Measuring costs: Derms address healthcare crisis

August 6, 2009

To address the U.S. healthcare crisis, some dermatologists suggest everything from overhauling the FDA to abandoning it - and Medicare as it's currently configured. However, not all dermatologists agree with these proposals.

National report - Dermatologists' suggestions for reforming the U.S. healthcare system range from overhauling the Food and Drug Administration (FDA) to abolishing third-party insurers and forcing legislators to rely on Medicare as many of their constituents do. However, other dermatologists reject these ideas.

"The U.S. healthcare system is suffering because it's all about money, not people," says Christopher B. Zachary, M.D., F.R.C.P., professor and chair, department of dermatology, University of California, Irvine.

As currently configured, he adds, "Regulation is an absolute pain. It prevents us from treating our patients the way we should."

Risk-benefit analysis

Although experts disagree regarding how best to measure the total annual cost of U.S. healthcare regulations, one estimate places this figure at $340 billion to $1 trillion, while these regulations deliver only about $170 billion in benefits ( Conover CJ. Healthcare Regulation: A $169 Billion Hidden Tax. October 4, 2004., accessed April 23, 2009), he says. Meanwhile, around 18,000 Americans die yearly because they lack health insurance.

One economist estimates that FDA regulations save approximately 5,000 to 10,000 lives per decade, although as many as 100,000 Americans die per decade due to the delays and roadblocks of the FDA approval process (Gieringer DH, Sam Peltzman. The Benefits and Costs of New Drug Regulation, in Regulating New Drugs, ed. Richard L. Landau (Chicago: University of Chicago Press, 1973), pp. 114–211).

"The way the FDA goes about approving devices is problematical and, even at the congressional level, considered suspect," Dr. Zachary says. In particular, he notes a recent New York Times article indicating that in 2008, eight senior Center for Devices and Radiological Health (CDRH) scientists rebelled against documented corruption involving CDRH management. To get devices approved, he says, "The managers apparently ordered experts to change their opinions and conclusions, in violation of the law, accessed April 23, 2009).

"The shame of it was that the people who wanted to regulate for legitimate reasons were overturned by managers" with no scientific or medical expertise, says Stephen P. Stone, M.D., professor and director of clinical research, Division of Dermatology, Southern Illinois University.

On a broader scale, Dr. Zachary says that because the 510(k) approval path requires that manufacturers prove only substantial equivalence to an existing device, "The FDA often approves complex medical devices with very little evidence of effectiveness."

Dermatologists' Rx

For such reasons, a panel of eight dermatologists whom Dr. Zachary queried about healthcare reform recommended first fixing the FDA, calling it "opaque to industry and medicine alike. It's hamstrung with isolation, hesitation and fear of bad results," he says. These dermatologists suggest making drug approval decisions through a system of transparent peer review, he says.

"Data submitted to the FDA for approval should be made immediately available to professionals, engineers and the pharmaceutical industry on any product, instead of keeping it closeted" for a year or more, as commonly happens under the FDA.

"The panel suggests we hold physicians and companies to higher standards, be tougher on those who do poor science" and disqualify companies who falsify claims from future approvals, he adds.

The many reforms suggested by Dr. Zachary also include a well-designed universal healthcare system. "Solving the healthcare crisis will take serious solutions. The main question I have is, ’does this country have the nerve to take the type of action that is likely to give us real solutions?’"

Under Dr. Zachary's proposal, "There might be a requirement for junior physicians to serve the underserved when they graduate from medical school" in exchange for forgiveness of their student loans. "And we should abolish this incredibly inefficient and convoluted third-party healthcare insurance system in favor of a mandatory solution for all, possibly based on the Kaiser philosophy, with a focus on preventative care."

He also recommends severely limiting malpractice for appropriately trained physicians, and abolishing all but a core of healthcare regulations for which there is evidence of a favorable cost-benefit ratio.

"Finally, we should pay physicians very well; otherwise I fear that few would accept the onerous obligation of healthcare reform."

Senior economists interested in healthcare reform generally believe the FDA is overly restrictive, Dr. Zachary says. Some advocate scrapping the FDA for a system of free-market certification that would preserve manufacturers' incentive to innovate and patients' legal rights should mishaps occur, he says.

Dr. Stone counters, "I'm very upset with the idea of promoting a free-market economy of doctors. Anybody who wants to can hang up a shingle and be a doctor; at the same time we're talking about making it harder to sue them for malpractice."

"The thought that we could have a free economy based on the comments of some economists is not evidence of anything. It's all opinion," says Michael J. Franzblau, M.D., clinical professor of dermatology, University of California, San Francisco. He adds that the current worldwide financial meltdown represents a consequence of insufficient regulation.

As for eliminating the FDA, Dr. Franzblau says, "In 1962, if it hadn't been for a woman physician at the FDA, thalidomide would have been distributed all over the United States. And we would have had the tragedy" of thousands of birth defects, as happened in Europe.

"I don't believe we can succeed by abolishing the FDA," adds Dr. Stone. "We must streamline it and come up with a better way for it to manage."

"What amazes me is the laissez-faire attitude that we physicians have with regard to our compromised healthcare system," says Dr. Zachary. "Physicians have an enormous amount of power, influence and clout, but we as a group are too disinterested, timorous, apathetic or comfortable to bother wielding it. If we don't start to get involved, then we are the problem.

"I don't want to sound reactionary, but those physicians who are happy with the status quo are not thinking of the future, and are probably too close to the regulatory and insurance industries.

"We work in an environment that is more costly than almost all other systems, and yet delivers only modest quality. For a country that prides itself in innovation, healthcare is going the way of Motor City."

Medicare roots and reforms

Daniel M. Siegel, M.D., traces modern health insurance's roots to 1929, when an administrator at Baylor Hospital noticed that many of the hospital's unpaid accounts belonged to low-paid school teachers. He instituted the Baylor Plan, which collected $.50 a month from teachers to guarantee that the hospital would be paid for services - with benefits to physicians and patients as a sideline. Dr. Siegel is the dermatology representative for the American Medical Association's Resource Based Relative Value Update Committee (RUC).

Today, he says administrative costs of private insurance average 11.7 percent and range as high as 25 percent, versus 3.6 percent for Medicare (excluding Part D). Public/private overhead costs $72 billion yearly, or 5.9 percent of total U.S. healthcare spending, he adds.

Nevertheless, he says, "Sick people need insurance to cover the cost of getting better. That's a common sense approach that few would argue with." Underlying this social-insurance concept is the fact that everyone pays the same amount, regardless of their risk levels, he says.

Medicare is a social insurance model, he continues, "and Americans with Medicare report themselves to be happy with virtually every aspect of their insurance."

Dr. Siegel adds that although his Beverly Hills colleagues might disagree, ."if everybody paid me as well and efficiently as Medicare, and I only had to deal with one carrier, I'd be happy."

Conversely, he says actuarial insurance - like car insurance - factors the insured's history into payment levels.

According to one expert, "In recent years, the United States has been moving toward the actuarial model, with profound consequences. If you're unlucky enough to have high-cost employees like United Airlines, you have higher costs (Gladwell M. The Moral-Hazard Myth: The Bad Idea behind Our Failed Health-Care System. The New Yorker, August 29, 2005.) "

Moreover, this author says that health saving accounts represent "the irrevocable final step in the actuarial direction.". Dr. Weinberg says, "That's the wrong direction, in my opinion. It's the antithesis of universal healthcare. "

In contrast, Dr. Siegel compares Medicare to "a vintage 65 Mustang that's been ridden hard. It's held together by frequent fixes, and it keeps going. But it ignores the technological changes of the last 40 years, " Dr. Siegel states. To provide a meaningful fix that gets all Americans covered, "it needs an upgrade. "

Meanwhile, says Dr. Siegel, "Federal employees have great health insurance. Is anyone surprised? But if Medicare is good enough for mom and dad, and the Department of Veterans Affairs (VA) is good enough for veterans, how come they're not good enough for lawmakers? "

Therefore, he says, "It's time to put every member of the House, Senate, executive branch and their families on Medicare as their primary insurer, and eliminate preferential drug plans for them. " If lawmakers don't like this arrangement, "they can buy their own insurance, " and report this information online, as with campaign contributions.

Years three and four of his plan call for adding Medicaid patients to the program. "Roll the VA and Medicare into one program, keeping the best parts of each. Then, you can let the costs of actuarial science - not actuarial insurance - spread the risk. "

Under such a model, he says, "You charge the public based on the cost of keeping the program up and running. And you charge those who can afford it somewhat more, and those who can't below a certain level get it for free. "

Rather than simply fixing the healthcare system with more Band-Aids, says Dr. Siegel, "I'm saying take the people who are inflicting things upon us and throw them into the pit. And they'll come up with logical solutions. "DT

Disclosures: Dr. Franzblau was a special investigator for the FDA. Dr. Siegel is the dermatology representative for the American Medical Association's Resource Based Relative Value Update Committee (RUC) and accepts health insurance including Medicare. Drs. Zachary and Stone report no relevant financial interests.