Michael Dukakis and Jerome Grossman MD discuss competition regulation and relationship in health care

It has been said that if the health care system in this state, and in this country, is in crisis, it has been in crisis for 25 years. And during that crisis, it is fair to say, more people have gotten better care and more successful treatment for a variety of ills–many of them incurable just years before–than ever. If this is what crisis looks like, maybe we could use more of it.

But in today’s prosperous, nearly full-employment society, nothing causes more discomfort and unease than the health care system. New, miraculous treatments and wonder drugs are being doled out through a system that, to the public, seems populated by soulless technicians who dash through patient visits and faceless bureaucrats who subordinate care to cost. Though medical care consumes an ever-increasing share of the state’s–and country’s–economic product, providers ranging from hospitals to home-health agencies are crying poverty so loudly that the state is giving them a $95 million bailout this year.

And even with providers complaining they are underpaid for every service, we started off the year with one payer–the state’s largest health maintenance organization–averting bankruptcy only by swift legislative maneuver (allowing for state receivership instead), creative accounting (juggling debt on the balance sheet), and subscriber forbearance (which may be short-lived). While that scare was enough to stifle complaints about premiums once again on the rise, it was not enough to stem the consumer and physician backlash against managed care. This took the form of a “patient’s bill of rights” passed into law this summer after years in the Legislature and an anti-managed care referendum that, while abandoned by some of its authors once the bill of rights passed, will nonetheless appear on the November ballot, promising universal coverage and complete freedom of consumer choice–health care nirvana–though by means unspecified.

But the health care crisis is as much symbolic as it is manifest. More than any other good or service in the economy, health care is a Rorschach test for attitudes toward markets, regulation, competition, and consumer rights. As a necessity of personal and family well-being, medical care is seen–though not, in the United States, guaranteed–as a basic right, for which money should be no object. Yet the escalating cost of ever-more sophisticated treatment has increased reliance on ostensibly free-market competition as the means of saving us from our own insatiable demand for care. Here, market-driven medical reform was embraced in the last days of 1991, when Massachusetts–then-Gov. Weld and the Democratic Legislature in harmony–abandoned state regulation of hospital pricing.

As a result, the current complaints and tensions that mark the health care industry today also appear as a referendum on that market-driven course. The fiscal meltdown of Harvard Pilgrim Health Care–a storm that, at this point, seems to have passed–caused former governor Michael Dukakis, in a State House News Service interview, to declare hospital deregulation “a terrible mistake,” one that has led to a complete abdication of governmental responsibility for a vital public good.

“In the health field, the state still has broad authority but you have to exercise it,” said Dukakis, who now teaches health-policy reform as Distinguished Professor of Political Science at Northeastern University and as a visiting professor at UCLA’s school of public policy. “The failure to exercise it has created this mess.”

Reacting from the other end of the spectrum was Jerome Grossman, MD. The former chief executive officer of New England Medical Center, from 1979 to 1995, was involved in the founding of the original Harvard Community Health Plan, in 1966, and of Tufts Associated Health Plan, in 1981. A trail-blazing entrepreneur in hospital software–he founded Medical Information Technology (Meditech) in 1969–he is now CEO of Lion Gate Management Corp., a new firm promoting Internet-based clinical and quality-management systems for health care providers and purchasers.

Grossman is also enough of a free-marketeer to be commissioned by the pro-competition Pioneer Institute for Public Policy to write a working paper on health care in Massachusetts. In that paper, which was released in June, Grossman characterized today’s health care system as “dysfunctional,” but he attributed that dysfunction not to the ravages of market forces, but to their feeble development. “We have entered the era of deregulated, competitive health care, but have seen little of the innovation in structure and operations that has brought productivity improvements to other industries that have made similar transitions, such as the financial and airline sectors,” wrote Grossman. “It may be far more useful–and accurate–to regard this as the early stages of a new era rather than the end of one that has failed.”

CommonWealth brought Dukakis and Grossman together for a conversation about markets and regulation in health care today. But that narrow, if fundamental, topic turned out to be just a starting point for a wide-ranging discussion that touched on medical licensing, information technology, anti-competitive maneuvers, doctor-patient relationships, patient empowerment, and the on-air hawking of prescription drugs. Some of their individual preoccupations were predictable. Dukakis has lost none of the passion for the plight of the uninsured that led him to sign the 1988 Massachusetts Health Security Act, which would have required employers to cover their employees, had it not been delayed, then repealed, in the aftermath of recession. And Grossman missed no opportunity to extoll the value of information technology to change health care delivery in ways that restore the sovereignty of physicians and consumers alike, which he sees as key to true competition in the industry.

But these polar opposites did reach some surprising agreement–on the need for new forms of government oversight on the health care industry, and for leadership from both the public and private sectors which they see as largely absent today. What follows is a transcript of that conversation, which took place in a conference room at Northeastern, edited for length.

CommonWealth: Perhaps we could begin by each of you elaborating on what you think the Harvard Pilgrim fiscal crisis tells us about what was right or wrong about the de-regulatory health care path we set off on in this state in 1991.

Dukakis: I don’t think what we were doing in 1990 was immutably correct. There were certainly things about the way the state was regulating in the ’80s, when I was governor, that could have and should have been improved, but I think the notion that there is a “health care marketplace” is absurd; there isn’t [one]. For one thing, entry is controlled, for obvious reasons. I mean, barbers don’t do surgery anymore. There isn’t a provider in this or any other state that doesn’t have to be licensed, because we expect our providers to be good, and in this state we expect them to be excellent. So states exercise a very broad and detailed regulatory role over who can practice, who can provide, whether it’s an institution or an individual, and that includes not just docs, but dentists, nurses, physician’s assistants, physical therapists, X-ray technicians and every institution, pretty much, that provides health care: hospitals, nursing homes, a wide variety of labs and so on and so forth. Secondly, I am not even sure we’re served well by whatever one might call a competitive marketplace. Thirdly, if you do believe in that–and I don’t–I think what we need is collaboration and that means that the state has to be a positive partner in that.

“I think the notion that there is a
‘health care marketplace’ is absurd.”

But if you do believe in a competitive marketplace, whatever that means in the context of health care–and remember, this is health care; this isn’t like going out and buying a television set at Circuit City–you’ve got to be ready to vigorously enforce anti-trust and anti-competitive laws, and that just isn’t happening. Whatever the reason for, say, the merger of the Brigham [& Women’s Hospital] and Mass[achusetts] General [to form Partners Health-Care System], that clearly didn’t enhance competition in the marketplace. In point of fact, we’ve had an enormous amount of consolidation and merging on both sides-that is, on the side of the managed care companies as well as on the hospital side. Frank-ly, one of the reasons that, in my opinion–I don’t know how Jerry feels about this–Harvard Pilgrim got into trouble is they started running around and talking about market share instead of taking care of patients. They ended up getting too big, they didn’t know what they were doing, and the end result is what we got.

Now, it is true that this crisis has temporarily subsided, but that’s because we’re going to have double-digit premium increases again, at a time when inflation in the general economy is virtually nonexistent. So I’m not sure that’s much of an answer. In point of fact, because of all of this consolidation, nobody is saying “boo” about these double-digit increases. We’re just sitting here and taking them. Of course, as far as individual patients are concerned, or for that matter, individual docs–if we’d purposely gone out to try to destroy a great health care system, we couldn’t have done a better job. So I think it’s time to get off this competitive model stuff, to see if we can’t get back to the notion of genuine collaboration here, both within the health care system and between government and the health care system–and all of us who are consumers. In my view, that’s much more likely to lead to the kind of health care system where patients feel good about it, docs feel good about it, and the folks that are running our hospitals and health care institutions feel good about it, than what we’ve got today.

CommonWealth: Dr. Grossman, if I can put words in your mouth, you might also agree that we aren’t quite at the point where we have a health care marketplace, but you think we’re headed that way, and that we should go further down that road, rather than pull back.

Grossman: The delivery of care is both factual information transfer and relationship; those are the two parts of it. I believe that information technology can allow us to redo the technical/factual part [in a way] that includes patients as truly empowered. I’ve been a physician almost 35 years…. As a physician I have worked on how to bring the best of management science to medicine. I went to MIT, so I’m very interested in how we use information. In the last 10 years, the last five, the presence of the Internet and the Web have changed how we’re able to get and transfer information, and it’s changed the people you might call “patients.” Patients are really quite able to take care of themselves, especially as we move to [the management of] chronic illnesses, to long periods of ambulatory illness. It’s very different than when we had many people taking care of you in a hospital when you were acutely ill. Many things that we used to put you in the hospital for, [now] you have to take care of yourself at home. I just came from [observing] three hours of structured e-mail between patients with Type II diabetes and their team of caretakers.

You asked the question about Harvard Pilgrim, and I would probably agree with the governor: It was a failed merger [between Harvard Community Health Plan and Pilgrim Health Plan] in which there was not oversight. You can argue whether there should be government oversight or market oversight, because if you’re a public company there’s a lot of oversight and a lot of requirements. We just had no oversight; that’s the real dilemma…. I think most of us knew that was a troubled merger before it truly got into terrible trouble. It’s like a patient who starts out only modestly ill, but gets very ill without us intervening. So that’s one point. The second point you talked about is that for the patients, there can’t be a marketplace. Why I say that we’re only in the beginning [in the development of such a marketplace] is to some extent–a great extent–there’s no information about the quality or safety of the caretakers. We just don’t have it. With all of the regulation we had, none of it ever said this person, this institution, does a good job. The only report we get on what I call quality–outcomes, relationship, trust, service–the closest we get is [rankings in] US News & World Report. So in order to have a market, all of that information has to be transparently available to every patient in a way they can understand.

The inflation is coming from drugs and devices, on the one hand, and in Massachusetts, [because] we have more patients hospitalized in teaching hospitals at an average of twice the price–four times as many as the average state. We have 150-percent over-doctored population, of which two-thirds are specialists. But people who live in Massachusetts like that kind of medicine. They’re free to go [to high-priced specialists and teaching hospitals, through their health plans], and they go there. So we have a dilemma of a high-cost system that’s getting higher cost as the new drugs and devices come our way. Unless we are able to increase productivity through quality improvement, efficiency, and use of technology, we’re going to get worse than we are now.

I see competition on quality, not on price. Right now, no doctor is rewarded for being a high-quality doctor; [being a doctor] is a commodity. Once we’re licensed, whether we have malpractice suits against us, we start today or we’ve been in practice 35 years, it’s exactly the same. So I guess I’m trying to find ways to transform the way we operate to return to the core values of trust in relationship, using technology to be sure we don’t err in the process, and to engage the patient [in his own care], especially as the hospital becomes less important.

You mentioned consolidation. Do you know what the numbers are? In 1970, 40 percent of the health care dollar went to the hospital. Last year, it was 20 percent. Drugs and devices passed that; they are now more than 20 percent. Doctors have stayed the same at 20. There’s no reason to believe that we’re not going to get to 10 or five [percent paid to hospitals]. So the issue of consolidation in a high-fixed- cost industry is inevitable, but to me it’s critical, therefore, that there be a transparency and an openness so that one is both doing one’s work based on quality, and one is choosing where to go based on quality; one expresses one’s view of quality by where one goes. More visits were to alternative providers last year than to traditional providers. So patients have been acting with their feet.

CommonWealth: As you note, less and less of the health care dollar is going to the hospital. In part, that’s because the managed care industry, which came to dominate our local markets in Massachusetts, was able to force some change in the hospitals, which also operate in local markets. With so many of the other drivers of medical costs today, the local HMO does not have the same leverage. We’re talking about prescription drugs and medical devices, which operate in national and international markets. How do locally based managed-care companies make a dent in non-hospital costs?

Grossman: Ten percent of patients use 60 percent of the entire health care dollar. A large portion of those come from people with chronic illnesses who don’t comply with their treatment and who fall into catastrophic illness. So not only is there the potential for productivity through the use of information, but one could come to monitor sick patients over the Net. I did an experiment with high-school dropouts and 85-year-olds, and all of them, because of ATM and home banking and e-mail, were able to answer simple questions [online]. You just want to know what’s going on and have an easy way for them to communicate. If we could not only be more efficient, more productive, and make it so that you could have access to medical care seven days per week, 24 hours per day, when you wanted it, not when it was possible, we could reduce the number of complicated catastrophes. We could make an enormous savings; some people say as much as 25 percent to 30 percent of cost.Well, then we’d have some room to pay for what are going to be new and better treatments….There are no aligned incentives [today] to do quality and innovation in delivery the way there [have] been in biology.

“There are no aligned incentives to do quality and innovation in delivery.”

Dukakis: First, with respect to these new drivers [of health care costs]. I mean, there’s a very interesting question here. I don’t know how Jerry feels as a doctor. I know how I feel. Turning on my television set now and watching prescription drug after prescription drug being advertised intensively–and believe me, it’s producing for those companies–bothers the hell out of me. By their very nature, prescription drugs are drugs that only a doc should prescribe, right? Now we’ve got a situation, which by the way, the FDA I think, Jerry, has the power to stop if it wants to, but hasn’t–

Grossman: There was a law passed that allows us to be the only country that allows [advertisement of prescription drugs]…

Dukakis: Well, shame on whoever passed it…. So Claritin is on my television day after day after day. I happen to sneeze occasionally during the spring, and the CVS generic does very well by me, at $3.99 or $5.99 for 100. Patients are racing into their doctor’s office–or maybe in Jerry’s world they’d be e-mailing him–saying I want a prescription for Claritin. Whether you call this oversight, regulation, or otherwise, it seems to me we’re just sitting here letting this happen, and the impact on cost is obvious. Maybe oversight, Jerry, is a better term than regulation. I don’t know. But some degree of public oversight is essential here.

And maybe I’m hopelessly old-fashioned. Look, I’ve got a Medicare card and I’m riding the T for 20 cents, so I’m getting up there. I’m the son of a doctor who was a family doc’s family doc, seven days per week, 24 hours per day, made house calls, did his own surgery, delivered 3,000 babies. That’s the health care environment I grew up in. Maybe I’m hopelessly nostalgic, but I think most Americans want to have a relationship with their doctor which is quite personal. I don’t know what to tell you about e-mail except that it brings with it huge privacy concerns. I won’t use e-mail because it’s so easily invaded. Who am I? I’m a retired politician. I’m not just going to have anybody and everybody chiming in on what I say to people. When I have a problem, and this is just Mike Dukakis talking, I want to talk to the doctor. I want to pick up the phone and hear a voice on the other end of the line that sounds familiar and reassuring, who knows me and has cared for me and to whom I can talk. Now that’s the way it used to work, and to the best of my knowledge, Jerry, in virtually every other health care system in the world that’s the way it continues to work. Maybe they’re e-mailing each other in Germany or Britain or Australia or in Canada, but I don’t think so.

Grossman: As you well know, Canada’s system is not what it was 10 years ago either.

Dukakis: Look, they’re all under great pressures; there’s no question about it.

Grossman: That’s right, but if you listened to at least what I was trying to say, the doctors are overwhelmed with non-relationship work.

Dukakis: Meaning what, Jerry?

Grossman: Administrative work. The biggest problems are chronic, ambulatory. Eight different illnesses make up 50 percent to 70 percent [of diagnoses]. There are 11 million diabetics; less than half of them get adequate treatment. So I think it’s worth at least a try to see whether or not there are ways to take away the technical data-following part and focus on the relationship, on the trusting relationship…. I want to go back to your Claritin example. They just finished a study about what’s happened in the three years since this [advertising of prescription drugs] happened. Seventy-five percent of patients who come to a doctor’s office and say I saw and I want [this drug on TV], they get what they want. I’m trying to make it open and transparent and knowable so that you might make a choice of not asking for that…. I think we’ve gotten into choice and cost. I call it informed consumer choice. We have enough doctors that you could have a doctor in your house if you wanted to spend your money on it, and we have people who apparently could. But if I could lower the costs and make them more predictable for routine illness, then I could cover more people with the same dollars…. There are now a million people on Medicaid because of the things you talked about and the change in welfare. So we are using government dollars to support more people, and this state is in the top five for sure. Another part of that is there are free riders. There are people who earn more than $50,000 who don’t buy insurance.

Dukakis: We still have 600,000 people without a dime of health insurance in the Commonwealth, Jerry–600,000 people without a dime of health insurance. One out of every ten. [Editor’s note: Shortly after this discussion, a new report showed that the number of uninsured in Massachusetts has dropped to 346,000, thanks in part to expansion of state health insurance coverage for children approved in 1996.]

Grossman: Yes.

Dukakis: And they are showing up in emergency rooms every day.

Grossman: No, they are not.

Dukakis: Well, a lot of them are…but the reality, Jerry, is that we have 44 million uninsured people in this country; it’s going to be 60 million by 2010….

Grossman: But it’s happening, I guess, in other states; it’s not happening in this state. The number hasn’t gone up [here]…. I would wish for universal entitlement, but that’s a political decision that this country does not, nor does the state at the moment–it may have when you were governor–but at the moment does not seem to want to.

Dukakis: If you take a poll today in Massachusetts or across the country and ask people whether or not working people and their families–as you point out, the vast majority of uninsured people are working folks and also working families–about 90 percent of the American people say yes, those people should have health insurance.

Grossman: Yes, but…the answer is, and has been for 20 years, 90 percent of people want it. But when you ask how much they would see added to their taxes to pay for it, the number goes almost to zero.

Dukakis: But if you require all or most employers to provide it, we won’t have an increase in taxes, in fact we’ll have a decrease in taxes in this state, because we won’t be imposing this premium tax [on employers who provide insurance].

Grossman: And I don’t believe the companies who are not providing insurance can afford to do it, not for the high cost in this state, without help from public monies.

Dukakis: Well, that’s a judgment, it seems to me, we may or may not want to make. All I’m saying is that to continue to tolerate a situation, in this state and across the country, where hundreds of thousands or millions of people are uninsured, and to expect either the taxpayer or other responsible employers to pick up that tab, I think is wrong. … It ought to be possible for this state…to do what a Republican governor of Wisconsin is doing quite successfully, but to do so in a way that doesn’t invite employers to dis-insure. If we did that, I think we’d be doing a far better job of providing coverage and basic health security to our citizens. Admittedly, this does not deal with the cost issue.

Grossman: It doesn’t deal with the quality issue.

Dukakis: Nor does it deal with quality. Nor does it deal with this growing perception which I hear all the time, Jerry…. This growing sense among patients of great dissatisfaction.

Grossman: Among doctors, too.

Dukakis: The doctors are worse. I hope Jerry is right, and I hope information technology can somehow deal with this, but my own feeling is that the kind of personal relationship–Jerry, you called it trust–that most Americans want to have with their doctor, not only increasingly isn’t there, but as I look down the road at the existing system, I don’t see what’s going to restore it. And frankly–and I’m not denigrating what Jerry said here–I don’t think e-mail is going to do it.

Grossman: I don’t think e-mail is going to do it either, Mike…. We don’t have any research and development and innovation going on in the delivery system. I believe we could make it better for patients, better for doctors, higher quality, lower costs…. I call for small groups of physicians who, in exchange for freedom to decide how to take care of their patients, make public the performance of their care, the quality of their care, all these things. Right now, to have Harvard, Tufts, and Blue Cross tell you that 89 or 98 percent of their people are satisfied is an absolutely non-useful piece of information. You want to know how the doctors you have to choose among have done in keeping their patients healthy, or treating their diabetics. So, to me, you have to make this data available. And you have to let smaller groups of people come together and offer their services [unencumbered by traditional restrictions on professional practice]. It’s a little bit like–and some people are not excited by this–“charter” health systems, in that it’s a chance to try things, to take down barriers, to get waivers on all these ways people do their jobs. It limits your creativity, your innovation–who can take care of a patient, what they can do for a patient, how they can interact with them, is limited by laws which I think are less relevant in today’s world.

CommonWealth: You’re talking about licensure?

Grossman: Yes, and accreditation. A nurse can do this, but can’t do that. With the aid of innovation and teams and protocols and evidence-based medicine and patient partnership, I believe we can do terrific things.

Dukakis: Jerry, let me ask you this, though. If you were the health care czar in Massachusetts, if I were still governor, and you were my secretary of health and human services, what kind of a role do you think the governor and the secretary of health and human services ought to play in moving us towards the kind of system you’re talking about? Because I don’t see it happening.

Grossman: No, I don’t either…I think there are two parts. I would want them to set up oversight and transparency; that’s what government, the SEC does, the Fed does, so that it would be sunshine as to who does it well and who doesn’t, and if you do it well there’s some reward. Rather than incentives to not give care, I’d like incentives to do it better and have patients [treated] better. So I think government needs to help us–not everybody agrees with me–help us create that framework. You need a referee for any market.

“Government needs to…create that framework.
You need a referee for any market.”

Dukakis: I’d go one step further and say to you that unless there’s effective public leadership on this, it’ll never happen. I’m not sure I’d buy into it, only because I haven’t spent enough time thinking about it. If you want to move in a direction which you hope will restore trust, improve quality, and reduce cost, the industry by itself isn’t going to do it. There has to be a high degree of public leadership here which guides, shapes, changes the law.

Grossman: The industry could show some leadership too.

Dukakis: Yes, it could. But is it likely to?

Grossman: It’s been less good at it than it might be…. [But] this state has an enormous amount of skills and abilities, so I think there needs to be private leadership to match, because private leadership is what helps make public policy.

Dukakis: I agree. I don’t think it’s going to happen unless people in positions of political leadership, public responsibility, take action here. Although there may be some room for flexibility when it comes to licensing and other things, just let one of those new groups screw up, Jerry.

Grossman: But, gee, the old ones are doing pretty good at screwing up.

Dukakis: I understand that. Otherwise, we wouldn’t be having a debate over a patient’s bill of rights…. Jerry, let me ask you this. Isn’t [what you’re talking about] the way we started out? Kitty and I joined what was then called the Harvard Community Health Plan, in 1971.… [It] made a lot of sense to us. Not only that, there was one place where you could go and get a wide range of treatment. You spent a lot less time in the hospital, because a lot of the procedures that in those days were being done in the hospital could be done at one of the centers. It was about two minutes away from us. They were available 24 hours per day, seven days per week, in some form or another. Everybody knows that when you have young kids, they always get sick on Saturday at 11 o’clock at night. So we were very happy. It sounds to me as if your new groups [the ones you’re proposing] are kind of baby Harvard Community Health Plans all over again, in some ways–[practicing in a] kind of collegial atmosphere where they can use nurses and nurse practitioners and others a little more freely.

Grossman: That’s right, but they don’t have to be the same as each other. Every Harvard plan was run out of Ken-more Square. I’m hoping for innovation and change. That’s why I’m asking for demonstration [projects]. But it requires leadership, private and public, to say, it isn’t working, we need something new. We don’t know what it is. And we shouldn’t change the nation based on someone’s idea…. Well, we ought to be a leader again, doing for the delivery system what we did for biotech. If we could be as good at delivering care as we are at…

Meet the Author

Dukakis: Producing great new discoveries.

Grossman: That’s right. We have those smart people. We just need to get them a little refocused. They’ve finished the genome.