Health Care: Supply, Demand and Politics

IF gross medical resources alone guaranteed physical wellbeing, Americans would be the healthiest people in the world. The U.S. has more than 7,000 hospitals, many of them with the most advanced and elaborate equipment available anywhere. The nation's 330,000 doctors, one for every 650 people, are the products of the most rigorous training. In sheer dollar terms, health has become the second largest industry in the U.S., last year turning over $67.2 billion, or 6.9% of the G.N.P.

But this vast expenditure, $324 per capita annually, does not ensure a high level of care. The rate of infant mortality is lower in twelve other industrial countries. Men in 17 other countries live longer than Americans do; women live longer in ten. Distribution of services is so spotty that more than 40 million people virtually never see a physician under any circumstances, and millions of others do so only after having been struck by serious illness. Soaring costs and the scarcity of practitioners and facilities in many areas have retarded the development of preventive medicine. Nationally, the U.S. does not really have a healthcare system; rather it has an inadequate system for treating disease and injury. For those who cannot afford the most comprehensive insurance or are not covered by Government programs for the old and the very poor, serious illness can mean financial ruin.

Obvious and Urgent. The problems are numerous and complex, including the training of medical personnel, the organization of hospitals and the melding of private and public facilities. But public attention has focused most sharply on the price of visiting a doctor's office or staying in a hospital. Politics is following that preoccupation. Republicans and Democrats, liberals and conservatives, and even the American Medical Association, which fought Medicare for so long, are all agreed that a new federal role is necessary to help Americans pay their bills. Making more money available to more people is only part of the solution, but it is the most obvious and urgent step both economically and politically. It will be the rare candidate in 1972 who will feel comfortable without having voted aye. Which new approach to vote for is the only subject of real debate now.

The consensus grows from arithmetic. Since 1960, the costs of health care have climbed by more than 50%, far outstripping even the 31% rise in the consumer price index. Physicians' fees alone have risen by 58%, while hospitalization, which averaged $35 a day ten years ago, has more than doubled in price and now stands at $75.

Five Years to Pay. Even so routine a surgical procedure as hernia repair can end up costing $1,000 in hospital and doctor bills. Charges totaling $1,200 for a routine delivery followed by a four-day stay in a maternity ward are not uncommon. Many such expenses can of course be avoided. Some elective operations can be delayed or even put off indefinitely, though at an eventual cost in health. Other conditions can be controlled, though not cured, by drugs and medication rather than surgery. The expenses of normal childbirth are predictable, and a family has nine months to save up to meet them.

But many illnesses are unpredictable, and these can be disastrous. Construction Worker Roland Snyder, 36, a bachelor who lives with his mother in Maryland Heights, Mo., thought that his weight loss and headaches were the result merely of overwork until doctors hospitalized him and learned that he had tuberculous spinal meningitis. The first 13 weeks of treatment cost $13,000. After another five months in a free public hospital, he was moved to a nursing home. His and his mother's insurance benefits were soon exhausted, along with their savings of $1,500. Snyder is now home once more but unable to work and he still owes one hospital $4,000. "They were very nice about it," says his mother, Mrs. Minnie Snyder, who supports herself and her invalid son on an income of $300 a month. "I am now paying them $20 a month on the $4,000."

Snyder's expenses are not unusual. John Schureman, 21, of Hollywood, developed peritonitis when his infected appendix ruptured, and then needed a second operation when the infection spread to other parts of his body. His condition, complicated by a peritoneal hernia, worsened to the point that he required three more operations, 15 pints of blood that cost $15 each, and round-the-clock care. Schureman spent nearly two months in various hospitals. His bills, which came to more than $20,000, wiped out his $3,000 savings. They also left Schureman, who works for the American Institute of Hypnosis but carried no insurance, with a $15,000 debt that, he estimates, will take five years to pay.

Inadequate Armor. Not all Americans are so unprotected. Fully 85% of the U.S. population under 65 have some sort of health-insurance coverage, but in many cases the armor is inadequate. At least 20% have no hospitalization insurance, 32% have no coverage for in-hospital doctors' bills, half get no benefits for X rays or laboratory tests, and 97% have no dental insurance.

Even the more generous insurance policies are limited in their benefits, which usually run out before catastrophic illnesses are cured. Leonard Kunken of Oceanside, N.Y., sought to protect himself and his family by buying the best policy offered by the insurance company for which he was a salesman. The policy allowed $40,000 in benefits, and it seemed more than ample until Kunken's son Kenneth, a Cornell University student, broke his neck during a football game and was paralyzed. The bills--over $6,000 a month--exceeded the limit in seven months.

Cottage Industry. Aside from ceilings, most of the policies offered by both nonprofit and commercial organizations pose other problems. Many provide no coverage for diagnostic procedures; few provide payments for out-of-hospital prescription drugs; many make no provision for private- or visiting-nurse care. In cases of long-term illness, most plans make no allowances for nursing-or convalescent-home care. Because health insurance has become a major factor in wage negotiations, many policies are tied to employment by a specific company. Firings because of the recession have deprived thousands of families of their coverage. Illnesses or injuries that occur in such a period can make it difficult for the family to regain full protection later.

Some people have even found it necessary to leave the country to find medical care at prices they can afford. Dr. Martin Allwood, a Swedish-born sociologist who had spent 25 years of his life in the U.S., gave up on American medicine after a series of expensive examinations failed to diagnose his problem. Returning to the country of his birth, he spent another year having X rays and tests before exploratory surgery disclosed an unusually inaccessible cancer. Allwood found the treatment excellent and the costs low. Private medicine is still practiced in Sweden, but the government maintains an elaborate national health system. Allwood relied on the national service, which not only accepted him for treatment but also paid him $11 a day to help make up for his lost income.

Allwood's experience points up the major difference between European and American medicine. Ever since Chancellor Otto von Bismarck initiated the first such plan for German workers in 1883, national health programs have been an important aspect of the welfare state. The Swedes have had a national health system since 1955, the Norwegians since 1956; Britain adopted its national health scheme in 1948. Indeed, among the world's major industrial nations, only the U.S. has thus far failed to devise some kind of national program that either provides or subsidizes comprehensive health care.

The omission is ironic. Throughout Europe, medicine began as a cottage industry, underwent a sort of industrial revolution as individual medical entrepreneurs were absorbed into larger, nationalized health-care systems. In the U.S., medicine started off under controls, to a degree, and evolved into a cottage industry. Colonial laws set doctors' fees and established taxes to pay doctors hired by local governments to provide health care to settlers. The earliest American hospitals were publicly operated, generally for the benefit of the poor, or for sailors whose ships called at colonial ports.

Vested Interest. Few attempts were made to perpetuate or expand this system, and as the nation grew, medicine developed into the present confused complex of doctors, hospitals and ancillary services--nominally independent, yet inextricably bound up with one another. Doctors, who still remain the individual's main point of contact with medicine, need hospitals in order to treat their patients. Hospitals depend upon the doctors for the referral of patients; patients' fees make up the major portion of hospital operating costs.

Both doctors and hospitals contribute to the high costs of care. Physicians simply are not trained to consider costs, but rather to provide their patients with the best care possible. Thus they order up whatever X rays or tests are necessary to make an accurate diagnosis, use the most up-to-date techniques and devices. The costs of these techniques, and the hospitalization that they require, are enormous. Hospitals, with their high overhead, have a vested interest in keeping their beds filled.

The salaries of hospital workers, once among the lowest in the nation, have risen by 31% since 1966, mainly as a result of minimum-wage laws and unionization, and are reflected in the rising charges hospitals make for room and board. The introduction of modern medical equipment has also pushed the cost of medical care skyward. A heart-lung machine, for example, costs $17,000, and runs a hospital another $50,000 a year in maintenance.

Spur to Inflation. Even Medicare, passed in 1965 to lessen the economic impact of illness on the aged, has helped to push up the costs overall. The program provides broad medical coverage to an estimated 20 million Americans, most of whom would be otherwise unable to obtain insurance. But it has also worsened inflation by allowing over-generous payments for the care provided, increasing the demand for services without enlarging the supply.

Nor has Medicaid, which covers an estimated 17 million of the nation's poor, improved medical economics. Many jurisdictions refuse to tax heavily enough to match the Federal Government's contributions to the program, and some, like Washington, D.C., simply ran out of money last year, leaving the poor as vulnerable as they were without the plan. Thus Medicaid, like welfare, is subject to local quirks and disparities. Ira Jay Thau, 23, a New Yorker whose existence depends upon regular kidney dialysis, cannot take a job without losing the Medicaid benefits that pay for his treatment. Says he: "If I try to be a useful member of society by getting a job, then I lose the only thing that keeps me alive."

Eight health-care bills have already been submitted to Congress; others may also be thrown into the hopper as debate continues through the summer. The bills cover a broad spectrum of approaches and benefits. The A.M.A.'s "Medicredit" plan and a bill sponsored by the health-insurance industry seek to expand insurance protection by allowing tax benefits for premium payments. Senator Jacob Javits' proposal would gradually expand Medicare to cover the entire population. The American Hospital Association's "Ameri-plan," which has not yet been introduced in Congress, aims to create with federal assistance some 400 "healthcare corporations" across the country. Each would be responsible for bringing together the personnel and facilities to meet health needs in its area, providing such services on a prepayment basis to those who could afford to pay and making them available without charge to those who could not.

The major contest, however, is between just two pieces of legislation--the National Health Insurance Standards bill offered by the Administration and the Health Security bill sponsored by Senator Edward Kennedy and Representative Martha Griffiths. The two proposals differ considerably:

THE PRESIDENT'S PACKAGE features mandated coverage through the existing insurance industry. It would require all employers to provide their employees with a tax-deductible insurance plan that would include hospitalization, major-medical and catastrophic-illness coverage with a maximum benefit of $50,000. A separate program would be set up for the self-employed, while the Government would finance the entire cost of health insurance for families with incomes below $3,000 a year and pay partial premiums for those earning up to $5,000. The poor would receive less generous payments than others in case of catastrophic illness, but Medicare recipients would get a break. The Government would pick up the entire $1.4 billion bill for the Plan-B supplement, which currently covers doctors' bills.

To encourage efficiency, the Nixon bill would set aside a fund of $23 million for grants to groups of doctors willing to establish prepaid health-maintenance organizations (HMOs) like the Kaiser-Permanente Health Plan, which operates in California, Oregon, Hawaii, Colorado and Ohio. Another $100 million would be allocated to help medical schools train more doctors. Total cost: $3 billion a year in new federal funds, $2 billion in lost tax revenues, about $6 billion from business and industry. The insurance companies, however, might not regard the bill as a bonanza. Though the industry's overall profits are high, few companies make more than 2% profit on health coverage.

THE KENNEDY-GRIFFITHS PLAN would create a comprehensive national health-insurance system. Based on a proposal originally drafted by the late Walter Reuther, this bill would have the Government pay at least 50%, and in some categories 70%, of the cost of nearly all health services, including dental care for children under 15, prescription drugs and psychiatric treatment. Essentially a broadening of the Social Security system, the Kennedy-Griffiths bill would be financed by a 3.5% payroll tax on employers, a 1% tax on employees and general federal revenues as required. The bill would seek to promote efficiency by allocating $600 million to encourage the formation of group practices. It would promote cost control by requiring health-care institutions in a given locality to negotiate and provide primary care within an annual budget and by putting doctors on a salary or paying them a fixed fee per patient.

The Kennedy-Griffiths bill would not, however, reduce the country's total outlay for health, which now comes to nearly $68 billion. On the contrary, Administration spokesmen claim that Kennedy-Griffiths would cost $77 billion. Those who now pay for private health insurance would still pay the same amount for coverage--except to the Government. Nor are the bill's provisions for promoting efficiency likely to keep costs from climbing. Both Medicare and Medicaid have cost the Government far more than originally anticipated. There is no reason to believe that the Kennedy-Griffiths plan, the administration of which would require a bureaucracy of gargantuan proportions, would not similarly exceed initial cost estimates.

The bill could create other problems as well. Its emphasis on hospitals as the principal purveyors of primary care could, many fear, force the patient to accept treatment from any doctor who happened to be available. This, opponents feel, would deny them the right to choose their own doctors. It would alter still further the physician-patient relationship, a personal tie that has already been strained by a number of factors, including growing specialization.

No Marketplace. The Administration bill would protect the patient's freedom to choose his own physician. But it is no more likely than Kennedy-Griffiths to curb the rising costs of care. Merely enabling more people to pay for health care will only increase the demand for services, not the supply, thus contributing to the medical inflation that makes action necessary in the first place. Moreover, as John Krizay of the 20th Century Fund points out, the determination of doctors' fees is simply "not in the marketplace." Doctors, he notes, can and do create their own demand for their services. One way around that fact is to abandon the fee-for-service method of payment entirely and put doctors on salary; one way to accomplish that is to put health care on a prepayment basis.

Most doctors are adamantly opposed to prepayment. Many patients tend to feel otherwise. The 2,000,000 members of the Kaiser plan pay a fixed annual fee for a broad range of medical and preventive health services, all of which are provided by salaried doctors. The plan, which runs its own hospitals and clinics, keeps its costs down by early screening to diagnose diseases before they become serious, thus reducing the amount of time its members spend in expensive hospital beds. Similar prepayment plans have also proved successful in New York, Massachusetts and Michigan. But the Administration bill, which offers financial incentives for the formation of such prepayment plans, is unlikely to encourage their creation as long as doctors have the opportunity to earn more under a fee-for-service system.

Neither of the bills is likely to increase the availability of medical services--at least not in the near future. Even if the nation's medical schools were suddenly to produce the 50,000 additional doctors the U.S. is said to need, there is no guarantee that these physicians would practice where service is scarce.

Kennedy feels that only a complete restructuring of the health setup will provide Americans with the care they need and argues that only his bill will provide it. "The system," he says, "shows no signs of being able to respond to the crisis or to take even the most rudimentary steps to solve the problem."

Many of those in the system agree. The Student American Medical Association, which speaks for 18,000 medical students, supports the Democratic bill, and many younger physicians have also given the measure their support. So has Dr. Count Gibson of Stanford University School of Medicine, who believes that the bill reflects a new philosophy of social service. "Medicine is moving from the entrepreneurial mode to the community institution," Gibson says. "You can compare it with education. In 1789, this was a private enterprise, but now nobody questions the responsibility of communities to provide public education. Now we're beginning to see health care as a right."

Shoring the Walls. Even the A.M.A. now recognizes health care as a right. But it is still unwilling to go along with Kennedy-Griffiths. Dr. Max Parrott, chairman of the A.M.A.'s board of trustees, describes Kennedy's bill as "rigid" and "monolithic." Parrott and many of his colleagues defend the existing system and seek to eliminate what they see as its most egregious inequity with their tax-credit bill. "Some people are denied health care because of their inability to pay for it," says Dr. Richard S. Wilbur, A.M.A. deputy vice president. "Medicredit will take care of that problem."

So will the Administration bill. Though Richard Nixon has described the state of medical care as a "massive crisis," the Administration does not favor radical overhaul. "There is much that is worthwhile in the existing system," says Health, Education and Welfare Secretary Elliot Richardson, who drafted the Administration bill. But, he adds, "National health insurance can be built on the solid foundation that exists by expanding the present dimensions and shoring up the walls."

Philosophic Asset. Kennedy, who already has the backing of the A.F.L.-C.LO. and 25 liberal Senators, has been holding hearings around the country in an attempt to drum up broad public support for his plan. He stresses that only his bill would give the Government the leverage it needs to reform the entire health-care system. The Administration stresses the need for a more gradual approach and is courting the congressional center, which is already more attuned to the free-enterprise outlook of the Administration bill than to Kennedy's tack. "We have philosophy going for us," says White House Aide Clark McGregor, "plus the certainty of much higher taxes with the Kennedy bill." The A.M.A. will probably come around to supporting some variation of the Nixon proposal.

In fact, neither the Kennedy-Griffiths bill nor the Administration plan is likely to win the support it needs for passage. Some compromise between the two seems inevitable, and the man most likely to effect it is Wilbur Mills, chairman of the House Ways and Means Committee. Mills, recognized as the most powerful man in the House, has committed himself to the idea of national health insurance. He agrees that Social Security, through which the Kennedy program would be financed, has been one of the most successful programs ever adopted. Yet Mills is reluctant to endorse the Kennedy bill. He believes that payroll taxes, on which the Kennedy bill relies for financing, may be getting "out of hand," and he questions the necessity of a complete Government takeover of health insurance. "It would be more practical to get the private sector to bear some of the cost burden; we can't afford to eliminate the people and organizations engaged in it. We'd be shorthanded."

Though White House aides claim that he has done so in private, Mills has yet to endorse the Administration's bill publicly. Probably he will not. What seems likely is that Mills will piece together his own "Mills bill," combining the best features of both the Administration and the Kennedy plans into a measure for which he feels the public and Congress are willing to pay.

The precise ingredients of the package that will win House approval probably will not be visible until midsummer. But it is already clear that the emphasis will be on improving the means of supporting the present system, mitigating the burden that medical inflation places on individuals. The importance of that accomplishment cannot be minimized merely because it is a partial solution.

Borderline. Though socialization of medicine on the Swedish or British model seems to be impossible in so large and diverse a society as America's--at least for the foreseeable future--the Government will eventually have to face more decisions on the borderline of socialized health care. Means will have to be found to supply personnel and facilities in areas that are now medical deserts. More emphasis will have to be put on diagnostic procedures and other methods of preventive medicine, both to improve the quality of care and hold down costs. Hospitals will have to receive more incentives to operate efficiently. Ultimately some kind of ceiling, voluntary or imposed, may have to be worked out for fees. The duration and cost of medical education need thorough review.

None of these issues can be coped with easily. The doctor-patient relationship is a highly sensitive one, and both organized medicine and a public interested in personal service are strong barriers to major change. Many people would be unhappy about yet another Government bureaucracy, particularly in a field that affects people so personally. But there is ample precedent for further public intervention short of socialization. The U.S. has long accepted the principle that the public interest, represented by regulatory agencies, should determine the services provided and prices charged by railroads, telephone companies, airlines, power companies and other essential enterprises. The average citizen spends more for medical care than for any of these, and often needs health care more urgently.

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