Opinion Editorial
September 17, 2007

By Linda Gorman

Because it is cheaper to let people die than to treat them, an obvious conflict of interest occurs when a single organization has the absolute power to both pay for health care and define it. Monopoly providers like the Canadian provincial health plans, the National Health Service, Medicare, and certain HMOs routinely use cheap medicine in order to save money. Their cost cutting strategies often emphasize older, less effective, pharmaceuticals, longer waits for care, dated equipment, and less training for personnel. Cheap medicine can cut costs, but it generally does so by delaying diagnosis, slowing recoveries, increasing morbidity, and hastening mortality.

In the United States, private medicine helps protect patients from cheap medicine. Private medicine benchmarks the public systems. Because the private system exists, people can pay cash for a second opinion, a procedure, or a more effective drug. Government helps too by using its power as a neutral referee to ensure that private entities keep their contractual promises.

The Veterans Health Administration has spotty performance. Some of its facilities keep poor records and have long waits for care. It shields “its physicians from the professional accountability that is required of private sector practitioners.” It cannot accurately estimate the size of its waiting lists, or tell you where it spends its money. Its hospitals may not have formal processes to report incidences of serious injury, death, or potential legal liability, and electronic patient records can be edited by unauthorized people. VA insured patients are less likely to receive kidney transplants than people with private insurance. But Medicare eligible veterans have a choice. They can switch to private care. Switching helps benchmark VA care.

The situation is much worse in countries without significant private medical sectors. Cancer survival rates in Europe and Britain are lower than in the U.S. When governments control health care whole nations routinely practice cheap medicine by denying access to prompt care, advanced treatments, and new drugs. Cheap medicine loves waiting lists. They increase mortality. Increased mortality cuts future treatment costs. For example, the probability of death increases significantly with waiting times for bypass surgery. Delaying surgery for a hip fracture by just 2 days increases mortality a year later.

Private sector providers are also tempted by cheap medicine. In 2005, the Northern California Kaiser Foundation Health Plan had almost 6 million members, about 30 percent of the California managed care market. Kaiser is an HMO. Unlike preferred provider organizations, it does not offer partial payment for out-of-network medical services. Signing up with Kaiser means that you are paying for the medical care that it decides to give you via its captive hospitals, laboratories, and physicians.

In 2003, Kaiser Permanente of Northern California decided to stop contracting with outside hospitals for kidney transplants. By September 2004 it had started its own transplant program. The program was a mess. People staffing the program were inadequately trained. Medical records were lost. Patient complaints were ignored. Many Kaiser patients lost their place on regional transplant waiting lists. In 2004, 142 Kaiser patients had received transplants at the University of California, San Francisco. In 2005, Kaiser did only 56 transplants. Twice as many people died on its waiting list as received transplants.

The Permanente Medical Group staffs Kaiser facilities. If the fee it negotiates with Kaiser exceeds the actual cost of care, Permanente physicians split the profit. The Permanente Medical Group understaffed the Kaiser transplant program. To boost survival rates, it refused risky cases. To save money, Kaiser denied permission to transplant ideally matched kidneys into members still on the waiting list at UC San Francisco. When asked about this in May 2006, Dr. Sharon Levine, associate executive director of the Permanente Medical Group in Northern California, reportedly responded that “It isn’t as if waiting another six months or nine months for a transplant is a death sentence” and that “There are patients who choose to stay on dialysis rather than going through a transplant.”

In the spring of 2005, a group of Kaiser nephrologists urged that the transplant program be shut down. David Merlin was hired as administrative director of the transplant program. He was vocal about its flaws. He left in February 2006, fired just 8 weeks after he started work. Mr. Merlin sought action from regulators at Medicare and the California Department of Managed Health Care. As a result of their investigation, Kaiser terminated its transplant program in May 2006. It paid $5 million in fines and contributions and settled a wrongful termination suit with Mr. Merlin.

Had other kidney transplant programs not existed, the Kaiser transplant program would not have been considered substandard. Had government not acted as a neutral regulator, it might still be operating.

The lessons for health care reform are clear. Power over patients corrupts. Absolute power, whether held by government or the private sector, corrupts absolutely.