Correspondence (March/April 2000)

Economics of Health Care

Dear Editors,
I am happy to be back as a member of AAPS. I appreciate very much the concerns for physician autonomy and quality care for patients expressed in the writings I see in AAPS News and in the Medical Sentinel. I am pleased with the solid ethical base which AAPS demonstrates, as well as concern for innovative plans for providing care to patients.

AAPS mission statement emphasizes free enterprise, the ethics of Hippocrates, a focus on the individual patient (as opposed to group care), and the sanctity of the trust-based patient-doctor relationship.

What I have not seen much has been discussion of the costs of health care. Does AAPS take a specific interest in finding the least costly way to render quality health care? I am afraid government intervention in health care has some legitimacy if it is based on a desire to control costs. To what extent is the private physician to be concerned about the economics of health care?

Philip D. Ranheim, MD
Everett, WA

Dr. Orient Replies

Dear Dr. Ranheim,
AAPS certainly does take a position about the most economical way of practicing medicine, which also happens to be the most ethical way. That is the method in which physicians and patients deal directly with each other according to mutually agreeable terms. It may also be called a free market. We believe it is the intrusions of third party payers that have led to skyrocketing costs of medical care, both because of the increasingly oppressive administrative overhead and also because of the perverse incentives in which both the supplier and the customer have to maximize consumption. Managed care attempted to overcome these incentives by putting financial risk on the physician, thus putting him in a conflict of interest with his patient. But it still didn't work to control costs because physicians do still retain some ethical sense and because the managed care overhead is so grossly out of proportion.

Every private physician is constrained by the values the patient places upon his service, and also by the patient's ability to pay. Physicians are also constrained by these considerations. Most physicians, I am sure, have had the same experience I have had. If a patient is "fully insured," he may say things like, "I know I don't really need that technetium scan of my heart, but Blue Cross is paying for it and I want it."

On the other hand, a patient who is paying the bill himself, as well as facing the risk to his health of foregoing the procedure, will ask intelligent questions like the value of the procedure, the consequences of not having it, the availability of a less expensive approach, the possibility that he may be able to obtain a discount for immediate payment, and so forth. Most physicians are more than willing to make accommodations to patients who truly can't afford to pay, although they are certainly less inclined to do so for patients who have money for beer, cigarettes, a night on the town, a fancy car, and so forth.

A very common answer these days is that society should take from the haves in order to provide more medical services to the have-nots. This is called socialism, or in Frederic Bastiat's terms, legal plunder. This is not only immoral, but throughout history has led to evil consequences that turn out to fall most heavily upon the poor.

I see you are about to undertake a new such experiment in the State of Washington, with the approval of the Washington State Medical Association. I hope you will join with the efforts of the Washington chapter of AAPS to fight this initiative and to educate your fellow citizens about the advantages of free enterprise, in terms of cost, availability, quality, and morality.

Jane M. Orient, MD
Executive Director, AAPS


Dr. Faria Replies


Dear Dr. Ranheim,
We have perhaps emphasized ethics and the free enterprise system in the Medical Sentinel because those ingredients seem to be the ones missing out of the brew steaming out of the cauldron of medical journalism. "Cost containment" for "spiraling health care costs," as you know, has been thoroughly pontificated upon in the mainstream medical journals; in fact, that was, supposedly, the reason for the inception of managed care and the government's granting of favored status for HMOs for the last two and a half decades.(1-3)

We believe medical care costs have risen because of government intrusion and the increasing interference of other third-party payers in the patient-doctor relationship. Since World War II, despite the deceptive mirage, we have gradually lost the free market in medical care because when a patient (acting as a consumer of medical care) spends health care dollars, the perception is that someone else is footing the medical bill (be it the government as in Medicare or Medicaid, or the insurer or HMO as in employer-provided coverage).(4,5) So Adam Smith's invisible hand of the free market is shackled by the fetters of this perception --- which, increasingly, turns out to be correct, for indeed, someone else is paying (either directly by wealth redistribution in the case of government-provided medical care, or indirectly via cost-shifting as we see in the private sector).

The solution is patient empowerment by giving individual citizens (including the self-insured and small businesses) the same tax advantages as employer-provided coverage and allowing them to establish tax free Medical Savings Accounts (MSAs) coupled with catastrophic, high-deductible, true indemnity medical insurance. Allowing citizens to keep and accumulate what they do not spend in the MSA encourages them to act as prudent consumers of medical care and to remain healthy, providing another incentive to avoid self-destructive behaviors and unhealthy lifestyles. And for those who become seriously ill or require extensive procedures, they will have the piece of mind of knowing that when their deductible has been satisfied, their indemnity insurance kicks in and provides real catastrophic coverage so they don't lose the possessions of a lifetime to impoverishment or their lives to illness.

Eventually, politicians will either take us down the path of the single-payer system of health care with cataclysmic consequences, or we will take the decisive, necessary steps to go in the opposite direction toward freedom --- by severing insurance coverage from place of employment and ending the employer link that was established accidentally with the wage and price controls of World War II --- and establish an individual-based, true free market in medical care. With competition and a free enterprise system, doctors will have to discuss costs with their non-urgent patients (i.e., 90 percent of patients in their offices) just as they discuss now informed consent information, and although they will surely make less money than they do now, it will be worth it. They will be happier taking, once again, control of their own practices, and regaining their autonomy, their independence, and their lost liberties.

Patients will also be happier because they will also, once again, trust their physicians, have more freedom of choice, and health care would become more affordable. Unfortunately, this latter liberating alternative (6,7) will be fought tooth and nail by politicians and policy makers because it strikes fear in their hearts --- because not only would they lose control over our lives, but it would also make them superfluous.

There is an organization that will continue to be at the forefront of this battle, making sure the scale tips towards the side of freedom and that is AAPS. Welcome back to AAPS, be an active member, and encourage others to join. Only then can we win the battle between complacency and socialism on the one hand, and empowerment and freedom on the other.

Miguel A. Faria, Jr., MD
Editor-in-Chief, Medical Sentinel


1. Hilsabeck JR. Medical practice today - how did we get here? (Parts I and II). Medical Sentinel 1996;1(2):18-21 and Medical Sentinel 1996;1(3):14-17.
2. Faria MA, Jr. Managed care - corporate socialized medicine. Medical Sentinel 1998;3(2):45-46.
3. Dorman T. Managed care - a review. Medical Sentinel 1999;4(1):21-23.
4. Goodman JC, Musgrave GL. Patient Power: The Free-Enterprise Alternative to Clinton's Health Plan. Washington, DC, The Cato Institute (abridged version), 1994.
5. Orient JM. Your Doctor Is Not In - Healthy Skepticism About National Health Care. Macon, GA, Hacienda Publishing, Inc., 1994, pp. 235-254.
6. Faria MA, Jr. Medical Warrior: Fighting Corporate Socialized Medicine. Macon, GA, Hacienda Publishing, Inc., 1997, pp. 147-179.
7. Faria MA, Jr. Vandals at the Gates of Medicine - Historic Perspectives On the Battle Over Health Care Reform. Macon, GA, Hacienda Publishing, Inc., 1995, pp. 239-242, 255-263.


Dear Editor,
With warm regards to Dr. Pat Flanagan, and his insightful commentary on my article "You Copy That?" (Medical Sentinel, November/December 1999), I might contribute these few thoughts.

In Dr. Flanagan's commentary, he slightly misconstrues my stance on property rights and their application to clones.

As we both agree, one's own DNA falls under the penumbra of private property. But when Dr. Flanagan interprets that I then extend the penumbra of ownership to any animated living product of that DNA --- a clone --- he is mistaken. As I stated, once the gears of life have been set in motion, the entity created is a unique individual, and, as such, retains his own natural rights. He, therefore, cannot be the property of anyone else.

I believe the real dilemmas arise in two cases, and these are inevitable, given the development of biotechnology. Some may hope we can avoid the moral problems associated with cloning by halting cloning experiments, but it is unlikely such efforts would prove successful.

The first dilemma is the issue of tissue masses. Are they truly the gears of human life? Dr. Flanagan and I appear to disagree on whether the dividing cells designed to produce a tissue mass with no central nervous system or the potential to develop self-awareness are those of an individual with a natural right to life. I lean towards the position that they are not. But I admit that such a view begs the question:

"Why, then, should we allow brain-dead patients or fetuses the guarantee of their natural rights? Surely they aren't self-aware, and never will be." This is a frightening prospect.

The distinction I make comes prior to inception (I hesitate to call the formation of a clone "conception"), and it concerns whether the DNA used by an individual --- and manipulated under his acknowledged property rights, is designed to grow into a recognizable, potentially sentient human being. I believe there is some ambiguity when the DNA is manipulated to create, say, spare parts.

In this case, is the product of the manipulated DNA truly a recognizable human life? And, if not, how can we reconcile the retention of one's right to control his own DNA with any law that precludes him from creating something other than a human being with natural rights?

If scientists can grow replacement ears on rats --- such as has been done recently --- should we consider that ear to have natural rights. I believe not.

The second dilemma Dr. Flanagan presents concerns the mistakes --- the mutants and miscarriages --- that would undoubtedly be created during the process of applying experimental cloning techniques to humans. And this is indeed troubling. One must acknowledge the moral quandary this presents. These experiments may result in loss of life, or harm to the cloned child.

Yet if we preclude such activity, how can we reconcile that position with our current societal stance on parenting? Surely many couples who know they run the risk of passing on a genetically inherited disease, or conceiving a malformed child, or having a miscarriage, could not morally be forbidden by others to try to conceive if they so desire. Similarly, if a mother's personal habits - diet, smoking - can bring harm to the fetus, how can we justify not regulating her activities a priori?

Thoughtful consideration of the DNA/clone/natural rights issue gives rise to many associated ethical puzzles. The exploration of these issues is both important, and intellectually challenging, and I appreciate Dr. Flanagan's intelligent thoughts --- and food for thought.

P. Gardner Goldsmith
Amherst, NH

Correspondence originally published in the Medical Sentinel 2000;5(2):33-35. Copyright©2000 Association of American Physicians and Surgeons (AAPS).