Using World War II as a starting point is somewhat arbitrary, but two events occurred around that time that initiated a new era in American healthcare. The first was rapid innovation in medical care because of advances made during battlefield surgery, and because of insights gained from the effort to produce penicillin in large quantities. The second event, and for us the more important one, was the spread of group health insurance, which American companies began offering to their workers during the war in partial compensation for the wage freeze that was in effect.

Health insurance proved to be so popular that after the war (encouraged by the federal government through tax incentives), it quickly became a nearly universal benefit for American workers. Then, in 1965, the federal government created Medicare and Medicaid, providing health insurance to millions more (and suddenly making the government itself the biggest third-party payer). This rapid adoption of a third-party payment system for healthcare changed everything.

Thanks to this new third-party funding mechanism, we in the U.S. evolved a mentality that remains unique when it comes to healthcare. We expect and insist on nothing but the best healthcare available, whenever we want or need it, and the Tooth Fairy picks up the tab. Such a system, where the individuals making the purchasing decisions are spending someone else’s money, made Quadrant IV healthcare financially unstable and doomed it to failure.

The Tooth Fairy has been pushed beyond her limits. Providing every kind of useful healthcare to anyone who needs it is a fiscal black hole, the cost to payers is outstripping revenues, and insurance premiums and Medicare costs are growing at many times the rate of overall inflation. The government and insurance carriers are becoming more aggressive in their efforts to curb spending.

A system where individuals can choose whatever healthcare they want and someone else picks up the tab is not sustainable. It might have worked when medical science didn’t have much to offer sick people, when doctors were still lancing boils and getting paid in chickens and couldn’t spend much money delivering healthcare no matter how hard they tried - a situation that existed not so many decades ago. But the medical advances financed by the Tooth Fairy system have produced an environment in which this system can no longer exist. We had to exit Quadrant IV. And the direction of movement as we did so was resolutely to the left, toward centralized decision-making.

1) Until recent years most medical decisions were not based on rigorous clinical science, a fairly recent invention. That is, the information that doctors used to make medical choices tended to come from personal experience, anecdotal case reports, or the opinions of medical gurus instead of from large, controlled, randomized clinical trials.

2) Doctors have traditionally had the ethical and professional imperative to place the needs of the patient first. But at least in the era before managed care, the more stuff doctors did, the more they got paid. So they tended to do more than was necessary. This tendency was enhanced by the general dearth of evidence. Without hard evidence doctors relied on a synthesis of soft data from many sources of their own choosing; it was easy for them to shade their decisions, often subconsciously and more or less in good faith, in the direction of doing the things they got paid for.

3) Overt, old-fashioned, in-your-face medical paternalism (which persists to this day to some extent) was the rule during much of the Quadrant IV era. According to this paternalistic viewpoint, patients are supposed to rely on the opinion of the experts, that is, their doctors, in sorting through the complex nuances of medical decisions. Patients aren’t at all capable of understanding this sort of thing themselves, the reasoning goes; after all, this is why their doctors spent all those years in training.

Your Health Insurance Shouldn’t Break the Bank!