HMOs and PPOs have become accepted methods of deliv- ering health care in the United States in the past 30 years.
During recent decades, other methods have been considered, yet not passed by legislation and adopted as law. Two plans worth further review are managed competition and universal coverage, with and without a single-payer system. The benefits and drawbacks of each are important to discuss here.
Managed Competition
The idea of managed competition, as a health care delivery method, was born from the controversy regarding competi- tion versus regulation and was driven by the need for health care reform. Managed competition, it was hoped, would combine with market competition to achieve cost savings with government regulation to achieve expanded coverage. This idea, whose origin is credited to economist Alain C. Enthoven of Stanford University, has played a major part in debates on health care reform. It sought to address the two fundamental issues driving reform: cost containment and universal access to health care (Enthoven
& Talbott, 2004).
Managed competition has been viewed as a market- based solution that places accountability for resolving the health care crisis with the insurance industry and with consumers. Insurers would be required to accept all appli- cants, without excluding those at poorer risk. At the same time, the insurers must control costs. Consumers would choose among competing health insurance plans, paying above fixed amounts paid by their employers to receive the best value. But for true competition, employers must offer real choices and a wide variety of plans. To do this, employers may form “regional exchanges” that select health plans, manage risk selection, and establish equity rules (those plans with sicker participants would be subsi- dized by plans with younger, healthier participants) (Sip- koff, 2003, ¶6).
Another concept of managed competition is consumer choice, and consumers must be able to access information, so that they can make responsible choices and feel that they have purchased something of value for their money. Other common features of managed competition proposals include regula- tions that prevent screening-out of high-risk enrollees, penal- ties for companies that try to achieve better risk pools, com- munity ratings to prevent companies from setting rates by risk pool, and guaranteed coverage for all who apply. Another crit- ical component involves management; some standardization must be established among benefit packages and an effort CHAPTER 6 Structure and Economics of Community Health Services
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must be made to dismantle health care monopolies that endeavor to gain uneven market power—in other words, a more level playing field (Enthoven, 2004).
Proponents of managed competition cite many advan- tages. Managed competition would encourage insurance companies to compete on price and quality of services to attract enrollees. It would also offer consumers tax incen- tives to purchase the lowest-cost plans that meet minimum benefit requirements. Managed competition, although mar- ket driven, would be highly regulated to ensure quality and access. Cost-effectiveness and quality/outcomes informa- tion must be made available to consumers, although cur- rently this information is not always easy to find or to deci- pher. Providers have not widely accepted systems of ranking on measures of quality. According to its proponents, man- aged competition, as a reform concept, would have the potential for reducing expenditures and improving access to health care coverage (Enthoven, 2004).
Managed competition may not be beneficial for physi- cians, however. A study commissioned by the AMA found that, in many regions of the United States, only a few health insurance companies dominate the market, and they exert sig- nificant market power. Because physicians are often unable to exert bargaining power against these large insurers—in 64%
of areas studied, one health plan had a 50% or greater market share—they have called for antitrust action by the federal gov- ernment to stem the further consolidation of health plans (AMA, 2007).
This example highlights some of the problems with the managed competition concept. Can market forces really work in the health care market? It remains fully untested anywhere in the world, and many believe that it would fail to achieve the needed cuts in the growth of health care spending.
Similar models, such as HMOs and the Federal Employee Health Benefits Program, have failed to slow increasing health care costs (Sultz & Young, 2006).
Some argue that managed care networks, which enhance managed competition and enable health insurance plans to control cost and quality, also would limit consumers’ choices in selecting their own providers and hospitals. Consumers would have to pay out of pocket if they chose services from outside the network. Cost-saving incentives built into man- aged competition networks still have the potential for reduc- ing quality of services and denying care to enrollees. Other countries, such as New Zealand, have initiated health care reforms based on principles of managed competition, and these plans have not been well received by voters (Laugesen, 2005). Recent research found that health plan competition did not measurably improve quality (Encinosa & Hagan, 2006).
Another major criticism of managed competition is its potential failure to provide equitable and universal coverage.
This was one of the key provisions of the Clinton Health Security Act (Budetti, 2004). It is possible that large employers would benefit financially under managed compe- tition, but small businesses would find the cost burden heavy, and many individuals, such as the self-employed, would remain uninsured. A basic benefits package, critics argue, must address the special concerns affecting groups such as women and elderly adults, including coverage for long-term care, home care, mental health, dental care, and prescribed drugs. Competition among providers would be inefficient in rural areas, where there are fewer provider
choices, such as county nursing agencies and isolated small- town hospitals scattered over great distances.
Although the private insurance industry and many physi- cians have endorsed the managed competition concept, a num- ber of respectable groups in the United States strongly oppose it. Among the organizations that oppose managed competition and support some kind of single-payer plan are the ANA, the National League for Nursing, the APHA, Physicians for a National Health Program, and the American Association for Retired Persons (AARP). Dissatisfaction with managed com- petition as a reform solution has spurred a host of different proposals, all addressing cost savings and access issues.
Universal Coverage and a Single-payer System
A different approach to health care reform emphasizes uni- versal health insurance coverage, often through a stronger role played by government. Some proponents of this system of health care promote a single-payer system that would replace the health insurance companies in the United States with a single, public-sector insurer that would entitle all cit- izens to universal coverage (everyone would have health insurance of some type, assuring better access to care).
Efforts to accomplish this approach have been evident for many years.
Since the time of Teddy Roosevelt in 1912, national health insurance (NHI) has been debated while its proponents have sought comprehensive health care protection, in particu- lar, for the aged, children, and the needy. Presidents Roosevelt (both Theodore and Franklin), Truman, Nixon, Carter, and Clinton have all lobbied for some form of NHI or universal health coverage (Cutler, 2004). Growing concern over the cost and accessibility of health services in the 1960s and again in the mid 1970s led to a renewed focus on NHI as a solution by which health insurance coverage could be provided for all cit- izens through a single-payer system or a mix of public and private insurers. Numerous attempts to pass some form of NHI resulted in piecemeal legislation that added various ben- efits for Social Security recipients. The Kerr-Mills bill (1960) set a precedent of public financing for elderly persons who were medically needy but not receiving public assistance.
Medicare (1965) was the first compulsory NHI program in the United States. By 2001, it reached some 40 million people—
only 16% of the total U.S. population (CMMS, 2007).
Most other developed countries offer some type of NHI or attempt to provide universal health coverage to their citi- zens. Other countries believe that health care is a funda- mental right, and provide it as a social service, unlike the United States, which tends to view it as a commodity that is only available based on one’s ability to pay (Woolhandler et al., 2003). The APHA has long been an advocate of uni- versal health care, initially endorsing a single-payer system.
The APHA is now endorsing more incremental extensions of current forms of health coverage along with health care delivery system reforms (Akhter, 2003).
Although many agree that insuring all Americans will improve overall national health and performance, the concept of a government-sponsored, single-payer system is contro- versial (Himmelstein & Woolhandler, 2003). Even though polls reveal that Americans are dissatisfied with the current health care system, they usually report being satisfied with 158
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their own arrangements for health care—and they are un- comfortable with the idea of a government-controlled health plan (Blendon et al., 2006). Single-payer plans could pro- vide cost savings from reduced overhead and administrative costs. Compelling evidence suggests that between $320 bil- lion to $1.1 trillion could be saved through universal health care coverage over the first decade, and the quality of the health care system would substantially improve (Broder, 2005). Once everyone has access to health care, attention can focus more on primary interventions and less on expen- sive tertiary care because people will either remain healthier or be treated earlier at lower costs (Broder, 2005).
What is the best way to provide universal coverage?
Should health insurance still be linked to employment? How can the expense be funded? Should citizens become more responsible for their health outcomes? How can quality be ensured and costs managed? These are important questions, and many policy makers and health care economists are working on potential solutions (Heskett, 2007).
In testimony to Congress, experts from the Common- wealth Fund encouraged the design of a universal health care system that meets four criteria: improves access to care, has the potential to slow cost increases and improve effi- ciency, improves equity in the system, and has the potential to improve health care quality (Collins, 2007).
Some politicians propose expanding Medicare, Medic- aid, and the SCHIP programs, or focusing more on prevention and individual responsibility. Other groups support a system of tax credits, employer and individual taxes, and more
“transparent information about costs and quality” (Interna- tional Foundation for Education, Benefits & Compensation [IFEBC], 2007, ¶10). Some states have begun to initiate leg- islation to extend coverage to uninsured residents. Illinois extended coverage to all children through a program called All Kids, and ways to extend coverage to uninsured adults are being examined. Washington extended insurance coverage for unmarried dependents to age 25 and organized a “state purchasing pool” to help small businesses find health insur- ance for employees (¶ 27). Maryland attempted to tax large, for-profit employers (the “Wal-Mart bill”) in an effort to provide health coverage for the large uninsured population, but the attempt was overturned in the courts. Massachusetts initiated universal health coverage in 2006, and created a state agency to provide information on health insurance plans to consumers and employers. At the same time, Mass- achusetts requires all residents above a set income level to get insurance coverage from their employer or purchase it individually (IFEBC, 2007). Some people think that univer- sal coverage will not be attained because of the partiality toward private insurers and the plan’s lack of cost control measures and lack of adequate provisions for low-income families (Himmelstein & Woolhandler, 2007). Setting potential inadequacies aside, some states have at least begun to incrementally approach the problem of universal coverage.
Proposals to build upon the current mix of public and private insurance may be most acceptable (Tooker, 2003).
This could be accomplished by expanding Medicare, Med- icaid, and SCHIP coverage, along with a new group insur- ance program with a variety of options similar to the Federal Employees Health Benefits Program (FEHBP) and require- ments for insurance coverage for all with income-related subsidies, as needed (Broder, 2005; Collins, 2007; Tooker,
2003). Currently, the federal government provides health insurance through FEHBP to over 9 million employees (e.g., members of congress, park rangers, postal workers) by con- tracting with a variety of insurers who must agree to provide coverage to everyone at the same premium rate (Cutler, 2004). Most agree that a combination of higher taxes and employer/employee fees could subsidize a public–private plan that could cover all Americans (Cutler, 2004; Kahn &
Pollack, 2001).
How much will universal coverage cost? It depends upon which type of plan is chosen, but most agree it will not come cheaply. One economist projected costs of coverage for the current uninsured population to run about $75 billion annually. However, by the end of 10 years, net savings would be between $125 billion and $182 billion annually (Broder, 2005). Others have projected $200 billion cost savings annu- ally by providing universal health coverage and “eliminating the high overhead and profits of the private, investor-owned insurance industry and reducing spending for marketing and other satellite services” (Woolhandler, et al., 2003, p. 798).
Even if everyone receives health insurance, how can quality be assured? Some believe that the overall performance of the health care system will improve as everyone gains access to care. However, others propose “quality-based bonus payments” as an incentive (Cutler, 2004, p. 115). Still others think that a system providing incentives to both providers and patients to use services efficiently and effec- tively will produce the best results (Collins, 2007). Providing information to consumers is another component of quality assurance, and this is sorely lacking. But, information is becoming more readily available. For instance, the Leapfrog Group (2007) promotes transparency through surveys of standard measurements and practices to enable comparisons, and reimbursement incentives to encourage quality and effi- ciency. Scores for local hospitals can be reviewed at the Leapfrog website (see Internet Resources at the end of this chapter). The quality of insurance plans, measured by the Health Plan Employer Data and Information Set (HEDIS), includes information on patient satisfaction, data on risk factor control, and procedures such as prescribing beta (b)-blockers after heart attacks, and is monitored by the National Commit- tee for Quality Assurance (NCQA). Other systems of quality measurement, like health outcomes, the process of care, and adherence to standardized guidelines, among other things, are still needed (Cutler, 2004).
Health Care Reform: Making the Change The cry for health care reform is not new. Perkins examined the work of the 1927 to 1932 Committee on the Costs of Medical Care. More than 75 years ago, the committee defined costs as the major problem and business models of organization as the major solution (Perkins, 1998). Today, consumers and professionals agree that health care reform is needed in the United States. The disagreement lies in the form that it should take and the speed at which it should be completed. At issue is a fundamental conflict in values between advocates of the managed competition model and advocates of the universal coverage or single-payer plan. On the one hand are those who strongly value the competition model, which ensures a free market, individualism, and the right to choose the type of health care desired. On the other CHAPTER 6 Structure and Economics of Community Health Services
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hand are those who propose a more regulated, statutory model.
Proponents of universal coverage argue that more com- prehensive benefits are needed to include the unemployed and those who are physically or economically disadvantaged and cannot afford individual health care coverage. Further- more, they argue that universal coverage emphasizes pre- vention and primary health care as key factors in reducing long-range health care costs and, more importantly, in ensur- ing improved levels of health for the public (Collins, 2007).
Nursing’s Agenda for Health Care Reform (American Nurses Association [ANA], 2002) supports this emphasis by promoting nurses as primary providers of health care. The ANA’s nursing’s agenda proposes a core of care that involves restructuring of the health care system, a federally defined standard package of essential health care services, planned change to anticipate the needs of a population with changing demographics, steps to decrease costs, insurance reform, case management, assured access to health care for all, and establishment of public/private sector review. This plan is enthusiastically endorsed by more than 60 nursing organiza- tions and four non-nursing organizations.
Designers of health reform have faced a difficult chal- lenge in reconciling these conflicting views. As a result, ele- ments of both models have been used to shape an improved system. Reform proposals include an incremental plan that allows for a flexible transition and opportunities for states to experiment with both approaches. Sultz and Young (2006) and Collins (2007) point out the importance of separating the task of financing (how insurance funds are collected) from that of disbursement (how providers receive payment) and implementation (how to put a plan in place). Financing might be tried through an income-based premium that would go into a publicly administered health insurance fund. The methods of collection and administration can then be decided. Japan and Germany have used a payroll-collection method for years to successfully finance their health care systems. Supplemental financing (to adjust for low-income or no-income households) might come from an extra tax on those with moderate to high incomes or from a tax on prod- ucts that are known to contribute directly to health care costs, such as alcohol and tobacco. Some have even pro- posed a tax on fat in foods as a means of raising revenues while impacting the problem of obesity (Chouinard, Davis, LaFrance, & Perloff, 2007).
Disbursement of health insurance funds could occur in at least two ways. First, a strictly federal program could enroll all Americans who are not privately insured and disburse funds through a program similar to Medicare or the Federal Employees Health Benefits Plan, as noted earlier. A second option could be to disburse capitation funds from the federal government to the states for payment to providers. In some cases, state funds could supplement federal disbursement.
Forms of either the single-payer or the managed competition models could be tried to accomplish disbursement, allowing states to adjust for local preferences and existing delivery systems (Cutler, 2004; Sultz & Young, 2006).
Another aspect of health care reform that has been considered is a global budget. In this system, a single, nationwide health budget would help to control certain aspects of national health spending. Much like the Oregon Health Plan (mentioned earlier), funding might come from
income-based premiums plus supplemental sources (Loewy
& Loewy, 2001). The amount of money in this budget would help to determine the size of disbursements to federal pro- grams (e.g., Medicare) and to the states. States could choose to spend more on health care out of their own resources, or to limit the provision of services.
A standard set of benefits, set by law and enjoyed by the entire population, regardless of age, health, income, and employment status, is an important health care reform element. Many countries have successfully implemented such a package under a plan called a statutory model. Var- ious versions of this model have worked well in Austria, France, Belgium, Japan, Germany, Israel, Poland, the Netherlands, and Switzerland. In this model, health insur- ance falls under the rubric of social security, and is funded through government- mandated payroll premiums or taxes.
Payment is made to private-sector health insurers, from a fund called a sickness fund in some countries (Loewy &
Loewy, 2001). Individuals select among nationwide plans and choose their doctor and hospital, and can switch plans when desired. This element of consumer choice is thought to encourage the sickness funds to respond to consumer preferences and improve efficiency in the health care sys- tem (van de Ven et al., 2007). Reimbursement for services is made directly by insurers to providers. In Germany, a disease management program was added to the statutory health insurance plan in the 1990s; its purpose is to both promote competition and increase the quality of care (Stock, Redaelli, & Lauterbach, 2007). This statutory model eliminates the need for separate programs such as Medicaid and Medicare. It also provides uniform and com- prehensive benefits (Harrington & Estes, 2004; Loewy &
Loewy, 2001). See Display 6.3 for a comparison of health systems in four developed countries.
Other issues to be addressed in health reform include making the system more accountable, eliminating adverse risk-selection, and providing informed choices to con- sumers. Although reform is under way, the need continues for strong advocates of universal access and cost contain- ment. Furthermore, health reform proposals must be encour- aged to focus on the central question: Do they fund the pro- motion of health and prevention of illness or simply pay for the diagnosis and treatment of those who are already ill?
World Bank evaluations show that public health interven- tions have been found to be consistently more cost-effective than medical services, yet health reform proposals have often paid minimal attention to this critical issue. In addi- tion, “the current emphasis on managing medical care for cost containment disregards the social and environmental genesis of many health problems” (McIntosh, 2002, p. 85).
Community health nurses can play an influential role in emphasizing health promotion services as being central to future health reform efforts through political involvement and policy development.