A Cure for the Wrong Disease

By Barbara Ehrenreich

It's the ultimate medical nightmare. You slip under the anesthesia confident that your problem will be solved with some simple procedure -- a polyp excision, for example, or tubal ligation. But when you wake up you find your breasts are missing or your intestine now terminates in a plastic bag. Too bad we had the wrong patient, the surgeons shrug, because the operation went beautifully.

Something similar could be happening in the area of health-care reform. Dreaming of universal, comprehensive health insurance, Americans are about to wake up to a byzantine new arrangement called "managed competition." More than 60% of the public tell pollsters they want a Canadian-style system of national health insurance, which would make health care, quite simply, a right. But managed competition, which Bill Clinton is on record as favoring, may more nearly resemble an amputation of the limited health rights most Americans already have. Even its boosters are expecting the public to warm to managed competition with the enthusiasm usually reserved for root-canal work.

The Clintons, like the surgeons in the nightmare, seem to have the wrong patient. Their first concern should be us, the "consumers," whose symptoms include lack of coverage, inadequate coverage or the terror of losing insurance through a job change or the whim of some green-visored claims adjuster. Another worthy "patient" is American business, or at least businesses that offer health benefits to their employees. These benefits, which consume one-fourth of corporate net income, have become like cement shoes on the feet of American enterprise, threatening to hobble the entire economy.

But managed competition seems to be designed for yet another patient, the private insurers. The insurance industry has been languishing because demand for its product keeps shrinking as prices shoot through the roof, and whimpering because a majority of Americans -- the ones who favor a single, public-sector insurer -- would just as soon see it in hospice care.

No one doubts that managed competition will cure what ails the insurers. The idea, insofar as anyone can comprehend it, is to create a new layer of bureaucracy -- health-insurance-purchasing cooperatives, or HIPCs -- which will contract with insurance companies to provide health-care plans for consumers, including the poor and unemployed. In theory, the HIPCs will force the insurance companies to compete to come up with the lowest-cost plan, which will in turn cause the insurance companies to lean on doctors and hospitals to hold down their costs. Thus, whatever else happens under managed competition, the insurance companies will cease to be mere money handlers and become the very organizers and arbiters of care.

That might be a small price to pay in order to cover the 37 million Americans who presently lack insurance, but what about the rest of us? Here's where managed competition starts looking more like Dr. Jekyll than Dr. Welby. All the analysis behind it -- cooked up by academics and insurance-company reps schmoozing at comfortable seminars in Jackson Hole, Wyoming -- assumes that given a little insurance, Americans greedily drive up expenditures by "overutilizing" care.

Hence the supposed wisdom of proposing that the insurance companies be located at the very center of the medical system. They are, as we all know, remarkably adept at weeding out sickly consumers and harassing providers about the need for each and every test or procedure performed. Beyond that, the HIPCs and insurance companies will be doing their best to herd us all into "managed care" plans featuring a limited choice of physicians and strong financial incentives against anything that could be regarded as overutilization. Never mind that utilization has remained constant for the past 10 years, while costs have soared, and that Americans are actually less likely to use doctors and hospitals than citizens of other industrialized nations.

Unfortunately, there's not the slightest evidence that the sacrifices entailed by managed competition will pay off in lowered costs. Managed competition has never been tried, anywhere in the world. But managed care, represented by HMOs, PPOs and other ghostly amalgams of insurance plus actual care, has been abundantly tested right here in the U.S. -- and found ineffective at curbing health-care costs.

There is a solution -- at least for our first two patients. Instead of adding a new layer, like a Band-Aid on a gangrenous wound, the aim should be to simplify: eliminate the 1,500 private insurers (they can always go back to auto and life) and replace them with a Canadian-style "single payer," which could be the Federal Government, a quasi-public agency or each of the 50 states. In one fell swoop, health-care costs would be reduced by much of the $80 billion that now goes for "administrative overhead," producing savings that, according to the General Accounting Office, would be sufficient to insure everyone, without deductibles, coinsurance or Oregon-style rationing. It would still be the job of the new single payer to crack down -- not on consumer overutilization but on rampant profiteering and plain old corruption (doctors referring patients to their own profitmaking CAT-scanning facilities, for example).

It's a shame that Big Business seems willing to put its commitment to free enterprise, i.e., the insurance industry, ahead of an obvious and effective solution. It would be worse than a shame -- a betrayal -- if the Clintons were to ignore public demand and go for a cumbersome, jerry-built plan designed to benefit the most parasitical element of the health-care system.