Cure Worse than the Disease
Wednesday, August 29, 2007 3:30 PM
Sick, Sicker, and Sicko
A case where the cure may be worse than the disease
Some patients just aren’t willing to sit back and take it anymore. The nation’s health system is long on promises and short on delivery. The litany of delays in care due to limited access grows by the day. In one instance, a patient sued her insurer because she was forced to wait four months for an MRI for her brain tumor and then months more to see a neurologist. In one metropolitan area, waiting times in the ER average four hours, while one in ten waits more than 12 hours.
One in three households surveyed tried and failed to gain timely access to at least one health service within the previous three months. And in one study, the total waiting time between referral from a general practitioner and specialty care averaged nearly 18 weeks. Even the Supreme Court has weighed in on the unacceptable delays in care. But the lawsuit is not against a dreaded American HMO and the events did not happen in the U.S. All were byproducts of the Canadian health care system.
Models for the U.S.?
In the movie Sicko by Michael Moore, several socialized health systems are held out as exemplars for the U.S., including those in Canada, Great Britain, France, and Cuba. The American health care system is a complete shambles, the sickest of the lot, according to Mr. Moore. Escalating numbers of uninsured, disproportionate access to health services, long ER waiting times, rapidly growing insurance premiums, denials of insurance coverage, high infant mortality rates, and profiteering by the greedy pharmaceutical companies fuel growing public dissatisfaction. U.S health care just doesn’t measure up when you look at all the money being spent according to Moore.
What you do not see in Mr. Moore’s movie are the inconvenient truths forced upon patients in those model socialized systems. In 2005, Canada’s Supreme Court ruled that, “access to wait lists is not access to health care,” which struck down key laws in Quebec that have prohibited private medical practice and private health insurance. Suits have been filed to enable Canadian citizens to “opt out” of the mandatory, government-run Canadian system, which some citizens even consider dangerous.
How dangerous? A cardiologist at the University of Ottawa reported on how delays affected Ontario heart patients. In a single year, 71 Ontario heart patients died before they were able to have surgery and 121 were removed from the surgery list permanently because they had become too ill to operate on. So for 192 people, the wait either led to their death or they became too sick to have surgery before they could work their way to the front of the line. Another 44 who could afford to bear the cost on their own left the province to have surgery – most in the U.S.
The waiting game
Since the mid-1980s a Vancouver-based think tank has been tracking how long patients are required to wait for medical care in Canada where by law many private alternatives have been banned. In its 16th annual report published in 2006, the Fraser Institute notes that the average time to receive treatment after referral from a general practitioner was 17.8 weeks. Patients waiting to see a neurosurgeon waited an average of 21 weeks, while actually getting treatment required another 11 weeks. The wait for an orthopedic surgeon averaged 16 weeks, and treatment required another 24 weeks. Total wait times are now 91 percent longer than they were in 1993.
Sicko holds the Canadian system out as a model for proponents of universal coverage where health care costs are lower and everyone has free care at the point of service. "While many proclaim Canada's Medicare program to be one of the best in the world, or suggest it should be the model for reform in the United States," says one of the Fraser Institute’s study authors, "the reality is that health spending in Canada outpaces that in most other developed nations that, like Canada, guarantee access to care regardless of ability to pay, and yet access to health care in this country lags that available in most of these other nations."
Because health care is largely free in Canada, demand is likely to exceed supply. It’s just human nature. Thus, waiting lists become the principal way of rationing medical care and holding down spending. And after 16 years of tracking growing waiting lists, the Fraser Institute observes that the problem is probably not a temporary one that can be fixed with a little more money or time. They note that provinces with higher spending per capita do not experience shorter wait times.
Just as we saw in the old Soviet system with its long lines for food and basic services, government central planning does not efficiently match supply with demand. And human beings will always seek more of something that is free. As one free market advocate states, "Long waits and widespread denial of needed care are a permanent and necessary part of government-run systems.”
And it’s not the care-givers who are at issue. Canadian physicians and nurses are among the best in the world. To paraphrase, “It’s the system, stupid.” That is, a mandatory system of care to which there are few alternatives. The rationale that no one is denied care when everything is free ignores the fact that everyone waits, and a considerable number even die in the process.
What about other socialized systems? Surely others have gotten it right and can serve as a model for America. In France, the health system failed spectacularly during the summer heat wave of 2003 when 13,000 people died, mostly from dehydration. Hospitals simply stopped answering the phones and ambulance services told citizens they were on their own.
British National Health Service
Things are not much rosier in England which launched its National Health Service (NHS) in 1948. At that time, the government nationalized more than 3000 independent hospitals, clinics, and care homes. The government promised that it would provide its citizens with all the “medical, dental, and nursing care” needed so that “everyone – rich or poor – could use it.” It didn’t quite work out that way.
More waiting and rationing
Health care is free in the U.K. as in Canada, but as you might expect, wait lists are the result (not to mention high rates of taxation). Nearly 1 million British patients are on wait lists for treatment. Another 200,000 British are waiting to get on the NHS waiting lists. That’s right. They are waiting to get on a list so they can wait some more. Patients may wait years for treatment or procedures considered routine in the U.S. One in eight patients waits more than a year for surgery.
The NHS cancels around 100,000 operations due to shortages each year (shortages being the hallmark of centrally planned economies, or in this case, health services.) One British hospital in Sutton Coldfield announced that it will save money by not changing sheets between patients, but just turning them over.
Private practice options
Unlike in Canada, Britons have access to a thriving private health care market. More than 6.5 million people have private medical insurance, 6 million have cash plans, and 8 million pay out of pocket for a range of therapies, and 250,000 self-fund for private surgery. Millions more opt for private dentistry, optometry, and long-term care. So the Brits are voting with their pocket books despite access to free NHS medical services.
The impact on the homegrown supply of doctors and nurses is equally compelling. The U.K. must import a significant number of doctors to staff its NHS facilities. Medicine, as a career choice, has lost much of its appeal to native born citizens, many of whom don’t view NHS employment as a rewarding option. And doctors already in practice are turning to the private sector for more desirable working conditions and income. In 2003, over two-thirds of doctors registering to practice in the U.K. were from overseas, the vast majority from non-European countries.
If Canadians are restricted from accessing private services as do the Brits, where can they go? The current relief valve in the Canadian system is, you guessed it, crossing the border into the U.S. Large numbers of Canadians are willing to pay out of pocket to obtain care in the U.S. rather than suffer through interminable waits inherent in the Canadian system. MRI units, surgical centers, and hospitals across the northern tier of the U.S. provide much needed services to frustrated Canadians. (If the US goes socialized, what is our escape valve - Cuba?)
American public’s concerns
None of this is to say that there aren’t legitimate concerns about the American health care system. A Wall Street Journal / Harris Interactive poll conducted in 2007 shows around half of U.S adults polled with health insurance coverage fear that premiums will become unaffordable. And even more worry their benefits will be cut back or eliminated. Over two-thirds feel that government should subsidize health insurance for those who do not have access to employer-paid insurance.
After all, it’s very reassuring to think the government will pick up the tab if someone loses their health insurance coverage. But only 26% of those polled were actually willing to pay more in taxes to cover such subsidies. So a large majority think government should be on the hook for payment, but the reality of paying more in taxes as a consequence is far less appealing.
Now, I suppose it’s possible that really sick Americans are seeking care in neighboring Cuba or Canada, but the reality is that most of the world seeks the care and innovation available in American medicine. After all, long waits to see specialists or obtain MRIs or other studies is driving people to cross the border into the U.S., not out of it. And most Americans don’t worry about finding aspirin and other common medications in their hospitals, which are often in chronic shortage in Cuba.
American medical successes
American patients are twice as likely as Canadians to get certain life-saving treatments such as dialysis. They are three times more likely to receive a coronary bypass, and four times more likely to undergo coronary angioplasty. Survival rates in American hospitals for leukemia, breast cancer, and heart disease are much higher than in Canadian or European hospitals. In the U.S., the annual death rate from cancer is 196 per 100,000 people, compared to 235 in Britain, 244 in France, 270 in Italy, and 273 in Germany.
Death due to heart disease has been reduced by two thirds over the past 50 years, polio belongs in the history books, and childhood leukemia, once a death sentence, is now largely survivable. All of these advances are indebted to the free market American medical system.
The reality is that American medical innovation is the envy of the world. The much maligned American pharmaceutical companies have given us extraordinary cures and preventive treatments. These include life-prolonging AIDS drugs, numerous, now-routine, life-saving vaccines, powerful antibiotics, a cancer vaccine (for HPV), targeted cancer therapies, powerful cholesterol lowering statin drugs, antidepressants, genetically engineered medicines to treat cancer and anemia, and even Botox®.
Sicko also fails to mention the name of Dr. Maurice Hilleman, an American whom we should all know about. He invented 8 of the 14 vaccines routinely given to young children that save about 8 million lives per year. His measles, mumps, and rubella (MMR) vaccine protects children against three diseases with a devastating legacy. Ironically, his death came less than one month after the Centers for Disease Control and Prevention announced that rubella had been eliminated as a health threat in the U.S.
Perhaps the reason the public doesn’t hear much about Dr. Hillman is because he spent most of his career at pharmaceutical giant Merck where he was able to convert his research into life saving products that benefit children world-wide. And to acknowledge Dr. Hillman’s achievements would be acknowledging the contributions of his employer to world health.
In light of these pharmaceutical breakthroughs, its interesting to note that the British NHS has developed a type of medical rationing system known as Health Technology Assessments (HTA) that selects which drugs, procedures, and treatments are to be made available – meaning paid for by the government. HTA has already barred the purchase of Herceptin, a life-saving breast cancer drug that is available to U.S. patients.
And American innovation is not limited to medicines. American medical technology brought us the cardiac stent, vastly improved medical lasers, automatic external defibrillators, implantable insulin pumps, robotic surgery, medical diagnostics using PCR (polymerase chain reaction) techniques, neurostimulators for Parkinson’s and pain management, ultrasound diagnostics and therapeutics, and decoded the human genome to name a few.
Infant Mortality Rate and Life Expectancy
The U.S. infant mortality rate (IMR) is often cited as higher than that of many countries with socialized systems, but it has been cut in half since 1980 due to major advances in the care of premature infants. In fact, the U.S. leads the world in the development of neonatal intensive care technology for preemies.
Sicko does not mention that IMR is measured differently here than in many other countries. The U.S. includes many infant births in our IMR calculation that other countries do not, thereby appearing to have a much higher rate of infant mortality. Some European countries have certain age (minimum 26 weeks) and size limits (12 inches or 1000 grams) under which the baby is excluded from IMR statistics. IMR data from third world countries like Cuba are likely underreported as most births occur outside of the hospital.
Mr. Moore notes that Americans pay more for health care but have a shorter life expectancy than in some socialized systems. But are measures of IMR and life expectancy really an accurate reflection of a country’s medical system? Don’t they really have a lot more to do with sociology than medical care? Americans happen to have more car accidents, murder each other more often, and many of them look like, well, Mr. Moore. The latter risk diabetes, hypertension, and heart disease.
The medical system is only part of the solution to these pressing, broader social challenges. In fact, if you adjust for the higher American homicide and vehicular death rates, our life expectancy is actually higher than nearly every other industrialized nation. Comparative life expectancy as currently calculated is hardly an accurate or fair reflection of the remarkable successes of the American health care system.
Also, the U.S. experiences 40% out of wedlock births; up to 70% among certain ethnic groups. For example, only 17 percent of all U.S. births were to African-American families, but 33 percent of all low-birth weight babies were African-American. Research has also found that poorer mothers with less education were at a significantly higher risk of early delivery and low birth weight babies.
So, a single, poor, under-educated minority has a greater likelihood of having a high risk pregnancy that will result in low birth weight babies with high IMR. It is difficult to indict American health care for all of these factors. Interestingly not all ethnic minorities are so disadvantaged. Hispanic mothers have an IMR that is even lower than whites.
Americans’ perception of the health care system
How do Americans themselves feel about their health care? If you ask them how they feel about the quality and cost of health care, thinking about the country as a whole, 54% are dissatisfied with the quality and 80% are dissatisfied with the cost according to a 2006 ABC News / Kaiser Family Foundation survey.
But if you ask how satisfied Americans are with the care they receive themselves and their own health care costs, 89% are satisfied with the quality and 57% are satisfied with the cost. In other words, if you listen to the Moores of the world you would believe that the American system is a low quality, high cost nightmare. But the vast majority of Americans reflecting on their own care experiences are satisfied.
Cost of America’s government-run health care
Should Americans attempt to emulate the Canadian and European experience by introducing universal health coverage? Are we putting medical innovation at risk and replacing inconsistencies in coverage with institutionalized medical rationing? As the saying goes, if you think medical care is expensive now, wait until you see what it costs when it is free.
A remarkable study performed by Rand Corp. that tracked health care spending by 2000 families over eight years proves this point. Families who got free health care spent 40% more than families that had to bear some of the cost. And yet health care outcomes were the same for both groups. And that is what we are witnessing with Medicare, the single largest health care payer in the country – uncontrolled spending.
The Medicare mirage
Medicare is touted to be a highly efficient system that spends only 2 percent in administrative costs to manage hundreds of billions of dollars of medical care compared to claims of 20-25% overhead for private insurance. Pure administrative costs for Medicare are not as low as the government reports because Medicare excludes several important components such as certain management costs, the costs of capital (money used to pay claims), underwriting, collecting premiums, plan design, commissions, state premium taxes, etc.
When these real costs are included, one major study places Medicare’s administrative costs at 5.2 percent in 2003. The private sector runs 8.9 percent in administrative expenses when commissions, profit and premium taxes are excluded, and 16.7 percent on average when those factors are included.
Moreover, Medicare pushes its administrative burden onto the very hospitals and doctors who provide the care by making them deal with the 130,000 pages of Medicare regulations with more being added all the time. No single person, entity, insurance company, or even the government can possibly understand all of them. It’s not even possible to lift them all at once. It is more likely than not that compliance with one provision among the 130,000 pages will put providers in conflict with another. And violating any single provision can be punishable by financial and even criminal penalties. What a nightmare.
And Medicare doesn’t even pretend to control costs like the private health plans must. Total Medicare expenditures have grown from $330 B in 2005 to $408 B in 2006, an increase of 24%. The trustees that oversee Medicare estimate that the program's total unfunded obligations amount to $34.2 trillion over the next 75 years.
Medicare expenditures are expected to outpace general health care inflation for the foreseeable future. And Medicare makes no pretense about trying to manage care or save money, whereas private insurers must manage their medical costs and live within their means or go out of business. So based on the data, it is difficult to point to Medicare as a model of cost effectiveness for a government-run health care system.
Veterans Health Administration
Aside from Medicare, the other major government medical system is run by the Veteran’s Health Administration (VHA). The VHA is considered by some advocates of socialized care as exhibit A for the advantages of government provision of medicine. It is praised for containing costs while providing excellent services. There is no question that many excellent physicians and nurses practice in the VHA system and some facilities have an excellent track record. In many areas, VHA hospitals work closely with local medical schools to train students and residents and conduct important medical research.
But the VHA, like most politically controlled systems, has a budget set each year by bureaucrats and approved by politicians independent of true market mechanisms that would ordinarily match supply with demand. When the budget misses the mark, the VHA responds by doing what all single-payer system do – they ration.
The parent Veteran’s Administration missed big in 2005 with an unexpected $1.3 billion shortfall. Consequently, the VA suspended enrollments on more than 250,000 veterans to meet budgetary goals and disability payments are lagging behind for hundreds of thousands of veterans. It also tightly controls the list of approved drugs available to veterans, often denying some of the newest and most effective pharmaceuticals. An independent study at Columbia University suggests this strategy is reducing the life expectancy of veterans under VHA care.
Rationing is also observed in the area of mental health benefits. The Miami Herald reports that many VHA clinics offered little or no mental health care in 2005, and access to mental health specialists has declined by a third compared to 10 years ago. All this at a time when the VHA is facing an epidemic of post traumatic stress disorder.
The mismatch of VHA resources with the needs of veterans is compounded by the political budgetary process affecting the system’s 1,400 hospitals and clinics. Newer and underutilized patient facilities are more likely to be found in the districts of powerful congressional leaders while facilities in other districts may be straining to meet the patient load. VHA spending bills typically contain millions of dollars of pork barrel spending each year that could be better allocated to meeting veterans’ health needs.
And the VHA bureaucracy is legendary. Common to government programs, problem solving in the VHA system often gives way to placing blame. In 2006, poor controls over sensitive information led to the theft of 26.5 million veterans’ personal data in the government’s largest ever security breach. Imagine the security challenges if the government takes control of the personal healthcare records of 300 million Americans.
Socialized health systems discover benefits of privatization
In light of the failures of many country’s socialized systems to effectively manage care on behalf of their citizens, several have taken a novel approach – privatize sectors of the failing delivery system. After decades of effort, many have concluded that the private sector is actually more efficient at meeting certain patient needs.
Sweden, the shining example of socialized medicine, will contract out some 80% of Stockholm’s primary care and 40% of total health services, including Stockholm’s largest hospital. Germany has enhanced private insurance competition and turned state enterprises over to the private sector, including the majority of public hospitals.
The socialist Labor party in Britain which has previously dismissed private medicine as “Americanization,” today favors privatization and promises to triple the number of private sector surgical procedures and give patients the choice of four providers for surgery, at least one of them private. They have even considered contracting out some primary care services which could include, ironically, American companies.
Our neighbor to the north has also recognized the need to contract with non-government providers to meet some urgent needs and reintroduce competition into the health care arena. In 2005, the Canadian government set the maximum waiting times for five priority treatment areas. Their Supreme Court held that waiting times for joint replacements should not exceed six months. Consequently, Ontario may follow British Columbia, Alberta, and Manitoba in contracting with private surgical facilities to reduce waiting times for such procedures as cataract surgery, and knee and hip replacements.
State mandates drive up costs
A strong argument can be made that the very regulations promulgated to protect the public interest in America may in fact be driving much of the complexity, bureaucracy and cost in our own system. The tax code, Medicare design, tort liability, and insurance laws all conspire to drive expense and inequity across our medical system.
For example, each state has its own set of regulations and mandates for health insurance coverage. Coverage mandates in New York and New Jersey drive the cost of premiums several times higher for certain groups than in other states. It’s nice for a health plan to offer chiropractic or impotence drugs or hairpieces, and some individuals may be willing to pay more for such coverage. But should they be mandated for all? New Jersey has some 40 such mandates (Minnesota has over 60) that insurers must satisfy – and employers and consumers must pick up the tab.
In 2005 there were over 1,800 such state mandates compared to 1965 when there were only 6. About 30-50 mandates are added each year by state legislatures, creating a patchwork quilt of mandates that interferes with creating a highly competitive, national insurance market. Enrollees in New York and New Jersey cannot purchase insurance through cheaper Idaho or California plans. If they could, the savings would be enormous. Simply allowing the citizens of each state to purchase health insurance without state mandates, matching premium cost with the type of coverage they seek, would result in billions of dollars in savings to the consumer.
State experiments with universal coverage
Several states are experimenting with their own versions of universal coverage. This experimentation is important to understand the costs and opportunities of various options. So far the experience has been a challenging one.
Maine’s Dirigo plan had only 8100 enrollees compared to 31,000 planned by the end of 2005, and only 1,800 of those were uninsured to begin. In other words, for the majority of enrollees as of 2005, Maine’s health plan was allowing individuals to drop their private insurance for state-paid care – hardly the intended effect of providing coverage to the uninsured.
Health insurance is now mandated for individuals in Massachusetts or they will pay a penalty on their state taxes (beginning in 2008). Premiums are set on a needs-based sliding scale, and government will make up the difference in cost. Access problems are already cropping up due to a lack of primary care physicians able or willing to accept patients and the fee schedule in the Massachusetts plan.
TennCare, Tennessee’s health plan for the uninsured had to severely cut back both enrollment (by around 25%) and benefits in 2005 due to cost overruns. Several market based solutions have since been introduced to take the burden off of TennCare. Now we are hearing that the Wisconsin legislature has proposed a universal coverage plan that would cost an estimated $15.2 billion annually, or $3 billion more than the state currently collects in all income, sales, and corporate taxes.
So at the very moment several countries with socialized systems are beating a retreat toward help from the private sector, many in the U.S. are calling for the socialization of our health care system.
The hype around the 45 million uninsured
But what about the 45 million uninsured we hear so much about in this country? Surely we can’t accept this disparity in coverage even if universal care would mean longer waits and rationing for the rest of us. Well, it might not be surprising to learn that this number is quite misleading.
Nearly 40% (or 17 million) of the uninsured live in households earning more than $50,000 per year, and 19% are earning more than $75,000 per year. Many of these only temporarily lack insurance as they move between jobs. Others lack insurance because they have made different choices about how to spend their money. Nearly all these households have elected to purchase multiple televisions and automobiles instead of health insurance.
Another 20% of the uninsured are not citizens. That’s right, some 9 million non-citizens are added to the total and they are growing in number every year. They may be uninsured, but why should that be the responsibility of the American health care system and citizen tax payers?
Finally, a full 33% (or 15 million) are eligible for existing government programs but are not enrolled. Despite an enormous outreach effort to enroll eligible individuals, it is simply easier for some to show up at the ER when they need care than bother filling out the paperwork in advance.
For example, the State Children's Health Insurance Program (SCHIP) administered by CMS is intended to give money to the states to provide insurance coverage for uninsured children in families generally earning under $36,000 per year. One of the greatest challenges for the states receiving SCHIP money is getting eligible families to enroll. In fact, some states experience enrollment rates of only around 30% of those eligible.
So if you add up the working families without coverage, the non-citizens, and the non-enrolled, we can account for about 85% to 90% of the so-called 45 million uninsured. Does it make sense to federalize the whole system to fix this level of inequity, much of it self-inflicted or related to failed immigration policy?
Market-based reforms
While there are genuine problems with the current system, we should all think twice before throwing out the baby with the bathwater, overturning our system in favor of a socialized model. Our efforts would be better directed at unshackling market forces from expensive state mandates, opening up a national market place for health insurance, implementing much needed tort reforms for reducing medical malpractice costs, expanding health savings accounts, and allowing tax deductibility for individually purchased health insurance policies.
If the prevailing remedies for American health care emulate the Canadian, British, French and other socialized systems, this will truly be a case where the cure is worse than the disease. And once the bureaucracies, unions, and politicians are entrenched and beholden to a government-run health system, there may be no therapies strong enough to cure the damage done to the greatest health system in the world.
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