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Third-Party Payment of Medical Benefits
Third-Party Payment of Medical Benefits GEOFFREY V. HELLER:'
The late 60's have witnessed a marked increase in public interest in the comprehensiveness of medical care available through health benefit plans and in its quality, its method of delivery, and especially its cost. The reasons are obvious. For one thing, the vast new governmentsupported medical care programs of 1966, Medicare and Medicaid, are generally of so broad a scope as to be equalled only by the most progressive private programs. Their very comprehensiveness has not only exposed these programs to all the factors at play in the arena of medical economics but has, in fact, led to a stepped-up demand for medical services - some scarce and a few even unavailable in some areas of the country-triggering, in turn, pressures on the price structure of medical care. Quite apart from the impact of the public programs, a more sophisticated consumer has learned that, since the individual components of medical care are interdependent, it makes good sense to facilitate diagnostic and preventive medical services through prepaid programs, rather than to seek protection only from a potential financial catastrophe which can befall the victim of a prolonged hospital episode. In other words, the consumer has learned to think of the ideal health benefit program as one spanning the full spectrum of health maintenance. And once committed to this goal of comprehensiveness, he now finds that he has a very critical stake in the way in which the health benefit plans conserve his medical care dollar through good design and competent administration. Quite apart from his own programs, he now has, as a taxpayer, a painfully direct stake in the way in which the medical care benefits of the tax-supported public programs are administered, since they are ultimately borne by him, either through his federal and state income taxes or his contribution to the Social Security system. What is more, the administrative practices and cost patterns of the private and public sectors are now intertwined so closely that one directly affects the other. The physicians' billing practices, the patterns ':'Vice President, California Blue Shield, San Francisco, California
Pediatric Clinics of North America- Vol. 16, No.4, November, 1969
901
902
GEOFFREY
V.
HELLER
of public demand, and the techniques of control relating to anyone major program invariably have a direct impact on the entire medical care system. This is why private health and welfare plans view the practices and trends of public programs so anxiously. During the fiscal year 1967-1968, $53 billion were spent on health and medical care in the United States, or 6.5 per cent of the nation's gross national product. While many believe that an affluent nation with so much available for discretionary spending could well afford to set aside a larger portion of its productive capacity for health, it is nevertheless significant that the allocation has nearly doubled since 1928-1929, when 3.6 per cent went for health expenditures. With $19.4 billion (or 37 per cent) of the aggregate 1967-1968 health spending allocated to public expenditures, medical care, its quality, comprehensiveness, accessibility and cost, its points of weakness, and its occasional abuses all attract the legislative limelight. To the individual, however, medical care in a personal sense is often the source of keen anxiety, and the physician the object of a mixture of an unattainable faith in his infallibility ... and resentment for his aura of omniscience. Thus it is not surprising that medical care, though it costs the consumer only about one-half what he spends on transportation and just about what he spends on recreation, should be the focal point of national concern and the cause for uneasiness that the mechanisms through which care is delivered and financed are somehow falling short of perfection. Part of this feeling concerns shortcomings in the comprehensiveness of health benefits, generally with regard to physicians' services outside the hospital, especially to an employee's dependents. The record is by no means so bleak as to justify excesses of selfcriticism. The enrollment of persons of all ages for hospital benefits by private organizations stood at 175 million in 1967, as compared to 79 million in 1950 and 12 million in 1940. In terms of percentage of the total U.S. population, this is equivalent to 83 per cent in 1967, 51 per cent in 1950, and 9 per cent in 1940. Comparable figures for in··hospital medical (other than surgical) coverage are 131 million (62 per cent) in 1967,21 million (14 per cent) in 1950, and 2 million (2 per cent) in 1940. If we eliminate the 65+ age group due to their enrollment in Medicare, we find the following statistics for the end of 1967: Percent of civilian population under age 65 covered for: Hospital care Surgical services In-hospital visits Office and home visits Prescription drugs (out of hospital) Nursing home care Dental care
87% 80% 66% 43 % 39% 9% 3%
Impressive as the record of growth is, there remain quite obvious critical gaps, usually where we can least afford them-in the coverage of the "marginal" risk groups, in preventive care, and in comprehensive
THIRD-PARTY PAYMENT OF MEDICAL BENEFITS
903
out of hospital benefits for children. Many plans, notably Blue Shield, have sought to close this gap by eliminating exclusion for the newborn, by avoiding prohibitive deductibles, and by experimenting with preventive care. There can be no question that it is the prevailing trend to broaden coverage for outpatient medical services. It is, after all, the accepted viewpoint that the availability of outpatient benefits tends to reduce unnecessary hospital utilization that occurs when people are covered solely for care that takes place in the hospital, with the result that many a compassionate doctor sends them there needlessly. The second point raised by advocates of outpatient coverage is that it encourages preventive care and, in turn, reduces aggravated medical episodes requiring hospitalization. This is doubtless so. But the availability of outpatient benefits also leads to a greater awareness of health problems and to the detection of illnesses that otherwise would go undiagnosed. This, then, may actually lead to an increased use of medical services, even an increased use of hospital services, so that the end result of "comprehensiveness" may often not be a reduction in the cost of health insurance, but rather an improvement in the health of the covered population, and in what we might term "the return for the consumer's investment in his health." Outpatient medical benefits, which are often elective, diagnostic, and preventive in nature tend to be especially vulnerable to abuse, that is, to capricious and excessive demand by the patient and to occasional overuse by the physician. Some have found that, from the carrier's point of view (concerned with the fiscal solvency of programs) and from the physician's vantage point (anxious to protect his practice from extravagant patient demands of a few), outpatient coverage without some type of patient participation in its cost, such as through a copayment, is impractical. The federal Medicare program took this into account in the design of its program, which requires the patient to defray 20 per cent of cost after an initial deductible. Most state welfare programs do not, and very often cannot, do this because the welfare recipient, by the very nature of his indigency, has no funds for discretionary spending. Be that as it may, there can be no question that the provision of prepayment benefits for outpatient services puts heavy stress on the carrier's capability to apply judicious controls. What is needed, in a sense, is the creation of "artificial" checks and balances that simulate the economic restraints that regulate supply and demand in the private market place of goods and services. A carrier, backed by the self-discipline of the health professions, has to devise restraints that stimulate a comparable concern for careful use of services as though the patient had to conserve his private funds and the physician had to be concerned for the finances of his own patient. And this needs to be done without erecting barriers which discourage care when it is needed. Many devices are employed to retard the use of outpatient benefits, in fact, all benefits, and to exercise thereby control over the cost of medical insurance. We find ceilings on the number of visits and on the
904
GEOFFREY
V.
HELLER
aggregate dollar amount, deductibles that must be paid out of pocket before benefits commence, coinsurance features, limits within limits, and many other ingenious limitations. Some make sense, are adapted to the needs and preference of the covered population, and avoid the administratively costly small claim; others make no sense at all, but merely shift the burden back to the individual consumer, inhibit care, and dilute the effectiveness of risk sharing. Prepayment, as the name implies, is a fiscal device whereby the consumer of medical care pays before the event occurs through budgetable monthly contributions. It is also the means whereby people band together and "spread the risk," thus averaging costs not only over an individual's lifetime but over the sick and the well. Over the past decades, this has taken a number of forms, all essentially based on this principle of risk pooling, whether it be sharing by the total community through "community rating," by a population segment of similar characteristics, such as retirees, by groups, or by individually enrolled individuals. Gradually, as far as the working population is concerned, the cost has been shifted to the employers of the insured individuals. And more recently, we have seen a shift of much of the burden of the elderly and the poor to society as a whole through the device of social insurance whereunder the benefit is not directly proportional to the individual's contribution but is redistributed in accordance with certain social concepts. Whatever the device, it is a pooling and averaging of costs. But the abilities on the part of the individual to budget medical care in advance, and to band together with others to cushion the shock of financial catastrophe, are not the only factors that provided the impetus for medical insurance. A number of circumstances add to the attractiveness of medical coverage as a fringe benefit. First is that of favorable tax treatment. Medical group coverage is generally not taxed as income, and this is a significant break to the wageearner. While his private medical bills must be met out of net earnings depleted by federal and state income taxes, the part of his renumeration that comes to him in the form of medical insurance benefits is exempt from the tax bite. Every dollar contributed by his employer for medical coverage accrues to him without dilution. At a time when creeping inflation moves people into progressively higher income tax brackets without a commensurate increase in purchasing power, the tax shelter for medical benefits is a significant factor in determining what benefits employers and unions either provide or bargain for. Second, we have in prepayment programs certain gratis components which the patient would not have at his disposal were he to pay for his care out of pocket. For instance, under the Blue Shield plans, there are charge limitations which physicians voluntarily impose upon themselves as a condition of Blue Shield participation, which means that care is either provided at an established fee or, more recently, at a charge adjudicated under tightly controlled criteria which define the limits of "reasonableness. " Third, we see the consumer benefit from techniques of surveillance over utilization and quality patterns developed out of sheer necessity by the prepayment organizations.
THIRD-PARTY PAYMENT OF MEDICAL BENEFITS
905
Fourth, the individual alone would not exercise the leverage that members of prepayment organizations wield solely as participants of major organized programs. In the context of comprehensive benefits, these four factors are thought to compensate amply for the view that insurance for totally predictable occurrences, such as annual check-ups, is wasteful since it spends some of the insured's money on unproductive administrative and promotional expenses, making it really preferable for the individual to set aside his own funds for such predictable costs. There has been an evolution in the concept of paying for medical services during recent times. The consumer has become accustomed to paying in advance; that is, he is spreading his own cost over a period of good health, pools his experience with others, and makes his regular deposits to a health benefit plan, very much in the same way as the annual retainer paid to a physician in ancient times. In fact, an insurance premium is not too different from the capitation charge of organized medical groups engaged in prepayment. True, the conventional health benefit plan, be it an insurance company or a service plan, distributes the pool of contributed moneys to the individual providers in direct proportion to the services rendered by each, a concept generally referred to as "fee for service." But, for the consumer, the prepayment principle is quite similar: For the period that pre-established premiums are in force, the uncertainty of fluctuations in the rate of use, and in the cost per unit of service rendered, are transferred wholly or partly from the consumer of medical care to the health benefit plan. Equally significant in recent times has been a move away from what is sometimes referred to as the "Robin Hood concept" - the graduated scale of charges by an individual physician geared to the financial circumstances of his patients, often resulting in gratis care for the poor and a stiff fee for the affluent patient. In a way, this was a highly personal redistribution of wealth, somewhat reminiscent of the social insurance concept of Social Security, which also gives the lowest contributors (with the lowest earnings) a break at the expense of the high wage earner (making the heaviest contributions). In its stead we now see a spreading preference for making a uniform charge to all patients. One of the reasons may well be that the poor and the aged are the responsibility of tax-supported programs that remove the need for personal charity in the provision of medical care. This has been matched by a parallel move by the physician-sponsored service organizations, Blue Shield, away from the multiple incomerelated schedules whereunder physicians committed themselves to accept a set fee schedule as payment in full for patients fitting a certain income category. Instead they reflect now to an increasing extent the medical usage of the day by paying a charge which is usual for the individual physician, generally prevailing in the community, or deemed fair and reasonable in the judgment of the physician's peers. To make this work presupposes a number of things. For one thing, it is predicated on the assumption that the majority of a physician's patients, or at least the patients in a given community, are private patients, that is, that they pay for their own care, either out of pocket or
906
GEOFFREY
V.
HELLER
through their insurance premiums, and therefore have a direct stake in the charges made by the physician. It is fortunate that doctors don't see their services as a commodity that can be "cornered" with impunity. It is also fortunate that there is an abundance of public spiritedness and realism in the professional community that puts an effective restraint on the laissez faire theory of orthodox economics and generally prevents the individual practitioner from raising his prices until they balance the demand for medical services. If this were not so, the tragic consequences to the disadvantaged, who cannot meet the cost of a service that is in relatively short supply, would be obvious, and a public outcry for legislative remedies would follow inevitably. This mixture of professional ethics and political realism has given us some remarkably effective mechanisms of professional self-restraint and self-policing so that we now have an elaborate and generally wellfunctioning system of active intraprofessional discipline and surveillance. This is important because the increasing popularity of paying for medical care on the basis of usual and customary criteria calls for a system which depends heavily on the honor system and peer judgment, concepts, in fact, which are almost utopian and which, to some cynics, may appear naive in their faith in the more enlightened motives of men. The controls perfected in the wake of the large publicly supported programs of the late 60's have thus worked out remarkably well. This being so, they have given stability to a concept which, while potentially vulnerable, provides some persuasive advantages through its adaptability to local conditions and practic~s. As to the future of health benefit programs that are committed to the full spectrum of necessary services and to adaptation to modern and progressive methods of care and medical organization, we can perhaps say this: The future scope of medical care programs will depend on the priorities the community assigns to medical care. Traditionally the employer has considered himself primarily responsible for the wellbeing of his employee, and coverage for dependents has come often as a reluctant afterthought. Broadening of coverage to include family dependents and the full range of preventive and diagnostic services will come when the consumer puts first things first and insists on comprehensive and intelligently conceived programs. Prepayment for highly predictable benefits, such as annual checkups, maternity, and well-baby care, are not, we have seen, insurance in the orthodox sense. They do, however, seem to have a very real place in a health benefits program for a number of persuasive reasons discussed earlier. Thus the argument that medical benefit plans should include only services that constitute a catastrophic financial hazard or are unpredictable in their occurrence lacks validity. Provision of health benefits through organized plans tends to diminish restraints because, to many, in very subtle ways, an impersonal
THIRD-PARTY PAYMENT OF MEDICAL BENEFITS
907
third party can be taken advantage of with some impunity. That the cost of such habits is passed right back to the consumer is generally forgotten. Thus the voluntary way will only work effectively if it continues to foster a sense of mutual responsibility on the part of the provider, the patient, and the health plan and if it continues to be disCiplined, not through rigid regulation (which is so easily circumvented), but through a strong pragmatic commitment. Finally, the whole system of financing comprehensive health services through voluntary mechanisms will stand or fall on its ability to devise programs that stimulate optimum efficiency in the medical care system and do not corrupt medical care patterns because of poor program design. In short, we will need programs that provide sensible alternatives to high-cost institutional care, use supportive paramedical personnel wisely, and are the result of an intelligent community-wide planning of health resources. 720 California Street San Francisco, California 94108
The late 60's have witnessed a marked increase in public interest in the comprehensiveness of medical care available through health benefit plans and in its quality, its method of delivery, and especially its cost. The reasons are obvious. For one thing, the vast new governmentsupported medical care programs of 1966, Medicare and Medicaid, are generally of so broad a scope as to be equalled only by the most progressive private programs. Their very comprehensiveness has not only exposed these programs to all the factors at play in the arena of medical economics but has, in fact, led to a stepped-up demand for medical services - some scarce and a few even unavailable in some areas of the country-triggering, in turn, pressures on the price structure of medical care. Quite apart from the impact of the public programs, a more sophisticated consumer has learned that, since the individual components of medical care are interdependent, it makes good sense to facilitate diagnostic and preventive medical services through prepaid programs, rather than to seek protection only from a potential financial catastrophe which can befall the victim of a prolonged hospital episode. In other words, the consumer has learned to think of the ideal health benefit program as one spanning the full spectrum of health maintenance. And once committed to this goal of comprehensiveness, he now finds that he has a very critical stake in the way in which the health benefit plans conserve his medical care dollar through good design and competent administration. Quite apart from his own programs, he now has, as a taxpayer, a painfully direct stake in the way in which the medical care benefits of the tax-supported public programs are administered, since they are ultimately borne by him, either through his federal and state income taxes or his contribution to the Social Security system. What is more, the administrative practices and cost patterns of the private and public sectors are now intertwined so closely that one directly affects the other. The physicians' billing practices, the patterns ':'Vice President, California Blue Shield, San Francisco, California
Pediatric Clinics of North America- Vol. 16, No.4, November, 1969
901
902
GEOFFREY
V.
HELLER
of public demand, and the techniques of control relating to anyone major program invariably have a direct impact on the entire medical care system. This is why private health and welfare plans view the practices and trends of public programs so anxiously. During the fiscal year 1967-1968, $53 billion were spent on health and medical care in the United States, or 6.5 per cent of the nation's gross national product. While many believe that an affluent nation with so much available for discretionary spending could well afford to set aside a larger portion of its productive capacity for health, it is nevertheless significant that the allocation has nearly doubled since 1928-1929, when 3.6 per cent went for health expenditures. With $19.4 billion (or 37 per cent) of the aggregate 1967-1968 health spending allocated to public expenditures, medical care, its quality, comprehensiveness, accessibility and cost, its points of weakness, and its occasional abuses all attract the legislative limelight. To the individual, however, medical care in a personal sense is often the source of keen anxiety, and the physician the object of a mixture of an unattainable faith in his infallibility ... and resentment for his aura of omniscience. Thus it is not surprising that medical care, though it costs the consumer only about one-half what he spends on transportation and just about what he spends on recreation, should be the focal point of national concern and the cause for uneasiness that the mechanisms through which care is delivered and financed are somehow falling short of perfection. Part of this feeling concerns shortcomings in the comprehensiveness of health benefits, generally with regard to physicians' services outside the hospital, especially to an employee's dependents. The record is by no means so bleak as to justify excesses of selfcriticism. The enrollment of persons of all ages for hospital benefits by private organizations stood at 175 million in 1967, as compared to 79 million in 1950 and 12 million in 1940. In terms of percentage of the total U.S. population, this is equivalent to 83 per cent in 1967, 51 per cent in 1950, and 9 per cent in 1940. Comparable figures for in··hospital medical (other than surgical) coverage are 131 million (62 per cent) in 1967,21 million (14 per cent) in 1950, and 2 million (2 per cent) in 1940. If we eliminate the 65+ age group due to their enrollment in Medicare, we find the following statistics for the end of 1967: Percent of civilian population under age 65 covered for: Hospital care Surgical services In-hospital visits Office and home visits Prescription drugs (out of hospital) Nursing home care Dental care
87% 80% 66% 43 % 39% 9% 3%
Impressive as the record of growth is, there remain quite obvious critical gaps, usually where we can least afford them-in the coverage of the "marginal" risk groups, in preventive care, and in comprehensive
THIRD-PARTY PAYMENT OF MEDICAL BENEFITS
903
out of hospital benefits for children. Many plans, notably Blue Shield, have sought to close this gap by eliminating exclusion for the newborn, by avoiding prohibitive deductibles, and by experimenting with preventive care. There can be no question that it is the prevailing trend to broaden coverage for outpatient medical services. It is, after all, the accepted viewpoint that the availability of outpatient benefits tends to reduce unnecessary hospital utilization that occurs when people are covered solely for care that takes place in the hospital, with the result that many a compassionate doctor sends them there needlessly. The second point raised by advocates of outpatient coverage is that it encourages preventive care and, in turn, reduces aggravated medical episodes requiring hospitalization. This is doubtless so. But the availability of outpatient benefits also leads to a greater awareness of health problems and to the detection of illnesses that otherwise would go undiagnosed. This, then, may actually lead to an increased use of medical services, even an increased use of hospital services, so that the end result of "comprehensiveness" may often not be a reduction in the cost of health insurance, but rather an improvement in the health of the covered population, and in what we might term "the return for the consumer's investment in his health." Outpatient medical benefits, which are often elective, diagnostic, and preventive in nature tend to be especially vulnerable to abuse, that is, to capricious and excessive demand by the patient and to occasional overuse by the physician. Some have found that, from the carrier's point of view (concerned with the fiscal solvency of programs) and from the physician's vantage point (anxious to protect his practice from extravagant patient demands of a few), outpatient coverage without some type of patient participation in its cost, such as through a copayment, is impractical. The federal Medicare program took this into account in the design of its program, which requires the patient to defray 20 per cent of cost after an initial deductible. Most state welfare programs do not, and very often cannot, do this because the welfare recipient, by the very nature of his indigency, has no funds for discretionary spending. Be that as it may, there can be no question that the provision of prepayment benefits for outpatient services puts heavy stress on the carrier's capability to apply judicious controls. What is needed, in a sense, is the creation of "artificial" checks and balances that simulate the economic restraints that regulate supply and demand in the private market place of goods and services. A carrier, backed by the self-discipline of the health professions, has to devise restraints that stimulate a comparable concern for careful use of services as though the patient had to conserve his private funds and the physician had to be concerned for the finances of his own patient. And this needs to be done without erecting barriers which discourage care when it is needed. Many devices are employed to retard the use of outpatient benefits, in fact, all benefits, and to exercise thereby control over the cost of medical insurance. We find ceilings on the number of visits and on the
904
GEOFFREY
V.
HELLER
aggregate dollar amount, deductibles that must be paid out of pocket before benefits commence, coinsurance features, limits within limits, and many other ingenious limitations. Some make sense, are adapted to the needs and preference of the covered population, and avoid the administratively costly small claim; others make no sense at all, but merely shift the burden back to the individual consumer, inhibit care, and dilute the effectiveness of risk sharing. Prepayment, as the name implies, is a fiscal device whereby the consumer of medical care pays before the event occurs through budgetable monthly contributions. It is also the means whereby people band together and "spread the risk," thus averaging costs not only over an individual's lifetime but over the sick and the well. Over the past decades, this has taken a number of forms, all essentially based on this principle of risk pooling, whether it be sharing by the total community through "community rating," by a population segment of similar characteristics, such as retirees, by groups, or by individually enrolled individuals. Gradually, as far as the working population is concerned, the cost has been shifted to the employers of the insured individuals. And more recently, we have seen a shift of much of the burden of the elderly and the poor to society as a whole through the device of social insurance whereunder the benefit is not directly proportional to the individual's contribution but is redistributed in accordance with certain social concepts. Whatever the device, it is a pooling and averaging of costs. But the abilities on the part of the individual to budget medical care in advance, and to band together with others to cushion the shock of financial catastrophe, are not the only factors that provided the impetus for medical insurance. A number of circumstances add to the attractiveness of medical coverage as a fringe benefit. First is that of favorable tax treatment. Medical group coverage is generally not taxed as income, and this is a significant break to the wageearner. While his private medical bills must be met out of net earnings depleted by federal and state income taxes, the part of his renumeration that comes to him in the form of medical insurance benefits is exempt from the tax bite. Every dollar contributed by his employer for medical coverage accrues to him without dilution. At a time when creeping inflation moves people into progressively higher income tax brackets without a commensurate increase in purchasing power, the tax shelter for medical benefits is a significant factor in determining what benefits employers and unions either provide or bargain for. Second, we have in prepayment programs certain gratis components which the patient would not have at his disposal were he to pay for his care out of pocket. For instance, under the Blue Shield plans, there are charge limitations which physicians voluntarily impose upon themselves as a condition of Blue Shield participation, which means that care is either provided at an established fee or, more recently, at a charge adjudicated under tightly controlled criteria which define the limits of "reasonableness. " Third, we see the consumer benefit from techniques of surveillance over utilization and quality patterns developed out of sheer necessity by the prepayment organizations.
THIRD-PARTY PAYMENT OF MEDICAL BENEFITS
905
Fourth, the individual alone would not exercise the leverage that members of prepayment organizations wield solely as participants of major organized programs. In the context of comprehensive benefits, these four factors are thought to compensate amply for the view that insurance for totally predictable occurrences, such as annual check-ups, is wasteful since it spends some of the insured's money on unproductive administrative and promotional expenses, making it really preferable for the individual to set aside his own funds for such predictable costs. There has been an evolution in the concept of paying for medical services during recent times. The consumer has become accustomed to paying in advance; that is, he is spreading his own cost over a period of good health, pools his experience with others, and makes his regular deposits to a health benefit plan, very much in the same way as the annual retainer paid to a physician in ancient times. In fact, an insurance premium is not too different from the capitation charge of organized medical groups engaged in prepayment. True, the conventional health benefit plan, be it an insurance company or a service plan, distributes the pool of contributed moneys to the individual providers in direct proportion to the services rendered by each, a concept generally referred to as "fee for service." But, for the consumer, the prepayment principle is quite similar: For the period that pre-established premiums are in force, the uncertainty of fluctuations in the rate of use, and in the cost per unit of service rendered, are transferred wholly or partly from the consumer of medical care to the health benefit plan. Equally significant in recent times has been a move away from what is sometimes referred to as the "Robin Hood concept" - the graduated scale of charges by an individual physician geared to the financial circumstances of his patients, often resulting in gratis care for the poor and a stiff fee for the affluent patient. In a way, this was a highly personal redistribution of wealth, somewhat reminiscent of the social insurance concept of Social Security, which also gives the lowest contributors (with the lowest earnings) a break at the expense of the high wage earner (making the heaviest contributions). In its stead we now see a spreading preference for making a uniform charge to all patients. One of the reasons may well be that the poor and the aged are the responsibility of tax-supported programs that remove the need for personal charity in the provision of medical care. This has been matched by a parallel move by the physician-sponsored service organizations, Blue Shield, away from the multiple incomerelated schedules whereunder physicians committed themselves to accept a set fee schedule as payment in full for patients fitting a certain income category. Instead they reflect now to an increasing extent the medical usage of the day by paying a charge which is usual for the individual physician, generally prevailing in the community, or deemed fair and reasonable in the judgment of the physician's peers. To make this work presupposes a number of things. For one thing, it is predicated on the assumption that the majority of a physician's patients, or at least the patients in a given community, are private patients, that is, that they pay for their own care, either out of pocket or
906
GEOFFREY
V.
HELLER
through their insurance premiums, and therefore have a direct stake in the charges made by the physician. It is fortunate that doctors don't see their services as a commodity that can be "cornered" with impunity. It is also fortunate that there is an abundance of public spiritedness and realism in the professional community that puts an effective restraint on the laissez faire theory of orthodox economics and generally prevents the individual practitioner from raising his prices until they balance the demand for medical services. If this were not so, the tragic consequences to the disadvantaged, who cannot meet the cost of a service that is in relatively short supply, would be obvious, and a public outcry for legislative remedies would follow inevitably. This mixture of professional ethics and political realism has given us some remarkably effective mechanisms of professional self-restraint and self-policing so that we now have an elaborate and generally wellfunctioning system of active intraprofessional discipline and surveillance. This is important because the increasing popularity of paying for medical care on the basis of usual and customary criteria calls for a system which depends heavily on the honor system and peer judgment, concepts, in fact, which are almost utopian and which, to some cynics, may appear naive in their faith in the more enlightened motives of men. The controls perfected in the wake of the large publicly supported programs of the late 60's have thus worked out remarkably well. This being so, they have given stability to a concept which, while potentially vulnerable, provides some persuasive advantages through its adaptability to local conditions and practic~s. As to the future of health benefit programs that are committed to the full spectrum of necessary services and to adaptation to modern and progressive methods of care and medical organization, we can perhaps say this: The future scope of medical care programs will depend on the priorities the community assigns to medical care. Traditionally the employer has considered himself primarily responsible for the wellbeing of his employee, and coverage for dependents has come often as a reluctant afterthought. Broadening of coverage to include family dependents and the full range of preventive and diagnostic services will come when the consumer puts first things first and insists on comprehensive and intelligently conceived programs. Prepayment for highly predictable benefits, such as annual checkups, maternity, and well-baby care, are not, we have seen, insurance in the orthodox sense. They do, however, seem to have a very real place in a health benefits program for a number of persuasive reasons discussed earlier. Thus the argument that medical benefit plans should include only services that constitute a catastrophic financial hazard or are unpredictable in their occurrence lacks validity. Provision of health benefits through organized plans tends to diminish restraints because, to many, in very subtle ways, an impersonal
THIRD-PARTY PAYMENT OF MEDICAL BENEFITS
907
third party can be taken advantage of with some impunity. That the cost of such habits is passed right back to the consumer is generally forgotten. Thus the voluntary way will only work effectively if it continues to foster a sense of mutual responsibility on the part of the provider, the patient, and the health plan and if it continues to be disCiplined, not through rigid regulation (which is so easily circumvented), but through a strong pragmatic commitment. Finally, the whole system of financing comprehensive health services through voluntary mechanisms will stand or fall on its ability to devise programs that stimulate optimum efficiency in the medical care system and do not corrupt medical care patterns because of poor program design. In short, we will need programs that provide sensible alternatives to high-cost institutional care, use supportive paramedical personnel wisely, and are the result of an intelligent community-wide planning of health resources. 720 California Street San Francisco, California 94108