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A Proposal for Socialized Medicine

by Bill McGaughey

The term “socialized medicine” carries with it the stigma of state bureaucracies in Stalinist Russia and elsewhere where the concentration of political power brought corruption and abuse.  Free-market enterprises, on the other hand, offer a variety of choices. Such businesses are more dynamic and creative.  People living in societies dominated by the free market tend to be more prosperous.

This stereotype conflicts with the reality of health-care system as it exists today in the United States.  We are devoting 16 percent of GDP to medical needs and, if present trends continue, the Congressional Budget Office estimates that by 2082 half of the U.S. economy could be devoted to satisfying health-care needs.  

This is not a healthy situation.  Like cancer, organized medicine has claimed an ever growing share of our nation’s economic resources, threatening our competitiveness in world markets. Meanwhile, 40 million Americans are uninsured.  If these people become ill, they could be hit with tens of thousands of dollars in medical bills. Such bills are a leading cause of personal bankruptcies.

The American health care system, nominally based on free enterprise, compares unfavorably to state-run systems in Canada and western Europe.  There the state assumes a major responsibility when people become ill. The cost of health-care service is comparatively low while the quality of care is high.  The main drawback seems to be that there are longer waiting lists for certain procedures.  On the whole, however, “socialized medicine” in those nations is a success story compared with what we have.

The major-party candidates talk about increasing health-insurance coverage so that all Americans are insured. Some propose that  a single-payer system run by the federal government should replace private insurance to reduce the cost of administration, now running 31 cents on the dollar. The problem, obviously, is that the cost of health care in the United States has risen to an alarming level.  Instead of throwing more money at the problem, we need to reduce expenditures in the medical field. Despite the political rhetoric, accountants as well as doctors need to be involved.

In spite of our aversion to “socialized medicine”, the health-care field is far from displaying principles of the free market. Costs are rising in part because the health-care industry departs from those principles. There are two little-discussed factors that drive costs: First, the practice of medicine is a monopoly. Monopolized supply of a commodity drives up costs. Medical care is a monopoly because state boards determine who should be allowed to practice in this field. In the name of maintaining health-care quality, such boards restrict the supply of practitioners. As a consequence of this restriction, costs rise.

A second reason for rising costs is that the adversarial relationship which exists between buyers and sellers in industries governed by principles of the free market does not exist in the health-care field. There the seller of medical services - the doctor - decides what services and how much of them the buyer of those services - the patient - will buy. The buyer is considered unqualified to make those buying decisions.  The seller, of course,  has every incentive to decide that the buyer will purchase expensive services. Doctors make money by dinging the insurance companies with charges for both needed and unneeded procedures.

So if you have a field of business where the seller controls the buyer’s decisions and where a third party - the insurance company - pays for everything, there is no incentive to control costs. It makes no difference whether the government or private-insurance companies provide the insurance; costs still rise. “Most Americans with insurance have high expectations,” an observer writes, “cost be damned.”  Who cares what someone else will pay. Insurance is essentially a system of payment which the cost is shifted from those who use the service to those who do not.  The normal constraints against making unnecessary purchases are missing. We need to get away from this expensive model of medical services and provide some measure of cost control and competition. 

Advantages of Socialized Medicine

My paternal grandfather, Samuel McGaughey,  was a medical doctor who worked in the public sector.  He was an army doctor during World War I, reportedly the first in  Indianapolis to sign up. So, in a sense, he was practicing “socialized medicine”.  Now, of course, wars are an emergency not meant to set a pattern for peacetime activities.  And yet, the fact that my grandfather was working for the government did not affect his motivation or quality of care.  The profit motive may not have been as strong but he conscientiously examined and treated patients nonetheless.

It may be that some doctors in America still regard their medical careers as a calling to serve the public.  Not all are focused on maximizing their incomes.  The European model shows that medical practitioners can still function effectively in the context of government bureaucracies.  What are the advantages of such a system in comparison with private-sector medicine?

First, one should consider that the advantages of free enterprise in comparison with services delivered by government may, in fact, work to the detriment of sound medical practice.  Businesses exist to make money:  the more money, the better.  Business operators increase profits by selling more of a product or increasing its price.  That may not be the best approach for medical decisions.  In this particular field, one would want doctors to make decisions on the basis of what is good for the patient. If that means forgoing a procedure or a prescription that would earn the doctor more money, we would want him (or her) to choose that option if best for the patient.  We would not want the doctor to unload product on the patient just to make more money.  That practice might actually reduce the quality of medical care, besides increasing its cost.

In a newspaper article, a medical doctor sought to explain why health-care costs were rising so rapidly.  First, he said was the financial abuse that accompanies mergers and acquisitions in this field.  For example, the CEO of United Health Care, Dr. William McGuire, received $1.6 billion in compensation one year, partly as a result of backdating stock options.  A second reason was the unhealthy relationship between doctors and pharmaceutical companies. Doctors are aggressively courted by the drug companies’ sales representatives.  They receive free samples of drugs or lucrative consulting contracts, intended to sway the doctors’ decision to prescribe a particular brand of drugs.  Finally, doctors have learned that they can double their incomes by purchasing MRI (magnetic resonance imaging) devices and prescribing their use to patients. Unneeded MRI procedures are therefore not uncommon.

CT scans (computed tomography) have more than tripled in number since 1995.  In 2007, U.S. doctors ordered 68.7 million of this expensive procedure (which generates tens of billions of dollars in billings) even though recent studies show that the cheaper ultra sound or MRI procedures would have sufficed in at least one third of the cases.  CT scans have become a standard prescription for such problems as kidney stones, head aches, and appendicitis.  Unfortunately, each full-body CT scan generates twelve times the radiation that is generated in the standard abdominal X-ray; and some doctors prescribe this once a year.  A study published in the New England Journal of Medicine estimates that 2 percent of cancer deaths in two or three decades will be due to the frequent use of CT scans.

One of the most common operations is arthroscopic knee surgery.  This is intended to relieve pain and stiffness due to arthritis.   Nearly 27 million, mostly older Americans suffer from osteoarthritis as cartilage on the end of their bones breaks down and the bones rub together at the joints. A recent study shows that less expensive medications and physical therapy could achieve results similar to what surgical procedures achieve.

Another growth area in the medical field is orthopedic surgery to repair problems with the spinal column.  This has become a $7.5 billion industry.  About half a million patients undergo spinal fusion surgery each year. A problem here is the close relationship between surgeons and companies that manufacture devices used in the surgery. One of the most influential doctors practicing in this area, Dr. David Polly, head of the University of Minnesota’s orthopedic spine-surgery department, received $344,375 last year in consulting fees from Medtronic, which supplies hardware in this area, and similar amounts in the two preceding years.  

A “pedicle screw” used in spinal surgery might cost the manufacturer $60 to $100 to make and later be sold to a hospital for $1,100 at its “discounted” rate.  A standard fusion operation uses four to six of these screws, paid by Medicare and private-insurance companies, of course.  More complicated surgeries may require forty of them. It’s important to manufacturers that doctors recommend and use their product. Paying influential doctors helps close the deal.

In this case, the true “buyer” of the medical device is not the patient, and not even the insurance company, but the doctor who alone is authorized to do the procedure and order needed supplies.  A respected practitioner such as Dr. Polly, who has published numerous articles in scholarly journals, regularly gives lectures to fellow practitioners.  His recommendation of a particular medical device carries great weight with his peers.  There is, however, a potential conflict of interest when the doctor has too close a relationship with vendors in his field, especially when he himself receives hefty payments for various work.  

Nowhere is this conflict of interest felt more intensely than in the sale of prescription drugs.  Only doctors can legally prescribe those drugs.  A 27-year-old man named Christopher Smith from Burnsville, Minnesota, recently received a 30-year prison sentence for illegally selling prescription drugs on the internet. In other words, the monopoly that licensed medical doctors enjoy with respect to drug purchase is zealously protected in the courts.

Drug companies know this, of course.  They spend $7 billion a year marketing their products to doctors and another $18 billion in giving doctors free samples of their product.  A study showed that for each minute which a sales representative spent with doctors, sales of the recommended prescription drugs increased by 16 percent. Because this approach is cost effective, the number of sales representatives targeting doctors increased from 30,000 in 1985 to 100,000 in 2005. 

The drug companies’ sales reps followed the doctors to places where doctors congregate. They would buy lunch or dinner for the doctors, buy them drinks, or give them tickets to professional sporting events.  A practice known as “mirroring” the doctor became popular - where several sales reps from the same company pitched the same message as a reinforcement technique.  If a doctor already prescribed the medication, the goal was to get him to increase the number of prescriptions.  Increasing market share was the goal from the drug company’s standpoint.

Another marketing technique has been to sell drugs to consumers through television commercials.  Even though doctors alone can prescribe the product, the drug companies know that doctors are influenced by what their patients want.  If a patient sees something on television, he or she is apt to mention the product to a doctor by its brand name and, in effect, lobby the doctor to prescribe it.  If the doctor refuses to do that, the patient then has the option of shopping around for someone who will oblige.  The television commercials, painting a picture of an attractive lifestyle for those who use the product, are always careful to respect doctors and suggest that their opinion be sought in all matters.

As a result of such pressures combined with the “war” on illegal drugs, misuse of prescription drugs has now become the nation’s leading type of drug abuse - worse than cocaine, heroin, Ecstasy, and inhalants put together.  Nearly 7 million Americans abuse prescription drugs.  Their abuse has risen by 80 percent since 2000.  Additionally, 5 million children in the United States take a pill every day for behavioral disorders.  Prescription drugs have a reputation of being “safer” than the others.  Some addicts shop around for obliging doctors or seek multiple prescriptions for the same illness while others make copies of the prescriptions, fill them, and sell the extra pills to other addicts.

Another problem is disposal of waste product.  Drug prescriptions have become so prevalent that the waste is beginning to affect water quality.  Many hospitals and clinics simply flush their excess drugs down the drain.  In a recent story, the Associated Press estimated that at least 250 million pounds of pharmaceutical products and contaminated packaging nationwide were annually flushed into public waste-disposal systems which had no way to separate the medical contaminants from other waste.  Researchers have found that “even extremely diluted concentrations of pharmaceutical residues harm fish, frogs, and other aquatic species in the wild.”  Much of the drug waste also enters sewers in human excrement.

While wanton disposal of unneeded drugs might continue in a government-run health-care system unless properly regulated, I would argue that the system itself would prevent most other kinds of abuse.  If doctors were employees of the system and not its managers, then the decision which pharmaceutical brand to purchase might be delegated to purchasing departments in a position to demand quantity discounts rather than to the overworked doctors.  There would be no need for sales reps to call on these doctors or for drug-industry commercials aimed at consumers. 

If doctors did not personally profit by prescribing expensive procedures, they could limit their prescriptions to what they thought would benefit patients.  The profit motive with its attendant need to overprescribe would be taken out of medicine.  That is what a system of government-operated or “socialized” health care might accomplish.  The right incentives would be brought into play.  Doctors could concentrate on medical issues and have the business aspect handled by others.

Right now, we have a system of health-care financing designed by health-care lobbyists.  Medicare Part A, which seniors receive free of charge, covers the more expensive costs such as hospitalization.  The preventive services that avoid costs are not covered.  Those who sign up for Medicare Part B are given a once-in-a-lifetime physical if they schedule it within a certain time period.  The prescription-drug benefit under Medicare was designed to benefit the drug companies.  The federal government was forbidden to negotiate for lower prices.  This new program creates an unfunded liability for the federal government which some estimate to be as high as $17 trillion.

I have a better idea:  Repeal the prescription-drug benefit and use the money saved to set up a system of free health-care service run by the federal government.  This would be a bare-bones system of medicine designed to supplement private health care rather than to replace it.  For the uninsured, however, this would be the main system.  It would be free to all U.S. residents, same as walking into a public library and checking out a book.  Socialized medicine would provide a safety net for the poor.

Outline of a pluralistic health-care system

The idea is to use “socialism” in health care to compete with the private sector, introduce efficiencies, and bring down costs. We need to break up the monopoly which the medical profession has established so the public has more choices. I propose that the government create or authorize two new sectors of medicine that would compete with the current practice of medicine. The federal government would initiate one; state governments another. The third sector - medicine as we presently know it - would be left unchanged under my proposal except that it would now have to compete for its business. 

(A)  Under my proposal the federal government would offer free health-care services to all residents of the United States. This would not be unlimited expensive medicine of the sort to which we have become accustomed but a minimal service that would consist of the following elements:

(1) Every U.S. resident would be entitled to a free annual physical check-up. It would be a simple routine of measuring weight, checking blood pressure, doing simple blood tests, etc. that should take a half hour or less to complete per person. The whole routine should cost the government less than $100, even if a licensed professional did the tests. The use of paraprofessionals for the standardized testing would further drive down costs. In the end, the patient would know if he or she had certain immediate medical problems that needed to be addressed by a paid professional.

(2) Once in a lifetime, the federal government would analyze the genetic code of each resident of the United States, focusing upon medical risks. Presently, private companies will do this for $1,000 or less. The government could develop a cheaper and more sophisticated model of genetic testing. This one-time test, spread out over the years of a person’s lifetime, should cost very little on an annual basis.  It would be the gateway to a more sophisticated type of diagnosis that would bring American medicine into the 21st century.

(3) The federal government should create and maintain a web site containing medical information which each person should be able to access, given private security codes. A file would be created for each individual using Social Security numbers. Medical information gathered in the annual checkups and in the genetic test would be stored in that file. The website would also include a section that would dispense general medical information. The user might type in a description of an ailment, the computer would ask some pertinent questions (as doctors typically do in office visits), and then the computer would list possible diagnoses. The medical software might also coordinate this input with the information derived from the annual checkup and genetic tests.

The purpose would not be to replace traditional medical exams but to give each person an idea of whether a particular ailment is serious enough to visit the doctor. Am I having a heart attack? Do I have cancer? Those would be some of the questions answered for free from visiting this web site. It would not offer a conclusive diagnosis but would provide timely information that, if acted upon, might avert health emergencies.

(B)   The second new sector would consist of “paramedical services”. Anyone, qualified or not, should be legally permitted to practice medicine. It should be up to individuals, not state medical boards, to decide whether consumers should purchase such services. The only requirement would be that the health-care consumer should have accurate and independently determined information about the health-care provider's type and record of service.

Perhaps a state examiner would examine the qualifications of each practitioner and issue a report. Perhaps the practitioner should be required to report names, addresses, and phone numbers of all persons receiving his service in a certain dollar amount or more, so that state examiners can contact patients after the treatment to judge its effectiveness. All such information gathered would be posted on a state-controlled web site. If, of course, the practitioner met all the requirements of state licensing boards, he or she would enter the mainstream medical profession and not be subject to this kind of regulation.

In summary, the health-care consumer would have an expanded set of options: First there would be the free government exams. Second, the consumer could lawfully engage the services of an unlicensed medical practitioner in a paraprofessional field. Third, there would be medicine as it is currently practiced. Especially if the prescription drug benefit is repealed, the cost of the whole package to the taxpayer should be less than the cost of the present system. Competition between these various sectors of medicine would further reduce costs.

Are Medical Doctors Competent to Prescribe Drugs?

I seriously doubt it.  Medical doctors undergo extensive educations that include study of human physiology, diseases, modes of treatment, and other things.  They could not include information about specific drugs because, when the doctor was being educated, most of the drugs did not yet exist.  The pharmaceutical companies are continually developing new drugs for various ailments.  This is done through experimentation first on laboratory animals such as mice and then on human beings.  Through trial and error, the ingredients of a proposed drug are tested until the federal Food and Drug Administration (FDA) determines that the product has achieved a satisfactory result with respect to its stated purpose.  The drug is then approved for commercial use and it goes on the market.  Doctors are free to prescribe this drug.

So how do doctors know that the drug will effectively treat an ailment?  They cannot truly know its effect.  They do know that the FDA has approved the drug for use.  They gain additional knowledge from reports in medical journals.  They know, of course, what the sales reps say.  They listen to what their peers tell of experiences with this drug.  As they themselves prescribe the drug for patients, they begin to acquire personal experience in using the drug to treat certain ailments.  In that respect, they are treating their patients as guinea pigs to test the drugs further and acquire first-hand knowledge.

Even conceding that doctors will eventually become experts in prescribing particular kinds of drugs, there are two additional problems.  First, doctors usually prescribe drugs in combination with others.  Some drugs counteract the effect of other drugs.  Some may be toxic when combined with others.  There are so many combinations and permutations in medical prescriptions that no doctor can know for sure that the combination of drugs in a given prescription is effective or safe.  Both drugs and the human body are so complex that individual doctors can have no real knowledge of how they might interact.

Another problem is that human beings vary in their genetic nature.  A given drug may have one effect on a patient with one nature and a different effect on another patient having a different genetic nature.  Since most doctors are in the dark with respect to their patients’ DNA, they cannot hope to handle this aspect of treatment.  Some day, as genetic knowledge becomes more available, the situation may change; but it has not yet happened.  Doctors are largely ignorant in regard to the impact of drugs on patients with different genetic tendencies.

Such considerations introduce great complexity into the practice of medicine.  The human brain may never comprehend the factors that make a particular drug suitable for a particular patient.  But that does not mean that that challenge is insurmountable.  The computer is capable of making such an assessment.  To do that, we need a sufficiently large data base that includes accurate and complete information.  We need software that will analyze the data to tell doctors what they need to know in prescribing drugs.  The federal government is well suited to take the lead in creating this medical data base and developing the related software.

A Vision of Future Medicine

All signs indicate that the decoding of the human genome will produce great advancements in the practice of medicine.  Geneticists have linked particular diseases to particular genes or lack of them.  For example, two international studies indicate that persons lacking a particular segment of genes run a substantially higher risk of acquiring schizophrenia than persons having those genes.  Macular degeneration, an eye disease that leaves many old people visually impaired, is linked to two particular genes.  Scientists working with the decoded human genome have identified 1,700 genes that affect a variety of illnesses.  Often, the genes work in combination with one another to produce the illness.  Such knowledge is in its infancy.

Dr. Bernadine Healy wrote a column in U.S. News & Report regarding the advent of what she called “personalized medicine” that is based on genetic variations within the human population.  This she contrasted to the old-style “template” medicine. She wrote:

“Template care is increasingly at odds with the emergence of personalized medicine, a new discipline driven by the exploding knowledge of the human genome that guides treatment tailored to the individual patient. And this is what today’s medical students will be practicing tomorrow.”

“Thanks to ever better, faster, and cheaper sequencing technology, researchers have shown the many ways our 25,000 or so genes can vary. One little glitch - a misspelling, a hunk of DNA lost or added, or a gene altered by interplay with other genes and molecules - can affect disease susceptibility or treatment. Already, researchers have tied genetic differences to many diseases, including diabetes, heart failure, autism, restless leg syndrome, multiple sclerosis, and rheumatoid arthritis. Imagine this in medical practice. Knowing your patient’s risk early on would bring more targeted prevention.”  (U.S. News & World Report, April 7 & 14, 2008, p. 59)

This is one piece in the puzzle. Another is computerization of medical records.  Presently, with our system of private-sector medicine, nine out of ten doctors rely on paper records.  Less than 25 percent of community physicians in Minnesota have access to electronic medical records.  Even those record-keeping systems that are computerized have problems in communicating with one another.  As a result, providers are ignorant of what other doctors have done.  Many laboratory tests need to be redone.  Due to patient privacy laws, the process of treatment is slowed by the need to get patient permission before certain medical information can be released. 

The lack of quick and universal communication means that doctors may be ignorant of medication errors or patient allergies known to other health-care providers.  Information sitting in a locked file cabinet does them no good. The Institute of Medicine estimates that more than 1.5 million preventable mistakes occur annually with respect to medicating patients.  As many as 98,000 Americans die as a result of these mistakes.  Besides saving lives, better communication of medical information would save tens of billions of dollars each year, an important step in controlling our health-care costs.

The ultimate is a federal medical-information system.  One imagines a single, giant website in which medical records are kept for all Americans.  If the health-care system includes genetic profiles and up-to-date health information about individuals from their free annual checkup, then any doctor who treats them will have basic needed information and, just as important, will immediately know where to look.  The data will be presented in comparable formats.  A record will exist for each individual.

There is yet another advantage.  If doctors can be persuaded or financially induced to enter information about patient visits into this electronic system including the types and dosages of drugs prescribed, then we have a powerful new tool for analyzing the effectiveness of prescribing particular kinds of drugs for particular illnesses.  With the record of follow-up visits, we can determine whether or not the prescription worked.  We would have information in the system about drugs that were combined.  We would know their respective dosages.  We would also have information about the genetic makeup of the patients.  

All this in a single information system would allow the computer to do the kind of analysis which no human doctor could undertake:  It would tell us how successful a particular medication was in treating a particular patient, given the patient’s genetic structure and the combination of drugs prescribed.  A huge data base including information from millions of patients would give a sufficient sample to hone in on genetic variations, types of symptoms, and drug combinations so we would have something approaching real knowledge for each variable.  Only the federal government could undertake a project of this scale.

And so the computer in combination with knowledge of human DNA would bring medical treatment into the 21st century.  The old-style prescriptions based on brand names and aggressive marketing would become obsolete.  The practice of medicine would become more efficient and cost the community less.  New occupations might arise in the interpretation of medical information in the federal data base and in the development of appropriate software.  And, if a clear procedure is established and medical practitioners work for the federal government, the room for litigation and defensive medicine becomes much less.  

Some of these developments are currently under way, but a government-run program, which I call “socialized medicine”, would bring them to fruition and spare the nation of the strangling costs that the current system has created..


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