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Maggie Mahar, Money-Driven Medicine: The Real Reason Health Care Costs So Much (New York: Collins/HarperCollins, 2006). [Thesis. Since 1980, power in health care has passed from doctors to corporations. But the notion that health care is a commodity is false and has led to waste of about one third of health care dollars and a dysfunctional system. Power should be restored to doctors. On the financing of the system Mahar takes no explicit position, but since she argues that market approaches are inappropriate to health care and that the public ends up paying in any case, she implicitly endorses single-payer national health insurance.] Acknowledgments. People who shared their stories; agent (Rafe Sagalyn), editor (Hollis Heimbouch), researchers, editors, and transcribers, Michelle Obama, BBC and ABC, family members (vii-ix). [Pie chart] Who Is Paying? TAXPAYERS Medicare 17%; TAXPAYERS Medicaid & SCHIP 16%; TAXPAYERS Other public spending 12%; TAXPAYERS buying private insurance for government employees 6%; PRIVATE INSURANCE 30% (paid primarily by private sector employers and employees, as well as the self-employed); PATIENTS out-of-pocket expenses 14%; CHARITY and philanthropy 5%; Source: 2005 Report on National Health Expenditures (xi). [Pie chart] What Are We Paying For? Private insurers’ profits and administrative costs 4.5%; Government programs administrative costs 2.2%; Nursing home care 7%; Prescription drugs (sold directly patients) 11%; Physicians and other clinical services 22%; Other spending (dentists, home health services, over-the-counter medicines) 22%; Hospital care 31%. Source: 2005 Report on National Health Care Expenditures (xii). Preface. Dimensions of the crisis (xiiixv). Popular explanations of costs (lack of rationing; litigation & “defensive medicine”) are wrong (xv-xvii). The real reasons: “we pay higher prices for the same services, have higher administrative costs, and perform more complex, specialized procedures” than other countries (xvii). The underlying reason: “power in our health care system has shifted from the physician to the corporation” (xviii). The best evidence is that 1/3 of health spending is waste (xviii). The main cause: aggressive care induced by a competitive fee-for-service market that often proves to be detrimental to health (xviii-xix). Four out of five professionals contacted in researching the book called back (xix). Ultimately, our health problems require solving “political and ethical conundrums” (xx-xxi). In the summer of 2004 the National Coalition on Health Care recommended national health insurance (xx-xxi). First two chapters are historical (xxi). Ch. 1: The Road to Corporate Medicine. In health care, unlike other markets, the supplier “plays a much more active role in determining what consumers believe they want—or need” (2; 1-3). It is therefore a “transaction based on trust,” “not a commodity” (3-4). For most of the 20th century, the AMA opposed not only socialized medicine but also capitalist exploitation of medicine (4-7). It was the Great Depression that led to the first American experiments with health insurance—Baylor Univ. Hospital in Dallas, which grew into Blue Cross; other insurers followed, with employers playing a greater and greater role (7-10). The passage of Medicare in 1965 (10-14). Specialists grew in
number, prominence, and compensation (14-15). The for-profit hospital arrived in the 1960s (15-17). By 1970, there was a consensus that costs had pushed the health care system into “crisis” (17-19). Under Nixon a comprehensive health insurance plan nearly passed (19-22). Costs continued to rise, but under Reagan markets were regarded as the solution; Paul Starr’s 1982 book The Social Transformation of American Medicine marked the advent of the corporation (22-25). Clinton’s reform proposal failed (26). The search for corporate profits is now driving health care cost increases (27-29). Ch. 2: The Cost of Competition: An Overview. Managed care failed; there was a revolt and plans liberalized approval procedures, with attendant cost increases (30-34). Since 2000 we have had mostly “unmanaged competition” (as health care economist James C. Robinson puts it) (34-36). The public has lost confidence in corporate health care (3637). Hospitals, often losing money, compete with one another wastefully (3738). Physician-owned specialty hospitals (cardiac, orthopedics) divert income from general acute-care hospitals, promote unneeded procedures, neglect preventive medicine, and spend money on advertising (38-43). The relationship between doctors and hospitals is breaking down; doctors are “blackmailing hospitals,” says James Orlikoff (44-45). In the past five years the business model has taken over medicine, producing rancorous competitive tensions (e.g. when bypass operations declined in favor of minimally invasive techniques) (4549). Advertising competition among pharmaceutical companies with redundant products is out of control, with the public footing the bill (49-55). Insurers have enormous administrative and advertising costs they must pay to stay competitive (55-58). The physicianmonitored oversight system is no longer functioning reliably (58-69). With
increasing consolidation, oligopolistic effects are appearing (69-74). The “creative destruction” of capitalism (Schumpeter) may not be desirable or affordable in health care (74-79). Ch. 3: For-Profit Hospitals: A Flaw in the Business Model? In 2005, U.S. spending on health care exceeded $2 trillion; the U.S.’s per capita spending is almost two and a half times the U.K.’s (80). Hospital care is the largest sector of expenditure and one of the fastest growing (80-81). Yet most hospitals “barely manage to break even” (82-83). The Frist family pioneered the first investor-owned hospital chain in 1968, but this model has experienced boom and bust cycles (83-86). National Medical Enterprises (later renamed Tenet) in California bribed doctors for patient referrals in the early 1990s, gamed Medicare reimbursement formulas, did unnecessary bypass operations at its Redding hospital (86118). Columbia/HCA Healthcare Corporation: another case of Medicare fraud, keeping two sets of books (11824). HealthSouth inflated profits by $2.7bn but cofounder Richard Scrushy was acquitted in a criminal trial (125-27). Many studies show “for-profit hospitals have succeeded only in leading hospital prices higher” (127). Their stock prices are very volatile (128-30). Investors forgot that historically hospitals have been unprofitable (130-33). They cannot be high-growth enterprises (133-36). The role of patient demand is exaggerated (137-38). Ch. 4: Not-for-Profit Hospitals: “No Margin, No Mission?” Competitive pressures have diminished the differences between for-profit and notfor-profit hospitals (139-42). High-tech costs exceeded the ability of philanthropy and government to pay (142-44). Revenue considerations dominate discussions (144-48). Not-forprofit Gaston Memorial Hospital in North
Carolina built “a 120,000-square-foot maternity ward which features a two story glass atrium with a 60-foot waterfall; a children’s library where siblings can play; and 52 private rooms with Internet access, whirlpool baths, and sofa beds for expectant dads” (148). With higher co-pays, an aging population doesn’t necessarily translate into rising demand for hospital services (149-53). Hospitals have lost their sense of mission: they seek to attract revenue rather than cure disease (152-53). Ch. 5: When More Care Is Not Better Care. Excessive care for an elderly dying patient is an ordeal for both patient and family (155-58). Up to one third of health care dollars “are squandered on ineffective, sometimes unwanted, and often unproven procedures,” according to Dr. Jack Wennberg of Dartmouth (159). Enormous regional disparities exist in Medicare spending (159-61). More care often actually leads to worse outcomes (162-65) and, a Dartmouth study showed, lower quality of care (165-67). Cultural differences may explain some of the differences (167-69). Supply correlates with high spending (169-75). Clinicians can have an interest in prescribing high-tech therapies (175-77). Overuse of technology is a factor in the health care crisis (178-80). Donald Berwick of the Institute for Healthcare Improvement claims half of health expenditures do nothing to relieve pain and much of it adds to suffering (18088). Too much confidence is placed in high-tech diagnostic equipment (188-90). Palliative care requires doctors trained to listen (190-96). Specialists lose sight of the patient (196-97). Ch. 6: “Too Little, Too Late”: The Cost of Rationing Care. The uninsured —47m in 2005 (198-202). Denial of service to the uninsured (202-07). Uncompensated health care ($25bn by hospitals in 2004) (207-08). How the poor are dunned and shunned (207-18).
The system forces the biggest decisions to be made in the worst conditions; comparison with Japan (218-20). We have rationing, but without clear guidelines the market decides (220-21). Medicare, too, rations irrationally (22224). Ch. 7: Doing Less and Doing It Right: Is Pay for Performance the Answer? Centers for Medicare and Medicaid Services (CMS) (which pay 60% of all hospital bills and 20% of all doctors’ bills) have embraced reform based on information technology (IT) with pay for performance, paying 2% more to institutions in the top 10% (P4P) (225-26; 230-34). Critics say it’s demeaning (22729). In the case of prostate cancer screening, P4P encourages useless misery (229-30). In practice, incentives can undermine trust and commitment (234-35). But research on P4P in a medical setting is just beginning (23638). Donald Berwick argues that incentives should apply to institutions, not individuals, who often find them alienating (238-41). The case for IT is stronger, leading to better diagnosis and monitoring of physician performance (241-56). The VA’s successfully reformed system (256-64). Kaiser Permanente’s successful IT program (264-65). Though there’s resistance to a governmentfunded IT program, the consumer will pay for it in the end (266-69). Ch. 8: Device Makers, Drugmakers, and the FDA. The experience of Charles Rosen of UC Irvine, pilloried for expressing doubts about Charité (an artificial spinal disc), illustrates the secrecy, financial pressures, and conflicts of interest involved in the development of new drugs and medical devices (27085). Spending on drugs and devices (over $300bn) is the fastest growing area of health care (285). Prices inflated by advertising and high profit margins (13%18.6% from 1995 to 2002) (286-89). “Virtually every other developed nation
regulates or negotiates prices for health care products” (289). Drugs (289-92). Devices (292-303). Manufacturer of Guidant defibrillator sold devices containing a flaw (303-10). Pressured by companies eager to get products to market, the FDA neglects its mission to protect the public (310-20). The era of Big Pharma may be ending; the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) bill may give CMS more leverage (320-24). Where We Are Now: Everyone Out of the Pool. Medicare + Choice (M+C) failed to save money, Medicare’s success isn’t acknowledged because it challenges conventional wisdom about the superiority of market solutions (325-31). The real attractiveness of “the market” is to avoid responsibility for difficult decisions (331-34). MMA created Health Savings Accounts (HSAs) for younger people with high-deductible health plans (HDHPs) can function as tax shelters for the affluent but can have high out-ofpocket cost obligations and may skim the healthiest, wealthiest individuals out of the insurance pool (334-39). The public still pays most expenses (339-40). Regina Herzlinger’s Market-Driven Health Care (1997) advocates “consumerdriven” medicine, but this is a role few consumers are up to (340-43). But “we must once again empower doctors” so that they are “free to practice patientcentered medicine . . . In other words, society needs to recognize doctors as professionals” (343, emphasis in original). Health care is “a transaction based on trust” (344). Most patients want doctors to bear primary responsibility for medical decisions with competence and compassion (345-46). Notes. 83 pp. Index. 21 pp.
About the Author. Maggie Mahar was an English professor at Yale before turning to financial journalism in 1982. She is the author of Bull! A History of the Boom and Bust, 1982-2004 (rev. ed. 2004; orig. publ. in 2003), which Paul Krugman said “makes a devastating case against the contention that the market is almost perfectly efficient.” She lives in New York. [Additional information. Margaret Anne Mahar was born in 1949. She has a B.A. and in 1975 finished a Ph.D. in English literature from Yale University with a 195-page dissertation on The Shape of a History: Eliot, Hardy, and Lawrence. She has written for Institutional Investor, the New York Times, Barron’s, and Bloomberg News. She is a fellow at The Century Foundation, a high-profile liberal think tank in N.Y and D.C. formerly known as . The Cooperative League (1919-1922) and Twentieth-Century Fund (1922-1999); she writes frequently for its website (www.tcf.org)—her most recent column is entitled “Is the Obama Administration Giving Up on a Public-Sector Insurance Plan?” (answer: “I doubt it”). Mahar is prominent in the health care debate; in July Terry Gross interviewed her on “Fresh Air,” and in August Bill Moyers Journal featured her twice and she answered questions on his website.] [Critique. A well-organized book providing a good overview. The style is that of breezy, clever, and intervieweecentered savvy journalism, but it is backed up by a formidable amount of research and many interviews. Quotations and statistics sometimes swell the text and obscure main points; the chapter subheadings are poorly done. Some of the book seems to derive from the author’s columns over the years.]