ROBERT MOFFIT: On Capitol Hill and around the country,
Americans are pondering the basis for renewing the debate on the
American health care system. What is our starting point? Of course,
with you, the members of the medical profession, the central issue
is the doctor-patient relationship. Ideally, that relationship and
its preservation should be the touchstone of reform. But not all
agree. Some corporate experts feel that we ought simply to build
reform on the basis of the current health insurance system -- the
employee-based, tax-supported insurance arrangements that have been
with us since World War II.
But underlying the current insurance system are major market
distortions. This is a fundamental fact of our economic life. It is
the environment in which you, as physicians, currently operate.
These market distortions serve to drive up health care costs while
accelerating the rate of uninsurance among the working
What this means, ladies and gentlemen, is that if you insist on
building upon the current insurance system, inescapably this means
that you must close it up even more, to adjust for these
distortions, and increase the already heavy role of bureaucracy and
the regulatory regime that governs it. It also means reducing
doctors and hospitals to the status of even more highly regulated
public utilities. I think this is logically inescapable if the
basis for new reform is simply the current employer-based insurance
With last year's collapse of the Clinton plan, several states
are experimenting with the latest versions of "managed
competition," establishing the managed care networks inspired by
the theoreticians of the Jackson Hole Group.1
Let us consider the current trends in private, employer-based
insurance. Right now, in too many boardrooms of corporate America,
our colleagues in the business community are celebrating what they
believe to be a triumph of the free market. We are witnessing a
mass movement of employees into managed care networks. Now, the
rate of acceleration is nothing short of breathtaking. In 1992, no
more than 15 percent of all Americans were enrolled in health
maintenance organizations. Today, 63 percent of all workers are
enrolled in health maintenance organizations, PPOs, or other
managed care plans.
While, in fact, many representatives of corporate America see
this as a triumph of the market, it is nothing of the sort -- at
least in the normal meaning of the market. Could you imagine a free
market where there is no normal collision of the forces of supply
and demand, even on the most basic level, which is the consumer
purchase or sale of a commodity? Could you imagine a free market
where the customer of goods and services is an entirely different
personality from the consumer of those goods and services? Or could
you imagine a free market where, for all practical purposes, the
consumer of a good or a service has no property right in the
commodity -- in this case insurance -- that is bought and sold? Of
course, you could not answer "yes" to any of these questions.
So it is really quite absurd to say that we are witnessing a
triumph of the market when the consumer of the commodity -- in this
instance, health insurance -- cannot personally buy it, when the
consumer can have no property right in the commodity once it's
purchased, and when the consumer cannot realize any personal
savings in a free exchange by weighing the value of the commodity
and the price to be paid for it.
The current mass movement to managed care, whether that form of
care is a good idea or a bad idea, is not a triumph of the market.
It is, however, the latest evolution of the current insurance
system, which is a fundamentally distorted third-party payment
system built upon a legally exclusive, tax-supported,
employer-based model that frustrates consumer choice and
Consumer Demand and Consumer Choice
In many instances, there is no consumer demand because, in
fact, consumers are not even consulted by insurance companies about
whether they would like to buy the product. Rather, corporate
managers are deciding, for solid financial reasons relating to the
company's bottom line, that they can no longer afford traditional
indemnity insurance and are enrolling their workers in managed care
plans. This is a transaction where the employer, not the employee,
makes the key decisions and, at the same time, where the employer,
not the employee, realizes the savings.
If the managed care plan is less expensive than the conventional
corporate insurance plan, this amounts to a reduction in the
worker's compensation. Too many Americans do not yet clearly
understand this. The reason: Too many Americans think, wrongly,
that the employer's contribution to their company's health benefits
package is the employer's money and not the employee's money. I
personally know of no instance where corporate benefits managers
are giving workers cash back in an amount equal to the difference,
say, between the higher cost of last year's indemnity plan and the
lower cost of next year's new managed care plan. Whatever the
impact of the managed care revolution on the quality and delivery
of health care services, this is very often an employer, not an
employee, decision. This should be the subject of extensive
congressional debate. Unfortunately, it is not; at least, not
The new managed care revolution brings with it two related
problems. One is economic. The other, more important problem is
In the transition from fee for service to managed care plans,
there is likely to be -- and the preliminary studies bear this out
-- a transitional savings to employers. The existing professional
literature indicates that this is the case. The economic problem is
that there is no guarantee that managed care, whether in the form
of a staff model HMO or other managed care options, will contain
long-term health care costs. According to a 1993 GAO report on the
subject: "Although many employers believe that, in principle,
managed care plans save money, little empirical evidence exists on
the cost of savings and managed care."
But that is not the most important problem. The more serious
problem is political; and it is a political problem at the direct
expense of managed care. Lest I be misunderstood, I am not an
opponent of managed care. I am only saying that individuals should
be personally free to choose or reject it, and that government
policy on the issue should be strictly neutral. Managed care, in
fact, is not being given a fair shot in the free market because
there is no free market. This is bad for managed care. When
employees are forced into managed care plans without other options,
or against their will, they not only have been deprived of a choice
of their health plan, but they also are deprived of their choice,
in many instances, of a doctor or a medical specialist.
In other words, Americans will have even less choice over their
health care decisions than they have today. If popular
dissatisfaction with employer-based insurance grows -- as it surely
will, especially with the higher number of uninsured and an
expected rise in health care costs, which we may see again, perhaps
at the end of this business cycle -- this popular dissatisfaction
can threaten the entire private health care system.
Advocates of a Canadian-style system have had a rather difficult
time selling the notion that monopoly is really good for you, or
that government monopoly is even better. Or, as my colleague, Dr. Stuart Butler, Heritage Foundation
Vice President, suggests, try to imagine that your health care
future is going to be bright and cheery when it is run by those
thousands of eager public servants ready to answer your every call
or help you with any question over the phone down at the local
But advocates of the Canadian-style system can make an excellent
case in saying, "You may not like the Clinton plan or its various
congressional incarnations, and you may not like government-run
health care, but at least, under a Canadian-style system, you will
retain your right to a physician."
The End of Private Practice?
That is, for most Americans, a powerful argument. It's a clincher.
It can also mean the end of private health insurance, and I submit
to you that if it's the end of private health insurance, it is
really the end of private medical practice. Private practice cannot
survive outside of private markets.
This morning, we have two physicians who are going to talk about
this vital issue: the doctor-patient relationship.
Kevin Vigilante, M.D., comes to us from the Miriam Hospital at
Brown University in Providence, Rhode Island. He is the clinical
partner in the Miriam Immunology Center. Kevin cares for women with
HIV and started a community outreach clinic to provide health care
to women coming out of prison. He has been the principal
investigator in an NIH study to determine the effects of early
treatment of HIV infection with AZT. He has also been the principal
investigator on the Ryan White grant to provide HIV prevention and
care. He has been the Director of Emergency Medical Services and
Clinical Assistant Professor of Medicine at Brown University. He
has been the Director of Primary Care and Instructor of Medicine at
Dr. Vigilante is a graduate of the Harvard School of Public
Health and Yale University's Internal Medicine Department. His M.D.
is from Cornell University. He got his master's degree in
bacteriology from Wagner College, and he got his bachelor's degree
at Johns Hopkins University in philosophy and political science.
This past year, Dr. Vigilante ran for the U.S. House of
Representatives against Congressman Patrick Kennedy, garnering 46
percent of the vote.
Sandra Mahkorn, M.D., serves as Chief Medical Officer of FHC
Managed Care Health Services in Norfolk, Virginia. Before assuming
that position, she was a Clinical Assistant Professor and Satellite
Clinic Medical Director for the University of Wisconsin in the
Wisconsin Medical School.
In the Bush Administration, she served in two capacities: first,
as the Deputy Assistant Secretary for Public Health Policy of the
Department of Health and Human Services between 1991 and 1992, and
second, during the last several months of the Bush Administration,
with Vice President Dan Quayle on the White House staff. She was an
Associate Director for the President's Council on
Before her White House appointment, Dr. Mahkorn was the lead
physician at the Oxnor Clinic in New Orleans, Louisiana. She is a
member of several medical associations and holds a master's degree
from the University of Wisconsin in Milwaukee in educational
psychology and urban affairs and a master of public health degree
from the Tulane School of Public Health and Tropical Medicine. She
received her M.D. from the University of Wisconsin at Madison.
I turn you over to Dr. Vigilante.
THE ETHICAL IMPERATIVE
KEVIN VIGILANTE: Thanks very much. It's great to be back
here at the Heritage Foundation. It is always a pleasure to work
with brilliant people, and I have been a fan of the innovative
Heritage approach to solving our health care dilemma for quite some
I was asked to come and talk about the physician-patient
relationship. I think it is probably the most precious thing we
have in the practice of medicine. Most of us did not choose to do
what we do because of money, but because of some other, more
important sources of gratification. I think that in this whole
national health care debate, the physician-patient relationship has
not had adequate attention.
And it is undergoing a tremendous change. Go back to the
Hippocratic Corpus, 2,500 years ago. We Hippocratics call it the
Hippocratic Corpus because it was written by a number of different
people. Hippocrates, the great Greek philosopher, only wrote a
small portion of it, and like any piece authored by multiple
people, it has its share of contradictions, inconsistencies, and
differences in style.
But one thing throughout the entire Corpus is constant: It is
the physician's primary duty -- actually, his sacred duty -- to
serve the patient. It puts the physician clearly in the servant
That is the ideal. Throughout ancient and modern history, that
tradition endured right up until the present time. True, you can
find exceptions, such as the Great Plague, where some of the best
and brightest physicians fled the towns and cities to leave their
patients behind to be cared for by lowly "plague doctors." But that
was an exception.
We all know physicians who are, perhaps, pompous and arrogant,
and thus do not typify the notion of the servant. But, again, that
is a deviation from the ideal.
Under this model, it is the patient's prerogative to leave the
physician at will, for whatever reason, without explanation. But,
ethically, it is not a reciprocal relationship. The physician can
never leave the patient at will, or abruptly. That, according to
the professional ethic and the law, is called abandonment. The
physician must subordinate himself or herself to the needs of the
patient in a service capacity.
What has happened recently, very recently, is that for the first
time in the last 2,500 years, on a large scale, that relationship
has started to change. In a very subtle, insidious, and somewhat
unrecognized way, it is changing, and we are seeing corporate
medicine, managed care medicine. It is a change from a dual
relationship to a triadic relationship, where the physician is no
longer employed by the patient. The physician is now employed by a
A physician has two functions in that regard. He has to care for
the patient, but he also has to meet a financial or cost objective
established by the corporate entity. So what was previously a very
unambiguous relationship with the patient has become conceptually
blurred. Where does the physician's loyalty lie?
Most of us, and most of our colleagues, are going to go on
practicing largely the same as we did before. We have a strong
feeling that the ethical imperative is to be responsible first to
your patient. But like all such changes, at first imperceptible and
insidious, these things have gradual influence, and in subsequent
generations, I fear we are going to see a change in physician
behavior. This is borne out, I think, most acutely or dramatically
in the concept of futility. Somebody mentioned last night at dinner
that the last few months of life are the most expensive when we're
There is a raging debate in the realm of medical ethics called
the problem of futility. When you have somebody who is in the last
days and months of life, undergoing extraordinary methods of
treatment, and the physician feels that this is futile care, that
this will not change the ultimate outcome of this person's life,
who has the right to withdraw treatment? Is it the physician
unilaterally? Is it the physician in consultation with the family,
particularly if the family wants everything done?
In the old model, you could have a debate as to whether the
physician had some right in saying, "I'm not obliged to deliver all
forms of treatment -- I can withhold some treatments based on
professional judgment." But now there is a third factor in this
decision, not related to the physician's professional judgment as
to whether this care is futile or in accord with the family's
wishes. It's the pressure that the managed care corporation brings
Their bottom line is precious; and if the last six weeks, or six
months, of care is responsible for the majority of their cost --
well, who is going to be making decisions about futility, and where
are the pressures going to come from? And when there is
uncertainty, when do you come down on one side or the other? This
is very, very important ethical territory. We cannot avoid it.
So I am very concerned about the corruption of the
physician-patient relationship. Again, let me just say one thing: I
am not anti-managed care and I am not anti-HMO. Some of my best
friends work for HMOs, and they're good doctors. Harvard Health is
in my territory, and I'd be proud to practice medicine there. It's
good medicine. But you know, there's the good among HMOs, there's
the bad, and then there's the ugly. And it's not always easy to
tell, especially if you're a lay person, which is which, or what
it's going to be five years from now.
The solution to this problem, to this dilemma, is choice. Give
the patient the choice of saying, "Yes, I want to be a part of that
HMO and that doctor," or, "I don't. I would prefer to be a part of
that HMO, or managed care, or PPO, or neither. I want to go to
somebody else completely outside the managed care structure."
That is the essence of it. Because once you've done that, you've
empowered the patient. He can make the decision as to how much
ethical ground he's going to trade in for cost savings, and it's
his choice. Right now, it's the employer's choice because the
employer says, "Look, I'm getting the best deal from X Y Z managed
care down the road. So you don't get so many MRIs. However they're
doing it, I don't care. They're saving me money. That's who you're
going with." For employers and their doctors, that's a real
The reason why employees don't have choice is simple: the tax
code. It is because the only way you can get a tax break is if your
employer buys the policy for you. And that's nuts.
Most people still don't get it. They don't realize that right
down there in the bowels of the system is this one small, invisible
tax lesion. It's like a genetic error. It's very tiny; it's very
small; but its effects are protean, and it's passed on from one
generation to the next. Unless you identify that gene, you will not
fix the disease.
But this is more invisible than any gene, because nobody is out
there getting NIH grants to look for it. Unless you change the tax
code, you're not going to fix this problem. And that's the
importance of what the Heritage people were saying years ago: "Fix
this lesion." If you do that, the American health care system will
be in a position to pick up its pallet and walk.
The other thing that is very important is medical savings
accounts (MSAs). MSAs provide an ethical, as well as financial,
counterweight to corporate managed care because with an MSA, you
are dealing, for much of your care, in cash, and cash goes
anywhere. It's your choice as to where to bring it. Nobody says you
can't go here or go there. It preserves the possibility of a
fee-for-service environment and opens up possibilities for other
forms of care. And it injects price competition, real price
competition, into the marketplace. The only way a consumer can tell
what something is worth economically is price. That's what prices
So I conclude by warning that the traditional physician-patient
relationship is under threat. This very emotional, precious
relationship is under threat from a very arcane and technical
marauder: a few lines in the federal tax code. For too many
policymakers, there is a cognitive disconnect here; you almost
can't believe it. Unless we focus on it, we will not be able to
heal our health care system or salvage the doctor-patient
A MODERN FABLE
SANDRA MAHKORN: I'd like to tell you a story about Dr.
Goodfellow, who lives and practices in Home Town, U.S.A. Dr.
Goodfellow finished his internship in 1963 and set up a simple
general practice. He hired a medical assistant and a receptionist
and worked hard, often seeing as many as thirty-five to forty
patients a day.
A large factory in Home Town shut down, and Dr. Goodfellow saw
about five or six patients a day for free during the local economic
crisis. Many of these were older and retired people, and he knew
they'd have a hard time paying their bills.
Dr. Goodfellow knew his patients very well, and so did his
medical assistant and his receptionist. He loved medicine, and he
loved being his own boss, a trait that he had inherited from his
father, who ran a small family grocery store. In the evening, Dr.
Goodfellow often spent an hour or so going over books and catching
up on his paperwork, and at the end of the day, he went home to
find his two children watching "Leave It to Beaver" and to enjoy a
good, home-cooked meal.
He worked long days, and sometimes nights, but he was happy. He
felt good about what he did, and he knew his patients liked him and
believed in him.
The years passed quickly. One morning after coming to the
office, Dr. Goodfellow paged through his 1995 calendar. August 8
was a day he had circled in red. He would turn
fifty-nine-and-a-half on that day, and he could withdraw money from
his IRA without penalty. Should he retire? He never thought he'd
want to consider that option so soon, but things had changed.
"Oh, well. I'll think about it a little more," he decided. Then
he grabbed his white coat and stethoscope, and entered the
examining room of his first patient.
"Hello, Mrs. Adams. I'm Dr. Gatekeeper -- oh, I'm sorry. I mean,
Goodfellow. I see you're a new patient with Happy Health HMO. Can I
do anything for you today?"
Mrs. Adams pulled a long strip of paper from her purse. He sank
onto the swivel stool, prepared for a long session. "Well, I've
been seeing a dermatologist for this rash and an allergist for
these awful sinus problems I have. And I have some urinary
problems, so I see this nephrologist. So if you'd just write me
some referrals, I'll be on my way."
"Why didn't the HMOs ever tell patients they'd have to get most
of their care from a family doctor?" thought Dr. Goodfellow. He
resented being put in the middle.
Dr. Goodfellow's staff had grown with the years and the hassles,
and he now employed a registered nurse, a file clerk, a
receptionist, and a medical assistant. Besides that, he contracted
with a billing service, an answering service, and medical
transcriptionists. Not infrequently, he was forced to hire a
lawyer. He was also forced to hire consultants to help him decipher
new regulations, such as OSHA and CLIA.
Last year, the overhead alone was over 60 percent, and his
income had dropped. Dr. Goodfellow now had time to see only about
eighteen patients a day. Some days, it seemed as though the
paperwork took the bulk of his time.
New Medicare regulations had just been published. "Well, I guess
that interesting article on new treatments for rheumatoid arthritis
will just have to wait," he thought. A few years ago, he had
neglected to keep up with some regulations regarding Medicare
billing, and several patients left his practice after receiving
nasty-sounding letters from the federal government that made it
seem as though he was fraudulently charging them.
He walked into the next exam room. Mrs. Williams hadn't noticed
him come in at first. Her forehead was barely visible behind the
latest issue of . Dr. Goodfellow's mouth dropped a little bit when
he read on the front cover of the magazine, "What Your Doctor
Doesn't Know Can Kill You." As Mrs. Williams slowly lowered the
magazine that she had picked up in his waiting room, Dr. Goodfellow
detected a sense of anxiety in her expression. After spending half
an hour convincing her that he really did understand the side
effects of Robitussin DM, he ordered all magazines removed from his
waiting room except for and .
He was about to see his third patient of the day when the
receptionist paged him to take a call. It took him twenty minutes
to explain to Happy Health HMO's utilization review expert why Mr.
Cardiac, a 52-year-old business executive in congestive heart
failure and a four-day-old coma, wasn't a candidate for early
discharge on a home respirator.
Even though his office staff had swelled, it seemed as though
the number of things he was able to do in his office had dwindled
to nothing. Last year, he discarded the strep screens he had been
doing and placed his cholesterol monitor in storage after
registering as a waivered lab under CLIA -- the Clinical Laboratory
Improvement Amendments. He continued, however, to secretly perform
Gram stains from time to time, something he had learned in medical
school. In his heart, he felt he really had a right to provide that
service to his patients.
He kept his microscope in a locked cabinet in a dark corner of
his office. One day, a disgruntled employee discovered the Gram
stain reagents he had forgotten to replace in the desk drawer and
called the CLIA police. The next afternoon, an officious-looking
gentleman stormed into his crowded waiting room flashing a badge,
while anxious patients looked on. Intimidated, he escorted the
surly inspector to his office. His microscope, a bottle of Crystal
Violet, and his microbiology texts were all confiscated. "You know,
you could be fined $10,000 for this," said the inspector as he
bagged up the evidence.
Finally, it was lunch time. He grabbed a bagel that had been
left by a drug detail man and jumped into his car. The hospital had
called a meeting to discuss the new PHO they were forming. The idea
sounded good until he read the fine print.
The afternoon schedule was almost as challenging as the
morning's. Exhausted, he was about to leave the office when the
hospital's patient advocate called. "Mrs. Macintosh was irate," she
explained. "She insisted she had not given informed consent for the
two metal staples to be used in place of the two silk ones after
her laparoscopy. She's threatening to sue, and her attorney wants
you to call him."
"Tell Mrs. Macintosh I'll speak to her about it in the morning,"
sighed Dr. Goodfellow wearily and apologetically.
Patient advocates. Every hospital has them now. "Strange," he
thought. "There was a time I thought I was the patient
He shuffled into the den after a long ride home. His
grandchildren were at first oblivious to his presence, watching
"Beavis and Butt Head." Finally, his granddaughter bounced onto his
lap: "Grandpa, guess what? I've decided to become a doctor."
The Moral of the Story
The Dr. Goodfellow story illustrates several factors that have
contributed to the disintegration and dissolution of the
First, there has been a revolutionary transformation in the
medical marketplace resulting in a dramatic shift in the way we
interact and view ourselves in relation to our patients. The
helping relationship has been replaced by a contractual
relationship. Instead of doctor and patient, it is now provider and
Second, the third-party payer has taken on a directive role.
Rather than passive players, as was the case with traditional
indemnity plans, physicians and patients are the subjects of
behavioral management strategies. Reimbursement schemes and
monetary incentives are designed to elicit defined health care
decision responses. Not only must the physician and patient
consider the medical pros and cons of alternative treatment, but
other factors must be considered. For example, should the
60-year-old woman who has been doing well on a particular blood
pressure medicine that is no longer on her HMO's preferred drug
formulary risk changing medications to avoid a higher copay?
Third, since PPOs and MCOs discourage or prohibit the use of
providers not listed in their panels, the doctor-patient
relationship has been supplanted by the patient-HMO relationship.
It's no longer "my doctor," but "my HMO."
Fourth, the media have not been particularly kind to the
physician. Perhaps it's the anti-authority inclination; perhaps
it's a bit of muck-raking. Doctors are not above being questioned.
Nor should they be immune to legitimate challenges. But the
challenge often takes the form of an attack. Articles such as "What
Your Doctor Never Learned in Medical School" abound and undermine
Finally, federal and state governments have stepped into the
physician's office to regulate the practice of medicine. Under the
Clinical Laboratory Improvement Amendments, for example, physicians
who choose to do a simple strep screen or read a Gram stain are
faced with costly and burdensome regulatory requirements.
Regulations promulgated under the guise of protecting the public
too often have been the products of scientifically baseless
political grandstanding. A 1994 study in the found that strep
screens could be performed by sixth graders, with an average IQ of
90, with 95 to 100 percent accuracy on the first attempt. Yet the
government considers strep screens so complex a test for the
physician that expensive regulatory burdens are required to protect
There is probably no turning back, but where do we go from here?
As physicians, we must take an active role in deciding our futures.
In many cases, we may be employees. But the health system can't
function without us, and therein lies our strength. We have a
responsibility to our patients to preserve their health care
choices. And we have a responsibility to ourselves to preserve our
- For a discussion of the managed competition approach to health
care reform, see Robert E. Moffit, "Overdosing on Management:
Reforming the Health Care System Through Managed Competition,"
Heritage Lecture No. 441, February 23, 1993.