How Did Health Care Get to Be Such a Mess?

My Comments: trump famously commented that he had no idea health care reform could be so complicated.

There are five principal stakeholders in our health care delivery system: insurance companies, pharmaceutical companies, hospitals, the medical profession, and lastly, we the consuming public.

All five have vested interests they want to grow and preserve, and all five have legitimate claims against the other four. None of them have enough leverage by themselves to either correct or make the system better.

I endorsed the introduction of the ACA because it created another vested stakeholder that by its nature, could put the other five in a subordinate role and slowly cause remedies to surface with the ultimate goal being a better outcome for all of us.

But it was flawed from the start and for political reasons alone, no one had the necessary leverage to fix the flaws. So we are where we are and everyone is still pissed off. The one redeeming thought from the past 8 years is that there is an increasing acceptance in our society that access to health care is a social benefit. The discussion will slowly evolve to figuring out how to pay for it, and by whom, instead of a purely capitalist approach which says, in effect, it’s everyman for himself. Leaving people out in the street to die is not an acceptable outcome for most of us.

I don’t claim to know the answer. But discuss it we must, and that calls for a better understanding of how we got to where we are today. This article by Ms. Chapin is useful in that regard.

By CHRISTY FORD CHAPIN \ JUNE 19, 2017

The problem with American health care is not the care. It’s the insurance.

Both parties have stumbled to enact comprehensive health care reform because they insist on patching up a rickety, malfunctioning model. The insurance company model drives up prices and fragments care. Rather than rejecting this jerry-built structure, the Democrats’ Obamacare legislation simply added a cracked support beam or two. The Republican bill will knock those out to focus on spackling other dilapidated parts of the system.

An alternative structure can be found in the early decades of the 20th century, when the medical marketplace offered a variety of models. Unions, businesses, consumer cooperatives and ethnic and African-American mutual aid societies had diverse ways of organizing and paying for medical care.

Physicians established a particularly elegant model: the prepaid doctor group. Unlike today’s physician practices, these groups usually staffed a variety of specialists, including general practitioners, surgeons and obstetricians. Patients received integrated care in one location, with group physicians from across specialties meeting regularly to review treatment options for their chronically ill or hard-to-treat patients.

Individuals and families paid a monthly fee, not to an insurance company but directly to the physician group. This system held down costs. Physicians typically earned a base salary plus a percentage of the group’s quarterly profits, so they lacked incentive to either ration care, which would lose them paying patients, or provide unnecessary care.

This contrasts with current examples of such financing arrangements. Where physicians earn a preset salary — for example, in Kaiser Permanente plans or in the British National Health Service — patients frequently complain about rationed or delayed care. When physicians are paid on a fee-for-service basis, for every service or procedure they provide — as they are under the insurance company model — then care is oversupplied. In these systems, costs escalate quickly.

Unfortunately, the leaders of the American Medical Association saw early health care models — union welfare funds, prepaid physician groups — as a threat. A.M.A. members sat on state licensing boards, so they could revoke the licenses of physicians who joined these “alternative” plans. A.M.A. officials likewise saw to it that recalcitrant physicians had their hospital admitting privileges rescinded.

The A.M.A. was also busy working to prevent government intervention in the medical field. Persistent federal efforts to reform health care began during the 1930s. After World War II, President Harry Truman proposed a universal health care system, and archival evidence suggests that policy makers hoped to build the program around prepaid physician groups.

A.M.A. officials decided that the best way to keep the government out of their industry was to design a private sector model: the insurance company model.

In this system, insurance companies would pay physicians using fee-for-service compensation. Insurers would pay for services even though they lacked the ability to control their supply. Moreover, the A.M.A. forbade insurers from supervising physician work and from financing multispecialty practices, which they feared might develop into medical corporations.

With the insurance company model, the A.M.A. could fight off Truman’s plan for universal care and, over the next decade, oppose more moderate reforms offered during the Eisenhower years.

Through each legislative battle, physicians and their new allies, insurers, argued that federal health care funding was unnecessary because they were expanding insurance coverage. Indeed, because of the perceived threat of reform, insurers weathered rapidly rising medical costs and unfavorable financial conditions to expand coverage from about a quarter of the population in 1945 to about 80 percent in 1965.

But private interests failed to cover a sufficient number of the elderly. Consequently, Congress stepped in to create Medicare in 1965. The private health care sector had far more capacity to manage a large, complex program than did the government, so Medicare was designed around the insurance company model. Insurers, moreover, were tasked with helping administer the program, acting as intermediaries between the government and service providers.

With Medicare, the demand for health services increased and medical costs became a national crisis. To constrain rising prices, insurers gradually introduced cost containment procedures and incrementally claimed supervisory authority over doctors. Soon they were reviewing their medical work, standardizing treatment blueprints tied to reimbursements and shaping the practice of medicine.

It’s easy to see the challenge of real reform: To actually bring down costs, legislators must roll back regulations to allow market innovation outside the insurance company model.
In some places, doctors are already trying their hand at practices similar to prepaid physician groups, as in concierge medicine experiments like the Atlas MD plan, a physician cooperative in Wichita, Kan. These plans must be able to skirt state insurance regulations and other laws, such as those prohibiting physicians from owning their own diagnostic facilities.

Both Democrats and Republicans could learn from this lost history of health care innovation.

Christy Ford Chapin is an associate professor of history at the University of Maryland, Baltimore County, a visiting scholar at Johns Hopkins University and the author of “Ensuring America’s Health: The Public Creation of the Corporate Health Care System.”

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