Health Care

We know exactly what it should do:

Provide universal insurance coverage-no one should be denied essential care;

Allow absolute freedom of choice–we should be free to choose our doctors, and they should have autonomy to select the best treatments for us;

Control costs–government, businesses and families shouldn’t be bankrupted by soaring health spending.

The trouble is that no health-care system can fully achieve all these goals. Universal insurance coverage, coupled with absolute freedom of choice, would make costs uncontrollable. Every crank psychotherapy would qualify for insurance coverage. Every new lifesaving technology–no matter how huge the expense or brief the benefit–would be used. We can control costs only if some people or some treatments aren’t covered by insurance. Some things have to be made unaffordable. We either make these choices directly or tolerate a medical system that makes them for us.

What President Clinton has started is a historic effort to find an acceptable new balance of competing public demands–to reinvent health care in ways that provide somewhat less freedom for patients and doctors and somewhat more cost control. In its mind-numbing complexity, the debate will be about whether his program or any of its rivals can do what they claim. But in a larger sense, the debate represents an awkward attempt to come to terms with the ambiguous nature of modern medicine.

We once hailed every medical breakthrough as a triumph of science and a gift to humanity. Now we see the mixed blessings of advanced medicine. Its growing sophistication also makes it more costly and bureaucratic. We can get better care–and feel less cared for. We are shuffled between specialists and subjected to batteries of tests. When Americans say they want “choice,” it means that they don’t want health reform to make the system even more impersonal. They still crave a trusting doctor-patient relationship. “When people get sick, they feel they need to reach out to someone,” says Dr. Stanley Talpers, a retired family practitioner who now teaches at George Washington University. “If they know the doctor, it’s so much easier.”

Our health-care problem is not that we are less healthy or have become hugely unhappy with our medical care. just the opposite. Despite urban violence and the scourge of AIDS–which have had a devastating impact on some Americans–most of us are healthier than ever. In 1950, life expectancy was 68 years; now it is 76 years. Likewise, most Americans (about 80 percent) say they’re satisfied with their personal health care. Nor has there been a massive loss of insurance coverage. Between 1977 and 1992, the share of Americans without coverage rose only slightly, from 13 to 17 percent. Health costs are the big problem, because today’s system essentially provides unlimited care for the insured.

Between 1965 and 1991, health spending rose from 5.9 to 13.2 percent of GDP. If unchecked, it could hit 20 percent in a decade. The increases have squeezed take-home pay and overburdened government. They are draining funds from police and schools. As companies pay more for health insurance, less is left for wages. Since 1972, rising insurance costs have eaten up half of workers’ increased compensation (pay plus fringe benefits). Unless health costs are curbed, it may also be impossible to subdue federal budget deficits. Between 1965 and 1992, health costs (mainly for Medicare and Medicaid) rose from 2.6 to 16 percent of federal outlays. By 2000, they could exceed 25 percent.

The final effect of uncontrolled spending is to corrode confidence in the entire medical system. Loss of insurance may not have exploded, but anxiety about it has. Americans correctly sense that a vicious circle is at work. The costlier insurance becomes, the harder it is for individuals and small businesses to afford it. As companies “downsize,” more workers worry that they’ll become uninsured if laid off. More than a quarter of those with insurance fear losing it, reports a survey done for The Henry J. Kaiser Family Foundation.

The basic cause of the spending explosion is the volatile mix of generous insurance and high-tech medicine. The two have fed each other. The more expensive medicine became, the more people wanted protection against its costs. In 1960, patients paid 56 percent of health costs out of their own pockets; by 1991, that was only 22 percent. But the more insurance Americans had, the more doctors and hospitals resorted to expensive technology. Patients wanted the best and doctors could order whatever seemed necessary, because someone else paid.

It’s wrong to dismiss high-tech medicine merely as the excesses of the health-industrial complex: expensive gadgets and drugs peddled by doctors enriching themselves. Many new drugs really do offer spectacular benefits. In 1977, the first drug (Tagamet) to treat stomach ulcers appeared; more risky and less effective stomach surgery declined sharply. Heart disease is more treatable than ever. Drugs lower blood pressure and dissolve clots. Bypass surgery moves blood around clogged arteries with veins from elsewhere in the body. Since 1963, death rates from heart disease have dropped 56 percent, and some of the decline reflects these advances. (Much of the rest is better diet, less smoking and more exercise.)

Even when new treatments don’t improve crude health indicators–like fife expectancy–they may deliver huge benefits. “A lot of this is quality of life. It’s comfort,” says economist Henry Aaron of the Brookings Institution. Artificial hips enable grandparents to play with grandchildren. Prozac has relieved depression. Cataract removal allows the elderly to enjoy reading or TV.

But all these medical advances clearly raise total health costs. Indeed, economist Joseph Newhouse of Harvard attributes roughly half of the recent increases in health spending to new medical technologies (much of the rest stems from rising population and inflation). The reasons are clear. Some lifesaving procedures are hugely expensive. A liver transplant and follow-up treatment cost $300,000 in the first year, reports the consulting firm Milliman & Robertson. Once a new advance occurs, its use explodes–and there’s a tendency to overuse (page 60). Between 1970 and 1991, the number of annual bypass operations rose from 14,000 to 407,000. At first, patients were younger. As surgeons’ skills improved, older patients (who have less to gain from surgery) became candidates, too.

FINALLY, HIGH-TECH MEDICINE creates a grim paradox: the more it extends life, the more it raises the cost of living longer. The beneficiary of today’s bypass surgery may have a heart attack in five years or develop cancer. Medical advances can be cost-effective in treating individual illnesses, even while raising a person’s life-time health costs. The trouble with our present system is that it imposes no discipline on spending. Open-ended insurance reimbursement makes it in doctors’ self-interest to provide more treatment. It’s often hard to know in advance who win benefit, and patients expect the best.

Any health reform that curbs costs must impose some limits. Doctors and/or patients will lose some freedom in determining care. The health-care debate is so morally discomforting precisely because it poses questions few of us want to face, either individually or as a society. When do we give up hope for a loved one? Can we embrace medical technology without becoming its victim? In general, we don’t believe limits are necessary. A survey done for The Robert Wood Johnson Foundation asked respondents what restrictions might be acceptable on insurance to cut costs. Three quarters of the respondents rejected limiting transplants; 70 percent opposed limiting personal choice of doctors or hospitals; 61 percent opposed restricting specialized services to regional medical centers requiring an hour’s driving time.

We deny that choices exist and rationalize our denial in two ways. The first is to imagine that some other country has created an ideal system. This is a mirage. True, all other countries have done a better job of controlling costs. In 1991, Germany spent 8.5 percent of its GDP on health, France 9.1 percent, Japan 6.6 percent and Britain 6.6 percent. (Recall that U.S. spending was 13.2 percent of GDP) But lower costs were not achieved miraculously. There are only two ways to limit health spending: provide less care and pay less to those providing it. Other countries do both.

There are tighter price controls. In Germany, for instance, doctors’ earnings are 4.3 times the average; in the United States, they earn 5.2 times the average. But other countries also provide less care. In Britain, many aging hospitals are overcrowded. Patients are routinely, though often informally, denied the most advanced treatments. Rates of kidney dialysis or heart surgery–to take two examples–are much lower than in the United States. Germany also often offers less; one study found that the availability of some advanced treatments, such as open-heart surgery, is one quarter to one half the U.S. level.

All foreign comparisons also overlook one obvious difference: other societies have controlled health costs more easily in part because their values are different. They are more accepting of death, less captivated by heroic lifesaving technologies and less hostile to restrictions–often informal–on care. Other societies often practice medicine in ways that we would reject. Despite all this, many countries face cost pressure similar to ours. Between 1980 and 1991, for example, Canada’s health costs rose from 7.4 to 10 percent of GDP

Our second rationalization, embraced enthusiastically by Clinton, is that we can realize all our health-care goals simply by squeezing out waste–from excess paper-work to useless surgery. in the survey for the Johnson Foundation, respondents were asked to rank the most important causes of rising costs. “Greed and profits” topped the list (67 percent), followed by “malpractice suits” (64 percent) and “waste and inefficiency” (61 percent).

In 1991, health spending totaled $752 billion. Everyone agrees there’s waste, but no one really knows how much because “waste” is a vague term that covers many alleged sins. Consider some common suspects:

Doctors and hospitals are a wash in it. There are claim forms for 1,300 insurers and constant feuds over bills. In Canada, much paperwork and wrangling is avoided, because the government is the major payer. Adopting a Canadian-like system might save $50 billion annually in costs, says the consulting firm Lewin-VH1.

Doctors and drug companies are common targets. In 1991, the median income of doctors was $139,000, but many specialists earned two or three times that much. In 1991, doctors’ incomes totaled about $74 billion, after office and other expenses. Drug-company profits in 1992 were about $12 billion.

Perhaps a seventh to a third of some types of operations may be unnecessary, according to studies by Robert Brook of the Rand Corp. Other studies have reached similar conclusions about some diagnostic tests. It’s hard to estimate savings, because no one knows how much is spent annually on all surgery or tests.

Possible savings may be smaller than the public imagines. Doctors’ malpractice-insurance premiums average 5 percent of their revenues. That’s about $7 billion annually. Defensive medicine–tests or procedures done to protect doctors against suits–is crudely estimated at $25 billion annually by Lewin-VHI.

“You’re getting fat out of the system,” says White House health adviser Ira Magaziner. “There’s going to be tremendous one-time savings.” All health-care reformers make the same pitch: our plan will knock waste out of the system without compromising care. Maybe–but savings may be smaller than advertised and may provide only temporary cost relief. if you examine the list above, some items overlap. Some “unnecessary tests” reflect “defensive medicine,” and if fewer tests were done, doctors’ incomes would drop. The same dollar can’t be saved three times. Nor can costs be controlled without limiting patients’ or doctors’ medical choices. Clinton’s plan relies heavily on health-maintenance organizations (HMOs). Patients who joined these groups could choose their doctors only from those belonging to the group. Decisions about seeing specialists would lie largely with the group’s doctors: if they decide you don’t need to see a specialist, you don’t–unless you pay extra. In this way, HMOs claim they cut unnecessary treatment. For example, Kaiser Permanente, the largest HMO, says its patients have fewer heart-bypass operations without any apparent effect on their health.

Clinton’s plan also aims to force some doctors and hospitals out of the system. Some older doctors might retire early rather than join groups. Hospitals left out of groups might shut. All this might cut health costs, as hospitals operated more efficiently. In 1991, their occupancy rate (the share of beds with patients) averaged only 66 percent. But closures could involve public inconvenience because there will be fewer hospitals.

Relying on strict spending and price controls to cut costs–proposed under Clinton’s plan or a Canadian-like system–would involve different disruptions. Some doctors might work fewer hours because their earnings were limited. Or they might shorten patient visits. Some hospitals might close, be unable to buy the newest medical equipment or stop offering some advanced procedures. In 1990, 113 hospitals in California did open-heart surgery, reports health economist Victor Fuchs. But after a while, cutbacks could mean longer waiting periods for some tests or operations.

Even if substantial waste is eliminated, the cost relief may be only temporary. “If there’s waste, you can squeeze it out only once,” says economist Aaron. Suppose paperwork costs were cut by $50 billion annually and doctors’ incomes dropped $25 billion, a hefty one-third decrease. But health costs have been rising $75 billion or more annually, and so the savings would simply offset one year’s growth. Aaron and others believe the real reason we’re paying more for health care is that we’re getting more of it. Between 1980 and 1991, the number of CT scans jumped from 300,000 to 1.5 million.

In the end, controlling health costs means denying some treatment to the very sick-rationing, somehow-because the very sick account for most health spending.In any year, the sickest I percent of patients account for about 30 percent of health spending and the sickest 5 percent of patients account for 58 percent of costs, report analysts Alan Monheit and Marc Berk. Most Americans are, except for an occasional cold, healthy most of the time. The healthiest 50 percent of Americans account for 3 percent of annual costs. Nor are the sickest 1 percent just the very old; slightly more than half are under 65.

“‘Unnecessary’ is a very vague word in medicine,” says Dr. William Schwartz of the University of Southern California. “Every technology provides a spectrum of benefits. What we face is the real issue of making decisions on a slippery slope-where should we stop?” There are often no right or wrong answers. Consider tacrine, a new drug to treat Alzheimer’s disease. It relieves memory loss slightly, but works for only about a fifth of patients. Worse, no one knows in advance who might benefit. There are now roughly 4 million people with Alzheimer’s. Suppose only 10 percent (400,000) take the drug at a cost of about $3.50 a day. The annual cost would exceed $500 million, and about 80,000 patients might benefit. That’s more than $6,000 per person. Do the gains justify the costs?

To Schwartz and others, strict spending limits will someday become inevitable. Making HMOs into “agents of rationing” is the most humane and medically effective way to curb costs, he argues. There would be loose guidelines to help doctors decide which treatments–for which patients–are worth the expense. In some cases, patients wouldn’t know what they weren’t getting. In others, doctors, patients and family would decide jointly. But rules, Schwartz says, must be flexible enough to give doctors discretion. A healthy 72-year-old might be a prime candidate for an operation unsuited to a 52-year-old in poor health.

Even those who think rationing is inevitable disagree on details. Large-scale rationing at bedside is “impossible,” writes ethicist Daniel Callahan (page 67). “Physicians differ among themselves, family members disagree. . . " Only explicit rules prohibiting some treatments will work, he says. Oregon’s plan to limit Medicaid coverage embraces this concept. Under it, the state won’t pay for liver transplants, among other things.

We don’t know if spending 13 percent of GDP on health care is “right,” or whether 9 or 18 percent would be better. The trouble now is that no one decides. A basic question of any reform is where responsibility should he. Clinton thinks many of these decisions must be made collectively, through government. Many conservatives want individuals to take more responsibility. Under some conservative plans, mandated insurance would be limited to catastrophic coverage. Families would get a tax-free allowance and be responsible for the first, say, $2,500 of annual medical expenses. This (the theory goes) would make everyone more cost-conscious.

Our dilemma is that a system that provides unbounded benefits for all of us as individuals will hurt all of us as a society. It will squeeze private incomes and burden government. Yet we all feel uneasy at placing limits on care for family, friends or almost anyone. Ours is a society highly sensitive to individual rights and ever optimistic about the possibilities of improving life. The dilemma will only intensify as America ages and medical technology advances. By 2020, the over-65 population could hit nearly 17 percent, up from 12.5 percent in 1990. Biotechnology makes possible new treatments for everything from cystic fibrosis to cancer.

The health-care debate is ultimately a giant guessing game about what kind of system best balances society’s need for economic discipline with individuals’ need for dignity. No reform can give us everything we want-lower costs, more medicine and total freedom. If we deny choices, we cannot have an honest debate. The debate will have lasting value only if it makes us more accepting of the, shortcomings of any health-care system. We cannot have an ideal system, but maybe we can have a less imperfect one.

Does the health-care system in this coutry work pretty well and require only minor changes, does it need fundamental changes, or do you think it needs to be completely rebuilt?

16% Minor changes 32% Fundamental changes 47% Completely rebuilt Will the health-care reform package proposed by President Clinton be good or bad for the country? 55% Good 27% Bad

THE NEWSWEEK POLL, SEPT. 23-24, 1993