John H. Frenster, M.D., FACP
Physicians' Educational Series
Atherton, California 94027-5446 

A. Date of Edition:

This edition of the analysis of Freedom-of-Choice Medical Care was completed on December 26, 1990. Data, opinions, and projections in books, journals, and newspapers were all obtained before this date for inclusion in the analysis.

B. Statistical Sources:

Medical expenditure data can be obtained at the local, regional, state, or federal level (1). Federal data is the most complete in the aggregate (2), although often it is not as detailed as at the state or regional level (3). Local data from individual hospitals, clinics, or physician's offices (4-5) is often not available, but will increasingly be needed for accurate analysis (6).

Surprisingly, federal data is often both inaccurate and misleading, as revealed in the recent discovery of double counting of physicians' income in hospitals by federal analysts (3), necessitating a fresh analysis of such previous federal data. This re-analysis resulted in "significant revisions from the data previously published, affecting all years from 1960 through 1987" (2). As a result, it was found that total physicians' services remained steady at 19 percent of the health dollar each year from 1960 through 1989 (1-3), while the number of physicians engaged in active care almost doubled in the same period, and the size of the U.S. population increased by more than one-third (Table 1).
 

Table 1. Newly-Revised Federal Data for Health Costs (1-3).

	1960	1965	1975	1985	1987	1988	1989
Total U.S. Personal Health Care (billion constant 1982 dollars)	90.	120.	217.	307.	328.	338.	366.
Percent of Total Health Care:
Hospitals	34	34	39	40	40	39	39
Physicians	20	20	18	18	19	19	19
Nursing Homes	4	4	7	8	8	8	8
Dental,other Professional, HomeHealth Care, Drugs, and Vision     Products	30	28	24	21	22	23	22
Administration, Research,     and Construction	12	14	12	13	11	11	12

Obviously, this newly-revised federal data will need very close scrutiny, especially since it has been the basis for most of the federal and state legislation during the past 30 years.

C. Medical Needs:

Certain diseases, such as heart disease, have decreased markedly in both incidence and consequence during the past 30 years (7), perhaps reflecting improved public awareness of high-risk behaviour, improved physician awareness of minimal or latent disease, improved drug and surgical methods for sustaining and improving cardiac function, and despite the continued federal subsidy of pathogenic products from the tobacco industry and the dairy industry. These improvements in heart disease have resulted in cancer now being the number 1 killer of Americans between the ages of 35 to 64, and "if trends continue, it could overtake heart disease for those aged 65 to 74" (7).

"In the past three years, cities have reported skyrocketing rates of tuberculosis, hepatitis A, syphilis, gonorrhea, measles, mumps, whooping cough, complicated ear infections, and, of course, AIDS. Experts blame new depths of urban poverty and inadequate medical services for the situation. Poor nutrition and overcrowded housing create ideal conditions for the spread of disease. The arrival of AIDS and crack pushed chronic hardship into crisis, shattering families and monopolizing scarce health dollars" (4).

"There is little disagreement among experts about what might be done about infant mortality in the United States, where some experts believe that up to a third of the 40,000 infant deaths a year could be prevented simply by making sure that all women got care" (5).

And even in the affluent suburbs, "American medicine is amid a revolution that is driven by cost. The impetus for the denial of claims does not come solely from the peer review organizations. PROs have to respond to directives from battle-hardened professionals at the Health Care Financing Administration. And the HCFA bureaucrats seem to care more about health care costs than quality. While federal agencies watch over expenditures, what really is needed is someone to watch over the individual patient's welfare. The family doctor used to play that role, but we in the medical profession are reaching the point where we no longer can apply our judgment to individual patient's needs" (6).

D. Academic Proposals:

It might be expected that University Departments and Corporation Think Tanks would respond to this crisis in some way, and indeed they have, but largely in ways that are parochial to their own interests rather than those that meet the medical needs of the American people.

Data have been collected and analyzed by Departments of Economics, sometimes just to further the state of the art in Economics (8), or to provide an economic rationale for the question of Who Shall Die? (9).

Graduate Schools of Business have formulated elaborate plans to divide the medical market and to conquer each in turn (10). Schools of Public Health have turned their eyes to the rigors of the Canadian Northland (11), or to the calculated benevolence of the Japanese Islands (12).

Not to be outdone, Institutes of Academic Research have proposed cutting the research pie into smaller pieces (13), and Academic Editors have proclaimed that the time has arrived (14).

E. Government Proposals:

Legislation, speeches, and analysis, usually in that order, have been used by the federal government to convey its views on medical care to the 50 states and to the American people.

The process had its apogee in 1965 at the time of passage of the Medicare and Medicaid programs, and the process has since continued through the Prospective Payment (DRG) System of 1983, the Freeze Imposition of 1984, the Participating Provider legislation of 1984, the Physician Payment Review Commission of 1988, the Catastrophic Coverage Act of 1988 and its repeal in 1989, the Resource-Based Relative Value Scale of 1989, and the decreases imposed upon the failure of the federal budget agreement in October, 1990 (1, 2).

One of the more famous of federal emissions is the bilateral debate between two United States Senators on the topic of rationing of medical care in Oregon (15,16). Oregon has decided to wait. One of the complicating features of federal planning is the inclusion within the National Health Accounts of: "Medical services provided by the Department of Defense to military and civilian personnel overseas" (3). Current events in the Middle East may increase this expenditure (17). In this regard, Gail R. Wilensky, Ph.D., chief of the Health Care Financing Administration was quoted in December, 1990 as saying: "The ability of society to meet other needs is affected by the growing share of economic resources claimed by health expenditures" (1). Accordingly, the White House Budget Office then disclosed plans to further reduce Medicare funds by $3 Billion more than the recent pact with Congress (18).

Louis W. Sullivan, M.D., the Secretary of Health and Human Services, is leading a review that the Domestic Policy Council has undertaken on the nation's health care system; he is to present his recommendations in 1991. Dr. Sullivan has already rejected Government-financed national health insurance as a solution, saying he favors continuation of a public-private system (1).

F. Physician Proposals:

The American College of Physicians has begun the process of formulating a new system of financing medical care that will ensure Universal Access to Health Care in America (19, 20). "In the near term, given the urgency of the need, it should build on the strengths of existing health care financing mechanisms. In the longer term, careful consideration of new and innovative alternatives, including some form of a nationwide financing mechanism, will be necessary" (20).

Earlier, the American Medical Association began a national discussion on improving our health care system which emphasized certain strengths of the present system (21). These strengths are:

"These strengths are the foundation on which the American Medical Association has based its proposal for reform. The individual's freedom of choice, combined with a free and independent medical profession, remain as the cornerstones of our system -- a system that does not allow government to dictate choices to patients" (22). The individual points of the program, Health Access America, remain under intense analysis and debate (21).

In the meantime, the eloquent cry of practicing physicians, such as those quoted above in section C: Medical Needs (6), has inspired new proposals for Freedom-of-Choice Medical Care that will meet the basic needs of both patients and their physicians by a double-voucher system.

G. Experimental Results:

Vouchers are economic warrants and guarantees for goods and services and have an increasing use in business and education (23). They may vary in value over time, and may be specialized for use in the separate phases of medical care (24). They do not require paperwork on the part of either patients or physicians, but are individualized for use by a single patient or a single physician (24).

In some respects vouchers resemble credit cards, although they are more specialized. In this regard (25), "A credit card-based payment and information service designed to streamline claims processing has been introduced on a limited basis by American Express Travel Related Services Co. Inc. American Express's new card, called Quattro, will be used by 500 of its workers and those of John Hancock Financial Services in the Boston area"(25).

"The credit-card giant hopes to expand the program to other Boston- area companies in 1991. It described Hancock as its "partner-carrier" for the Boston market. After its Boston expansion in 1991, American Express will decide whether to go nation-wide and use other insurance companies in different markets as partner-carriers"(25). "Quattro works with a company's existing health care plan by paying physicians directly and automatically filing claims and collecting payments from insurance carriers. It also bills employees monthly for any remaining charges not covered by the plan and offers them lines of revolving credit to extend payment of health care expenses"(25).

"With the presentation of the Quattro card by a patient, physicians have immediate verification of patient eligibility and coverage at the time of service"(25).

"Quattro will be marketed to physicians and hospitals and will pay them within 15 days after a patient encounter. Physicians and hospitals will pay a service fee for accepting the card. The fee will be based on specialty and claims volume and should average about 5.5% of claims."(25)

H. Double Voucher Systems:

A double voucher system for patients and physicians will also provide mechanisms to assure that the care decisions reached between patient and the physician are not subject to prior review or micro-management by the insurance carrier. Such prior review and micro-management has been the chief cause of the increasing frustration and anger felt by physicians over denials of their care (6), and its solution will go a long way to restoring the beneficence needed for all healers in the patient-physician interaction.

As the analysis, the debate, and the planning go forward, we welcome your comments, your questions, and your suggestions for inclusion in the forthcoming editions of this analysis.

Let us proceed in Freedom. 

References:

1. Associated Press, "U.S. Reports Rise, to $604 Billion, in Health Care Spending in 1989", N. Y. Times, p. Z+ A15, Friday, December 21,1990; repeated, in part, p. Y 8, Saturday, December 22, 1990.

2. Office of National Cost Estimates, "National Health Expenditures, 1988", Health Care Financing Review, 11, 1-41 (Summer 1990).

3. Office of Research and Demonstrations, "Revisions to the National Health Accounts and Methodology", Health Care Financing Review, 11, 42-54 (Summer 1990).

4. Rosenthal, E., "Health Problems of Inner City Poor Reach Crisis Point", N. Y. Times, p. Z 1, Monday, December 24, 1990.

5. Scott, J., "Trying to Save the Babies: A Washington Clinic Seeks to Help Reduce the U.S. Infant Mortality Rate. Access is Guaranteed for All Women and Infants", L. A. Times, p. A1, Monday, December 24, 1990.

6. Marchasin, S., "The Cost-Driven Revolution in American Medicine", S. F. Chronicle, p. A21, Wednesday, December 26, 1990.

7. Sutherland, J.E., Persky, V.W., and Brody, J.A., "Proportionate Mortality Trends: 1950 Through 1986." J. Am. Med. Assoc. 264, 3178- 3184 (December 26, 1990).

8. Roth, A.E., "New Physicians: A Natural Experiment in Market Organization", Science 250, 1524-1528 (December 14, 1990).

9. Fuchs, V., "The Health Sector's Share of the Gross National Product" Science 247, 534-538 (February 3, 1990).

10. Enthoven, A., and Kronick, R., "A Consumer-Choice Health Plan for the 1990s", New Eng. J. Med. 320, 29-37, 94-101 (1989).

11. Himmelstein, D.U., and Woolhandler, S. "A National Health Program for the United States", New Eng. J. Med. 320, 102-108 (1989).

12. Berwick, D.M., "Continuous Improvement as an Ideal in Health Care", New Eng. J. Med. 320, 53-56 (1989).

13. Bloom, F.E., Bulger, R.E., and Randolph, M.A., "Funding Health Sciences Research: A Strategy to Restore Balance", Clin. Res. 38, 671-685 (December 1990).

14. Relman, A.S., "Universal Health Insurance: Its Time Has Come", New Eng. J. Med. 320, 117-118 (1989).

15. Packwood, R. "Oregon's Bold Idea", Academ. Med. 65, 632-633 (1990).

16. Gore, A. "Oregon's Bold Mistake", Academ. Med. 65, 634-635 (1990).

17. Pasztor, A., "U.S. Medical Provisions Aren't Enough if Gulf War Erupts, Some Critics Say", Wall St. Journ. p. A6, Tuesday, Dec. 11, 1990.

18. Stout, H., and Wessel, D., "Budget Office Seeks to Reduce Medicare Funds", Wall St. Journ. p. A3, Friday, Dec. 21, 1990.

19. Greenberger, N.J., Davies, N.E., Maynard, E.P., Wallerstein, R.O., Hildreth, E.A., and Clever, L.H., "Universal Access to Health Care in America: A Moral and Medical Imperative", Annals Int. Med. 112, 637-639 (May 1, 1990).

20. Ginsburg, J.A., and Prout, D.M., "Position Paper. Access to Health Care", Annals Int. Med. 112, 641-661 (May 1, 1990).

21. Todd, J.S., "Problems With Incentives", J. Am. Med. Assoc. 264, 1294-1295 (September 12, 1990).

22. American Medical Association, "Health Access America: Strengthening America's Health Care System", Chicago, IL (February, 1990).

23. Editorial, "Midwestern Laboratories: Federalism in Social Policy", Economist (UK) 316, 25-26 (August 25, 1990).

24. Modderman, M.E., and Rogers, H.G., "Market-Orienting Military Health Care Through a Voucher System", J. Ambulatory Care Manag. 13, 60-68 (July 1990).

25. Mitka, M., "American Express Charging Ahead on Claims Processing System", American Medical News, p. 7 (December 7, 1990).