Second Rate System
excerpted from the book
how health care in America became
big business - and bad medicine
by Donald L. Bartlett and James
Broadway Books, 2006, paper
Over the last few decades, American health care has radically
changed. A system that was largely not-for-profit has become a
field where the profit motive and market forces affect every decision.
Publicly held corporations answerable to stockholders decide which
doctor you may see, how much medication you can take, whether
you can be evaluated by a specialist, whether you qualify for
a test, how long you stay in a hospital, how many therapy sessions-physical
or psychiatric-you may attend. Patients wait months for appointments
that once could be made in days. Their medical condition is evaluated
by clerks with no medical training. Patients who are so sick that
they meet the strict criteria for hospitalization are discharged
before they are well, despite the protests of their doctors.
And these are the lucky ones-the ones
who have health insurance. Beyond them are forty-four million
others, their numbers growing, who do not. They are working Americans
who can't afford to pay the premiums, or who live in an area where
there are no providers, or who are viewed by insurers as high-risk
liabilities. These are the people who don't seek help unless they
are critically ill, who postpone a test or a surgical procedure
until their condition is acute, or who, because they are embarrassed
by their inability to pay, put off treatment until it's too late.
Of these, 18,000 die every year.
Beyond the forty-four million are tens
of millions more who are underinsured. They have marginal coverage.
Faced with serious illness or injury, they would be wiped out.
And beyond them are tens of millions more who have what they believe
is high-quality health insurance, but who in fact would lose their
life savings and be forced into bankruptcy if they or a family
member came down with a debilitating disease or chronic condition.
American health care has become a lottery.
If you work for a large company that provides generous benefits,
you win; if you work for a small company or as an independent
contractor, you lose. You may be working hard at a job important
to society-as a teacher's aide or as an assistant at a daycare
center or a nursing home-but that doesn't mean a thing when you
get sick. In health care, equal treatment doesn't exist.
Politicians love to say that the United
States has the best health care system in the world. In truth,
it doesn't come close. Certainly, no one disputes that the nation
has many talented, highly trained professionals who work with
the latest equipment, who are knowledgeable and capable of delivering
first-rate care. But what kind of system shuts out forty-four
million Americans? 'What kind of system excludes people with illnesses
beyond their control? 'What kind of system insures a husband but
denies coverage to his wife? 'What kind of system forces people
to choose between risking financial ruin and risking their lives?
Much of the turmoil is a direct result
of a national policy to run health care like a business, a misguided
notion promoted by Washington over the last two decades that the
free market and for-profit health care would restrain costs and
bring high-quality care to all. On both counts, the experiment
has failed miserably. In the meantime, tens of billions of dollars-money
that could have gone into patient care-has been drained from consumers
and corporate subscribers and transferred to investors, executives,
and others who have a stake in perpetuating this myth.
... the United States spends more on health care than any other
nation-15.3 percent of gross domestic product in 2003. That's
a greater percentage than Germany, France, Japan, Italy, Canada,
and other developed societies spend to cover all their citizens.
American health care mediocre? Not if you believe the people in
Washington. In June 2003, President George W. Bush told seniors
in Miami: "We live in a great country that has got the best
health care ) system in the world, and we need to keep it that
way." That sounded much like former president Clinton, who,
although he wanted to recast portions of the system, said February
2000: "We do have the best health care system in the world.
This is one of America's most enduring
myths, that the United States has "world-class health care."
It doesn't. To be sure, it does offer the very best of care to
some folks. It does offer world-class high-tech surgery and some
space-age medical procedures. But these benefit 2 or 3 percent
of the population at most, along with the richest citizens of
other countries who come here for the highly specialized treatment.
Overall, isolated pockets of excellence aside, the system is second-rate
when it comes to meeting basic day-in, day-out medical needs of
the population at large.
Many countries around the world take far
better care of their people, achieve better results from their
health care systems, and do it all with far fewer dollars. In
2001, per capita health care spending in the United States amounted
to $4,887. That was 75 percent more than the $2,792 that Canada
spent. Yet Canadians can expect to live two and a half years longer
than Americans. The Canadian life span at birth: 79.8 years. The
American: 77.1 years. U.S. spending was 205 percent greater than
Spain's, yet the Spanish can expect to live 2.1 years longer.
As for the Japanese, with a life span of 80.9 years, the world's
longest, they can expect to live nearly four years longer than
Americans. This even though Japan's per capita spending on health
care is only 41 percent of U.S. outlays. In sum, Americans pay
for a Hummer but get a Ford Escort,
On this scale, the United States does
not even rank in the top ten. But the statistics are even grimmer
when life span is counted in years of healthy living. A comparatively
new yardstick devised by the World Health Organization (WHO),
this formula subtracts from traditional life expectancy the number
of years spent in poor health, the years when individuals are
unable to engage in all the activities their peers do, when they
are confined to beds in nursing homes and must be fed by someone
else. By this measure, the United States in 2002 ranked a distant
29th among the countries of the world, between Slovenia and Portugal.
At birth, American males can anticipate
67.2 healthy years of life. But the men in Sweden fare better.
They get another 4.7 years, even though the country spends less
than half per capita what the United States does on health care.
Italian women enjoy 74.7 years of healthy living at birth, while
for American women it's 3.4 fewer years. The women in San Marino,
an enclave in central Italy that bills itself as the world's oldest
republic, do even better. They can plan on 75.9 years of healthy
living-or 4.6 years longer than American women. Men in Iceland
may expect a healthy life for 72.1 years, or 4.9 years longer
than American men. This even though Iceland's per capita spending
on health care is little more than half that of the United States.
The United States also compares poorly
with other industrialized countries in infant mortality, with
6.9 deaths per 1,000 live births in 2000. In Japan, it was 3.2;
in Sweden, 3.4; in France, 4.6; in Denmark, 5.3.
And in a more revealing WHO global ranking
of health care, the United States placed even farther down the
list at No. 37-between Costa Rica and Slovenia, nowhere near the
top five countries, France, Italy, San Marino, Andorra, and Malta.
How is this possible, especially since
the United States devotes 15.3 percent of its gross domestic product
to health care-double that of many countries, triple of some?
The WHO survey considered two factors the U.S. government and
health care community ignore: Does everyone have access? Is the
cost distributed equitably across all of society? WHO reasoned
that "a fairly financed health system ensures financial protection
for everyone. Health systems can be unfair by either exposing
people to large, unexpected costs they must pay on their own or
by requiring those least able to pay for care to contribute more,
proportionately, than wealthier citizens." On that score,
Americans have little competition. "The United States and
South Africa are seen as the only prominent examples of industrialized
countries that do not have comprehensive social health insurance."
:'~hereby rests the second most enduring American myth: that all
citizens have access to the highest-quality care if they really
In the late 1940s and early 1950s, President Harry S. Truman advocated
a universal health care system to cover everyone. The medical
establishment-principally the American Medical Association (AMA)
opposed it with such intensity that the idea went nowhere. The
AMA's position drew strong support from those groups who saw the
Red Menace everywhere. It was the Cold War era, and any proposal
for government involvement on such a large scale was thought surely
to be part of a Communist plot, although oddly no one seemed to
pin the label on the nation's mandatory and publicly financed
education system. Truman's successor, President Dwight D. Eisenhower,
also opposed universal coverage for much the same reason, even
though he personally had received government-paid health care
for most of his life through the military and the Veterans Administration.
Nonetheless, President Eisenhower recognized the dilemma. "We
know that the American people will not long be denied access to
adequate medical facilities. And they should not be," Eisenhower
said in 1954. "We cannot rest content knowing that modern
health services are beyond the financial or physical reach of
many millions of our fellow citizens. We must correct these defects."
But not too hurriedly. It wasn't until
1965 that President Lyndon B. Johnson pushed through legislation
creating the two largest federal programs to deal with some of
the uninsured: Medicare to cover everyone over the age of sixty-five
and Medicaid for all those individuals and families living in
poverty. Medicare was financed entirely by the federal government
with a payroll tax applied equally on all employers and employees.
Medicaid's costs were shared by the federal government, out of
general tax revenue, and the states.
Whatever their purpose, prescription drugs in the United States
cost from 30 percent to 60 percent more than the exact same medications
sold anywhere else in the industrialized world. That's because
governments elsewhere do not consider drugs to be just another
consumer item, like cars and clothing, but rather products vital
to the health of their people. Although the process differs, each
country has a mechanism to restrain the sticker price of prescription
drugs to levels considered fair and reasonable, and still allow
pharmaceutical companies a profit. France, for example, permits
companies to sell their drugs at any price. However, according
to a congressional study, if pharmaceutical companies want "the
national health care system to reimburse patients for the cost
of the drugs, the companies must agree to a lower, negotiated
Congress on the other hand, allows pharmaceutical
companies to charge whatever they want, which ends up making the
medication too costly for millions of Americans. Congress even
prohibits Medicare, the largest buyer of prescription drugs, from
negotiating a price, thereby sticking taxpayers with the inflated
tab. This would be like permitting Boeing to put whatever price
tag it wanted on the latest jet fighter it was selling to the
The premium prices Americans pay have
made the pharmaceutical companies the country's most profitable
industry. In 2002, New York-based Pfizer Inc., the world's largest
drug company, reported a return on sales of 28.4 percent. That
was two and a half times better than the 10.7 percent return of
General Electric Company, perennially ranked as America's best-managed
business. It was nearly nine times better than the 3.3 percent
return of Wal-Mart Stores, the country's largest and best-run
retailer. And it was nearly thirty-two times better than the 0.9
percent of General Motors Corporation, America's largest J car
After several years of double-digit increases
in prices during the 1990s, resourceful older Americans living
on fixed incomes took the matter into their own hands by traveling
to Canada and Mexico, where they could purchase the same medications
for half or less their cost in the United States. Through word
of mouth, their numbers grew. Eventually, senior citizens organized
bus pilgrimages, especially to Canadian cities along the U.S.
As more stories surfaced in newspapers
and magazines, and eventually spread to radio and television,
the number of people joining drug-buying expeditions to Canada
increased dramatically, alarming the drug industry and the U.S.
Food and Drug Administration (FDA). Both conveyed the impression
that Canadian drugs were unsafe. FDA officials were quoted over
and over as saying such purchases were illegal, sometimes hinting
that American buyers might face federal prosecution. As FDA Commissioner
Jane Henney put it in July 1999:
"Either the active ingredient is
different or some of the other materials in that drug are different,
and that could have consequences for one's health. So we have
primarily legal concerns here, but also some public health concerns
Or as William K. Hubbard, associate commissioner
for policy and planning, described the danger: "Drugs in
the United States are treated very strictly in terms of safety
and quality. These drugs that come from Canada do not have the
same safety profile." In fact, there is no evidence that
Americans have been harmed by drugs purchased in Canada, and the
FDA itself admits it knows of no such cases. Drugs sold in Canada
are identical to medications on sale in U.S. pharmacies. More
than anything, the FDA's dire warnings have served to help the
drug industry maintain its huge profits.
... After Congress blocked efforts to
legalize drug purchases from Canada in 2003, more than a dozen
cash-strapped state and local governments announced plans to go
it alone and buy the lower-priced Canadian drugs for Medicaid
patients, their own employees, and prisoners. Among the defiant:
California, Wisconsin, Minnesota, Vermont, New Hampshire, and
The FDA countered with warnings of lawsuits
and angry attacks on state and local officials pursuing the Canadian
strategy. As always, the agency insisted it was concerned only
with protecting American consumers. ABC-TV News told viewers:
"The FDA has warned that getting drugs from Canada is illegal
and insists that it cannot guarantee the safety of those drugs."
In the face of the FDA's threats, some
states backed down. Some went ahead.
The drug companies ... threatened to shut off supplies to Canadian
pharmacies if sales to Americans continued. If necessary, the
industry was prepared to deprive sick Canadians of their medicine
to keep prices higher in the States. In a "Dear Pharmacy
Owner/Pharmacist" letter to every Canadian pharmacy, Pfizer
Inc., whose inventory includes a half-dozen drugs that bring in
more than one billion dollars a year each, asserted its "commitment
to safeguarding the integrity of the pharmaceutical supply system
and protecting the supply of Pfizer medicines for Canadians. .
." Then came a warning:
We also reaffirm that Pfizer products
purchased by you may only be sold in Canada ... You may not at
any time, either directly or indirectly, export out of Canada
any Pfizer products ... Should Pfizer have reason to believe that
you are in breach of its terms of sale, pending completion of
any investigations it chooses to carry out, Pfizer reserves the
right, in its sole discretion, to suspend or refuse further sales
In July 2001, Health Canada, the FDA's Canadian counterpart, issued
a warning about the antidepressant nefazodone, marketed under
the trade name Serzone by the Bristol-Myers Squibb Company. Health
Canada said the drug was causing liver damage that "resulted
in hospitalization, liver transplantation, or death."
... In the fall of 2003, Health Canada
again led the way. After meetings with regulators, Bristol-Myers
agreed to pull Serzone from the Canadian market. The reason: Now
there were fifty-one reports of Canadian patients who suffered
liver damage while taking the drug. Two patients had to undergo
liver transplants. One died.
Back in the States, Public Citizen Health
Research Group, a leading consumer organization headed by Dr.
Sidney M. Wolfe, continued to press the case against Serzone by
filing a supplement to its original petition to ban the drug.
"We found almost as many deaths from liver failure reported
in the last fourteen months we examined as in the seven previous
years (nine vs. eleven)," Public Citizen said.
The FDA would not be stampeded. The agency
so obsessed with products coming out of Canadian pharmacies was
more tolerant of a domestic drug company. It allowed Bristol-Myers
to keep Serzone on the U.S. market-far and away its most lucrative-and
the company agreed to advise doctors and other health care professionals
of the new concerns. In a warning letter dated October 2, 2003,
Bristol-Myers said that in some cases liver damage occurred "as
early as a few weeks" after patients began taking the drug,
and in other instances after up to three years of continuous use.
The company acknowledged that "to date, no risk factor to
predict patients who will develop irreversible liver failure with
nefazodone has been identified. Also no clinical strategy, such
as routine liver function tests, could be identified to reduce
the risk of liver failure." Translation: There was no way
of knowing whose liver would fail after taking the drug to ease
anxieties and depression.
Canada was not alone in its concern. Turkey
also banned the sale of Serzone. So, too, did Spain. Sensing a
trend, Bristol-Myers yanked it voluntarily across Europe, citing
poor sales as the reason. As for the FDA, it continued to insist
that U.S. consumers were adequately protected by a warning label
advising them-if they read the fine print-that some would require
a liver transplant and some would die. Perhaps most remarkable,
patients were risking transplants and death for a drug whose benefits
were at best questionable. In clinical trials, people who took
placebos-in effect, sugar pills-reported about the same improvement
as those who took Serzone.
In any case, with sales falling and the
number of lawsuits by consumers claiming they were harmed by the
drug rising, Bristol-Myers quietly removed Serzone from the U.S.
market in June 2004.
Does it make any difference if Canadian
authorities issue drug warnings before the FDA? It certainly did
in the case of the drug Cordarone. Just ask Kenneth Krutz of Chicago,
who in 1988 retired after more than four decades from his job
as a plant superintendent at Acra Electric Corporation, a manufacturer
of custom heating elements in Schiller Park, Illinois. In the
years that followed, Krutz and his wife traveled and spent their
newfound leisure time with their five children, eleven grandchildren,
and two great-grandchildren. Active all his life, he continued
to work on home-renovation projects, fish, and build miniature
In February 1997, the seventy-three-year-old
Krutz was in generally good health, except for an irregular heartbeat
treated with medication. That month, his cardiologist started
him on Cordarone. Within weeks, Krutz began to lose vision in
both eyes. By June, he was legally blind. That same month, Wyeth-Ayerst
Laboratories, Cordarone's maker, sent a letter to health care
professionals advising of an expanded warning label:
LOSS OF VISION. Cases of optic neuropathy
and/or optic neuritis, usually resulting in visual impairment,
have been reported in patients treated with amiodarone [Cordarone's
chemical name]. In some cases, visual impairment has progressed
to permanent blindness. Optic neuropathy and/or neuritis may occur
at any time following initiation of therapy.
For Krutz, the warning came too late.
If he had lived in Canada, things might have turned out differently.
Years earlier, Wyeth's parent, American Home Products, had issued
a similar warning on Cordarone sold in that country. Wyeth's decision
not to issue the same warning to Americans at an earlier time
"was driven, at least in part, by financial concerns related
to its ability to market the product," according to a court
opinion. The court found that Wyeth "deliberately placed
misleading information on its packaging in order to preserve sales."
Despite the Canadian action, the FDA did
nothing to require a similar warning for the U.S. market. Instead,
it merely directed Wyeth to stop promoting Cordarone for general
usage, which was far beyond what it had originally been approved
for in 1985-"a drug of last resort" to be given only
to seriously ill patients. Wyeth's belated letter to physicians
informing them that some patients who took Cordarone were going
blind was sent four months after a Multnomah County, Oregon, jury
awarded $21.9 million in compensatory and punitive damages to
Douglas Axen, a former social studies teacher who also lost his
eyesight after taking the drug. Wyeth appealed the jury verdict
but lost all the way to the U.S. Supreme Court. Krutz also sued,
and Wyeth settled for $10 million before going to trial, although
the company continued to maintain that its drug did not cause
To protect its interests and expand its influence, the health
care industrial complex has done what all successful special interests
do: It's become a big donor and a high-powered lobby in Washington.
In the last fifteen years, HMOs, insurers, pharmaceutical companies,
hospital corporations, physicians, and other segments of the industry
contributed $479 million to political campaigns-more than the
energy industry ($315 million), commercial banks ($133 million),
and big tobacco ($52 million). More telling is how much the health
care industry spends on lobbying. It invests more than any other
industry except one, according to the nonpartisan Center for Responsive
Politics. From 1997 to 2000, the most recent year for which complete
data is available, the industry spent $734 million lobbying Congress
and the executive branch. Only the finance, insurance, and real
estate lobby exceeded that amount in the same period, with a total
of $823 million. In contrast, the defense industry spent $211
million-less than one-third of the health care expenditure.
... the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003, which might more aptly be called
the Pharmaceutical Company and Health Care Industry Welfare Act.
In the fall of that year, when Congress enacted a Medicare prescription
drug benefit for the first time, the White House point man on
the half-trillion-dollar-plus taxpayer-funded program was Thomas
A. Scully, administrator for the federal Centers for Medicare
and Medicaid Services (CMS).
Before he became Medicare's top official,
Scully was president of the Federation of American Hospitals,
a 1,700-member trade association of for-profit hospitals "dedicated
to a market-driven philosophy." Its business plan, it should
be noted, depends heavily on federal tax dollars for Medicare
Scully helped craft the final version
of the Medicare bill, which blocked imports of low-cost drugs
from Canada, a top priority of pharmaceutical companies. Also,
bowing to the wishes of other industry lobbyists, the act provided
billions of dollars in tax subsidies to HMOs, private insurers,
and corporations to provide drug coverage. Thus, the congressional
supporters of market-driven medicine were giving billions of tax
dollars to private business to pretend the market system was functioning.
At the same time Scully represented taxpayers
and the government, he negotiated to go back to work for the industry
that would benefit from the bill he was overseeing. Scully's potential
employers, according to an internal Health and Human Services
Department (HHS) document, were "law firms, consulting firms,
and health care investment firms" that had "substantial
interests pending before the department."
Ordinarily, that would suggest a conflict
of interest, but in the spring of 2003, before the Medicare bill
negotiations got under way, Scully sought an official waiver from
government ethics law from his boss, HHS Secretary Tommy G. Thompson.
In an internal decision, Thompson ruled that Scully's job search
in the private sector was not "likely to affect the integrity
of the services which the government may expect from him."
Ten days after the bill was signed, Scully
returned to the private sector. He left government to join the
Washington office of an Atlanta law firm, Alston & Bird, and
the investment banking firm of Welsh, Carson, Anderson & Stowe.
Both had a long list of clients and interests in health care,
including pharmaceutical companies, HMOs, and trade groups.
As it turned out, the Medicare drug law
that Scully helped mold will be much more lucrative for the industry
and much more costly to taxpayers than even its harshest critics
realized. The Bush administration sold the legislation to skeptical
lawmakers on the basis that it would cost taxpayers about $400
billion over ten years. The actual estimate was closer to $550
billion. But when Medicare's chief actuary, Richard Foster, sought
to convey the real number to lawmakers while they weighed the
bill, he was silenced by Scully, his boss.
Foster later told the House Ways and Means
Committee that Scully "made it clear that we were not [to]
respond directly to requests from Congress anymore but instead
we were to give any such response to him and he would decide what
to do with it." When Scully did not send the estimates to
the Hill, Foster was upset. He told lawmakers later: "From
a professional standpoint, I felt and believe there is an obligation,
on behalf of the public, for my office to give you the best advice
possible when requested." Foster said he thought about ignoring
Scully's directive and sending the data to Congress, a move that
he knew would almost certainly get him fired. He also considered
resigning, but his staff talked him out of it, and he decided
he would be "better off working inside the system."
After Congress passed the bill-the House
did so by the narrowest of votes, 220 to 215-the Bush administration
revised its cost estimate. The new figure was $534 billion-35
percent higher than the amount floated to win support for the
program, and remarkably close to the estimates of Foster and his
actuarial colleagues at Medicare. This meant the Medicare bill,
the single largest corporate welfare bill in Congress's history,
would almost certainly never have passed if lawmakers had known
how much it was really going to cost.
Of course, Congress could repeal the act.
But lawmakers would need to get it by Senate Majority Leader Bill
Frist, the Tennessee Republican who played a pivotal role in pushing
the Medicare bill through in the first place. The health care
industry has no more ardent supporter in Washington than Frist,
a heart surgeon and staunch advocate of free-market medicine.
His father, Thomas F. Frist Sr., and his brother, Thomas F Frist
Jr., founded what has become HCA Inc., the nation's largest hospital
chain with nearly 200 hospitals and revenue of $21.8 billion in
2003. His brother held a variety of top HCA posts over the years
and still is the single largest individual stockholder, with seventeen
million shares. And it was the hospital chain that allowed Senator
Frist to start his career as a millionaire, with many of the millions
coming from a business built on the solid foundation of taxpayer
money. Over the years, HCA derived about one-third of its revenue
from the federal government's Medicare program and the joint state-federal
In addition to owning the largest number
of hospitals, HCA also can lay claim to one other distinction,
albeit a dubious one. The company has defrauded Medicare, Medicaid,
and TRICARE-the military's health care program-of more money than
any other health care provider in America, no small achievement
in a field where the competition is intense. In June 2003, HCA
agreed to pay $631 million in civil penalties and damages growing
out of false claims to the government health care programs. That
came on top of $840 million in criminal fines, civil restitution,
and penalties the company paid in 2000. That same year, the company
agreed to pay $250 million to settle other Medicare overbilling
claims. In all, HCA has paid $1.7 billion as a result of its fraudulent