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Marketplace advocates promise us equity. This page examines the issue of equity in the marketplace, and shows how equity has been compromised in the USA. It then examines the implications of a market system, particularly that proposed by Graeme Samuel for equity in Australia. It suggests that equity is integral to a community service but must be imposed on the marketplace. Continuous costly monitoring is required.


Equity in health care is a social value to which most developed countries aspire and to accomplish this most have developed some sort of publicly funded health system. This ensures that the poor receive the same medical care as the rich and their health care is not compromised by their social status. The response of the health care marketplace has been to make equity one of its publicly stated key objectives. This is another illusion. In practice its impact is very different. This is not surprising as the interest is in the money and who pays it - not in the poor patient. Attaching money to the poor patient does not generate humanitarian motives. It does make her a target for those in pursuit of the money.


The US promoted and installed a market system far earlier and far more thoroughly than any other country. The USA is an example of extreme inequity and this inequity has grown rapidly as competition and corporate influence has increased. There are sound logical reasons why this should be so and any advocate of marketplace medicine must confront these - none do.

In the USA millions of people struggle to pay very large bills or else depend on charity. The Capitalist US system does not provide a public hospital system for those who are disadvantaged. Limited equity was provided by the not for profit community based health system. Those who could pay were charged sufficient to provide some equity through pro bono services. Health promotion and other community services were provided in the community. Under the intense pressures of competition this has disappeared. Nonpaying patients are rejected and if acute dumped on another hospital. Community services have been closed. Those who failed to do so could not compete and went under. To improve competitiveness alliances and joint ventures have been formed with giant corporations like Columbia/HCA. Not for prophets have adopted corporate practices in order to survive.

As a consequence of corporatisation and competition the lack of equity has become an enormous problem in the USA. The corporate lobby has successfully frustrated efforts to create a more equitable health system. Clinton won his first election on this platform but was frustrated and forced to abandon his plan by corporate lobbying and massive marketing.

Teaching hospitals were able to fund health care training and some research in the same way. The pressures of the market have had a serious impact on both.


Psychiatry and Substance abuse:- Corporate hospitals like Tenet/NME carefully tracked the "payer mix" of the patients admitted to its psychiatric hospitals. Its marketing and bounty hunting admission practices were targeted at those with better insurance. Profits were linked to a good payer mix. The length of time patients were kept in hospital, their diagnosis and the treatment they received were tailored to the sort of insurance cover and not the patients clinical needs. In Tenet/NME the children without insurance were the lucky ones - protected from NME by their lack of medical cover.

Aged care and Rehabilitation: - In corporate aged care homes medicaid patients who pay less well are often shunned and even treated differently. The vast nursing home empires were built on medicare patients even though this group comprises only about 10% of nursing home patients.

Medicare paid for treatment called "therapies" on an item of service basis. This could be exploited and groups like Sun healthcare and Vencor built their empires on the funds generated by providing therapies to their own and other nursing homes. Patients for whom therapies could be provided were much sought after.

While subacute or step down care (recovering acute care patients sent to nursing homes to recuperate) was promoted as cheaper, it was the opportunities to profit from rehabilitation therapies which made it so popular. When government stopped paying for therapies as items of service, thousands of therapists were fired, companies went bankrupt and in many states there was a glut of nursing home beds.

Chasing the money: - When Vencor thought it could fill its beds in Florida with self paying patients who are the most profitable of all it adopted a policy of pushing medicare patients out of its homes. Vencor was under strong competitive pressure and this was its response. The patterns of thought were such that Vencor saw nothing wrong with this. There was a public outcry and the government stepped in to stop the practice and fine Vencor.

Hospitals and Managed care:- Dumping of uninsured emergency patients by diverting ambulances to another hospital is a major problem in emergency care. Managed care is accused of trying to cherry pick healthy patients and discourage those at risk of costly illnesses.

What is clear is that the profit motive has a negative impact on equity. The pressures are away from it. It has to be imposed by regulation, oversight monitoring and penalties. Experience from the USA reveals that these processes are very vulnerable to misuse and often do not work. Anyone claiming that the market encourages equity must confront its impact


My experience in other countries is that equity has only been maintained because the government and or not for profit entities have been motivated towards maintaining equity. The degree of equity varies in different countries. It is related to the commitment of government and the community to this ideal. When the care of public patients has been contracted out to private interests equity has been reversed.


Psychiatry: - The care of psychiatric patients in the UK was contracted out to the care of hospitals owned by the French multinational Generale de Sante Internationale (GSI). These patients were subjected to a money making "factory" system of care - a process. There were staffing problems and patients were sedated and restrained when they should not have been. There were deaths. Had these patients remained in the public system they would have received the individualised care which they required.


Samuel indicates that access levels to care can be increased in a competitive system. I agree. Tenet/NME and managed care are excellent examples of the way competition can increase or decrease access depending on the particular financial incentive. With Tenet/NME vast numbers who didn't need access got it. With managed care those who did need access did not get it. It all depends on where the profits are. The only problem is that most of us expect patients to get access when they need it and only when they need it. The ethics of the health care professions and the expectations of society dictate that profit will not be a factor in decisions about care. There is a fundamental paradigm conflict between society and the health care marketplace. Neither group is addressing it.

It is insufficient simply to look at figures of access. If corporations are paid per access you will have increased access, if they are paid a capitation fee you will not. The market follows the money. Enthusiastic regulation and intense distrustful scrutiny of corporate activities such as we have by the medical profession in Australia at the moment may help. The US experience shows that intense regulation cannot be maintained over a long period. It also reveals that the medical profession will not maintain its stance in the face of strong conflicting paradigms and personal disadvantage. Increasingly they will adopt the market paradigm and the queue for MBA courses which will soon rival public waiting lists.


In a well designed system the internal pressures are towards the desired outcome. In the market they are not. While profit and outcome may coincide this is not always so. The system as Samuel indicates depends on a series of regulations to prevent less paying poor risk patients from being rejected and also on contracts specifying the range of services to be offered. The loopholes in this are bound to be enormous. It is the very opposite of the "civil society" envisioned by Eva Cox in her Boyer lectures. In Cox's society regulation rests lightly and is seldom used. Graeme Samuel's health model introduces dysfunctional forces. Its success depends on ongoing intense regulation and monitoring.

If we are to allow choice then we cannot prevent a corporation (HMO's and Samuel's HIA's) encouraging or discouraging, by the way it responds to those making inquiries about products to purchase. Equity goes out the window. Resourceful groups will develop ways around the intention of this requirement in order to cherry pick. This is what HMO's in the USA do. How do you monitor the telephone conversations between the customer and the HIA. The HIA information service will want to encourage or discourage the consumer, depending on the health care risks he reveals in his discussion. Will he be encouraged to buy if the HIA detects a smokers cough? It becomes a regulatory nightmare.

This exact situation has caused government to make regulation ridiculous. They have made it illegal for an HMO to elicit any information which might indicate risk when talking to the customer. How on earth can they inform the customer and meet his needs if they don't know anything about him. His voice gives a lot of information anyway. Smokers are obvious.

The Australian newspaper is calling for regulations to specify what each nursing home is required to give the elderly to eat so that profit hungry groups don't starve patients to death. This is carrying regulation to a ridiculous level. We must ask how these people were allowed into aged care? How did they meet the probity provisions in our regulations. It is the privatised competitive system which encourages people who behave like this to care for our elderly parents. We have every reason to be angry.

Australian authorities claim that our regulations will prevent the sort of problems which have occurred in the USA. It is clear that they will not. Their failure to enforce state probity regulations when granting hospital licenses closely parallels the failure of regulations in the USA. Only Victoria rejected applications by Tenet/NME and Sun Healthcare. None have canceled existing licenses. Sun continues to operate in Australia. Mayne Nickless is Australia's largest hospital owner. It has a criminal conviction for defrauding its customers by running a price fixing racket.

What they have created in the USA is a complex and dysfunctional monster which is full of distracting pressures, disturbing conflicts of interests, contradictions, impossibilities and ludicrous anomalies. This is because the principles on which it is based are inappropriate and so cannot work. The model proposed by Graeme Samuel seeks to set up the same sort of system in Australia and in the developing world.


The model which Graeme Samuel proposes will make sure appropriate care is provided by specifying the "range of services" in contracts.

In the real world decisions about care are complex, hedged with "if's, but's and when's". Enforcing contracts of this sort is impossible. Detection of breaches would be very difficult. As I have indicated companies would routinely challenge and there would be endless arguments about whether the treatment was needed with competing "expert witnesses" painting different pictures. In the USA there are medical experts who make a lucrative living out of giving medical evidence for corporations. We are moving the same way. Wealthy multinationals can afford to outspend cash strapped regulators. It pays them to do so.

The US department of Justice have avoided this minefield by prosecuting corporations for fraud and not for failing to provide the care they were contracted to provide. Proving thousands on instances would be far too costly. They have concentrated on fraud and left care to individual citizens. In Florida a citizens movement is using the courts to drive corporations out of the state. In aged care outcomes are easier to measure and are reflected on death certificates. A Qui Tam action against Sun Healthcare in California will attempt to use this evidence to show that Sun did not provide the care which its medicare contract required it to provide.

Aged care corporations in the USA routinely challenge oversight findings and penalties. They use every legal option to delay and frustrate. This goes on until the regulator backs away or accepts a token fine. The courts are overloaded with appeals against rulings so that decisions are delayed for years. The costs are large. A process of gradual attrition occurs until an equilibrium is reached which suits the more powerful corporations.


It is much more sensible to develop a system where the internal pressures are functional rather than dysfunctional. This is a central principle of what I have in mind for a health system. Regulations then rest lightly and are seldom needed. In her Boyer lectures Eva Cox called this a "civil society". In what I have suggested inequity is difficult to imagine. It would have to be imposed. In the market it is equity which has to be imposed.


What I have suggested as an alternative to the marketplace model has the same potential to use different types of funding and offer alternatives. It has the additional advantage of being removed from the political battleground and so shielded from corporate influence and political opportunism.

Corporate advertising, lobbying and donations to politicians have been one of the major barriers to "reforming" the US competitive marketplace in ways favourable to corporate interests. There are also close relationships between business and government in Australia. These corporate "barriers" to informed discussion and planning need to be "liberalised" so that those with alternate solutions can present and argue their positions.

One suggestion is that health care funding decisions should be made through community processes. Government would act as an arms length facilitator during this process. It would retain the ultimate right to reject the suggestion but would need to justify this. Health care funding would only become an electoral issue when this happened.


As I have indicated I see great difficulty in setting up large corporate groups in competition across Australia or developing countries. There would be virtual total market dominance in all except the large centres. The pressures in each location will be to maximise the profit potential of the situation. The competitive pressures will not be towards providing care, particularly when the providers are being squeezed by HIA's. The logistics of all this with a complex system of customers, purchasers and providers. The logistics of providing regulatory oversight across sparsely populated rural Australia are mind boggling. The sort of infrastructure required in setting up a service it would not be possible to remove contracts when standards are not met. Who would step in to fill the gap? What Samuel proposes is a nightmare. Not only would the funds intended for the care of citizens be squandered in competition, marketing and other corporate activities but vast sums would be spent on building and maintaining this system.

In the sort of integrated community based system each central clinical service would be responsible for providing rural services and supporting them. It would work with the local community to do this. Staffing the difficult local rural services would be a responsibility of the centre - much more than at present. It would call for central engagement and support. Technology and teleconferencing would be an important part of the system.

There would be greater flexibility in dealing with rural problems when they are not compounded by financial self interest, contracts and cumbersome regulation. Early and prompt responses would be unencumbered by the legal paraphernalia in contracts.

What group is going to build a hospital and run a health service in a small country town when it might lose it after 5 years? What about the one doctor or even one nurse town?

How would Samuel's model cope with a rural health crisis - multiple people injured or an epidemic. If you have corporations large enough to cope then you would not have competition and could not stop them from going their own way. Look at how unsuccessful government has been in bending Telstra to its will and it owns 51%.

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This page created October 2000 by Michael Wynne