Healthcare Reform: In Retrospect
By Roger A. Forsyth, MDOctober 13, 2009
Before deciding where to go, it is necessary to look back at where you have been in order to avoid traveling in circles. In the early 1950s, less than 10% of the US population had health insurance. This insurance covered the costs of hospitalization, but not regular office visits. The majority of care was delivered by primary physicians, and less than 5% of primary care visits resulted in a referral to a specialist. The cost of a visit to a specialist cost only 10-20% more than a visit to a generalist, and healthcare accounted for about only about 5% of the Gross National Product. Now, the cost of specialist care far exceeds the cost of generalist care, health insurance covers regular office visits (outpatient services), and healthcare accounts for 16-17% of the GNP.
Many of these changes are desirable and are the result of normal market factors. Medical advances have significantly increased the skill level and dollar value of
most specialists, their training is longer and more expensive, and their involvment in care improves survival for certain types of problems, such as cancer and heart disease, than generalist care alone. Hospital stays are shorter, and our quality of life has improved.
There are, however, two important differences between then and now that increase the cost of health care but only improve quality marginally—the use of expensive specialists in the ongoing treatment of minor specialty problems and the use of insurance to pay for outpatient expenditures. These intertwined trends evolved from the employer-based, comprehensive insurance programs whose original purpose was to provide low-income workers with guaranteed access to basic primary care. As new technologies became available and the salaries of specialists outpaced those of generalists, the availability of what seemed to patients as “free” outpatient access allowed the US public to wrongly conclude that it had a right to have expert consultations and expensive tests done for relatively minor illnesses at little or no personal cost. Because patients were no longer directly exposed to the price of these visitis, the role of price in allocating resources was destroyed.
Let's consider an example. In the 1950s, a private practice patient with a typical migraine was likely to be treated by their generalist. In the few instances when a referral to a specialist was made, the patient returned to their primary for follow-up care. Now, insured patients with headache see a generalist for the sole purpose of getting a referral to a neurologist, who may then order a MRI to limit medicolegal liability rather than for pure medical reasons. Afterwards there will be another visit to discuss results, then visits to monitor progress. This results in three or more visits to a specialist instead of one.
A significant portion of the differences in cost between the US and the European or Canadian single payer systems (SPS) is due to our high use of specialists. Canada has 19 physicians per 10,000 people, and a 50:50 specialty/primary ratio while the US ratios are 26/10,000 and 2/1, respectively. If a specialist cost 50% more, these differences alone could add 40% to the cost of physicians care (an extra 2.5% of Gross Domestic Product).
A SPS can lower cost by arbitrary limitation of the number of specialists and their salaries, but this invariably results in shortages. Insurers have tried to reduce referrals through a cumbersome authorization process, but this has added costs in the form of time-and-money consuming appeals and lawsuits. Employers have tried to reduce the use of specialist by requiring co-pays and deductibles but these have been insufficient.
The efficient allocation of resources is most likely to occur in a free market in which fluctuations in prices of goods or services function as a signal for demand. This will occur if individuals (instead of employers, governments, or insurers) pay for their own healthcare costs and are given incentives to conserve healthcare resources. On the other hand, healthcare is not just another commodity. The US must continue to make specialists and technology readily available and must improve the availability of healthcare for the underserved. The next article will detail an approach that addresses these potentially disparate goals.
Roger A. Forsyth, MD is a retired family practitioner who currently teaches at the University of Southern California. His most recent publication, Inexpensive health care reform: The mathematics of medicine, was electronically published ahead of print in the Journal Medical Hypotheses.
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