Are Health Care Costs a ‘Crime?’

A special guest editorial cowritten by Despina Walsworth, MD, FACOG, Assistant Program Director at Oakwood Hospital Medical Center in Dearborn, Michigan, and Assistant Clinical Professor at Wayne State University, and Section Chief, Gynecologic Surgery, at John D Dingell Veterans Administration Hospital in Detroit

We should be outraged, concerned, even frightened about the rampant rise of health-care costs in the United States. Yet we would be amiss to follow H. Gilbert Welch’s lead in his op-ed piece published in the New York Times on July 4, “Diagnosis: Insufficient Outrage.” Welch argues that greed has led to an ethical violation of the “very ‘calling’ of medicine” and suggests that health-care costs are so egregious as to have become a “crime.” While we agree wholeheartedly that rising health-care spending must be slowed, Welch’s incendiary approach adds little but anger and frustration to the debate about how to curtail health-care costs.

If anything, Welch — the author of the book Overdiagnosed: Making People Sick in the Pursuit of Health is himself on shaky ethical ground. He opens with the provocative question of whether health-care costs are so outrageous as to have become a crime — “Recent revelations should lead those of us involved in America’s health care system to ask a hard question about our business: At what point does it become a crime?”  — and suggests health-care pricing has become “highway robbery.” The use of such incendiary — not to mention cliched — language is offensive and misleading. While provocative, it reveals a lack of understanding of the complex forces driving the cost of medical care. And it’s also certain to sell a lot of copies of his book.

Likewise, Welch lumps “hospitals, doctors, universities, pharmaceutical companies and device manufacturers” into one category as “providers.”  Again, the language is disingenuous and misleading: In medical parlance, “providers” are physicians and mid-level “providers” such as nurse practitioners or physician assistants.

Physicians practice medicine; the other groups Welch lists provide the tools and infrastructure for that practice. Conflating the two does a disservice to physicians, other health professionals, and consumers. The ambiguity is disappointing, especially coming from a physician who is familiar with the terminology. We would expect a far more sophisticated understanding of the forces driving health-care from Welch, himself an M.D., MPH, and a professor at the Dartmouth Institute for Health Policy and Clinical Practice.

In conflating physicians, facilities, and other health-care entities, Welch misses a hidden driver of health-care costs: the price of medical education. Many doctors, even years into their practices, have to repay more than $800,000 in fees for the $300,000 in loans they accumulated during their medical education. Student loan interest rates are about to double, creating more of a disincentive for emerging physicians to practice in the lowest-paying brackets — primary care and pediatrics — which is where we need them most.

In 2010, according to the Medical Group Management Association’s Physician Compensation and Production Survey, the average primary care physician earned $202,392, while specialty care physician took home about $356,885. Anesthesiologists topped the list at $407,292. Even at these salaries – and many physicians earn far less than these average figures – a $1500 monthly loan repayment bill strains the budget.

Welch also points out that hospitals are swallowing up private physicians’ practices. While he suggests that greed – in the form of higher Medicare payments for hospitals – is the primary reason for these consolidations, again, he misses the point. Physicians are giving up private practice because they are struggling to make ends meet. Shrinking reimbursements and overall uncertainty in this health-care system, hefty malpractice insurance fees, licensing and other fees, and increasing administrative costs are driving physicians from private practices to steady paychecks.

So what about hospitals? Are they the culprits in the rising cost of health care? The answer is an overwhelming “No.” Data from the American Hospital Association show the average hospital operates on a relatively small total margin, which increased – not steadily – from 2 percent in 1991 to just less than 8 percent in 2011. Net patient revenues – the profit that hospitals make on direct services – were negative throughout that time period. About 30 percent of U.S. hospitals had a negative total margin in 2011. Even the most altruistic not-for-profit community hospital needs to pay its bills. As the saying goes, “No margin, no mission.”

Welch does not mention insurance companies, except as negotiators of lower prices. Yet physician earnings and hospital margins pale beside exorbitant compensation rates for health insurance CEO’s, whose median annual pay falls at about $11 million. Stephen Hemsley, CEO of UnitedHealth Group, took home $106 million in 2009. Insurance companies’ overhead has increased between 2000 and 2009 by 72 percent. Doctors’ fees did not increase, nor did reimbursements. Meanwhile, health insurance premiums for family coverage rose 62 percent from 2003 to 2011, while deductibles more than doubled, according to analysis by The Commonwealth Fund.

Welch calls for “a dose of moral outrage.” And certainly, we should be outraged that health care is out of the reach of many people in the United States. We should be outraged that health-care bills underlie most bankruptcies in this country. We should be outraged that those who have the least — the uninsured — must pay the most (Welch gets that one right, at least).

But Welch doesn’t make clear the target of his moral outrage, or what a morally acceptable system would look like. Replacing fee-for-service structures with a flat fee, as he suggests, may temporarily slow costs, but previous attempts to cap prices have led to a “slippery slope effect.” Faced with reduced income — and those overwhelming student loans — physicians have responded to flat fee arrangments by seeing more patients and spending less time with them, resulting in poorer quality care.

In short, rapidly increasing health-care costs will not be curtailed simply by calling providers (no matter how you define them) criminals and pointing fingers. We need to understand where the true costs lie and develop a systemic approach to curtailing those costs. We need to curtail the cost of medical education and assess the impact of increasing medical education costs on our physician workforce. We need to reevaluate health insurance structure and payment modalities and the bonus provided to their administration. Ultimately, we need to offer our physicians the opportunity to practice good medicine.


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