The Myths of Managing Health Care

I learned the hard way that human nature is the biggest obstacle to cutting health care costs. President Obama is not the first chief executive to foist onto us an unrealistic medical reform.

I left Nebraska to become Medical Director of a Health Maintenance Organization (HMO) in Louisiana in 1980. I believed the myths of managed care promoted by the smart guys. Health insurance premiums were spiraling up, and business and industry were concerned. People wanted good insurance cheap. Managed care was the answer.

The Nixon administration wrote the Health Maintenance Act of 1973, funding and promoting managed care by a non-profit community-controlled, federal benefit package, one community premium, no limits on preexisting conditions, preventive care, comprehensive care, first dollar coverage health care. To help them get started, the law said that a federally qualified HMO under the act could mandate an offer to an employee group.

Government experts promote myths when policy agendas solidify in order to encourage public support. The myths of managed care were that:

  1. good medical science would eliminate unnecessary medical services;
  2. new financial incentives would reduce costs; and
  3. preventive health programs would improve things and reduce costs.

In 1980, I was a believer, living the dream. HMOs were a part of the grand solution for health care in America...but then reality intruded.   

Myths busted by reality:

- Salaried physicians are less motivated than fee for service docs, producing increased costs.

- People who buy comprehensive 1st dollar insurance use it -- a lot. And they demand the frills, in Louisiana called lagniappe -- extra. 

- The consumer movement attitude produces excess utilization.

- A community-based non-profit can't say no, even to inappropriate expenses.

- Reducing costs is important -- for someone else's care. Demands and expectations are high, complaints come quick, a litigious environment increases defensive medicine, and all of these increase costs of care.  

HMO of Baton Rouge was my life and my nurse wife's life, 24/7, for eighteen months in 1980 and '81. The HMO was in trouble in 1980, put on financial probation by the feds, but we had a slim chance of survival by offering the plan to a group we had avoided: the biggest employee group in the area, comprising government employees of the universities and the State. Government employees were and are notorious for excess use of health plan benefits, but we needed more members to make the magic break-even membership recommended by the feds. The sales staff put up the comprehensive luxurious package, and we added five thousand members at the end of 1980. It was a risk we had to take. In January of 1981, a flu epidemic hit, and demand went through the roof for everything -- phone lines, office visits, hospital care -- with the new members, government people who knew the complaint and grievance processes, not being shy. It was a nightmare.    

For me, the myths about managed care crashed on the rocks of reality in 1981. Fixed income and high demand for services don't make successful business plans. Americans can be anxious, health-conscious hypochondriacs who use up health care and always know the latest new and expensive medical development. Federal good intentions and human behavior make health care services a monetary black hole, regardless of the tricks employed or the myths held to be controlling.

The HMO went bankrupt by May 1981. It was doomed when I arrived, a bright-eyed, energetic 34-year-old from Nebraska. I put in the effort and dreamed the dream, but I have been an emergency physician pushcart trader ever since, and my taste for health care reform and government comprehensive strategies has been tempered by experience.

The HMO act organizations are no longer in existence, with few exceptions, because the myths don't work. Some of the managed care concepts promoted in the '70s and '80s are embedded in commercial health care insurance programs, like restricting provider and hospital care to contracted entities, but no one uses the words "HMO" and "managed care" now -- the public always like to save money on somebody else's care, and the media turned on managed care as evil profiteering. Medical Directors became public enemies. I'm happy that I quit that line of work.

A new set of myths and unswerving support for government are now the foundation of "comprehensive" health care reform. The myths affirm the value of a monolithic state collective medical system as the solution.

Comprehensive Healthcare Reform Myths

Private insurance companies are bad, government good.

This myth is part anti-capitalist, part statist. However, sixty years of government tax rules and mandates has destroyed free-market insurance and increased health costs. Economic good sense is out the window in a mandate-controlled, third-party-payer system. A free lunch will result in a crushing tax and debt burden.

Amy Finkelstein of MIT has shown that Medicare and Medicaid independently and significantly increased health care costs by distorting markets and increasing utilization, but also by causing cost shifting. Comprehensive reform advocates destroy competitive insurance and Health Savings Accounts options.

The uninsured numbers prove that America has failed.

Uninsured is a choice, not a disease. For the truly needy, America has charity care and a Social Security Title 16 and Title 2 safety net. Devon Herrick shows that the uninsured numbers are exaggerated by the advocates, but even so, most uninsureds are healthy, and if they get sick in America, then America takes care of them.    

The head of financial services at the Cleveland Clinic ruined the president's drama about a lady with leukemia by explaining that she was being cared for and qualified for Cleveland Clinic's generous annual 100 million charity care and Medicaid because she was a working citizen. America takes care, and the safety net works.

Uncompensated care is ruining any chance of fiscal integrity of the health care system.

America spends 2.2 trillion dollars annually on health care. The uninsured care cost is less than 100 billion, less than 5%. Crisis? Jack Hadley in Health Affairs explains that the uninsured are not a sick group. The system is expensive, but it works, with adequate safety net provisions for the needy.

We need to stop wasting money on emergency departments.

The total cost for emergency care in the United States is less than 5% of the total of $2.2 trillion America pays every year for health care. One hundred and twenty million visits, insured and uninsured, billed for $120 billion. Most of it paid for with insurance or cash. Crisis? Again? Emergency departments are convenient, open 24/7, and they offer access to high tech resources. Universal insurance will not reduce E.D. use because in a reformed system, it will be free to the patient. Robert Samuelson insightfully discusses these things in the Washington Post.

Reformers will use computers and make everybody's health record on a government databank, resulting in better care for all.

Computers are expensive, take providers away from the patient, magnify mistakes, and don't reduce costs. Computers don't take care of patients, systems crash, data decays and is not securely private. Computer problems that cause errors have not yet been solved. 

Comparative effectiveness panels and guidelines writers will save money and improve care.

The guideline and practice control projects will provide a way to ration or deny unapproved care for economic or medical reasons, but evidence does not show better care. The Leap Frog project in one thousand hospitals was reported as a disappointment by Leslie Kernisan in JAMA.

Lack of insurance is a killer.

The president and others wave the bloody shirt of a 2009 study claiming that a lack of health insurance causes 45,000 deaths in America per year. John Goodman and William Tate both exposed the study as irresponsible and flawed propaganda by Woolhandler and Himmelstein, unreliable and self-declared fanatic advocates of socialized medicine. In contrast, Dr. Steven Asch and Drs. Helen Levy and David Meltzer find no real benefit to health outcomes from health insurance.

New preventive care projects will save money and lives.

Preventive health myths flourish in spite of the evidence. Michael Fumento in National Review and Joshua Cohen in a comprehensive medical journal review report that claims of preventive care benefits are exaggerated and unimpressive in reality, and there are downside risks to screening healthy populations.

The American health care system isn't safe. Government needs to intervene and punish and penalize hospitals, nurses, and physicians.

The only comprehensive American hospital care patient safety studies over four decades show a rate of negligent patient injury less than 0.25%. Denigrating health care providers and hospitals promotes the savior role of nine-to-five government mandarins with clipboards, furrowed brows, and red pencils. Government experts as guarantors of safety and quality may be the biggest myth of all.

We are in the last stretch of the hijacking, intended to create a command-and-control health care reform by a mean rank of self-assured tyrants, monitoring and intruding into every nook and cranny of American life. Health care will open the door to the state dictating living and lifestyles. Those in charge will meddle and mandate to affirm their power, sense of superiority, and good intentions.  

Eric Hoffer, longshoreman philosopher, said, "The intellectuals and the young, booted and spurred, feel themselves born to ride us."       

Ronald Reagan warned that a federalized medical system would be the key to making America a socialist state. He said, "Freedom is never more than one generation away from extinction." 

Soon these remorseless, arrogant, socialist, dome-headed apparatchiks will be tallying and monitoring Americans lives in their journals, recording new orders and mandates, chronicling oppressions and terminations. Harshness will characterize their regime. 

Liberty will be a whisper, a faint and fading image.

Twenty-five years ago, Ronald Reagan was president. Are we lost to our home-grown socialist movement?  

John Dale Dunn, M.D., J.D. is an emergency physician and policy advisor for the Heartland Institute of Chicago and the American Council on Science and Health of New York City.
I learned the hard way that human nature is the biggest obstacle to cutting health care costs. President Obama is not the first chief executive to foist onto us an unrealistic medical reform.

I left Nebraska to become Medical Director of a Health Maintenance Organization (HMO) in Louisiana in 1980. I believed the myths of managed care promoted by the smart guys. Health insurance premiums were spiraling up, and business and industry were concerned. People wanted good insurance cheap. Managed care was the answer.

The Nixon administration wrote the Health Maintenance Act of 1973, funding and promoting managed care by a non-profit community-controlled, federal benefit package, one community premium, no limits on preexisting conditions, preventive care, comprehensive care, first dollar coverage health care. To help them get started, the law said that a federally qualified HMO under the act could mandate an offer to an employee group.

Government experts promote myths when policy agendas solidify in order to encourage public support. The myths of managed care were that:

  1. good medical science would eliminate unnecessary medical services;
  2. new financial incentives would reduce costs; and
  3. preventive health programs would improve things and reduce costs.

In 1980, I was a believer, living the dream. HMOs were a part of the grand solution for health care in America...but then reality intruded.   

Myths busted by reality:

- Salaried physicians are less motivated than fee for service docs, producing increased costs.

- People who buy comprehensive 1st dollar insurance use it -- a lot. And they demand the frills, in Louisiana called lagniappe -- extra. 

- The consumer movement attitude produces excess utilization.

- A community-based non-profit can't say no, even to inappropriate expenses.

- Reducing costs is important -- for someone else's care. Demands and expectations are high, complaints come quick, a litigious environment increases defensive medicine, and all of these increase costs of care.  

HMO of Baton Rouge was my life and my nurse wife's life, 24/7, for eighteen months in 1980 and '81. The HMO was in trouble in 1980, put on financial probation by the feds, but we had a slim chance of survival by offering the plan to a group we had avoided: the biggest employee group in the area, comprising government employees of the universities and the State. Government employees were and are notorious for excess use of health plan benefits, but we needed more members to make the magic break-even membership recommended by the feds. The sales staff put up the comprehensive luxurious package, and we added five thousand members at the end of 1980. It was a risk we had to take. In January of 1981, a flu epidemic hit, and demand went through the roof for everything -- phone lines, office visits, hospital care -- with the new members, government people who knew the complaint and grievance processes, not being shy. It was a nightmare.    

For me, the myths about managed care crashed on the rocks of reality in 1981. Fixed income and high demand for services don't make successful business plans. Americans can be anxious, health-conscious hypochondriacs who use up health care and always know the latest new and expensive medical development. Federal good intentions and human behavior make health care services a monetary black hole, regardless of the tricks employed or the myths held to be controlling.

The HMO went bankrupt by May 1981. It was doomed when I arrived, a bright-eyed, energetic 34-year-old from Nebraska. I put in the effort and dreamed the dream, but I have been an emergency physician pushcart trader ever since, and my taste for health care reform and government comprehensive strategies has been tempered by experience.

The HMO act organizations are no longer in existence, with few exceptions, because the myths don't work. Some of the managed care concepts promoted in the '70s and '80s are embedded in commercial health care insurance programs, like restricting provider and hospital care to contracted entities, but no one uses the words "HMO" and "managed care" now -- the public always like to save money on somebody else's care, and the media turned on managed care as evil profiteering. Medical Directors became public enemies. I'm happy that I quit that line of work.

A new set of myths and unswerving support for government are now the foundation of "comprehensive" health care reform. The myths affirm the value of a monolithic state collective medical system as the solution.

Comprehensive Healthcare Reform Myths

Private insurance companies are bad, government good.

This myth is part anti-capitalist, part statist. However, sixty years of government tax rules and mandates has destroyed free-market insurance and increased health costs. Economic good sense is out the window in a mandate-controlled, third-party-payer system. A free lunch will result in a crushing tax and debt burden.

Amy Finkelstein of MIT has shown that Medicare and Medicaid independently and significantly increased health care costs by distorting markets and increasing utilization, but also by causing cost shifting. Comprehensive reform advocates destroy competitive insurance and Health Savings Accounts options.

The uninsured numbers prove that America has failed.

Uninsured is a choice, not a disease. For the truly needy, America has charity care and a Social Security Title 16 and Title 2 safety net. Devon Herrick shows that the uninsured numbers are exaggerated by the advocates, but even so, most uninsureds are healthy, and if they get sick in America, then America takes care of them.    

The head of financial services at the Cleveland Clinic ruined the president's drama about a lady with leukemia by explaining that she was being cared for and qualified for Cleveland Clinic's generous annual 100 million charity care and Medicaid because she was a working citizen. America takes care, and the safety net works.

Uncompensated care is ruining any chance of fiscal integrity of the health care system.

America spends 2.2 trillion dollars annually on health care. The uninsured care cost is less than 100 billion, less than 5%. Crisis? Jack Hadley in Health Affairs explains that the uninsured are not a sick group. The system is expensive, but it works, with adequate safety net provisions for the needy.

We need to stop wasting money on emergency departments.

The total cost for emergency care in the United States is less than 5% of the total of $2.2 trillion America pays every year for health care. One hundred and twenty million visits, insured and uninsured, billed for $120 billion. Most of it paid for with insurance or cash. Crisis? Again? Emergency departments are convenient, open 24/7, and they offer access to high tech resources. Universal insurance will not reduce E.D. use because in a reformed system, it will be free to the patient. Robert Samuelson insightfully discusses these things in the Washington Post.

Reformers will use computers and make everybody's health record on a government databank, resulting in better care for all.

Computers are expensive, take providers away from the patient, magnify mistakes, and don't reduce costs. Computers don't take care of patients, systems crash, data decays and is not securely private. Computer problems that cause errors have not yet been solved. 

Comparative effectiveness panels and guidelines writers will save money and improve care.

The guideline and practice control projects will provide a way to ration or deny unapproved care for economic or medical reasons, but evidence does not show better care. The Leap Frog project in one thousand hospitals was reported as a disappointment by Leslie Kernisan in JAMA.

Lack of insurance is a killer.

The president and others wave the bloody shirt of a 2009 study claiming that a lack of health insurance causes 45,000 deaths in America per year. John Goodman and William Tate both exposed the study as irresponsible and flawed propaganda by Woolhandler and Himmelstein, unreliable and self-declared fanatic advocates of socialized medicine. In contrast, Dr. Steven Asch and Drs. Helen Levy and David Meltzer find no real benefit to health outcomes from health insurance.

New preventive care projects will save money and lives.

Preventive health myths flourish in spite of the evidence. Michael Fumento in National Review and Joshua Cohen in a comprehensive medical journal review report that claims of preventive care benefits are exaggerated and unimpressive in reality, and there are downside risks to screening healthy populations.

The American health care system isn't safe. Government needs to intervene and punish and penalize hospitals, nurses, and physicians.

The only comprehensive American hospital care patient safety studies over four decades show a rate of negligent patient injury less than 0.25%. Denigrating health care providers and hospitals promotes the savior role of nine-to-five government mandarins with clipboards, furrowed brows, and red pencils. Government experts as guarantors of safety and quality may be the biggest myth of all.

We are in the last stretch of the hijacking, intended to create a command-and-control health care reform by a mean rank of self-assured tyrants, monitoring and intruding into every nook and cranny of American life. Health care will open the door to the state dictating living and lifestyles. Those in charge will meddle and mandate to affirm their power, sense of superiority, and good intentions.  

Eric Hoffer, longshoreman philosopher, said, "The intellectuals and the young, booted and spurred, feel themselves born to ride us."       

Ronald Reagan warned that a federalized medical system would be the key to making America a socialist state. He said, "Freedom is never more than one generation away from extinction." 

Soon these remorseless, arrogant, socialist, dome-headed apparatchiks will be tallying and monitoring Americans lives in their journals, recording new orders and mandates, chronicling oppressions and terminations. Harshness will characterize their regime. 

Liberty will be a whisper, a faint and fading image.

Twenty-five years ago, Ronald Reagan was president. Are we lost to our home-grown socialist movement?  

John Dale Dunn, M.D., J.D. is an emergency physician and policy advisor for the Heartland Institute of Chicago and the American Council on Science and Health of New York City.