The Social Medicine Reader

Health Policy, Markets, And Medicine

by Jonathan Oberlander, Larry R. Churchill, Sue E. Estroff, Gail E. Henderson, Nancy M. P. King and Ronald P. Strauss

Paperback, 3 v., Duke Univ Pr, List Price: $24.95 | purchase

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The Social Medicine Reader
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Health Policy, Markets, And Medicine
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Jonathan Oberlander, Larry R. Churchill, et al

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Excerpt: The Social Medicine Reader

THE SOCIAL MEDICINE READER

Health Policy, Markets, and Medicine VOLUME III


DUKE UNIVERSITY PRESS

Copyright © 2005 Duke University Press
All right reserved.

ISBN: 978-0-8223-3569-6

Contents

Preface to the Second Edition...............................................................................................................viiIntroduction................................................................................................................................1The U.S. Health Care System: On a Road to Nowhere?, Jonathan Oberlander.....................................................................5Wanted: A Clearly Articulated Social Ethic for American Health Care, Uwe E. Reinhardt.......................................................25From Bismarck to Medicare-A Brief History of Medical Care Payment in America, Donald L. Madison.............................................31The Sad History of Health Care Cost Containment as Told in One Chart, Drew E. Altman and Larry Levitt.......................................67The Unsurprising Surprise of Renewed Health Care Cost Inflation, Henry J. Aaron.............................................................70The Not-So-Sad History of Medicare Cost Containment as Told in One Chart, Thomas Bodenheimer................................................73Medicaid and Medicare: The Unanticipated Politics of Public Insurance Programs, Lawrence D. Brown and Michael S. Sparer.....................76Bedside Manna, Deborah Stone................................................................................................................95Must Good HMOS Go Bad? The Commercialization of Prepaid Group Health Care, Robert Kuttner...................................................107Defending My Life, Geov Parrish.............................................................................................................119Business vs. Medical Ethics: Conflicting Standards for Managed Care, Wendy K. Mariner.......................................................128The Prostitute, the Playboy, and the Poet: Rationing Schemes for Organ Transplantation, George J. Annas.....................................150Ethics of Queuing for Coronary Artery Bypass Grafting in Canada, Jafna L. Cox...............................................................158Rationing in Practice: The Case of In Vitro Fertilization, Sharon Redmayne and Rudolf Klein.................................................167Reforming the Health Care System: The Universal Dilemma, Uwe E. Reinhardt...................................................................179Health Care in Four Nations, Thomas Bodenheimer and Kevin Grumbach..........................................................................199Keeping Quality on the Policy Agenda, Elizabeth A. McGlynn and Robert H. Brook..............................................................230What's Ahead for Health Insurance in the United States?, Victor R. Fuchs....................................................................240Luxury Primary Care-Market Innovation or Threat to Access?, Troyen A. Brennan...............................................................246Correspondence: Response to "Luxury Primary Care"...........................................................................................255Limiting Health Care for the Old, Daniel Callahan...........................................................................................260Scapegoating the Aged: Intergenerational Equity and Age-Based Rationing, Robert H. Binstock.................................................267Index to Authors............................................................................................................................285About the Editors...........................................................................................................................287

Chapter One

The Uninsured, Health Care Costs, and Public Programs

The U.S. Health Care System: On a Road to Nowhere?

Jonathan Oberlander

The health care system in the United States remains a "paradox of excess and deprivation." The United States spends more on medical services than any other nation, and U.S. physicians earn more than their counterparts in Canada, Europe, and Japan. An extraordinary amount of money-as much as $300 billion annually-goes to pay just for the system's administrative costs. Americans with insurance have access to the latest in sophisticated medical technology and innovative medical procedures; rates of diffusion for many medical technologies, such as magnetic resonance imaging, are higher in the United States than in other countries. Indeed, the availability of these resources is so widespread that some analysts believe that well-insured Americans receive too many medical services.

At the same time, millions of Americans receive too little medical care. Over 40 million (and counting) Americans do not have health insurance, which makes the United States the only industrial democracy in the world with a substantial uninsured population. Even those with health insurance may be underinsured, lacking both coverage for key services and adequate financial protection against the costs of medical care.

The 1990s was a decade of great expectations in U.S. health policy-expectations that ultimately were not met. Health reform efforts in both the public and private sectors failed to resolve the major problems in American medical care. In 1993, President Bill Clinton proposed a government-sponsored system of universal health insurance, but despite initial optimism about its political prospects, the bill failed in Congress. After the defeat of the Clinton plan, the private market emerged as the engine of health care reform. The U.S. health insurance system moved toward "managed care" arrangements, with rising enrollment in health maintenance organizations (HMOs) and the growth of for-profit health plans. Proponents touted market-based reform as a solution to health care cost inflation and an opportunity to enhance both quality of care and patient choice. However, by decade's end a widespread backlash against managed care had developed, initial success in controlling costs had abated, and managed care's appeal as the latest magic bullet in American health policy was waning.

What is the state of the U.S. health care system after a decade of turbulence? What political dynamics are driving health policy? And what is the outlook for health care reform? This essay introduces readers to issues in American health policy, and reviews the contemporary politics and future prospects of health care reform. In particular I focus on the persistent problem of the uninsured, efforts at cost control and incremental reform, and the rise and fall of managed care.

Little Progress for the Uninsured

The U.S. health care system is often erroneously labeled a private health care system. In fact, the United States has a mixed system of public and private insurance, though the word "system" connotes much more organization, rationale, and logic than is actually at work. Most working-age Americans receive health insurance through their employers (table 1). This private insurance is voluntary in the sense that companies are not required by law to provide health coverage, though employer-based insurance is subsidized by federal tax policies (employers' premium contributions are tax exempt) at an annual cost to the government of over $100 billion in foregone revenues. Medicare, a federal government program, provides health insurance to virtually all Americans over 65 years of age, as well as to persons with disabilities and end-stage renal disease. Medicaid, a jointly funded federal-state program, pays for medical services for low-income Americans (though it covers only about 40% of the poor), including seniors who spend down their incomes and assets to a level that qualifies them for Medicaid-funded nursing home care. In between those covered by this hodgepodge of private and public plans, however, lies a substantial population without any health insurance at all.

In 2003, 45 million Americans-15.6% of the population-lacked health insurance. About 80% of the uninsured are workers or live in families with workers. They typically have low-wage jobs or work in small businesses in which the employer does not offer health insurance or, if it is offered, they cannot afford to purchase it. However, a growing share of the uninsured population is employed by large firms, a trend explained primarily by the decline in manufacturing jobs and reduced rates of unionization; companies such as Wal-Mart, the largest private employer in the United States, employ eligibility restrictions and long waiting periods on insurance coverage for part-time workers. The uninsured are also disproportionately of low income. In 2002, one-third of the poor were uninsured and nearly two-thirds of the uninsured had incomes less than 200% of the federal poverty line, or $29,000 for a family of 3. A substantially higher percentage of black (20%) and Hispanic (32%) than white (14%) Americans were uninsured in 2002.

Many Americans mistakenly believe that the uninsured obtain adequate medical care from hospital emergency rooms and other charity sources. Studies have consistently found, however, that the uninsured receive much less medical care than insured Americans. Nearly 25% of uninsured children and 40% of uninsured adults have no regular source of medical care. The uninsured are much more likely to delay or forego needed treatment, have their conditions diagnosed at a later stage, and be admitted to hospitals for avoidable conditions; overall, the uninsured use 50% fewer medical services than those with private insurance. The Institute of Medicine estimates that 18,000 uninsured Americans die each year prematurely due to a lack of access to proper medical care. Moreover, inadequate insurance coverage carries with it financial as well as medical risks: the costs of medical treatment are a leading cause of bankruptcy in the United States. Indeed, about half of all bankruptcies in the United States "involve a medical reason or large medical debt."

The number of uninsured Americans has climbed steadily upward since the 1980s (figure 1). During 1998-1999, though, the uninsured population declined from 44.3 million to 42.6 million, and in 2000, fell again to 39.8 million (though this drop was due in part to statistical adjustments in how the government counted the uninsured). Yet perhaps most striking was not the decrease, but rather that it took so long to happen and that the overall trend during the decade remained one of an expanding uninsured population. During much of the 1990s the United States enjoyed ideal conditions for an expansion of health insurance. The economy went through an unprecedented era of sustained growth, the rates of general inflation and unemployment were both exceptionally low, and health care inflation moderated. Still, from 1990 to 1999 the number of uninsured Americans increased by nearly 8 million.

That even these favorable circumstances did not generate any significant expansion of health insurance was disquieting. It also revealed the limits of the market and the voluntary health insurance system, left to their own devices, to solve or even substantially ameliorate the problem of the uninsured. Nor did it bode well for the future when the inevitable economic downturn would come and pressure the employment-based health insurance system. Indeed, economic growth slowed in 2000, and in 2001 in the aftermath of the September 11 attacks, the United States entered a recession with substantially higher rates of unemployment. The predictable result of job loss was a sharp increase in the ranks of the uninsured: in 2002, the number of uninsured Americans rose by 2.4 million, the biggest one-year increase in America's uninsured population since 1992.

In coming years, a reenergized economy could well slow the rate of growth in the uninsured population, but it will not reverse the long-term trend. For the foreseeable future, the number of uninsured Americans is likely to continue to grow absent government action.

The Politics of Health Insurance

National health insurance periodically emerged on the U.S. political agenda during the 20th century and occasionally was tantalizingly close to enactment. The most recent failure came in 1994, with the defeat of the Health Security Act, sponsored by President Bill Clinton (and drafted under the guidance of his wife, Hillary Rodham Clinton). President Clinton proposed to achieve universal coverage in the United States by mandating that all employers provide private health insurance to their employees and by giving small businesses and unemployed Americans subsidies with which to purchase insurance. However, the Clinton plan triggered fierce opposition from the insurance industry (which disliked the proposed limits on their profits and regulation of behaviors, such as experience rating, that enabled them to charge higher premiums for sick patients), the business community (which criticized the employer mandate), ideological conservatives (who saw the plan as an unwarranted nationalization of the health care system), and large segments of the public (who were anxious about the plan's emphasis on moving patients into HMOs). Confronted with this opposition, and despite Democratic Party majorities in both the House of Representatives and Senate, the Clinton health plan-along with all other compromise proposals-was defeated. The American Medical Association, which initially endorsed and then waffled on the idea of universal coverage, did not play a prominent role in the 1993-1994 debate, a sign of its deteriorating influence on U.S. health politics.

One legacy of the Clinton plan's failure was caution regarding health policy. Most politicians took the lesson of the plan's demise to be that comprehensive reform was not politically feasible. Consequently, from 1994 to 2003 talk of attaining universal coverage all but disappeared from the political landscape. Neither of the two major parties' presidential candidates in the 2000 election, Al Gore and George W. Bush, offered plans that would cover all or even most of the uninsured. Nor did any legislation for universal coverage that had a serious chance of passing emanate from Congress during this decade. One of the only organized advocacy groups for the uninsured, Families USA, even toned down its calls for universal coverage in favor of more modest policy goals.

What was remarkable about the absence of proposals for universal coverage during the period 1999-2001 was that fiscal circumstances appeared conducive to their adoption. After two decades of budget deficits, the federal government in 2000 ran a sizeable budget surplus, projected at $5.6 trillion over the next decade. It had long been assumed that the lack of affordability of a public program was a central barrier to universal coverage, particularly during an era of sizeable federal deficits in which large spending increases for domestic programs were politically constrained and tax increases considered taboo. Now, though, the affordability argument was exposed as a fallacy. Despite the availability of a budget surplus that could have been used to pay the costs of covering the uninsured, universal coverage did not surface as a central political issue in 2000. Instead, political attention focused on proposals for improving the medical experiences of the already insured through regulation of managed care and expansion of Medicare to cover outpatient prescription drugs.

It is clear, then, that the most relevant fact about U.S. health politics is not that 15% of the population is uninsured but that 85% of Americans are insured. Those who are insured are generally satisfied with their own medical care, even if they think poorly of the system as a whole; consequently, they are not a reliable constituency for change. Indeed, any reform that threatens to alter the medical care arrangements of the well insured is likely to provoke public opposition. The formidable constituency-led by the insurance industry-against reform is mobilized, wealthy, and politically influential. Meanwhile, the uninsured are disproportionately low-income, unorganized, and apparently politically expendable. As the Clinton plan vividly demonstrated, the political benefits to a president and legislators willing to take on a $2 trillion health care industry that literally profits from the status quo and opposes reform are uncertain, but the political costs are certain to be high. The result is that universal coverage remains an elusive reform in the United States, and the uninsured continue to live in an "aura of invisibility."

Incremental Reforms

In the aftermath of the Clinton plan's defeat, there was little appetite for comprehensive reforms that would assure universal coverage. One consequence was resort to a familiar foundation of American political life: federalism. By virtue of federal inaction, states became the locus for health care reform, as Oregon, Vermont, and Tennessee, among others, implemented ambitious reforms to expand access to health insurance. Focused largely on extending coverage to low-income children and adults, these reforms represented a political success story when contrasted with the deadlock over health policy in Washington, D.C. However, while some states achieved noteworthy reductions in their uninsured rate, no state came close to attaining universal coverage; initial aspirations for coverage gains and cost savings were often not met, and economic troubles and budgetary shortfalls created pressures that threatened the sustainability of much-heralded state programs like the Oregon Health Plan and Tenncare. In 2002, none of the aforementioned reform-minded states had uninsured rates lower than 9%. There appeared to be very real limits, then, to the potential of state-led health reform to cope with the uninsured problem.

At the federal level, incrementalism was in vogue. In 1996 Congress adopted the Health Insurance Portability and Accountability Act (HIPAA), which was designed to limit preexisting condition exclusion periods and make it easier for workers losing group coverage to purchase health insurance on the individual market. However, the law's insurance market reforms did not address the affordability of individual market health policies, limiting its impact on the uninsured. In 1997, Congress enacted the State Children's Health Insurance Program (SCHIP), which targeted children who lived in families with incomes below 200% of the federal poverty line but who were not eligible for Medicaid. By 2003, 4 million children were enrolled in SCHIP (funded through a federal block grant to the states), and the program helped reduce the percentage of uninsured low-income children by one-third between 1997 and 2002. However, faced with severe budget shortfalls, following the 2001 recession some states instituted enrollment freezes and waiting lists for children applying for SCHIP, potentially "undermin[ing] further progress toward reducing this number."

Since the enactment of SCHIP and HIPAA two main pathways to incremental health reform have emerged. The first approach, generally favored by Democrats, is to expand existing public insurance programs, including Medicaid and SCHIP. Proponents of this approach would change eligibility requirements for these programs, opening them up to more of the poor and near-poor (e.g., to parents of children enrolled in SCHIP). One of the more ambitious plans would extend Medicaid and SCHIP coverage, without premiums or cost-sharing, to all persons with incomes below 150% of the federal poverty line and subsidize enrollment for persons up to 300%. It is estimated that this plan would extend eligibility for public insurance to over 25 million Americans who are currently uninsured.

(Continues...)