Letters

From the March 1997 issue

Mangled Care?

I was surprised by the editorial "Medical Meddling" in the December REASON. I am shocked that Virginia Postrel would even suggest that managed (rationed) care has anything to do with the market. Indeed, were it not for a discriminatory tax code favoring employers rather than employees, managed care would not exist. Managed (rationed) care is therefore a creation of the federal government, not a market phenomenon.

When an employer, rather than an employee, makes the decision regarding a health plan, the veterinary ethic of medical care replaces the Hippocratic ethic. In fact the only difference between managed (rationed) care and veterinary medicine is that the owner of the poodle loves the animal.

Organizations such as the American Medical Association are guilty, as Postrel charges, of lobbying for non-market-based health care funding schemes. The Association of American Physicians and Surgeons favors medical savings accounts (not mentioned in Postrel's editorial) as a way to put the purchasing power in the hands of the person to receive the medical product/service.

I do not blame the managed-care companies for seizing the day and profiting from a discriminatory tax code--the feds deserve all the blame. I do not, however, pity those same companies for suffering from the regulation, litigation, and red tape that comes with any deal made with Leviathan.

G. Keith Smith, M.D.
Edmond, OK

It is distressing to see how little understanding REASON has for free markets in medicine. Virginia Postrel states that managed-care plans have to find ways to encourage quality lest they lose their customers. Wrong. The customer for managed-care plans are employer benefits managers, whose first and only concern is price. To restore a free market in medicine, the consumer and customer need once again to become one and the same--the patient--and the patient needs the right to fire his insurer, without incurring a huge tax penalty.

Fee for service is not necessarily a "system with strong incentives to overtreat and overtest." The incentives come from third-party payment. Patients spending their own money have the incentive to be prudent consumers. When medical care was mostly paid for by patients, the hospital bill for an appendectomy was the equivalent of 10 days' wages for a common laborer ($149 in 1960). Now it's at least a couple months of take-home pay for a middle-income person (about $3,000). They still do the procedure the same way, and the patient is generally home faster.

The opposite of communism is not fascism. What we need is patient-purchased, patient-owned, catastrophic insurance, with most bills paid directly by the patient, possibly via a medical savings account. The answer to the question about who should be favored, the insurer or the doctor and the hospital, is none of the above. Medicine is for the benefit of the sick.

Jane M. Orient, M.D.
Executive Director
Association of American
Physicians and Surgeons Inc.
Tucson, AZ

In her defense of managed care Virginia Postrel makes an unfortunately common error--she mistakes the ostensibly private nature of an industry as proof of its free market nature.

Managed care was only a minuscule part of the health care system prior to World War II and would likely be so now if not for the tremendous distortions in the medical market brought about by the actions of government. Most important, the tax code promotes employer-provided, first-dollar coverage. Employees believe that they are spending somebody else's health care dollar, which leads to health care inflation through poor consumer discipline and lack of consumer pressure on providers. The government's provision of similar first-dollar coverage through Medicare and Medicaid leads to the same end.

The result is that employers or the government are the real consumers of health care, not patients. The resulting health care inflation has generated a move to ration care through managed care and various public sector rationing mechanisms. Managed care is further favored by a variety of governmental policies such as an only recently expired law mandating an HMO option for employees in businesses offering health care coverage, relaxed antitrust provisions for managed care, and direct government subsidization of private managed care companies through lucrative contracts with Medicare and Medicaid. Would managed care survive in a true free market? Perhaps. I would have no qualms with it if it did. However, we'll never know the answer until we repeal government's unfortunate control over our medical system.

Mark Schiller, M.D.
San Francisco, CA

Virginia Postrel replies: It's interesting that none of the physicians accusing me of heresy criticize the trend that prompted my editorial: the passage of state and federal laws interfering with the rights of managed care organizations to freely contract with physicians, patients, and insurance buyers. Too often, support for freedom of contract goes right out the window when the contracts in question affect one's own profession.