This important documentary is made possible by the firm of Arthur Anderson & Company, an auditor and consultant for the healthcare industry, government organizations, and the business community throughout the world.
We've got a time bomb that's about ready to go off, and it's called healthcare costs generally, and Medicare is a part of that.
This problem is the most serious social economic issue that Congress is going to face in this decade. It's that serious.
If you really want to control the cost of healthcare, you have to say to the public, you can't have it as much as you had it before.
The issue of affordable care is a fake. It's a phony. It's no good. The issue is how do you get care that people need to them at a reasonable cost?
The art of healing in America has been described as one of the noblest and greatest enterprises in this country's history. Moreover, the operation of this vast system of healthcare delivery is one of the last big businesses to retain vestiges of the entrepreneurial American dream.
But as we plow through the era of the 80s with its emphasis on budgets and bottom lines, American medicine is facing its greatest challenge, a challenge posed not by disease and death, but rather by dollars and cents.
The outcome of that challenge could dramatically affect the care and treatment of a nation, not to mention the livelihood of its hospitals and its doctors.
In short, after 50 years, the golden age of medicine has lost some of its luster. As a result, America's doctors and hospitals are feeling the pinch.
What happened was that in the late 70s, the cost of healthcare became a very real economic issue. It grew from 4% of gross national product over 10% of gross national product. It consumes over $300 billion a year in services.
And so it becomes a very critical issue, not so much in terms of access to care or the quality of care, but the cost.
That shift in concern has been motivated by a tripling in expenditures on healthcare over the last decade, rising from over $103.2 billion in 1973 to an estimated $362.3 billion last year.
Those figures are especially troubling in light of the fact that the inflation rate for health cost was nearly five times the rest of society, increasing at a pace of 12% annually compared to 9% for the rest of the economy.
Those figures have made healthcare the second largest industry in America, one that consumes more than $1 in every tin produced in this country.
And despite many attempts in the last two decades to put the brakes on rising healthcare costs, they continue to grow at a rate four times that of the rest of society.
That's especially troubling to the federal government, which through two entitlement programs called Medicaid and Medicare is the largest purchaser of healthcare in the country.
Medicaid is a program administered jointly by federal and state governments to aid the poor in obtaining healthcare. Because of tight budgets on both levels, this program has problems of its own.
But those problems pale when compared with what is being called a crisis in Medicare.
By 1987 or 88, it'll start going bankrupt. It'll start going into the red, not being able to pay its bills.
By 1995, it'll be so deeply in the red, it'll be to the tune of $250 billion in the red.
The entire federal government this year won't run a deficit, but about 180, maybe even less, and that'll be a record.
But here this one government program will be $250 billion in the red.
If we don't do something to change it, this great society program, this Medicare program that was invented in 1964 will be flat on its face, not able to pay hardly any bills at all by the year 1990.
Henson Moore is a congressman from Louisiana's 6th District and ranking minority member on the health subcommittee of the House Ways and Means Committee.
Congressman Moore was so worried about the government's health insurance program for the elderly that he co-authored an amendment to the Social Security Reform Act of 1983.
The new law established a complicated set of 467 diagnosis-related groups.
These DRGs will post prices for treatments based on illness, type of hospital, and the geographic location of the hospital.
Something's been studied for years.
What it is is the concept of a buyer of health care agreeing to buy something but stating the price ahead of time, just like you buy an automobile or you buy a car or you buy a life insurance policy.
You don't go in saying, okay, I'm going to buy unlimited health care and you just charge me whatever you want to for it, and that's the way the system used to work.
Now the system is going to work as any reasonable consumer buys anything on the idea that I want to buy a certain amount of care and here's what I'm going to pay for it.
And you sign a contract in advance for that.
That's what the DRG system is.
That is the coming wave of the future.
The key element here is that for each hospital admission that falls into and will fall into one of these 467 categories, there's a price for that admission and that is the price the hospital will receive whether the patient is there for one day or 10 days or 15 days.
Whether they receive five tests or 50 tests, whether they receive four different treatment therapies or 17 different treatment therapies, one price.
So that there is now not only the incentive to the provider institution, to the hospital, to hold costs down in a general sense, but also more specifically to limit the resources that are applied in each individual case.
I think the most difficult thing to understand about DRGs and about the whole healthcare system is that it's not like repairing automobiles.
It's not like taking care of a radio or a television and pulling some tubes out and putting some new ones in.
Everyone is different and everyone responds to treatment differently and as a result, there's not any true averages.
Robert Merkel is president of the Louisiana Hospital Association.
That's not going to solve the problem, not solve it in a way that you or I or any other person in this United States would want to see it solved.
All it's going to do is begin to erode the system and it's going to create, for those who can pay, maybe we'll be able to retain the semblances of the healthcare industry as we know it today.
But for those who have only X number of dollars available to them, I'm very fearful that we're going to see a system that develops that will be much less than what we've known as good healthcare in this United States.
We've got to try some of these things. We have to experiment because in addition to that senior citizen day, they're going to be senior citizens there in 50 years.
And we're not going to have a good medical system if we don't start making some changes and restraining the growth of the program.
As chairman of the Senate Finance Committee, Senator Robert Dole holds great sway over what the government will and will not pay for.
And right now, what the government will pay is shrinking. Medicare is composed of two essential parts.
Part A is the hospital insurance program. Under Part A, elderly people needing hospitalization first pay a deductible of $356 and share payments after that.
The administration has proposed increasing both the deductible and the share payment.
It is this part of Medicare called the trust fund which is in danger of bankruptcy.
Part B is an option under Medicare that pays for doctor bills and which is financed by deductions from an individual social security check.
But Part B pays only 80 percent of what is considered reasonable and customary by the government, something known as the Medicare assignment rate.
Physicians under the law then have the choice to accept assignment as full payment for services or to charge the patient over and above what Medicare pays for.
In reality, Medicare pays an average of only 44 percent of a person's medical bill, a figure which could shrink even further in the future.
If in fact people know in advance, let's say the workforce, those in their 20s, 30s, and 40s now, if they know it's going to be a little tougher as far as Medicare benefits,
they can protect themselves through the private sector. So when they're 65, they don't have any problem.
They've got somebody else to pick them up, so-called Medigap or some kind of insurance, some supplemental program.
If recent trends are any indication of what Robert Dole was speaking of, then the future is now.
As this and other television advertisements suggest, Medigap insurance is already a popular item.
Of those already on Medicare, about half have already purchased supplemental coverage.
For the 14.5 percent of retired people at or near the poverty line and living on fixed incomes,
the added burden of additional payments, of additional insurance premiums, many feel is more than a society should ask its elderly to bear.
Currently, about 70 percent of Medicare's funds are spent on 9 percent of the elderly, much of it in a beneficiary's last year of life.
And that situation is compounded by an added dimension to this crisis, one that makes a solution to Medicare's financial woes even more critical.
Within the next quarter century, more than half the population will be over 65. In short, we are getting older.
I think that's what makes the control of health care costs really a moral issue, not just an economic issue.
Because if we don't control the appetite of the health care system, and particularly of hospitals, for money,
there won't be any money left over to do the things that really have a much more powerful effect on health,
the preventive measures, the public health measures, which are often much less expensive,
but which tend to be neglected because of the tremendous appetite of the acute care system for resources.
Paul Starr is a Harvard University sociologist and author of a book titled The Social Transformation of American Medicine.
It is his contention that DRG repayment mechanism is but a small shift in the way hospitals do business
and will have little bearing on the amount of money spent on health care.
It is a measure of how little has been achieved by government that it could be said that the DRG system was a revolutionary change.
It is a modest, bureaucratic shift in financing, which will have an effect on the way hospital administrators work.
It will have very little effect, I think, on overall health care costs in the United States.
They had an old game called cost-based reimbursement, an old game that they learned to play very well,
under which they learned to extract a tremendous amount of money from the people of the United States
through government and private insurance funds. Now they will learn to play a new game.
Not surprisingly, those in the hospital industry don't feel that way.
People like Alexander McMahon, president of the American Hospital Association, feel just the opposite.
He says the DRG system, which began a three-year phase-in last October,
has already had a dramatic and positive effect on what hospitals charge.
We have a handle on it. As a matter of fact, the reduction in the rate of increase in hospital costs
has been dramatic over the course of the last year.
Whatever period that you want to take in 1982, hospital cost increases were in the 15 percent range.
They started down early in 1983, down to 12 percent in the first quarter, first six months,
down to 9 percent, a little over 9 percent, third quarter of 1983 versus the increase in the third quarter of 1982 over 1981.
We need to be accountable for the reduction of that rate of increase.
But we can do it. We are doing it. We'll continue to do it.
We've got to be left alone to do it in our own way.
I want to be sure that we continue to do it without impairment of quality,
and thus our task will be to say to the federal government, now you made a big move, you made the right move,
let us alone for a while while we work this thing out because we have the message.
The hospital industry has had the message before.
As late as 1975, the industry undertook what was called the voluntary effort to reduce spiraling cost.
The result was costs that continued to escalate and a system left largely unaffected.
It is important to note that few people in Washington or in the industry itself are actually talking about reducing hospital cost.
Rather, they are talking about reducing the rate of increase.
Representative Henson Moore.
I'd love to tell you that I think it's feasible for us to reduce the cost.
Whatever a hospital bill is now, let's say $1,500 a day, we can reduce that to $1,200 a day five years from now.
We don't think we can do that.
We think as a practical matter what we can do is stop the escalation of the increase in cost,
which for 1983 ran something like four times the rate of inflation.
And we need to get that down to about the rate of inflation.
And then we've accomplished a tremendous thing if we've done that.
That situation, as well as the dire financial crisis menacing Medicare,
has left a bad taste in the mouth of legislators feeling pressure to take additional action.
As a result, Representative Moore and others in Congress think additional measures will be forthcoming.
Already a congressional conference committee has taken what many feel is the first of many steps directed toward doctors.
That legislation, known as the Deficit Reduction Act of 1984,
froze Medicare payments to physicians for a 15-month period beginning July 1st.
While still giving physicians the option of charging Medicare patients more than the government will pay,
the new law for the first time has established fines
and exclusion from the Medicare program as penalties for raising rates during the freeze period.
To some, though, such public policies are a risk,
decisions made in a rush to save dollars that ultimately will cripple the ability to save lives.
And when you make major public policy decisions such as the Congress did,
in the absence of hard information about those questions,
I think you're running some very large risks.
There's no way that everybody's going to be able to have it both ways.
You can't save billions and billions of dollars to deliver health care in the same way,
at the same level that we've done in the past.
And the politicians have yet to tell America that health care may have to be rationed.
There's only so much money to go around.
George Porter is president of the Elton Osner Foundation, a medical complex in New Orleans.
There's not a very constructive debate going on that would help us plan
to how we're going to set these priorities in the future.
Our concern is not that the economic incentives and priorities of an industry
be preserved at the expense of the public,
but that the great system that's come about isn't ruined in a revolution.
Because, as you know, when a problem is perceived in society,
you either take care of those solutions through evolution or revolution.
And we sense what has happened in the last year
as to be more of a revolutionary than an evolutionary change.
More money does not necessarily mean better quality of care.
It is certainly the contention of the providers, that is, the doctors and the hospitals,
that any cutback in financing is going to reduce the quality of care.
That is, I think, a self-interested argument that has got to be scrutinized very carefully,
because the evidence is that there is a tremendous variation in the use of health resources,
even within the United States, in different parts of the country,
in different types of health care organization.
There are different styles of medical practice.
Hospitals currently receive about 41 cents of every health dollar spent in this country,
and for that reason, they've been the target of the first congressional efforts to cut costs.
But the DRG repayment system, many feel,
is but the first salvo in what may be a long and bitter war over this issue.
As the nation's largest purchaser,
the federal government pays about 29 percent of the tab for health care in this country.
And revolution or evolution, many feel that what Congress does to Medicare in 1985
will shape the entire health care system for years to come.
One who feels that way is Melvin Glasser,
director of the Health Security Action Council
and a longtime negotiator of health benefits for organized labor.
Medicare is part of the total system.
It consists of people who at a certain age become eligible or with a certain physical disability.
It is serviced by doctors and nurses who are not restricted to the elderly,
who are in institutions, hospitals and nursing homes, not restricted to the elderly.
So the problems of Medicare are the problems of the system.
Whatever we do in 1985, and I hope that's the year we do it in our health subcommittee,
to save Medicare and to reform it will probably be copied
around the health care system delivery system around the country.
And so I don't think health care and Medicare are, you have to do one before the other.
We will move to take care of Medicare first and in so doing will help the entire health care system.
If those words become reality, it could send shockwaves through an industry
that has remained relatively unchanged throughout much of this century.
And while change will not come easily to the delivery of health care,
there are those who feel change is needed and needed badly.
Health care today is still largely a cottage industry.
Doctors in their own offices, though that's breaking down some.
Hospitals competing with one another.
Too many hospital beds.
Too many employees in hospitals.
Too many duplication of services and not nearly enough for low-income people.
So you've got a system in disarray.
That's not something I just invented.
Presidents going all the way back to Harry Truman have been saying that and trying to correct it.
And this country just hasn't gotten around to getting its medical house in order.
Arthur Kaplan is an author and scholar at the Hastings Institute,
a think tank located outside New York City.
The Institute focuses on issues of biomedical ethics.
What I think has to go hand in hand with economic reforms
is some serious thought about changing the structural organization of medical care.
I mean basically I believe that the high cost of care is fueled by not only sloppy management practices
or wasteful practices with respect to financing.
I think there are some basic structural flaws in our system.
For example, we have a malpractice system that forces doctors to practice defensively.
They order unnecessary tests.
They simply try to protect themselves against suits by running every imaginable diagnostic thing they can think of
and then do it again.
That's not a system that's going to provide access to people
because it consumes an enormous amount of resources for no good purpose.
The major reshaping is going to take place around the moral question of justice
and justice being who gets what in the form of medical care.
And that debate is really just beginning.
So I think that will, it is definitely going to put pressure on us
to rethink the way we provide medical care in this country in general.
It seems to me that given the cost of medical care, the greatly increasing cost of medical care,
the incredible inequities that exist in the current system that we cannot avoid in the future,
the stupidity inherent in the system which leaves preventive care low on the totem pole
but then is willing to pick up much bigger bills later on when people get sick,
all those things added together seem to make it impossible for us to avoid having some more rational,
more consistent, more coherent national health policy.
The issue Congress and the incoming administration must face in 1985 doesn't just address elderly care,
but how to care for us all.
The problem for Congress then is how best to legislate change in the system without destroying it.
There's no one answer.
You're going to see the government looking after this election, 1984 year.
You're going to see them looking at changes in benefits, reductions in benefits,
greater co-payments by beneficiaries still.
You're going to look at tax programs being proposed
and any other combination of steps that will help them cope with the deficit problem that they have.
The administration feels the answer lies in the heart of the way America should do business.
Currently, roughly 86% of all health bills are paid for by third parties like the government or insurance companies.
Because of that, the consumer is insulated from the true cost of care.
By making the system price competitive and forcing the consumer to pay a bigger share,
consumers will become cost-conscious.
The result proponents say will drive health costs down.
If you offer somebody a free lunch, they don't go to McDonald's, they go to the Ritz.
We have tended to insulate the patient, the ultimate consumer, of health care
from the cost of the resources, the raw materials, the labor, the energy
that goes into the production of health services
so that the consumer sees all of the benefits associated with receiving care
but generally does not in a direct or timely way bear the cost of those resources
As a result, we have had a tendency, especially in the entitlement programs, but also more generally than that,
to view health care almost as what an economist would call a free good
or a notion that health care is a right that, regardless of the quantity,
everyone is entitled to as much as they can consume that is of any benefit whatsoever.
Therefore, the patient doesn't care what it costs.
The doctor doesn't care what it costs because somebody else is paying the bill.
The hospital doesn't care what it costs because somebody else is paying the bill.
The insurance company that's paying the bill doesn't care what it costs
because the employer or whoever is paying it is going to pay the price.
That philosophy is not just popular among congressmen and economists.
It is a cornerstone of the Reagan administration's approach to the problem.
At the time of this interview, Robert Rubin was assistant secretary in the Department of Health and Human Services.
I think we have sensitized both consumers and providers.
For the first time in this country's history, we're paying hospitals that participate in the Medicare system
a specific price for taking care of patients with a particular diagnosis.
That replaced the old cost-based reimbursement system.
In terms of making corporate America, who are the basic payors of health care in this country
through the employment-based health insurance,
we've encouraged them to look towards more cost-effective ways of providing that health insurance.
For example, placing a greater emphasis on catastrophic insurance
rather than first-dollar, no-questions-asked insurance.
The mobilization of the business community in the war against health care cost
has been a critical element to the Reagan administration strategy,
and that mobilization has not been piecemeal nor without cause.
Over 180 business coalitions across the country have joined the fight in the past three years.
The movement is an attempt to reduce the cost of employee health insurance plans,
costs which the Chrysler Corporation estimates add $600 to the price of a new car.
One such coalition is the Southeast Louisiana Health Cost Management Corporation.
At the time of this interview, Andrew Anderson was president.
Business is now aware of what it costs them on their bottom line.
Previously, it was a benefit, go get it fixed, the insurance company would pay, and we'd pay premiums.
But now the business corporations have seen the costs of their health care going up 30, 40 percent one year,
and that's one hell of a jump.
So now you've got the attention of a smart CEO,
a CEO who knows what it costs them to provide health care for his employees,
has a good handle on a major portion of his bottom line.
So I think the input of the business community saying, hold it, let's look at this,
is going to be a major factor in holding down health care costs.
And we've been very gratified with the changes.
All across this country, corporations are moving towards a better structured health insurance program for their employees.
Forty-five percent of the Fortune 500 companies in a recent poll have restructured their insurance benefit
so that there's less so-called front-end insurance and a lot better catastrophic coverage.
People want to be protected against the financial crisis associated with illness.
I mean, it's fine for you and I to sit here in a very theoretical way
and talk about involving the person in the transaction through a variety of fiscal techniques.
But when push comes to shove, the American people want protection, and that's what they go to the marketplace for.
And you can't do anything about that.
I don't think that our society or our Constitution will allow us to legislate against that.
And I think that'll always be the case.
What you have to offer the American people is option, option in the manner in which they receive care.
Indeed, all manner of options are springing up across America in the form of alternative delivery systems.
One such organization is known as the Free Standing Emergency Clinic, or perhaps less appreciatively, the Dock in the Box.
These for-profit corner medical stores have been hailed by some as the way in which the high cost of emergency room visits can be reduced.
Advocates point to the fact that more than 80 percent of visits to hospital emergency rooms are not true crises
and can be handled in facilities like this one at a fraction of the cost.
Detractors say the Free Standing Clinics are but referral agencies who handle only the easier, more lucrative cases
deferring the more difficult problems to their hospital counterparts.
Another, perhaps more respected alternative, is called the Preferred Provider Organization.
In the PPO, employers or other groups contract with a hospital or clinic for services.
If a patient elects to use the preferred service, a reduced rate or full coverage is offered.
If the patient chooses to go elsewhere, the patient must pick up a portion of the tab.
The PPO and the Free Standing Emergency Clinic are but two growing changes in health care delivery,
changes many think will bring soaring costs down to earth.
A third is the Health Maintenance Organization, or HMO.
This is a prepaid, organized system which assumes responsibility for and provides care to a large group of people.
While physicians especially have had problems accepting HMOs in the past, this too is being hailed as one of the new driving forces in medicine.
And behind all of the enthusiasm for these new and different brands of health care is one driving thought, a thought not everyone agrees with.
We're now going to compete. We're now going to see who can offer the quality medical care at the cheapest price.
And that's where we're heading in the marketplace already. It's beginning to show up.
That's where we're heading through HMOs and PPOs.
That's where you're heading through Medicare and a prepaid system of DRGs.
We'll extend that to physician services probably next year. That's where we're heading.
Their notion is that they will somehow compete by spending less on the delivery of services.
But it took them a long time to realize that the expenditures for services are largely controlled not by the government and not by the patient,
but by the doctor, who is a party of interest, and if not the doctor, by the hospital, who is a party of interest.
So there is competition all right, but it's the wrong kind of competition.
It is the competition of monopoly. And who pays for it, the government or the patient?
There is no reason why, in basic economic logic in theory, and I've not seen that refuted yet,
there's no reason why a service such as health care is any different from a service such as legal care or such as any other kind of service you buy,
life insurance, casualty insurance, whatever service you buy in society.
I don't believe that a market model is going to succeed in lowering the cost of health care
because I don't think it fits the traditional assumptions that economists make about markets.
Consumers are too vulnerable. Providers have too much power.
Once more, take another deep breath, hold your breath, keep on holding it.
It is that sort of point-counterpoint which could dominate the debate over health care in Congress.
And while competition is the cornerstone of the administration's plan for saving the system,
there are several key building blocks, proposals that thus far have drawn mixed congressional review.
One is a tax proposed in President Reagan's 1985 budget, which would assess health benefits employees receive,
which amount to more than $175 a month.
Administration officials claim that such a tax would add $3.9 billion to the nation's coffers.
Another plan, also included in the 1985 budget, would create a system of what are called health care vouchers for Medicare and Medicaid beneficiaries.
Here's how it would work.
In essence, we would determine what the average adjusted per capita cost for a particular kind of Medicare beneficiary would be.
Say, for example, $2,000.
We would then contact the beneficiaries and tell them that they have their option of either staying in traditional Medicare
with the same sets of services and limitations that the Medicare system currently has,
or they can purchase private health insurance.
We would pay $2,000 of it, or they could join an HMO and we would pay $2,000 of that.
Basically, this is a retreat, a retreat from government responsibility.
What they're trying to do is to give up official responsibility for control of costs and say to the patient, you do the best you can.
Our estimates are that with the voucher system that the administration proposed last year,
the average patient could expect about 28% less coverage than if he stayed in Medicare.
If they wanted benefits over and above the Medicare benefit,
they would be free to negotiate that with either the HMO or a private insurance company.
We think that that has some significant benefits to the beneficiaries,
54% of whom have additional coverage outside of Medicare, so-called Medigap insurance,
and we think that it would spur the creation of cost-effective comprehensive medical plans.
Poor people, and there are lots of folks, over half the people on Social Security are poor,
will gamble if they think they have a chance of making some money.
They're poor and need money for food and shelter, and they're in reasonably good health.
They'll say, I'll take the voucher because I can make some money on it and hope I don't get sick or don't get seriously sick.
And if they are seriously sick and they get less coverage as they will with these vouchers, well then they're out of luck.
We think that's a retreat from society's responsibilities.
The administration, many feel, is placing the onus for cutting health care costs squarely on the back of the consumer.
Through all of its proposals, the cost sharing and higher deductibles, the competition, and the voucher and tax proposals,
detractors maintain the administration is ignoring the real reason for health cost inflation.
You do not need a stethoscope to diagnose the cause of health care cost inflation.
Hospitals and doctors charge too much.
This is where the battle lines were drawn.
In a February 1984 news conference, Senator Edward Kennedy of Massachusetts and Representative Richard Gephard of Missouri
announced what has come to be known as the All Payers Plan to save Medicare.
It is but one in a series of similar plans advocated by at least one Democratic presidential candidate.
This proposal attacks soaring health care costs by limiting the amount of money that can be paid to providers.
In essence, the All Payers Scheme borrows the competition and DRG elements of the existing administration program.
In addition, the Medicare Solvency and Health Care Cost Control Act of 1984 would do the following.
Extend the DRG system to physicians, something that many in Congress feel is inevitable.
Make mandatory the acceptance of Medicare Assignment Rates, the clause in Part B of Medicare
which allows physicians to charge over and above what is paid to them by Medicare.
Pay to hospitals a lump sum payment for both hospital and physician charges.
Encourage states to develop plans to stimulate competition.
That would be motivated by the promise of additional Medicaid funds.
Develop guidelines for states to meet and establish federal limits on what can be paid by all insurance payers
if states do not meet those guidelines.
In short, this bill would take a regulatory approach to the problem,
a little bit of a stick compared to the carrot many feel the administration is offering.
In the Washington D.C. of the 80s, however, regulation is a dirty word.
Those who defend it say it's the only way.
I don't think that the federal government needs to get involved in private transactions between private individuals.
We proposed a system for Medicare because Medicare is a public insurance program
and as a buyer of health care for some 30 million elderly and disabled beneficiaries,
it was our responsibility to be prudent in the use of that money.
We would expect the John Hancock or the Travelers or Blue Cross Blue Shield to act prudently with respect to their beneficiaries.
And we would not think that the government ought to be setting prices in the health care area.
The government solution is the one everybody understands.
It's the one that's simple. It's the one in the steady march towards socialism that's next on the ladder.
It's the kind of thing that's going to happen if we don't move to educate the public and get it moving very quickly.
And so when the doctor says this is a revolution, it's a very fast evolution to prevent a revolution, in my way of phrasing things.
Some estimates say that as much as 20 percent of the costs of private insurance are in fact Medicare costs that have been shifted.
They've now gotten so excessive that it's much more difficult to shift.
And more and more it's being realized that problems are one. The problems of the medical care system are one.
The problems of Medicare are the same as the problems in collective bargaining for health care in the private sector.
I think it's fascinating to see that some of the very same people who champion the cause of airline deregulation and trucking deregulation
are at the forefront in the regulation, of utility type regulation indeed, of the health care industry.
Until the problems of access and control on costs and limitation on the number of hospital beds are solved, we won't get it.
That's why what is called an all-payer approach, government or private, is considered a desirable way.
No solutions for Medicare will work unless there are solutions for all of us.
The Kennedy all-payers proposal is not an altogether new idea.
All or parts of it have been proposed at one time or another over the past 20 years.
The most recent was in April of 1984.
Then one element of the bill, mandatory Medicare assignment, was proposed and defeated in the House.
But while there is great opposition and division between the competitive and all-payers proposals, they do share some common components.
One is the DRG repayment mechanism for Medicare.
Another is the emphasis both plans place on an alternative delivery method that advocates say will both decrease cost and increase benefits.
That delivery method is the HMO, or Health Maintenance Organization.
Essentially, HMOs provide full treatment for one payment and survive by deferring their cost over a large group of people.
Proponents claim HMOs can provide good medicine at a price 5 to 15 percent less than traditional fee-for-service delivery methods.
We have to do it that way.
Opponents disagree.
They say the quality of care suffers in HMOs that because bigness is essential to their survival, patients lose the continuity and contact with a single physician that many feel is crucial to quality care.
Detractors also say that costs are rising in HMOs as well and that the freedom to seek treatment outside the organization is a high price to pay for the small savings.
There are, though, some examples against which these pluses and minuses can be weighed.
One is the Kaiser Permanente Health Plan, the nation's oldest and largest health maintenance organization.
Begun in 1948, this plan now boasts over four and a half million members in ten states.
One of their plans is located in the Washington, D.C. area.
Mrs. Suzanne Young and her family have been members of the Kaiser Plan in Georgetown for about five years.
I feel more comfortable with this if I have a problem, if there's something that feels a slight cold but there's a sore throat or something, then I think I should have it checked.
I might not have gone and paid the fee at the doctor for all the cultures and everything, but I know that we're entitled to it, so we come here and get it done without hesitation.
I've had the same doctor the whole time I was here and the kids had a nurse practitioner and so I just heard she's been here the longest of anybody who's been here.
I was always comfortable with her and never really needed to see a doctor when the kids were really little because they were so healthy and just came in and I knew I could get an appointment whenever I wanted and she would be here.
Mrs. Young's physician is Dr. Karen Levitas.
There's a tremendous advantage to people because they don't have to worry about deductibles and they don't have to worry about us only paying part of the bill.
They don't get a bill.
Send somebody to the hospital, they have a complete hospitalization, a child can be in the hospital for 10 days and have surgery and they don't even get the bill.
The bill comes to us.
I think that people do give up some freedom.
They give up the freedom to choose whichever doctor they want to go to in the community.
They have a certain panel from which they have to choose and the panel tends to be large and varied so I think people have a good choice.
But there's definitely, I don't think that this is for everybody.
I think there are people who just would not be able to tolerate this type of group.
The Kaiser system is successful and according to officials there, growing.
But to many that is not true of all HMOs. Critics say that outside of success in some areas of the country and despite a strong push from the government during the Nixon administration, the success of these ventures has been mixed.
Many feel that's due to a lack of support from doctors, the most important cog in the process.
Physicians in health maintenance organizations are paid on a salary basis, a practice that heretofore was taboo to the physician community.
But there are a number of forces at work on this nation's nearly half a million doctors, forces that could reshape the way they are paid, their relationships with hospitals, and perhaps most importantly, the way they practice their craft.
The fiscal survival of our most single important sector of the healthcare industry depends now not on the clever things that can be done in the business office and the accounting statements as was the case under cost-based reimbursement.
But now it depends on what happens on the unit, on the patient floor, with the physician ordering procedures.
Those kinds of clinical decisions are now going to more directly affect whether or not that hospital is going to survive, whether it's going to be able to meet payroll, whether it's in fact going to be around three or five years from now.
Traditionally, physicians have held great sway in hospitals largely because it is they who perform surgery, they who order tests, they who order care for patients, and they have been well paid for it.
Currently, doctors' fees comprise about 20 percent of all health expenditures.
If that total is averaged through the nearly half million doctors in this country, the mean income of physicians totals around $100,000 each.
There are those who feel the DRG system will alter both the influence and incomes of physicians and that the delicate balance of power within hospitals will shift now that fiscal survival is at stake.
Well, I think the DRGs have a real potential for changing that relationship for the worst, and that's why I think they have to be so very careful in the implementation,
because when push comes to shove, the physician is going to be solidly behind the patient and keeping the patient and treating the patient, irrespective of what the hospital is being reimbursed for that.
And that does have the potential for some serious confrontations downstream.
James Sammons is executive vice president of the American Medical Association.
Unless they are very, very carefully done, and unless hospital administrations and medical staff sit down and really have straightforward conversation about the impact on the institution of DRG payments, they could result in some very, very bad situations for a large number of hospitals.
Clearly, that is not a good situation for anyone concerned, neither doctor, hospital, nor patient.
For that reason, brighter viewpoints suggest that cooperation, not confrontation between hospitals and doctors, will be the norm under the new system.
But there is yet another new development in the medical scene which some say will have a more direct bearing on the hospital-doctor relationship and only heighten the potential for conflict.
That development is the growth of the for-profit multi-hospital chain.
Welcome to the opening of Meadowcrest Hospital in New Orleans.
Meadowcrest is but one of six hospitals in New Orleans and 380 in the United States and overseas, owned by a company called National Medical Enterprises.
NME is the third largest hospital chain in the country and is part of one of the fastest growing industries in the nation.
Currently, about 33 percent of the nation's hospitals are owned by chains like NME.
Well, I decided to practice medicine on the West Bank.
It is that trend toward commercialization in the hospital business that has prompted one man to turn the multi-hospital chain part of, quote, a new medical-industrial complex.
West Bank Health Care System, we're on your side.
For the first time in the history of this country, on a broad scale, we now have stockholders and investor-owned corporations influencing, determining very important decisions about the utilization and the distribution of health care.
Dr. Arnold Relman is editor of the New England Journal of Medicine.
You're going to see doctors beginning to lose the autonomy, the independence, and a good deal of the authority that they used to enjoy, that they have been enjoying up until now.
And this concerns me a good deal because I don't have any confidence that the for-profit institutions that are investor-controlled are going to put the patient's interests first.
I believe that most honest, well-meaning companies are going to want to provide a good product at a fair price.
But they're not going to want to provide any products that they can't make a profit on.
And they're going to want to market, sell as many units of the profitable products that they provide as they can.
That's not always in the best interests of the public or the patient.
Those who criticize the investor-owned industry talking about profit and so on and so forth, I think they're coming from the standpoint, hopefully, of a concern about quality.
Worse concern about that is anybody, more so perhaps because we've really got to provide the quality care.
John Bedrosian is a senior vice president with National Medical Enterprises.
We all recognize we're in the same business. Those who criticize the investor-owned industry, frankly, are scared of change.
We represent change not because we're trying to create it, but because it's a natural evolutionary thing.
The reasons we talked about earlier for creating multi-systems, large corporate medicine as it's called,
it's not because people like to get big and powerful and throw their buck around.
It really isn't. It's because it's a natural evolutionary trend in any industry in this country.
Unfortunately, bigness comes into play. I'll tell you frankly, I don't like bigness at all. I really don't.
But you either do that, grow, or you're out. And we're growing, like it or not.
In the past, physicians have held a trump card in these situations, even in the face of corporations and cost-conscious hospital administrators.
That card has been their knowledge and ability to heal.
But now some people think even that position is being weakened, weakened by the sheer weight of their own numbers.
By the turn of the century, some forecast project the number of physicians in America will increase from around 485,000 to 643,000.
Translated, that means there will be one physician for every 388 people, compared to one for every 500 now.
That fact alone could dramatically affect the price of care and where it is delivered,
although it is difficult at this point to determine how it will influence the system.
Another influence is technology.
Technology has given doctors the ability to diagnose more quickly and to heal more readily.
Many of the tests and procedures that are commonplace today were unheard of years ago.
But these new machines and procedures do not come cheaply.
By some estimates, about one-third of the cost increase in health care is due to changing and improving technology.
And some say the cost consciousness currently sweeping the industry will curtail technological research
and thereby limit our ability to cure and heal.
On the other hand, critics suggest that there is no mechanism to monitor the effectiveness and efficiency of new machines and procedures.
If there were, critics say millions of dollars could be saved.
In a decent society, people have an obligation to provide a decent minimum of health care for all members of the society.
Those are the words of a recent presidential commission reporting on health care to Ronald Reagan.
And indeed, since 1965 and the creation of the Medicare Medicaid program,
that notion has been central to the operation of the health care delivery system in America and part of the American dream.
But medicine seems to have hit its budgetary bottom line.
And as the shockwaves echo throughout the industry, there are experts who feel this part of the American dream is beginning to fade.
We're getting to where there have to be economic considerations.
And maybe everybody can't have the best, like it or not.
I think we're getting to that point.
We're getting to the point where I think we're going to say in this country, we're going to offer you a certain level of care.
If you want extras on that level, you're going to have to consider paying for them out of your own pocket.
That's how the government hopes to control the demand factor.
I think we're moving away from the achievements that the United States made in the 1960s and 70s,
the improvement in access for poor people, access to medical care,
and that the increased corporate involvement, the increased price competition in health care,
can lead only in one direction, and that is to make the obstacles greater for people without insurance,
people who do not have sufficient private resources to get adequate care.
And the reason for that is really very simple.
It is that as the competition heats up, each organization tries to export the poor,
tries to unload all of those obligations that don't pay.
There are 35 million people outside the system entirely.
They are the working poor, working people who work 52 weeks a year.
They are the poor, they are the alienated,
and these people are not facing an issue of too few or too many benefits or too high or too low a premium.
They get nothing.
You're making a very fundamental leap of faith here.
What you're saying is that we have a number of Americans who are uninsured, which is true.
And then you're saying that those people are not getting access to the quote that you used
from the President's Committee on Biomedical Ethics, a decent adequate level of health care.
And I don't know that you can link the two.
Now, the problem is going to be defining what is a decent minimum of health care
and figuring what does that include.
Well, I think at the minimum it includes good preventive care.
And if you go to a hospital, it isn't that you ought to be treated in surgery, let's say,
by surgeons who use rusty knives and I use shiny knives.
There can't be two standards.
There has to be one standard of decency.
And I think everybody in our society is entitled to that.
Is that a radical notion?
It isn't in any other country in the world except U.S. and South Africa.
Well, really, I was holding it.
It was a short piece of 2x4 that was being cut.
And, you know, like I was trying to hold it together.
And again, you have to ask yourself, you know, is everybody entitled to the best possible treatment?
Well, you'd like to think so.
But again, there are limitations.
How much can we afford as a country?
And how much are we going to be able to provide what was promised to the American public in the middle 60s?
It doesn't need to be that way.
That's the point.
It doesn't need to be.
We have the resources, we have the know-how, and most of us think we're spending enough money to see that everybody gets good care.
But everybody's not getting good care.
The fact is that group practice and prepayment plans called health maintenance organizations reduce the reliance on hospitals,
reduce the most expensive kinds of health care, and they do not reduce the quality.
It is very possible, I believe, I think the evidence shows this,
it is very possible to have a high quality style of medical practice that is far more thrifty with our resources.
It is being done in this country today, and that ought to be the objective of health policy,
to encourage that more thrifty, that more parsimonious style of health care that produces good health care,
that keeps up the health of the American people, but which does not eat away, that does not erode the national treasure.
In other words, you link the financing and the delivery system together.
It travels under various names.
They're called HMOs, Preferred Provider Organizations, or PPOs, or they're called by all sorts of names.
What that says is that you link financing and delivery together,
and you build incentives in to contain the cost of health care while still providing the comprehensiveness of benefits.
That's giving up a freedom, and the AMA will let us know that we're giving up our right to see whoever we want whenever we want it.
I think that value trade-off is worth it because I think the freedom to see whatever doctor I want to if I have the money
is purchased at a price of 25 million people who get nothing.
That seems to me to be inequitable.
Clearly, our health system is on the precipice of change,
seemingly caught between the traditions of the past and the economic realities of the future.
As individuals needing health care, any change in the system could mean sacrifice,
either the sacrifice of a freedom or of dollars that don't go as far.
What it all boils down to, then, is choice, and what those choices are will determine the health of a nation
and ultimately our strength as a people.
I'm Richard Anderson. Good night.
There's a solid calcium in a valve. It's supposed to be like tissue paper, and you don't see it. Solid calcium.
I need a 25 and a 22.
I need a 21 and a 22.
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