Health Insurance Supply of Medical Services

Grand Unification Theory of Healthcare

Dr. Richard N. Fogoros has a very interesting website named, the Grand Unification Theory of Healthcare, which relates his views about health care.   His analysis is systematic.  One is able to understand the health care system from the point of view of physicians, patients, health plans, the government, and employers. His “Pathway # 2 to Enlightenment” is very long, but merits a read.  While the author’s website certainly won’t win him any awards for modesty, it does offer some very insightful commentary.  Below I give a brief summary of some of the points which I find particularly, well, enlightening.

Rationing is unavoidable

When a resource is scarce, such as health care, it must be rationed in some way.  In a typical market, goods are rationed by a pricing mechanism.  Only those with a willingness to pay above $3/gallon can buy a gallon of gas.  Other rationing mechanisms include queuing and refusing to give individuals products or services based on some guidelines.  Dr. Fogoros’ comment that rationing is unavoidable is best understood in his mind as that third party rationing is inevitable.

Wonkonians vs. Gekkonians

Dr. Fogoros divides the world into two halves: the Wonkonian School and the Gekkonian school.  The Wonkonians consist of liberals, government regulators, politicians, and public health officials who want government to strictly regulate the health care industry.  Gekkonians, modeled after Gordon Gekko, include healthcare executives, many physicians, and most political conservatives.  This group believes in a free market system.  Where the Wonkonian School wants health care run by large government, the Gekkonians would prefer it to be run by large corporations.

Benefits of both world views

  • Wonkonians: These wonks have pushed through legislation to help reduce physician fraud.
  • Gekkonians: The large managed care companies have increased efficiency and standardized care (when possible).  The concept of critical pathways was introduced by the Gekkonian school.

 Drawbacks of both world views

  • Wonkonians: The wonks attempt to regulate the healthcare market has created a morass of legislation.  Physicians have less freedom to use their professional judgment since if they do not abide by the standard of care and decide to bill Medicare, they may be prosecuted for fraud.  The government can turn an earnest billing mistake into a large fraud case.  For instance, the University of Pennsylvania had to pay a $30m fine in 1995 after a PATH (Physicians at Teaching Hospitals) investigation found that the university was billing Medicare for services where the attending physician was not present.  Yet having an attending physician present at every service provided is an inefficient use of physician time and also reduces the learning experience of the trainee.  Also, compliance with government regulation costs the health care industry millions (if not billions) of dollars per year.
  • Gekkonians: Insurance companies make money by signing up more people for their plan.  They lose money, whenever they have to pay out money for medical costs.  Early on, the health plans realized to retain healthy patients and compel ill patients to drop their plan, they needed to “let the system bog down in red tape for the ill, while, at the same time, to work hard to keep the system squeaky clean for healthy subscribers.”  For example, “providers can strategically locate and number specific services to make them easy (e.g., primary care) or difficult (e.g., specialists) to utilize.”  Also, some health plans began to pay physicians on a capitation basis, which encourages them to withhold care, especially from the sickest patients.

Other interesting Points

Finally, I will mention a few other interesting points that Dr. Fogoros brings up.

  • The Erosion of the fiduciary relationship between physicians and patients. Doctors now must abide by standards of care in order to now run afoul of the law, even if a non-standard form of care would be beneficial for the patient.  They must abide by the cost rationing of their managed care bosses in order to reduce cost.  Thus, the physician is longer the person who will advocate for the patient to get adequate care, but instead is constrained by government and corporate rules.  In Dr. Fogoros opinion: “the traditional doctor-patient relationship is vital to the professional survival of the physician, and to the physical survival of the patient.  If we lose this relationship, we lose everything.”
  • Non-profit hospitals.  The article also discusses how non-profit community hospitals were bought up by private health care corporations in the late 1990s.
  • Health plan customers.  Who are a health plan’s customers?  Most people would say that it is the patients.  However, most patients do not actually choose their health plan directly; a human resources employee or benefit manager from their company generally chooses the health plans which are offered to the patients.  Thus, health plans must try to market their services to these HR managers.  But don’t the HR managers want high quality medical care for their employees at a reasonable price?

“My own eyes were opened on this issue several years ago when I attended a retreat, sponsored by my hospital, that featured a panel discussion by a group of prominent local employers.  When asked how they go about assuring themselves that the health coverage they buy for their employees provides high-quality care, the captains of industry responded thusly: ‘We make widgets, we don’t assess healthcare quality.  We don’t know how, and we don’t want to know how. So we’ve got to be practical about it.  To us, quality means quiet.  As long as we don’t hear more than the average number of complaints from our employees, the health coverage we provide is, by definition, good enough.'”