HEALTH CARE IS A GIFT, NOT A COMMODITY
By Joseph Jarvis, MD MSPH
The Prophet Ezekiel lived 2,600 years ago in the heart of what is now Iraq, in the most powerful city of what was then the known world. He was a Hebrew slave laboring on the fabled Hanging Gardens of Babylon, captured during a Babylonian raid 10 years before the final fall of Jerusalem and destruction of the Temple of Solomon. In a post-mortem review of the causes of downfall of the Kingdom of Judah, Ezekiel said: “Woe to the shepherds of Israel who only take care of themselves! Should not the shepherds have strengthened the flock?. . .You have not strengthened the weak or healed the sick or bound up the injured (Ezekiel 34:2-4).” Six centuries later and only a few years before Jerusalem would again be destroyed, this time by Roman legions, another Jewish prophet spoke of the need to care for the sick. In the last parable found in the Gospel of Matthew, Christ made the point that righteous people seek out the needy to assist them, including care for the ill. “I was sick, and ye visited me,” he said, and he meant all sick people, even “the least of these (Matthew 25:36).”
These words have inspired generations of Christian doctors and nurses and induced the donations which have led to the construction of many hospitals, including most of the hospitals in Utah. King Benjamin , an American Christian monarch living more than a century before Christ, made the same point: “For the sake of retaining a remission of your sins from day to day. . .I would that ye should. . .(visit) the sick and (administer) to their relief (Mosiah 4:26).” King Benjamin also made it clear that the care of the sick must be done wisely, which I take to mean efficiently, or in a sustainable fashion. The care of the sick must be a priority for all who would follow Christ.
Americans have generally tried to live up to that Christian principle. We have built thousands of hospitals with charitable donations and taxes. Medical and nursing education has been publicly subsidized, as is most meaningful medical research. When private sector funding for indigent and elderly medical care failed, we shouldered the dual burdens of Medicaid and Medicare. And then there are the countless other programs for the care of the sick: the Indian Health Service, the VA medical centers, the Child Health Insurance Program, Ryan White funds, family planning grants, the Women, Infants, and Children program, Children with Special Health Needs, Newborn Screening, and many others. And polling data over many years reflects our intent that every American should be able to receive the gift of health care. The Harris organization and the Washington Post/ABC news both found that 4 in 5 Americans support publicly funded health care for all. The goodwill and generosity of the American people speak volumes about our intent. We have believed the ancient Jewish prophets: Health care is a gift we want to give to ourselves.
But we have allowed ourselves to fail to deliver this gift. While we generously spend twice as much per-capita as any other country for health care, and we tax ourselves more than any other citizenry for health care, ours are the only citizens in the industrialized world at risk of having no or little health care financing when it is needed. More than eighty million Americans are now either uninsured or underinsured, leading to at least 18,000 premature deaths each year. The United States is ranked only 37th by the World Health Organization, in part because we have lower life expectancy and higher years of potential life lost than most other developed countries. The American infant mortality rate should be a national scandal. How is it that we pay more than any other country but receive so little return on our investment? Why has an epidemic of at least 18,000 deaths per year received so little notice?
The reason our health care dollars are so unfruitful may be that these dollars have been transformed from a charitable investment in the care of the sick and injured to an investment for personal gain. Health insurance, which began as a non-profit, community-rated mechanism for spreading the risk of hospital care, has become a highly profitable investment. Hospitals built with Hill-Burton funds and charitable donations have been bought by for-profit corporations and turned into cash cows. Pharmaceutical companies are the most profitable, and least taxed among Fortune 500 entities. American health care institutions are not delivering promised health benefits, but they are the most profitable health enterprises in the world.
Americans are apparently no longer as persuaded by the wisdom of the ancient Jewish prophets as they are enthusiastic about the power for personal gain in the so-called health care marketplace. Our zeal for creating markets has led us to see health care as a commodity and ignore our time honored tradition of giving the gift of healing to ourselves. Tony Snow, a conservative, syndicated columnist now frequently seen on the Fox News Network, said this in 1993: “In the real world, people stampede when somebody slaps up a sign that reads ‘free.’ This is the theory behind bargain basements, but it also applies to hip replacements and appendectomies.” According to Mr. Snow, Americans would be foolish to organize health care as a charitable endeavor, because Mr. Snow asserts that health care is a commodity, not a gift. According to market principles, demand for commodities increases to infinite as price declines towards zero. Conversely, demand for a commodity falls when the price rises. Mr. Snow believes that if you charge nothing for a hip replacement, Americans will stampede to get them. But if you charge a lot of money for the procedure, few people will seek new hips.
The further implication of Mr. Snow’s assertion is that the problem of high cost in health care has been artificially created by not charging enough to the patient for the services received. According to this theory of high health care costs, Americans have been protected from paying the costs of medical services by insurance that is too generous, and have therefore demanded too many surgeries. In short, he believes the ancient Jewish prophets are wrong; health care is not a charitable endeavor which we give to ourselves, it is a commodity best distributed through competing, investor-owned corporations which strive to make a profit.
The debate about health care between Mr. Snow and the ancient Jewish prophets has recently been mostly one sided. It has become fashionable for American politicians to dismiss serious health care policy debate by assuring the citizenry that the market will efficiently distribute health care services to all (or at least to all those who deserve them).
No one, it seems, stops to consider whether health care really does act like a commodity, or whether the prerequisites for a free market are in fact true of the health care sector. A market does not exist without competition between many suppliers who are freely able to bring their commodities to the attention of many buyers, who have both the time to shop and the information needed to make decisions in their own self-interest. Buyers and sellers are not coerced in a market, they can choose to produce, spend, withdraw, or save as they will. And what they barter for in the marketplace has no external consequence or value to anyone else.
One observation which should disturb Tony Snow is that high costs in American health care are apparently not caused by high utilization of physician and hospital services. Americans have fewer per capita physician visits and hospital bed days than do the citizens of most other industrialized countries, despite Mr. Snow’s assertion that our first dollar health insurance coverage has made health services artificially cheap in the US, thus allegedly increasing our demand. Nor is there any evidence that Americans will enthusiastically seek a hip replacement just because it is a covered benefit in a health insurance policy. People seek health care, even when it is offered with little out of pocket expense, only when they are persuaded by a physician that they need it, not because it is priced low. On the other hand, when they are persuaded by a physician that they need health care, Americans will pay any price to get it, even if they can not afford the price. Half of personal bankruptcies in the United States are caused by the cost of illness and injury care.
In truth, health care does not fit the definition of a commodity which can be traded efficiently in a free market. On the supply side, sellers of health services, like hospitals and doctors, are highly regulated by society giving health care providers extra market power that compromises competition. On the demand side, people purchasing health care are not customers, or consumers, they are patients; they lack the special knowledge needed to shop for health care the way one shops for a car, they are too sick to explore various options in a market, and they are not free to choose an alternative use of their resources. Society, by insisting that all should have some access to health care, has partially severed the link between demand and private purchasing power which is a prerequisite for a free market. Health care often benefits society beyond the price attached to it. For instance, it matters to society as a whole whether each person with tuberculosis receives appropriate treatment. If person doesn’t receive treatment, the disease can spread to others. This complicates the transaction between the tubercular patient and the caregiver. And society expects doctors and nurses to act ethically and not simply in their own self-interest as sellers in a marketplace. For all these reasons, the assertion by Mr. Snow that the market is the only answer to all American health policy questions is wrong. The ancient Jewish prophets are still right about health care, it is not a commodity; it is a gift that we are morally obligated to give to ourselves.
If we reject market principles as a proper means to realize either a moral or an efficient health policy, how can we organize health care financing so that we can give the gift of health care to each member of American society? Over the past five decades, Americans have endorsed and tried many different health policy options. Employment based health insurance was born during World War II as an inducement to bring people to work even though wages were frozen. Lyndon B. Johnson’s Great Society brought Medicaid and Medicare. Carter was responsible for Health Systems Planning and the Certificate of Need programs. The Reagan administration tried DRGs for Medicare and HMOs. The Clintons proposed employer mandates and managed competition, which were thankfully rejected. Bush is now proposing Health Savings Accounts. All of these are flawed policies which have failed or will fail. When it comes to health care policy, I take solace in the words of Sir Winston Churchill: “Americans will always do the right thing, after they have tried every other alternative.” In the spirit of finally doing the right thing in health care, I propose that we follow six principles:
1) Do what the Bible says to do, give the gift of health care to every citizen. Anything less is manifestly unfair and leads to unnecessary suffering and death. Virtually all of the uninsured and underinsured in America are either employed or dependent upon someone who is employed. Therefore, most uninsured people are taxpaying citizens who are paying the world’s highest health care taxes and are helping to fund care for the elderly and poor in our country, but have no health care financing when they need help themselves. The uninsured, working poor are paying the taxes which provide Medicare to the retired wealthy; there is no policy more manifestly unfair in our country. We can solve that problem by guaranteeing health financing for all medically necessary care. That is merely what the ancient Jewish prophets would advise us to do.
2) Let patients make their own decision about which physician can best serve them. In the final analysis, the choice a patient makes when selecting his or her own doctor is based upon a non-economic judgment. Patients tend to choose a physician who matches their expectation of ethical, care-giving behavior. To allow business decisions to interrupt the patient-physician relationship is to reduce the chance that the full potential for quality health care made available by modern medical science will be realized. After choosing a doctor, there are no other health care decisions a patient can make independently.
3) Cover every citizen for medically necessary care and unfettered choice of physician without increasing per capita health spending. This principle may seem counter-intuitive, but here are the facts: Americans are now spending over $6,600 per person for health care, with 60% of the health care revenues coming from taxes, 20% from out of pocket payments, and another 20% from private employers paying premiums for workers. By 2015, the Bush administration expects the per capita health care budget to grow to $12,000 per person per year, or approximately $4 trillion per year or 20% of the GDP. Current health spending in Utah is more than $10 billion. Most of the revenue growth will accrue through increased taxes and out of pocket spending. I conclude that we have enough money to cover all Americans with medically necessary services. Since the revenues are primarily from individual tax payers, we already have the funds to give the gift of health care to ourselves.
4) The means to achieve budget neutrality while providing universal, medically necessary care are available, if we limit health care overhead costs. Estimates of savings available through reducing bureaucratic costs and profit throughout the US health system indicate that we can legitimately save $300 billion per year ($1.6 billion in Utah), enough to fund universal, medically necessary health care in the US. American businesses outspend competitors in other first world countries by 13 fold for employee health benefits while seeing double digit increases in health premiums each year. Overall administrative costs in the US are triple that of other first world countries. The leading edge of administrative waste in the US health financing system is found in health insurance and managed care companies which have substantially higher overhead costs than do government health care payers. Administrative costs in health financing should be held to less than 5%. And the health insurance and HMO bureaucracy force health providers, hospitals and doctors to waste their funds on an endless crusade to get payment for services rendered, driving up the price for physician and hospital services. Our failure to use possible economies of scale such as mass purchasing for large populations allows sellers of medical goods, such as pharmaceutical companies, to overcharge us for their products.
5) The quality of health care can be improved by eliminating competition among health institutions and replacing it with cooperation. At its core, health care is not competition, it is an enterprise based upon the cooperative efforts of doctors, nurses, other professionals, and institutions such as hospitals, long term care facilities, and public health departments. Optimal patient care is achieved only when institutions cooperatively deliver high intensity services. Motivation in the health care delivery sector matters, as repeated studies have documented higher costs and poorer outcomes when the profit motive is allowed. The biggest fine ever collected by federal prosecutors for fraud was not Enron or MCI, it was from HCA, the largest hospital chain in the US, and one of dozens of medical care fraud cases during the last decade. Despite paying $1.7 billion in fines, HCA’s profits are up 10 fold over the past two years, and not because they are just better at delivering hospital care. As the State Health Officer for Nevada, I observed that sick newborns in Reno died at a higher rate than did those in Las Vegas. The reason for the disparity was that only one hospital in Las Vegas had a high level newborn nursery while two smaller hospitals in Reno were competing to provide those services, neither of which could muster the necessary support for optimal care in the newborn intensive care nursery. Competition in health care always raises the cost of the care and lowers the quality.
6) Finally, the vehicle for financing all health care should be a private, non-profit trust fund with public governance in each state, which I call a health cooperative. Each state health cooperative would receive all revenues for health care, no matter the origin, and, under the direction of a publicly elected or appointed board of directors, would pay for all medically necessary health services in the state. Federal assistance in founding and maintaining the state health cooperatives would be assured by passage of an already existing bill: The States Rights to Innovate in Health Care Act. This bill provides for the removal of all federal rules and regulations which prohibit the establishment of a universal health financing system, such as ERISA. The bill also authorizes a block grant of all federal health care funds to any state demonstrating the capacity to fund care for all residents. Each state would provide the health cooperative with all currently appropriated state and local tax funds. The remainder of health funding from out of pocket and employer contributions could be raised with progressive payroll and individual taxes.
Health care is a gift we give ourselves and we will pay for the gift collectively and fairly. Our benefits will be as generous as we decide they should be. Physicians will bill fee for service according to a negotiated schedule. Hospitals and other institutions will be paid a negotiated operating budget, eliminating the burdensome billing system for hospital care. A capital budget held in reserve will be used to increase capacity according to need. Using economies of scale, the state health cooperatives will negotiate wholesale prices for pharmaceuticals and durable medical equipment.
These six principles have obvious merits: health care for all without raising new revenues, a return of authority over health care from the federal government to the states, and an opportunity to realize improved health for every American. But more importantly, it fulfills the intent of the ancient Jewish prophets. Hanging in the halls of Massachusetts General Hospital is a quote from Dr. Edward Churchill, one of the 20th Century’s finest teachers and innovators in surgery, which says: “Charity in the broad spiritual sense—the desire to relieve suffering. . .is the most precious possession of medicine.” Health care infused with that sense of charity can never be a commodity; it is the gift that we give ourselves.