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Reader’s Comments
To the Editor: Thank you for the opportunity to respond to the health-care debate with constructive ideas for the problems we face. Since my departure from academic medicine in 1989, my “research interest” has been consumer-oriented, market-based health-care reform. I have gained some degree of local and national recognition in this discussion {from articles published in} Investor’s Business Daily, The Wall Street Journal, Forbes, and local newspapers. I have a weekly radio program in Seattle that discusses the ramifications of the Washington Health Services Act of 1993, upon which the President’s Health Security Act is modeled. I have spearheaded the Association of American Physicians and Surgeons (AAPS) chapter in Washington state while it has grown from 10 members to 500-and I chose to enlarge AAPS, rather than to work with the Washington State Medical Association, because of AAPS’ dedication to private practice and free-market principles. However, I take your invitation as the first ray of sunshine in a storm I’ve been weathering for five you have asked for constructive crityears -because icism, which, with education of the public, is precisely what this debate needs. It is important to begin with proper definitions of the problems that we face. What are our major problems today? Quality is not the problem. Unquestionably, the United States has the finest quality health care in the world. People come from around the world to see American physicians, and physicians in training clamor for even brief stints in our country. We have more MRIs, lithotripters, lasers, and intensive care units than anyone. Every specialty has multiple Americans leading it into the 21st century. Access is not the problem. At any given time, our health-care system can be accessed for routine care on demand by more than 90% of our population, with the likelihood that the individual requesting the health care will pay less than 20 cents out-of-pocket on the billed dollar. Urgent health care is immediately accessible even to those who lack health insurance. Many uninsured individuals obtain care for problems that would simply be untreatable anywhere else in the world. Insurance coverage is not the problem. The oft-bemoaned 1l%, or 35 million without health insurance includes: 15 million making more than $20,000 per year, 20 million under the age of 30; more than 18 0090-3019/95/$9.50
million who will again be insured before six months have elapsed; and less than 4 million who will be continuously uninsured for two years, or who are uninsurable. What this means is that we do not have a healthcare crisis-we have a health-care financing crisis. This financing crisis began from a very small number of unintended consequences, but because the underlying premises were wrong, our excellent health care system has become extremely expensive. It need not be. A review of history is in order. The current health-care financing crisis has its roots in the development of the Blue Cross/Shield Plans in the 1930s and 194Os, by which health care for the first time became pre-paid by third parties-that is, money was given to health-care organizations (early on, hospitals only) in advance of the actual expenditure for or necessity of delivered health care. Quickly, the so-called “cost-plus system” evolved; hospitals were paid for 25% of their costs if 25% of their patients were in the local Blue Cross/ Shield plan. Fuel was added to the fire when, in World War II, the Internal Revenue Service made a ruling-codified into law in the early 1950s-allowing employer-purchased health-care benefits to be free of tax implication for both employer and employee. As a result, the employer was motivated to spend as much on health-care benefits as possible because such expenditures decreased the adjusted gross income of the company, and the employee was motivated to use as many of these benefits as possible because after a small deductible had been satisfied, these benefits were essentially free (or, stated another way, were compensation that could only be derived by utilization of health-care resources). Finally came the institution of Medicaid and Medicare in the mid-1960s. A nice article by Milton Friedman in the WallStreet Journal in November 1991 demonstrates how health care spending was 5.5% and less of GDP for more than 50 years, until the institution of Medicare and Medicaid; only since 1965 have we seen the spiraling upward of health-care costs. The problems with our current health-care financing can be summarized by the fact that neither provider nor consumer has had any reason to consider the costs of health care until very recently. Most health care expenses were gladly borne by the 0 1995 by Elsevier Science Inc. 655 Avenue of the Americas, New York, NY 10010
Reader’s Comments
employer who, as noted above, had a financial incentive to spend much on health care; the incentive for the patient was to consume much of it. Likewise, the doctor had only to consider what test might conceivably shed one additional photon of light on the patient’s situation, and that test was ordered. Hence, American health care’s cost explosion. This financing crunch, in concert with the current political landscape, brought us to the current debate. Unfortunately, institutionalizing third-party payment and mandating managed care will further drive up costs, as the populace is encouraged to consider health care and insurance coverage as rights-and therefore free-rather than products produced by others, and therefore purchases. Because infinite money for health care does not exist, and because many more people are likely to demand coverage for well-baby visits and yearly pap smears than for neurosurgery, politically ordained “universal coverage” is likely to result in rationing of neurosurgical and other high-intensity specialties. Ironically, only neurosurgery and other specialty care are truly insurable; whereas “insurance” that seeks to cover maintenance care is inherently unstable and is always expensive. (Would you buy insurance for oil changes and spark plugs on your car?) This leads to my constructive solution. The Congress of the United States should enact medical savings accounts. This concept, originally developed by Jesse Hixon of the AMA some 20 years ago, has been modernized and embellished by, among others, the National Center for Policy Analysis in Dallas, Texas. A number of variations on the theme exists, but the basic concept is to actually give the patient the first $2000~$3000 of what is usually spent on a standard low-deductible indemnity or HMO-type policy, in an interest-bearing account, and use the remaining $1,500 to buy a highdeductible major medical and surgical policy that covers catastrophic events at 100% (above the $2000-$3000 deductible). Because more than 80% of the population use less than $3000 for healthcare purposes each year, most medical transactions would become cash-based. Patients would have not only first dollar coverage, but also an incentive to use medical resources wisely-after all,
Surg Neurol 30 1 1995;43:300-1
suddenly it would be their money rather than that of the insurance company or the employee. Patients would also be protected from unpleasant surprises in copayment amounts at the end of hospitalizations, because of 100% coverage above the high deductible. In each of the last two session of Congress, legislation containing medical savings accounts has garnered 150 or more co-sponsors, and has that many or more in the current session. This is true bipartisan support. Several states have enacted medical savings account legislation, including Idaho and Arizona, and several excellent demonstration projects exist in the private section-notably Forbes magazine, Golden Rule Insurance Company, and Dominion Resources, a utilities holding company in Virginia. Each of these firms has noticed a dramatic decline in claims and in the yearly rise of insurance premiums, while assuring their employees unrestricted choice of physician and treatment. At each of these companies, more than two-thirds of their employees opt for the medical savings accounts plan and are thrilled with them. Medical savings accounts have several additional benefits. Properly implemented, medical savings account-type plans would essentially do away with “preexisting conditions.” Because people would be empowered to own their own insurance, they could never lose their coverage and then have to endure a waiting period while preexisting conditions came under coverage. Medical savings accounts would accomplish the middle class tax break President Clinton so forcefully recommended during his 1992 campaign. Medical savings accounts would increase access to care and simultaneously empower the consumer to forcefully shop the market-and can you think of any more powerful tool to bring medical costs into line than 250 million shoppers? Finally, medical savings accounts would begin to provide for the baby boomers’ approaching retirement-an important consideration, because even the government admits that Medicare is likely to be insolvent within a decade. Michael Schlitt, M.D.
Bellevue, Washington SSDI 0090-3019(94)00119-B
Reader’s Comments
To the Editor: Thank you for the opportunity to respond to the health-care debate with constructive ideas for the problems we face. Since my departure from academic medicine in 1989, my “research interest” has been consumer-oriented, market-based health-care reform. I have gained some degree of local and national recognition in this discussion {from articles published in} Investor’s Business Daily, The Wall Street Journal, Forbes, and local newspapers. I have a weekly radio program in Seattle that discusses the ramifications of the Washington Health Services Act of 1993, upon which the President’s Health Security Act is modeled. I have spearheaded the Association of American Physicians and Surgeons (AAPS) chapter in Washington state while it has grown from 10 members to 500-and I chose to enlarge AAPS, rather than to work with the Washington State Medical Association, because of AAPS’ dedication to private practice and free-market principles. However, I take your invitation as the first ray of sunshine in a storm I’ve been weathering for five you have asked for constructive crityears -because icism, which, with education of the public, is precisely what this debate needs. It is important to begin with proper definitions of the problems that we face. What are our major problems today? Quality is not the problem. Unquestionably, the United States has the finest quality health care in the world. People come from around the world to see American physicians, and physicians in training clamor for even brief stints in our country. We have more MRIs, lithotripters, lasers, and intensive care units than anyone. Every specialty has multiple Americans leading it into the 21st century. Access is not the problem. At any given time, our health-care system can be accessed for routine care on demand by more than 90% of our population, with the likelihood that the individual requesting the health care will pay less than 20 cents out-of-pocket on the billed dollar. Urgent health care is immediately accessible even to those who lack health insurance. Many uninsured individuals obtain care for problems that would simply be untreatable anywhere else in the world. Insurance coverage is not the problem. The oft-bemoaned 1l%, or 35 million without health insurance includes: 15 million making more than $20,000 per year, 20 million under the age of 30; more than 18 0090-3019/95/$9.50
million who will again be insured before six months have elapsed; and less than 4 million who will be continuously uninsured for two years, or who are uninsurable. What this means is that we do not have a healthcare crisis-we have a health-care financing crisis. This financing crisis began from a very small number of unintended consequences, but because the underlying premises were wrong, our excellent health care system has become extremely expensive. It need not be. A review of history is in order. The current health-care financing crisis has its roots in the development of the Blue Cross/Shield Plans in the 1930s and 194Os, by which health care for the first time became pre-paid by third parties-that is, money was given to health-care organizations (early on, hospitals only) in advance of the actual expenditure for or necessity of delivered health care. Quickly, the so-called “cost-plus system” evolved; hospitals were paid for 25% of their costs if 25% of their patients were in the local Blue Cross/ Shield plan. Fuel was added to the fire when, in World War II, the Internal Revenue Service made a ruling-codified into law in the early 1950s-allowing employer-purchased health-care benefits to be free of tax implication for both employer and employee. As a result, the employer was motivated to spend as much on health-care benefits as possible because such expenditures decreased the adjusted gross income of the company, and the employee was motivated to use as many of these benefits as possible because after a small deductible had been satisfied, these benefits were essentially free (or, stated another way, were compensation that could only be derived by utilization of health-care resources). Finally came the institution of Medicaid and Medicare in the mid-1960s. A nice article by Milton Friedman in the WallStreet Journal in November 1991 demonstrates how health care spending was 5.5% and less of GDP for more than 50 years, until the institution of Medicare and Medicaid; only since 1965 have we seen the spiraling upward of health-care costs. The problems with our current health-care financing can be summarized by the fact that neither provider nor consumer has had any reason to consider the costs of health care until very recently. Most health care expenses were gladly borne by the 0 1995 by Elsevier Science Inc. 655 Avenue of the Americas, New York, NY 10010
Reader’s Comments
employer who, as noted above, had a financial incentive to spend much on health care; the incentive for the patient was to consume much of it. Likewise, the doctor had only to consider what test might conceivably shed one additional photon of light on the patient’s situation, and that test was ordered. Hence, American health care’s cost explosion. This financing crunch, in concert with the current political landscape, brought us to the current debate. Unfortunately, institutionalizing third-party payment and mandating managed care will further drive up costs, as the populace is encouraged to consider health care and insurance coverage as rights-and therefore free-rather than products produced by others, and therefore purchases. Because infinite money for health care does not exist, and because many more people are likely to demand coverage for well-baby visits and yearly pap smears than for neurosurgery, politically ordained “universal coverage” is likely to result in rationing of neurosurgical and other high-intensity specialties. Ironically, only neurosurgery and other specialty care are truly insurable; whereas “insurance” that seeks to cover maintenance care is inherently unstable and is always expensive. (Would you buy insurance for oil changes and spark plugs on your car?) This leads to my constructive solution. The Congress of the United States should enact medical savings accounts. This concept, originally developed by Jesse Hixon of the AMA some 20 years ago, has been modernized and embellished by, among others, the National Center for Policy Analysis in Dallas, Texas. A number of variations on the theme exists, but the basic concept is to actually give the patient the first $2000~$3000 of what is usually spent on a standard low-deductible indemnity or HMO-type policy, in an interest-bearing account, and use the remaining $1,500 to buy a highdeductible major medical and surgical policy that covers catastrophic events at 100% (above the $2000-$3000 deductible). Because more than 80% of the population use less than $3000 for healthcare purposes each year, most medical transactions would become cash-based. Patients would have not only first dollar coverage, but also an incentive to use medical resources wisely-after all,
Surg Neurol 30 1 1995;43:300-1
suddenly it would be their money rather than that of the insurance company or the employee. Patients would also be protected from unpleasant surprises in copayment amounts at the end of hospitalizations, because of 100% coverage above the high deductible. In each of the last two session of Congress, legislation containing medical savings accounts has garnered 150 or more co-sponsors, and has that many or more in the current session. This is true bipartisan support. Several states have enacted medical savings account legislation, including Idaho and Arizona, and several excellent demonstration projects exist in the private section-notably Forbes magazine, Golden Rule Insurance Company, and Dominion Resources, a utilities holding company in Virginia. Each of these firms has noticed a dramatic decline in claims and in the yearly rise of insurance premiums, while assuring their employees unrestricted choice of physician and treatment. At each of these companies, more than two-thirds of their employees opt for the medical savings accounts plan and are thrilled with them. Medical savings accounts have several additional benefits. Properly implemented, medical savings account-type plans would essentially do away with “preexisting conditions.” Because people would be empowered to own their own insurance, they could never lose their coverage and then have to endure a waiting period while preexisting conditions came under coverage. Medical savings accounts would accomplish the middle class tax break President Clinton so forcefully recommended during his 1992 campaign. Medical savings accounts would increase access to care and simultaneously empower the consumer to forcefully shop the market-and can you think of any more powerful tool to bring medical costs into line than 250 million shoppers? Finally, medical savings accounts would begin to provide for the baby boomers’ approaching retirement-an important consideration, because even the government admits that Medicare is likely to be insolvent within a decade. Michael Schlitt, M.D.
Bellevue, Washington SSDI 0090-3019(94)00119-B