09/2003 Consumer Choice Matters: The Physician as Small Business Owner

Published September 1, 2003

I testified before the House Small Business Committee, chaired by Congressman Donald Manzullo (R-Illinois), at a hearing on physicians as small business owners.

This was a field hearing held in Frederick, Maryland to get the ideas of members of the local community. Our local Congressman, Roscoe Bartlett (R-Maryland), was there, as was Congresswoman Donna Christensen (D-Virginia). The hearing was not about any particular legislation, but about the problems physicians face in maintaining their independent practices.

Witnesses included Dr. and Mrs. Camilo Toro of Frederick Neurology; Dr. Michelle Davis of the National Medical Association; Dr. Jim Pendleton of the Pennsylvania chapter of the Association of American Physicians and Surgeons (AAPS); Elizabeth Chung, a Frederick practice administrator; Dr. Christopher Unger of Bethesda; William Sarraille, a local attorney; and Linwood Rayford of the Small Business Administration.

Among the material handed out by the committee were two articles published by the Objectivist Center–one by Madeleine Cosman called “The Government’s Envy Engine,” and the other by Edward Hudgins titled “Doctors Shrug.” Cosman’s article looks at the (mis)use of qui tam (“whistleblower”) actions against physicians. She cites some horrendous examples of doctors being fined huge sums and sent to jail for what amount to billing errors or differences in medical judgment.

Hudgins argues we are beginning to see a replay of Atlas Shrugged in medicine, where the best and the brightest are refusing to continue to play the game.

My own testimony emphasized what virtually every physician will agree are the big problems: inadequate reimbursement, excessive regulation, administrative overload, and a tort system out of control.

I suggested to the committee that, instead of trying to fix these issues directly (which could be un-fixed by the next Congress), they should work on changing the underlying dynamics of our system by allowing patients to control their own resources. This would reduce the need for regulation, increase the income of better physicians (but not the mediocre ones), lower administrative burdens, and reduce the impulse to sue for medical problems.

Committee members were surprisingly savvy about these issues. They had already identified excessive reliance on third-party payment as the core problem, and were very interested in empowering health care consumers.

The Committee will be posting the testimony on its Web site at: http://www.house.gov/smbiz/. My statement may be found at http://www.galen.org/news/Small_Business.pdf. The two Objectivist Center papers may be found at http://www.ObjectivistCenter.org.

Reimportation: Latest Hot Topic in Washington

There has been a real split among conservative/libertarian types over the issue of “reimporting” prescription drugs from Canada and other price-controlled countries.

One side argues free markets demand people be free to buy stuff wherever it is cheapest. The other side counters free markets also demand respect for property rights.

Price controls amount to a confiscation of intellectual property–especially when there is a hidden threat by a foreign government to violate patent rights. In the course of these debates, I realized I knew very little about how Canada’s price controls actually work. But Chris Middleton of the Pacific Research Institute came to my rescue with an excellent description from Health Affairs written by Devidas Menon, CEO of Alberta’s Institute for Health Economics.

Source: This is a fee-based subscription site. http://www.healthaffairs.org/1130_abstract_c.php?ID=/usr/local/apache/sites/healthaffairs.org/htdocs/Library/v20n3/s13.pdf

High-Deductible Plans Attractive in Kansas City

After all the contention and emotion surrounding the great debates in Washington, it is refreshing to get out of the Beltway and remember that in the real world people do more than just argue.

For instance, Karen Uhlenhuth writes in the Kansas City Star about the Scott Lewis family, who decided to forego paying $1,200 to $1,300 a month for HMO coverage and opted instead to pay $500/month for a $5,000 deductible policy. “He goes to any doctor he wishes. He doesn’t need permission for any procedure or to see any specialist. (His) health plan is refreshingly simple–and cheap.”

While individuals have always been able to purchase coverage like this, the article notes, “employers are starting to offer this option.” It cites several local companies where as many as 30 percent of the workers have opted for consumer-driven health plans.

The article also cites a local physician who has decided to convert her practice to a cash-only basis; SimpleCare is mentioned as an example of a growing trend. The article quotes Devon Herrick of the National Center for Policy Analysis, Larry Akey of the Health Insurance Association of America, and Vivius founder Howard Wizig.

Source: http://www.kansascity.com/mld/kansascitystar/living/6265408.htm. To learn more about SimpleCare, go to http://www.simplecare.com

Risk-Based Ratings

The Detroit News published an article by Lynn Waldsmith, who looks at consumer-driven health from a different angle. The article asks, “Why should a thin health-conscious worker pay the same premium as his 320-pound, smoking co-worker?”

Such issues, Waldsmith writes, are helping to fuel the move to consumer-driven care, in “an effort to get people to take more responsibility for their health.” The article explores the pros and cons of risk-based rating, especially in the areas of smoking and obesity.

Source: http://www.detnews.com/2003/editorial/0307/13/a13-215602.htm

Consumerism Works for Public Programs, Too

Writing in the Milwaukee Journal Sentinel, John Torinus notes, “The principles of consumer-driven health care are spreading quickly across private-sector health plans,” and he calls for similar expectations “for personal responsibility (to be) built into public-sector health plans.” Torinus says medical costs consume 25 percent of the Wisconsin state budget and are rising at a rate of 15 percent or more per year.

“Public employees have a huge stake in getting this monster under control because they are sacrificing take-home pay for keeping their ill-designed medical packages in place,” he notes.

Source: http://www.jsonline.com/bym/News/jul03/154555.asp

Wisconsin Employers Embracing CDHC

Also in the Journal Sentinel is an article by Joe Manning, who asks, “When was the last time you asked your doctor how much a procedure or treatment would cost? Probably never. But that could change soon with the dawning of CDHC.”

Manning predicts a “major shift” in the health insurance industry, but also notes “the concept has its critics.” These include “Dirk Carson, an executive with Patient Choice, a Minnesota-based health insurer attempting to enter the Wisconsin market,” who says, “The idea just throws people to the wolves.”

The rest of the article is largely favorable and includes the experience of a number of local employers who are moving in the consumer-driven direction. Robert H. Booz, who authored a study for Conning Research & Consulting, says, “CDHC market penetration could be as great as 50 percent within the next five years,” according to the article.

Source: http://www.jsonline.com/bym/News/jul03/153481.asp

Defined Contribution, the “Next Dominant Form”

The Wharton School has jointly issued a paper with Booz Allen Hamilton, titled, “Consumer Take Charge: Defined Contribution Health Plans.” The paper says “2003 may be the year that defined contribution plans begin to make their mark as the most influential new form of health insurance coverage since managed care.”

Booz Allen’s Gary Ahlquist says, “Defined contribution plans won’t be the final form of American health care, but they will be the next dominant form.” Wharton’s Mark Pauly says, “(these plans represent) a lot of risk for people to take on. Still, people feel more capable of handling their own health care rationing today than they did before.”

Source: http://www.strategy-business.com/article/?art=47325691&ps=pHwXw0

Greg Scandlen is director of the Galen Institute’s Center for Consumer Driven Health Care and assistant editor of Health Care News. His email address is [email protected].