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This page created October 2000 by Michael Wynne
This page discusses the problems of reduced access in managed care
and augmented access in item of service for profit systems. It
responds to issues raised by Graeme Samuel.
This page was originally written around a section of Graeme Samuel's speech. It follows the headings and context. It supplements a shorter criticism.
Samuel in his speech to the World Bank claimed that corporations do not squeeze care for profits, and that care is not distorted by profit potential. Access was not decreased. It was increased because for profit care was more efficient.
The hard reality is that the largest health care corporations in the world have built their empires by taking profits from care. This is how the corporate market system works. This is how they make their profits. Tenet/NME, Columbia/HCA, Sun Healthcare, Vencor, IHS have all built huge corporate empires within a very few years by doing this. There was only one place where this money could have come from.
In this instance access was if anything increased as money was made by providing services. In managed care money is made by not providing services when they were required. Access was therefore restricted. There are many examples. Kaiser paid Texas a US $1 million fine. Texas and Connecticut have taken action against several HMO's for inducing doctors to restrict access to care.
Understanding corporations:- The public increasingly perceives large corporations to be self interested, directed to profit and profit only, to lack integrity and to be untrustworthy. There is plenty of evidence to show that they are right - QANTAS and the banks in the money for mouths scandal - Mayne Nickless in price fixing - Phillip Morris and other tobacco giants. There are vast numbers of them - cement cartels, fire protection groups and so it goes on.
Health care corporations are "growth companies". Investors get their money from growth and not interest. Health care attracts corporations which are as much if not more interested in profit and growth than others. More than any other group they have been shown to lack integrity and to be much less trustworthy than any other corporate groups. They are directly comparable with the tobacco companies. I argue that a lack of integrity and trustworthiness give groups a competitive advantage in health care. This is because a willingness to compromise care for profits gives a competitive advantage - whatever psychological mechanism is used to rationalise the practice.
Samuel wants us to trade the care of our vulnerable citizens with these people. It is likely that access to care will depend largely on the relationship between access and profit. Instead of access based on need and available resources, access will be modulated by the various economic incentives and disincentives in the system - the way someone in a distant office or board room juggles the system.
Macmedicine:- Samuel like Columbia/HCA's Scott and Tenet/NME's John Bedrosian argues that health care is a MacMedicine which can be traded like a hamburger or a house. His arguments as I have shown earlier are flawed because the patient is not a customer. He is comparing apples with oranges.
Health care is primarily a humanitarian service by one caring human to another who is in need. It is a specialisation of the community's Samaritan traditions. This is why we do not think that the profit motive is appropriate.
The construction of a house is easily examined. It is not purchased at a time when we are incapacitated and impaired. It is not a "life event". We plan to buy a house, a life time investment. Housing for the poor is provided by government and government buys a house, an object much in the same way as the health service buys an operating table. If someone's house is burnt down neighbors and family will take them in - a Samaritan act more comparable to health care.
The cost of public capital:- Without the benefit of economic training I think at a very simple level. I cannot take Samuel on at his level but if the rest of his arguments are a guide then I am distrustful! He argues that the way health care is paid for has different overall economic consequences.
It is not clear to me why paying for care via a levy or by taxes is any different macro-economically to paying for it as fee for service. In all cases the money goes from someone's pocket to care. Method of payment via government should make no overall economic difference. All we are arguing about is how best to get it from A to B without wastage and with the best possible end result in care. By using government it is easier to get the more fortunate to contribute to the care of the less fortunate. Health care has done this for hundreds of years.
Public money is raised like other money in the marketplace or by contributions from the public. It is backed by the government or in my suggestion by the community. It has greater leverage to secure favourable terms because the risk is minimal. It is spent in the same way. The essential difference is that it all goes where it is intended - to the patient. The only "productive private use" from which it is diverted is out of the pockets of directors and shareholders. It is not something which generates a product which can be exported to boost our trade balance. For profit groups employ fewer people than not for profit so that more are unemployed -- they call this efficiency
Risk transfer:- Samuel revisits the transfer of risk to the private sector. The advantage of this is debatable as is well illustrated by our experiences in contracting care to corporations like Mayne Nickless and those in the UK. The community would be much happier if the risks were retained by government. This poses a far smaller risk to their health care.
Efficiency gains:- The efficiency gains Samuel claims are not in health or aged care, but in commercial activities. Experience in health care suggests that the only system similar to the one he propose is both the least efficient and the most costly. Privatisation has been associated with increased costs wherever it has been introduced. For profit care has been more costly.
Efficiency in the for profit marketplace has been most readily accomplished by eliminating care as a humanitarian process and replacing it with instrumental services - shearing sheep, milking cows, showering the aged and toileting them. This is most readily accomplished by reducing staff levels to the extent that there is insufficient time to provide care. This is most apparent in aged care.
Increased Access:- Samuel's claim that
access is increased by competition is not supported by the market's
behaviour in health care. Restriction of access and care are the ways
in which corporations control costs in a capitation system and there
are no grounds to think that this will be otherwise in this model.
Access is increased when corporations are paid per item of service.
Profits are made by overservicing. Tenet/NME is a good example. In
fairness to Samuel his system of contracting does ensure that all
bodies contracted to a particular corporations will be equally
disadvantaged - unless of course some will pay for "extras" not
covered in the package. The problem is the distortion of care created
by market pressures - whether they will get access to the same or a
different range of investigations as in a not for profit or public
system.
Samuel argues that his model will ensure universal access
Regulation:- Samuel reaffirms his reliance on regulation to ensure equity. I have addressed the difficulties in monitoring and preventing cherry picking elsewhere.
Costs blowouts for government:- Samuel argues that our government funded systems in Australia and the UK can no longer meet the demands of the community and this may be true. There are some who dispute this.
The evidence from the USA suggests that in a for profit system you often pay more for less - or more accurately don't get what you have paid for.
I agree with Samuel that we may not in the future be able to afford to provide everybody with everything they want at the public expense - their demands. It is possible that the community may not be prepared to pay for everyone's needs. We will have to decide what "needs" we will meet.
I also agree that we cannot deny people the right to pay for (I do not use the word purchase) care which is not considered to be the responsibility of the community. It may be difficult for government to decide what will and what will not be paid for in its hospitals and to accommodate "extras" in its hospitals. This site reveals the major problems in trading basic care out to for profit groups. they cannot be trusted. I believe that it might be possible to accommodate both basic care and optional extras within a not for profit system without running these risks.
It is simply not possible to ration care to secure profits for shareholders, without deliberately deceiving them. Imagine the outcry when a director with a multimillion dollar salary gets a million dollar bonus linked to profits at the same time as the company advises the public that it has decided to reduce the number of costly cardiac bypass procedures - 30 or even 50 lives which might have been saved.
We want medicare:- The hard political fact is that Australians, like Canadians do favour a system where their major health care needs and costs are covered by the medicare system. My problem with this is that governments are not up front. They make promises which they cannot fulfill. Instead of increasing the medicare levy and decreasing taxes they hide the payments in the tax system. Why not let us all see what it is all about. When given the opportunity provided by contracts governments may be tempted to squeeze the system, not for the benefits of the community but to fund projects which will generate more political mileage.
The carrot:- The advantage for for-profit groups and what will make them bid competitively will be the profit potential which providing extras paid by patient or insurer will bring. They may bid below cost to secure this extra potential profit.
If we do this we will be setting up the system for exploitation. Corporations like Tenet/NME and HCA will once again set up teams in the hospitals to play on anxieties and persuade vulnerable people that the basic care is less than adequate. By paying more they will be offered those extra bits that matter.
What anxious relative will accept second best. We will now have a situation where basic care is poorly funded and extra therapies are well rewarded. This is a situation capitalised on by Sun Healthcare, Vencor, IHS and many others. Thousands are alleged to have died for lack of care while vast profits were made from extra therapies. Corporations simply cannot be trusted.
Samuel cannot claim that this will not happen because this is the way all of the groups with whom he would be contracting operate. They have a demonstrable track record for dishonesty and deception. He cannot claim that regulation and oversight will prevent this from happening. Regulation and oversight have failed repeatedly to do so.
A not for profit alternative:- The alternative I have suggested as a path to explore is a community not for profit service which is not driven by profit but by a motive of care, trust and integrity. Additional options could be readily provided for luxuries and for services which are not deemed to be the responsibility of the community. Any profits from the misfortune of others could be ploughed back into profitable community activities - perhaps less rationing for the poor.
The community and government:- My own view is that for such a system to work best the decisions about funding and funding options should be removed from the political process and returned to community processes. Government should not take initial responsibility but should be advised. They would be expected to accept that advice and if they reject it do so at an election.
The community should also be intimately involved in the provision of care and in decisions about what should and should not be paid for by the community. Corporate groups and government have rightly come to be distrusted by the public. Any attempt at rationing by government or by corporate interests can only provoke an intense backlash. Rationing is something which must be resolved within the community - between motivated groups who come together with a common purpose.
Australia differs from the USA:- Samuel claims that the critical difference between Australia and the USA is that our system is funded by the taxpayer, and the US system by implication by private moneys. This is not quite true.
Corporate medicine was founded on medicare and its existence depends on medicare and medicaid. Both are funded by taxes. Very few corporate hospitals would be viable without these patients.
It is the potential which the enormous medicare budget provides for profit which so attracts corporations. The latest, Healtheon is investing many hundreds of millions in an internet service which it believes will enable it to squeeze competition even harder and in doing so secure a large enough piece of the medicare budget to make very large profits.
Most of the remaining funding in the USA comes as a sort of employment tax which is directed to their health through the HMO system. These are the younger and healthier working community who require less. Many corporations have shed their retirees health plans. Only a small sector of funding is paid privately by insurance or out of pocket. Vast numbers have no medical cover at all.
The difference between the USA and Australia is that in Australia we have until recently had what is essentially a humanitarian service. In the USA they have developed a market place dominated by corporate interests, profit priorities and a system which uses profit as the motivating force in providing care. Financial incentives and disincentives drive profit at the expense of care. This is what Samuel is proposing.
Government policies:- Government in contracting its services to the private corporate sector is following Sun Healthcare's chairman Andrew Turner's advice that government should contract the care of public patients to the market and then "butt out". The market would address problems like quality of care. Turner resented government oversight. "Butting out" is not part of Samuel's model. He sees government as a regulator.
Our experience of government over the last several years indicates that despite all the rhetoric about control and regulation "butting out" is exactly what they are likely to do. This is what has happened in aged care recently. It has happened to the probity requirements for licenses. Australians will be left to the competitive mercy of the likes of Tenet/NME, Columbia/HCA and Sun Heathcare. These groups will not provide care unless they can do it their profitable way. This is what Ron Williams warned us about in 1992.
This can't happen here:- One of the responses I get repeatedly is that this is Australia and not the USA. These things could not happen here. It is simply ethnocentric egotism to suggest that as Australians we are different to other humans and will respond differently. That we are no different is only too apparent not only from the aged care debacle but from the way in which politicians have been prepared to undermine and disregard our laws and the principles on which our society is built in order to implement their policies.
-sl