TIME: Almanac 1993/TIME Almanac 1993.iso/time/112591/1125100.000

Text File | 1992-08-28 | 28.4 KB | 601 lines

                                                                                NATION, Page 34

COVER STORY

Condition: Critical


Millions of Americans have no medical coverage, and costs are
out of control. Here are 10 ways to fix what ails us.

By JANICE CASTRO -- With reporting by Mary Cronin/New York,
Barbara Dolan/Chicago and Hays Gorey/Washington, with other
bureaus


    There are two kinds of prices in America today: regular
prices and health-care prices. The first kind seems to follow
some sensible laws of supply and demand. But America's medical
bills are something else. They flow from a surreal world where
science has lost connection with reality, where bureaucracy and
paperwork have no limit, where a half-hour tonsillectomy costs
what an average worker earns in three weeks. The prices, like
the system that issues them, are out of control. Examples:

    -- Annual dose of human growth hormone for a child with a
severe deficiency: $20,000.

    -- Coronary bypass surgery for a 50-year-old man: $49,000.

    -- Cost of a Bufferin tablet for a patient in a
psychiatric hospital: $3.75.

    -- Price of a modified radical mastectomy: $7,900.

    -- One day's intensive care for a crack baby: $2,000.

    -- A 50-minute session with an elite psychotherapist: $160.

    -- Delivery of a baby by Caesarean section: $7,500.

    Americans spend $23,000 a second on medical care, more
than $2 billion a day, $733 billion a year. That is nearly
twice what they spent seven years ago, including annual
increases of 10% during the past two years. For the Federal
Government, medical costs have become the fastest-growing major
item, increasing at more than 8% annually at a time when
inflation is only about 5%. For corporate America, health care
has become a crippling expense. General Motors laid out $3.2
billion last year, more than it spent on steel, to provide
medical coverage for 1.9 million employees, dependents and
retirees. Unchecked, the U.S. medical bill will more than double
in the next 10 years, to $1.6 trillion, crowding out spending
for other urgent needs. "Health-care costs have created an
American state of siege," says Florida Governor Lawton Chiles.
"It's going to break us."

    Suddenly health care is becoming the litmus test of
American politics. It was a central issue in this month's
senatorial race in Pennsylvania. Little-known Democrat Harris
Wofford, who called for a health-care plan that would cover all
Americans, easily defeated former Governor Dick Thornburgh. As
the 1992 presidential campaign gathers steam, every Democratic
candidate is putting universal health care at the top of his
agenda. While Nebraska's Bob Kerrey proposes a comprehensive
plan that would require substantial new taxes, others, including
Bill Clinton and Tom Harkin, are fashioning less costly
approaches that emphasize preventive care. Says Harkin: "We
don't have to spend a nickel more. We just have to spend it
smarter." Congressional Republicans, sensing that the White
House is moving too slowly on the issue, offered their own plan
earlier this month to provide basic care for uninsured
Americans.

    How did America's health care slip into such a critical
condition? It's all so paradoxical. We're the medical miracle
workers. We're the picture of health. We live decades longer
than we did before. We've harnessed the body's natural defenses
with antibiotics, defeated plagues and diseases, learned how to
make spare parts for almost every organ except the brain.

    We got what we wished for, a medical miracle system -- but
all its perilous side effects too. Medicine's amazing new tools
have made decent health care a rich man's privilege, too
expensive for the working poor and even many middle-class
people. Moreover, America may be shackling its economy by
investing too much in one industry. The U.S. currently devotes
12.3% of its gross national product to health care, up from 9.4%
in 1980. At this rate, within 20 years Americans will be
spending a third of all their resources on medicine. Says Daniel
Callahan, the director of the Hastings Center in Briarcliff
Manor, N.Y.: "We have let ourselves be seduced by the idea that
there is no such thing as enough health care."

    Yet we accomplish less and less. Doctors may waste more
than $100 billion a year on overzealous testing and unnecessary
surgery, among other things. Insurance companies say patients,
hospitals, doctors and thieves are cheating them out of $60
billion or more. Meanwhile millions of Americans are starving
for care in the midst of plenty. Doctors have migrated away from
rural areas across America, leaving families in dread fear of
the tractor accident, the heart attack, the sudden illness.
Another problem: the health-care system devotes so much of its
resources to last-minute miracles that it neglects the more
mundane realm of preventive medicine, where many terrible
illnesses could be halted sooner or avoided altogether. "We have
to rearrange how the dollars are being spent and refocus them
on earlier stages of illness," says Jeff Goldsmith, a
health-care adviser to the accounting firm Ernst & Young.

    Americans used to take health care for granted. But now
they can see the cracks in the system -- and those gaps scare
them. The prospect of an additional 30% increase in medical
costs next year has prompted many employers to cut their work
force, reduce health benefits, or both. At the same time,
insurance companies are raising premiums to nigh unaffordable
levels. Millions of workers are terrified of losing their
coverage.

    Until now, attempts at reform have run into a gridlock of
powerful constituencies: giant corporations, doctors, hospitals,
insurance companies and the highly organized senior-citizens
lobby. But popular opinion may break the impasse. In a TIME/CNN
poll of 1,000 adults surveyed by Yankelovich Clancy Shulman, 91%
said that "our health-care system needs fundamental change."
Most of those polled, 75%, said costs are much higher than they
should be, and 83% said they would cut costs by limiting
doctors' fees. Two-thirds said health care is a right, and 70%
said they would be willing to pay higher taxes to ensure that
all Americans have coverage. Last week the National Leadership
Coalition for Health Care Reform, a group of big companies and
labor unions, put forth a proposal to require all employers
either to provide health insurance or to pay a new 7% federal
payroll tax to fund public coverage.

    The U.S. can do a much better job with the money it is
spending by balancing compassion with realistic notions of what
can be done. It is not possible to offer unlimited medical care
to everyone, nor fair to cushion the well-to-do with vast
public-health-care subsidies while millions of American children
and their parents go without. It's time for a cure.

    On the following pages, TIME looks at 10 of the most
important problems in the American way of medical care. Here are
some suggestions on how to fix them.


    1. THE BASICS

    About 1 out of 9 American working families, a total of 37
million people, has no health insurance at all. Most of the
uninsured are the families of workers in small firms that do not
offer such coverage. Among the uninsured are an estimated 8
million American children growing up without adequate medical
and dental care. About 17% of all Americans suffering from
diabetes and high blood pressure are going without treatment,
according to Robert Blendon of the Harvard School of Public
Health.

    Medicaid is supposed to insure those who cannot pay for
coverage, with each state making that determination according
to its own means test. But even this voracious state-and-federal
system -- which cost $2.3 billion in 1967, the first full year
after it was launched, and now costs 69 times as much -- can
barely afford to help 40% of the poor. In 1980 the figure was
65%. As hard-pressed states have found it increasingly
difficult to pay for the program (they put up 68% of the total
money), they have tightened eligibility standards. As a result,
more and more working Americans earn too much money to qualify
but too little to afford care. In Alabama a family of four
cannot qualify for Medicaid if it earns more than $16,584 a
year.

    SOLUTION: Establish a universal health-care plan covering
basic preventive treatment for all Americans who cannot pay for
their own insurance. Nearly two-thirds of the 500 senior
executives surveyed last summer by the consulting firm Noble
Lowndes said they support such a plan. To help pay for it,
Congress should eliminate the $53,400 income cap on the payroll
tax that funds Social Security. While this would sharply
increase payroll taxes for the wealthiest, such a change
represents a more equitable way of apportioning the burden,
which now falls more heavily on lower-income workers. Removing
the cap would provide an estimated $25 billion in new funds for
the universal plan. Congress should then shift the entire
federal Medicaid budget to the universal-health program, which
would give it a generous $115 billion in its first year.

    To control costs, care must be delivered through tightly
managed private systems, such as a network of health-maintenance
organizations (HMOs) or cost-conscious doctors and hospitals
that provide moderately-priced services. Patients must have a
financial stake in making sensible use of the system. They would
benefit based on their ability to pay; deductibles and
co-payments would sharply rise as one's income increased.
High-cost medical procedures would be closely screened for their
anticipated value in extending life and health.


    2. MEDICAID

    The fastest-growing spending program in the U.S., Medicaid
will dispense $158 billion in federal and state funds this year
to provide health care to 27.3 million Americans. Costs are
careering out of control. Medicaid pays for half of all
nursing-home patients -- or 250,000 Americans -- at an average
annual cost of $34,000 a person. Medicaid also looks after the
158,000 severely impaired crack babies born every year ($1.8
billion a year), the 35,000 AIDS victims who have run out of
money, the poor single mothers and pregnant teens, the
hardest-pressed Americans.

    It doesn't do a very good job because the rules governing
the delivery of care are unrealistic and wasteful, often
requiring hospitalization, for example, where out-patient
treatment would suffice. Moreover, many doctors refuse to treat
Medicaid patients because of rock-bottom reimbursement and the
snarl of bureaucratic rules. The program is also a sitting duck
for thieves because of poor administration. Medicaid pays
billions in fraudulent insurance claims for nonexistent
patients.

    SOLUTION: Shut it down. Medicaid patients can receive
better care, and the federal contribution would be better spent,
under the simplified universal plan proposed above.


    3. MEDICARE

    This $110 billion program -- which started out 26 years
ago with a budget of $5 billion -- was designed to provide
decent care for the elderly. But the program gives the same
benefits to those who are well-off as to the elderly poor.
Though the elderly do pay some of the costs -- and staunchly
resist bearing more of them -- nearly 90% of Medicare funds come
from payroll taxes on workers. As a result, the burden falls
partly on laborers who have no health insurance of their own and
may have trouble making ends meet.

    The burden on younger Americans is growing more onerous as
the U.S. population ages, bringing with it the responsibility
of caring for millions of elderly with enormously expensive
medical needs. There are now about seven Americans under the age
of 65 for every person over that threshold, compared with 11 to 1
in 1960. One of those younger Americans is unemployed, and two
are children. That leaves about four workers to support each
elderly American. And one of those doesn't even have his own
health insurance.

    SOLUTION: To slow its runaway growth, return the program
to its original goal: taking care of people who need financial
help. People who can afford to pay more for their own health
care should do so. In addition, subsidies should be more
carefully rationed when it comes to extremely complex and costly
medical procedures for very old patients. "Most of the elderly
would probably accept that idea," says Dr. Perry Stafford, a
surgeon at Bethesda Naval Hospital in Maryland. "It is usually
their families who have this tenacious hold on anything that
will prolong life. It is hard for people to see that at some
point, you are prolonging death, not life."


    4. FRAUD AND ABUSE

    How does an insurance company know whether a patient
really got the care for which it picks up most of the tab?
Doctors and hospitals are on the honor system, but some of them
cheat. Fraud may account for as much as $75 billion of annual
U.S. health-care expenditures, according to the National Health
Care Anti-Fraud Association. Last June California officials
uncovered the biggest single medical fraud to date, a $1 billion
rip-off carried out by thieves operating clinics on wheels.
Investigators say the clinics offered patients free tests and
exams, then used their insurance information to generate a huge
number of fake bills. In a similar scam in New York City, a
doctor billed Medicaid for $50,000 worth of lab tests for a
single patient.

    Innumerable smaller crimes are committed daily in labs,
hospitals and doctors' offices to inflate the costs of care,
often under the guise of doing patients a favor by circumventing
cumbersome insurance regulations. Some doctors and dentists give
patients inflated bills in exchange for slightly higher than
normal fees. The patient collects his own kickback in the form
of a bigger insurance refund. Some hospitals and doctors bill
for treatment they did not provide. In a survey of Aetna Life
& Casualty customers, 4 out of 10 consumers said their doctors
had cheated insurance companies.

    Physicians also have conflicts of interest that contribute
to vast waste, reformers say. In a study released in August,
Florida officials reported that doctors owned 93% of the
diagnostic-imaging centers surveyed, 78% of the radiation-therapy
centers, 60% of the clinical labs and 38% of the physical-therapy
and rehabilitation centers. Miami doctors prescribe MRI scans
(cost: $800) and various lab tests about twice as often as
doctors in Baltimore, where very few own the equipment. Lab
charges are more than twice as high at facilities owned by
doctors.

    SOLUTION: Tougher enforcement. Insurance companies and
public authorities should pool information on fraud via computer
networks. At the very least, this would prevent thieves from
simply repeating their crimes later in fresh territory, as many
now do, thanks to lax record keeping by program administrators.
In addition, physicians and hospital officials must police their
own ranks and blow the whistle on dishonest billing practices.
Stricter policing will cost more, but it should pay for itself
many times over.

    At the same time, doctors should be required to disclose
to patients their investments in testing centers and
laboratories and offer an alternative in which the doctor does
not have a financial interest. (That proposal has already been
recommended by the American Medical Association's Council on
Ethical and Judicial Affairs.)


    5. DISAPPEARING DOCTORS

    More than 570,000 physicians practice medicine in the U.S.
today, almost double the number 20 years ago. Yet huge areas --
18 counties in Texas alone -- have none. Rural America, like
many inner cities, is facing a crisis in primary care.
Communities need about 35,000 more general practitioners,
according to most estimates. Doctors typically prefer more
lucrative practices as specialists and surgeons (who can earn
more than $300,000 a year, compared with the average family
practitioner's income of $96,000). The shortage of general
practitioners leads to wasteful use of medical resources.
Without a family doctor to keep track of their overall health,
people are left to find their way through a costly medical
system ache by ache, often seeking high-priced help where the
skills of a generalist would more than suffice.

    SOLUTION: Federal money pays for half of graduate medical
education. Redirect as much as 50% of that $3.6 billion federal
contribution to students who aim to practice primary medicine.

    Expand a three-year pilot project authorized by Congress
last year. The program provides up to $50,000 in matching funds
for communities that finance medical education for physicians
(cost of training: about $75,000) as well as other medical
professionals. This plan was prompted by the experience of Dr.
Roger Pelli. A resident of Ashland, Me. (pop. 1,800), a town
without a doctor, Pelli promised in 1982 to care for the people
in the Ashland area if they would help send him to medical
school. Six local towns raised $15,000 a year for his education.
Today Pelli takes care of 3,000 people scattered over the
surrounding area, making house calls, handling everything from
chain-saw injuries and cardiac arrest to births and
vaccinations. Says Ashland town manager Nancy Farris: "He's
always there, and he always greets his patients with a smile,
no matter how tired he is. The only thing is, he's working too
darned hard."

    Pelli's emotional commitment is all the greater because
his patients are his friends. Not long ago, a young woman in
town was fatally injured in an auto accident. Recalls Pelli: "I
couldn't revive her. All the time I was trying, I could hear her
two young children, her husband and her parents crying. It was
just heartbreaking." Says selectman Ray Beaulier, who doubles
as the town mail carrier: "Roger is as close as you can get to
the old country doctor."

    As an additional incentive for doctors who have already
finished school, waive taxes on the first $40,000 in income for
those who treat patients in designated neglected areas. Expense
to the U.S. Treasury: approximately $9,000 a year for an
unmarried doctor with no dependents. As well as being worthwhile
in itself, this investment in basic medicine would also produce
other kinds of savings by preventing unchecked chronic disease
and producing healthier and more productive citizens.


    6. PHYSICIAN COMPENSATION

    Back when doctors were paid out of patients' pockets,
there were natural brakes on the amount of medical service
prescribed and the charges levied. For one thing, doctors knew
their decisions could devastate a family's finances. And
patients who paid their own bills yelped at high prices. But
concerns over costs diminished over the past 40 years as vast
insurance pools were created through company benefits plans and
the huge Medicaid and Medicare systems.

    Under the circumstances, insurance is like a blank check.
Research has shown that doctors paid in fee-for-service programs
order 50% more electrocardiograms (about $27.50 each) and 40%
more X-rays ($62 for a frontal-lateral chest X-ray) than
physicians in managed-care groups. Says Edmund Kelly, group
president of Aetna: "The problem with our medical financing
system is that most doctors get paid for doing things to people,
not for keeping them healthy."

    Medicare and insurance companies have tried to make sense
of medical charges by establishing maximum fees for hundreds of
surgeries, tests and procedures. But the medical establishment
is winning the accounting war. Some doctors attend seminars on
"creative billing," learning how to describe medical treatment
in terms that will yield the highest prices. A $2,900
gastrectomy, the removal of all or part of the stomach, can be
billed a la carte as several procedures for a total of $6,900.
When auto-repair shops or lawyers do that, we call it padding
the bill. Doctors call it "unbundling." Some maintain that they
do it in the spirit of Robin Hood, overcharging people with good
insurance in order to charge less for the treatment of poorly
covered patients.

    SOLUTION: Managed care. Providers of group insurance
should insist that doctors treating their patients be paid
salaries or flat fees. Such a system is already employed by many
HMOs, which charge group-insurance plans an annual fee for
treatment and produce often dramatic savings. Treating 40
million Americans last year, HMOs cost an average of $2,683 per
person, 17% less than the $3,214 cost of traditional indemnity
plans, according to a survey conducted by the Foster Higgins
consulting firm. Doctors bound by such strictures would still
be free to earn extra income by treating other, higher-income
patients in private practice.


    7. UNNECESSARY CARE

    Fear of malpractice lawsuits drives doctors to perform
many extra procedures to protect themselves against accusations
of negligence. The A.M.A. estimates that defensive medicine
adds $21 billion to the U.S. health-care bill every year. Other
experts, including former U.S. Surgeon General C. Everett Koop,
believe the cost is several times that high. Some reformers
think juries in malpractice cases share the blame by punishing
doctors not only for shoddy practice but also for their human
limitations. "Medical care is not always successful," says
Aetna's Kelly. "But that doesn't mean the doctor should have to
pay huge awards for pain and suffering."

    Then again, many doctors and hospitals overtreat patients
simply because they have a blank check to do so under many
insurance programs. As much as 20% of all medical procedures and
treatment is completely unnecessary, contends Dr. Robert Brook,
director of health sciences for the Rand Corp. Cost of the
waste: $132 billion a year. Aetna estimates that as much as 30%
more ($198 billion) is discretionary care that may not solve the
problem under treatment.

    Rand studies have found that in some regions of the
country as many as 44% of coronary bypass surgeries and 64% of
artery-clearing carotid endarterectomies were either unnecessary
or highly questionable. In a separate review for the
Philadelphia Professional Standards Review Organization, Dr.
Allan Greenspan found that about 25% of heart-pacemaker implants
performed in the Philadelphia region were inappropriate. Many
doctors challenge such findings, arguing that it is better to
err on the safe side.

    In the same vein, some extremely expensive technologies
are used even before it is clear that they're needed. That may
be the case with at least one new biotech drug, Centoxin, which
is available on a limited basis to treat hospital-acquired
infections that can cause fatal septic shock (estimated cost:
$3,800 a dose). Trouble is, since the condition can kill so
quickly, doctors will have to decide whether to administer the
drug before they are sure the patient needs it.

    SOLUTION: For malpractice cases, cap noneconomic awards
for factors like pain and suffering at about $250,000.
California placed a limit on such awards in 1975, and it now has
some of the lowest malpractice premiums in the U.S. One reason:
ambulance-chasing lawyers have less incentive to bring
questionable claims.

    Another wise investment: devote more research to finding
out which procedures and drugs are most effective. If doctors
can be supplied with better, consensual guidelines about what
works in treating various ailments, they will feel less pressure
to do things on a just-in-case basis. They also will be better
protected against unwarranted litigation. It is important,
though, that such standards be viewed as guidelines, rather than
rules that might impinge upon a doctor's best sense of what a
patient needs. "Judgment is an important factor in medicine,"
says Dr. Robert Heyssel, president of the Johns Hopkins
Hospital. "Doctors disagree all the time about whether a carotid
endarterectomy or a coronary bypass will offer a patient the
best shot at recovery. There are no absolutes around these
things."

    Finally, set maximum reimbursement levels for high-cost
pharmaceuticals. Drug firms are among the most profitable in the
U.S. And $3,800 a dose is too much.


    8. THE HOSPITAL GLUT

    America has too many hospitals. On average, U.S. hospitals
are operating at 64.5% capacity. To fill their beds, some
hospitals buy physicians' practices and then pay the doctors
under so-called census-based compensation, which is geared to
the number of patients the physicians send to the mother ship
and the number of procedures they perform. Some hospitals pay
doctors in other ways -- through honorariums or appointments to
hospital boards -- as a reward for referring patients.

    SOLUTION: Remove the more blatant conflicts of interest
governing the relationships between doctors and hospitals.
Outlaw census-based compensation for doctors. Require physicians
to disclose their financial relationships with the hospitals to
their patients.

    Companies as well as federal and state programs should
encourage doctors to refer those patients who do not need the
full range of hospital services to less costly outpatient
clinics. Simple fractures, for example, often can be treated in
this way. Pay doctors and hospitals less for clearly wasteful
practices.

    Eliminate tax subsidies for underused and obsolete
hospitals. Together with the discipline of managed care and
physician disclosure requirements, this change will help weed
out vestigial institutions so that taxpayer support for health
care can be put to better uses.


    9. FAIRNESS

    Taxpayers, even those who have no insurance, spend an
estimated $84 billion a year to subsidize medical care for
mostly middle- and upper-class Americans. That is because
companies can write off every dollar they spend on health care
as a business expense, which may help explain why corporate
America did so little to contain the costs until they got out
of hand. At the same time, employees who enjoy generous benefits
plans pay no taxes on the thousands of dollars in health-care
coverage that their companies provide for them.

    SOLUTION: Reduce the corporate write-off for medical costs.
And impose a tax on employee health benefits at a moderate rate
for well-compensated workers.


    10. WASTE

    The U.S. has more than 1,500 different health-insurance
programs, each with its own marketing department, complex forms
and regulations. Doctors, nurses and clerks are buried in the
paperwork needed to keep track of whom to bill for every aspirin
tablet. It's a massive waste of time. U.S. health-care providers
will spend as much as $90 billion this year on record keeping,
according to a Harvard study.

    SOLUTION: Standardize insurance fees. Maryland did so 20
years ago. Partly as a result, the cost of a hospital stay at
top-rated Johns Hopkins in Baltimore, which was 25% above the
national average before the system was put in place, is now 7%
below the average. Louis Sullivan, the Secretary of Health and
Human Services, proposed a national plan earlier this month to
standardize health-insurance forms. If his program is carried
out by the end of the decade, Americans could save as much as
$20 billion a year. Just as important, eliminating wasteful
paperwork would leave doctors and nurses more time and resources
to care for patients.

    Cleaning up the health-care system will be an epic
adventure in compromise. No one wants to give up his share of
medicine's glittering promise, whether it comes in the form of
pills or paychecks. But the problems won't wait: health care has
emerged as the most important domestic issue of the '90s. "At
some point," says Missouri Congressman Richard Gephardt, "no one
will be able to afford health care. We have got to act."

    While no treatment manual for American medicine should
focus purely on its price, controlling costs is critical. If the
medical experts are right, the U.S. could save at least $200
billion a year simply by curbing fraud and unnecessary practice.
We know where the problems lie. Doing something about them is
at the very least our moral duty and is profoundly in our
self-interest as a nation. Depriving millions of Americans of
health care is wrong. Wasting billions of precious medical
dollars on paperwork, dead-end procedures and outright theft is
stupid. Undermining the health of our workers and children for
lack of political gumption is suicidal. It is time to make the
hard choices.