All posts by Paul Eckel

I am a graduate of the Duke Program in Hospital Administration. I have been a healthcare management consultant for over 30 years, and am a Fellow in the American College of Healthcare Executives.

Muddling Through to a Likely Future in Healthcare

Our current economic troubles ripple across every fabric of American life; one aspect of American life that is especially affected by the economic downturn is our access to adequate healthcare.  The increased role of our federal government in the troubled economy could possibly set a precedent for the Administration attempting to improve and solve the great problems in the healthcare system. increasing its present portion of healthcare spending from by providing healthcare services directly. This role of the federal budget stands in contrast to the more conservative approach of the government indirectly playing a role in the delivery of quality healthcare services by both sectors of the economy.

Both approaches, which have been debated and analyzed very thoroughly since the early 20th century, attempt to solve the problems of accessibility, availability, quality, and affordability in health care. There is a clear distinction, between these two main alternatives and various proposed solutions have vacillated between them both. The significant divide between both aspects often leads to a stalemate that produces an environment of frustration. This frustration produces compromise and incremental attempts at solutions. We seem to make progress by just “muddling through”, which characterizes this trend of our government bureaucracy over the years.

There are some trends and developments that will continue regardless of the progress of legislation produced by Congress.  What are some of these short term improvements?

One significant development is the increased emphasis on the health care “safety net”.  The “safety net” is a fairly complex but often times informal network of private and public resources committed to the provision of healthcare services to those unable to pay. It is made up of a range of public and private providers like government funded Community Health Centers all the way to private entities such as Free Clinics and Churches.  This network makes needed health care services more available to those in need.  Understandably, the government and private sources are likely to place a greater emphasis on these programs in the future.

Another significant advance is the continued growth of retail healthcare clinics. These clinics are located in pharmacies and grocery stores, and are staffed by Nurse Practitioners and Physician Assistants who are under the direction of a physician. They are operated on a “no appointment” basis, and their charges, which are much cheaper than a trip to the doctors’ office, are posted.  Prescriptions also can be written at these clinics. A recent study by one of the retail clinic companies stated that by 2013 there could be as many as 3,000 clinics nationally, with each receiving 8000 visits annually.

Moreover, there is significant progress being made in the utilization of mass consumer health information.  Recently Microsoft and Google teamed up to use the internet for medical information useful to the consumer. By promoting easy availability of medical information like individual patient records utilized by the consumer, more decisions can be made by the consumer.  Already there are other well developed web sites such as Revolution Health and WebMD competing with other companies to provide the necessary and useful healthcare information for the consumer to use in their decision making.  This information revolution will lead to price and quality transparency.

Another trend is the explosive growth in medical tourism for consumers interested in value.  Patients will shop for care internationally.  A recent study by Deloitte stated that outbound medical tourism currently accounts for 2.1 billion dollars spent by Americans overseas.  This amounts for 15.9 billion dollars in lost revenue for American healthcare providers. Medical care in countries like India, Thailand and Singapore can cost as little as little as 10 percent the cost of comparable U.S. care.  Often this includes airfare and very nice accommodations and fits well with elective procedures. This is spurring on leading academic medical centers and other quality providers to compete strongly to capture the medical tourism market. They will use leverage and strong brands to compete with international providers.

In addition, there is the important trend of the government becoming more aware of the inequality of the tax treatment for medical services.  Employees who work for large companies receive their heath care plan with tax free dollars.  On the other hand, the self employed, and individuals cannot deduct the cost of their healthcare plans with tax free dollars.  This dilemma will receive the attention of government. The tax treatment of healthcare expenses will likely become the same for everyone.

As the debate continues and fluctuates between both approaches to solve the wide array of healthcare problems, progress on many fronts will still be made. We will continue to muddle through to solve some of the major problems. Whichever overall solution develops, our country depends on our excellent health care system to compete effectively in a world economy.

The Pluralistic Healthcare System – Its Problems and Solutions

Our historical emphasis on freedom and limited government has kept our health care delivery system a combination of private and public forces. Many have attempted to make our system a socialized system where healthcare is a governmental right, but they have not succeeded. The system therefore, tends to be fragmented, uncoordinated, and complex with many elements and entry points. It seems to be a patchwork of separate responses to various problems with each solution creating a new distortion. Our current system has become dominated by vested self interest, politics, and protection of turf.  Our system is disease oriented rather than oriented towards prevention, nurture, and self-healing.  The allopathic model has not allowed alternative therapies to be recognized as effective means of healing.  Leland Kaiser has stated that our system is out of control; we waste too much and spend too little.  We are beginning to lose public confidence of our systems’ commitment to the patients’ welfare.  Alain Enthoven has commented that the American system is “a paradox of excess and deprivation.”  This ambivalence has produced a challenge to properly balance the a social contract of providing health care to all, with a free market economic approach that places heavy emphasis on individual responsibility.  We must decide how to make sure the community good prevails over institutional management. How should we spend our limited time, energy, and money?  What is the proper mix between government and individual responsibility?

The easiest way to understand and explain our pluralistic healthcare system is to examine it by three major categories: financing alternatives, service providers at various delivery points, and research.  The financing of health care is divided into two major divisions which are:

Government or Public




The public system is dominated by the federal system and its mandates.  These requirements are the primary basis for states providing the many services which they provide.  These services are addressed below.  Various formulas requiring matching funds, specifically earmarked funds, and block grants, provide the primary resources states use to provide their services.  Medicare and Medicaid are the main financing mechanisms for services provided by the government system. For the past three decades health care spending has increased on average by over 11% on average per year.  Federal healthcare costs will far outpace Social Security beginning in 2005. All other financial resources and programs available to citizens flow through these two programs. Other direct services provided by government are:  End Stage Renal Disease Program, the Veterans Administration healthcare system, Native American system, and a system for migrant workers.  Further each state and local health department provide various public health services which range from insuring clean food and water to clinics for AIDS and venereal disease.

Private insurance and financing is broken down into three major categories.  These three categories include employer provided health insurance, Individual insurance, and various charity programs and association provided resources.  At the present time about +or- 15% of our population does not have any kind of health insurance. The cost of employer provided health insurance has become so expensive that many employers have ceased providing it or have implemented various cost cutting strategies that have placed a significant portion of the coverage on the employee.  Further, various strategies to control utilization have often been required that have significant barriers that prevent care from being provided without significant review and control.  These programs have benefited primarily the insurance company or the employer.    Currently, fee for service insurance makes up only 5% of all employer provided health insurance.  Individual insurance is more expensive but it is portable from job to job or in force during periods of unemployment.  The administrative cost of individual insurance amounts to approximately 49% of the premium compared to about 5% for group insurance.  A new option for both group insurance and individual insurance is purchasing a large catastrophic insurance policy and placing the deductible amount in a savings account that the consumer controls.  In this arrangement the consumer benefits from any money not spent as it accrues over his or her lifetime.

The healthcare system also has available resources from many charities and voluntary organizations.  The list of programs is very large and diverse. Some examples of various programs include faith based programs, as well as many private programs.  The faith based services include various outreaches to the poor as well as programs within churches such as parish nursing.  The private area consists of foundations, community and social service agencies, as well as voluntary efforts such as free medical clinics.  Our pluralistic health care system has traditionally relied on various voluntary efforts to form the foundation of our present system.

The subject of service providers also can be categorized into governmental and private service and delivery points.  Here is where the true nature of our pluralistic and quasi-private public health care system is evident.  A large number of the service and delivery points are provided by both government and private organizations.  Further, the private area of providers contains both profit and non-profit entities. Also, a large number of providers in the non-profit private system are church owned facilities. The following table lists the major provider categories and their usual ownership status.

       Major Service Providers and Types  
  Private Government
Category Non-Profit For Profit State/Local Federal
Hospitals IP x x X x
Hospital Clinics and Diagnostic x x   x
Ambulatory Surgery Centers x x    
Community Health Centers x     x
Solo Practice   x    
Group Practice x x    
Ambulatory Surgery x x    
Free Clinics x      
Community Mental Health     X  
Drug and Alcohol Treatment x   X  
Public Health Services     X  
Alternative & Complementary   x    
Intermediate & Group Homes x   X  
Home HealthCare x x    
Assisted Living Centers   x    
Nursing Homes   x X  
Hospice x      
Wellness and Prevention X x    
Health Education     X  

The final major division of our pluralistic health care system is the research and development category.  Here the majority of research and service is performed or sponsored by the Federal government.  The major Federal agencies involved are the following:

National Institutes of Health

Center for Disease Control

Food and Drug Administration

The private sector is also active in the areas of research and development.  The most notable areas occur in pharmaceutical companies, private and public genetic and genome research, and other similar ventures

Our present pluralistic and quasi-public healthcare system has many short comings.

It seems to be a patchwork of responses to various problems with each solution causing various distortions.  There is a lack of coordination between prevention and wellness, acute care, chronic care, and long term care.  As Dr. Arnold Relman has stated we have created a large medical industrial complex, with a mixture of humanity, science, and money. Our current system seems to promote the powerful retaining their power and loosing sight of their original mission. Our system is heavily oriented toward employment based health insurance.  This approach has put an unreasonable emphasis on third party payment which has removed the patient from responsibility for their decisions.  This approach insulates the individual from knowing the true cost of healthcare, which has resulted in using insurance to pay for services which are perceived as free and often are unnecessary.  Further, this attitude has placed an emphasis on consumption as opposed to investment into the future. Also it has cemented a provider orientation that has limited the development of prevention, wellness, and alternative services.

Another major characteristic of our health care system is the massive expenditures by the Federal government that provide health care to the non-poor.  Currently Federal tax revenue is reduced by $120B per year by subsidizing employer paid health insurance.  The tax subsidization is unequal.  Those with individual health insurance must pay for it with after tax dollars.  Those with low income receive no tax benefit.

Another characteristic of our pluralistic healthcare system is that it has followed the trend in our society toward excessive litigation.  This has contributed to the decline in a close and personal physician patient relationship and there are few incentives to improve this relationship. Concern for rights has replaced concern for duty.  Also, there often is an unrealistic expectation of what the medicine can actually do.

We have a culture dominated by free enterprise and solving social problems with local autonomy.  There are significant forces leaning almost equally between maintaining a private oriented system and changing to a more public oriented system where health care is declared a right extended to all citizens.  The emphasis seems to change according to which political party is in power. The struggle goes all the way back to our beginning days as a country.  In 1798 the government enacted a pre-paid system of healthcare for the seamen.  In 1912 President Theodore Roosevelt tried to enact a governmental system of care. Currently we have in power a more private oriented perspective which is profiting by the failure of programs such as Regional Health Planning and a recent effort by President Clinton to shift massive amounts of control in healthcare to the Federal government.

Do we have a responsibility to see that everyone in our society has equal access to healthcare?  There are considerable barriers to this becoming a reality. For example, about 13% of all Americans do not have health insurance.  However, a close analysis of the problem reveals that it is not a poverty problem as only 30% of those without health insurance are considered in poverty.  Those without insurance have access to healthcare but tend to access it less often.  Most Americans would want all citizens to have access to healthcare.  We must find solutions which are judicious and wise.


  1. Equalize and limit the tax treatment for all citizens.  Above a certain benefit amount the tax deductibility would be phased out.  Lower income families would be given a tax credit similar to the Earned Income Tax Credit.
  2. Provide catastrophic insurance by the Federal government to all citizens above a certain amount based on actuarial analysis.  The purpose of this is to reduce the cost of health insurance and to make sure all citizens would be covered for a major catastrophe.  For example the amount could be over $1M over a lifetime.  Insurance should be regionally or nationally rated so that all citizens can access health insurance.  Health insurance should be required similar to car insurance.
  3. Increase the role of market forces by promoting HSA’s that have tax advantages equal to employer based health insurance.  Reduce regulation to allow for more competition especially at the primary care level.  This will unleash a wave of savvy consumers who think for themselves.  Health coaches and patients becoming their primary care provider will result.
  4. Make key health information readily available. This information would include data on quality, pricing, results, and other important information.  All published information and studies would become available.  The government would develop standards for reliability.  Patients will have information available on evidence based medicine and disease management protocols to help eliminate much of medical care which is unnecessary.  This  movement will accelerate the incentives to “wire” the health care system and make the electronic medical record a necessity
  5. Reform the current medical liability system to provide reasonable judgments for legitimate cases, but remove unreasonable criteria for court awards that encourage defensive medicine.  A separate court system utilizing peer review criteria for acceptable cases for adjudication would be a reasonable step towards a solution.