Health Policy in America

As a population, we tend to be woefully uninformed about public health matters, even as we become more and more obsessed with our individual health and fitness. That lack of information contributes to our failure to achieve consensus on change: we all know the current system isn’t working very well, but we know very little about where and why.

When John Gibson called and asked me to address the issue of health policy, I explained to him that I am by no means an expert in this highly technical area. But John assured me that technical details were not what this forum is all about.  You are concerned instead with the framing of issues for public deliberation and decision, and that process is what I teach, and hopefully something I do know something about. 


I tell my students that several elements must be in place if we are to make sound public policy decisions. There must be general agreement on the facts of the issue involved. There must be general agreement on the goals we are trying to reach. There must be an accurate understanding of the trade-offs involved, the costs and the benefits of the competing policy prescriptions. And finally, our discussion of alternative policies must take into account the legal, social and constitutional framework that constrains our systemic approaches to social issues, including, importantly, the proper role of the government.


What does all of this mean to the discussion of health care services delivery?


At a minimum, it means engaging in a widespread public education campaign, because the public is simply unaware of—or misinformed about—many of the facts. Recently, for example, a consortium of local hospitals and other providers asked the Bowen Center at SPEA to conduct a baseline community health assessment. Among individuals who responded to the survey instrument, none identified infant mortality as a major health issue in Marion County, although infant and maternal mortality are, in fact, significant issues in our community. As a population, we tend to be woefully uninformed about public health matters, even as we become more and more obsessed with our individual health and fitness. That lack of information contributes to our failure to achieve consensus on change: we all know the current system isn’t working very well, but we know very little about where and why.


What are the facts about American health care? What do we need to know in order to make sound policy decisions in this area?


While there are certainly conflicting explanations for many of the facts that characterize delivery of health services, there is ample documentation to support the following description of the American health system as it currently operates:


·     In 1997, 43.4 million Americans, or 16% of the population, had no health insurance.

·     Over a three-year period, about 30% of the population, or 81 million people, will experience a gap in coverage lasting at least one month.

·     44% of workers who lose their jobs will experience a gap in health insurance coverage lasting one month or longer.

·     America spends more per person on health care than any other country in the world. In 1998, U.S. spending per capita was $4,270, compared with a median of $2,000 in twenty-three other industrialized countries. Yet we are just 37th in overall quality of service as ranked by the World Health Organization.

·     Medical costs have risen from 75 billion, or 7.6% of GNP in 1970, to 250 billion, or 9.2% of GNP in 1980, to 666 billion, or 12.1% of GNP in 1990.

·     Employers’ costs for health insurance equaled 100% of their net after-tax profits in 1990.
·     Ten percent of the population consumes 72% of all medical costs, making risk avoidance by insurers the simplest and easiest path to profitability.
In short, there are major problems plaguing our health care system: mounting costs, the growing number of people who are uninsured, declining and/or uneven quality of care, and the growing gap between care available to the affluent and that available to lower-income Americans. The National Coalition on Health Care has noted that these problems are interrelated: Efforts to expand coverage are made more difficult by rising health care prices; at the same time, reduced access to care among the uninsured actually drives up costs, because the uninsured don’t get routine preventive care and only seek medical attention when they are sicker. They are also more likely to seek that care in the most expensive settings—hospital emergency rooms and emergency clinics. Also, the patchwork nature of our system does not have sufficient incentives for broad and highly cost-effective public health initiatives to combat environmental and other causes of health problems and thus prevent many illnesses.

That is the system we have. What are our goals? What do most Americans want their health care system to do?  There is far less uniformity on goals than there is agreement on the facts I have just outlined, but until we have some sort of consensus on goals, policy prescriptions are impossible. And in fact, some of our goals may conflict: universal health coverage and cost containment are simply incompatible with a system that does not ration care, for example.  Continued improvements in diagnosis and treatment mean that many diseases that used to kill have become chronic conditions to be managed, at far greater cost. AIDS is one recent example. We will not be able to give every patient the benefit of every treatment, no matter what sort of system we have. Rationing is inevitable. Of course, as one commentator recently noted, a system that coddles wealthy patients with minor ailments but cannot find money for universal vaccinations is rationing; a system that spends millions keeping alive twenty-week premature babies and subsidizing in vitro fertilizations, but has forty million people going without basic health coverage is rationing. We ration today on the basis of wealth. The policy question is whether wealth is the proper basis for making these decisions.  


Among the goals for the health-care system that policy-makers have advanced are: universal coverage, or access; equity (that is, one’s access to adequate medical care ought not depend upon one’s wealth); cost-containment, which would require more emphasis on abatement of environmental factors and more preventative care, as well as some degree of rationing; and continued improvement in medical science, drug therapies and the quality of care. To those overarching goals, you might add a number of others that are desirable: the ability to choose ones own doctor, avoiding lengthy waits for appointments or elective procedures, and so forth.


Interestingly, public opinion polls suggest that the American public agrees on most of these goals, especially the need for a national system, and has for many years. In 1937, 80% of Americans supported government provision of access to health care; in 1942, the number was 74%, in 1961 67%, in 1976 66.7% and in 1992, 75%.  These numbers are particularly surprising given the acrimonious nature of discussion about the proper role of government in our lives generally and in the health care system specifically.


Other western countries consider health care a right to be guaranteed by the state. Americans have historically approached government differently; we view the state not as a guarantor of positive rights like health, housing or education, but as a protector of individual autonomy. To put it another way, our approach to rights has been negative—preventing the government from infringing our liberties. The notion that government has a role in providing material benefits really only took root in the New Deal, during the Roosevelt years, and in the wake of the Depression, and it is still a point of great contention. Those of us who are strong supporters of the marketplace tend to look critically at government programs that distort or displace market mechanisms. In fact, the past twenty years have seen ideological challenges mounted to a whole range of existing social welfare initiatives, with privatization and “reinvention” being urged in lieu of government programs. This ideological predisposition to limited government and the existence of powerful players with entrenched interests in the status quo will make policy changes favoring more government involvement very difficult. Any comprehensive reform will have to confront a medical/industrial /insurance complex that has over $800 billion dollars a year at stake.


When the United States enacted the social security pension, disability, work accident and unemployment programs that Europe had, we did not include statutory health insurance. Trade unions, in the wake of World War II, urged employers to buy group health policies as a fringe benefit of employment, and policymakers assumed that employment-related health insurance would eventually cover the entire American labor force and its dependents; government would need only to cover persons without jobs, in the form of Medicare and Medicaid. But group coverage through the workplace has always left many Americans out. The major reason is that small businesses can rarely afford or provide health benefits, and small businesses employ millions of Americans. Tying access to health care services to employment  has other built-in problems:

·        There is no equalization mechanism—no contribution by the affluent to costs incurred by the poor.

·        Insurers engage in preferred-risk selection—and incur large marketing costs to find and sign up healthier populations.

·        Benefits vary widely from employer to employer.

·        Owners and managers can—and do—give themselves more generous coverage than they give their workers

·        Hospitals and doctors continue to deal with the complexity and administrative burdens posed by different coverages and reimbursement procedures.

·        Since much regulation occurs at the state level, there are wide variations in benefits, financial oversight, and consumer protection around the country.

·        Personnel offices of businesses have the headaches of negotiating packages with unions and shopping around for insurance coverage.

·        Hospitals shift costs from the less generous payers to the more generous/affluent payers, making true cost accounting problematic. (This also provides an incentive for “boutique” hospitals that can make money by limiting services to money-making procedures—from article)

·        In periods of economic growth, when businesses are competing for good workers, businesses with the ability to offer health benefits enjoy an unfair advantage over smaller businesses that cannot afford to do so.


While defenders of the current system tend to talk about the virtues of a free market for medical care, it is obvious that we do not have anything remotely resembling a real market. Consumers do not have any meaningful choice, and increasingly neither do businesses. What has been overlooked in the past, but is increasingly being recognized, is the extent to which our current system also intrudes unacceptably into the proper domain of the doctor. We have all become aware of the problem of insurance companies restricting hospital stays or refusing to pay for treatments the physician thinks best; what has been less noted is that—because of the system’s patchwork nature—many cost-effective treatments aren’t used because insurance doesn’t happen to cover them. This is particularly true in the geriatric field, where interventions short of expensive nursing homes are rarely covered.


What are the alternatives? We can simply continue to tinker at the margins of our current, unsatisfactory system, of course. If we choose real reform, however, there are essentially two models: the British, and the so-called “Bismark” system, variations of which can be studied  in Canada and Europe.


The British system, where Doctors work for the State, is highly unlikely to be adopted in the United States.


The Canadian model is a true “single payer” system. Each Province operates one health insurer. The government subsidizes health care from tax dollars, and uses its considerable bargaining power to negotiate favorable prices for medical services and drugs.


The European model—the system used with some variations in Germany, France, the Netherlands, Belgium, Switzerland and Japan—is different.  In those countries, while health insurance coverage is mandatory, those who can afford it retain free choice of an insurance company, which acts as the fiscal intermediary between the government, the providers and the consumers. The system is financed through payroll taxes, and subscribers have free choice of doctors and hospitals. Employers no longer have the burden of administration, and no employer is at a competitive disadvantage for workers because it can’t afford to offer health insurance. Most important, insurers cannot “cherry-pick” by insuring only those who are healthier.


In such a system, there is redistribution. Those who are more affluent pay for those who are less affluent. The truth of the matter, however, is that we have redistribution now in the United States, just as we have rationing now. When uninsured poor people are treated at public hospitals, and those hospitals cannot get reimbursed for the treatment,  our tax dollars make up the difference. (Recent article about Wishard).


As the population ages, as medical science improves longevity and turns terminal illnesses into chronic conditions, the costs of health care continue to escalate, and the haphazard and wasteful nature of our current system becomes more problematic. At some point, we will be forced to confront the central question: would the national government be better able or less able to implement our common goals than the system we have now?  And if we do decide to significantly change the delivery of health care, what safeguards must we put in place? What priorities must we establish? What dangers must we avoid?


Physicians for a National Health Program cite studies by the GAO and the Congressional Budget Office for the proposition that a single-payer health system like Canada’s could save enough money simply by streamlining paperwork to cover the 44.3 million who are now uninsured. They also assert that if the U.S. government used its bargaining clout to negotiate drug prices down to Canadian levels, the savings of approximately 16.2 billion dollars would provide the seventy million Americans who do not have drug coverage with their needed medicines.


Whether such claims are valid, I don’t know. But I do know that the debate over health care in the United States needs to occur openly and honestly, rather than through the covert mechanisms currently being employed. Recent budget priorities, for example, have shifted dollars from teaching hospitals to primary care. That has had an enormous impact on the health care system, and has real implications for the future supply of doctors. But that policy outcome was not a result of public debate and deliberation; it was one set of provisions among thousands in an omnibus budget act. Whatever policies Americans choose, those policies deserve to be genuinely chosen, and we all need to understand what the trade-offs truly are.


If we go to a national system, will incentives for research and development suffer, as pharmaceutical companies claim? Will Americans have to wait longer for elective procedures when everyone is entitled to care? What mechanisms do we need to employ to ensure that hypocondriacs don’t overuse the system? What “safety valves” should be built in, to ensure that those who want and can afford private care can still get it?


Those are the issues we need to surface and debate. That debate can be informed by the experience of other industrialized countries—we can benefit from their trials and errors. What we cannot benefit from is a continuation of a system that is neither fish nor fowl—neither government nor private—but with the worst features of both.


The challenge for the twenty-first century is to confront these difficult issues with honesty and fashion a health care delivery system that works for all Americans.


Thank you.