The problem with American health care is not the care. It’s the insurance.
Both parties have stumbled to enact comprehensive health care reform because they insist on patching up a rickety, malfunctioning model. The insurance company model drives up prices and fragments care. Rather than rejecting this jerry-built structure, the Democrats’ Obamacare legislation simply added a cracked support beam or two. The Republican bill will knock those out to focus on spackling other dilapidated parts of the system.
An alternative structure can be found in the early decades of the 20th century, when the medical marketplace offered a variety of models. Unions, businesses, consumer cooperatives and ethnic and African-American mutual aid societies had diverse ways of organizing and paying for medical care.
Physicians established a particularly elegant model: the prepaid doctor group. Unlike today’s physician practices, these groups usually staffed a variety of specialists, including general practitioners, surgeons and obstetricians. Patients received integrated care in one location, with group physicians from across specialties meeting regularly to review treatment options for their chronically ill or hard-to-treat patients.
Individuals and families paid a monthly fee, not to an insurance company but directly to the physician group. This system held down costs. Physicians typically earned a base salary plus a percentage of the group’s quarterly profits, so they lacked incentive to either ration care, which would lose them paying patients, or provide unnecessary care.
This contrasts with current examples of such financing arrangements. Where physicians earn a preset salary — for example, in Kaiser Permanente plans or in the British National Health Service — patients frequently complain about rationed or delayed care. When physicians are paid on a fee-for-service basis, for every service or procedure they provide — as they are under the insurance company model — then care is oversupplied. In these systems, costs escalate quickly.
Unfortunately, the leaders of the American Medical Association saw early health care models — union welfare funds, prepaid physician groups — as a threat. A.M.A. members sat on state licensing boards, so they could revoke the licenses of physicians who joined these “alternative” plans. A.M.A. officials likewise saw to it that recalcitrant physicians had their hospital admitting privileges rescinded.
The A.M.A. was also busy working to prevent government intervention in the medical field. Persistent federal efforts to reform health care began during the 1930s. After World War II, President Harry Truman proposed a universal health care system, and archival evidence suggests that policy makers hoped to build the program around prepaid physician groups.
A.M.A. officials decided that the best way to keep the government out of their industry was to design a private sector model: the insurance company model.
In this system, insurance companies would pay physicians using fee-for-service compensation. Insurers would pay for services even though they lacked the ability to control their supply. Moreover, the A.M.A. forbade insurers from supervising physician work and from financing multispecialty practices, which they feared might develop into medical corporations.
With the insurance company model, the A.M.A. could fight off Truman’s plan for universal care and, over the next decade, oppose more moderate reforms offered during the Eisenhower years.
Through each legislative battle, physicians and their new allies, insurers, argued that federal health care funding was unnecessary because they were expanding insurance coverage. Indeed, because of the perceived threat of reform, insurers weathered rapidly rising medical costs and unfavorable financial conditions to expand coverage from about a quarter of the population in 1945 to about 80 percent in 1965.
But private interests failed to cover a sufficient number of the elderly. Consequently, Congress stepped in to create Medicare in 1965. The private health care sector had far more capacity to manage a large, complex program than did the government, so Medicare was designed around the insurance company model. Insurers, moreover, were tasked with helping administer the program, acting as intermediaries between the government and service providers.
With Medicare, the demand for health services increased and medical costs became a national crisis. To constrain rising prices, insurers gradually introduced cost containment procedures and incrementally claimed supervisory authority over doctors. Soon they were reviewing their medical work, standardizing treatment blueprints tied to reimbursements and shaping the practice of medicine.
Both parties have stumbled to enact comprehensive health care reform because they insist on patching up a rickety, malfunctioning model. The insurance company model drives up prices and fragments care. Rather than rejecting this jerry-built structure, the Democrats’ Obamacare legislation simply added a cracked support beam or two. The Republican bill will knock those out to focus on spackling other dilapidated parts of the system.
An alternative structure can be found in the early decades of the 20th century, when the medical marketplace offered a variety of models. Unions, businesses, consumer cooperatives and ethnic and African-American mutual aid societies had diverse ways of organizing and paying for medical care.
Physicians established a particularly elegant model: the prepaid doctor group. Unlike today’s physician practices, these groups usually staffed a variety of specialists, including general practitioners, surgeons and obstetricians. Patients received integrated care in one location, with group physicians from across specialties meeting regularly to review treatment options for their chronically ill or hard-to-treat patients.Individuals and families paid a monthly fee, not to an insurance company but directly to the physician group. This system held down costs. Physicians typically earned a base salary plus a percentage of the group’s quarterly profits, so they lacked incentive to either ration care, which would lose them paying patients, or provide unnecessary care.
This contrasts with current examples of such financing arrangements. Where physicians earn a preset salary — for example, in Kaiser Permanente plans or in the British National Health Service — patients frequently complain about rationed or delayed care. When physicians are paid on a fee-for-service basis, for every service or procedure they provide — as they are under the insurance company model — then care is oversupplied. In these systems, costs escalate quickly.
Unfortunately, the leaders of the American Medical Association saw early health care models — union welfare funds, prepaid physician groups — as a threat. A.M.A. members sat on state licensing boards, so they could revoke the licenses of physicians who joined these “alternative” plans. A.M.A. officials likewise saw to it that recalcitrant physicians had their hospital admitting privileges rescinded.
The A.M.A. was also busy working to prevent government intervention in the medical field. Persistent federal efforts to reform health care began during the 1930s. After World War II, President Harry Truman proposed a universal health care system, and archival evidence suggests that policy makers hoped to build the program around prepaid physician groups.
A.M.A. officials decided that the best way to keep the government out of their industry was to design a private sector model: the insurance company model.
In this system, insurance companies would pay physicians using fee-for-service compensation. Insurers would pay for services even though they lacked the ability to control their supply. Moreover, the A.M.A. forbade insurers from supervising physician work and from financing multispecialty practices, which they feared might develop into medical corporations.
With the insurance company model, the A.M.A. could fight off Truman’s plan for universal care and, over the next decade, oppose more moderate reforms offered during the Eisenhower years.
Through each legislative battle, physicians and their new allies, insurers, argued that federal health care funding was unnecessary because they were expanding insurance coverage. Indeed, because of the perceived threat of reform, insurers weathered rapidly rising medical costs and unfavorable financial conditions to expand coverage from about a quarter of the population in 1945 to about 80 percent in 1965.
But private interests failed to cover a sufficient number of the elderly. Consequently, Congress stepped in to create Medicare in 1965. The private health care sector had far more capacity to manage a large, complex program than did the government, so Medicare was designed around the insurance company model. Insurers, moreover, were tasked with helping administer the program, acting as intermediaries between the government and service providers.
With Medicare, the demand for health services increased and medical costs became a national crisis. To constrain rising prices, insurers gradually introduced cost containment procedures and incrementally claimed supervisory authority over doctors. Soon they were reviewing their medical work, standardizing treatment blueprints tied to reimbursements and shaping the practice of medicine.
by Christy Ford Chapin, NY Times | Read more:
Image: Tim Lahan
