Arnold Relman

Health Care and the Marketplace, Part II

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 this is the second program with Dr. Arnold S. Relman, now Professor Emeritus of Medicine and Social Medicine at the Harvard Medical School and long the distinguished, and often quite controversial Editor of the New England Journal of Medicine.

Dr. Relman has time and again decried what he considers the transformation of our health care system “into a vast commercial market”. Now his Century Foundation/Public Affairs book offers what he titles A Second Opinion – Rescuing America’s Health Care – A Plan for Universal Coverage Serving Patients Over Profit.

And I’d suggest that we pick up now our discussion where we left off last time.

And Dr. Relman last time I hadn’t had a chance, yet, to get to what you have identified over the years as another major factor in increasing, increasing, increasing the costs of medical care … and that is the drug industry. And I wonder what you see in the future being done for its part … its role.

RELMAN: Yes. Yes. Well, it’s true that I have been critical of many of the policies of the drug industry. But I don’t think one can accurately say that the high cost, the very high costs of drugs and the rising expenditures on drugs are a major cause of the health care cost explosion.

After all, as of now, expenditure on prescription drugs amounts to some 12%, roughly, of the health care dollar. While it’s increasing more rapidly than any other segment in, in the health care economy, it’s still a relatively minor part.

We’re spending right now, Richard, this year we’ll be spending probably close to two and a half trillion dollars on health care. 2.2 was the estimate for 2006 and I would say by next year we’ll probably be well over two and a half trillion dollars. And while the three hundred billion or so … that order of magnitude that we spent on prescription drugs is a big item, it’s not the main item.

The main expenditures in health care are what we spend on hospital care, on ambulatory services of all kinds and on professional services.

HEFFNER: What role does what our friend Dan Callahan complains about play? The increasing year by year … increasing of cost for higher and higher technology in medicine.

RELMAN: Yea. Well … that plays a role, but it’s not, it’s not much different in the US than in any other country. The difference is in other countries there are much more effective government regulations on expenditures and on allocation of resources.

The reason that American health care is going up so rapidly is a combination of more technology a la Callahan together with powerful economic incentives to provide more … that don’t exist in other countries.

In the United States almost half … almost half of the entire health care system is under the control of for-profit investor owned businesses. And that means that there’s a, there’s a powerful drive to increase income all the time. Businesses have to grow in order to thrive. They must grow. They must get bigger. And that …given the high technology that’s available and all the fancy diagnostic services and therapeutic modalities that we have today, it’s easy for profit oriented health care institutions, businesses … to push that.

Now when you also pay doctors on a fee for service basis and you pay doctors a relatively high fee for a relatively short time doing a highly technical procedure, that encourages doctors to do more also. So that’s the … now drugs are part of it. (Clears throat) Excuse me. Drugs are part of it, but a relatively small part.

HEFFNER: Well, I … I referred … when we were talking alone before to the wonderful exchange between you and a Princeton economist in which he seemed to be saying that you were minimizing … what I think you would say … the normal human nature … selfishness, self-seeking … of physicians. And that generally you were sort of saying … left to their own devices, physicians would not serve themselves quite as handsomely as they have. Is this a, a fair comment?

RELMAN: Yes… you mean is Reinhart’s criticism a fair one?


RELMAN: No, I don’t think it is. I, I thought you were asking me whether …

HEFFNER: Well, is it a fair statement of what he says you say and that you’re saying that his criticism is not a fair one.

RELMAN: That’s correct.

HEFFNER: In what way?

RELMAN: Well, I think it’s a fact and Reinhart as an economist would not have an opportunity to experience that fact. It’s a fact that if you live and teach amongst young physicians, medical students and young physicians and you listen to what they say and you see what motivates them … it’s a fact that the great majority of them do not expect to acquire great riches and become very wealthy the way their classmates who went into investment banking or some other Wall Street activity do.

HEFFNER: But Dr. Relman you’re talking, you …the key word there as you say if you function among young physicians …


HEFFNER: … beginning physicians.


HEFFNER: What happens to them when they’re not so young, when they come out in the world, they have debts to, to … obligations to meet. They have neighbors to live up to. What happens then? Are you still so certain that there is a …

RELMAN: No, no. I think that part of the problem is that these young physicians, many of whom … I wouldn’t say that they’re idealistic, I just think that they are, are convinced that the Hippocratic ideal, the idea of taking care of patients, doing good for patients … and being fairly paid for it, but not exorbitantly paid is a very attractive one to young people and it draws them into medicine.

HEFFNER: And then?

RELMAN: And then … you’re right. They … the system in which they have to function is one in which they feel themselves in a, in a competitive market. And that’s why I wrote my book. I said “the problem is that we’ve made health care into a competitive market in which physicians, as well as hospitals, not for profit hospitals, as well as for profit hospitals have to fight for their share of income and for their market share and where the name of the game seems to be to maximize your revenues. And so doctors find themselves in that situation and all around them they see evidence that businesses are taking over health care. So they say, “Well, if that’s what it is, I guess I have to behave like a business, too.” And Reinhart is right … that in the present system doctors have powerful incentives to act like income maximizing businessmen. My argument is … that’s not the way they’re trained, that’s not the essence of medicine, that’s not good medicine, it’s not good for the public and what we need is major reform. We have to change the system.

HEFFNER: Take away the incentive.

RELMAN: Take away the profit incentive from health care and make it once again, a social service that pays well for competent physicians and for competent care. That rewards creativity in an appropriate way, but does not go beyond the bounds of common sense.

HEFFNER: And he would say if I’m not unfair … that you’re spitting against the wind.

RELMAN: Well, I would say to him … and I have said to him … we still communicate …

HEFFNER: That’s a wonderful exchange between you two.

RELMAN: (Laughter) I would say to him “You really believe what I’m saying, but you think that it won’t come to pass. I’m saying that it will come to pass if you and many other people face the facts and do what’s sensible, it’s not impossible.”

It’s not the wind, it’s not, it’s not a natural force that can’t be changed, it’s a human force. It’s, it’s a culture that we have created and we can change.

The whole medical industrial complex which I first wrote about in 1980 … the whole medical industrial complex is a creation of the last two or three or four decades. Before that it didn’t exist. And there’s nothing inevitable about it. There’s nothing immutable about it. It’s a question of whether we want, as a people, to change it. It can be changed.

To say that the lobbyists will not prevent …it will not allow it … is foolish. It’s the will of the people. If finally expressed the will of the people and the will of the rest of the American economy … the non medical part of the American economy and the will of the medical profession that will win in the end if that’s what we want.

HEFFNER: So you’re saying, if I understand you correctly … let teachers be teachers. Let doctors be doctors and let businessmen chase profit.

RELMAN: Yes. I have nothing against business, I, I have nothing against profit …

HEFFNER: But you don’t want doctors to be businessmen?

RELMAN: And I don’t want profits to dominate health care. As I’ve said before, there are parts of American culture, the American economy which don’t belong in the market. And health care is one of them.

And, and the, the … you have to believe that everything in life is a market … you have to believe that markets are the only way that people can live and live well together is through free, free market forces. You have to believe that, which is nonsense in order to think that health care is best managed through free markets. It isn’t.

The evidence is very clear, Richard, and I try to summarize it in my book. Whenever you compare the kind of healthcare that you get and the kind of health insurance that you get in the for-profit, investor owned sector, with the not-for-profit sector, the comparison shows that the not-for-profits are better, less expensive, usually of a higher quality and there’s nothing special to be gained by the public from for profit health care.

And it’s simply a way of exploiting the health care system. It’s a way of taking money … investors taking money out of the health care system and reducing the amount of money available that we think we’re spending on health care.

HEFFNER: Well, in a discussion of this with a friend, he made use of the old Franklin Roosevelt notion of driving the money changers from the temple …


HEFFNER: … and saying that’s what we needed, that kind of leadership. And I made the point to him that first we had a Depression and it was only because of the Depression that Franklin Roosevelt’s words could be heeded …


HEFFNER: … do you think we’re going to have the counterpart?

RELMAN: I think we’re first going to have to have a serious deterioration in the American health care system. We’re heading that way now.

I think more and more people are going to lose their insurance or feel that they can’t afford to buy the insurance they need. And more and more businesses are going to feel the pressure of the, their employee’s health care costs. Employees are going to feel more and more ill-used and the medical profession itself, I think, will begin to realize that professional health care … as a profession … an ethical profession … medicine has no future in a market driven system.

And the markets don’t care about the ethics of professionalism. The markets don’t care about altruism and the ethos of serving the needs of patients first. And doctors … most doctors, I repeat, not all but most doctors went into medicine because they really wanted to be of service. They wanted to be paid fairly, but they wanted to be of service and they wanted to be respected, independent professionals. So, the doctors are going to realize that the system is destroying that opportunity. Big business is going to realize that they can’t compete with, with the … in the global economy with the enormous health care costs that they have to bear. And the public is going to realize that they’re being exploited. We’re not getting our money’s worth.

HEFFNER: My mother would have said, “From your lips to God’s ears.” But I’m not so sure that, that that’s going to happen. As, as you are certain. And you are?

RELMAN: I’m quite certain. I … what I don’t know is, how long it will take.

HEFFNER: What do you think?

RELMAN: My guess is at least ten years. It may, it may be sooner. It’s hard to predict. But it’s not going to be right away, it’s not going to be with … if, if a Democrat gets elected in 2008 and says, “I want to improve health care and work towards universal coverage.” That’s not going to solve the problem. The New York Times editorial of September 23rd makes that very clear. Simply expanding coverage is not going to solve the problem. You have to expand coverage, at the same time you’ve got to deal with controlling health care costs. And you won’t control health care costs unless you change the system. You’ve got to get rid of for-profit business and you have to change the organization and delivery of health care so that doctors are working primarily for salaries and not for profit groups rather than on a fee-for-service basis.

That may take more than ten years to occur. It may occur gradually. But the handwriting is on the wall. The numbers don’t lie. The facts are the facts. And nobody is going to stop the investors from, from investing more and more in health care if they continue to make the money that they’re making.

Again, in its September 23rd issue of The New York Times was an extraordinary article, the lead article on the front page, was an extraordinary piece of investigative reporting of investor owned nursing home care. And it described in great detail what happens when investment trusts, having nothing to do with health care, no connection with health care at all, simply put their money into nursing home businesses, buy up thousands of nursing homes and turn it into a profit making enterprise. The only way you can make profit on a nursing home … since nursing home payments are usually fixed, per day or …

HEFFNER: Reduce services.

RELMAN: Is to reduce services. And that article documents to a fare-thee-well what happens when you reduce services. Actually for-profit nursing home have been doing that for a while and there’s very good evidence in the, in the literature already that reduction of services to make profits and for-profit nursing homes kills people. It causes more bed sores, it causes people to fall out of bed, unattended and so on and so forth. And the … that information is gradually going to percolate through our society.

HEFFNER: Yeah, but you have said again and again something so important and that is that it will require the medical professionals themselves to accept change.

RELMAN: Yes, it will.

HEFFNER: And you’ve talked though about the young ones …


HEFFNER: They’re not the ones with the power.

RELMAN: Well, they will have the power.

HEFFNER: When they get old … and … (laughter)

RELMAN: And the old ones, the old ones are retiring with their profits.

HEFFNER: But the younger ones become the older ones.

RELMAN: Look, I believe there’s, there’s an old story, it may well be apocryphal about Winston Churchill during World War II. Before the U.S. entered the war on the side of the Allies, Churchill’s colleagues in Parliament chided him repeatedly with the question of “Winston, why don’t your American friends do the right thing and come in and help us defeat the Axis?”. And the story goes that Churchill said in reply, “Don’t worry about the Americans, they will always do the right thing at the end. But only after they have tried everything else.”

And I think that’s what we’re doing now in health care. We’re trying everything else. We are falling for all the myths about the market, the magic of the market and consumer directed health care, which is also another myth. And it will have to play itself out. That’s why it’s going to take a while. But the results will be very clear. Fewer and fewer people will have adequate insurance. More and more businesses will be damaged by health care costs and they’ll be no evidence that we’re getting commensurate benefits from all of this. And finally, at some point, legislators … that, who after all need votes more than they need lobbyist’s money … they need votes, legislators will get the idea and they will begin to pass laws that restrict the activities of for-profit health care companies and make it possible for doctors, encourage doctors to practice in not for profit groups. And gradually move our system towards the kind of not-for-profit social system that it should be. But that’s going to take time.

HEFFNER: In the short time that we have remaining, just a few minutes. I would like to go back, if you don’t mind, to the more benign answer you gave me at the very beginning of this program about the drug industry. Because I’ve been reading Arnold Relman for some time …


HEFFNER: … and when you and your colleague talk about “America’s other drug problem” …

RELMAN: Yeah, Marcia Angell and I wrote that article together and she wrote a book on the subject …

HEFFNER: Right. A compelling, compelling …


HEFFNER: … statement by both of you. You talk about the usual excuse about research and development costs, not so great. You talk about “marketing where the action is”. You talk about gaming the system …


HEFFNER: Ah … you talk …

RELMAN: All of that is true, those are facts.

HEFFNER: Well, but … what’s not … what, what made you suddenly …

RELMAN: Well, no … don’t, don’t misunderstand. I, I strongly oppose these policies on the part of the drug companies. I have written many times to the effect that the drug companies are not serving the public interest and they need to be regulated more. And I think the FDA has to take a much stronger role in regulating the research and development of new drugs. I feel very strongly about that. I simply took a more benign view of the effect of reducing extravagant expenditures on drugs on the total health care budget.

The total health care budget is so huge and drugs are a relatively minor fraction of that. So that while there are many ill effects, there are many bad things that flow from what the drug companies are doing. And I don’t mean to imply that we shouldn’t be concerned about changing those policies … I think we should. But it’s not going to solve the basic …


RELMAN: … budgetary problem of health care in the U.S.

HEFFNER: Should we make certain that they can’t follow the dollar also? Since they do play an important role.

RELMAN: Oh, yes. Well, you (HUGE NOISE … DRAGGING CUP) … know, the pharmaceutical industry is … started out as a business and the question is … should the pharmaceutical industry be replaced by some government agency. I don’t think it should. I, I think that we need the pharmaceutical industry, but we need more government regulation of the pharmaceutical industry and we need more government control, particularly of the testing of new drugs.

HEFFNER: Would you eliminate advertising of drugs?

RELMAN: To, to, to in the public?


RELMAN: Consumers. Yes, I would. I think it’s a, it’s a disgrace. It’s a, it’s a fraud. It is said to be educational. Of course it’s nonsense, it’s not educational. And it simply adds a growing number of billions of dollars to the expense of drugs that consumers have to pay. It influences doctors’ behavior in a bad way. And it serves no useful purpose. So I’m totally opposed to direct to consumer advertising of drugs. As I am opposed to many other policies of the, of the drug industry.

Don’t, don’t call my attitude a benign one. It isn’t. I just state that they are not the main cause of the tremendous cost of the health care system.

HEFFNER: Thank you for straightening me out on that. And thank you for joining me again today on The Open Mind.

RELMAN: It’s a pleasure, thank you.

HEFFNER: And thanks, too, to you in the audience. I hope you join us again next time. For transcripts 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.