MODULE V HEALTH CARE POLICY

1. MODULE V HEALTH CARE POLICY

2. Why Not The Best?U.S. Health Care in Comparative Perspective

3. “OF ALL THE FORMS OF INEQUALITY, INJUSTICE IN HEALTH CARE IS THE MOST SHOCKING AND INHUMANE” MARTIN LUTHER KING JR.

4. “IF I HAD TO SUM UP THE AMERICAN HEALTH CARE SYSTEM IN ONE WORD, THAT WORD WOULD BE ‘CHAOS.’ ” PRIMARY CARE PHYSICIAN EAST LANSING, MICHIGAN

5. A PREFATORY NOTE: POWERPOINT “FOOTNOTES” THIS MODULE FEATURES THREE “FOOTNOTE” SLIDES (#s 24-26) CONTAINING DETAILED INFORMATION RELEVANT TO THE MAIN NARRATIVE (MN). FOOTNOTES APPEAR AT THE END OF THE SECTION ON MANAGED CARE; THIS COLOR SCHEME DISTINGUISHES THEM FROM MN SLIDES.

6. A Comparative Perspective on U.S. Health Care • A purely domestic analysis of health care is inadequate because it excludes: 1) comparative evaluation of American health care performance; 2) the potential relevance of foreign health care models to the U.S. health care system. • (Point#2 will receive detailed treatment in Module#9.) • This module focuses on point#1 by surveying American health care from a comparative international perspective. We will also review the unique ways in which the U.S. system has evolved in recent years. • In particular, we’ll be looking at the following questions….

7. America the Exceptional: US Health Care Delivery • In what ways is the U.S. health care system “exceptional”? • What factors account for this “exceptionality”? • What are the system’s major characteristics? • What efforts have been made to reform the system? • What have been the results of recent reforms? In particular, what has been the impact of managed care, and what has been the reaction to it?

8. In What Ways is US Health Care “Exceptional”? • As noted, American society places unusual stress on individual responsibility. One consequence has been a relatively “immature” welfare state devoid of many benefits & services taken for granted elsewhere. • Preference for private sector health care delivery is one aspect of this pattern. Nowhere else in the advanced world has government played so modest a role in regulating/managing health care; nowhere else is access to care so dependent on specific qualifying criteria. Indeed, the U.S. is the only advanced country in which access to health care is not an inherent right of citizenship. • America is likewise “exceptional” in its high per capita health care spending (#7). Yet Americans are on average no healthier than people in other societies that spend far less (#8). The American health care system is thus “exceptional,” insofar as heavy expenditures have yielded comparatively “light” results (#9).

9. PER CAPITA HEALTH EXPENDITURE (1997)

10. HEALTH STATUS INDICATORS, 1995

11. HEALTH CARE EXPENDITURES 1970 – 1997 (IN PERCENTAGE OF GDP)

12. US “Exceptionality” : The Uninsured & Underinsured. • U.S. health care eligibility is based on one or more of the following three criteria:1) employment (private insurance); 2) very low – income or welfare status (Medicaid); 3) stage of life (Medicare). Those without jobs, not old, or ---paradoxically---not poor enough therefore often have problems securing health insurance. Even many employed people---- notably those in small business, contingently- or self-employed---also often lack adequate (perhaps, any) coverage. (Slide #11 provides the details) • Since most of the uninsured are young, some analysts conclude that lack of health care protection is not a serious national problem; after all, the young typically do not need medical services nearly as often as do older people. • But two facts---highly relevant and deeply worrisome ---counter such complacent assumptions: 1) the # of uninsured people is rising by about1m per year(#12); 2) officially undefined & uncounted, the underinsured probably number upwards of 100m. Inadequate coverage is thus a problem arguably as serious as total lack of coverage.

13. HEALTH INSURANCE COVERAGE, 1997

14. NONELDERLY AMERICANS W/OUT HEALTH INSURANCE1987 – 1997(CALCULATED AS PERCENTAGE OF THE POPULATION)

15. What Factors Account for US “Exceptionality?” • “Idealist” analysts identify cultural factors---notably, our individualist ethos and suspicion of “big” government---as crucial in accounting for U.S. “exceptionality.” • “Structuralists” contend that our fragmented political system, with its “checks and balances” and divided state - federal jurisdictions, is the major source of American “exceptionally.” • While not entirely discounting either of these positions, “materialists” regard the political clout of the trillion dollar a year health care industry as the decisive factor obstructing reform. How incisive! Let’s pare costs by cutting people.

16. U.S. “Exceptionality” : Does the U.S. Have the “Best Health System in the World”? • Partisans of the existing system claim that it is exceptional in the affirmative sense of providing the world’s “best” care. • Yet much depends on how “best” is defined. Thus, high – tech care, fine medical schools, and large cadre of specialist physicians are often cited as proof of U.S. excellence. • American medical education is certainly---and rightfully---a matter of national pride. Yet many experts question whether our emphases on advanced technology & specialized manpower really are decisively important, especially since other advanced societies attain comparable health care outcomes at far less cost. • Note, too, that the “best” U.S. care is only available to a small minority: the Mayo Clinic and Sloan Kettering, nominally available to all, actually cater to an elite clientele. Most Americans must therefore settle for what is quite literally second best; that is, care that is good by advanced world standards, but hardly in a class by itself.

17. The American Health Care Reform Drama Act I: HSA (Enter Stage Center) • While “reform” of the health care system has occurred. its primary focus has not been on extending protection---as noted, the number of uninsured continues to rise---but rather on curbing expenditures, which had gone virtually out-of-control by the late 1980s. • The problem arose from reliance on fee–for–service (FFS) indemnity insurance, which tended to promote overuse. Indeed, in the FFS (non)system, patients could be as unrestrained in seeking treatment as physicians could be in providing it. • President Clinton’s Health Security Act (HSA) of 1993 was initially hailed as a sensible alternative. It would have: (1) extended health coverage to all Americans; (2) established regional “purchasing alliances” to spur price competition among newly organized networks of providers. • The HSA was doomed, however, by business opposition and by its own bewildering complexity. Its rejection by Congress opened the way to the current system of (mostly) for – profit managed care, in which government has been a follower rather than a leader.

18. Act II: Managed Care (Enter Stage Right) • Few concepts have sparked as much confusion as managed care---indeed, patients are often unaware that they are being treated in managed care settings.* Here managed care will be defined as: health care delivery arrangements designed to restrain provider prices and regulate the availability of services. • Managed care is thus a repudiation of the now rapidly fading FFS system. The latter was open, loose, and inefficient. In contrast, managed care deliverers monitor and regulate all health care services, which are in principle only authorized when (1) covered by contract; (2) deemed medically necessary; (3) provided at “capped,” discounted, or otherwise reduced cost. Thus, managed care hospitalization arrangements typically feature provider discounts and hospital stays calculated in terms of the minimal in-patient recovery time. • Although many regard its long term prospects as dubious, the new system has certainly been a short term cost-saving success (#17). However, as we shall see (#s19 - 23), there is bitter controversy about whether managed care constitutes an adequate alternative to a foreign -style national health care system. * “Footnote” slide# 24 explains why managed care has been so elusive a concept.

19. NATIONAL HEALTH EXPENDITURES (NHE), 1970 - 1996

20. Managed Care: Bureaucratic and Competitive Dimensions • Managed care incorporates both bureaucratic and competitive elements. It is bureaucratic insofar as it features elaborate controls on patients & providers in order to restrain costs. For example, under managed care, patients typically must receive authorization from their designated primary care physician before consulting specialists. The primary care physician is thus obliged to function as a bureaucratic “gatekeeper,” responsible for deciding whether patient resort to expensive specialist services is medically necessary. • Managed care is also competitive, however, in that physicians are often obliged to provide services at lower-than-customary prices in order to retain their standing as authorized managed care providers. • More generally, managed care companies compete with one another, and can lose crucial market share if their prices aren’t in line with those of their competitors. Loss of market share devastates share prices, and can threaten a company’s very existence: as profits decline, firms lose the capacity to invest in up-to-date management information technology, thereby endangering their ability to remain as cost efficient as their competitors. The immediate result is likely to be relatively high prices; the eventual result, bankruptcy or forced merger.

21. THE CASE FOR MANAGED CARE • Its advocates see no alternative to managed care. In their view, failure of the cumbersome Clinton plan confirmed the folly of relying on government in the health care area. Private sector partisans see this same message when they survey health care worldwide. They conclude that governments everywhere add to the expense and detract from the quality and efficiency of health care. In Britain, for example, the National Health Service (NHS), the classic public sector model, has recently required a bracing dose of private competition as a corrective to its “socialist” planning procedures. • Managed care proponents make the following specific points in explaining why government “meddling” allegedly results in wasteful muddle: • The price mechanism is the only accurate and flexible indicator of supply and demand. Without competitive market pricing as a guide to resource allocation, planning defaults to “experts,” who, as often as not, overestimate supply or underestimating demand. (Cont’d on #20).

22. THE CASE FOR MANAGED CARE • State-funded systems are notorious for their long waiting lists, thereby supposedly confirming what happens when public (mis)planning substitutes for private competition. • Laws inevitably involve coercion, and coercion makes for bad medicine; skilled professionals simply cannot be expected to perform “as ordered.” • Public health care policy inevitably reflects behind-the-scenes political haggling among powerful & largely self-interested groups. • Legislators lack either the time or expertise to make good laws in a highly technical area requiring professional insight and experience. • “Results are what count,” and by this inarguable standard, managed care has already been a resounding success. It has brought the rate of medical inflation down from formerly stratospheric heights (#17), and has introduced market discipline and rationality into health care delivery. It is not a perfect system----there is no such thing---but it effectively “gets the job done.” • Whatever problems remain will fade over time. That is because, unlike government, market suppliers must remain responsive to buyers---in this case, employer – purchasers, who demand value for money. It is this feature of the market system that is the best guarantee of quality health care.

23. THE CASE AGAINST MANAGED CARE • While the case against managed care can be classified into three categories---political, systemic, and internal---in reality, all three are grounded on a single insight. It is that health care delivery is inevitably flawed if motivated exclusively, or even predominately, by profit. While financial incentives have a place in medicine, their use must be balanced against patient welfare, as determined by medical professionals. • Those advocating unrestricted reliance on private sector managed care have thus overextended an essentially sound argument---in the language of logical analysis, they have committed the fallacy of reductio ad absurdum. More particularly, they have conflated the need to use resources efficiently with the unrestrained search for profits. The former can be reconciled with quality patient care through careful planning, as in the Canadian system. The latter, however, is without limits except as externally imposed.

24. THE CASE AGAINST MANAGED CARE • Health care should never simply be treated as a commodity, as it is under managed care: i.e., it is not a item purchased after a rational comparison of alternatives. Instead, health care is a life necessity dispensed by those whose professional judgments inevitably must have immediate priority over the judgments of laymen, whether “consumers” (i.e., patients), profit-oriented insurers, or government bureaucrats. This point deserves emphasis because, under managed care, immediate decisions made by physicians are indeed often second-guessed, and sometimes vetoed, by those lacking medical expertise, or on-site knowledge of the patient. • This does not mean, however, that medical decisions should not be strategically circumscribed by political ones. As noted, FFS indemnity insurance had to be abandoned because of the adverse financial consequences of virtually unrestricted physician autonomy. Needed, then, is a system that allows maximum practicable professional discretion, yet obliges physicians and medial administrators to efficiently manage what are inevitably finite resources. (Cont’d on #23.)

25. THE CASE AGAINST MANAGED CARE • While its creation will of course be “no mean trick,” intelligent implementation of this principle would provide a humane and rational alternative to both FFS and managed care. • Such alternatives will be discussed in Module #9.

26. Why is”Managed Care” So Difficult to Understand? • “Managed care” is a relative newcomer to the health care scene, so that difficulties in grasping its meaning are understandable. The concept itself is difficult to define (#16) , and the actual forms of managed care organizations (MCO) are still in flux: hybrid MCOs abound, with “textbook” types probably being the exception. (See #s 25 & 26 for more on this point.) • Yet sheer novelty is only one reason why the concept of managed care often evokes bewilderment. Less noticed but more basic may be the cultural tendency to regard concepts as things rather than as relationships, thereby deepening the confusion. Thus, “managed care” and health maintenance organizations (HMOs) are most likely to be envisaged, respectively, as a type of health care and an actual place within which such care is provided. In reality, however, these concepts have multiple meanings depending on the contexts in which they are used. For example, “HMO” can refer to (a) a clinical setting; (b) insurer; (c) institutionalized relationship between payers, insurers, and providers. Semantic tangles of this sort will undoubtedly continue pending adoption of a more refined nomenclature. Meanwhile, a high level of “contextual awareness” is obviously in order.

27. INDEPENDENT PRACTICE ASSOCIATION (IPA) • Employer hires an HMO (insurer), which in turn pays an IPA a per patient fee (“capitation”). The IPA then contracts with primary care M.D.s on a capitated basis, while paying specialists on a discounted FFS basis. IPAs also often pay “bonuses” to those providers who meet quality and output standards. Participating physicians remain “independent:” and may retain private practices and contract w/ other HMOs. SPECIALISTS X X CAPITATION X FFS INS. CONTRACT FIXED FEE HMO EMPLOYER IPA PURCHASER IPAs are the fastest growing type of HMOs: by 1996 they already had 26m members, and continue to grow rapidly. They are popular w/ physicians because they allow them to contract w/ several HMO simultaneously and to maintain their private practices. PRIMARY CARE

28. PREFERRED PROVIDER ORGANIZATION (PPO) • Employer hires PPO (insurer), which in turn pays all contracted providers on a discounted fee-for-service basis. In return providers benefit from increased patient volume. While some PPOs have HMO-style gatekeepers, most allow patients to directly consult specialists. Patients can also go outside the PPO network, but must absorb a higher co-pay for doing so. This is a particularly popular PPO feature, and has been emulated by so-called HMO point-of-service (POS) plans. PPOs use utilization reviews and other practices designed to assure quality and limit cost. SPECIALISTS DISCOUNTED FFS X X INS. CONTRACT DISCOUNTED FFS PPO EMPLOYER PURCHASER PPOs now enroll around 90m people; they tripled their enrollments between 1990 and 1996. PPOs also are popular with employers and with physicians, for whom increased patient traffic usually compensates for discounted fees. PRIMARY CARE