To the Editor:

In “What To Do About Health Care” [June], David Frum discusses a major question facing Americans today: whether to accept the Clinton approach to health care (or some variant thereof involving the government) or leave it to the private sector. Unfortunately, no matter which system is used, the results would in all likelihood be the same, . . . for both the public and private sectors have put their faith in the untested capability of “managed care” in combination with health-maintenance-organizations (HMO’s). . . . This is bad news for middle-class Americans who are being shoved by the government as well as by the private sector into HMO’s . . . and are being forced into a system which allows no choice of doctor or hospital and even makes them pay the bill.

Many questions about for-profit HMO’s using managed-care techniques continue to worry Americans. Do techniques like utilization reviews and second surgical opinions, as they are currently practiced, really increase quality, access, and freedom of choice while containing costs? And will there be enough money for future medical education, training, and research? Probably not. As the New York Times observed recently:

Health-maintenance organizations and other managed-care groups . . . refuse to pay for training or research that does not directly benefit their enrollees. Private markets do not pay for public goods, like research, that will eventually benefit everyone but not necessarily anyone in particular.

Even the General Accounting Office (GAO), the research wing of Congress, concluded in its study of managed care that although many employers believe, in principle, that managed-care plans save money, “little empirical evidence exists on the cost savings.” . . .

In addition, managed care presents an ethical dilemma for doctors and a quality-of-care issue for patients. Marco A. Robin of Indiana University warns:

Typically, managed-care organizations use primary-care physicians as gatekeepers and provide incentives for them to limit referrals to specialists. Such compensation arrangements create a direct incentive to limit the use of resources. Some managed-care organizations spread the financial risk among groups of doctors. All such incentives, however, create conflicts of interest: physicians have an incentive to reduce services even when it is in the patient’s interest to receive them and their responsibility as fiduciaries to provide them.

There is little doubt that we now have the best-trained doctors, dentists, nurses, and other health professionals, and that our pharmaceutical and medical research is second to none; Uwe Reinhardt, Princeton University economist and health-care expert, has called our system “the most innovative and technically sophisticated in the world.” And he has also pointed out that “When Americans speak of health-system reform, they typically do not think of revamping the mix of professionals and facilities that render health care. Instead, they focus on the way health care is financed.”

What needs to be addressed in order to keep down health-care costs is not so much the system as the far more serious problems of American society. . . . Comparing the U.S. with other countries can be an exercise in futility: more Americans engage in high-risk behaviors than people in any other developed country. We have more drug-abuse-related illnesses; more AIDS; more pelvic-inflammatory disease; more teenage, unwanted, out-of-wedlock pregnancies resulting in more premature and sick babies; more homicides and assault injuries and more accidents, especially among the young. These behaviors, linked with such social pathologies as the breakdown of the family, chronic unemployment, homelessness, violence, and despair, cause Americans to end up in overwhelming numbers in the emergency rooms, intensive-care units, and morgues of our hospitals.

Americans also tend to “medicalize” many social problems. This occurs when a behavior that was once considered socially deviant is redefined as an “illness,” treated by the health-care system, and paid for with health-care dollars. . . .

The costs of all this are high, amounting to about one-third of our health-care budget of one trillion dollars. . . . If we could eliminate these problems, our healthcare costs would be comparable to those of most industrialized nations. . . .

Leroy L. Schwartz, M.D.
Princeton, New Jersey

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To the Editor:

The Medical Savings Accounts (Medisave) proposed by David Frum are based on perfectly sound actuarial principles. Putting away small amounts of money over one’s working lifetime is cheaper and fairer than taxing the next generation for one’s health care.

The challenge is that if savings accounts are voluntary, some will put away far more than others and some will put away nothing at all. It is easy to imagine a healthy senior government employee accumulating $200,000 or more, while a chronically ill employee drains his account every year, and a part-time or temporary employee may never even have an account. Employees who belong to HMO’s rarely even see a medical bill, may think them barbaric, and surely have no incentive to save for them.

At retirement, those who have no account will be as dependent as ever on Medicare, and, on average, they may be less healthy, too, so federal costs would not go down at all. . . .

Republicans were perhaps a bit too gleeful at the defeat of Clinton’s employer mandate. Someone, somewhere, has to be mandated to finance our ever-lengthening life spans. Without unions and without lifetime employment, it is difficult for me to imagine that most individuals will succeed in a 30- or 40-year savings program. There is precious little evidence in the history of IRA’s and 401 (k)’s to suggest that rank-and-file employees can retire in dignity without massive employer contributions.

I note with interest that a recent proposal to use savings accounts in Medicare called for “each senior citizen” to receive about $2,000 a year for his individual fund. Not “each senior who had a full-time job,” or “each senior who qualified for a tax credit,” but “each senior.” Likewise, in school-voucher plans “each parent” gets a subsidy of $3,600 or whatever for the school of his choice, not “each parent with a generous employer.” The production of a public service is made more libertarian, but the financing remains extremely democratic. The same should apply to medical-savings accounts. . . .

Is this coercion? Of course! But we either coerce people to save now, and thereby reap the benefits of compound interest and a national-investment pool; or we coerce people to pay taxes later, with no national benefits. . . .

Bob Hertz
Universal Health Care Review
Willow River, Minnesota

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To the Editor:

David Frum does not address two important obstacles to appropriate health-care reform which the current system essentially mandates. First, people commonly lose coverage when they changes jobs or move. Second, people with preexisting conditions are denied coverage for these conditions. Denials range from a few months for relatively minor problems to permanent exclusion for cancer and other diseases.

How will a person with a newly opened Medisave account of the kind Mr. Frum advocates, to which both employer and employee contribute and out of which employees would pay for their medical expenses, deal with the financial impact of an immediate catastrophic illness? And how will we as a nation respond to the needs of people who do not provide for their own needs?

Gerry Mandell
Ashland, Oregon

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To the Editor:

. . . David Frum mentions . . . the importance of preserving medical quality, but he does not specify how this goal can be achieved. Oddly enough, the direction private-sector reforms are taking with respect to medical quality parallels that which the resoundingly unpopular Clinton plan would have taken had it been enacted. The essence of these sweeping cost-containment measures is “substitution,” which means providing cheaper care instead of “state-of-the-art” quality care. Our healthcare plans, both private and (increasingly) public are single-mindedly allowing or mandating such substitutions with little or no supporting scientific or clinical evidence of their effectiveness. They “switch” medical care for surgical care; outpatient care for inpatient care (although for most conditions we already have the shortest hospitals stays of almost any other advanced country); self-diagnosis instead of mammography for women up to age fifty. There has been a 25-percent drop in the number of MRI’s performed, and many hospitals are sending new mothers and their babies home only 24 hours after delivery. . . .

What can be done to improve the situation? Many of Mr. Frum’s ideas should be tried, but other changes ought to be introduced as well to restructure the ground rules of the health-insurance market and remove market distortions. These involve four areas:

• Taxation: the tax treatment of health insurance must be rearranged to give the patient ownership of his policy and thus ensure portability, and reinforce the patient’s control over his resources. All insured parties, not just those insured through an employer or those with a Medisave policy, should get a tax credit or exemption capped at the value of the average policy.
• Patient-centered reimbursement: put the patient back in the system by requiring all insurers to pay claims directly to the patient and not to the provider. . . .
• The patient’s right to know: protect this at each encounter with the health-care system, from the purchase of insurance to consenting to major surgery. The patient must be able to ask and find out what medical services or products relevant to his condition are excluded from reimbursement under his plan. . . .
• Demand reduction: the toughest problem of all to come to grips with is the level of America’s social pathology. America’s social problems must be addressed at all different levels of society (families, communities, schools, religious institutions) if the demands that they place on the health-care system are to be reduced . . .

Mark W. Stanton
Health Policy International
Princeton, New Jersey

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To the Editor:

As David Frum points out, health insurance for most Americans “is not insurance but a disguised form of salary”; it has become a perk. Instead of general health coverage, one now expects a policy to cover “eyeglasses, check-ups, and other routine expenses.” But this cannot go on forever.

Another reason we have arrived at a crossroads is that the two-party insurance system has expanded to three: the insured now receives a service from a third party instead of cash from the insurer; the third party now gets the cash. The consequences of this arrangement should not have been hard to predict. First, the insurer has a huge cash inflow from nearly everyone in the country (mostly out of fear and sometimes sheer terror of getting sick). Secondly, instead of paying out claims to the insured in cash, the insurance companies pay a third party—the doctors. Now, the doctors do what they do on a full-time basis, while the person paying for all this becomes ill part-time. So, thirdly, since there is a huge amount of money floating around in the system, the doctors, acting according to accepted free-market practices, base their charges on that sum of money and not on an individual’s ability to pay. Throw in the government, as Mr. Frum so aptly explains, and we have a superstructure consisting of a quagmire of bills and regulations plus billions of dollars. . . .

What ought to be done is . . . to start all over again. . . . and get the government entirely out of it. . . .

Eddie MacCausland
Ocala, Florida

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David Frum writes:

Leroy L. Schwartz complains of the deficiencies of HMO’s. Personally, I sympathize with him: I would not join one. But a competitive market will naturally tend to offer both lower-cost, lower-service products and higher-cost, higher-service products: both Valujet and American Airlines. You pays your money and you takes your choice. The preference of doctors for working in a high-cost, high-service environment is understandable, but the market almost always heeds the wishes of the parties paying the bill.

Bob Hertz astutely diagnoses Medisave’s vulnerability to free-riders. How much of a problem this vulnerability presents will depend, however, on how generous a backstop society offers those free-riders. If we collectively insist that the nonindigent will be expected to provide for their own old age—and that those who do not will be treated as indigents—we may find Americans rediscovering the virtues of responsibility after all. And without state compulsion.

Gerry Mandell asks how a person with a Medisave account will meet the expenses of a catastrophic illness. Remember: the account works in tandem with a high-deductible (say $3,000) catastrophic-insurance policy. Any illness that gives rise to expenses greater than $3,000 would be met by insurance. But because the first $3,000 of medical expenses each year are paid out of the insured’s own pocket with tax-sheltered money, the cost of catastrophic insurance would fall far below its present exorbitant rate.