Chapter 1.B: The "Crisis" in Access, Cost, and Quality

Updates on coverage and spending statistics can be found on the web pages of CMSKaiser Family Foundation, the Census Bureau, and the National Institute for Health Care Management

The California HealthCare Foundation has prepared a visual analysis of costs and financing trends over the past decade and some predictions of future costs, taken from numerous public and private organizations.

Also, McKinsey & Company has published a very illuminating report that documents how much more the U.S. spends on health care compared to the rest of the world, and why: "Accounting for the Cost of US Health Care: A New Look at Why Americans Spend More" (Dec. 2008).

For more on international comparisons, see Commonwealth Fund (various studies).  Critiquing that standard wisdom that the U.S. health care system lags those in many other countries, see this blog post by Harvard’s Ashish Jha:  Judging Health Systems: Focusing on What Matters.

Additional useful statistical information can be found at:
Robert Wood Johnson Foundation
National Health Information Center
MedPac (for Medicare data)

State-by-state information is at:

Demonstrating that the "crisis" in medical care costs is long-standing and unlikely to be easily resolved, see Odin W. Anderson, et al., Changes in Family Medical Care Expenditures and Voluntary Health Insurance: A Five-Year Resurvey 99-100 (Harvard Univ. Press, 1963)

The medical care field is in a continuous state of flux.  The changes and trends over as short a period as five years can give cause for alarm or pride depending on which facets of the field are given emphasis.  The greatest concern today is with rising expenditures.  At the same time the use of services is greater and more widespread and all indications point to further increases in utilization as the population becomes older and those with chronic illnesses survive longer than formerly.  Health insurance premiums are constantly going up as a consequence.  Still, health insurance helps spread the burden of medical expenditures more evenly among families and provides a stable financial base for the medical establishment.  The prevailing climate is one of crisis: “medical care is being priced out of the market;” ”insurance induces physicians to increase their fees;” “the fee system of paying physicians encourages unnecessary surgery;” “hospitals are operated inefficiently and need to be ‘rationalized;’” “drugs are over prescribed and more expensive than necessary;” “families and the aged are going bankrupt paying for long-term illness because of the inadequacies of current health insurance;” “there is insufficient attention paid to ‘preventive medicine’ and early care;” and so on.  At the same time, … [modern medicine provides tremendous benefits].  Why then the air of crisis?  It seems to stem from the great concern with costs and the inability of many people to meet them in an orderly fashion without going into debt liquidating assets, or reducing their accustomed standard of living. . . .

This amusing fable captures in allegorical form most of the important features of the crisis in American medicine.  For a more recent version of a similar extended metaphor, using "Breakfast Insurance: A Metaphor for Health Insurance," see Regina Herzlinger, Consumer-Driven Health Care (2004), at 61-73.

Gourmand and Food--A Fable
From, Medical Care and its Delivery: An Economic Appraisal
Judith R.Lave & Lester B. Lave
L. & Contemp. Prob. 252 (1970)
Reprinted with Permission

The people of Gourmand loved good food. They ate in good restaurants, donated money for cooking research, and instructed their government to safeguard all matters having to do with food. Long ago, the food industry had been in total chaos. There were many restaurants, some very small. Anyone could call himself a chef or open a restaurant. In choosing a restaurant, one could never be sure that the meal would be good. A commission of distinguished chefs studied the situation and recommended that no one be allowed to touch food except for qualified chefs. "Food is too important to be left to amateurs," they said. Qualified chefs were licensed by the state with severe penalties for anyone else who engaged in cooking. Certain exceptions were made for food preparation in the home, but a person could serve only his own family. Furthermore, to become a qualified chef, a man had to complete at least twenty- one years of training (including four years of college, four years of cooking school, and one year of apprenticeship). All cooking schools had to be first class.

These reforms did succeed in raising the quality of cooking. But a restaurant meal became substantially more expensive. A second commission observed that not everyone could afford to eat out. "No one," they said, "should be denied a good meal because of his income." Furthermore, they argued that chefs should work toward the goal of giving everyone "complete physical and psychological satisfaction." For those people who could not afford to eat out, the government declared that they should be allowed to do so as often as they liked and the government would pay. For others, it was recommended that they organize themselves in groups an pay part of their income into a pool that would undertake to pay the costs incurred by members in dining out. To insure the greatest satisfaction, the groups were set up so that a member could eat out anywhere and as often as he liked, could have as elaborate a meal as he desired, and would have to pay nothing or only a small percentage of the cost. The cost of joining such prepaid dining clubs rose sharply.

Long ago, most restaurants would have one chef to prepare the food. A few restaurants were more elaborate, with chefs specializing in roasting, fish, salads, sauces, and many other things. People rarely went to these elaborate restaurants since they were so expensive. With the establishment of prepaid dining clubs, everyone wanted to eat at these fancy restaurants. At the same time, young chefs in school disdained going to cook in a small restaurant where they would have to cook everything. The pay was higher and it was much more prestigious to specialize and cook at a really fancy restaurant. Soon there were not enough chefs to keep the small restaurants open.

With prepaid clubs and free meals for the poor, many people started eating their three-course meals at the elaborate restaurants. Then they began to increase the number of courses, directing the chef to "serve the best with no thought for the bill." (Recently a 317-course meal was served.)

The costs of eating out rose faster and faster. A new government commission reported as follows: (1) Noting that licensed chefs were being used to peel potatoes and wash lettuce, the commission recommended that these tasks be handed over to licensed dishwashers (whose three years of dishwashing training included cooking courses) or to some new category of personnel. (2) Concluding that many licensed chefs were overworked, the commission recommended that cooking schools be expanded, that the length of training be shortened, and that applicants with lesser qualifications be admitted. (3) The commission also observed that chefs were unhappy because people seemed to be more concerned about the decor and service than about the food. (In a recent taste test, not only could one patron not tell the difference between a 1930 and a 19[95] vintage but he also could not distinguish between white and red wines. He explained that he always ordered the 1930 vintage because he knew that only a really good restaurant would stock such an expensive wine.)

The commission agreed that weighty problems faced the nation. They recommended that a national prepayment group be established which everyone must join. They recommended that chefs continue to be paid on the basis of the number of dishes they prepared. They recommended that every Gourmandese be given the right to eat anywhere he chose and as elaborately as he chose and pay nothing.

These recommendations were adopted. Large numbers of people spent all of their time ordering incredibly elaborate meals. Kitchens became marvels of new, expensive equipment. All those who were not consuming restaurant food were in the kitchen preparing it. Since no one in Gourmand did anything except prepare or eat meals, the country collapsed.

Managed Care and Consumer-Driven Health Care

The following are some of the better selections of managed care humor and parodies that have come to our attention:


Welcome to Managed Friendship, a whole new way of thinking about friends and relationships. The Managed Friendship Plan (MFP) combines all the advantages of a traditional friendship network with important cost-saving features.

How Does It Work?
Under the Plan, you choose your friends from a network of pre-screened accredited Friendship Providers (FPs). All your friendship needs are met by members of your Managed Friendship Staff.

What's Wrong with my Current Friends?
If you're like most people, you are receiving friendship services from a network of providers haphazardly patched together from your old neighborhoods, jobs, and schools. The result is often costly duplication, inefficiency, and conflict. Many of your current friends may not meet national standards, responding to your needs with inappropriate, outmoded, or even experimental acts of friendship. Under Managed Friendship, your friendship needs are coordinated by your designated Best Friend (BF), who will ensure the quality and goodness of fit of all your friendly relationships.

How Do I Know That the Plan's Panel of Friends Is Not Made Up of a Bunch of Losers Who Can't Make Friends on Their Own?
Many of today's most dedicated and highly trained Friendship Providers are as concerned as we are about delivering Quality Friendship in a cost-effective manner. They have joined our network because they want to focus on acting like a friend rather than doing the paperwork and paying the high bad-friendship premiums that have caused the cost of traditional friendship to skyrocket. Our Friendship Providers have met our rigorous standards of companionship and loyalty.

What If I Need a Special Friend, Say, for Poker or Fishing or Shopping?
Special Friends are responsible for most of the unnecessary and expensive activities that burden already costly relationships. Under the Managed Friendship Plan, your Best Friend is qualified to pre-approve your referral to a Special Friend within the Managed Friendship Network should your needs fall outside of the scope of his/her friendship.

Suppose I Want to See Friends Outside the Managed Friendship Network?
You may make friends outside of the Managed Friendship Network only in the event of a Friendship Emergency.

What is a Friendship Emergency?
The Managed Friendship Plan covers your friendship needs 24 hours a day, 365 days a year, even if you need a friend out of town, after regular business hours, or when your Best Friend is with someone else. You might be on a business trip, for instance, and suddenly find that you feel lonely. In such cases, you may make a New Friend, and all approved friendly activities will be covered under the Plan, provided you notify the Managed Friendship Office (or 24-hour Friendship Hotline) within two business days.

What Friendly Activities Are Covered Under the Plan?
- Agreeing with you
- Appearing sympathetic
- Chewing the fat
- Dropping by
- Feeling your pain
- Gossiping
- Hanging out
- Holding your hand (up to 5 minutes per activity)*
- Joshing
- Kidding around
- Listening to you whine
- Partying
- Passing the time
- Patting your back
- Ribbing
- Sharing a meal
- Shooting the breeze
- Slinging the bull
- Teasing
*up to 15 minutes under the Premium Gold Friendship Plan

What Friendly Activities Are Not Covered Under the Plan?
- Bar hopping
- Bending over backwards
- Drinking to excess
- Giving a hoot
- Going the extra mile
- Lending money
- Real empathy
- Sexual favors
- Truly caring
- Using illicit drugs


A managed care company president was given a ticket for a performance of Schubert's Unfinished Symphony. Since she was unable to go, she gave the ticket to one of her managed care reviewers. The next morning she asked him how he had enjoyed it. Instead of a few observations about the symphony in general, she was handed a formal memorandum which read as follows:

  1. For a considerable period, the oboe players had nothing to do. Their number should be reduced, and their work spread over the whole orchestra, avoiding peaks of inactivity.
  2. All 12 violins were playing identical notes. This seems an unneeded duplication, and the staff of this section should be cut. If a volume of sound is really required, this could be accomplished with the use of an amplifier.
  3. Much effort was involved in playing the 16th notes. This appears to be an excessive refinement, and it is recommended that all notes be rounded up to the nearest 8th note. If this were done, it would be possible to use para-professionals instead of experienced musicians.
  4. No useful purpose is served by repeating with horns the passage that has already been handled by the strings. If all such redundant passages were eliminated then the concert could be reduced from two hours to twenty minutes.
  5. The symphony had two movements. If Mr. Schubert didn't achieve his musical goals by the end of the first movement, then he should have stopped there. The second movement is unnecessary and should be cut. In light of the above, one can only conclude that had Mr. Schubert given attention to these matters, he probably would have had time to finish the symphony.


Q: What does HMO stand for?
A: This is actually a variation of the phrase, "Hey, Moe!" Its roots go back to the concept pioneered by Dr. Moe Howard, who discovered that a patient could be made to forget about the pain in his foot if he was poked hard enough in the eyes. Modern practice replaces the finger poke with hi-tech equivalents such as voice mail and referral slips, but the result remains the same.

Q: Do all diagnostic procedures require pre-certification?
A: No. Only those you need.

Q: I just joined a new HMO. How difficult will it be to choose the doctor I want?
A: Just slightly more difficult than choosing your parents. Your insurer will provide you with a book listing all the doctors who were participating in the plan at the time the information was gathered. These doctors will fall into two basic categories: those who are no longer accepting new patients and those who will see you but are no longer part of the plan. But don't worry--the remaining doctor who is still in the plan and accepting new patients has an office just half a day's drive away.

Q: Can I get coverage for my pre-existing conditions?
A: Certainly. As long as they don't require any treatment.

Q: What happens if I want to try alternative forms of medicine?
A: You'll need to find alternative forms of payment.

Q: I think I need to see a specialist, but my doctor insists he can handle my problem. Can a general practitioner really perform a heart transplant right in his office?
A: Hard to say, but considering that all you're risking is the $10 co-payment, there's no harm in giving him a shot.

Q: My pharmacy only covers generic drugs, but I need the name brand. I tried the generic medication and it gave me a stomach ache. What should I do?
A: Poke yourself in the eye.