PRIVATE HEALTHCARE CENTRAL
January 24, 2007-- TOP STORY: PRESIDENT'S STATE OF THE UNION--A NEW HEALTHCARE TAX DEDUCTION
-- LOCAL STORY: DOES A $35 MILLION HOSPITAL GIFT SIGNAL THE TURNING POINT?
-- EDITORIAL: ARNOLDCARE 2007, NO MORE DR. WELBY
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| TOP STORY: PRESIDENT'S STATE OF THE UNION--A NEW HEALTHCARE TAX DEDUCTION President Bush(love him or hate him) proposed a useful change in our tax law for those of us in favor of consumer directed healthcare. One of the basic flaws in our healthcare financing system has been the 60 year long disparity between business and personal tax deductibility of health insurance and medical expenses. Individuals cannot use pretax dollars to pay for these but businesses can, thus putting them in control of most healthcare consumer decisionmaking. The President’s proposal would allow a deduction of $7,500 for individuals and $15,000 for families who purchase health insurance on their own. Those employers who purchase plans worth more than this would pay a tax on the difference. This latter provision nullifies any tax loss to the government and makes it more budget neutral. The plan has been discussed openly for weeks. Those concerned with the financial plight of small business generally favor it. Senator Kennedy and Rep. Rangel have weighed in against. The fate of this proposal is in doubt, given the unpopularity of the President and the growing momentum for universal coverage in many states across the nation. Nonetheless, if passed it would go a long way toward increasing the popularity of HSAs and putting consumers back in charge.
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| LOCAL STORY: DOES A $35 MILLION HOSPITAL GIFT SIGNAL THE TURNING POINT? You may already have heard that a billionaire biopharmaceutical exec and his wife donated $25 million to the St. Johns rebuilding program. In addition, they donated an another $10 million to begin renovation of property south of Santa Monica Blvd to create a biomedical research complex extending the work of the John Wayne Center to other disciplines. This will be named the Chan Soon-Shiong Center for Translational Sciences. This gift was of recent making, with negotiations beginning only a few months ago. It comes at a time when the two year effort of the new administration has made progress in many areas but still has a long way to go. It could be a boost needed to keep momentum going in many other areas. APPA fully supports the hospital’s efforts to become financially stable. Much of the chaos of the last ten years has been due to feckless efforts on the part of prior administrators to deal with problems which frustrated most physicians. Perhaps the turnaround effort of the present administration has reached the turning point.
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| EDITORIAL: ARNOLDCARE 2007, NO MORE DR. WELBY Marcus Welby M.D. was a beloved family physician practicing in my hometown of Santa Monica , California. His patients were admitted to my hospital, St. Johns Health Center. Well, at least that was the setting chosen for this number one rated , black and white TV series which ABC aired from 1969 to 1976. Anyone watching the title shots, background and b-roll will recognize familiar scenes from my Westside L.A. community. These surroundings and his fictitious practice felt very real to private physicians like myself in that golden era. Today, our Republican governor’s healthcare plan has been so well received by the Democrat controlled California legislature that it already seems a done deal. The effect this will have on this state’s physicians and their patients is inadequately appreciated. These state mandates add to 49 others enacted over several decades and come atop a mountain of federal regulations which have already altered the physicians’ world quite dramatically. Surprisingly little has been written about how the majority of our nation’s physicians who practice solo or in small groups have adapted to decades of regulatory intrusion. And little has been written about the value of what has been lost since the days private physicians had the freedom to practice like a Marcus Welby. Back in the day, what distinguished Dr. Welby from his colleagues like Dr. Kildare and the doctors portrayed on shows like Medical Center and The Bold Ones was the impact of his long term relationship with his patients. These other shows depicted acute illnesses, diagnostic wizardry and the surrounding drama among nurses and doctors. The same model is familiar today with such shows as House, E.R. and Scrubs. The writers of Marcus Welby M.D. knew the heartfelt intimacy of a caring doctor’s relationship with his suffering patient whom he know so well was a powerful dramatic vehicle. The TV audience got it. Of course Dr. Welby was a better and more effective physician. He knew most of his patients all of their lives. He could easily persuade them to do the right thing, accept treatment and change their lives to achieve better health. In medicine we call this “increased compliance.” That means getting more of a doctor’s patients to follow through with effective treatments. All good practicing physicians know that the most powerful tool they possess is not a CT scan or MRI, but a close relationship with their patients. Doctors who can achieve this have better outcomes and happier, healthier patients. The present day California TV audience may not remember Dr. Welby and the successful way he practiced. Yet they know that this kind of physician is getting harder and harder to find. Decade after decade of federal and state regulations have changed the way he can practice and limited patients’ access to private physicians. Healthcare consumers are herded into HMO and PPO managed care plans by employers who control their access to doctors and hospitals. When they become patients, their benefit plan limits their treatment choices. The doctors they see are restricted in how they operate their businesses by federal and state statutes. These same doctors are limited in what they can offer to patients by managed care contracts and Medicare regulations. The freedom Dr. Welby took for granted in advising his patients and the access they had to him are gone. The governor’s plan will make all of this worse. The healthcare consumers’ choices will narrow further. The proposed state mandates for community rating, guaranteed issue and mandatory coverage will drive up the cost of non-group, individual health insurance to unaffordable levels. This is the situation elsewhere. Try getting an individual health plan in New Jersey. The mandates to tax doctors and hospitals will have other unintended (or intended) consequences. The tens of millions of pro bono charity care that present day Dr. Welby’s dispense will be cut back dramatically. The hundreds of millions of charity care dispensed by California hospitals will have to be cut as well. In a good year these institutions’ profit margin is 2-4% with no room for a 4% state tax. Neither doctors or hospitals believe the argument that more of their indigent patients will be insured to make up the difference. If enacted, the proposal will accelerate the decline in physician reimbursement that has been going on for 20 years. The math is simple. More consumers receiving more services with limited state and federal resources to pay always means lower payments to providers. California has the highest practice overhead, lowest reimbursement rate, highest cost of living and lowest profit margin of any state in the country. Doctors can do the math too. The early retirement rate for senior physicians like myself will increase. Those private physicians who continue in practice will have to cut back staff and services to their patients or make other changes just to stay even. The slow evolution of doctors dropping all PPO contracts will accelerate. Extra fees and access charges will appear. More physicians will convert to fee only, retainer concierge practices. And the trickle of doctors opting out of Medicare completely will become a torrent. No more Dr. Welby. At least not on your PPO list of providers and maybe not if you are over 65 and on Medicare. If you want the kind of relationship Marcus Welby’s patients had with their doctor, you will find it only among the growing minority of physicians who practice outside the government run healthcare system. Richard Taw M.D. President American Private Physicians Association
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