Health Cost: What Limit?
Senator Edward Kennedy chose the setting with an eye for drama, and history: the Senate Caucus Room, where his brothers John and Robert formally launched their runs for the presidency. Teddy's purpose was not to announce his own candidacy--yet-- but to seize the initiative on an issue that seems sure to bulk large in the 1980 campaign: the skyrocketing cost of medical care. Before TV cameras last Monday he outlined the latest version of his national health insurance plan, designed to enable every American to have medical insurance regardless of age or state of health. Two days later he returned to the issue, this time as chairman of a Senate subcommittee that approved, with some changes, a high-priority Carter Administration bill to clamp a lid on hospital costs.
The legislative and political activity underlines a pressing national concern. As recently as 1965 the nation spent $38.9 billion in medical outlays of all kinds (hospital bills, physicians' fees, lab tests). That amounted to 5.9% of total spending for all goods and services. Since then the bill has increased by 429%. This year the total is expected to reach $206 billion, or 9.1% of the gross national product. The White House estimates that at the present rate of increase, medical costs will double every five years, a rise far in excess of inflation. Says Dr. Richard Corlin, president of the Los Angeles County Medical Association, with only mild hyperbole: "We are now in a position to spend the entire national bud get on medical tests and procedures."
Prices of the most routine facilities and treatments are staggering. Samples: in 1969 Massachusetts General Hospital charged $80 a day for a semiprivate room. Now the bill is $189 a day. Ten years ago, a baby could be delivered at Manhattan's New York Hospital-Cornell Medical Center for $350 in hospital bills, exclusive of the obstetrician's fee. But when 6-lb. Priscilla W. was born there in a fine uncomplicated delivery, she cost her parents $2,800--more than $450 a pound--$1,300 of that for the hospital.
It is true that most medical bills are covered by Government programs or by employer-paid private insurance. But many citizens who long kidded themselves into believing that, as a consequence, medical inflation did not hurt them, now realize that they do pay the bills. They pay in taxes needed in part to finance Medicare and Medicaid. They pay in smaller wage increases than they would get if private employers were not saddled with huge medical insurance premiums. They pay in price hikes that result directly from those premiums. The health insurance costs that Ford Motor Co. pays for its employees add $130 to the price of every car the company makes.
A growing number of policymakers, including Carter and Kennedy, are convinced that the nation must slow the surge in health costs as part of any effort to control the general inflation that saps the economy and erodes the dollar. But any attempt to do so must be based on a clear understanding of why those costs are so high in the first place, and that understanding is not easy to acquire. The economics of medicine are so unlike those of any other market that even many doctors and hospital administrators find them illogical. Says Dr. David Thompson, director of New York .Hospital: "The system is set up to pay for the most expensive means of treatment, rather than the most efficient or economical. It's crazy."
Strange, no doubt, even frightening, but not really crazy. Medical costs do follow a kind of logic, based on two factors that make medicine an economic anomaly:
> Medicine is inherently a sellers' market. The customer (patient) has no bargaining power; he initiates only one decision--to see a doctor. The sellers (doctors and hospitals) then take over; they decide what services the patient needs, and do not ask but order him to buy. Unable to diagnose his own illness, the patient has little choice but meekly to obey.
> In American medicine, government and insurance payments have removed all effective limits on demand, and thus price. Though sellers' markets always tend to rapid inflation, they usually are subject to at least one rough check: prices cannot rise so high that the buyers simply become unable to pay. That used to be true of medicine, too, in the now dimly remembered days when patients paid nearly all the bills out of their own pockets. No more: the saddest irony of the medical inflation is that it has been triggered largely by an effort to bring quality medical care within everyone's reach.
Starting with Blue Cross in the 1930s, and continuing through the post-World War II trend for employers to provide medical insurance for their workers, private insurers have picked up a giant chunk of hospital-doctor bills. In 1965 Congress chipped in, providing Medicare payments for those over 65 and Medicaid assistance for the poor. There are still gaps in the coverage: the 20% or so of the bill that the typical Medicare patient must pay can be a severe burden; the long illness that exhausts inadequate insurance benefits is a terror to the middle class. Nonetheless, the system of "third-party payments" has become so comprehensive that patients today pay directly a mere 6% of hospital bills and 39% of all physicians' fees. The government picks up 55% of hospital bills and 24% of doctor bills; private insurers pick up 37% of each. (The other 2% of hospital revenues comes from charity and other miscellaneous sources.)
Unquestionably, this system has saved innumerable lives and improved the nation's health by encouraging people to seek medical care that they could not otherwise afford (few could without insurance: total payments to doctors and hospitals will work out to more than $3,500 this year for a typical family of four). But the system could hardly have been better designed to fan inflation than if that had been its purpose. It has in effect repealed for medicine the last vestiges of the law of supply and demand, a free market equivalent of the law of gravity, and made health care a market of weightlessness: what goes up keeps going up.
Patients now are asked to produce their insurance or Medicare cards before they state their symptoms; once satisfied that they are covered, they rarely even ask what the treatment will cost. Thus demand expands no matter what happens to the national income. Increases in supply do not hold down costs, as they would in a conventional market, quite the opposite. Hospitals build more beds than there are patients available to occupy them: some 25% of the more than 1 million hospital beds in the U.S. are unused on any given day. Then the hospitals must charge more than ever to cover the cost of maintaining those empty beds. A case in point: New York City spent $200 million on its ultramodern 510-bed Woodhull Hospital in Brooklyn, then found it had a city wide surplus of some 3,000 beds. But since the city would have to spend $20 million a year to mothball the "dream hospital," it plans to put it into operation eventually, at a cost now estimated as high as $400 per bed per day.
The supply of doctors has increased gradually to 2 per 1,000 population from 1.5 in 1960. But to the chagrin of classical market theorist, no competitive fee cutting has occurred. Indeed, one physician calculates gloomily that every time a new doctor begins practice the nation's medical bills go up another $250,000 a year. Reason: the typical physician generates that much additional business in the tests and hospital admissions.
That might not be the case if the insurers and government bureaucrats who pay the bills kept a sharp eye on costs. But they do not. The Blue Cross movement, which affiliated with the American Hospital Association in 1937, has not rigorously questioned hospital bills until recently. Congress, when legislating Medicare and Medicaid, tacitly agreed to forget about cost controls as part of a bargain to keep the medical profession from opposing the program. Instead, one of the ways the Government reimburses hospitals for the care of Medicare-Medicaid patients is on a "cost plus" basis, and it asks few questions about the cost. Blue Shield and commercial insurers generally pay "usual, customary and reasonable" physicians' fees (U.C.R. in medical jargon). That gives doctors an incentive to charge all patients top dollar, so that they can establish those fees as U.C.R.
The few fumbling attempts to contain costs have not worked. In Massachusetts, for example, Blue Shield has established maximum fees for various medical procedures but so far has refused to tell doctors what the maximums are, lest everybody charge them. Many doctors do anyway. A Boston specialist's secretary explains: "Suppose we charge $45 for a service and then we learn that another doctor is being paid $65 for the same service. We then cannot ask $65 even though we may be as good or perhaps better. Blue Shield permits us to raise our prices by a small percentage from time to time, but we will never reach the maximum allowable. So the answer is to charge the insurance people well over the maximum. For a biopsy, we may put $110 on the insurance form. If the insurance company returns us $90, we know that is their maximum, and we then charge accordingly."
Some insurance practices operate directly to drive up costs. Many insurance companies will pay for lab tests only if they are done in a hospital on a supposedly sick patient. The result is to encourage hospitalization of untold thousands of people who could be diagnosed and/or treated at far less cost in a doctor's office. Says one Houston physician: "Say a man in his late 30s to early 40s complains of chest pains. I tell him he needs a thorough physical. In the office my fee would be $45, the tests $250, for a total of $295. But I have to put the patient in the hospital, so his insurance will pay for it. Everything is slow in the hospital, so figure he will be there three days. The cost increases from $295 to $900, but his insurance company will gladly pay for it."
Federal and state governments promote unnecessary hospitalization too. In the Miami area, a February survey found four times as many chronically ill Medicaid patients being treated in hospitals as in nursing homes. Dr. Gerard Mayer, who directed the survey, explains: "Medicaid in Florida makes such low payments to nursing homes that the homes limit the number of beds available to indigent patients. The catch-22 is that the patients wind up waiting in hospitals which are even more expensive" because Medicaid does pay nearly 100% of basic hospital costs, whatever they are.
The worst result of the system of third-party payments, however, is a far more insidious one: since the government and private insurers pick up most medical bills, no one in the system has an incentive to hold down those bills. On the contrary: if a doctor or a hospital substitutes an inexpensive treatment for a costly one, he or it merely collects less money from Medicare, Medicaid, a Blue plan or a private insurer.
The lack of necessity to watch costs would be inflationary in any business. In health care it has been catastrophically inflationary, because powerful underlying forces--economic, psychological and technical--would be working to drive up bills even if a determined effort were made to hold them down. Among these forces:
> Hospitals are inherently expensive places. They must maintain elaborately equipped facilities--emergency rooms, for example--24 hours a day, even though those facilities are used only sporadically. They are labor-intensive: the general ratio is 2.64 employees for every hospital bed. Aggressive unions have forced hospitals to raise the once depressed wages of their nonprofessional people (cooks, cleaners, clerks) so sharply that, for example, wages and benefits now take 70% of the budget of New York Hospital-Cornell Medical Center, vs. 35% only 20 years ago. The introduction of expensive machinery raises rather than lowers labor costs. For example, if a hospital buys a CAT (computerized axial tomography) scanner, a kind of super X-ray machine, it must also hire highly trained, highly paid technicians to run it.
> Doctors feel they have a right to charge high fees--their median income is a towering $65,000 a year--to make up for the long training they must undergo and the 80-hour weeks that many say they put in, and to compensate them for bearing the responsibility of making life-and-death decisions. Says one Boston specialist with an international clientele: "Remember that when a doctor has finished seven or eight years of schooling, two or three years of internship, two or three years of specialization, by then he is married, starting a family and an expensive practice, and is at his peak outlay. Consider the long years of learning and not earning, the killing hours and loss of contact with family." A few doctors indeed hint that they are underpaid--or observe that they earn less than corporation chiefs and top sports stars, though their value to society is at least as great. Whatever one may think of that argument, the physicians' attitude obviously does nothing to hold down medical costs.
> Most important, medicine has become an industry employing costly technology as sophisticated as that found in the space program. Dr. William G. Anlyan, vice president for health affairs at Duke University Medical Center in Durham, N.C., gives this example: "Today, the patient with a heart problem sees his family practitioner who refers him to a nearby cardiologist, who then refers the patient to a tertiary center like Duke. He's evaluated by a clinical cardiologist, then goes to a group of diagnostic laboratory cardiologists and radiologists. If the patient is to be operated on, the surgeons, the anesthesiologist, the pump team, the blood bank in the institution that feeds the pump are involved. The patient goes to a special recovery room with specially trained people to watch him. He's there five days with round-the-clock care. He goes to a rehabilitation unit for the rest of his recovery."
While such elaborate procedures might be justified in the case of a heart operation, doctors generally agree that expensive technology is used much more often than it needs to be, again because no one is watching costs. For instance, hospitals scramble to buy the fanciest equipment available. Secretary of Health, Education and Welfare Joseph Califano charges that hospitals in Southern California contain enough CAT scanners to serve the entire Western U.S.
Major metropolitan hospitals are not the only ones involved in the technology race. Jimmy Carter in April confessed that, as a member of the governing board of Georgia's Americus and Sumter County Hospital in the 1960s he had particpated in bilking his neighbors. Said the President: "We were naturally inclined to buy a new machine whenever it became available. Then we required every patient who came to the hospital to submit their body to the machine, whether they needed it or not, to rapidly defray the purchase. I did not realize then that I was ripping off people." One reason for the emphasis on machinery: the prestige of a hospital is judged by the quality of the doctors on its staff, and the most talented doctors gravitate to the hospitals that boast the most advanced facilities.
Doctors, too, tend to order every test that a patient could conceivably need. In part, that is done to reassure patients or to protect themselves against malpractice suits. Says Dr. E. Kash Rose, senior radiologist at Queen of the Valley Hospital in Napa, Calif.: "One study showed that 80% of skull X rays were unnecessary for care and treatment of patients. Rib X rays are done purely for the mental relief of the patient rather than for medical reasons. The treatment is exactly the same" whether the X ray discloses a fracture or not.
Says Dr. Noel Thompson of Stanford University and the Palo Alto Medical Clinic in California: "The doctor who does something to the patient--sticks something down his throat or up the other end of his anatomy, cuts him open or takes his picture--receives a much larger amount of money." A fierce dispute rages over how much unnecessary surgery is performed on Americans each year. Though the precise figure is impossible to pin down, no one doubts that at least some doctors will operate on patients who could get by without surgery simply because the Government or a private insurer will pay.
If the diagnosis of why medical costs are shooting up is reasonably clear, the course of treatment that could bring those costs under control is anything but clear. It is easy enough to insist that new technology should be subject to rigorous cost-benefit analysis, but if a new machine costs, to be hyperbolic, $5 million, and saves one life in ten years, who is to say the price is not justified? Asks Dr. David Thompson of New York Hospital-Cornell: "If you decide to do without some product of the new technology, which one would it be? And are you willing to take the chance that it won't be available when you, the patient, need it?"
More fundamentally still, the system of third-party payments may be the root of much medical inflation, but the old-fashioned alternative is a kind of rationing of medical care by ability to pay that the nation now would rightly find abhorrent. Says Rashi Fein, a noted Harvard medical economist: "Medicine is a social product like education. To ration health in terms of price is not the hallmark of a civilized society. You can differentiate between rich and poor with Cadillacs and yachts, but not with medicine."
Yet unjustified surgery, unnecessary hospitalizations, unneeded tests and an unwillingness even to consider costs do no one any good. The time is past when the nation could accept the resultant inflation as an inevitable side effect of good health; the price is simply becoming too high.
What then can be done? The experience of other industrial nations offers little comfort; many of them are struggling with medical-cost problems too. In West Germany, where most medical bills are covered by insurance companies supported by tax funds, doctors charge so much that their incomes average $100,000, far higher even than in the U.S., and medical costs consumed 12.8% of G.N.P. last year. The government, reluctant to raise taxes further, is pressing doctors and hospitals to hold down charges.
In Sweden, where the government provides free medical service, health costs have risen from 9.5% of G.N.P. in 1974 to 11.3% last year. As in Germany, the government is pressing for a hold-down; among other things, Sweden routinely denies expensive organ transplants to people over 70--a cruel but necessary form of rationing. Britain's National Health Service has done a better job of holding down costs; medical outlays as a percentage of G.N.P. (5.6% at last count, in 1977) have been fairly stable. But there has been a price to pay. The nation is suffering from a doctor shortage, because many physicians have left the country feeling that they cannot earn enough under NHS, and waits of three to six months for elective surgery are common.
In the U.S., the Carter Administration's immediate proposal is a bill imposing mandatory controls if the medical profession does not clamp down itself. Government interference is, of course, anathema to hospital officials and doctors. Michael Bromberg, executive director of the Federation of American Hospitals, claims that the public "doesn't care" about the cost problem. "But it is a good issue to demagogue about," he adds, "even if the President loses his bill."
Carter and HEW Secretary Joseph Califano are betting that Bromberg is wrong about a complacent public. Indeed, many members of Congress are feeling so much heat from constituents that they are also seriously beginning to consider a long-range, broad solution to the whole problem of high health care costs. A surprising total of 21 bills proposing some form of national health insurance have been introduced in the House, and ten in the Senate this year.
The first showdown will be over the hospital cost containment bill. Carter introduced a similar bill in 1977, and while it passed the Senate last year, the hospitals applied enough local pressure to get it killed in the House Commerce Committee by one vote. This time the President, Califano and Administration aides are lobbying intensively, something they failed to do in 1978, calling the bill "the litmus test" of whether a legislator is really serious about fighting inflation. The bill, Carter insists, would save the country "some $53 billion" over the next five years the amount by which he estimates medical costs would increase if no limits were enacted. The Congressional Budget Office is less optimistic; it pegs the likely savings at $31.7 billion. But adds one of the office's analysts: "That's still a lot of bucks to save."
Under this year's bill, hospitals would be given until Jan. 1, 1980, to show that they can voluntarily hold down the increase in their costs. Controls would go into effect only if hospitals fail to keep their average annual increase to 9.7%, plus an adjustable figure to compensate for general inflation. That is hardly a stingy rise. Even so, more than half of the nation's nearly 6,000 community hospitals, mainly those in small towns and in states with effective cost control laws already on the books, would be exempt from controls. The country's 1,200 other hospitals, including psychiatric and federal hospitals, would also be exempt.
Once the mandatory controls are in effect, the Government would have the power to require that the fees received by hospitals from their bed patients be limited by a complex formula based on general inflation, local wage levels and each hospital's efficiency. The Government would order Blue Cross, Medicare and Medicaid not to pay a hospital more than the specified increase. Hospitals would be required to set aside part of the payments they received from private insurance companies. If these payments exceeded the prescribed limit, the hospitals would have to reimburse the insurers. If they failed to do so the Government would have the power to take al of the hospitals' "excess' revenues, plus a punitive sum equal to 50% of the amount.
John Alexander McMahon, president of the American Hospital Association, calls the proposal so horribly complex that it would be "unworkable." Actually, a few of the bill's supporters, including Senator Kennedy, agree that there is a problem. Kennedy's subcommittee on health last week modified the Carter plan by increasing the voluntary limit to 10.9%, more carefully defining the conditions under which a hospital could be exempt from mandatory controls, and setting Dec. 31, 1984, as the date when controls would end, unless Congress acted to extend them.
McMahon argues that Carter's bill would create "a huge bureaucracy to do something that is already being done voluntarily." He notes that hospitals have cut their rising costs from 15.6% in 1977 to 12.8% last year. Michael Bromberg also protests that it is unfair to single out hospitals when such industries as food and housing contribute more to inflation.
The Administration has strong arguments against both points. Califano contends that hospitals braked their price increases only to counter the threat of Government controls, and predicts: "The day the Congress stops working on this problem, hospital rates will take off like a rocket headed for the moon." As for unfairness, Califano replies that, unlike other industries, hospitals operate in a "virtually noncompetitive system that says spend, spend, spend."
Politically, the fight is shaping up along party lines. The Democrats generally favor the bill, although some agree with the Republicans that it would allow an unwarranted intrusion by the Government into hospital affairs. The G.O.P. also sees the bill as a wedge to open the way for price controls in other industries. Contends Republican Congressman David Stockman of Michigan: "It is a classic Rube Goldberg legislative contraption that will be impossible to implement and virtually make Califano the hospital czar in the U.S."
Nevertheless, on balance, the combination of third parties paying most hospital bills and the noncompetitive nature of hospital care seems to have forced costs so completely out of control that, despite the obvious risks, only the Government may be able to clamp on a lid.
National health insurance is a perplexing matter to assess. The issue is also confusing because it takes so many different forms, and the costs, some of them stupendous, are so difficult to pin down. Nearly all sponsors seem to agree, however, on one point: the current mood against increased spending precludes any costly health insurance program for some time.
The three most prominent proposals are those of Kennedy; Louisiana Senator Russell Long, who advocates a far more restricted measure; and Carter, who takes a more modest, middle-of-the-road approach. The three:
KENNEDY. His revised plan, announced Last Monday, would require that all Americans, regardless of income or age, be covered. He has backed away from his earlier advocacy of making the Government the basic insurer. Instead, he would inject competition into the scheme by letting people choose whether they wanted to be protected by a consortium of commercial insurance companies, by Blue Cross-Blue Shield, or by joining independent group health plans or health maintenance organizations (H.M.O.s). Employers would be liable for the premium payments, estimated at $11.4 billion a year more than they pay now, but they could require workers to provide up to 35% of that amount. The workers' share would be related to their salaries. The Federal Government, as it does now, would pay the bills for most elderly and poor patients, but at a cost estimated at $28.6 billion a year more than it now pays. Kennedy would phase in the program over seven years or so, starting in 1983. Opponents claim that the Kennedy plan would cost closer to $45 billion.
LONG. He would restrict coverage to so-called catastrophic illness or accidents, protecting everyone against the huge medical bills that can bankrupt even a moderately well-off family. He has suggested, for example, that payments begin after $2,000 in doctor's fees plus 60 days of hospitalization. At minimum room rates, that would be a "deductible" of at least $12,000. The $3 billion-a-year plan would be financed entirely by employers. Long wants the plan to be fully enacted as soon as possible. "It is time to stop talking about these problems and start doing something," he insists.
CARTER. The details are still being worked out by HEW, which has taken so long on the plan that a White House aide reports: "Carter is pissed off with Califano." Now expected to be made public later this year, the scheme would expand Medicare and Medicaid benefits for the aged and the poor. In addition, it would give those unprotected by company or public plans a chance of buying insurance at a "reasonable" cost, although that figure has not yet been determined. This insurance, subsidized by the Government, would provide a "core benefit package," including hospital and physician services, X-ray and lab tests, and would also probably provide some kind of catastrophe coverage. Cost of the total Carter plan to the Government: $15 billion a year. Employees and employers would pay $5 billion.
Both Kennedy's and Carter's plans make a desperate stab at trying to control the alarming rise in health costs. Carter's assumes passage of the hospital cost containment bill and it might also require that the fees charged by physicians be negotiated by the Secretary of HEW and a board composed of consumers, insurers and health care representatives. In essence, Kennedy advocates giving the Government veto power over payment scales worked out on a state basis through bargaining among the insured, the insurances, the doctors and hospitals.
The White House and Kennedy contend that public sentiment is building irresistibly for the eventual enactment of some kind of universal health insurance plan. The present programs vary wildly but have one thing in common: the costs keep rising.
Beyond the politicians' remedies, there are more immediate, if less comprehensive steps that the profession and the various insurance plans already in force could take to control costs.
The first essential is to reform insurance practices. Some beginnings have been made: Blue Cross-Blue Shield will no longer automatically pay for a battery of tests administered to every patient who enters a hospital unless each test is specifically ordered by the attending physician. Insurance policies should be rewritten to pay for lab tests and other care administered in a doctor's office rather than a hospital. If Congress will not push the Blue plans and private insurers in this direction, corporations could and should. Exxon, General Motors and AT&T have the bargaining power that individual patients lack and a powerful incentive to hold down medical costs: the lower the insurance premiums they pay, the more money they will have to expand plants, raise wages or distribute to stockholders.
The Government should revise Medicare and Medicaid reimbursement formulas to pay hospitals a set amount for, say, removal of a gallstone, rather than costs-plus. Says Dr. Mitchell Rabkin, director of Beth Israel Hospital in Boston. "I'd like to see a system of incentives--say, if we saved money, that money could be split between the insurer and the hospital." Califano and some state regulators also are launching a drive to require that a majority of the directors of any Blue Shield plan be laymen. At present, many Blue Shield plans are dominated by doctors, who, to put it delicately, have no great zeal to question fellow physicians' fees.
Hospitals could keep a far sharper eye on costs. Says Duke University's William Anlyan: "You must have someone who is a rat and not a mouse on the hospital board--someone has to say no to a request for buying a $100,000 piece of equipment." If the Government and private insurers provided an incentive to hold down costs, the "rats" could force a much greater sharing of facilities. Detroit's Henry Ford Hospital, for example, provides computerized electrocardiogram analysis for seven other hospitals in Michigan. When a heart patient checks into Crystal Falls Community Hospital in the Upper Peninsula, a physician attaches wires to the patient's arms, legs and chest, then pushes a button that activates a line to the Ford Hospital computer. As soon as a circuit is clear, the Detroit computer signals "go," then reads the electrical signals and transmits an analysis of the readings--at far lower costs than if the Upper Peninsula hospital had its own computer.
A number of hospitals are already making efforts to keep a sharper eye on costs. At California's Long Beach Community Hospital, staff doctors meet at least four times a year for what they call "economic rounds," studying patients' bills to make sure they are not padded. At one such meeting a few weeks ago, a slide of a bill was projected on a screen. A tumor specialist quickly asked why the hospital had ordered two computerized blood tests when one--the cheaper one, at that--would have sufficed. In a very different cost-cutting program, New York University Medical Center has designated 104 rooms in a new building for a "cooperative care" experiment in which patients who are well on their way to recovery but cannot yet leave the hospital are looked after by friends and relatives rather than staff members.
On a far larger scale, one of the most promising alternatives to the traditional medical system is group-practice health maintenance organizations, which hire doctors to work on salary rather than charging fees for specific services, and sign up hospitals to take on their patients. A customer joining an H.M.O. pays a set monthly fee--$47 for individuals, $116 for families in the Harvard Community Health Plan in Boston. That fee entitles the subscriber and his family to any medical services they may need, from a routine physical exam to open-heart surgery.
The monthly fee would be too high for most prospective patients to afford, unless employers paid most of the premiums. Companies are only beginning to explore the idea. In the Detroit area, GM, Ford, Chrysler and the U.A.W. have joined to sponsor the largest H.M.O. in Michigan, called Health Alliance Plan. Says Jim Walworth, executive director of the plan: "It is our feeling that H.A.P. rates will be 10% lower than the costs of typical conventional medical programs in this area."
Many physicians argue that the only way the U.S. is going to bring its medical costs under control is by emphasizing preventive medicine instead of crisis care. They stress exercise, weight control, cutting out drinking and smoking. Says Dr. Hoyt D. Gardner, president-elect of the A.M.A.: "America medically suffers more from affluence--and consequent self-indulgence--than from poverty." But not many doctors are genuinely optimistic that much will be done.
No great optimism is justified either when it comes to cutting medical costs overall. Medicine cannot be made cheap, given the costs of its technology, and by its nature it cannot be anything but a seller's market. But U.S. health care bills do not have to shoot up as rapidly as they are doing now. The big question is whether doctors, hospital administrators, insurers and employers can devise ways to bring the public the benefits of technology at an affordable price, without a federal whip being held over them.
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