PreviousUpNext SearchFeedback[help] CPMCnet

P&S Journal

P&S Journal: Spring 1994, Vol.14, No.2
Health Care Reform: Responses and Proposed Alternatives
Two-Year Study Leads to Proposed Solutions

I devoted two years of study to the Control of Medical Costs and my analysis is enclosed. Although this is dated January 1992 nothing has changed since then except that things have become worse, if possible.
This analysis summarizes all of the facts relating to how we arrived at the situation which presently exists. You may disagree with some of the proposed solutions but you can't deny the facts that are in the record. The root of the problem lies in the attempt to control these costs through an insurance system. That system has been the principal factor in increasing these costs and any attempts to change it will only make them increase even more. They have created an enormous medical industry that is so heavily capitalized that we cannot afford to pay even the interest on it, let alone amortize it.

Excerpts from "Control of Medical Costs"
Any solution to the problems posed to the people of the United States by the exorbitant and constantly escalating costs of maintaining and improving health and obtaining medical care will require a restructuring of what has become a national medical industry. This will demand a great deal from all parties involved from the federal government through the business and professional communities to the individual who needs these services.
The necessary corrections fall in 6 areas: 1) the financing of a new system of payment and reimbursement; 2) a rationalization of charges and fees; 3) amortization of the capital expenditures made by the investors; 4) the use of treatment facilities; 5) control of the environment for the individual beneficiaries; and 6) reimbursement for loss of income associated with illness, accident or disability.
The changes that need to be made may involve denying or overturning historical precedents, disrupting traditional patterns of behavior and relationships and perhaps originating new systems to replace those that are no longer effective or even counter-productive. The ideas for these changes and the changes themselves will be resisted and even vigorously exposed by some. The proposals may, and should, bring out others which can work toward the same goal, and which could be more practical and less difficult to implement.
We have been dealing for 100 years with a system based on the concept that the costs of medical care could be managed by insuring against them. This system had its origin in a plan to compensate workmen for loss of wages. To attempt to insure people against the costs of medical care defies the basic principles of insurance. The provision of funds or services to meet these costs is a service problem, for which the financial support must come from the person or persons who are obligated for whatever reason to provide it. The means to make it practical is not by spreading the risk since the risk cannot be clearly defined and the possibilities of management are so varied, but to spread the time over which payment can be made, a pre-payment plan.
Prepayments should be made on a monthly basis and the amounts would be decided by a schedule that would take into account civil status, age, income and presence of any disability. For those unable to pay the federal government would pay, just as it pays benefits now through Medicare and Medicaid but without the limitations of age for the former. Charges for the use of facilities, such as hospitals or clinics, including the costs of technological services and fees or charges of physicians and other medical personnel not employees of the facilities, would be paid by the federal government according to established fee schedules. No additional fees or charges would be allowed. The government might hire the insurance companies to administer this system on a contract basis.
Physician's fees have been set and paid for in the past according to a variety of circumstances. The development of medical specialty practice was responsible for changes in the fees charged by or paid to general medical practitioners. The differential somehow appeared to reflect a perception it had been earned by the additional professional training after obtaining the MD which delayed the entry of the physician into private practice, that the demand for specialty services was greater than the supply of specialists, and that the demands of exercising the expertise involved in the specialty justified a higher financial reward. With the exception of the effect of delay to enter private practice, these ideas were simply perceptions that were reinforced by the cultural and social authority of the medical profession, and they were not unanimous.
The process of medical education leading to the MD is extraordinarily expensive. The entire cost should be paid for each qualified student by the federal government. In return, the student would sign a contract under which he/she guarantees following graduation to accept in full payment for his/her services the schedule of fees and reimbursements offered under the prepaid program.
The major factor in producing the high costs of medical care is the enormous capital investment that has been and is still being made by the medical industry. This investment in aggregate at the present time amounts to about $500 billion. We are not making substantial progress in amortizing this investment and, in fact, are not even paying the full interest on it. None of the corporations (which they can be called even though not formally organized as such) involved in the medical industry is or will be able financially to accomplish this. The federal government would be able to set a schedule for doing this over a period of years while enforcing a cap on new investment. The repayments will be made possible by the rationalization of the pricing and fee systems.
The facilities to be used in the new prepaid system would be the existing hospitals, medical centers and clinics, whether publicly or privately operated. The only necessary additions would be neighborhood clinics and health centers to expand on the number of those already provided by the U.S. Public Health Service and the State Health Departments. This will certainly be opposed by many of those that are privately operated but they have little choice but to accept it since under the present patchwork system they are losing ground steadily.
Better control of the health hazards in our environment will be necessary to reduce present demands on the medical care system and to prevent these demands from becoming greater in the future. This applies not only to the traditional role of public health measures to prevent the spread of infectious diseases, prevent or reduce the production of toxic chemical or other substances in our land, water and atmosphere, but to other measures indirectly related to health. Of these the principal one is homelessness. There is a relationship between having to live without shelter or in a shelter that is inadequate and unsanitary and the occurrence of illness and death.
Finally, workers and their families need to be protected against loss of income due to extended periods of layoff or inability to find jobs for which they may be qualified. Federal and state benefits presently existing are inadequate. Little recognition is given to the fact that when a person has been laid off for 6 months or more they need retraining, and when it has been for a year they're virtually unemployable for the same work. Workmen's Compensation laws must be continued, and when, where necessary in any of the states, be improved to assist properly those who suffer from partial or complete disability.
All of these things can be realized only if the efforts to bring them about and keep them working are accompanied by a continuing process of education for all of our population at all levels. In the schools this must involve the organization of instruction for all grades in a category which might be called Education for Living. This would embody at least the classical studies of health education and physical education taught as a fully integrated subject. The need for people to be able to play and practice sports as a lifetime activity could be met by the separate organization of sports clubs for a variety of these activities including interscholastic and intercollegiate competitions. These competition and teams would be organized not just for the elite but for several levels depending on interest and ability.
In the workplace continuing education for effective living is a necessity. It should be part of the regular workday but should also include opportunities outside of those hours for participation of family members. When business and industry can be relieved of the crushing costs of providing for medical benefits for their employees during their employment and following retirement they will be able to develop the educational programs that will help to keep them healthy, and as one result more productive.
These proposals relating to the general improvement of health and reduction of the costs of providing medical care are practical even though they may be seen by some as visionary. They may need modification in many ways to become accepted and effected. Change is always difficult and generally is opposed. What can be said without much fear of contradiction is that the system under which we are presently operating is not working effectively. Proposals to improve its functioning so far have not been successful because they are all moving with the same mistaken perception that it is an insurance problem.
Allan J. Ryan'40
Minneapolis, Minn.


copyright ©, Columbia-Presbyterian Medical Center

[Go to start of Document]