Health Care and Insurance: Distortions in the Financing of
By George Ross Fisher
2000/12 - Beard Books
1893122565 - Paperback - Reprint - 226 pp.
By tracing troubles in the health care system to the pervasive and disruptive dominance of insurance financing, a series of unique and challenging proposals are offered to lead to realistic and financially prudent yet humane health care.
In the 1980s, health care costs continued to soar faster than food costs, faster than inflation. Health care, America's second largest industry, is absorbing nearly 15 percent of the gross national product. Yet, as a system it is beset by bizarre distortions that lead only to frustration, extravagance, and financial burdens on a massive scale. Why do hospitals cost so much? What economic forces shape their services? If we are letting some great hospitals die in our cities, why are we building new ones? How much of our health expenditures actually pay for health care? These questions have developed into the most far reaching domestic issues of our time, involving household words such as Medicare, Medicaid, and the Blue plans. In this book, Dr. Fisher meets them head-on with a totally fresh analysis, offering provocative and clear proposals for reform. Troubles in the health system are traced to the pervasive and disruptive dominance of insurance financing. Beginning with a simple comparison showing why hospital rooms cost so much more than hotel rooms, Dr. Fisher concludes with a series of unique and challenging proposals to Congress and to the insurance industry. This book is intended to lead us toward realistic, financially prudent, yet humane health care.
From the Author:
Looking back on it, the book had more effect than I expected.
Ben Franklin advised, "if you want to convince people, don't use logic, tell stories." So, every other chapter was a story about hospital finances, and the other chapters were serious argument. Maybe it was effective. The book warned of the dangers of hospital cost reimbursement, leading to a serious amount of hospital overbuilding; and three years later Congress created the DRG system, or payment by diagnosis. The 1983 budget bill was hastily written, and it blundered in several major ways, but it did replace cost-plus with prospective reimbursement of hospitals, and things are somewhat better. I take a grim satisfaction from the venomous reviews which hospital administrators gave the book.
Unfortunately, the book predicted the death spiral of Blue Cross, and that has largely happened, even though the hollow shells remain standing, largely transformed into for-profits, and mostly providing HMO services.
Also predicted were the defaults of hospital municipal bond financing, and the collapse of the institutions which depended on them; take a look at the Allegheny system of medical schools and hospitals for a lurid example.
A book can go through doors whose threshold the author cannot cross, so a glowingly laudatory review in Barron's got me an invitation to address a health policy dinner in the Reagan White House. In honor of the occasion, the Medical Savings Account was created there. And I was soon invited to be the luncheon speaker for the inauguration of the Business Coalition for Health in Chicago --fateful occasion, in retrospect. And invited to join the health editorial panel of USA Today, on the Op-Ed page, during the defeat of the Clinton health care proposal in 1993. Plus several trips before Congressional Committees.
So, all in all, I can look back at this book with some satisfaction. Although its warnings were largely unheeded until too late, it helped my profession a little, and the country a little -- and it helped me a lot. Those who are afraid to write about an important but obscure subject, should take heart from the example.
From Nightingale's Healthcare News:
Health-care insurance is deeply and inevitably inter-twined with health care. The way health insurance is paid determines to a large extent the way the health-care system is structured and health services are delivered. Health insurance is shaped by government regulations and programs, particularly the giant programs of Medicare and Medicaid, more than the actual health needs and concerns of individuals and the desires of doctors and other health-care workers in providing and administering health care. Doctor Fisher, as have others before and since this still timely book was first published in 1980, sees through personal experiences and keen analysis how the contradictions and irrationalities in the health-care system are reflected in health insurance. This author's particular contribution to correction of the faults of health care unnecessarily costing individuals, employers, and the government billions of dollars while at the same time negatively affecting the health care of the public is to analyze the fundamentals of how and why health insurance works the way it does.
Fisher not only analyzes the numbers for eye-opening revelations about what is really going on in the insurance payment for health care, but he often also explains the thinking, the social psychology and values, and the economic principles accounting for the health insurance industry's practices. There's a network of such practices which cannot be justified financially. Nor can they be justified on the ground that they are effective even if they make no sense financially. However innocuous or apropos a wide variety of fundamental financial structures and practices may have seemed in the beginning days of the large government health-care programs, their counterproductive effects have grown to seriously affect health care. It is not alarmist to say that there is a crisis in health care. The troubles in the health care field have taken on a life of their own which so far has been impermeable to rationality, criticism, and the pleas of countless individuals and professionals. Dr. Fisher is not alone in recognizing the senseless, bewildering nature of the health-care system. But unlike most other authors seeking solutions to its problems, he realizes that changes in insurance coverage for health care would lead to changes in health-care services and the costs of health care. He realistically recognizes that there is barely any likelihood that changes could come to health insurance without changes in the health-care industry that leaders in it would agree to. But in widening the scope of factors involved in the ongoing and worsening troubles of health care, Fisher increases the possibilities that something positive can be done.
Health insurance along with health care have gone awry because of two improper premises guiding them. The first is that "modern health care is such a fundamental right of all citizens that it ought to be subsidized by income tax concessions." Fisher is not saying that all citizens do not deserve health care. But they ought to be able to afford most basic services, including things like medication and eyeglasses. And citizens ought to be able to have medical needs such as costly surgery or long-term intensive care they cannot individually afford covered for them by government programs, private plans, health insurance, or some combination of these. Thus, Fisher proposes bringing health care into the reach of nearly all citizens in other ways than considering it as an incontestable right to be guaranteed by the government in league with private organizations no matter what the cost. Paradoxically, considering health care a right takes good health care away from a large part of the population. It's become for many a meaningless right, like the right to walk on water. In going way too far in trying to offer this right to all citizens, the government has ended up denying many adequate and timely coverage.
Fisher's second improper premise is that "the insurance mechanism is an appropriate way to finance the entire health system." The health insurance industry's devising coverage for virtually every conceivable health condition, possibility, and requirement had resulted in a confusing plethora of insurance policies and the high cost of health insurance. In one analysis, Fisher shows how this premise that insurance is the most desirable way to finance the entire health system has led to much higher costs for elementary health needs, and incredibly high costs for surgery and other specialized health costs and hospital stays. One contrarian perspective Fisher takes is that by paying directly for basic health services, consumers would come out ahead in lower insurance premiums and stronger assurances regarding the truly costly health care. The book is filled with such revealing analyses pertinent to the problems in the health-care system.
The book uses a format shifting from made-up, but true-to-life anecdotes with characters and dialogue which illustrate the effects of the misguided or manipulated behavior of different types of individuals on the health-care system to examples of accounting practices in health insurance and health organizations along with analyses of these. The different aspects of the mixed format demonstrate the talents of a fiction writer and the skills of an accountant. For readers not wishing to follow Fisher's sometimes microscopic analyses of complex accounting practices and explanations of accounting and economic principles, the author always makes clear the point he is making with these. He says in his "Introduction" some readers may want to "jump to the set of solutions I propose in the second half of the book." The author's critical analyses and ideas for health care are indispensable for anyone--private citizen, policymaker, health-care worker--aspiring to play any part in reforming the health-care system. As the author realizes by his remark that "apparently, only the public can resolve" the deep-seated and continuing problems of the system by understanding how health-insurance policies and payments contribute to irrelevant and harmful health-care practices.
"This book was written to stimulate public awareness of a problem which, apparently, only the public can resolve." Fisher succeeds estimably in fulfilling this aim. The average reader as well as many with a more-than-average knowledge of the problems of the field, hearing all the time the criticisms of health care, focus almost exclusively on it. Fisher's accomplishment is to place the interrelated contradictions and irrationalities, the financial mismanagement and myopia, etc., in the health insurance field on a par with those of the field of health care. In widening the view on the sources of the problems, Fisher concomitantly opens up new avenues for solutions to them. With "Health Care and Insurance," ones sees that the problems with health care cannot be reduced, much less eliminated, by altering health-care organizations and services alone. Reforms have to be made to health insurance in conjunction with any changes in the health-care field.