Lawrence Solomon
The Next City
September 21, 1996

INSTEAD OF ADOPTING HMO-STYLE RATIONING, CANADIANS SHOULD turn to Medical Savings Accounts, another innovation in U.S. health care that over 2,000 large and small companies have been offering their employees.

With MSAs, as they’re known, employees generally receive a high-deductible insurance policy, plus the deductible in the form of cash, instead of a traditional low-deductible insurance policy. For example, the United Mine Workers Union successfully negotiated MSAs for 15,000 coal miners with the Bituminous Coal Operators Association. The zero deductible under the old health plan was replaced with a $1,000 deductible policy, and each employee was provided with a $1,000 cash bonus at the beginning of the year, to be used for health care expenses. If a miner has over $1,000 in expenses, the insurance policy kicks in. But if he doesn’t spend the full $1,000, he can keep the balance at the end of the year.

In most cases, employees end up with cash in their accounts: According to a study in the Journal of American Health Policy, one-third of Americans filed no claims in 1989, and 82 per cent, $1,000 or less. For this reason, MSAs have proved overwhelmingly popular with Americans, especially lower-income Americans who sometimes had difficulty paying the small deductibles common to traditional insurance policies. Because of their popularity, MSAs will soon be tried out in a demonstration project designed to let up to 1.5 million Americans keep their insurance if they lose their jobs.

Medical Savings Accounts, like those in the U.S. demonstration, will allow account holders or their employers to make tax-deductible contributions, similar to our RRSPs. These funds can then be used to buy high-deductible catastrophic health insurance, to take care of any serious or expensive ailments, and to pay for routine medical expenses as they arise. Any unspent amounts can then be invested within the MSA. To discourage withdrawals from MSAs for non-medical purposes, withdrawals will not only be taxed, they’ll be penalized 15 per cent. (After age 65, the penalty will be removed, and the MSA will become identical to an RRSP.) Three dozen U.S. insurance companies are about to market a variety of MSA accounts. Some estimate that MSAs, if applied nationally, could save the U.S. health care budget $300 billion per year.

But while these private MSAs are a major advance in a country that has discouraged personal coverage, private MSAs also draw justifiable criticism: The rich will be able to contribute more than the less affluent, the rich will benefit from a tax-free shelter that they can use to accumulate funds while they retire; and private MSAs will create a two-tier system, in which the sicker, less affluent members of society who can’t afford the large deductibles will dominate the normal insurance pool, raising their premiums. (Private MSAs also draw less justifiable criticism from the HMOs and other corporate interests whose profits they threaten.)

But the drawbacks to private MSAs would disappear if implemented under a publicly funded medical system such as ours. Here’s how MSAs would work in Canada:

On average, Canadians spend about $2,500 per person per year on our health needs, less as young adults, more in our earliest and latest years. Almost 30 per cent of that amount comes out of our own pockets for drugs, dentistry and other uninsured services, and the balance, or roughly $1,800, comes from our taxes. Under a public MSA system, the tax money that governments have spent on our behalf by issuing cheques to our health care providers would instead be deposited into a medical savings account.

On average, close to half of that $1,800 (perhaps $700 or $800, depending on the policy), would pay the annual premium for mandatory, catastrophic insurance coverage, to cover surgery, hospitalizations and other major medical needs that might arise. The balance, roughly $1,000 per family member per year, would be available for any currently insurable medical purpose. As with private MSAs, once we spent that balance, the catastrophic policy would kick in. But if some or all of the balance remained, it would belong to us. As in the U.S., the less affluent would benefit: Money unspent in one year would be available in the next for their prescription drugs, dental work, chiropractic and other currently uninsured medical services. Any unspent money would be invested, as it would in an RRSP, letting it grow should extraordinary future needs arise. After age 65, people could transfer some or all of their balance to an RRSP and withdraw it (paying tax) as for any other registered retirement fund they might have.

Seniors, who use the medical system most, could be the biggest beneficiaries of a Medical Savings Account system. Each year, about 10 per cent of all Canadian seniors are admitted to hospital for drug-related illnesses, making them our hospitals’ most frequent clients. Of those admissions, an inordinate number stem from errors in taking medication: The Pharmaceutical Inquiry of Ontario puts the figure at about 50 per cent; the Canadian Grey Panthers, an advocacy organization for the elderly representing 50,000 Canadians, believes the actual figure could be 70 or 80 per cent, since falls and other accidents caused by overdoses or drug inter-reactions aren’t recognized as such. These entirely preventable errors aren’t entirely of the seniors’ making. Grey Panthers’ research director Penny Grey blames a tendency of physicians untrained in geriatric care to give the elderly doses suitable to the nervous system of younger patients, and a fixed-price-per-visit system that discourages doctors from taking the time to understand their patients’ needs. Because of the “patient mills” that some doctors run, Grey explains, seniors often go from doctor to doctor, seeking answers but receiving a tranquillizer or sleeping pill instead. “The result of this pill-for-every-ill approach is an older population that’s seriously over medicated, some taking a dozen or more drugs of questionable value, often the same drugs sold under different names.”

MSAs would eliminate most of the tragic and enormously costly hospitalizations that result by restoring the best aspects of the traditional doctor-patient relationship. With doctors able to provide patients with the time needed to fully understand their problems, and with the patients able to pay for the visits from their Medical Savings Accounts, drug use and misuse will drop dramatically, as will senseless hospitalizations.

Since we’ll all be in charge of our own spending decisions, we’ll make health purchases more prudently, because the size of our family’s future medical and retirement reserve will depend on careful shopping. Bargain hunting in medicine? A 1992 study by Chicago’s Heartland Institute, “Why We Spend So Much on Health Care,” found that hernia surgery in Illinois could cost as little as $404, or as much as $4,329, cataract surgery cost anywhere from $650 to $5,674, and mammograms ranged from $35 to $178. While no one will shop for bargains in an emergency, emergencies only account for one-seventh of health care expenses, and many of our minor medical needs — say, tending to a badly scraped knee — could be performed by seeing a trained nurse (registered nurses or nurse practitioners can perform 32 per cent of the procedures performed by GPs as well or better). In the U.S., telephone-based nurse counselling is booming, providing advice about treatment options and disease management, education and support. Staffed 24 hours a day by registered nurses, and paid for by HMOs to keep their clients healthy, phone counselling services have more than doubled in each of the past two years, with 13 million Americans enrolled to this toll-free service. Some nurse counselling services conduct personalized research, others follow up with phone calls to go over the issues, or mail or fax customers health care information. Six towns in rural Maine plan to funnel all primary care through nurses.

A five-year study of 2,500 families completed in the late 1970s by the RAND Corporation shows just how careful consumers become when they have an incentive to control costs. Families with Canadian style coverage — those with insurance policies that had no deductible and no co-payments to make — spent 53 per cent more on hospital services and 63 per cent more on visits to doctors, drugs and other services. All told, these families spent 58 per cent more than families that paid part of the cost, in almost all cases without achieving any health benefits.

As in other consumer areas, health care choices often involve choosing between convenience and cost, a trade-off that will vary from consumer to consumer and even for the same consumer, depending on the circumstances. Laparoscopic, or “keyhole,” surgery, the minimally invasive technique that allows doctors to operate through small slits instead of large incisions, generally saves dollars as well as suffering through shorter recoveries for patients, and shorter hospital stays. But in the case of hysterectomies, traditional surgery can cost 20 per cent to 60 per cent less, depending on the hospital, saving as much as $2,500. If someone else is paying, we’ll always prefer laparoscopic surgery. But if the $2,500 comes out of our own account, the extra time in hospital may seem a reasonable price to pay.

With rationing systems, public or private, the patient wouldn’t get a choice — the less costly surgery would be chosen. Under an MSA system, the choice is ours. If the extra time in hospital means cancelling that vacation our family has booked, or failing to complete a contract for an important client, the $2,500 becomes well worth paying.

With MSAs, we’ll be cutting costs without cutting quality, and cutting quality only because doing so provides better value for our money. In a study earlier this year, the Canadian Institute of Actuaries warned that our medicare system could collapse as soon as the baby boomers start to retire, both because the boomers will start needing expensive medical services and because they won’t continue to contribute as much in taxes toward health care. The 10 per cent of GDP that Canada now spends on health care — the world’s highest next to the U.S., and 15 per cent more than Australia, New Zealand, Japan and most European countries — could balloon to an unsupportable 12 per cent. But the study also showed that Canada’s current spending level can be maintained if, on average, we keep our increases in health care spending to within one-half of one per cent of the increases in our GDP. If our nation’s earnings go up 3 per cent per year, in other words, health care spending can increase by 2.5 per cent without increasing our taxes. But the efficiencies to be had by converting to a government-funded MSA system — 10 to 15 per cent, according to one study of MSAs for U.S. Medicare — are at least 20 times as great as the Canadian actuaries need. With MSAs turning us into savvy health care consumers, health care costs will in all probability be slashed further from today’s high levels, leaving room in the system for either additional government spending or tax cuts.

Curing medicare’s side effects

ALTHOUGH MEDICARE PROVIDED A WORLD OF SOCIAL BENEFITS, because it disrupted a major sector of the economy, there was a price to pay as well. Among medicare’s losers are residents of small towns and rural areas, who often do not have ready access to medical services, and those choosing medical careers, who often find they cannot practise the medicine of their choice in Canada.

These failings spring from the way we regulate medicare, not from socialized medicine itself. To limit their health expenditures, governments set quotas for doctors, especially highly trained specialists, and then capped doctor fees to prevent prices of now-scarce doctor-provided services from rising. In effect, governments imposed wage and price controls on the medical sector, similar to the economy-wide wage and price controls that Canada and other countries tried in the 1970s. Because those controls, like most controls, caused serious side effects, they were eventually abandoned.

Medicare’s side effects saw the loss of many of our best doctors to the United States and a tendency of doctors to abandon rural areas and small towns for more prosperous city practices. By creating a shortage of doctors while still guaranteeing generous payments to doctors — the same payment, regardless of the doctor’s skill in providing the service — medicare provided doctors with a large and all-but risk-free, captive clientele in cities, tilting the economics of setting up a practice to cities. In so doing, medicare devalued the worth of rural and small-town customers — their business no longer counted for much in the new medicare economy.

MSAs do away with price and wage controls, and let the medical market function efficiently, virtually without economic distortion. Without governments controlling the supply of doctors, medical schools could graduate all qualified students, in all specialties, giving young adults more opportunities to pursue the career of their choice in Canada and giving Canada a more skilled medical system.

Once graduated, doctors would face the same job insecurities, and the same need to find their role in the workplace, as other professions. Urban practices would no longer be disproportionately lucrative, because competition would drive prices down. The distribution of doctors in Canada would spread to serve all communities whose size warranted them, just as lawyers and other professionals can be found to service small communities. Specializations such as geriatrics that promised a growing market in serving the specialized needs of our older population, would attract large numbers of young doctors. In this new buyers’ market, well-funded seniors would be able to pick and choose from a large pool of specialists eager to provide them with the time and the attention they demand, ending the doctor-caused epidemic of overmedication that leads to needless hospitalizations.

In the same way that increasing the supply of doctors creates healthy competition, rather than arbitrarily closing hospitals, we should allow all viable hospitals to remain open to improve the options available to us. Because of the numerous niche markets that hospitals would quickly discover, most hospitals closings would be reversed.

By creating a functioning medical market, MSAs will help the Canada Health Act in doing its job of promoting universal access. But even more importantly, MSAs will promote health care by empowering consumers, putting purchasing power squarely in the hands of highly motivated consumers who will begin to direct the medical marketplace, and to be influenced by it. The same marketing know-how that understands how to package information for every demographic sliver of the marketplace — male, female, young, old, rich, poor, urban, suburban, educated, uneducated — will now set its sights on the consumer health market. With every company in the health industry knowing that every Canadian, from minimum wage earner to millionaire, is in the market for health-enhancing products and services, a burgeoning health market will succeed in conveying health information to those down the social ladder, who have not fully shared, despite Canada’s universal medical system, in the longevity gains of more affluent Canadians. Because the money in their accounts will be as good as anyone else’s, they’ll be courted, many for the first time. Motivated by messages from hucksters and humanitarians alike, advised and alerted by consumer protection agencies, excluded from the discourse of medical knowledge no longer, the longevity gap between the rich and the poor will narrow, while the longevity of all, rich and poor will rise.

Meet me at the medical mall

A CHANCE ENCOUNTER IN 1987 BETWEEN SENIOR EXECUTIVES OF the Cambridge Health Authority and BAA, the newly privatized British Airport Authority, began a revolution in the development of the hospital. BAA had set the airport world abuzz by discovering that more money could be made from shopping than from airplane take-offs and landings — the airport’s main business was in retail. The culture of the airport changed to become consumer friendly: Mall retailers at Heathrow and other British airports began to offer their merchandise at prices no higher than in the city, leading them to focus on the specialized products and services airport users most valued. The airport recognized that it had captive customers with specialized needs. Hospitals fit the same bill.

The experiment played out at Addenbrooke’s Hospital in Cambridge, which — amid concerns that it would lose its caring culture — opened a 650-square-metre mall the next year for its 925 patients, unknown numbers of visitors, and 4,000 hospital staff. The mall was a hit-and-miss learning experience for all. The florists, bank and bookstore (aisles wide enough to take a bed) raised a few eyebrows. The hairdresser proved a hit with patients, whose spirits perked up with a perm. The biggest surprise: Premier, the travel agent, who was popular with the hospital staff when booking holidays, but also with consultants on the medical conference circuit and the patients’ friends and relatives. The biggest failure: Imagination, a store selling frilly lingerie, which learned to its dismay that the hospital clientele wasn’t up to some kinds of entertaining. The proposal for an on-site undertaker didn’t survive the guffaws. The lawyers in the mall did, despite occasional jokes about ambulance chasers, with most patients grateful for help in the cases of accidents and in drawing up wills. The hospital’s staff use the lawyers for everything from relocation legalities to divorces (sometimes at the same time).

Just-in-time service is provided by the insurance agents, helpful in sorting through claims, and the baby shop, conveniently tucked in the maternity wing. There’s more, too. A supermarket, clothing store, dry cleaner, and food court (Pizza Hut and Burger King are among the tenants) draw customers from the outside world. All told, 30,000 shoppers visit the mall at Addenbrooke’s each week, providing the hospital with a pretty penny and a spirit money can’t buy. Nobody gets into the hospital without passing retailers strategically located to attract their attention.

Today, no one regrets the decision. “There’s a ‘buzz’ in the hospital because of the mall,” explains Julie Speck, a former airport employee who is now the Addenbrooke’s mall manager. “It gives patients a sense of normality to be able to get a cup of coffee and do a bit of shopping.” Addenbrooke’s has since expanded its own mall twice and advises hospitals in London, Leeds and elsewhere that are eager to develop malls of their own.

While Addenbrooke’s was the first hospital to capitalize on the glitz of the mall’s shopping environment, the first hospital mall opened more than a decade earlier, but for a more practical reason: Dallas’s Medical City was built on the town’s outskirts in 1974 as a convenience to patients. But the public demanded more from its hospital, and Medical City evolved into a kind of community centre that hosts car shows, health fairs, circuses and bridal fairs in its 8,000-square foot atrium, one of three elegant spaces of marble floors and water fountains. Other U.S. hospital malls also became public places: Lebanon, New Hampshire’s Dartmouth-Hitchcock Medical Center, which has 10,000 square feet for retail space, holds concerts in its public spaces. When it opened in 1991, it was the state’s leading tourist attraction; 20,000 people still tour the hospital each year. Residents of Kendall, Florida, find Baptist Hospital so beautiful they ask to hold wedding ceremonies there. The Sutter Maternity and Surgery Center in Santa Cruz, California “feels like a hotel,” says Iris Frank, its administrator. “We offer 24-hour room service, with food ordered at will and delivered on a hotel-like room service cart. The chef is a graduate of the California Culinary Academy.”

Hospitals have come a long way since their origin in the last century. To shed their impersonal, inhospitable image in the emerging competitive health market for ambulatory care, hospitals are transforming themselves from being one of society’s most closed institutions into more welcoming and accessible places. Out are foul-smelling, green-tiled hospitals, in are medical malls designed to help ambulatory customers find their way. From the central atrium of the 220,000-square-foot Saint Joseph Health Center in Kansas City, Missouri, a visitor can locate all the mall’s services — among them the laboratory, physical therapy, medical offices, and surgery — by looking at the signs on the balconies of each level. Thanks in part to its better visibility in the marketplace, outpatient visits are up 16 per cent, 30 per cent for the pain clinic and ultrasound, since the centre opened in January 1995.

But most of the outpatients who visit the complex don’t enter the hospital itself. Instead of needing to navigate the hospitals’ intimidating maze of hallways, they now see the atrium’s glass backed elevators, a fountain and a player piano. And whether they’re entering or leaving, they must all pass through the mall, into the clutches of waiting retailers and service providers.

Education is the best inoculation

THE HOSPITAL — THE PLACE TO WHICH WE BRING OUR WORST MEDICAL problems and all the fears and insecurities that come with them — has in the past avoided both proselytizing and marketing its mission to its visitors. Yet we are never more open to changing our own unhealthy behavior than when circumstances take us to a hospital. For our health care system to treat the whole person, hospitals themselves need to capitalize on the educational opportunities in impressionable minds in the hospital traffic. Hospitals need to see their visitors as a pool of potentially motivated health care consumers, and their patients as more than about-to-be anaesthetized slabs on the hospital bed.

Fear of adverse consequences from unhealthy lifestyles — such as the fear of contracting lung cancer from smoking — only goes so far. People tend to adopt a new behavior when they feel their peers want them to. Nothing succeeds like a supportive environment.

Thousands of self help groups, for virtually all medical conditions, have sprung up to provide the peer support the human spirit craves. But because these groups are generally informal and difficult to find, they often don’t attract the membership they need to operate smoothly. They are often unfunded, poorly organized, and dependent upon a group leader whose illness may prevent him from carrying out his duties. By providing storefront space in an upbeat, empowering medical mall, hospitals would make it easy for self-help groups to find recruits in patients who are recuperating from a particular ailment, and in their friends and relatives, who might drop in to learn about the condition afflicting their loved ones. In meeting its members’ needs for support and information, self-help groups will be purchasing educational tools, providing tests, buying equipment and obtaining other paraphernalia. Each hospital specialty provides a ready market for a like-minded self-help group, a means to their empowerment.

Seniors, in particular, will gravitate to these self-help clubs, where, together with others with similar problems they’ll be able to share information about new discoveries (perhaps using their club’s Internet facilities) and benefit from lectures that they can solicit from members of the hospital’s professional staff on subjects of the seniors’ choosing. The membership fees required to pay for the club’s rent at the mall and otherwise maintain it should be eligible to come from the Medical Savings Account; these nonprofit, educational clubs will repay society many times over, and nowhere will the investment come back faster than in the case of seniors.

Seniors without a support structure — without helpful family or friends — are twice as likely to be in poorer health, according to Statistics Canada, and 50 per cent likelier to be taking three or more drugs. As well, for want of company and attention, seniors, often resort to visiting doctors’ offices, burdening the medical system without benefiting themselves.

Because group sessions aren’t for everyone, hospitals need to tap commercial retailers, who know how to appeal to the interests of almost everyone. Because the thousands of patients and their visitors that enter a hospital each day have health issues on their mind, they’ll be receptive to retailers able to capitalize on their needs, along the way providing them with the information that can turn a fear into an informed, empowering course of action. “Visiting someone with a heart condition? Shouldn’t you get your cholesterol tested while you’re here? Pick up your results in 30 minutes on your way out. Oh, while you’re at it, since it’s Tuesday, get a second test at half price — your choice from this menu of 21.

“Here, let me put you down on our mailing list for upcoming specials. Soon we’ll be able to check out your predisposition for Alzheimer and other inherited diseases.”

Want to do the testing in the privacy of your own home? Besides the pregnancy and HIV home tests now available, the University of Ottawa has just produced a $15 kit to help menopausal women decide if they want to take estrogen and progesterone. Medical hardware, such as blood pressure gauges, is also moving into the home. If you expect to be among the 100 Canadians that — on any day of the year — might suffer sudden cardiac arrest and die, Heartstream’s defibrillator, which weighs just four pounds, was designed to be operated by anyone, even in a state of panic. Users are guided through a one-minute setup by Peter Thomas, narrator of the PBS science program, Nova, after they turn on the machine. (“Apply pads to the patient’s bare chest . . .” he calmly intones.) The Heartstream devices, which start at $2,500, are priced for the super rich, or for a family with a history of heart disease with a medical savings account.

Medical software may prove to be a bigger market than heavy duty hardware. The American Medical Association’s Family Medical Guide, which sold five million copies in book form, is now available in a CD-ROM version. The guide does more than provide information on 650 diseases, disorders and general health concerns, it comes to life with over 60 animations and video clips providing information on self-care and medical tests, and guidance on wellness and prevention. Users answer a series of yes-or-no questions to evaluate their particular symptoms and help determine if medical attention is necessary.

Such reference manuals only begin to tap the market for medical material. CD-ROMs now let home-computer users view beating hearts or travel along the spine, all in 3-D. One of the first of dozens of such products, best-selling Visual Man, sells for $40. Another on retail shelves, 3-D Body Adventure, provides a full-body tour for $35. This software is based on an advanced academic research project, the Visible Human Project, that will revolutionize the understanding of medical professionals, allowing them to navigate the body the way airline pilots use flight simulators. But products based on this software will also be mass-marketed like Nintendo games to children and teens, providing Jules Verne-like adventures based on science fact instead of fiction. Medical education for the masses may not be far behind. With the help of mass marketers targeting different niches in the medical marketplace, the understanding of the body that has tended to be confined to society’s upper reaches may be distributed far more equitably. Punk rockers may develop an understanding of the workings of heart valves that rivals their interest in tattoos. Skate boarders may start caring about the mysteries of digestion as much as practising kick flips.

Once hospitals learn to treat their clients’ fears and insecurities as expertly as their tumors, they’ll take a giant stride toward their mission of promoting health in the population. By promoting an environment in which we can learn about our bodies, we will do so, eliminating many of our medical needs by becoming healthier.

A healthy conclusion

OF THE GROWING PORTION OF THE NATIONAL HEALTH CARE BUDGET THAT comes out of our own pockets — the $20 billion that medicare doesn’t cover — the fastest growing portion pays for treatments outside the medical mainstream. According to Statscan, at least 3.3 million Canadians paid more than $1 billion last year for chiropractic, homeopathic, naturopathic and Chinese therapies not covered by health plans. According to Canada Health Monitor, a polling organization, the number is closer to 5.5 million. In Canada, the market for natural remedies and nutritional supplements is growing at 20 per cent a year. In the U.S., the market for alternatives is even larger: one-third of Americans will use an alternative to mainstream medicine this year.

Ontario has 11 hospitals offering TT — therapeutic touch; at St. Joseph’s Hospital in Toronto, all nurses receive training in TT. In British Columbia, where the Vancouver Hospital is opening the Tzu Chi Institute for Complementary and Alternative Medicine, 75 per cent of doctors say they want to find out more about alternatives. The B.C. Medical Board has an alternative therapies committee. The faculty of medicine at the University of British Columbia and the B.C. Institute of Technology, which trains acupuncturists, will collaborate in research performed at the Tzu Chi Institute, which will treat patients using acupuncturists, shamans, aboriginal healers and specialists trained in ayurvedic techniques from the Indian sub-continent. The institute is responding to demand from Canadians who are frustrated by the failure of Western medicine to cope with chronic diseases such as cancer and AIDS, or mystery illnesses such as chronic fatigue syndrome. Once again, the public is leading, and the medical mainstream following.

Once again, the clamor for control over our lives is coming from those best off: Canadians in the top income bracket are 60 per cent likelier to use alternative medicine than those in the lowest income bracket. The affluent can better afford to pay for these unlicensed treatments, and they have the educational wherewithal to investigate alternatives. In all likelihood, this affluent group of medical activists will outlive its less affluent fellow citizens, who will have neither the medical budget nor the college degrees needed to access much of the literature now created by well-meaning, well-educated people for their peers.

The last century’s unprecedented lengthening of the human lifespan will carry on into the next one: With science’s daily unlocking of the mysteries of the genes and the citizenry’s march toward empowerment, that much seems certain. But if the human potential is to be realized for all of us, not just the affluent, medicare must offer more than the cradle-to-grave comfort of universal access; it must transform itself from a benevolent doctor/dictator to an agent of democratic change that puts power into the hands of the people. The Medical Savings Account, a great democratizer, promise to help span the longevity gap between rich and poor while moving us all toward our biblical 120 years and beyond.

Click here to continue to Part 2