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A Second Opinion: Rescuing America's Health Care

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I work currently as a consultant and entrepreneur in healthcare. Although my professional focus is specifically on electronic medical records and similar clinical information technology, I have read widely and done research in many aspects of healthcare and healthcare policy. Two other outstanding books which provide somewhat different perspectives. one written in the 1970s and one in the 1980s, but fully relevant today, are Who Shall Live? by an eminent economist, Victor Fuchs and The Social Transformation of American Medicine by an equally eminent sociologist, Paul Starr. I highly recommend both to anyone who reads Dr. Relman's book. There are many other good to excellent books on healthcare policy or specific aspects of healthcare financing and delivery.

Dr. Relman's book provides an excellent summary and analysis of the current healthcare "system" in the USA and recommends specific, fundamental changes to how the system is financed and how care is delivered. His background as a practicing physician, author, professor and medical journal editor in addition to his native intelligence and compassion for people stand him in excellent stead to write this book. Dr. Relman analyzes succinctly and clearly the various aspects of the healthcare "industry", then recommends changes to the "system". He correctly identifies and criticizes the universally negative role of the commercialization of healthcare in its various manifestations: for-profit hospitals, for-profit health insurers, procedure-based reimbursement for physicians and so on. His recommended solution is for a single payment and single insurance system that is funded primarily through federal taxes and administered by a centralized federal government entity. He recommends the establishment of a federal agency along the lines of the SEC or the Federal Reserve System to oversee healthcare policy and healthcare delivery. He proposes that physicians work as salaried employees of multi-specialty practices. He dedicates a chapter to analyzing and discussing the Canadian healthcare system. He correctly characterizes the Canadian system as a good model - in most ways - for the USA.

The book is opportune and most likely was published now because healthcare policy is a key issue at least for Democratic contenders for the Presidential election in 2008. Dr. Relman's proposals for reform are materially superior to the plans proposed by all candidates with the possible exception of Dennis Kucinich who co-authored a bill (H.R. 676) a few years ago that has some of the same features as Dr. Relman's proposal.

There is so much misinformation deliberately disseminated by all the beneficiaries of our current poorly-functioning system - ranging from the AMA to large drug companies to private insurers to large for-profit hospital chains - that it is very helpful to have a relatively short, well-written book that accurately describes the current system and makes comprehensive, intelligent recommendations for changes to it.

I think of this book in two parts, the first of which is analysis of how America's healthcare system became so inadequate yet so very expensive, and the second, the author's policy recommendations.

I've read a few books on this topic (including Critical Condition) and this is by far the best researched and level-headed. The author writes analytically by basing his assertions on numbers and throughout the book avoids being sensationalist. If you want to read one book about how the US healthcare system got to where it is now, this is it.

As for policy recommendations (which some other books don't even have), his recommendations are not necessarily the best, but then again any ideas for real reform are going to be controversial. At the least, they are thought-provoking.

This book is very persuasive and informative.
It is lucid with 200 short, well written pages.
It is full of facts and statistics and in spite of this it is very clear.
The arguments in it are extremely persuasive.
It is indispensable to read this book if one wants to understand the reasons we are in such a mess in health care and the optimal solution for the mess. Read it, you will be pleased and enlighten.

Dr. Relman begins by asserting that America's health care system is much too expensive and its costs are rising at an unsustainable rate. Further, care is not available to many who need it most, and it is provided inefficiently and with highly variable quality.

By most measures of national health we rank well below many other advanced countries that spend less. Why is this? Dr. Relman believes it is due to the extent that private enterprise governs insurance and the provision of care, rather than public regulation and social need. Dr. Relman also sees physicians as too often part of the problem - in the U.S. they are more specialized, more likely to be paid on a fee-for-service basis, and more likely to have financial interests in facilities and products than their counterparts in other western countries.

Dr. Relman provides data comparing costs and outcomes from for-profit vs. not-for-profit entities. A 1997 study covering all acute-care hospitals found total hospital expenses/admission 10% higher in for-profits (administrative costs were 34% of the total, vs. 25% for non-profits; however, the for-profits provided less in-house clinical personnel. Thus, it is also not surprising that a 2002 study pooling all published data found the risk of patient death 2% higher in the for-profit hospitals.

Similarly, a 1999 published study of dialysis units found mortality rates 20% higher in for-profits, as well as the likelihood of being placed on a transplantation list 26% lower (would end the center's revenues). Prior studies also found lower expenditures on care within the for-profits.

Most nursing home payments are from standardized, per-diem Medicaid rates. A 1998 survey found for-profits with 40% more serious care violations than non-profits. Investor-owned insurance plans take 10-25% of premiums, vs. 5-10% for non-profits and only 3% for Medicare.

G.M.'s 2005 health care costs in the U.S. added $1,525/car built in the U.S., compared to only $197 in Canada.

Relman estimates that 40-45% of U.S. health care expenditures are wasted in overhead, marketing, and unneeded procedures. Canada has only 75% of the number of physicians/population in the U.S., but half are in primary care (vs. 1/3 in the U.S.). Thus, Canada ends up with 93 specialists per 100,000, vs. 150 in the U.S. This creates less pressure for high technology and associated high expenditures, and helps explain their lower overall health care costs. The provinces fund teaching hospitals, and have an incentive to hold down their numbers and production of specialists.

At the beginning of my medical career, physicians feared inroads from socialized medicine. Three decades later we were pawns of capitalized medicine as insurers dictated what drugs to use, tests to order, and how long to keep a patient in the hospital. HMOs tout preventive care, and there are actually billing codes for this, but they are largely not reimbursed. During this time Dr. Relman held many prestigious positions that puts him near the top of the list of the most important physicians of our era. In this small book he succinctly outlines the history of patient care and the doctor-patient relationship over five decades. He reproves the entrepreneurial spirit that overtook physicians in the 1950s and how it created conflicts of interest. He describes how Medicare and Medicaid may have helped many patients, but almost destroyed the concept of a physician or surgeon giving free care to the poor. As insured health plans became more common in the 1970s and 80s, he castigates the unconscionable profit motive that effectively restricts health care to those who need it most. He outlines the socialized systems in Great Britain and Canada, good aspects and bad. Finally, he proposes a single payer plan for the United States.

It's hard to disagree with Relman when the current system is in such a mess. Nevertheless I maintain that any new or revised system should not eliminate entrepreneurship. Socialism has already demonstrated that if you fail to reward excellence and ambition, you only reap mediocrity.

"A Second Opinion" takes another complementary viewpoint from the eyes of a physician. Dr. Arnold S. Relman is widely known as former editor of the New England Journal of Medicine and for his prescient 1980 article on the commercialization of medicine, and his phrase "the new medical-industrial complex". As many of his predictions have come true, he argues for a radical change in both ends of the current system to reduce waste and administrative overhead, improve quality, and provide coverage for all.

Dr. Relman details the post World War II development of medical practice in the US, and the transition of role of the physician responsible for "care of the sick" to the varied roles they have today in the commercialized "health care industry". He describes the effects of commercialization as fragmenting the delivery of care at the expense of quality, encouraging overutilization of new technologies, and increasing inequity of care.

In "A Second Opinion" he argues for a single payer system to eliminate administrative costs in the insurance industry and waste in the overutilization of treatment. In addition, he recommends a restructuring of the delivery of care to physician multi-specialty group practices (PGPs) that resemble the integrated health systems such as Kaiser, with reimbursements based on a fixed annual dollars per patient and doctors paid on a salaried rather than fee for service basis. In this way, physicians would return to their roots as a profession of primary caregivers, without regard to the level of compensation or financial incentives to practice medicine a certain way. In addition, like the PGPs, health care delivery facilities such as hospitals would be not-for-profit entities owned by the local community.

By telling the history of how the practice for medicine has been commercialized and the effect of the growth of Medicare and the indemnity insurance industry, Dr. Relman is able to convey the ethic that has been lost in his profession that a systemic change could restore. In addition, he makes a detailed comparison with the Canadian system, recounting its history in parallel with ours. The result is that Canadians have 100% coverage and spend $3500 per person annually, or one-half the amount in the US (only 10% of GDP). He concludes with a open letter to his colleagues in the profession about the need for change and his vision of the practice of medicine in salaried not-for-profit multi-specialty group practices.

Because of his perspective as a physician and manager of health care institutions, he doesn't approach the subject with any faith in market forces or technology to correct the current situation. In fact, he believes that the movement of consumer driven health care (CDHC) will fade with time just as HMO's did. The combination of catastrophic indemnity insurance and health savings accounts (HSAs) promoted as a solution to restore consumer decision making in the market will not change the fee for service orientation of the major expenditures such as hospitalization. Thus, it will fail to contain costs and at the same time will cause hardship in paying for physician office visits for low income individuals that may forego care to save the money in their HSAs.

One issue with Dr. Relman's approach overall is that it freezes the current state of delivery of healthcare in place and makes adoption of innovation difficult, because there is no profit motive to compensate for risk taking and investment in service delivery. The rate of innovation in medical technology is increasing, not decreasing, and medical practice will need to keep up with the emergence of personalized medicine and telemedicine. But this structure would not preclude the medical device and pharmaceutical industries from remaining as for-profit suppliers to these non-profit delivery entities.

Arnold Relman is an insightful elder health care policy statesman. Born in 1923, he was 84 when he wrote this book. He has been engaged in formulating health care reform policies for decades. He wrote an earlier book on the subject: "The Choices for Healthcare Reform" back in 1992. He graduated from med school in 1946 nearly twenty years before Medicare and Medicaid were created in 1965. From 1977 to 1991, he was an editor of The New England Journal of Medicine (NEJM). He was a professor at Harvard Medical School, a research scientist, a clinician, a doctor, and a consultant to government.

Relman's main thesis is that for profit medicine has never worked. It has caused skyrocketing health care costs, as we have by far the most expensive health care cost worldwide (at 16% of GDP). And, our quality of care does not compare well with many OECD countries (shorter lifespan, higher infant mortality rates, and highest % of population being uninsured at 15%). The profit imperative dictates that a business grows its revenues and profits. This means overcharging, overutilization of health care services, and lower quality of care.

Relman's thesis, besides being now self evident, is supported by a seminal paper written in 1963 by a Nobel prize winning Stanford economists, Kenneth Arrow. The latter stated that health care services have no price transparency and no price competition. The demand for services is generated not by the customer (the patient) but by the vendor (the doctor) who makes the purchasing decision for the customer. Half a century later, Arrow's analysis is still spot on.

Back in 1980, Relman wrote a seminal article in the NEJM about "the New Medical-Industrial Complex." Emerging investor-owned health care insurers and providers reshaped the culture of health care services away from a vocational profession and towards entrepreneurship. This commercialization caused the tremendous rise in health care costs and a commensurate deterioration in its quality.

Relman brings an abundance of historical evidence to support his thesis. In 1986, Relman participated in a study conducted by the Institute of Medicine called "For-Profit Enterprise in Health Care" that compared for-profit vs not-for-profit hospitals. They uncovered that investor owned health care facilities steadily charged a lot more and incurred much higher overhead than their non-profit counterpart. They also restricted more access to health care by readily turning down patients who could not afford the care. This study readily concluded the advent of for profit medicine would lead to rapidly rising health care costs. Relman refers to another study in 1997 that found that for profit hospitals charged 10% more than their nonprofit counterparts because their overhead was nearly 10% higher (34% vs 25% respectively). A 2002 study comparing quality of care found that mortality risk was 2% higher at for profit hospitals vs nonprofit ones. A study on dialysis centers found that the mortality rate at for profit ones was 20% higher, and the likelihood of being placed on a waiting list for transplantation was 26% lower than for nonprofit dialysis centers. Similar studies on nursing homes found that the cost of care was higher and the quality lower at the for profit ones vs the nonprofit ones. For profit insurers are also much less efficient than public ones as they spend typically 25% of premiums on overhead (marketing, underwriting, management salaries) vs only 3% for Medicare.

When comparing the US with Canada, Relman notes that until the 1960s both country had a very similar health care system run mainly by nonprofit entities. In 1965, both countries spent 6% of GDP on health care. As the US went on a commercialization binge, it now spends 16% on health care vs only 10% for Canada who used instead a single payer publicly funded system. Thus, the US increased its health care spending by 10 percentage points of GDP vs only 4% for Canada over the same period. Yet, Canada covers everyone with its Medicare-for-all; while the US covers only 85% of its population. And, the overall quality of care does not favor the US. Similar comparison with most Western European countries would be even more detrimental to the US.

In the pre-Medicare era, two thirds of doctors were engaged in primary care and one third were specialists. Now, those ratios have flipped in favor of specialists. As a result, health care costs a lot more while its quality has suffered. The Dartmouth Medical Center publishes maps of health care costs comparison within the U.S. They found that costs correlate most with the percent of specialists within the medical staff of a geographical area. Thus, medical costs do not track the demand. They track the supply (% of specialists).

Relman policy recommendation is to adopt a publicly funded single-payer insurance system that would pay for health care services, on a prepaid per patient basis, provided by not-for-profit privately managed medical groups where doctors would be salaried employees instead of volume driven entrepreneurs. Think of a Medicare-for-all paying for services delivered through a not-for-profit Kaiser Permanente Group.

Plain arithmetic demonstrates Relman's recommendation cost savings. Medicare spends 3% on overhead. Private insurers spend 25%. For profit hospitals spend 34% on overhead. Nonprofit ones spend 25%. The for profit fee-for-service causes huge overutilization of services vs prepaid per patient compensation. When combining those factors you can readily see how you could reduce US health care spending by at least a third which would bring it in line with other OECD countries.

If you find this subject interesting, I also recommend the following excellent books: The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care, Overdiagnosed: Making People Sick in the Pursuit of Health, and Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer.

Dr. Relman was editor of New England Journal of Medicine for 14 years, a practicing physician, and on a variety of health care boards. His health care reform ideas offers the best or equal to the best plan for affordable, universal health care (at a basic level of care). He recommends single payer system, that physicians work in non-profit multi-speciality clinics for better comprehensive care of patients, that physicians receive bonus for going above a standard level of patient load.

This is a step in the right direction, but faces massive opposition from the insurance, pharmaceutical, medical device and hospital administration segments that are profiting from the present situation. But the excess money that goes to them could easily fund the uninsured. And then we need to recognize that there is at present absolutely no incentive in the present system to save money. But we'll need to re-train an army of insurance clerks and their managers to start working for the good of patients instead of the good of their employers and their stockholders. Doable with the Relman prescription? Maybe. Certainly better than simply throwing more government cash at the present players.

Superb "tough love" analysis of the way commercialization of healthcare has driven behavior predictably towards financial rewards while perpetuating disparities in access and quality of care and severely eroding the primary care workforce necessary for rational care for our next generation. Dr. Relman candidly acknowledges that correction of these patterns will cause some financial hurt to entrepreneurial physicians and physicians in highly remunerative procedural niches, as well as the familiar bogeymen of the for-profit commercial insurance companies and profit-driven hospitals. If physicians fail to take active, participatory leadership in the necessary corrections, a blunt and clumsy governmental change process will likely be necessary.