The first hospital, the first medical school, the first medical society, and abundant Civil War casualties, all combined to establish the most important medical center in the country. It's still the second largest industry in the city.
Some Philadelphia physicians are contributors to current national debates on the financing of medical care.
Insurance in Philadelphia
Early Philadelphia took a lead in insurance innovation. Some ideas, like life insurance, flourished. Others have faded.
By this point, a patient reader of these reminiscences has probably learned quite enough about the Clinton Health Plan and its immediate aftermath. There is, of course, more to say, but except for political junkies, the topic doesn't warrant protracted dissection. It might be worth knowing the motivations of the insurance industry when they launched that bombardment of "Harry and Louise" television advertisements. Opinion within the insurance industry must certainly have been divided, however, and the main decision makers are probably all now retired. The Harry/Louise ad campaign is often given credit for the political assassination of the Clinton Plan, but that seems unlikely. The decisions about medical care were made without heeding the opinions of providers of medical care, so it would not be surprising to learn that decisions about insurance were made without completely candid discussion with insurance professionals.
In fact, grieving too much for the past may have led to looking too little at the future, which clearly contains a whole new set of facts. When the largest generation in history, the baby boomers, start to retire in 2012, those boomers own children will then be at peak earning power but will be a very small generation, too small to support their more numerous parents. Consequently, the 12.5% tax the current teenagers pay for retirement benefits will be too small to pay for their parents' health costs. It will be uncomfortable to increase that 12.5% by much. Thus, the Ponzi scheme we have run for eighty years will then be unable to conceal its facts with talk of trust funds and lock boxes. For nearly a century, Congress has spent the Social Security and Medicare tax surplus for non-medical purposes. They will have to stop doing that in less than ten years. Consequently, we can confidently expect the boomers to protest loudly: they contributed 12.5% of income during their whole working lives to support medical care, and now learn that nothing was saved for their own health care. Even more exasperating is that the second Bush administration did attempt to introduce legislation in 2006 to set aside some current surplus to reduce the impact of the coming crunch -- and Bush was howled down. It would thus appear to be the nature of current politics that this boomer health cost shortfall will not be seriously addressed until the crisis is actually upon us. Democrats will apparently stonewall the matter to avoid blame for designing and ballyhooing a welfare expedient of the 1930s that was swept under the rug during decades of affluence. Republicans will be determined not to be paymasters for a welfare scheme they had opposed from the beginning. So what will happen?
Government only has two options in funding programs where the money has already been spent; they can raise taxes or they can borrow money. By raising taxes, they risk precipitating an economic depression. By borrowing, they flirt with hyper-inflation of the sort that destroyed Germany and Austria in the 1920s. By adopting a little of both remedies, we wander into "stagflation", a term invented in the 1970s to describe a very unpleasant episode. Whatever the description, there seems a very strong likelihood of economic pain and political uproar. It sounds pretty unlikely the public will be in a mood for expensive additions to health insurance coverage.
All this is a preamble to impending cuts in the health budget. We must anticipate the only approach government ever uses for program reduction, the only arrow in the government quiver. It goes like this: first you cut a program budget by, say, ten percent and watch to see if anything bad happens. If nothing bad happens, cut it again. If something bad does happen during a series of cuts, deny that it did happen, and scramble around to patch up the damage. If possible governments restore some of the cuts when they go too far, but in Medicare whose unfunded deficit is in the trillions of dollars, that may not be possible. Try to get re-elected after you pull off one of these capers, and you begin to sense how dictators get into office. It really isn't comfortable to talk apocalypse this way, and one would certainly hope there is some flaw in the prediction. There could be other unexpected events in the meantime, deus ex machina, but a stock market crash, a thermonuclear war, or violent changes in the environmental temperature are all going to weaken the world economy, not make things better. This doomsday scenario seems almost certain to include some serious cost-cutting in the health financing system. Therefore, it is only common sense to examine what advance changes might be made in the health delivery system to minimize the damage to it.
My proposal amounts to suggesting that we put the doctors in charge of the cost-cutting. In accident rooms, battlefield medical stations, and even television war serials, the person in charge of sorting out the influx of unexpected casualties is said to be in triage. In triage there is one basic rule: put your best man in triage. If the security guard, the admissions clerk, or the night watchman directs the emergency down the wrong corridor, the ensuing blunders will cascade as the system struggles to get things back on track. We can expect objections to what I have to propose which will take the form of warnings about letting foxes watch the henhouse, but in general, the public already supposes the non-physicians will step aside for the doctors in an emergency. So the more open the discussion about command and control, the better, with ultimate faith that the public will support the common-sense approach of putting your best-trained person in charge.
For present purposes, the general proposal is that when drastic cuts in budget get imposed, it should be the physicians of the local community, not the administrators or the insurance executives or the local business leaders -- who should make the painful choices between what is essential and what can be sacrificed. This is most readily achieved by setting aside the Maricopa decision and clarifying the HMO enabling acts to the effect that it is not an antitrust violation for physicians professionally practicing in nominal competition to participate in the shared governance of health maintenance organizations. In other words, that HMOs such as the Maricopa Foundation need not fear antitrust action, using the experience of a dozen other Foundations for Medical Care as proof of the harmlessness of the approach. It should not be necessary for these organizations to prove positive value, only to demonstrate lack of harmfulness. If they can be established and allowed to compete with insurance-dominated or employer-dominated HMOs, their worth can be established by success in the marketplace. Ultimately, the choice of governance form will thus be made by the patients, and the proposal should be a popular one.
It should also be popular with hospital administrators. They chafed at physician control thirty years ago, but that was before they encountered the far more brutal price negotiations of HMOs dominated by business and insurance. The consequent costly and disruptive wave of hospital mergers is defended by very few, although it would be interesting to examine dispassionate analysis. Probably no one adequately appreciated the threat that employer domination of these practice groups represented to hospital administrations. When hospitals confronted employer groups in serious hard price negotiations, hospitals came to the shocking realization that these people actually had the power to move large groups of people to a competitive hospital, and they certainly talked as though they were capable of doing it. The resulting panic of hospital mergers, consolidation into chains, and the emergence of for-profit competition by hospitals that had no thought of a charitable mission, has created a degree of cost and disorder that was not in the original plan. Hospitals in rural California who told their colleagues of the burdensome power of their staff doctors under doctor-run Foundations would now have to admit that a return to that environment would be a distinct relief.
And there might even be a reconsideration by business leaders. What physicians would bring to the table, what is now new and different, is the undeniable experience that dominating captive HMOs has not proved as useful to employers as they hoped it would be. The cost savings have been disappointing, the exploitation by insurance intermediaries, and the undeniable employee restlessness was not exactly anticipated. Running employee health projects is a large distracting time waster for C.E.O.s who have other goals and mandates to pursue. If employers keep a focus on their reason for involvement in employee health, hardly any of them could defend a posture of resisting the emergence of new choices which make a reasonable claim to reducing employee contentiousness, at a competitively lower cost.
And the government? Among the various unpleasant alternatives that Congress must consider, is the possibility to be discussed next that employers may want to pull out of employee health care entirely. Allowing competitive forms of ownership of existing arrangements might not seem too risky a step, compared with that prospect.
Originally published: Sunday, August 05, 2007; most-recently modified: Friday, May 03, 2019