fifty years to no avail, so the emphasis had to be on change, on big new ideas. Universities and think tanks were especially welcome to comment, and

Clark Havighurst was particularly influential. But there had to be some kind of track record, some practical experience on which to base such an enormous national initiative. The best available model was the Health Maintenance Organization (HMO), whose most famous proponent was Paul Ellwood, a former midwestern pediatric neurologist who had gravitated into health insurance consulting. Ellwood had a vacation home in Jackson Hole, Wyoming, where he then gathered the non-govermental component of this movement into his front parlor. Insurance companies, human resources officials, academics, and in later stages the newsmedia, were given the Word, an opportunity to criticise, and an opportunity to have their views coordinated with the government group in Washington. There was a rough division of labor, establishing general regions of dominance; but ultimately, the two components intended to fit together in a unified health system for the whole country, bar none. The business community began to see that inevitably in that case the final overarching decisions would be made in Congress.

Health Maintenance Organizations (HMO)


It's an ancient wrangle whether a manufacturer should actually own its suppliers, or the reverse; or instead whether it's healthier for industry components to stand at arms length from each other. At issue is not only what is best, but what is fair. If industry mergers seem sufficiently unfair, it will be proposed they should be illegal. That's the main substance of a lot of antitrust argument. Unfortunately, what is valid in good times may be reversed in a downturn. A prosperous supplier of materials often acts as a "cash cow", saving a merged enterprise from bankruptcy. Unfortunately, within a different economic climate one badly failing supplier can bring down the whole merged enterprise. There's also organizational friction; a temporarily prosperous unit may get to thinking it should boss the less prosperous units around. At the very least, the cash cow resists use of its cash reserves to help "losers". Several centuries of experience have thus left a minefield of old laws, traditions, and ingrained prejudice to undermine any broad standards for what is best. In no field is this more true than the Medical Industry.

Eighty years ago in Houston, the first Blue Cross health insurance company was started for a single group of school teachers to pay for service in a single hospital. That expanded to other subscribers and other hospitals, soon making it more workable for insurance, subscribers and hospitals to stand at arms length, allowing for a variety of local combinations. During World War II, combat in the Pacific led shipyards to be built on the West Coast, but westward migration of steel workers was hampered by lack of local medical facilities for them and their families. Taking advantage of the loophole provided in the wartime wage and price controls, Kaiser Industries attracted medical personnel by building hospitals, paying salaries, and offering physicians ready-made medical practices. Because of various licensing laws, Kaiser's medical enterprise was divided into two corporation, Kaiser and Permanente, so a specialized corporation within the Kaiser-Permanente Foundation could accommodate the licensed practitioners. The salaried nature of the physician organization immediately caused trouble with local fee-for-service practitioners, who were thus excluded from a large population in their neighborhood when they could not readily adjust to varying mixtures of the two payment methods. Their reaction, led by an obstetrician in Stockton, California, was also to organize dual-corporation structures which were exclusively fee-for service. Because Kaiser had a Foundation, they also called their organizations Foundations for Medical Care. Then, as now, it proved difficult to run a practice with two different reimbursement philosophies in the same waiting room; in time, friction between the two styles tended to increase as doctors who were more comfortable with each style tended to segregate themselves. Since offers of salaries are more immediately attractive to newly-trained physicians, they flocked to California to serve the steelworkers who were in need of doctors. Fee for service, on the other hand, allowed the gradual assembly of a more durable practice composed of patients who could test what they liked before making a permanent allegiance. Essentially, the transients went to Kaiser, more permanent settlers used fee-for-service.

Thus, it came about that several models for health care reform were tested in a few smallish towns of central California. These demonstration experiments may perhaps not meet everyone's standard for scientific purity, but at least they were public examples with the dumber features knocked away. They certainly provided a laboratory where ideas could develop about topics that otherwise were merely opinions and unsupported conjecture. The Foundations demonstrated that physician-dominated organizations could contain costs and maintain quality in a satisfactory way; there had previously been doubt about their ability to contain cost. The Kaiser organization showed that salaried practice performed acceptably as well, both to most staff physicians and to a majority of the patients; there had been doubt about the willingness of the public to limit choices to a panel of assigned physicians, mostly young and usually from elsewhere. Finally, the two systems seemed to be able to live together more or less peacefully; indeed, the California public seemed reassured that two systems apparently kept each other in check.

The first main difference rested on the system of quality control. The local Foundations developed review systems based on peer review and peer pressure; these worked remarkably well, particularly in constraining non-physician costs like pharmacy, tests, and hospitalizations. Cost and quality control in the Kaiser system was more rule-bound and quicker to apply discipline, kept within bounds however by the ability of both patients and staff to jump ship for the other system. Aside from professional peer review, the Kaiser system experimented with owning hospitals, laboratories, pharmacies. Here, the experience directly paralleled the experience of manufacturing industry with its suppliers; when reimbursement was generous suppliers generated welcome revenue. When reimbursement was constrained and substandard, ancillary service losses were unwelcome. Taken overall, the Houston experience was repeated, that ownership of such facilities was mostly a headache. Indeed, subsequent experience has shown the two systems usually co-exist nicely within independent ancillary facilities.

The Stockton, or Foundation for Medical Care, approach grew popular in the West. The variant which grew up in Utah was locally popular, and attracted the attention of Senator Wallace Bennett. The Bennett Amendment to the Medicare Act then picked out the peer review system as the secret of success, and set up a nationwide system of Professional Standards Review Organizations (PSRO) to conduct peer review of Medicare and Medicaid patients. The drawing of boundaries around these organizations was the most difficult part, and sometimes the boundaries were inept. Rural districts were adamant that the standards of big-city medical schools were not to be applied to their scattered resources, and urban areas saw themselves as ancient Rome surrounded by hostile tribes. Although these difficulties were foreseen, it is not always possible to draw a line that will separate the cultures, particularly where the outward migration of suburban housing was more rapid than the construction of suburban medical facilities, leaving the medical culture unstable. The PSRO system was quite successful in many areas, but caused trouble in others that was not adequately addressed. The central concept of the review system was that the doctors who worked together could quite readily identify the outliers, and better than anyone else could judge whether the local situation was justified. True, some practitioner might try to abuse the system to the disadvantage of his competitor, so no adverse decision was final until there had been an opportunity for outside appeal. There might even be a few circumstances requiring still higher appeal. The system was new and untried, but it produced eminently satisfactory results from the point of view of the Federal Government paying the bills. As former President of one of the largest PSROs in the country, I will assert that there was remarkably little friction or resistance in the medical community. My very good friend, the President of the New York City PSRO says much the same, and most people would say that if you can carry off a new system in New York without a lot of argument, it must work pretty smoothly. The Government wanted to eliminate unnecessary Medicare costs, particularly in hospitals, and it wanted to maintain peace with the medical profession. Hospital costs are obscured by the wide gap between posted charges and true underlying costs, compounded by disagreement about the proper assignment of overhead charges. Charges were not the assignment of the PSRO, utilization was. Days of hospitalization per thousand enrollees fell from roughly 1000 days per thousand to roughly 200 days per thousand, and that satisfies me at least that we were doing our job; physician peer review was doable.

It is likely, however, that peer review was much more apt to produce friction in rural districts. Philadelphia has had more than a hundred hospitals for more than a century. Birds of a feather tend to flock, so the sorting-out process was already far advanced by the application of constrained referrals to practitioners who failed local standards. Mixing members of different hospital staffs on appeals committees was easy in the big cities, and the naturally censorious tendencies of many physicians could be safely counted on to produce adversary balance. Most committees seemed visibly pleased, even relieved, to discover generally good quality in their competitors' practices. However, in the much smaller and more scattered institutions in the nation's regions with low population density, these informal arrangements cannot stretch as well. When there is only one specialist in a field, for example, it is sometimes hard to know whether he is a good one or not, but always easy to say whether you like him or not. Where the population thins out, much greater wisdom is required to make judgments, the number of close cases is greater, and the limited supply of judicious reviewers is similarly stretched. At least that is my surmise, based on knowing the background of most of the AMA delegates who eventually voted 105-96 to condemn the program in a standing vote. The result was the Dornenberger Amendment, which much weakened the system, when instead it should have triggered a more profound analysis and reconsideration.

Perhaps we spend too much time here describing a technical process. It is, however, at the heart of what makes the Foundation approach (sometimes called IPA or Independent Practice Association) superior to the HMO. It is now perfectly clear that both doctors and patients vastly prefer the IPA approach to the HMO, and any reasonable politician would jump at it. But there is one fear, summarized by the slogan that the Fox is guarding the Henhouse. In both systems, an attempt is made to combine the insurance with the delivery of health care. In the IPA, the physicians are taking the financial risk that aggregate income will exceed aggregate costs; it's a risk contract. In the case of an HMO, the employer or the government is taking the financial risk and therefore wants to control it. If revenue is good, the doctors will prosper in an IPA; the insurance company intermediary will prosper in an HMO. Doctors will care about that little difference, but why should the rest of the country care?

Because the prospect is overwhelmingly likely that future revenues will be constricted until something hurts, and when you starve with a tiger, the tiger starves last. In the case of an HMO, the insurance middlemen will starve last, and the quality of health care will starve fairly early. That's an unwise design. When we get to the point where Congress cuts the budget and watches to see what happens, Congress will cut it some more if nothing bad happens; it will back off only if something bad happens, so something bad is certain to happen. In designing the system, you need to design the internal review authority so it will cut the waste, inefficiency and luxury first. The reviewer, no matter who it is, will cut himself last, so you need to arrange the incentives for waste to be cut before the reviewer suffers, and quality of care only after the reviewer has suffered. If you wonder why a whole lot of special interests hate physician-dominated review systems, a short answer will be found in this synopsis. A special exception must be devised for rural health systems, which do have a unique problem.

To return to the well worn slogan about foxes and henhouses, we have overlooked the central question. Who's the fox, and who is the hen?

National Business Coalition on Health


In 1992 the National Business Coalition for Health was just forming at a convention in Chicago. Before I really understood what it was all about, I agreed to their flattering invitation to be the keynote speaker at the kick-off luncheon. Who suggested my name was and is a mystery to me, and I arrived in Chicago with very little idea what they wanted to hear. However, it followed the familiar pattern of inviting the speakers to stay overnight at the hotel on the evening before the meeting began, and to meet for drinks at the bar with the organizing leaders. I had enough experience with public speaking to know I could learn the general slant of the thing at such an informal party, and adjust the speech to the audience to whatever degree seemed needed. Among the people scattered around at tables was Harry Schwartz, who was also there to give them a speech. Harry had been on the editorial board of the New York Times for many years, and was known to be generally quite favorable to physicians. We had both written books about medical care, The Hospital That Ate Chicago in my case, and The Case for American Medicine, in his. We liked each other immediately, and fell into an animated cocktail conversation that would eventually be renewed every six months at the American Medical Association House of Delegates meetings, where I was a delegate and he covered the topic for various newsmedia. As we chuckled together about one anecdote or another of medical politics, the bar gradually emptied out. It soon became clear that all the other cronies had wandered off to dinner together, so we ordered dinner on the house, neither one of us having learned just what we were there to talk about. It really didn't bother either one of us very much, since from long experience we could tell some jokes and make it up as we went along. I knew what I wanted to tell businessmen, so it was just a matter of finding a way to lead into it.

The speech seemed to go well. There were several hundred, perhaps even a thousand in attendance, quite convivial and prosperous. As executives usually do, they looked younger than you might expect from the titles on their name tags; they laughed at the appropriate points, and applauded at the end. In other words, I went home from Chicago with no more idea what this organization was up to than I had before I came. At the very least, it is clear they were forming a national organization of businesses, with constituent representatives largely drawn from Departments of Human Resources. They wanted to speak for American Business with a more or less unified voice, and the topic seemed to be health care. Although fate had put me into the debate at the very earliest moment at Wills Eye Hospital, this convocation of extroverted Republicans seemed to know a lot more than I did about what was secretly afoot among the Democrats in Washington.

This Chicago tea party did one other thing for me. Many months later, when the editors of USAToday were in search of an editorial page writer who was both a physician and opposed to the Clinton Health Proposal, they called Harry Schwartz. And he suggested me. They ultimately ended up with an Medical Editorial Advisory Board of five members, at least three of whom were far to the left of me. At the New York Times, of course, Harry Schwartz was considerably more outnumbered than I was. After it was over, Harry and I used to joke that both sides were fairly evenly matched.


Jacob S. Hacker

In more recent writings, Jacob S. Hacker seems obsessed with social inequality, but while he was a graduate student he wrote an excellent and objective book, The Road to Nowhere containing unique insights into the politics of the Clinton Health Plan of 1993. After that hubub was over, he interviewed most of the important actors in that drama, at least those active in the liberal politics of it, and they talked freely. Like the rest of us, he was unable to identify let alone talk with the leaders of big business, who are of course still pursuing their original goals. What emerges does sound roughly accurate; Hillary Clinton and Ira Magaziner designated to find out what this health business was all about; solicit every proposal on the mind of political, particularly congressional, allies; gather and examine all the useful ideas in circulation in academia and the insurance community; and negotiate possible solutions with a surprising new ally, the big corporate employers. A huge semi-secret task force was then assembled to exchange ideas, discard really bad ideas, and work the proposal into legislative form. There would be internal inconsistencies and conflicts but no matter.

William Clinton

Congress would work it out, differing versions would appear in House and Senate bills, and President Clinton himself would eventually be able to intervene when things got to the House-Senate Conference committee. Since the Clintons really had no pre-conceived ideas on this complicated topic, the will of the people would emerge from a huge debate, and the will of the people would prevail.

That's one version. The other way to picture this circus would be that a highly skilled politician would offer everybody a chance to propose pet projects, and those who failed adversary process would be obligated to support the ones who did prevail. Trade-offs would be made, as needed, and the political ringmaster in the White House would have the final say.

But the final version was the one that came through to the public and the leaders of big business. You weren't going to know what the plan was all about until it was too late to do anything but accept it after a big sales talk full of snake oil. Big business, which had a serious interest in a particular outcome, also had an army of experienced Washington lobbyists. These people were aware of the unpredictable quirks of the house-senate conference system, were completely confident that the membership of that committee would be stacked in favor of a particular outcome, and knew that a congressional staff with agendas different from those of business would in the end be perfectly capable of stealing the show. For major employers, that settled it.

Big business had been wavering about whether to go ahead with their own plans, anyway. They had listened politely and carefully to what the government wished for its own insurance plans, Medicare and Medicaid, and were probably willing to agree. But as matters approached a unified approach, too many things surfaced they didn't like, and too much chance the decisions would go against their wishes. There was too much to lose, too little to gain, and well, we're sorry, we can't go along. This or something rather like it seems to have been the final outcome. The press had been furious about exclusion from major news items, coupled with annoyance at the favoritism toward Mr. Weinstein of the New York Times. The whole medical industry was jittery about exclusion from consultation or even notice; the insurance industry was pretty comfortable with the status quo; the public was in a state of utter confusion, After the main partner dropped out, the proposal never even came up for a vote in Congress.

Hold the Presses

Stop the Presses

At USAToday, techniques are astounding. After getting an 800-word piece, an editor by phone will suggest cuts to 300 words; the piece is always improved. Last-minute speed, trying to match television, is unbelievable. On one occasion, after a medical meeting in Kansas City, watching a baseball game go into extra innings I fell asleep with the game undecided. The next morning a newspaper was pushed under my door. It was USAToday, not only carrying the final score, but a full story, under a color photo of the winning play. Just consider the precision Chicago reporting, Washington DC editing, Kansas City printing and local delivery that took place in seven hours. By contrast in book publishing, a full year often intervenes between manuscript submission and actual bookstore sales.

So on a certain Monday night, the editor called. The Senate Majority Leader, George Mitchell, finally was to unveil the Clinton Health Proposal tomorrow morning. Would I please submit an editorial to run in the morning paper; he would supply the title. It was to be called, What Should Congress Do Now? and the deadline was 7 PM tonight. My watch read 5:30 PM.

Well, what fun. After a few minutes of stumbling around, I resolved to build the editorial around the theme, Don't Make Things Worse. It then seemed natural to allude to similar proposals gone famously wrong, define some predictable traps, and end up with Hippocrates. Over and over it is thundered at medical students: Primum non nocere. First do no harm. It all came together in my head, and I sat at the typewriter to bang it out. But when I came to that last sentence, pleading at least do no harm, I was hit by terrible doubt.

That phrase comes to us in Latin, and Hippocrates was a Greek, living at least five hundred years before the Roman Empire. Famous though the saying is, it wasn't (then) in Bartlett's Quotations, or Roget's Thesaurus, or anything else I could lay my hands on in what was, after all, a medical office. It was 6:50 PM. I called a learned friend from his dinnertable, and he agreed it was a strange business, looked at a couple of books, couldn't help, sorry. So, I drew a deep breath, said the Hell with it, typed in, "As Hippocrates said, At Least Do No Harm," and shoved it into the fax machine. The next morning it appeared, next to two million copies of my photo; so at least the editor seemed to like it. Some friends soon called to say that Senators Dole and Moynihan had adopted the line on the noon and six o'clock news, each attributing it to Hippocrates. No matter what happened to the Clinton Health Plan, it looked to me as though I would be forever guilty of supplying the world with a highly quotable misquotation.

Since then, with more time to do a proper search, I'm unfortunately still uncertain. William Safire at the New York Times, was intrigued but could only refer me to a nice lady at the Library of Congress who was a crony. She tried to help, but was stumped. Some Hippocrates scholars at the Library of the Philadelphia College of Physicians were able to find a reference in The Epidemics which seems to say what we are looking for, and that reference has tardily crept into Bartlett's latest edition. Some people think Galen really wrote it, which might account for the Latin; but even that is unsatisfying to scholars. Somebody or other took that phrase, whether written by Hippocrates or not, and pounded it over and over until it became a medical student incantation. Even if Hippocrates actually did express that sentiment in passing, it doesn't come through as a really important statement, and there isn't much evidence that his students were repeating it over and over as the words of the master.

My present suspicion is that vague rumors about Samuel Hahneman, the father of Homeopathy having a hand in promoting the slogan during the Nineteenth century, may have some underlying substance. Homeopathy was a belief system which emphasized the prescribing of infinitely minute doses of medicines. It had a flurry in the 19th Century when conventional Medicine was reeling from excesses of bleeding and purging, which surely did a lot of harm to victims of, say, Yellow Fever. The acrimony even spilled over into the emotionalism of the abortion debate, because laws prohibiting abortion had been sponsored by the allopathic American Medical Association. The verbal warfare between doctors of Homeopathy and "Allopathy" was bitter beyond describing. Although conventional medical care finally got its feet on the ground, and homeopathy is now pretty much a historical relic, the homeopaths did have that big strong point. Doing nothing is clearly better than doing something harmful. Nobody takes Latin, much, anymore. So the modern medical way of saying the same thing has come to be, "The hardest thing to do, is to do nothing". This way of stating the same idea is widely believed to have been offered by William Osler, but after all the controversy about Primam non nocere, I am now reluctant to be too sure about anything in this area.

Be Careful What You Wish For


Events at the time of the introduction of the Clinton Health Plan to Congress were a confused jumble, but one vignette stands out in my memory. The five hundred or so members of the secret work group were all invited to the White House for a big party, with saxaphones and all. On a television interview at home in Minnesota, Paul Ellwood said he wasn't going to the party. Indeed, he looked rather morose and had little to say. It is clear he had advance notice, before the plan even reached Congress, that things were not going the way he wanted. Since the public, even Congressional leaders, were still unclear just what was to be proposed, Ellwood's dejection, or rejection, did not come from them. No one has said so, but it must be presumed the rejection came from his sponsors, the business leaders. Business, in short, had pulled out; responsibility probably lies with no more than half a dozen CEOs who continue to be anonymous fifteen years later.

At that confused time, the reasoning of the masterminds was obscure. Perhaps they decided HMOs were no good; perhaps an outrageous political demand had been linked to the proposal; or there was to be too much political control, too little business control; or perhaps government costs had been shifted onto the backs of employers; perhaps the whole idea sounded too leftist to be comfortable. And perhaps a lot of other things, who knows. Even today, no one has written a book or even listed a few plain sentences of reminiscence.

What is known is that major business employers immediately launched a nation wide initiative to go ahead with a strong push to convert employer-based plans from fee-for-service to managed care HMOs. This was to be the way employers handled health care they were paying for; the government could do as it liked. It must be admitted it was a bold stroke, quite effectively handled. When you consider the rather uncertain legal right they had to impose a system of health care on their employees, it took more audacity to go ahead than you would suppose they could summon. It was a gamble that the Clinton White House would lack the courage to challenge a private initiative to go ahead with what they had so publicly endorsed, and that providers would be so surprised by the concerted coup that they would hold back legal challenge until evidence of antitrust or conspiracy emerged. It was a sort of Battle of the Bulge in reverse, and it might well have been hugely successful except for one thing they did not anticipate. Their employees almost universally hated HMOs when they tried them out. No one likes to be hustled into something he doesn't understand, no one likes to change doctors, no one like to be told he can't have what he expects to have. Employers expected resistance of this sort, but it simply had to be done to save the fiscal health of the business. Unfortunately, what emerged was that it didn't save much more money than its own extra cost to administer. The hard reality of business life is you regularly have to bully people in order to make any money. But bullying people without making any money is a quick route to dismissal. No wonder there have been no memoirs written.

A quick re-appraisal of the Clinton Health Plan was that the two systems, Medicare for people over sixty-five and employer-based for people under sixty-five, were to be merged into a single system for efficiency and better control. There were to be local, regional, and national governance bodies; evidently the purpose of the National Business Coalitions for Health was to supply a unified business hierarchy to match it up and down the line. Hated politicians, hated bureaucrats and hated unions could be counted on to apply strong pressures; business would have to remain well informed, sternly disciplined, and speak with a single voice for any hope of surviving in such an environment. It is my surmise that such a prospect seemed to guarantee failure for business. No, we're sorry, Business would draw a bright line at age sixty-five, and run its own show where it ruled the roost.

Health Maintenance Organizations, Reconsidered

Paul Elwood

Paul Ellwood once enjoyed the title of Father of the HMO, while the captains of industry who came so close to pushing HMOs down the nation's unwilling throat remain invisible, quite willing to let Bill and Hillary twist in the wind for the near-miss. In the fifteen years since the Plan was dropped by Congress, 10,000 major employers coerced their employees into HMOs; endured much greater employee resistance than anticipated; and watched in dismay as administrative costs ate up the savings. The National Business Coalition for Health has been transformed from its intended role into an information system for encouraging, testing and swapping experience about minor enhancements and tweakings. Much ado about, well, less than was hoped for. But in spite of all that, let me state right here that it would only take one fundamental change to make the HMO model into a popular and desirable system.


There's an underlying truism about all effective cost-saving measures in a service industry: regardless of whether you eliminate waste or cut into essentials, you have got to fire a whole lot of people. If you fire the loafers, the quality of your product is improved; if you fire the productive workers, the product is injured. The third choice is to streamline your production methods; you may maintain high quality in spite of firing some good people. But no matter how you go about it, if you are successful, it will be the result of putting good managers in charge. The American Academy of Actuaries once calculated waste in the American healthcare system to be 30%, but in spite of opportunities of that magnitude, the present design of HMOs cannot seem to do more than barely break even. And that is in spite of wide-spread dissatisfaction with denials of care, inconvenient service, and increased paperwork. There's a tragedy here. The alternative model has already been tested, shown to reduce costs, and produced the general satisfaction of both patients and physicians.

Kaiser physicians

That model was the original one, called the Foundation for Medical Care, devised in Stockton and Sacremento California in the 1950s. The Foundations were expressly created to compete with Kaiser-Permanente, both for patient satisfaction and cost effectiveness, so judging their success is simply a matter of getting out the records and submitting them to impartial evaluation. The Foundation movement was brought to a dead stop by the legislation which enabled the present employer-based version of HMO, as well as an unfortunate Supreme Court Decision (Maricopa) whose evidence was never put on trial, but based on a motion for summary judgment. The central underlying difference between an HMO and a Foundation is that an HMO is run by an insurance company, while the Foundations were formed and controlled by the physicians who worked for them. While it might be argued that circumstances have changed in the last thirty years, it still seems reasonable to suppose that physician-run HMOs remain superior to the present insurance company-run variety. The reason for this confidence is the benchmark of Kaiser-Permanente, whose only difference is that Kaiser physicians are paid salaries, and a few of the affiliates own hospitals. Kaiser systems are at present having a serious struggle in competition with insurance company owned HMOs. Some years, some branches of Kaiser are profitable, sometimes they lose money. The triumphant flag that Foundations waved in their heyday was, "We beat Kaiser."

So where is the problem? Actually, there are two. The Foundations were usually although not invariably set up as non-profit corporations because of squeamishness of the doctors about the appearance of self-dealing. That eliminated both insurance profit and incentive to interfere with payments, although it naturally displeased commercial insurance companies. Since I can name at least two HMO operators who rewarded their CEOs with more than a billion dollars each, you can understand the displeasure with non-profit competition. The other resistance came from hospitals. The Foundation system of utilization review put a weapon in the hands of the attending physicians in their eternal tension with hospital administrators, giving the administrators little choice but to do what the physicians wanted. Essentially, what the physicians wanted was for hospital quality to be maintained while any cost cuts affected hospital revenue before they affected physician revenue. The predictably unfortunate consequences for the hospital were held in check by opening staff privileges to physicians who were not participants in the Foundation. Their vigilance and competitive power was on the side of the administrator, for the benefit of their own patients in the common hospital. Kaiser, by contrast, usually found that owning closed-staff hospitals was itself a major headache.

A hidden advantage to shifting control of healthcare to physicians is that the system acquires the management talents of the staff physicians, essentially without charge. The plain fact is that most physicians hate administrative work, and it comes closer to the facts to say that physicians abandoned management chores than to say they were deprived of them. And just in case it needs restating, it is easier to teach management to a physician than to teach medicine to administrators. While there may be some initial fumbling, physicians are the logical group to be in charge of the management of a medical system, and indeed most lay people suppose they are already in charge. Unlike the situation just after World War II, physicians would now have much more enthusiasm for administration. Not only are their own incomes suffering, but they see their product beginning to disintegrate. And it has not escaped their attention that most large-hospital administrators are paid more than a million dollars a year. No doubt physician income would be enhanced by shifting from HMO to Foundation, but less than you might suppose. Physicians are a censorious lot.

Technical footnote: Two technical obstacles must be overcome before Foundations for Medical Care -- HMOs run by physicians -- can be restored to viability. For sixty years, insurance has been regulated by state governments as a result of the McCarran Ferguson Law. Large corporations doing interstate business have found it quite unworkable to comply with fifty different regulators, and were given relief by a Federal law called ERISA. ERISA is so large and complex as a consequence of a large number of trade-off compromises, that for many years it was deemed impossible to amend it in any way. That gridlock was broken in 2006. The Supreme Court decision in State of Arizona v. Maricopa has always seemed dubious as a result of a 4-3 decision which lacked a majority at the time it was handed down, and in any event never had a hearing on the evidence. The decision was based on a technicality related to a motion for summary judgment. With the passage of time and changing membership of the Supreme Court, it is easily possible to imagine a reversal of this decision.

On a political level, the climate of opinion has also changed. Insurance companies, and quite possibly hospitals, might well resist. However, it is the business community which supplied the main political force for the present version of insurance company-controlled HMO. Since that model has proven to be a disappointment from the employer perspective, but the cost problem has become much worse, it may now be possible to persuade business to allow a competitive model to emerge.

Computerizing Medical Care

Note: This article was written in 1999, long before Computerized Medical Insurance Exchanges were such a disaster:

First Computer

My first encounter with a computer was in 1958, and I have loved them ever since. As president of what called itself the Delaware Valley Hospital Computing Society, I remember giving a dinner speech concluding as follows: "If you want to be happy for a day, get drunk. If you want to be happy for a week, get married. But if you want to be happy for a lifetime, get a computer!" After fifty years, my affection continues. But to be candid, billions of dollars about to be spent on computers in medical care, will mostly be wasted. Even worse, like malpractice suits computers will induce behavioral changes in the system costing far more than the directly visible costs.

That's unpopular news at present, since the National Business Coalition for Health has launched a major lobbying campaign to persuade Congress to spend an initial billion dollars inducing physicians to maintain an electronic medical record. Various health insurance companies already provide financial incentives to doctors to file electronic claims forms, eventually threatening to reject any claim submitted on paper. The American College of Physicians has established a rather large department to develop programs for physicians to use in their practices; twenty years ago the University of Indiana started much the same thing. The College of Physicians of Philadelphia has spent close to a million dollars on such a project. It is reported that Microsoft Corp. has a massive project underway to supply electronic medical records. It sounds fairly easy to obtain large research grants from the government to devise something, anything, useful in this area. In my own case, training funds really weren't necessary, since I eagerly got into the field when everybody was a beginner. I was just as good a beginner as any other beginner. But let me repeat: the electronic medical record has been in the past and will be for decades, an expensive digression. In health care, creating more administrative work isn't the solution, it is the problem.

For fifty years the problem with an electronic medical record was that it took too much of the doctor's time to complete his part of the input, and then cost him too much to pay employees to do the rest. Presumably, automatic voice recognition and dictation will soon make it possible to record doctor's notes without handwriting or typing. Since, however, the elimination of current paper forms and check-off boxes will create a major problem in organizing the dictation verbiage, it could add five or ten additional years before programmers manage to rearrange dictation material and effectively integrate it into organized form, complete with laboratory results, dictated x-ray and EKG reports, even small images of the original material. Temperature, blood pressure, weight, photographs and the like can all be readily integrated into the stored electronic record, but to do so usefully is an expensive programming project. Doctors are quite right to be anxious they will lose control of the usefulness of their records in order to ease the task of programmers, speed up the sluggish pace of development, and reduce what will surely be an unexpected cost overrun. Storage and retrieval of such records is known to be an achievable but expensive task, which however also risks sacrificing the speed and ease requirements of the medical task it is supposed to serve -- in the name of cost effectiveness.

Computers are no longer an unfamiliar tool; physicians have altogether too much experience with "vaporware" , unrealized promises of convenience, and the damaging effect on medical quality of the philosophy of Quick and Dirty. To respond to their resistance to design blunders with an accusation of undue conservatism is to provoke an icy stare and gritted teeth. Inevitably, the effective use of automation will require a redesign of workflow with major disintermediation of "gopher" staff; after all, that is how cost savings are to be achieved. That will provoke outcry that physician time is the most expensive component in the process, but unfortunately physicians will discover Information Specialists with a business background will brush that argument aside. The most overpaid people on the face of the earth are investment bankers, but information consultants have persuaded business executives that inefficiency of the investment process is more expensive than even an investment banker's time. Having been through this themselves, insurance executives are unlikely to pay the slightest attention to physicians dancing to a familiar old tune.

For all that, data input is not the real problem; it's just the first problem. It's in a class with data storage and retrieval, which is expensive and cumbersome when you add a need for instant access and total privacy. But costs will come down steadily, and eventually we can expect automated fingerprints or other biological identification, and cheap instant retrieval. Doctors will be able to make rounds in the hospital with a computer in their pocket, record telephone calls in their entirety, dial automatically and whatnot. There are problems with wireless transmission inside buildings with steel girders, and legal requirements for signatures on narcotic orders, but if we are determined, these problems can be overcome as easily as they were with electronic check writing and stock brokerage. Cost may top twenty billion dollars in twenty years, but it all can be done if we insist.

But then you encounter the real problem. Information will accumulate in these records in staggering amounts. Even if you resolutely resist demands to have the nurses record every groan, and the orderlies file every laundry slip, the legitimately important medical information will be exposed as the massive heap of transients that they really are. Plaintiff lawyers will insist no scrap of data may be deleted, hospital administrators will insist on compliance, when in fact most of a doctor's concentrated effort is devoted to brushing aside momentarily distracting data in order to see what's going on, and react to it instantly. When a quick look doesn't solve the problem, the doctor goes back for additional data. If you disrupt these skills and traditions of coping with information overload, evolved over centuries, you will at best impose frustrating delays on a complex system under pressure, and ultimately inspire elaborate systems of short-cuts. The Armed Forces are famous for paperwork, but even they know better than to ask a pilot for his Social Security number as he starts a bombing run. The hospital nursing profession has already just about collapsed under paperwork pressure. If you see five nurses in a hospital, three of them will be sitting down writing something. The terrible truth is that no one reads it, no one checks it, and ultimately it sits in the record room waiting for a plaintiff lawyer with unlimited time to sieve out some misrecorded misconception or uninformed conclusion. My faith in the computer is such that I feel sure that methods can be devised to produce periodic summaries, automatic alarm signals, and mostly effective prioritization of data elements. Unfortunately, medical care is changing at such a rapid rate that ad hoc automation of physician thought processes cannot keep up with the current pace of change in medical progress. You would think some things would be unthinkable, but since I can remember the organized campaign to suppress the CAT scan as an unnecessary expense, I confidently predict that programmer inability to keep up with some advance in medical care will at times lead to organized outcry that we should slow down the pace of improving medical care, so that computer clerks can keep up with it. But that is only a small part of the issue, which at its center is that physician time will be dissipated and his attention distracted by presenting him with unwieldy amounts of neatly printed, spell-checked, encrypted and de-encrypted, biometrically secure, hierarchically prioritized -- avalanches of data which are irrelevant to the issues of the moment. The goal is not, after all, an electronic record. The local goal is to decrease the cost of medical care by increasing the productivity of the physician, and the overarching goal is high quality patient care at reasonable price. Behind all that, since the impetus comes from NBCOH -- the ones paying the insurance premiums -- suggests that the local goal is not so much the improvement of care as oversight reassurance that care provided has been as good and as cheap as possible. The goal is legitimate, but this cybernation approach looks to be self-defeating by being overly specific.

If the reader has the patience for it, let me now cite a historical example of the third-party tail wagging the medical dog. In this case, third-party health insurance similarly overextended its reach by imposing internal health system changes, trying to facilitate the role of monitoring it externally. Specifically, the system of diagnostic code numbers was changed from one devised by the medical profession for its purposes, into a different coding system devised outside medial profession sponsorship, which seemed to suit the needs of payment agencies better even though it suited medical purposes less. After twenty-five years, it is now clear that third-party payers have shot themselves in the foot on this matter, and everyone is worse off. The topic, please pardon the obscurity, is the diagnostic coding system.

To go back to beginnings, the American Medical Association perceived a need for a diagnostic coding system in the 1920s. Organizing or even merely indexing vast amounts of information about a disease required more specificity than free style verbal nomenclature could provide. Quite a distinguished panel of specialists and consultants then produced the Standard Nomenclature of Diseases (SNODO) which in time became the Standard Nomenclature of Diseases and Operations. In order to reduce ambiguity, this system developed a branching-tree code design for anatomy, linked to a branching-tree for causes of disease, ultimately linkable to a branching tree of procedures. These three sets of three-digit codes linked the components together with hyphens (000-000-000). The first digit of each was the most general, as in Digestive, Musculo-skeletal, etc. and subsequent digits were progressively more specific and detailed, as in "Digestive, large intestine, sigmoid colon". The causes of disease would resemble "Infections, bacterial, streptococcal". An example of Procedures would be "Incision, incision and drainage, drainage and insertion of drain". In nine digits, it was thus possible to represent " incision, drainage and insertion of a drain into a streptococcal infection of the sigmoid colon". After a while, the codes grew from three to five and six digits, again repeated three times, so an immensely detailed, unambiguous description might be coded in fifteen digits by a physician who knew the rules, but didn't own a code book. This code was ultimately taken over by the Academy of Pathology, expanded and is called SNOP. The pathologists absolutely refused to give it up.

The rest of the profession gradually yielded to the pressure of hospital administration, who were pressured by the Association of Medical Record Librarians, responding to the views of outside statistical interests, particularly insurance. A simpler, shorter coding system was needed, they felt, concentrating on the thousand most common diseases. The International Classification of Diseases was produced, reducing the millions of SNODO diagnoses to 999 by heavy use of several varieties of "Miscellaneous" or "Not Otherwise Classifiable (NOC)". Since the goal was to count the incidence of common diseases, the coding system was stripped of any logical tree-branching, and became a short list of what was most common, starting with 1 and going to 999. In time, of course, the common-ness of conditions changed, and various complaints from various directions forced the ICD to go to 4 digits, then five. Unanticipated conditions or complications eventually required the patchwork of some alpha "modifiers", and the original short hodge-podge became a long and bewildering hodge-podge. Coding accuracy declined markedly, but ho-hum. The health insurance companies paid the bill, no matter what the code said. At another place, we will discuss the entertaining way that Ross Perot became a billionaire out of the computer chaos of Blue Cross and Medicare at this time, but right now the central theme to follow is DRG, Diagnosis Related Groups. Try to follow, please.

By 1980, Medicare was fifteen years old. It was clear that certain things just had to be changed, because the excuse that the system was new and untried was beginning to wear thin. The early designers of the system based their payments on auditing a hospital's yearly costs, auditing the proportion of patients who were Medicare beneficiaries, and paying a proportionate share. That was easy and reasonably accurate, but it had the rather significant flaw that it took no account of whether the patients needed to be in the hospital in the first place. Or whether they needed to stay so long. The response they adopted (in the Budget Reconciliation Act of 1983) is a measure of just how desperate they must have felt. Knowing full well how inaccurate the ICD coding system was in practice, it was all there was. Consultants, particularly at Yale, ran computer simulations of various subsets of ICD codes to find a formula that would produce approximately the same hospital payments as the system of cost reimbursement. If memory serves, the original formula was to divide the thousand ICD codes into 27 diagnosis-related groups (DRG). Eventually, the process was tweaked to seventy or eighty groups. Walter McNerny, then Past President of the American Hospital Association told Congress hospitals could live with this system, and promptly we had a system for paying out hundreds of millions of dollars. It was touted as a highly sophisticated advance in the arcane science of hospital reimbursement, so it must have included a lot of deliberate overpayment. I can remember trying to remonstrate with McNerny, who felt he didn't have time for the discussion. Physicians had very little to do with the DRG portion of the 1983 Medicare Amendments, because the AMA had long insisted that physicians and hospitals go their separate ways on reimbursement. Russell Roth, who was president of the AMA at the time, recounted many times the episode in the Oval Office, when it was announced to Lyndon Johnson that Dwight D. Eisenhower"was in the next room waiting for him. LBJ excused himself to leave, and on the way out said to Wilbur Cohen, "Give him anything he wants." Things were destined to change, but at least for a very long time, physician and hospital reimbursements were strictly independent.

Clinton Plan Summary: Physician Effects

Medicare HMO

The Clinton Plan of 1993 was of course a failure, never happened. But it was intended to create a universal system of managed care (ie HMO) unifying the government programs with employer-paid ones. When business groups ultimately decided they would lose too much control with a federal bed-partner, they made their excuses and walked out. But they then promptly set about installing HMOs in their employee health programs, herding their hapless employees into them. In consequence, conversion from the old model of health delivery was never complete, since it was unpopular, fell short of its cost containment goals, and is therefore now receding. In fact, there are signs that a chastened business leadership intends to abandon the project as unsuccessful, or at least now seeks new directions to take things. However, there were appreciable effects on physician behavior that will probably be lasting ones.

Overhead costs for physicians have been rising for fifty years. My own first experience with private practice was in 1950, as a locum tenens just two blocks from where I still live as a commuter. There was no secretary, no nurse, no billing clerk, no appointments. This lack of amenity may now seem shocking, but it made it possible to practice with essentially no overhead costs at all. Essentially all gross revenue became net revenue. I can remember opening the door from my breakfast table, and there in the waiting room would be two or three patients reading old magazines. They were seen, each in turn until no one replaced them, and then the lights were turned out. As the patients concluded their business and left, thanking me, ninety percent of them pressed two crumpled dollar bills into my hand; a handful expected to get bills at the end of the month if I remembered to jot down their names. Sometime each day I had to walk down the street to the local bank and unload the wad of dollar bills from my pocket. Since the office was open both Saturday and Sunday mornings for a few hours, the wad on Monday was sort of a nuisance. But it was fun to walk past the barbershop and have the barber wave his scissors at me, fun to have patients swerve their cars to the curb to chat a little as I walked along. The corner druggist was, perhaps, a little excessive in his cordiality.

In later years, when my office was in the center of Philadelphia, a patient who was an Internal Revenue agent told me that the IRS hated cash transactions because of the opportunity to avoid taxes. Colleagues have told me of the FBI parking a car outside a physician office, counting the number of patients who entered and left; months later, they would come back and demand to see the accounting records for that particular sample day. In fact, an FBI agent said every rookie agent would be assigned to similar activities in nearby retail and restaurant districts; presumably the system of visitor-counting was perfected in that environment. There is now little doubt in my mind that the IRS kept up a steady harrangue on other agencies to encourage systems and rules that might force all mom-and-pop businesses to keep verifiable financial records. There's a lot of reason to believe the underground economy is a significant drain on tax revenues, hence results in higher taxes for those who do pay. By the same reasoning, increased accounting overhead costs also result in higher prices to the public, but the multiple steps in the third-party payor system tend to obscure it, and readily enable compliance costs to exceed the underlying tax avoidance. A general extension of the IRS mind-set has come to mean that more than half of all physician revenue is now consumed by overhead; tax avoidance of the most mendacious sort could not approach that much. Some overhead cost is due to rising malpractice insurance premiums, but the largest part is devoted to appointment systems, billling systems, medical records systems. I notice my own dermatologist spends five minutes per patient, has six employees working at paperwork, and though I know he is an affable man discourages chit-chat even with a medical colleague . A naturally genial person has thus been turned into a drudge, so overwhelmed by overhead that taking a vacation is a daunting expense for him. He can vacation any time he pleases, but six salaries continue while revenue stops. No doubt the IRS is pleased to be able to report near-perfect tax compliance, much better in their eyes than the old loosey-goosey days of 1950. The compliance costs to society of imposing this towering administrative system must in fact be many times the cost of just ignoring it. From the surveillance point of view, physician response to new data requirements must be particularly frustrating, since the almost invariable physician response to a new requirement is to ignore it totally. In time, the requirement is either withdrawn or renewed with some egregious penalty for non compliance. And so we go with the bureaucratic war, with the bureaucrats imagining that they are slowly winning. Perhaps they are, considering the widening disparity between physician income and administrative salaries with benefits. But the taxpayers are certainly losing.

In 1950, I would not have guessed that a significant result of increased physician workload would be overspecialization. But that's the case, and the consequences to cost and quality of medical care are subtle but profound. An unrelenting demand on physician time is the need to keep up with the rapidly advancing scientific frontier. The half-life of medical information is said to be seven years; that is, half the drugs prescribed today were unknown seven years ago. You can go a week, a month or even a year without reading or attending a seminar, but if you go seven years you are half gone, down the professional drain, and may never have the time and energy to recover. Somewhere or other, five or ten hours a week must be found for professional enhancement. Adding that to a minimum of sixty hours of work, the inroads into personal life start to become burdensome; a young physician with a hundred thousand dollars of educational debt must feel frenzied indeed. And so everybody seeks to specialize in order to narrow information demands. That's taking a chance, of course; a specialist like a urologist could see his whole specialty disappear with the discovery of a single new pill. Since at the moment, it is easier to define the cost and value of a surgical procedure, procedural specialties are reimbursed more generously than cognitive medical ones, and seemingly always will be. The net effect of all this is a lot of people can't find a family doctor. You can find a colonoscopist or even a back surgeon, but you can't find a family doctor because they are paid less but must keep abreast of the whole range of medical advances. Generalists are tip-toeing out the door. The same thing happened in England, where the cognitive specialties disproportionately moved to Canada and New Zealand. The empty places in England were then filled with doctors from Pakistan, with social discord that is only now beginning to suggest itself.

In America, the flight of the brightest males from medical school to investment banking takes the form of increasing proportions of medical students who are female, since the girls with fewer occupational choices are generally smarter than the boys. Since my wife and daughter are both physicians, I am not in a position to complain about this trend, although women physicians clearly prefer certain specialties with limited work hours, and women retire younger than men do. But there is one aspect where this army of women physicians will eventually serve us well. In recent years, a nursing shortage has emboldened a sort of union-like behavior among urban hospital nurses. Watching physicians go about their work, and particularly when they watch physicians make mistakes, nurses (like medical students, by the way) develop the idea that they could do better. Add a little feminism to the mixture, and you get some hot soup. But the growing ranks of female physicians are going to stand for none of the feminist implication. I first got this idea at the hospital watching my aunt, who had been a nurse before she became a physician. I have sometimes wished my aunt had been beside me at that party at the AMA, at the door of the Pennsylvania Delegation reception, imagining her brisk and dismissive retort.

Clinton Plan Summary: Hospital Effects

Hospital closed

ERISA opened the eyes of employers. From roughly 1940 to roughly 1975, employers saw health benefits for employees as a tax loophole. Health insurance costs would be roughly 30% less if the employer paid for them than if the employee bought the insurance himself. Gradually, the realization dawned that employers were taking all the risks, since their premiums went up if their employee claims cost went up. In effect, insurance companies were only providing administrative services but charging as though they were taking risk. So, ERISA permitted employers to become self-insured for the group costs, but employ insurers to do the paperwork for a nominal charge. Although insurers had to agree to the arrangement, it was somehow important enough to maintain the brand name that they offered something valuable in return. Insurance companies, especially Blue Cross, had discount arrangements with hospitals. No matter what charge the hospitals made for a service, the actual payment would be based on internal audits of actual costs. For a long time, the effective discount was about 30%, it grew to 60%, and now it is as much as 90%. An electrocardiogram with interpretation, for which the market price in doctors offices is around $40. is charged $365 in one large teaching hospital in Philadelphia. If you enjoyed the discount, your cost was close to $40. When business leaders considered a switch from fee-for-service payment to HMO arrangements, it was vital that this discount be preserved. Stated another way, they were adamant that no one was going to impose these fictitious surcharges on them.

Becoming self-insured under ERISA taught them a second important thing. They saw to it that the claims came to them, or at least that the aggregated statistics they wanted were provided to them or their auditors. From this data, it seemed to these auditors that employers were somehow being overcharged anyway. They had neither the skill nor the access to data to know how it was done, but their conviction grew strong that they were not getting their money's worth. Many business executives were trustees of hospitals, and were convinced the hospitals were not making excessive profits, or were even actually running at a loss. If business was overcharged, and the hospital lost money, some other group of patients was being undercharged. Fairly or unfairly, the business community developed the firm conviction that what was happening was Cost Shifting. Never mind that in corporate conglomerates it is entirely legitimate for one subsidiary to subsidize another, or even at the retail level, for profit margins on one product to subsidize losses in another. Or perhaps especially because this behavior is so evident to them, they found it necessary to be constantly on guard.

The HMO mechanism imposes expensive control systems on a dispersed medical enterprise which is really quite cost effective, and neither needs not welcomes control. It has some obvious inefficiencies, but they are usually less costly than their seemingly more efficient substitutes. It would seem bizarre for business executives to spend their time managing employee medical choices when they are being paid to manage their own business. But the HMO structure offers one opportunity too tempting to ignore. If the employer substantially controls his employee health delivery, he is put in a credible position to threaten to move the whole group to a different hospital. That is the decision traditionally left entirely in the hands of physicians, thus clarifying the main reason employers have seen physicians are ultimately their enemies. Obviously, local physicians are in the best position to judge the relative merits of local facilities, and therefore obviously physicians will resist anyone who suggests making those decisions for any other reason than the ones they can see. If you don't see this analysis as obscene insolence, you will probably agree it is extremely shrewd. Hospitals are somehow cost-shifting us into bankrupcy, we don't know and don't care, how. The way to get them to lower their prices for our employees is to have a credible threat of moving the whole bunch to some other hospital and, yes, bankrupting this one as an example for others.

So now perhaps it is possible to see the position of hospital administration in the post-Clinton years. Hospitals have long had forty to sixty percent of their patients represented by federal auditors empowered to examine every scrap of their internal accounts. Now, inside a sort of medical Alamo, they have forty to sixty percent more patients represented by hard-faced HMOs who have he power to shift half their business to a competitor on a few weeks notice. Inside the Alamo, there may have been other choices, there may even have been better ones. But the defense against this blood-thirsty onslaught which was agreed upon was, reduce the number of hospitals, either by merger or destruction.

Several books have been written about the expensive chaos created by merging hospitals; the loss of neighborhood facilities is much mourned. It must be left to others to calculate the aggregate cost of this scorched earth defense. But it has been considerable, and is part of the cost of the Clinton Plan, or if you please part of the skyrocketing cost of medical care which calls for drastic reform. It is a heavy cost in any event, and like so many features of modern medical care is not assigned to the business leadership which provoked it.

It is in this way we see the current paradox of massive building and expansion plans in hospitals across the country, at the same time that the number of hospitals is drastically reduced. There were 120 hospitals in the Delaware Valley in 1970, and now the number is around forty. Some of this can be blamed on the malpractice liability mess, since lawsuits heavily concentrate around obstetrics. Obstetrical facilities at the southeastern corner of the state can easily shift across state lines. Other closures allude to the savings in administrative costs, which would make you giggle if it did not make you cry.

Let's end this summary of hospital uproar with a brief mention of its simple solution. There is no need to mention increased waiting periods in crowded accident wards, or extravagent streamlining of patient throughput in order to reduce bed capacity, or the disappearance of reserve bed capacity in the event of a major disaster.

All of these problems would go away if we reversed the Maricopa decision and relaxed antitrust strictures against the ownership of HMOs by local physicians. Local physician reviewers may well squeeze hospital costs, but they will never move themselves to another hospital. Managed care by Health Maintenance Organizations may or may not be a good system, but having such organizations controlled by payors without allowing physician-owned competitors as a restraining benchmark has been thoroughly tried, and is a disaster.

Clinton Plan Summary: Nation's Financial Health


We now address two national financial issues which dwarf some others of fairly major consequence. During the past two decades we have seen dramatic changes, even revolutions, in the management of financial transactions. Banking with paper checks is on the way out, mortgages held by banks are obsolete, coupon bonds are a quaint relic, retail stock brokerages are vanishing, financial instruments like derivatives and private equity are consuming us before most people can even define them, the central banking management of the money supply is a miracle, and so on and so on. No one claims those things are unimportant. They just aren't as important as the way we blundered into financing health care; any action we took is less important than the way we neglected it. Or refused to face it.

When the state of New Jersey made a promise to pay the healthcare costs of state employees after they retire, the Legislature created a liability. Although provisions were made to pay for the costs of this promise for a few years, the liability was essentially unfunded. That is, it was quite predictable that in a few years there would be no way to pay for it. At present, the unfunded liability is calculaed to be $58 billion dollars, and the state taxes in New Jersey are already the highest rates in the country, hurting the influx of business and prompting the emigration of those who find a cheaper place to live. Remembering there are fifty states in only slightly better shape, the total national debt for this purpose alone is surely more than a trillion dollars. Secondly, the auto industry is said to have $100 billion in unfunded liabilities for the healthcare benefits of their retirees. We have lots of other industries of course, so it's not wild to assume that another couple trillion exist in industrial healthcare financing. Give or take a trillion, it's a lot of money without mentioning Medicare, the biggest unfunded liability of all. While this burden of debt was bound to create a problem eventually, it now comes at us with a fairly predictable shortfall when the baby boomer quits contributing as workers and starts demanding payment as retirees, because the boomers neglected to have enough children to support them.

The auto industry has the same problem with demographics, but has the additional problem that the Japanese made better cars. Starting later, the Japanese companies won't have as many retirees for a decade or so. Our politicians are thus beginning to see they may have to choose between watching our biggest industry go bankrupt, or bailing out the auto companies with tax money. With the Medicare deficit just on the horizon, it will be fairly uncomfortable to add to it in the next couple of years. The discomfort for politicians will be deepened by publicity about the terms of the agreement made decades ago between the auto companies and their union, the United Auto Workers. The heart of it can be briefly stated to be that the companies agree to pay absolutely all the healthcare costs of the workers, even those who quit in six months, for the rest of their lives. If Medicare pays the costs of the workers that will be fine, but if not, the companies are on the hook. The substance of this arrangement is to raise the company costs every time Medicare introduces a cost-saving measure.

The third ingredient of this perfect storm on the horizon is the consequence of whatever the government decides to do about it. We can raise taxes, but the government's chronic inability to save money makes it unlikely that we can pay much of this debt off in advance. To use fancier language, we are already at the point on the Laffer Curve where raising taxes produces progressively less revenue; carried to extremes, taxation will provoke a depression. On the other hand, inflation isn't very attractive, either.

For centuries, governments have found it easier to borrow money than to raise taxes. The currency gets progressively less valuable until it eventually can become totally worthless. That's what happened to Austria and Germany after the reparations of the Versailles Treaty were imposed as external taxes in the 1920s. The suffering caused by this episode of hyperinflation was one of the main grievances leading to the ascendency of Adolf Hitler, although it is true the German economy was in poor condition after losing World War I.

In any event, whether our efforts to correct the situation lead to depression or inflation, or both, the sequence of collapse of the auto industry, followed by desperate constraint of healthcare costs, and then the monetary convulsions amply justifies the term of Perfect Storm. The sooner the matter is addressed the less painful it will be. There were a hundred opportunities to address this problem, starting in 1943. But the last time the country stood at attention, waiting for revelation of what would reform our broken system was in 1993. And when the miracle of deep academic thinking finally emerged with fanfare, Congress wouldn't even bring it to a vote, and rightly so.

Clinton Plan Summary: Effects on National Health

health care

The huge 19th Century professional battle about homeopathy demonstrated that. not only is it possible to do the right thing for the wrong reason, it is possible to make briefly improved outcomes emerge from a silly approach. In general, the medical professional focus on the quality of care rendered is founded on an article of faith. It is assumed that if you do the right thing well enough and often enough, aggregate patient health will improve. Unfortunately, the provably better health of the American public in the past two decades was in spite of, not because of, the changes employers forced on the organization and financing of the medical system.

Life expectancy of persons who attain age 65 appears to have lengthened by three years in the past ten. A significant component of this totally unprecedented event lies in the fact that the mortality rate from cardiac disease has fallen fifty percent in five years. About half of this decline in deaths is due to preventative measures, about half due to rescue and repair. It seems almost certain that a longer time period will see an increasing benefit from prevention, and therefore a further decrease in mortality from heart disease is probable. And a huge decrease in medical costs.

When improvements of this magnitude are taking place, it is impossible to judge whether comparatively trivial effects are taking place in the opposite direction, propelled by employer meddling in the health system, and associated insurance torment of the provider community. Because it is impossible to test conflicting assertions, it is futile to make them. The concurrent malpractice mess provides a useful example, however. It is now just about impossible to deliver a baby in the nation's capital, because obstetricians have shifted their practices across the Potomac River to Virginia. The premiums for malpractice insurance reflect the differences in judge and jury selection within the District of Columbia, compared with Virginia. Philadelphia is similarly situated across a river from another state, and a migration of obstetrics to New Jersey is plainly evident. One would not expect infant mortality rates to show much difference, so it is possible for a determined partisan to shrug off the matter; that's plainly wrong. The approach of examining statistical outcomes data is not going to resolve this issue, whether the point under debate is malpractice or managed care.

The matter is further compounded by patient cooperation, and here we rely on Benjamin Franklin's advice to abandon logic and just tell stories. It is widely repeated in conversational medical circles that Bill Clinton himself was given statin pills to prevent heart attacks. He took them for a while, and then quit, following which he soon needed to be admitted to Columbia Presbyterian Hospital my old alma mater, for cardiac by-pass surgery. He thus converted an inexpensive prevention into a very expensive repair.

Perhaps, when he and his wife were redesigning the American health financing system, they should have included a provision that those who do such things should pay for it themselves.

Money Bags

This little morality tale was told to me by two unrelated sources, one of whom was a staff aide to Wilbur Cohen, the author of the Medicare law. And the other was a high official of Pennslvania Blue Shield, the appointed administrative agent for Medicare in Pennsylvania. Its relevance to the more recent SNAFU with Insurance Exchanges introducing the world to Obamacare, should be fairly obvious.

After Lyndon Johnson rammed the Medicare amendment to the Social Security Act through Congress in 1965, he wasn't shy about drawing attention to it. The press was present in great numbers, with staff officials who had a role in crafting the document, members of Congress, and anyone else who was standing around. The legislation was laid before him and signed with twenty different pens to be presented as mementos to the in-group. Each pen was only used to inscribe about half of one letter of his name, so it was a slow but joyful process. As intended, it got lots and lots of publicity.

H. Ross Perot

So, thousands of thankful old folks saw the ceremony on television, thought they heard that the law was in effect immediately, and proceeded to dump their medical bills into a shoe box, sending them to Medicare to be paid. Unfortunately, Medicare didn't have an office, a staff, or even a telephone number. These things take time. As fast as they could, the Medicare staff constructed a system of carriers and intermediaries, carriers for part A, and intermediaries for part B. And almost without exception, appointed the local Blue Cross and Blue Shield organizations to be the carriers and intermediaries. Consequently, the organization of Medicare was patterned closely after the organization of the two administrative corporations. Meanwhile, the bills from old folks just kept pouring in through the postal service. It was about all the staff in Washington could do, just to direct the mail out to the local intermediaries and at least get it out of their hair.

Less than a year later, that's how the claims manage to Camp Hill, PA, a little suburban town near Harrisburg. In desperation, Blue Shield had rented a local vacant supermarket, and piled the mailbags ten feet high. There were quite a few telephone calls of inquiry, and the old folks were politely told the matter was being looked into. It was beginning to look as though one supermarket wasn't big enough.

Computers were of course rented from IBM, who had a policy of renting, not selling, its valuable equipment. Keypunch operators, computer operators were hired, air conditioning was installed, and one team after another of computer programmers was hired -- and fired. Consultants were called, scratched their heads, sent big consultation bills, and turned sadly away. Sorry, but somehow it just don't work.

So that's how it happened that one Friday afternoon, a vice-president of Texas Blue Cross named H. Ross Perot came in, accompanied by a fellow with glasses so thick they looked like the bottom of Cocoa Cola bottles. So far as anyone can remember, the guy with coke-bottle glasses never said one word. The desperate, hopeless mess was explained to Perot, whose salary at that time was rumored to be twenty-five thousand dollars a year, about right for a Blue Cross executive. His background as a kindred Blue Cross person inspired confidence, and the conversation rambled on for an hour or so. Meanwhile, the guy with coke bottles went over to the Penn-Harris Hotel across the street, and got to work. By the end of the weekend, he had come back a couple of times, but eventually, would you believe, it really, well it really worked. Contracts were quickly signed, the wheels began to turn, the mail bags in the supermarket began to march through the processing cycle. Blue Shield, the Medicare program, the finances of the nation's elderly, and Lyndon Johnson's reputation -- were all rescued.

As everyone now knows, the Medicare processing contracts made Ross Perot into a billionaire, living on Bermuda in the lap of luxury, eventually upsetting the re-election hopes of George Bush, senior by running for President himself on a third party ticket that had something or other to do with giant sucking sounds. A Congressional investigating committee looked into the outrageous profits Perot had extracted from his homeland's elderly, volleyed and thundered. Whether Perot actually thumbed his nose at them is doubtful, but he certainly was in a position to do so.

Meanwhile, whatever happened to that guy with the coke bottle glasses, no one seems to know.

Clinton Health (2)

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ZNOTE: Clinton Health Plan of 1993



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Nobel Prize: Michael Brown, MD
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Clinton Health Plan Starts at the Union League
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Meeting of the Minds
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Picking Up the Usual Suspects
{}When the U.S. President plans to change health care, everyone involved in healthcare gets excited. Some want to resist change, some want to exploit it, but everyone wants to have influence.

Equal Pay for Equal Work
Sometimes the representatives of political interest groups try, just a little too hard.

A New Gorilla in the Cage
{Gorillacage.jpg}Large employers, distressed by costs of employer-based health insurance, had formed a coalition to do something radical about their problem when the Clinton Health Plan burst into the news. Both groups decided to have a joint look at Health Maintenance Organizations (HMO).

Health Maintenance Organizations (HMO)
Paul Ellwood gets credit for inventing the term HMO, and for selling a version of it to large employers, as well as the Clinton Administration. It's been a bumpy ride.

National Business Coalition on Health
{}The NCOH was founded in 1992, at the time of the Clinton Health Plan. The national body is headquartered in Washington, coordinating seventy or so state and local coalitions of businesses that are paying for employee health care.

After the Clinton Health Plan faded, but before new ones emerged, participants thought it safe to talk to graduate students studying the event. What emeges is a picture of big business pulling the plug.

Hold the Presses
{}The Clinton Health Plan was dead on arrival, but the media didn't know that.

Be Careful What You Wish For
{}After the Clinton Health Plan of 1993 fizzled, major employers pushed their employees into managed care. The negative reaction to HMOs was as unambiguous as it was unexpected -- we hate it.

Health Maintenance Organizations, Reconsidered
{}HMOs are wildly unpopular, giving every sign of phase-out. A pity, because proposed alternatives are worse, while the one corrective measure for HMOs seems so simple.

Computerizing Medical Care
Healthcare is mainly information processing, but utilizing computers has been a disappointment. Be prepared for high costs and continuing disappointment for decades to come.

Clinton Plan Summary: Physician Effects
Pressure from third-party payors reduced physician income, forced them toward overspecialization within group practices, increased the proportion of women and foreign-trained physicians, and probably induced earlier retirement. The mechanism was increased workload, mostly on administrative tasks..

Clinton Plan Summary: Hospital Effects
Events in the aftermath of the Clinton Health Plan confronted hospital administrations with a deadly serious counter-party. In a war for survival everyone does things you wish they wouldn't do.

Clinton Plan Summary: Nation's Financial Health
{}Neglecting to address more important issues may be the worst error of the past two decades..

Clinton Plan Summary: Effects on National Health
{}It is not possible to prove whether the recently reduced quality of care which physicians deplore, has resulted in decreased health or not. In a wry way, it is their own fault..

Money Bags
When Medicare started it was chaos, worse confounded.

Clinton Health (2)
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ZNOTE: Clinton Health Plan of 1993