The recent cold-blooded murder of the UnitedHealth insurance executive has prompted a debate about the pros and cons of healthcare insurance. No one in their right mind should advocate murder of anyone, let alone because of a grievance with the healthcare industry. But it is good to better understand the healthcare system we live in, especially as it compares to alternatives in other countries.

There is no one better to assist us in that discussion than John C. Goodman, a healthcare economist who writes for The Independent Institute. Recently he reviewed and compared the healthcare system of Canada with the U.S. But before we compare different healthcare systems, we need to better understand problems that all healthcare systems face.

Three Problems in All Systems

Goodman says there are three problems with the doctor-patient relationship in all developed countries – regardless of the way the payment system is organized:

First, when a third party is paying the bill, neither the doctor nor the patient has any incentive to apply the kind of cost/benefit analysis that is normal in the purchase of any other good or service. In considering whether to obtain an expensive test (an MRI scan, e.g.), the incentive is to consider only the benefit. Since cost is irrelevant to the patient, a tiny benefit—no matter what the cost—is viewed as desirable.

Second, in a fee-for-service arrangement (such as exists in both the U.S. and Canada), the more services doctors perform, the higher their incomes. So, just as patients have an incentive to over-consume, doctors have an incentive to over-provide.

Third, there is malpractice liability, which is especially a problem in the U.S. A doctor who orders an unnecessary MRI scan faces no real penalty. But no matter how improbable, there is always a chance that a scan not ordered will fail to detect a problem that grows worse through time. Our legal system, therefore, provides incentives for too many tests and too many procedures, compared to a system in which costs would have to be justified by comparable benefits.

These are called perverse incentives in the language of economists. If they are not checked in some way, medical care becomes unreasonably expensive. That means higher premiums or higher taxes, depending on your healthcare system, or both. How do we check these perverse incentives?

The Canadian System

Canada checks these incentives by limiting resources. The typical Canadian general practitioner, for example, does not have radiology equipment and must send patients to a hospital for simple x-rays. The hospitals, in turn, operate under global budgets that limit spending, no matter what the level of demand. In other words, they put profits before patient care. This can happen in any healthcare system.

Canada ranks 25^th of 29 countries on the number of MRI scanners per person. As a result, the wait for a scan is almost three months, and the wait until final treatment is more than six months. The government has decided to prevent overuse of MRI scanners by severely restricting the number of scanners that are available.

Canada’s system of limiting heath care resources and forcing doctors to ration care has many undesirable characteristics. The system favors high-income over low-income patients. It favors white patients over racial minorities. It favors city dwellers over rural residents. It favors the politically connected over those without connections. Arguably, there is more inequality in access to health care in Canada than there is in the United States.

You might suppose that in countries that impose rationing, such as Canada and the U.K., doctors are forced to be more efficient—prioritizing resources so that the most promising procedures are done first. But studies by the RAND Corporation found that this isn’t so. In Canada and Britain, for example, scholars found just as much unnecessary care (as a percent of the total) as they found in the United Staes.

Then there is fraud, which is a special problem in government-administered programs. In Medicare and Medicaid, for example, fraud is estimated to consume at least $100 billion a year. Hospital upcoding (claiming a higher level of patient severity in order to obtain a higher insurance payment) is another problem. One study estimates that increased upcoding (relative to a decade earlier) was associated with $14.6 billion in hospital payments. Although doctors are the biggest critics of claim denials, hospitals are by far a bigger problem.

The Pre-Authorization Problem

As a doctor, I can tell you that pre-authorization is the bane of practicing medicine. It slows down your treatment of the patient and sometimes prevents you from doing what you know is needed. But there is a role for pre-authorization to hold doctors accountable for their treatment decision-making.

Goodman explains: “An important tool private insurers use to avoid unnecessary spending and inappropriate care is to require preauthorization for a particular drug, therapy, or procedure. Doctors tend to regard these procedures as burdensome and irksome. Yet only 7.4% of requests by patients in Medicare Advantage and Medicaid managed care plans are denied. Moreover, in the vast majority of appeals (83.2%), the initial denials are overturned.”

It’s easy to think other countries have better healthcare, but the facts don’t support that claim. All countries with government-provided healthcare (socialized medicine) suffer from the same problem: rationed care. If you can’t get in to see the doctor, or the government won’t allow the treatment he recommends, your “free healthcare” isn’t really free.

The public seems to understand this. Despite occasional complaints, more than two-thirds of Americans rate their health insurance as “good’ or “excellent.” And that holds for all kinds of insurance: employer plans, (Obamacare) marketplace plans, Medicare and even Medicaid. Even among people who say they are not in good health (and who, presumably, need medical care), a substantial majority give positive ratings to their health plans. Only a tiny percent rate their insurance as “poor.”

The U.S. Surgeon General, Dr. Vivek Murthy, says drinking alcohol can cause cancer – even in moderation. In fact, he is calling for all alcoholic beverages to carry warning labels to inform the public of the danger, much like cigarettes were required to do many years ago.

“Alcohol is a well-established, preventable cause of cancer responsible for about 100,000 cases of cancer and 20,000 cancer deaths annually in the United States,” Dr. Vivek Murthy said in his advisory issued Friday. “Yet the majority of Americans are unaware of this risk.”

Laura Cooper and Brianna Abbott, writing for The Wall Street Journal, tell us “An act of Congress would be required to change the existing warning labels on bottles of beer, wine and liquor. Today, federal rules require only a warning against drunken driving and drinking while pregnant, as well as a general warning that alcohol “may cause health problems.”

Alcohol consumption is the third leading preventable cause of cancer in the U.S., after tobacco and obesity. The link between alcohol consumption and cancer risk has been established for at least seven types of cancer, including breast, colorectum, esophagus, liver, mouth, throat and voice box, Murthy said.

The Distilled Spirits Council, a spirits industry group, pointed to recent research from the National Academies of Sciences, Engineering and Medicine concluding that men who consumed two drinks a day and women who consumed one drink a day had lower all-cause mortality rates than people who never drank alcohol. The same report also found a link between alcohol consumption and breast cancer risk. “Many lifestyle choices carry potential risks,” and the government should consider the entire body of scientific research, the spirits council said.

Obviously, this council has an inherit bias since they represent an industry that profits from the sale of alcohol. But are there differing opinions on this issue in the scientific literature?

Allysia Finley, also writing for The Wall Street Journal, says yes. She says, “Surgeon General Vivek Murthy has done more to politicize science and erode trust in public-health leaders than anyone other than Anthony Fauci. Dr. Murthy was at it again on Friday with a headline-grabbing report that recommends alcohol be distributed with cancer warnings.

She notes two weeks earlier the National Academies of Sciences, Engineering and Medicine released a congressionally mandated review of the recent evidence on the health effects of moderate drinking, or up to one drink a day for women and two for men. Its more than 200 pages of findings run counter to Dr. Murthy’s 22-page report, though they got scant attention in the press.

The academies found insufficient evidence to support a link between moderate drinking and oral, pharyngeal, esophageal, laryngeal and other cancers. It did find a slightly higher risk of breast cancer with moderate drinking but also a lower risk of death generally and from cardiovascular disease specifically compared with never drinking.

Finley says, “More government is Dr. Murthy’s prescription for every social and public-health ailment. Given this record, why would anyone take his latest warning about alcohol and cancer seriously?”

Since I was in medical school in the 1970s, we have known that excessive use of alcohol is related to certain cancers such mouth, throat, esophagus, liver, colon and breast. Yet there has been little evidence it is correlated with occasional to moderate alcohol usage. In fact, occasional use of alcohol, especially red wine, has been associated with reduced cardiovascular risk. This new surgeon general report is a deviation from this prior information.

If this is really more about political ideology than science, I would expect some pushback from the medical community in the near future, especially after the inauguration of our new president. Let’s wait and see.

Last August I posted a story on how home nursing visits were being used by insurance companies to bilk Medicare for billions. (Home Nursing Visits Bilking Medicare for Billions)

The story was reported in The Wall Street Journal by Anna Wilde Mathews, Christopher Weaver, Tom McGinty, and Mark Maremont. They discovered that insurance companies were instructing their home nurses who visited Medicare Advantage patients to add diagnoses to the patient record whenever possible to increase payments from the federal government.

Now these same investigative reporters have uncovered similar activity by doctors working for the UnitedHealth Group. Their report in The Wall Street Journal reveals how the insurer prepared a checklist of potential diagnoses even before the patients were examined. Here’s how they described the situation:

“Like most doctors, Nicholas Jones prefers to diagnose patients after examining them. When he worked for UnitedHealth Group, though, the company frequently prepared him a checklist of potential diagnoses before he ever laid eyes on them.

UnitedHealth only did that with the Eugene, Ore., family physician’s Medicare Advantage recipients, he said, and its software wouldn’t let him move on to his next patient until he weighed in on each diagnosis. The diagnoses were often irrelevant or wrong, Jones said. UnitedHealth sometimes suggested a hormonal condition, secondary hyperaldosteronism, that was so obscure Jones had to turn to Google for help. “I needed to look it up,” he said.”

The government’s Medicare Advantage system, which uses private insurers to provide health benefits to seniors and disabled people, pays the companies based on how sick patients are, to cover the higher costs of sicker patients. Medicare calculates sickness scores from information supplied by doctors and submitted by the insurers. In the case of UnitedHealth, many of those doctors work directly for UnitedHealth.

More diagnoses make for higher scores—and larger payments. A Wall Street Journal analysis found sickness scores increased when patients moved from traditional Medicare to Medicare Advantage, leading to billions of dollars in extra government payments to insurers.

The authors say, “Patients examined by doctors working for UnitedHealth, an industry pioneer in directly employing large numbers of physicians, had some of the biggest increases in sickness scores after moving from traditional Medicare to the company’s plans, according to the Journal’s analysis of Medicare data between 2019 and 2022. Sickness scores for those UnitedHealth patients increased 55%, on average, in their first year in the plans, the analysis showed. That increase was roughly equivalent to every patient getting newly diagnosed with HIV, the virus that causes AIDS, and breast cancer, the analysis showed.”

That far outpaced the 7% year-over-year rise in the sickness scores of patients who stayed in traditional Medicare, according to the analysis. Across Medicare Advantage plans run by all insurers, including UnitedHealth, scores for all newly enrolled patients rose by 30% in the first year.

A spokesman for UnitedHealth said in a written statement that the company’s practices lead to “more accurate diagnoses, greater availability of care and better health outcomes and prevention, including less hospitalization, more cancer screenings and better chronic disease management.” The company’s approach, he said, helped to avert more serious health problems later, and to achieve Medicare Advantage’s goals of improving quality and reducing costs.

It is revealing that Dr. Jones, the Oregon doctor mentioned above, said UnitedHealth didn’t suggest diagnoses for patients he treated outside Medicare Advantage, where it doesn’t pay. Traditional Medicare patients treated by UnitedHealth doctors had much lower sickness scores, the Journal’s analysis showed.

UnitedHealth has acquired dozens of medical groups over the past decade-and-a half. Its Optum unit now employs about 10,000 physicians, its top executive has said, making it one of the nation’s largest employers of doctors. It contracts with tens of thousands more. No other national insurer has acquired and hired doctors on that scale.

In my opinion, the company is rationalizing their policies to justify the additional diagnoses that lead to much higher payments from the government. This is exactly why I abhor the recent trend of doctors leaving private practice to work for insurance companies, hospitals, and other large corporations. This inevitably leads to doctors compromising their judgements about diagnosis and treatment due to pressure from their employers. Doctors need to make decisions based on what’s best for the patient, not their employer.