Volume 77 / Number 50 - May 14 - 20, 2008
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Talking Point

MD/Rx Inc.; How going to the doctor became a luxury

By Dr. Charles Hesdorffer and Daniel Meltzer

Can a physician uphold the Hippocratic oath in America today and get rich at the same time? When did the practice of medicine morph from vital public service to a business?

Farther back than you think. But it didn’t become really big business until recently.

In 1870, the Homestake Mining Company in South Dakota began offering free medical care to its employees — a first. The National Association of Clinic Managers was founded in 1926 in Madison, Wisconsin, to help doctors form cost-sharing group practices. In 1963 it became the Medical Group Management Association. M.G.M.A. today services group practices with more than a quarter-million physician members.

“Managed care” dates to the pivotal year of 1929, when the Los Angeles Department of Water and Power contracted with two local physicians to serve its workers. Within five years, 12,000 employees and their 25,000 dependents were enrolled and receiving comprehensive care for a fee of $2.69 a month per subscriber. Various similar groups formed in the ’30s and ’40s and, in 1947, New York City’s Mayor Fiorello LaGuardia wisely endorsed the country’s first H.M.O., the Health Insurance Plan of Greater New York (HIP), after a study concluded that debt incurred by illness was a major cause of individual and family hardship.

In 1971, when there were 30 H.M.O.’s operating nationwide, the Nixon administration offered federal loan guarantees to encourage the establishment of more. By 1997, there were 600 H.M.O.’s. Today there are an estimated 1,300, according to the trade association AHIP (America’s Health Insurance Plans).

President Ronald Reagan’s “trickle down” supply-side fiscal policy (help business and let business help everyone else), helped cripple many labor unions, which had been protecting the rights of workers. And Reagan’s policies fostered the growth of privately owned health insurance companies, which led to extraordinary increases in physician fees. These fees were passed along in the form of higher and higher premiums for patients, to whom many doctors indeed now refer as “clients.”

The filtering (or “fencing”) of the individual office fee via the insurance company shields the patient from knowing the actual amount a physician charges. Ten or 15 minutes in a specialist’s office, with little or no lab work, may cost a patient a nominal co-pay fee of $20 or $25, while the practitioner bills the insurance company for several hundred. The patient ultimately pays through constantly escalating premium rates.

What about the drug companies?

The costs of prescription medications have been skyrocketing since the 1980s, the most significant relaxation of rules and controls having taken place during the corporate-friendly Reagan years. In 1985, early in Reagan’s second term, the Food and Drug Administration revised the Federal Food, Drug and Cosmetic Act of 1938 to declare that a prescription advertisement need only state the effects and side effects of a medication in an abbreviated “major statement;” wording far less specific than what had originally been required, thus ushering in a virtual Niagara of print and television advertisements for everything from Vioxx to Viagra.

The new act further eliminates any requirement, under the ruse of possible prior censorship and infringement of corporate First Amendment rights, that the companies submit their ads for advance approval. Costly ad campaigns get factored into the manufacturer’s marketing costs. The billions spent on the ads over the ensuing two decades has brought us to the situation we have today, where necessary, often life-sustaining medications may cost a patient hundreds or even thousands of dollars a week. The luckless “client” lacking prescription drug coverage or health insurance at all must pay the pharmacist out of his or her pocket or forgo the prescribed medicine.

If the patient is covered, the insurance company pays; but as prices rise, all patient-clients get hit with annual premium increases so that the H.M.O. can maintain its high profits, attractive stock prices, executive bonuses, advertising and promotion budgets, etc.

Add to this the enormous outlays by “Big Pharma” for lobbyists who ply senators and representatives with free meals, gifts, consulting fees and junkets, not to mention the parade of reps into practitioners’ offices with free samples, gifts, offers of seminars, honoraria, etc. to encourage them to prescribe their products and promote them to their colleagues.

Efficient mass production of prescription drugs reduces the actual cost of each unit dramatically. But the enormous overhead from all of the above continues to generate exponential increases in retail prices, placing them out of the reach of many thousands, if not millions of patients in need both here and abroad.

This year’s presidential election presents a precious opportunity to reverse this calamitous course. Our indifference to the vulnerable patient in favor of the corporation and professional wealth is not only an embarrassment in the “land of the free” — it is hazardous to our health, individually as well as nationally. The only force powerful enough to correct these egregious practices is the federal government. It is likely too late now to simply eliminate all the private insurers from the equation, but it is not too late to put a brakeman on this runaway train and bring it under control. To call this a matter of life and death is not an exaggeration.

Hesdorffer is associate professor of medicine and oncology and chief of the clinical hematology service at Johns Hopkins School of Medicine.

Meltzer is an essayist and an adjunct professor of journalism at New York University.

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