Julius B. Richmond is a M.D. with vast government experience -- a founder of Head Start, the former Surgeon-General under President Jimmy Carter (who wrote the introduction here); currently Professor Emeritus of Health Policy at Harvard. Rashi Fein is Professor Emeritus of Medical Economics at Harvard Medical School. Their book is called The Health Care Mess: How We Got Into It and What It Will Take to Get Out (2005, Harvard University Press). I picked it up at the library along with David Mechanic's The Truth About Health Care. The main difference between the two books is that most of The Health Care Mess details the history behind the current state, whereas Mechanic's book is more of a current snapshot.

The final quarter of the book makes two proposals: a pitch for a single-payer national health system, which the authors prefer, and a series of piecemeal approaches mostly based on the Federal Employees Health Benefits (FEHB) program -- the latter is pretty much what Kerry ran on, or at least namechecked, in 2004. Neither proposal comes close to sizing up the whole problem described in the early parts of the book. For that matter, the "mess" of the title strikes me as a good deal tidier than reality.

On the development of modern medicine (p. 9):

Scientific advances taking place in the early twentieth century were destined to have a significant impact on diagnostic and therapeutic interventions available to physicians, the understanding of disease patterns, and the nature of medical education and physician preparation for the emerging modes of practice. Discoveries in the natural sciences and the increasing availability and applications of the compound microscope fostered the development of pathology, bacteriology, physiology, pharmacology, and biochemistry as sciences basic to the study of medicine. The development of x-ray examinations, electrocardiography, and laboratory examinations of body fluids, based on new knowledge in phsyics and chemistry, were beginning to change the nature of medical practice.

It has been said that, at the turn of the last century, if a randomly selected patient with a random illness met a randomly selected physician, the patient had only a fifty-fifty chance of benefiting from the encounter. Those odds increased remarkably over the century, and that increase began in the early decades.

On the accidental development of employment-based health insurance (pp. 37-39):

Because the most common group arrangement and linkage involved employment, this pattern had many administrative and enrollment advantages, especially so during the Second World War when America bounced back from the depths of the depression. Between 1939 and 1944 the unemployment rate dropped from 17.2 percent to 1.2 percent, and the Gross National Product grew by almost 75 percent in real (corrected for inflation) terms. In an effort to control inflationary pressures on the prices for consumer goods in short supply and on wages in a full-employment economy, the federal government instituted price and wage controls. Nevertheless, it did permit additions (within limits) to fringe benefits, including health insurance. Given the high levels of taxation on wartime increases in profits, employers were willing to augment their contribution for health care coverage (or to offer such coverage if they had not previously done so). The costs of insurance, after all, were being paid by dollars that in large measure would otherwise have been paid in taxes.

And there was more: the amount that the employer paid for health insurance was considered a "cost of doing business." It was a cost, akin to wages and other items that were legitimate expenses and deductions from what otherwise would have been profits. Yet at the same time the value to the individual of the premium dollars paid on his or her behalf was not considered as income on which the worker would have to pay income and (perhaps) Social Security taxes. The consequent decrease in government revenues provided a substantial subsidy toward the purchase of health insurance. It should be pointed out that the failure to tax the value of the premiums as income meant that the subsidy was greater and worth more the higher the individual's income and the greater the individual's marginal tax rate. The CEO received a larger tax benefit subsidy than did the secretary. [ . . . ]

At the entry of the United States into the war at the beginning of 1942, Blue Cross covered 6 million subscribers; by 1946 enrollment had exploded to 18.9 million. Commercial insurance covered some 3.7 million persons in 1941 and 10.5 million by 1946. Further rapid growth followed; from a 1946 total of 32 million persons covered by Blue Cross, commercial plans, PGPs, and independent plans, to 53 million in 1948, and to 77 million in 1951. As a consequence of changing patterns of medical care, in particular the utilization of hospital services, much of this increase in coverage was for hospital care, creating a not-so-subtle perverse incentive to hospitalize individuals. This was the case even for diagnostic tests that could have bene performed on a less costly outpatient basis. Over time the hospital thus became all the more important and central to the delivery of health care services, a phenomenon not unrelated to the expansion in the number of hospitals and of beds following the 1946 enactment of the Hospital Survey and Construction Act (the Hill-Burton Act). In a reciprocal manner, since medical care became more costly, insurance became more useful (indeed, necessary). In turn, the presence of insurance helped underwrite a buildup of resources and an upgrading of technology that added to costs and made insurance even more valuable.

It strikes me that we can file this as yet another unanticipated consequence of WWII -- a triumphal "victory culture" that validated and reinforced everything America did during the war, regardless of its merits.

On the growth of health care expenses (pp. 73-74):

The concern about rising costs and expenditures was a matter of top priority. After all, national health expenditures (NHE) constituted an increasingly larger proportion of the GDP, and there were no signs of a slowdown in their rate of growth. In 1960 NHE accounted for 5.1 percent of GDP; by 1965 (even before the implementation of Medicare and Medicaid) the share had risen to 5.7 percent. By 1970 the proportion had increased to 7.1 percent; by 1985 it had reached 10.3 percent.

Nor was this growth accounted for solely by increases in that part of national health expenditures that went to administration, research, and construction (matters that at least in theory were amenable to control through the appropriation process). Expenditures for personal health care services (roughly 90 percent of national health expenditures) were also growing rapidly, both in absdolute terms and as a share of GDP. In 1960 personal health care service costs totaled nearly $24 billion. By 1965 the total rose to $35 billion, and by 1985 to $376 billion (all in current dollars). Per-capita expenditures rose more than twelvefold, from $124 in 1960 to $1,523 in 1985. These increases affected all Americans and, not surprisingly, were accorded a higher priority than the issue of the uninsured and underinsured, which directly impacted a much smaller number (around 15 percent) of Americans. The uninsured were a minority. Furthermore, they were "others": the poor, black, Hispanic, the unemployed, low-wage earners, those too old to work and too young for Medicare.

Another quote on progress, i.e. forgetting where you came from (pp. 98-99):

Physicians and patients who have grown up in what some consider the golden age of medicine would most probably be shocked to discover that prior to World War II physicians had little by way of specific therapies for their patients. The general public and even today's younger health professionals would surely be astonished to learn that a review of medical textbooks of the 1930s, when one of us was a medical student, indicates that the only specific medical therapies then available were liver extract for pernicious anemia, insulin for diabetes, quinine for malaria, arsenicals and heavy metals for syphilis, and digitalis for heart failure. Today's sophisticated imaging and diagnostic techniques, pharmaceutical interventions, transplantation, and microsurgery techniques did not exist. The medical and surgical resources were extremely limited.

The availability of antimicrobial medications, initially that of sulfonamides, just prior to World War II, transformed the treatment of the infectious diseases. It also created a hopeful climate for intensifying and expanding medical research during and after the war. The time was ripe, therefore, for the rapid growth of the National Institutes of Health (NIH) and the creation of a remarkably inventive partnership between the federally funded NIH and the private and state universities and research institutions of the nation. As a consequence of the increased complexity of medical care and expansion in the flow of research funds, academic medical centers that could deal with that complexity and that were equipped to respond to the research opportunitites and to the availability of funds with which to undertake them, underwent rapid expansion.

A rather good definition of schizophrenia, by no means limited to the immediate subject here (p. 119):

The American dilemma, on the one hand, of wanting to rely on market forces yet nevertheless being skeptical about their efficacy, and on the other hand, wanting something akin to the results of rational planning while rejecting planners and planning mechanisms -- that is, the dilemma of wanting lower expenditures while rejecting control and budgeting mechanisms -- shaped how we dealt, and did not deal, with graduate medical education.

How the AMA's anti-government stance let doctors be blindsided by for-profit entrepreneurs (p. 130):

Concomitant with the growth of these for-profit sectors was the corporatization of much of medical practice. In retrospect it is surprising tha tthe medical profession did not offer significant resistance to this trend. Part of the explanation lay in the fact that the largest organization of physicians, the American Medical Assocation (AMA), had long opposed any systematic planning for the delivery of medical care services. Consequently, financial flows and organizational arrangements were left to the marketplace. Physicians were now reaping what AMA ideology had sown.

The irony was that organized medicine in the form of the AMA had focused its attention on government as the threat to physician independence, power, and control, and did not recognize that the marketplace and the behavior of employers who were large purchasers of insurance and of investors who were "medical care entrepreneurs" would represent an even larger threat. While organized medicine could lobby government, it could not identify a locus for exerting pressure against employers who were more actively questioning the costs of and expenditures for medical care. Nor could it identify a locus for resisting the forces of Wall Street that were seeking new opportunities to increase profits by constraining physician behavior and cutting costs.

It's worth noting that the AMA's line fit nicely with the general Cold War ideology, which is part of the reason why conservatives have locked themselves into a private-profit health care system even though it winds up being predatory on all other forms of business.

In the early '90s price increases temporarily abated (p. 142):

Nevertheless, cost increases appeared to ease. Much of the easing could be attributed to the lower utilization of expensive hospital days. Some of the relative stability was associated with a decline in the overall rate of inflation, and some was the result of HMO (temporary) "underpricing" policies designed to improve market share. Still, whatever the explanation, in the short run employers and employees benefited from the stabilization of premiums. Between 1991 and 1998 the annual rate of increase in health expenditures slowed to a low of 5 percent. Regrettably, it started to rsie again in 1998, reaching 9.3 percent in 2002. Basing the Consumer Price Index (CPI) at 100 for average prices in 1982-1984, the CPI for all nonmedical care items was 128.8 in 1990, while the CPI for medical care was 162.8, or 26.4 percent higher. By 1999 the CPI for nonmedical care items stood at 162.0, while that for medical care was 250.6, or 54.7 percent higher. The disparity continued to grow, and by 2002 the CPI for nonmedical items was 174.3, while medical care was 285.6, or 63.9 percent higher.

Of course, the other reason for holding the line on prices was that until Clinton's plan was killed the industry needed to prove that it could regulate and moderate its appetites without government intervention. Prices started rising again once the Clinton plan was dead and the Republicans took control of Congress. The rate increased further when Bush entered the White House, even though the high tech bubble had largely collapsed. As such, there is public value in the mere possible threat of political reform, even if it doesn't lead to legislation.

On health care economics (pp. 229-230):

None of this should have come as a surprise. The marke tis not a redistributive device, and many of the health problems required some, and in a number of cases much, redistribution. The market responds to disparities in income and allocates resources to meet market demand (the exercise of which requires income) rather than to meet needs (a concept with which economists, as economists, have difficulty). Yet health issues are about "need," not about the economic concept of "demand." The latter can be measured; the former is a matter of opinion. Nevertheless, that does not make "need" any less real. Although Americans seemed to agree that health care was a "right," and did not embrace the counter-formulation that health care is a "privilege," the laissez-faire market still repeated, "follow the money."

Furthermore, the delivery of health care services constituted a special market that did not meet the various criteria usually cited by economists for a fully competitive market. Resources could not be moved freely. New firms did not have the ease of entry that, through competition, would help constrain prices and profits. The symmetry between buyer and seller was absent since the patient (buyer) had much less knowledge than the physician (seller). Indeed, as already discussed, the real buyer often was not the consumer/patient but the employer; the managed care entity, not the physician/hospital, was the seller. In addition, there had to be many sellers, no single one large or powerful enough to influence market supply significantly, as well as many purchasers, no single one large or powerful enough to influence demand significantly. True, in the nation overall and in the various states individually there were many hospitals, many HMOs, and many insurers, all together presumably making for competititon. Nevertheless, the health care market that most of us faced and in which mnost health care was produced and delivered was in fact a local market. Many local markets had a very limitd number of health institutions and of organized delivery systems. Thus those who sought and received medical care in their localities (and that, of course, meant most of us most of the time) did not necessarily face conditions that rendered a competitive market possible.

On public control of reform (pp. 259-260):

We recognize that such debates are not only about what might be considered "technical" matters. Nevertheless, we believe that it would be useful to insulate, insofar as possible, the boards from the heavy dose of partisanship that could jeopardize their activities. To that end we would urge that the terms of office, selection, and approval of board members and regional administrators should follow procedures designed to maximize the nonpartisan character of their various supervisory and policy responsibilities. Furthermore, we believe that there must be significant representation and input from the general public, and therefore recommend that a substantial proportion of central and regional board members be nonprofessionals in the health field, tha tthey be selected as individuals who represent the public, and that mechanisms be developed to facilitate substantial public input.

The book includes a fair discussion of malpractice issues, but doesn't go very far with it. There is no real discussion of moving away from private patenting of pharmaceuticals and other innovations. The present system is not just costly -- it compromises quality by limiting transparency of information, distorts the market through massive advertising promotion, and limits research by allocating capital according to potential returns rather than need.