Does the Doctor work for you?
Does the Doctor Work for You?
Not unless pay-as-you-go medical care becomes a reality
Barron's May 29, 2000
" Lawmakers determined to get something for nothing for their constituents
have resisted medical savings accounts as an early version of a
defined-contribution health-care system.
But they will not be able to stand in the way when employers,
employees and doctors unite on the principle that
you get what you pay for, and you must pay for what you get ".
interactive.wsj.com
By THOMAS G. DONLAN
Remember the old-fashioned doctor, like the ones in the
movies and TV shows of a bygone age? With his horse and
buggy, or maybe his Buick, he carried a little black bag
that contained practically everything he could do for a
patient. He made house calls, because keeping a patient calm,
in familiar surroundings, was too often the most professional service he could render.
By the late 1950s, physicians needed refrigerators for new, effective medicines
and high-voltage power supplies for new, effective medical devices.
They could not bring what they needed to patients' homes.
People would have to come to their offices. By the end of the 1970s,
they had moved those offices from a wing of the house to a new medical-center building
next door to a hospital, where their patients could have easy access to modern effective care
and to the very best medical specialists.
The practice of medicine, which had been an art for centuries and a profession
for several decades had become an industry.
Doctors had to change more than their style of practice.
They had been small businessmen and they were becoming industrial technologists.
Until about two decades ago, the typical doctor ran his own business,
or ran it in partnership with a few other doctors. He charged what he wanted,
his receptionist collected cash and checks at the exit.
How their patients paid was not the doctor's problem,
although most extended credit and charity as needed.
Industrial medicine, however, was too expensive for such casual arrangements,
and required formal insurance to spread the costs into monthly premiums.
Also, by an unfair quirk of federal tax law, employers could deduct the cost of
providing "free" medical insurance to workers. There was nothing free about it,
but it meant that employees enjoyed a federal subsidy for choosing corporate health insurance
paid with pre-tax income rather than buying individual, private insurance with after-tax dollars.
Cost of Doing Business
All too soon, the cost of health care became a major industrial cost.
During the 1980s and 1990s, companies large and small goaded their employees
into managed care programs that would save money.
Some employed doctors outright, others recruited doctors into intimate financial relationships
little different from employment. By 1997, about three-quarters of Americans with health coverage
were in some form of managed care and nearly half of American doctors were employees.
In these new institutions, care was managed, and not by the doctors themselves.
The doctor no longer called his office; he called his practice-management association,
and then his administrative team called the offices of a dozen insurance companies and
managed care outfits.
And the doctor would not always like what these new bosses would tell him.
Do this, don't do that. Take only so many minutes for an office visit,
or the extra time comes out of your hide. Prescribe this pill,
wait this many days before referring a patient for surgery, and if the doc argues,
he can read this 4,000-page book of practice-management policies
to find out that he is wrong, always wrong.
The new business of managed health care had been constructed to satisfy somebody else
-- not doctors, not patients, but the corporations that really paid the bills.
"Who pays the piper calls the tune." Most American employers offer only the
illusion of health insurance. They no longer pay insurance premiums on behalf of their workers;
instead, they self-insure, paying the health-care costs of their employees
directly and engaging insurance companies and HMOs to manage the benefit.
Companies self-insure to evade expensive mandated benefits that Congress and state legislatures
have seen fit to impose on health insurance. They also get to negotiate the fine points of coverage
and cost, in effect designing their own health-care policy for their employees.
If their policies lean more to their financial benefit than to the comfort and
medical benefit of their workers, that's just the way the world works.
Cost Avoidance
Doctors often didn't like it, and said so. Many believed that corporate practice management
was mismanagement for the patients that bordered on malpractice.
But the doctors were employees and they had to take it.
Even the privileged half of physicians who remained in traditional private practice had to take it.
Patients stuck with bills that their insurance wouldn't cover sometimes wouldn't pay,
and frequently would find another doctor the next time.
Worse than practice mismanagement was business mismanagement: Some of the very companies
that were supposed to modernize the medical-care industry messed up the job so badly that they
could not afford to pay their doctor-employees. They went broke, and left doctors holding the bag.
Here and there, however, doctors are wising up. They are tuning in to economic reality and dropping
out of the industrial-management system.
In small numbers, they are going back to the cash economy.
A growing movement of free-marketing doctors are rejecting health-maintenance organizations,
practice management, preferred-provider organizations and even old-fashioned indemnity insurance.
They could lead the way to better medical coverage and better medical care.
Cash-and-carry medicine is still so small a trend that some doctors make news
when they refuse to accept health insurance. Dr. Lisa Grigg of Wallingford, Vermont, was featured on
the Associated Press wire last month because she has a charge board on the wall
of her clinic: sewing up wounds is 10 bucks per stitch; examining a kid's ear infection costs $8
unless there's a complication; treating a simple sprain costs $20.
Like an auto-repair shop, where she got the idea, she also has a flat rate for labor- $2 a minute.
And yes, she punches a time clock. But it's her time clock.
A group of doctors based in Seattle is pursuing a similar idea nationally.
It has launched SimpleCare on the Internet. It's a program in which affiliates,
eventually including hospitals, promise to give their lowest possible price to
cash-paying patients who won't bother them with the hassles of dealing
with their insurance companies.
SimpleCare's sponsors claim that office-visit charges in a family-practice clinic
ought to be about 50% lower for patients who pay cash because the clinic does
not have to include the cost of billing, collections, coding, reporting and meeting r
egulatory requirements. "Doing the right thing simply costs less," the organization says.
Another Wave of Change
Cash-and-carry doctors are just the canaries in the mine -- an early warning signal that
something is changing in the American medical system. The next stage will be bigger
and more far-reaching. Like the last round of big change, it will be imposed by employers.
American corporations are getting tired of managing risk. Most of them aren't insurance companies
and don't do a very good job of imitating them. Self-insurance is becoming too big a headache.
Some companies will find an answer around the corner in another part of their own benefits department.
Managers should look at corporate pensions.
Over the past 20 years or so, almost every company
with a choice has tried to phase out defined-benefit pension plans and replace them
with defined contribution plans such as 401(k) plans. Unless unions resisted,
companies have stopped managing risk by ceasing to guarantee a specific monthly pension.
In the new system, the employer makes a contribution and provides a system for the employee
to make his own choices for the management of his own money.
Generally, this has been a good change, benefiting workers and employers
as well as the mutual-fund managers and insurance companies that administer
the defined-contribution retirement systems.
Workers have a new level of retirement security grounded in independent accounts they own.
Their pension rights are independent of their jobs;
they can leave and take their retirement accounts with them.
Defined-contribution plans work for retirement security; they can work for health-care security, as well.
Lawmakers determined to get something for nothing for their constituents
have resisted medical savings accounts as an early version of a
defined-contribution health-care system.
But they will not be able to stand in the way when employers,
employees and doctors unite on the principle that
you get what you pay for, and you must pay for what you get.
No payment system will bring back the house call,
but cash-and-carry medicine will bring back doctors who work for patients.
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