Arnold Relman

Health Care and the Marketplace, Part I

VTR Date: October 1, 2007

Dr. Arnold S. Relman discusses the potential of universal coverage.


GUEST: Dr. Arnold S. Relman
VTR: 10/01/2007

I’m Richard Heffner, your host on The Open Mind.

And I’ve been pursuing today’s guest for years … certainly back to when he was still the distinguished long-time Editor of The New England Journal of Medicine, much given as he was — and remains — to quite pungent and controversial commentary on the state of health care in America.

Now Professor Emeritus of Medicine and Social Medicine at the Harvard Medical School, Dr. Arnold S. Relman has just published his Century Foundation/Public Affairs book A Second Opinion – Rescuing America’s Health Care – A Plan for Universal Coverage Serving Patients Over Profit.

Indeed, it is this notion of serving patients over profit — surfacing quite so often in Dr. Relman’s writings — that I find particularly compelling in our increasingly Darwinian times … as in reviewing former Harvard President Derek Bok’s University In The Marketplace: The Commercialization of Higher Education, my guest insisted that “The medical profession, like the rest of higher education, is too important to society to allow its future to be determined by market forces” … and in another review complained that “…our health care system has been transformed into a vast commercial market.”

But, how did all this come to pass that’s what I first want to ask Dr. Relman. After all, HE took an oath to do no harm. So did all of his fellow doctors. Don’t THEY have a responsibility for this transformation? That’s not an unfair question, is it?
RELMAN: No, it isn’t. And doctors do share a responsibility for what has happened. But I do think it’s fair to say that most of what happened in this transformation of the health care system from a social service to a huge industry … most of what happened did not start with the doctors. Was not the doctors primary doing. It started with the influx of huge amounts of money into the health care system at a rapid rate. And with the realization on the part of certain entrepreneurs that with that enormous influx of money there was an opportunity to make a lot of profit by running health care as a business. That was the beginning of it.

HEFFNER: But didn’t they take the medical profession with them on that ride that hasn’t ended yet?

RELMAN: Not at first. They, they ultimately have co-opted the medical profession. But that was only later. At first, in fact, the medical profession resisted a major source of new funding namely Medicare and Medicaid. At first organized medicine fought the government, resisted Lyndon Johnson’s efforts to pass Medicare and Medicaid. And only after it was passed and they were promised that the government would not interfere with the practice of medicine, did doctors accept the fact that government money would be used to pay for the cost of care of the elderly and of the very poor.

HEFFNER: Was that their major concern that government was going to interfere with the individual practitioner’s decisions?

RELMAN: Yes. Doctors are trained to be rugged individualists. To make decisions, take responsibility for their decisions and of course take responsibility for the care of their patients. And they were afraid … ahh, misguidedly, but they were afraid that government insurance would take away their ability to make medical decisions for patients and also I think some doctors were worried that if government paid the bill, ultimately government would cut down on their income.

But I don’t think that was the major factor. The major factor was concern about loss of independence.

HEFFNER: And what role does that concern play today?

RELMAN: Ahh, still a powerful role, but I’m glad to say less of a role because of many factors. But the most important of which is that doctors are seeing that without some kind of government involvement in health care they are being changed from an independent profession to a well-paid, but dependent employee of big business and commercial interests.

Now, some doctors … I stayed out, out front … some doctors liked the idea that they can make a lot of money by being part of the big business of health care and they invest in it, and they partner with it, and they, they seek it out.

Most doctors, in my opinion and in my experience, most doctors value the professional fundamentals which drew them into the practice of medicine. They want to feel that they have responsibility for taking care of patients. That they can practice the kind of medicine that they think is best. And while they expect to make a decent living, no doubt about that, the doctors don’t take a vow of poverty when they enter the profession … they feel they’re entitled to make a decent living.

But most young doctors today start out with the idea that they’re not in it because of the money. Their, their classmates who really want to make a lot of money went into investment banking or some Wall Street activity, or some other way to make a lot of money. Doctors think they should be well paid, but they’re not … they shouldn’t be investors. And more and more, I think, young doctors are worried about the increasing power of the corporations that control health care today.

And so, that, along with what I would call the feminization of medical care, that is to say the increasing presence of women in the practice of medicine … that is changing the way doctors look at the health care system, as compared to the way they did even ten or 20 years ago.

HEFFNER: Is it true as some of my medical friends tell me that in medical school today a little over 50% of the students are women?

RELMAN: Yea. That’s a fact. Very soon, roughly half of all the practitioners, medical practitioners in the US will be women. And women take a different, in general … obviously there are exceptions to every rule. But in general women take a different view of their professional life from what their male colleagues do.

Women are less, I think, committed to earn a lot of money first of all. They value their personal lives and they want to have defined hours and defined commitments. And they’re more socially inclined. They’re, they’re willing to … more willing to work in groups.

Whereas the average male physician is more likely to want to be independent. The Lone Ranger (laughter) is the, is the model for the average, young male physician these days. But it’s changing, it’s definitely changing.

HEFFNER: And the whole business then … let’s just continue for a moment about the feminization of medicine … and medical practice. The … how does that impact upon the, the, um the willingness to accept government involvement?

RELMAN: It isn’t so much the willingness to accept government involvement, it’s the … greater value placed on organized, integrated group practice, in which doctors are likely to be paid … mainly by salary … rather than by fee for service.

In other words, I think women, more than men, these days are more happy with the idea of working in a group, as part of a team, for salary. With defined hours. With shared responsibilities. But … I repeat … men are beginning to come to the same conclusion. Because the alternatives are very unattractive. The alternatives are either total control by corporations, by businesses that provide health care. And, and in these corporations you are simply a highly paid technically qualified employee, doing what the corporation needs to have done.

Or else, many doctors now are seeing that if they don’t move towards a system that’s more viable than the one we have now, the system is going to come apart. And they will have to be rescued by a more aggressive government program … which might control their practices more than they would like.

HEFFNER: How will it come apart? What, what danger do you see?

RELMAN: In the September 23rd issue of The New York Times, Sunday, New York Times had a lead editorial which was very important and very powerful. It said right up front, “the big problem in health care today … the elephant in the living room … that we’re not confronting squarely is the outrageously high cost and the rate at which costs are increasing … it’s bankrupting the country.”

HEFFNER: Do you agree with that?

RELMAN: Yes. Absolutely. It’s, it’s a fact … it’s not a matter of opinion. And the Congressional budget office, the Director of the Congressional budget office recently, in a press conference, said the same thing. “The greatest threat to the fiscal integrity of the US government is the rising cost of health care. The rising cost of Medicare.

And look what’s happening in Detroit. The big three automobile manufacturers are fighting for their economic lives, in part because they have to carry such a heavy burden of medical costs for their employees. And the new contract that GM just agreed to with the UAW shifts that responsibility off to the union. It’s the only way that GM thinks it can survive.

HEFFNER: Now, do you feel that this dire situation, the financial situation, is a function of medicine becoming a profit center?


HEFFNER: Increasingly?

RELMAN: Yes. There are, there are many factors that explain why health care is so expensive. But that’s true in all parts of the industrialized world. Our friends in
Canada and the U.K. and Sweden and France, Germany, Holland are all facing rising health care costs because of certain common forces. Like the aging of the population, old people require more medical care and it’s more expensive.

The rapid development of medical technology, which is very expensive and provides more and more opportunities for providing expensive care. These forces operate all over the developed world.

There’s one force though that operates in the United State alone … or virtually alone … at least to the extent that it does, it’s far greater than anywhere else. And that is the conversion of the health care system into an industry. No other country in the world has the delusion that we have in the United States that health care should be traded in the market like any other commodity. For profit. And that investors should be part of the health care system.

Now, there, there is investment owned health care. There are for-profit providers of healthcare in many other countries, but not nearly to the extent that exists in the United States.

We are the country in which investors think that health care is a playground for making money.

HEFFNER: As everything else is.

RELMAN: I beg pardon?

HEFFNER: As everything else is.

RELMAN: Yes. Exactly. These people who take this point of view think that everything … almost everything in life is a market. And why shouldn’t health care be a market? Why shouldn’t waging war be a market, too? Why shouldn’t there be corporations that make money by fighting instead of soldiers, volunteer soldiers, for profit companies that are contracting to provide military services.

Everything in this country seems to be for sale. But it shouldn’t be. There are certain parts of our economy and of our culture that are not appropriate, that are not adequately dealt with by the market.

And one of them is the health care system. Higher education I think is another. The, the protection of the environment, the national parks, the protection of our waterways, the Coast Guard. These things are public responsibilities and the market is not adapted to provide these services very well. And people who think that health care is just another market are sadly mistaken, it isn’t.

And that concept, by the way, was … was first developed by a very smart economist who won the Noble Prize later in his career named Kenneth Arrow. In 1963, in the American Economic Review, Kenneth Arrow wrote a very important analysis of health care as a market. And he said, “You know as an economist, I don’t see how market forces can operate in the health care system.”

He laid out many reasons why health care could not be a market. And he said, “Therefore, to regulate health care, we have to rely on other forces in our society.”

And, his, his analysis which was right on the mark was lost in the, in the “gold rush” that followed the introduction of Medicare and Medicaid two years later. And that was building up with the rapid growth of private insurance. And as all the money poured into the health care system, in the United States, entrepreneurs, the same entrepreneurs who started Kentucky Fried Chicken franchises said, “Why can’t we have for profit hospital franchises? We’ll make a lot of money.”

They started these companies and they made huge amounts of money.

HEFFNER: Then, the question, of course, that occurs to me is having entered that valley how in the world are we ever going to get out? It seems to me, too, that your answer is …”we’re going to come into such dire straits that we’re going to have to”. What’s going to happen? What do you see as the, as bringing about that turning point? The, the idea about the market place is something that is, if not peculiarly … is distinctly American.

RELMAN: Yes, it is. Yes, it is. Well, you know, my crystal ball is clouded as everybody else’s is and I don’t pretend to have any special wisdom about this. My guess is that something like this is going to happen … that the 85 or 90% of the American economy that has to bear the costs of the … the business costs of rising health care will view the other 10% or 15% of the economy that’s making a lot of money from the health care system as the enemy.

And what you see happening in the automobile industry and in certain other big businesses in American now … namely the CEO’s say … “Wait a minute, something’s got to change because the costs are getting out of control. We don’t want to disenfranchise our workers. We don’t want to turn our workers away and say, ‘Bob, pay your own health care insurance. But we simply will go broke if we continue to pay the costs. Something has to change’.”

My prediction is that there’s going to be revolt of the big corporate payers and that’s going to be felt in Congress and by the public. At the same time, the public which is having to pay a larger and a larger share of health care costs, you know more and more deductibles and co-payments and less and less insurance coverage. The public is going to finally get to the point where it’s fed up. And says, “Wait a minute, what are we getting? What are we getting for all of this money that we’re paying for health care?”

Now, you can’t say … the answer will not suffice to say, “Well, the American health care system … you’re getting … it’s very expensive, but the American health care system is the best in the world.” That’s what George W. Bush says, that’s what many economists who believe in the high health care costs … meaning they are an acceptable thing, would like to believe … and, but … but, it’s simply not true.

The facts stare us in the face. Despite the fact that we spend almost twice as much per capita or as fraction of our economy on health care, as do all the other advanced countries of world … despite that fact … about 15% of our people now are uninsured. And another 15% or 20% are underinsured. And American life expectancy is not as good as many other countries. Infant mortality is not as good. The quality of our care as assessed by professionals in a quantitative way can be shown to be very highly variable.

The best American medical care is the best in the world. As good as there is in the world. But there’s also side by side with that excellent medical care is terrible medical care. And as you … and there’s fraud … the Medicare people and private insurers estimate that at least 5% of what they have to pay out, maybe as much as 10% is fraudulent. So, in, in view of all of this evidence to say, “Well, the high cost of care in the United States is worth it” is ridiculous.

HEFFNER: You know Dr. Relman what I admire most about your book, A Second Opinion, about all the many articles you’ve written that I have had the pleasure of reading over the years is that you’re superbly, supremely a man of reason. You’re very rational.

RELMAN: I try to be.

HEFFNER: And what you say makes sense. But you …

RELMAN: Well, I try to. I, I try to follow the evidence, that’s how I grew up, that’s how I was trained and that’s what I believe. You have to follow the evidence.

HEFFNER: Yes, but what of the evidence is around us is the kind of power that is exercised by those who have profited.


HEFFNER: From this system.

RELMAN: No doubt.

HEFFNER: And that’s where the reason, the reasoning, the rational system seems to me to …


HEFFNER: … break down.

RELMAN: That’s of course what has muted the voice of smart people who ought to know better. Hillary Clinton, for example, says she’s chastened by what happened in 1993 and 94 to the Clinton health care plan. And so what she’s proposing is something more modest. And more gradual.

HEFFNER: But they did do it to her … they sure as hell did.

RELMAN: Yes. But things were different then, Richard. Health care was not nearly as expensive, big business wasn’t hurting nearly as badly as it is now. As a matter of fact, in … in 1993 and ’94 many physicians thought it was a good idea, too, to have health care reform a la Clinton. But they were outgunned and … by the, by the lobby of the 10% or 15% of the economy that makes money from, from health care. Harry and Louise.

HEFFNER: Absolutely.

RELMAN: And there are television ads and so on. So …

HEFFNER: You don’t … you don’t believe they can do it again?

RELMAN: I don’t think they can. I, I, I mean I just don’t think that Rich Wagner, CEO of General Motors is going to fall for this any longer, he knows the facts. The facts are that American health care is outrageously expensive; it’s not justified. What we get is not worth the money. The facts are that private insurance, private for profit insurance takes out of the premium, before it pays doctors and, and hospitals and health care benefits … before it pays anything … it takes out a minimum of 12% to 15% … sometimes as much as 20% or 25% of the health care premium for it’s own profit and overhead and management expenses, etc., etc.

And there’s not a shred of evidence that we get anything of commensurate value in return. Now those facts, which I’ve put in my book and which are out there in, in the literature now … those facts are gradually getting to be known.

HEFFNER: That’s why I want you to stay where you are and … because this program is over …and do another program …


HEFFNER: … with me.

RELMAN: Thank you, Dr. Arnold Relman. And thanks, too, to you in the audience. I hope you join us again next time, which will be next week. If you would like a transcript of today’s program, please send $4.00 in check or money order to The Open Mind, P. O. Box 7977, FDR Station, New York, New York 10150.

Meanwhile, as an old friend used to say, “Good night and good luck.”

N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.