Medical Industrial Complex

Demand for an extensive health care system created what is known today as the medical industrial complex. In the eyes of some, this complex has already begun to erode the fabric of American society in its pursuit of the economic resources it needs to sustain itself. This paper will cast a light on the American medical industrial complex, breaking down the major components of this network as well as discussing the benefits and perceptions of this concept. In doing so, the reader will glean a better understanding of the complexities of the U.S. health care system and the forces that create it.

Keywords Affect-Neutral; Generic Medication; Issue Pace Setter; Medical Industrial Complex; Profit; Proprietary Hospitals; Universal Health Care

Sociology of Health & Medicine > The Medical Industrial Complex

Overview

In 1946, Congress recognized that the Great Depression and World War II had severely impacted the amount of capital available for renovations and upgrades to the primary institution used to protect the public health: the hospital. The House and Senate passed one of the most significant pieces of health care legislation of the twentieth century, the Hospital Survey and Construction Act (also known by the names of its chief architects, the Hill-Burton Act). The measure created a mechanism whereby federal grants and loans would be made available for the construction and renovation of medical centers. The law was clearly well-received — between 1946 and 1997, $4.6 billion in total grants and $1.5 billion in total loans were distributed under the program, and 6,800 health care facilities were built in 4,000 communities nationwide (US Health Resources and Services Administration, 2008).

The unprecedented attention paid to hospitals by Hill-Burton represented a national acknowledgement of the importance of such institutions as central in the administering of health care. Still, the focus on hospitals was attention paid to but one part of the heath care industry. Today, health care is a multifarious and far-reaching industry. While the hospital remains the central delivery point for care, the health care industry is a vast network, each component of which is a profit- or performance-driven entity. This network has come to be known as the "medical industrial complex."

This paper will cast a light on the American medical industrial complex, breaking down the major components of this network as well as discussing the benefits and perceptions of this concept. In doing so, the reader will glean a better understanding of the complexities of the health care system and the forces that create it.

Profit Before Care

In 1970, feminist and socialist Barbara Ehrenreich received poor care at the hands of the hospital in which her daughter was born. She and her husband, John Ehrenreich, decided to pen a critical assessment of the entire health care system, entitled The American Health Empire: Power, Profits, and Politics. In it (and in subsequent writings), she railed against what she considered the "medical industrial complex," which in her estimation put profits before care (Quinn, 2004).

Ehrenreich was by no means alone in her criticisms. Images of a "corporate" health care system driven by profit margins instead of the more noble cause of administering to the sick and injured became more prevalent in the latter twentieth century, particularly in times of economic uncertainty. It is certainly an easy target for cynics: just eight years after the Ehrenreichs wrote The American Health Empire, the New England Journal of Medicine reported that the medical industrial complex produced a gross income of $35-40 billion in 1979 (Relman, 1980).

What are the components of this vast network? How do they interact with one another?

Doctors & Patients

Generally, the individual considered the primary deliverer of health care is the doctor. Doctors are invaluable components of the medical industrial complex, chiefly because of the direct relationship they share with the patient. Ideally, this relationship is built on the training of the medical doctor — in addition to biology, chemistry, anatomy and other natural sciences, the physician receives training while in medical school to avoid too strong an emotional connection with the patient. By successfully adopting this skill, doctors are able to focus on the needs of the patient instead of his or her own reactions to those needs.

One of the first sociologists to study the doctor-patient relationship was Talcott Parsons. Illness, he said, is a form of dysfunctional deviance that separates an individual from society, causing social disorder due to that person's detachment. The role of the physician is to reintegrate the individual into the social group by treating his or her medical issue. The doctor's greatest asset in this pursuit is his or her focus on the patient, as described above, to which Parsons referred as an "affect-neutral" relationship. In addition to focusing greater attention on the recovery of the patient, the affect-neutral relationship also gives a doctor a noble attribute — less focus on personal interests and more on a universal sense of egalitarianism (Hughes, 1994).

Of course, Parsons' ideal endures some adaptation in the context of the medical-industrial cost. Increasingly during the late twentieth and early twenty-first centuries, the doctor-patient relationship has been strained by government regulations, hospital protocols, and insurance guidelines. Such external factors weigh heavily on the mind of a medical practitioner, often affecting how he or she administers to the needs of a patient.

Such externalities even have an influence on how the patient might enter into a doctor-patient relationship. The strict guidelines offered by private insurance companies governing whom an individual may and may not see for medical treatment means that individuals may have to pay more for coverage that includes his or her preferred doctor. Additionally, the profit-driven mentality of pharmaceutical companies has elevated the price of prescription drug coverage, leaving patients with few affordable choices as they "shop" for medical care (Stevens & Rosenberg, 2006).

As medicine and medical care continues to evolve, so too will the doctor-patient relationship. The changes occurring as a result of the development of the medical industrial complex will also be manifest in the venues at which the care occurs: the hospital.

The Modern Hospital

Prior to the early twentieth century, hospitals and clinics were smaller and largely owned by the physicians themselves. These so-called "proprietary hospitals" were the most common of facilities until the 1920s, providing community-based medical treatment to local populations. Small, doctor-owned centers eventually gave way to larger, more sophisticated hospitals or those owned by religious and/or nonprofit institutions. In a mere forty years, the number of proprietary hospitals in the United States declined from 2,435 (36 percent of all medical facilities) to 769 (a mere 11 percent) by 1968. However, the trend began moving upward again by the latter twentieth century, this time initiated by the transfer of ownership from nonprofit groups and smaller, physician-owned facilities to corporations and for-profit entities (Relman, 1980).

Proprietary hospitals continue to operate successfully, even as much larger medical centers have become the dominant facility for the administration of health care. These smaller properties generate an average of $12 billion to $13 billion in income each year, with a growth rate of between 15 and 20 percent. Most of these hospitals are located in Europe, but some are still found in the US, including Humana and Hospital Corporation of America, which in 1980 posted revenues of $1 billion (Relman, 1980).

The diversity of health care facilities and increasing number of changes in the form of care received means an enormous complexity in the pursuit of health care at one of these facilities. An issue that has presented itself over the last few decades is the types of service available at such facilities and the ability by most patients to be able to afford the services. In many cases, patients may learn of the disparities in cost between two or more medical centers that provide the same service or procedure. In 1991, one study of Pennsylvania hospitals revealed a startling trend: the cost for the very same procedure (giving birth to a baby) varied considerably among the hospital systems, a difference of $864 as a baseline to $2,180 in cost, but there were no noticeable differences between the services (Morgensen, 1991).

The evolution of hospitals from small, doctor- or nonprofit-operated facilities to large, corporate-run medical centers lends support to critics of the medical industrial complex. Arguably the most controversial component of this network is the insurance company.

Further Insights

Paying for Health Care

In the pursuit of health care reform in the United States, long-term improvements depend on a number of important factors, including access, funding for services, and, above all, the containment of costs (Gill, Cox, & Ingman, 1997). As the component of the medical industrial complex primarily charged with helping individuals pay for medical expenses (while also making a profit for itself), the insurance company is easily one of the more maligned entities in the health care system.

In 1993, President Bill Clinton proposed comprehensive reform to the American health care system. He took note of the fact that the medical industrial complex at the time was worth about $900 billion in business, consuming one of every seven dollars the nation spent and employing 11 million people. With patients losing access to affordable health care, many pointed the finger of blame at the insurance companies responsible for setting prices. The centerpiece of Clinton's proposal therefore was the formation of regional, government-regulated "health alliances," which would be funded by federal government, corporate, and individual contributions (Freudenheim, 1993). However, the bill failed in Congress, due in no small part to the prevailing view that government regulation over the industry would do little to control costs.

The mantle of health care reform was taken up again some fifteen years later with the election of President Barack Obama. This time, in 2010, the president was successful in persuading Congress to pass a sweeping change to the U.S. health care system, the Patient Protection and Affordable Care Act (ACA). While not decisively solving the problem of the millions of medically uninsured Americans, the ACA made great inroads by expanding eligibility for Medicaid (the government-sponsored health plan for low-income people) and setting up state-level insurance exchanges where people and small businesses can buy insurance coverage from private companies; individuals whose income falls below a certain threshold are eligible for government subsidies to help them pay for coverage. The law also established a mandate requiring individuals, with some exceptions, to purchase health insurance coverage or pay an annual penalty. New regulations affecting insurance companies include a ban on denying coverage to individuals with pre-existing conditions and dropping coverage on individuals who become sick. The passage and implementation of "Obamacare," as it is popularly known, was highly controversial, with proponents of universal health care saying it does not do enough, and opponents of big government saying it goes much too far; however, all agree that it constitutes, for better or for worse, the largest overhaul of the U.S. healthcare system since the 1960s.

While the profit-driven aspects of insurance providers in the United States have captured the ire of the general public and reform-minded political leaders, the fact that the services themselves remain expensive and patient income varies widely suggests that simply capping the revenues generated by insurance providers will do little to address the larger issue of health care costs. Dissatisfaction with the practices of insurance providers in the United States as components of the medical industrial complex is joined by concern about the profit-driven nature of another component of this network, pharmaceutical manufacturers.

The Drug Companies

Adding to the already emotional issue surrounding universal access to health care coverage is the high cost of prescription medication. Media stories about elderly men and women having to choose between purchasing the drugs that will save their lives and eating regular meals have fanned the flames of controversy surrounding the overall notion of the medical industrial complex.

Pharmaceutical companies are not nonprofit organizations. They are manufacturers, answering the demand of consumers. However, the products they introduce to the market are not smartphones, fuel-efficient cars, or a faster computer — they are compounds that will ease physical pain, prevent a heart attack, or mitigate psychiatric conditions.

In the early twenty-first century, one of the most pressing international issues among activists and critics of the pharmaceutical industry's approach to distribution of their products is the introduction of much-needed drugs to sub-Saharan African countries with high concentrations of AIDS and HIV patients. Many of the medications used to mitigate the symptoms of this deadly disease are expensive and do not have a generic alternative. The drug producers, driven by high demand with no competition, have remained wary about selling their medication at lower prices (given the inability of most Africans in such regions to afford these drugs).

A 2005 study of "issue pace setters" (situations or individual actors that may effect changes in behavior) on this issue revealed that social pressures on the drug manufacturers led to an eventual relenting on this policy. In this case, activist calls for "moral responsibility" in making the medications available to impoverished victims of AIDS and HIV, coupled with strong pressure from political and media sources, eventually pushed the pharmaceutical industry to adjust its policies to create greater affordability and access to their life-saving medications (Dawkins, 2005).

Just as market demand created the need to manufacture such medications on a name-brand level, so too has market demand fostered the production of lower-cost, generic versions of those drugs. Of course, there has consistently been resistance by larger drug companies to allow for the production of their products on a generic, lower-cost level. Again, one of the battlegrounds for this conflict has been over the distribution of AIDS and HIV medications in sub-Saharan Africa. In this case, however, market demand for lower-cost drugs has created a new sub-industry: the generic pharmaceutical company. The above-mentioned loosening of major pharmaceutical company policy regarding the intellectual property transfer of their products has in one country, South Africa, created a significant growth in the number of generic-producing companies, manufacturing a larger percentage of the prescription drug market ("Bright Prospects," 2006).

With its continued profit-making mentality, it is likely that the pharmaceutical industry will remain a popular target for those who abhor the concept of the medical industrial complex. Certainly, the glut in the number of pharmaceutical companies across the US and the exorbitant volume of revenue they generate on an annual basis makes this area of the network particularly controversial and no doubt contributes to the negative view of the medical industrial complex as a whole.

Viewpoints

In 1961, President Dwight Eisenhower used his farewell address to the public to comment on the state of military defense. The military organization of the early 1960s, he said, bore very little resemblance to any previous administration in either peacetime or wartime. The immense military establishment operated by the federal government and the private contractors that produced weapons and systems for the Department of Defense constituted a mammoth network of defense bureaucracy, which Eisenhower termed the "military industrial complex." In his estimation, the military industrial complex impacted every level of government — federal, state, and municipal — having what he saw as a political, economic, and even spiritual effect on American society. While Eisenhower acknowledged the needs that fostered the unprecedented development of this complex during that era, he also understood that the network that was created had enormous power that could undermine the American way of life. He cautioned, "We must never let the weight of this combination endanger our liberties or democratic processes" (Eisenhower, 1961).

It was Eisenhower's speech that inspired people like Barbara Ehrenreich to see a similarity in the burgeoning medical industry. As the example of the Hill-Burton Act demonstrates, the need for the creation of a strong, interconnected health care system has since the early twentieth century remained an important pursuit among every facet of society. As Eisenhower warned for the military industrial complex, the medical industrial complex has also permeated every part of American society, fanning the flames of controversy among those who see its current state as detrimental to the health of Americans.

The medical industrial complex is vast, consisting of several subcomponents that are, in and of themselves, sizable and extensive. This paper has analyzed four of the most prominent elements of this complex — doctors, hospitals, insurance companies, and pharmaceutical companies. Each has connections to or contains other important parts of the network, including nursing homes, home treatment services, diagnostic laboratories, and many other programs and institutions. It is indeed challenging to realize the full extent of the composition of the modern American medical industrial complex and its impact on both the economy and the way of life in the United States.

Each component of the medical industrial complex is faced with its own individual issues and controversies. Because of the tight interconnection between such components and the rest of the complex, these issues, however localized, may have a profound impact on the rest of the health care delivery system. A pharmaceutical company's introduction of a new medication, for example, may in turn introduce a vital but extremely expensive item to the market, causing cost increases in hospital care and insurance coverage.

Paraphrasing President Eisenhower, demand for an extensive health care system created what is known today as the medical industrial complex. In the eyes of some, this complex has already begun to erode the fabric of American society in its pursuit of the economic resources it needs to sustain itself. Still, Eisenhower pointed to a common good that the military industrial complex serves in spite of its risks. However imperfect, the modern medical industrial complex poses the same potential to meet the needs for which it was created.

Terms & Concepts

Affect-Neutral: Relationship in which one party seeks to effect change in the other's behavior without becoming emotionally involved in that change.

Generic Medication: Medicine that is similar in composition and effect to brand-name medication.

Issue Pace Setter: Situations or individual actors that may effect changes in behavior based on the impact of a given political, social, philosophical, or economic issue.

Medical Industrial Complex: Sociological term applied to the interconnected components of the health care industry.

Proprietary Hospitals: For-profit hospitals owned by corporations, investment groups, or physicians who use it for their own patients' purposes.

Universal Health Care: Political ideal in which every citizen has health insurance and equal access to health care services.

Bibliography

Bright prospects for generic market. (2006). Pharmaceutical Executive, 26, S15–S20. Retrieved November 19, 2008 from EBSCO online database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=20034421&site=ehost-live

Chamberlain, J. (2011). Teaching and learning guide for: Regulating the medical profession: From club governance to stakeholder regulation. Sociology Compass, 5, 116–120. Retrieved November 11, 2013 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=64995171

Dawkins, C. E. (2005). First to market: Issue management pacesetters and the pharmaceutical industry response to AIDS in Africa. Business and Society, 44, 244–282.

Eisenhower, D. (1961/2006). The military industrial complex: The farewell address of President Dwight D. Eisenhower. J. Smith, cont. Portland, OR: Basementia.

Freudenheim, M. (1993, November 14). The medical business: The stakes. New York Times. Retrieved November 17, 2008 from http://query.nytimes.com/gst/fullpage.html?sec=health &res=9F0CE0D81E3DF937A25752C1A965958260

Gill, D. G., Cox, D., & Ingman, S. R. (1997). Health care reform in the United States: Implications for the elderly. Journal of Aging Studies, 11, 177–194. Retrieved November 18, 2008 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=9710112876 &site=ehost-live

Hughes, J. (1994). Chapter one: The doctor-patient relationship. In Organization and Information at the Bedside. Unpublished Dissertation. Retrieved November 18, 2008 from http://www.changesurfer.com/Hlth/DPReview.html.

Morgensen, G. (1991). Consumer guide to the medical industrial complex. Forbes, 148, 70–72. Retrieved November 17, 2008 from EBSCO online database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=9112231354 &site=ehost-live

Quinn, E. (2004). Barbara Ehrenreich. Cyclopedia of World Authors (4th ed.). Pasadena, CA: Salem Press.

Relman, A. S. (1980). The new medical industrial complex. New England Journal of Medicine, 303, 963–970. Retrieved November 19, 2008 from http://content.nejm.org/cgi/content/abstract/303/17/963.

Schofferman, J. (2011). The medical-industrial complex, professional medical associations, and continuing medical education. Pain Medicine, 12, 1713–1719. Retrieved November 11, 2013 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=69662269

Shaffer, E. R. (2013). The Affordable Care Act: The value of systemic disruption. American Journal of Public Health, 103, 969–972. Retrieved November 11, 2013 from EBSCO online database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=90568272

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Stevens, R., Rosenberg, C. E., & Burns, L. R. (2006). History and health policy in the United States. New Brunswick, NJ: Rutgers University Press.

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Suggested Reading

Healy, B. (2005). A medical-industrial complex. US News and World Report, 138, 54. Retrieved November 20, 2008 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=15676038&site=ehost-live.

Healy, S. (2008). Caring for ethics and the politics of health care reform in the United States. Gender, Place and Culture, 15, 267–284. Retrieved November 20, 2008 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=32718664&site=ehost-live

Levy, R. M. (2012). The extinction of comprehensive pain management: A casualty of the medical-industrial complex or an outdated concept? Neuromodulation, 15, 89–91. Retrieved November 11, 2013 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=74078892

Poduval, M., & Poduval, J. (2008). Medicine as a corporate enterprise: A welcome step? Mens Sana Monographs, 6, 157–174. Retrieved November 20, 2008 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=32059802&site=ehost-live

Rochel de Camargo, K. (2008, January). Health, knowledge and economics. American Journal of Public Health, 98, 8. Retrieved November 20, 2008 from EBSCO online database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=28804928&site=ehost-live

Scrambler, G., (Ed.). (2005). Medical sociology: Major themes in health and social welfare. Vol. 4. New York: Routledge.