The mental health parity bill finally has arrived in the U.S. Congress. The Senate passed its version of parity last year and the House passed its own version in mid-March. We are optimistic that the two chambers will be able to work out their differences and send a bill to the President shortly. We should be able to celebrate by summer. Is there anything left to tackle in the health care arena after parity? I’m just kidding. How about Medicare reimbursement for psychologists, or privacy issues, or even health care system overhaul in general for starters??? We are hard at work on those pernicious Medicare rate cuts, the problem that keeps on living. Since the political season is rife with Presidential candidates offering their ideas for solving the health care crisis, I thought it an opportune time to examine our national dilemma once again.
U.S. health care expenditures rose 6.7% in 2006, the government recently reported. According to the Centers for Medicare and Medicaid Services, total health care expenditures exceeded $2.1 trillion, or more than $7,000 for every American man, woman, and child. Medicare costs jumped a record 18.7%, driven by the new privatized drug benefit. Total health care spending, now amounting to 16% of the gross domestic product, is projected to reach 20% in just 7 years. Keep in mind that this figure will have grown by a whopping 65% since 1990.
This rate of relentless health care inflation has been attributed to many factors — the aging population, the proliferation of new technologies, poor diet and lack of exercise, the tendency of supply (physicians, hospitals, tests, pharmaceuticals, medical devices, and novel treatments) to generate its own demand, excessive litigation and defensive medicine, and tax-favored insurance coverage.
This phenomenon may well be attributable to something else. Changing demographics and medical technology pose a cost challenge for every nation’s system, but ours is the outlier. The extreme failure of the United States to contain health care costs results primarily from our unique, all-encompassing immersion in commercialization. The dominance of for-profit insurance and pharmaceutical companies, a new wave of investor-owned specialty hospitals, and profit-maximizing behavior even by nonprofit players surely act to raise costs and distort resource allocation. It is estimated that profits, billing, marketing, and the gratuitous costs of private bureaucracies siphon off $400 billion to $500 billion of the $2.1 trillion spent, but the more serious and most often less appreciated syndrome is the set of improper incentives produced by commercial dominance of the system.
Markets are said to optimize efficiencies. The “markets” mantra is the holy grail of the business community and the forces that oppose government intervention. I, personally, am normally a “markets” supporter. But despite widespread belief that competition is the key to cost containment, health care—with its third-party payers and its partly social mission—does not lend itself to market discipline. When presented with this fact pattern, it is not unreasonable to ask “why” health care doesn’t fit into market theory.
The private insurance system’s main techniques for holding down costs are: practicing risk selection, limiting the services covered as every psychologist knows (parity relief is on its way), constraining payments to providers which is another technique with which psychologists are all too familiar, and shifting costs to patients. But given the system’s fragmentation and perverse incentives, much costeffective care is squeezed out, resources are increasingly allocated in response to profit opportunities rather than medical or psychological need, many attainable efficiencies are not achieved, unnecessary health care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game the system. The result is a blend of over-treatment and under-treatment as well as escalating costs. Researchers calculate that between one-fifth and one-third of health care outlays do nothing to improve health.
Great health improvements can be achieved through basic public health measures and a population-based approach to wellness and medical care. But entrepreneurs do not prosper by providing these services, and those who need them most are the least likely to have insurance. Innumerable studies have shown that consistent application of standard protocols for conditions such as depression, anxiety, diabetes, asthma, and elevated cholesterol levels, use of clinically proven screenings such as annual mammograms, provision of childhood immunizations, and changes to diet, exercise, and alcohol and drug usage can improve health and prevent larger outlays later on.
Comprehensive, government-organized, universal health insurance systems are far better equipped to realize these efficiencies because everyone is covered and there are no incentives to pursue the most profitable treatments rather than those dictated by medical need. Although the populations of most countries that belong to the Organi – zation for Economic Cooperation and Development are older than the U.S. population, these countries have been far more successful at containing costs without compromising care.
Cost-containment efforts in this country have fallen heavily on primary care physicians, who have seen caseloads increase and net earnings stagnate or decline. A popular strategy among cost-containment consultants relies on the psychology of income targeting. The idea is that physicians have a mental picture of expected earnings—an income target. If the insurance plan squeezes their income by reducing payments per visit, doctors compensate by increasing their caseload and spending less time with each patient.
This false economy is a telling example of the myopia of commercialized managed care. It may save the plan money in the short run, but as any practicing physician can testify, the strategy has multiple self-defeating effects. A doctor’s most precious commodity is time—adequate time to review a chart, take a history, truly listen to a patient. You can’t do all that in 10 minutes. Harried primary care doctors are more likely to miss cues, make mistakes, and—ironically enough—order more tests to compensate for lack of handson assessment. They are also more likely to make more referrals to specialists for procedures they could perform more cost-effectively themselves, given adequate time and compensation. And the gap between generalist and specialist pay is widening.
A second cost-containment tactic is to hike deductibles and copayments, whose frank purpose is to dissuade people from going to the doctor. But sometimes seeing the doctor is medically indicated, and waiting until conditions are dire costs the system far more money than it saves. Moreover, at some point during each year, more than 80 million Americans go without coverage, which makes them even less likely to seek preventive care.
Defenders of commercialized health care contend that economic incentives work. And they do—but often in perverse ways. The privately regulated health care market is signaling pressured providers to behave more like entrepreneurs, inspiring some to defect to “boutique practices,” in which well-to-do patients pay a premium, providers maintain good incomes, and both get leisurely consultation time. It’s a convenient solution, but only for the very affluent and their providers, and it increases overall health care outlays.
A comprehensive national system is far better positioned to match resources with needs—and not through the so-called rationing of care. (It is the U.S. system that has the most de facto rationing—high rates of uninsurance, exclusions for preexisting conditions, excessive deductibles and copayments, and shorter hospital stays and physician visits.) A universal system suffers far less of the feast-or-famine misallocation of resources driven by profit maximization. It also saves huge sums that our system wastes on administration, billing, marketing, profit, executive compensation, and risk selection. When the British National Health Service faced a shortage of primary care doctors, it adjusted pay schedules and added incentives for high-quality care, and the shortage diminished. Our commercialized system seems incapable of producing that result.
Despite our crisis of escalating costs, dwindling insurance coverage, and deteriorating conditions of practice, true national health insurance that would not rely on private insurers remains at the fringes of the national debate. This reality reflects the immense power of the insurance and pharmaceutical industries, the political fragmentation and ambivalence of health care professionals, the intimidation of politicians, and the erroneous media images of dissatisfied patients in universal systems.
As mentioned above, the upcoming election is producing a number of proposals from the final three candidates. Are any of these plans sufficient to substantively change the system? Currently, we have been in a pattern of what appears to be exhausting all the alternatives. In my personal opinion, it remains to be seen how much exhaustion the health care system will suffer before we turn to national health insurance. Psychology has made great political gains in Washington so that we can be seen as genuine players in the creation of a national health system. However, we still have a way to go to insure that we will have a place at the table when the negotiations begin. Tell your friends to get involved. Support AAP, talk to your elected officials, become more politically active.