American the Exceptional: US Health Care Delivery

1
MODULE V HEALTH CARE POLICY READINGS PART III,
15, 16, 18 6/20 26 27
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.
• (Point2 will receive detailed treatment in
  Module9.)
• This module focuses on point1 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, well 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 systems 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
INFANT MORTALITY INFANT MORTALITY LIFE EXPECTANCY MEN WOMEN LIFE EXPECTANCY MEN WOMEN
U.S. 8.0 72.5 79.2
CANADA 6.0 75.3 81.3
GERMANY 5.3 73.0 79.5
JAPAN 4.3 76.4 82.8
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 criteria1)
  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!
Lets 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 worlds 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
  feeforservice (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 Clintons 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 arent in line with those
  of their competitors. Loss of market share
  devastates share prices, and can threaten a
  companys 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. (Contd 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. (Contd 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 isManaged 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
X
CAPITATION
FFS
INS. CONTRACT
FIXED FEE
EMPLOYER
HMO
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