James A. Morone
In the high drama of winning health reform, a crucial matter is being pushed aside--who is going to make the system work? The fate of health reform turns on effective, sensible administration. Ignoring the issue now will produce chaos when the reforms are implemented.
The president's Health Security Plan gives the administrative job to vaguely delineated regional health alliances. The plan leaves most organizing details to the states though it loads an eye-popping roster of tasks onto the alliances. The alliances oversee cost control, assure universal coverage, keep an eye on the quality of care, negotiate insurance contracts, collect premiums, and discipline insurers who grab the easy money by chasing healthy people. They are the heart of the new health care system.
Conservatives respond with the Republican reflexive: too much government. They are exactly wrong. It is health care competition that creates the regulatory burden. Entrepreneurs in a dynamic market will restlessly seek out creative, winning strategies. In health care, the surest path to fortune is grabbing the healthier patients. The next best alternative is shifting your own costs to another payer.
Reforming the rules will not alter the entrepreneurial incentives, only prompt new calculations about how to achieve them. Someone--call them alliances or regulators or health boards--has to referee the complex health markets. Without careful monitoring, the new competition will yield the same old troubles: eroding coverage, rising costs, nervous citizens, cost shifting, chaos.
But if conservatives cannot have health markets without regulation, progressives must design agencies that are up to the job. The financial stakes will be enormous. Expect ferocious interest group politics.
Begin with the most rudimentary question of political design. To whom will the alliances be accountable? Answer: cross cutting political forces competing for influence over health policy. The states will each have to hash out their own laws, specifying the details and granting operating authority. Interests that lose in Washington can try again on their political home court. This time, those who can afford lawyers and lobbyists will most profit from the drafting of esoteric administrative details.
When the governors draw the alliance boundaries within their states, a new set of conflicts will erupt. In some cases, boundaries will affect reimbursement rates. In others, they will provoke long-standing local animosities. Expect years of litigation.
The last federal try at rational health policy through local agencies--the health planning program of the 1970s--signals the danger. Throughout the country, local communities plunged into the bare-knuckled politics of agency construction. In Philadelphia, for example, the suburbs sued for a separate agency to avoid being swallowed by the Philadelphia medical establishment. The powerful hospital union quickly jumped into the fray. So did local hospital associations, medical associations, the Rizzo administration, suburban leaders, the congressional delegation, the secretary of HEW, several business groups, Blue Cross, a grass roots citizen action group, and a civil rights organization--each with their own agenda. The brawl lasted more than three years. And the result was a hopelessly unwieldy organization--a governing board of more than 100 members, overlapping committees, chaotic by-laws. Nor was Philadelphia at all unique. In Los Angeles, an organizational meeting got so hot that the police had to intervene. Four years into the health planning program, only eight states had met federal requirements. And, all this when the stakes were far lower.
Federal officials do retain some oversight authority over the alliances, but not nearly enough. The blunt mechanisms at their disposal offer little effective control. Federal officials can withhold certification only so long. They can de-fund only so many recalcitrants. And for many state officials, picking a fight with the feds is a trusty route to local popularity.
Choosing board members is another notorious source of uproar. In the presidents plan, the governors specify the selection method, though one-half of the board must be "consumers." However, unless the representational details are far more carefully specified, calling for consumers is more a fantasy than a serious policy. "Consumers" is an almost inexhaustible category that ranges from abortion foes to the Hemlock society, from Latino groups to motorcycle clubs. Once the alliance boundaries are sorted out, expect a spectacular scramble for board seats. Scores of organizations will stake their claim. And though the Clinton plan offers some sensible advice about board selection and accountability, state officials are free to ignore it.
The staff is even more important than the board. The alliances will need genuinely talented men and women, but their recruitment efforts will face the usual barriers. Professionals will be leery of joining high-conflict agencies. During every budget crisis, the staff will be tagged "bloated bureaucracy" and cut. And the most talented people will swiftly be lured to high paying industry jobs where they will negotiate with former colleagues over matters such as reimbursement levels.
In short, while the complexity of a decentralized, proto-competitive plan magni- fies the importance of good administration, Washington politics present twin dangers: Conservatives push to eviscerate the alliances altogether--all but ensuring that the new health competition will magnify the troubles of the old. And all political sides are drawn to the alluring prospect of just forgetting about administration and jousting over the headline issues like universal coverage and employer mandates.
For those who care how the reforms will actually work, the historical lessons are vivid: resist the temptation to weaken the infrastructure of the plan. Do not fob off administrative detail to the states or to the unspecified future. Design the alliances carefully. Worry now about organization, management, board selection, and staff recruitment. Organize tight oversight. Carefully, specify the stick and carrots of federal control.
This is the oldest lesson in American political reform, laid out clearly in The Federalist Papers: we ignore the administrative detail at the peril of our aspirations.
Get Insurers Off the Case
Even the most complex plan for health care reform--which the Clinton plan may well be--can be reduced to the simple matter of what a doctor does for a patient and why. No health care system can work unless doctors and patients are generally satisfied with this fundamental transaction. The greatest weakness of the Clinton plan is its potential for adding to the difficulties of doctors trying to deliver good medical care to their patients.
Most doctors are now paid on a fee-for-service basis. The more services they perform, the more they are paid. Although the consequent incentive of doctors to overtreat is not the only cause of rapid inflation in health care costs, it is certainly one of them. Furthermore, the fees are skewed so that doctors are rewarded preferentially--and sometimes extravagantly--for doing expensive tests and procedures. Since medical decisions are seldom clear-cut, there is great latitude for doctors to exercise a bias in favor of high-technology medicine--a bias further encouraged by medical schools, the malpractice system, and public credence.
In recent years, third-party payers have reacted by attempting to reduce coverage in one way or another. For example, they often review doctors' decisions before agreeing to cover certain services or deny coverage for certain services after the fact. Such efforts to micromanage care are extremely frustrating for both doctors and patients. Doctors feel like double agents, torn between their patients' interests and restrictions imposed by third parties. Patients, for their part, feel that the care they receive is increasingly determined by conditions other than their medical needs or their doctor's judgment.
The Clinton approach, proponents hope, will reduce third-party micromanagement, in part by removing the incentives for doctors to perform too many services. Unfortunately, it would replace them with different incentives that may be even more harmful to doctors and patients. Most patients would receive their care from health plans, prepaid networks of providers analogous to HMOs. Since a plan would receive a set premium for each patient--"capitation"--no matter how many services were actually delivered, it would have an incentive to provide fewer services rather than more. Primary care doctors would function as gatekeepers, regulating access to the more expensive elements in the system, such as specialist consultations and hospitalization.
This reversal of incentives carries with it the risk that doctors might do too little, rather than too much. The Clintons propose to prevent undertreatment by requiring plans to compete for patients on the basis of quality as well as price. The playing field would be leveled by requiring all plans to offer at least the same basic package of services, and they would not be permitted to turn down an enrollee because of health status. Ostensibly, quality would be assured by permitting patients to switch plans each year if they were dissatisfied, and also by setting up an independent quality management program. But most people stay reasonably well in any given year, regardless of the quality of their medical care. Deficiencies in quality would therefore affect only a small fraction of enrollees and would be difficult to discern. Indeed, the great majority of enrollees might be satisfied relatively cheaply by plans that provided courteous and prompt attention in pleasant surroundings, while simultaneously stinting on more important elements of care, such as access to expensive imaging studies for the few who need them.
The threat to quality is exacerbated by the fact that most plans would be owned by profit-making businesses, notably the giant insurance companies. To maintain profit margins within a budget, these businesses would have a strong incentive to cut down on services. Since the doctors would be employees or contractors, the insurance companies would have even more control than they have now over the care doctors deliver to their patients. Efforts to monitor quality in the face of strong pressures to reduce it would require a large and inevitably clumsy public bureaucracy that would siphon off resources from the actual delivery of health care. Such a bureaucracy could well turn out to be as expensive and intrusive as the present one.
Two revisions to the Clinton plan would help. First, the plans should be owned not by profit-making businesses but by nonprofit cooperatives of doctors and enrollees. If this were the case, the interests of investors would not be pitted against the interests of doctors and patients. Second, price competition should not be permitted. Instead, the plans should be paid a fixed premium according to their patient mix. Plans would then compete explicitly on the basis of patient satisfaction and the incentive to undertreat would be greatly tempered. With these revisions, there would be little financial reason to provide either too much care or too little, and the need to monitor quality closely would be reduced.
Health care should be treated as a social good, not a market commodity. Although there is no way to remove financial incentives completely, we can reduce them. Doctors want to serve their patients well, as long as they are not subject to overwhelming inducements to do otherwise.
Keep Single Payer Alive
Since the debate on health care reform debate centers on the Clinton proposal, trying to improve that plan is more responsible than complaining that the president didn't choose the "single-payer" approach.
If some version of the Clinton plan is enacted, we need to maximize the likelihood that states will choose the single-payer option and that the plan will eventually evolve into a single-payer system overall. On the other hand, if Congress rejects the president's approach (say, by enacting incremental insurance reform and minor financing changes and merely promising to revisit universal coverage later), it will be important to have prepared the ground for a later debate.
How can advocates plant the seeds of a single-payer option within the Clinton framework? One idea is to add a Medicare option to the mix of health plans from which individuals can choose. This new Medicare option, perhaps called "Part C," could also enroll people in states that elect not to enter the program--a far more realistic fall-back option than the president's plan to put recalcitrant states into "receivership" and have the federal government develop alliances and plans for them. More important, the availability of a Medicare Part C option would stimulate the gradual development of an infrastructure for a single-payer financing mechanism. This new option would permit public insurance to compete with private insurance. Surely such competition should be welcomed by those who are aware of Medicare's performance compared with that of private insurance and should not be feared by those who claim that government is unable to do things efficiently.
Another worthwhile amendment would remove obstacles that make it nearly impossible for states to finance health insurance through broad-based state taxes or graduated premiums linked to income, instead of through employment-linked premiums. Though few states would probably opt for the single-payer tax alternative, the option to go that route would permit the gradual evolution toward a tax-based, non-employment related system.
Neither of these amendments does more than make things possible. To move further would require a radical restructuring of the president's approach. Nevertheless, even these changes would increase options and enhance competition and public debate. For that reason, they should appeal to the constituency that believes in the advantages of social insurance over employer-mandated mechanisms, as well as to those who believe in marketplace competition and are convinced that the public sector cannot compete effectively with the private sector. Let government (Medicare Part C, tax-financed care in some states) compete with private insurance, and may the better approach win.
Doctor's Orders and Patient Choice
Jeffrey B. Morris
Among the least popular and least understood features of the Clinton plan is the proposal to create insurance purchasing alliances. Supposedly, the alliances would be just another layer of bureaucracy on top of the existing system of insurance company managed care, but this caricature is a dangerous misconception. In reality, creating alliances is the best way to prevent insurance companies from taking over the entire system, as seems likely to happen if present trends continue.
Under Clinton's plan, consumers and employers would pay premiums to their regional alliances. Consumers would then be free to choose from many "accountable health plans" certified by the alliances. Some of these AHPs might be sponsored by insurance companies, but others would be networks of physicians and hospitals, HMOs, or even state single-payer plans. This would be decidedly different from the current arrangement, wherein employers choose an insurance company that has previously arranged an exclusive relationship with a provider network, usually without input from consumers.
To critics, the alliances represent "more layers of bureaucracy," "increased government control," or even "socialized medicine." Paul Ellwood, for example, of the Jackson Hole Group, wants to weaken the influence of alliances by allowing employers to opt out and purchase insurance on their own. He argues that the traditional relationship between insurance companies and employers has created a group of very sophisticated buyers who have leveraged down prices.
But doctors in California know too well the result of that relationship: insurance-run managed care. Although most of us do not object to the concept of managed care, we are alarmed to see insurance companies selling HMO products to employers and then escaping from their traditional role as risk underwriters by shifting the risk to physician providers.
In this situation, physicians have been stripped of control over how they take care of patients but are still blamed for medical cost increases. Meanwhile, insurance companies pay bonuses and dividends to CEOs and shareholders, shifting a greater percentage of the health care dollar away from direct patient care and into corporate profits and expensive marketing plans. Physicians are left with the risk for care_--not to mention a growing morass of quality-of-care concerns.
The Clinton plan would fundamentally shift control back where it belongs: to the physicians and patients. The bargaining for health care services will take place not between insurance companies and employers but between consumers and providers. The insurance companies would no longer be able to contract with an employer and "deliver" groups of patients to one provider network over another; in addition, employers would no longer have the administrative chore of selecting an insurance plan for their employees. Through the alliance mechanism, that responsibility would revert back to each citizen along with the right to choose individual doctors. Each accountable health plan would have an equal opportunity to compete, both on cost and quality, for consumers who directly choose their plan.
For physicians, this provides a historical opportunity to unite as AHPs. True, most physician networks would ultimately join with a hospital, an insurance company, or with other business organizations to vertically integrate into AHPs. But the insurance companies would be competing to become partners: they would have to offer competitive prices for the services they bring to the table, such as administration, management, and marketing.
We cannot turn back the clock to a time of unlimited health expenditures. Managed care is already a reality. The fact that this reality places physicians and consumers alike in roles subservient to the insurance industry is something President Clinton has attempted to change. Doctors can learn new ways to practice medicine in a budgeted environment, as long as we can channel most of our resources into direct patient care. Those who either unwittingly or knowingly attempt to undermine this legislation could destroy a golden opportunity for health professionals to regain the stewardship of health care in this country, in partnership with citizens.
Beyond the Economic Model
Ezekiel J. Emanuel
Along with universal access and cost control, accountability has become a mantra of health care reform. Doctors are supposed to be accountable for the results of their decisions and treatments. Managed care plans are supposed to be accountable for patient satisfaction and efficient, high-quality care. Health alliances are supposed to be accountable for controlling costs and ensuring access. But what do we mean by accountability? And how should we institutionalize it?
The proponents of managed competition unabashedly offer an economic conception of accountability: make providers feel the pressure to survive in a competitive marketplace. Patients, meanwhile, will act as consumers, choosing among the competing plans based on price, quality, and service.
Health alliances will police the whole market. They will ensure truth in advertising by health plans, as well as compliance with the minimum standard benefit package. They will measure patient satisfaction and monitor providers' clinical judgments and outcomes, publishing all this data in a sort of "Consumer Reports" for the patient-consumers. Dissatisfied consumers can leave plans and seek a better combination of price, quality, and service.
The economic model of accountability has always been afforded a privileged position in American society. Yet in some spheres--most notably individual rights, socially guaranteed opportunities, and sometimes the environment--we reject treating goods as commodities and using the market for accountability. While we are not always consistent or successful in this endeavor, our belief that some spheres are off-limits to markets raises the question of whether the economic conception of accountability is the right one for health care.
Americans condemn pharmaceutical companies that accrue high profits while millions of Americans forgo necessities to buy medicine. Similarly, we restrict physicians and hospitals that act like businesses in refusing to treat patients who cannot pay or in making profits on self-referral. And when hospitals act like profit-making businesses, the public call is to force them to reaffirm their public service missions. Probably the most telling piece of evidence supporting the notion of health care as a socially guaranteed right is President Clinton's repeated insistence that universal coverage is the single value that cannot be compromised.
One alternative is a political conception of accountability Here, health care is viewed as a socially guaranteed benefit and individuals act not as consumers but more as citizen-members. Managed-care plans are less businesses and more democratic policymaking bodies. The patient's loyalty to a particular physician and health plan is not viewed as an irrational quirk distorting ideal economic behavior but a virtue to be encouraged. In a political conception of accountability, the main mechanism for expressing dissatisfaction and assuring accountability is not "exit" from the organization in search of a better one, but active participation by patients in evaluating their health care plans and in making critical administrative decisions affecting provision of services.
If we are going to reject--or at least temper--the economic model of accountability and infuse more political accountability into health care, then certain institutional adjustments to the Clinton plan will be necessary. For example, we could ensure enrollee involvement by requiring that all managed care plans have a board of directors elected from among its members or--even further--by requiring that managed care plans be patient cooperatives, like Group Health Cooperative of Puget Sound, one of the oldest HMOs in the country. We might also create a special pool of capital to help fund managed care plans by citizens' organizations or other community-based groups. We might also switch the focus of cost control from pressure on individuals to select the cheapest health plan-- which undermines loyalty--to strong global budgets for each plan.
Everyone accepts the goal of more accountability in health care. But we should not let the economists and their allies dictate the conception of accountability.
Don't Forget Public Health
Joan E. Ruttenberg
Whatever other criticisms the Clinton plan may deserve, it is beyond debate that achieving universal access to medical care will be good for the public's health. The plan also gives welcome emphasis to prevention and primary care in several ways: coverage for well-child and adult screening services, promotion of primary care physicians and advanced-practice nurses, more money for health facilities in schools and medically underserved areas, and support for nonmedical services-- transportation, child care, translation--that enable people to better use existing services. All will improve health.
Yet much illness and injury can be traced not to a lack of medical care but to dramatic rips in the social fabric: addictions, violence, homelessness, malnutrition, adolescent pregnancy, and environmental contamination, among the most damaging. One-on-one clinical encounters, even of a preventive nature, are unlikely to redress or prevent medical problems with such deep social roots. Expanding treatment alone, therefore, will not create good health, nor will it contain health care costs.
The Clinton bill goes further and creates, under the rubric of "public health initiatives," a pool of federal money to fund state and local public health action. Grants would support traditional public health functions (e.g., protecting food, water, and housing quality, educating the public, and performing lab services, training, and data collection). Money also would be available for innovative community-based public health projects, expanded substance abuse and mental health services, and National Health Service scholarships.
Increased federal support for chronically underfunded state and local public health activities is certainly desirable. Universal coverage may even free up state resources currently devoted to direct medical services. The bill's funding categories are general enough to encompass many innovative state efforts. And maintaining state discretion respects both political reality and state expertise. Yet when all is said and done, the plan essentially funnels additional money to the existing public health structure, without assessing whether that structure, or its traditional priorities, is adequate to the job.
The current national debate affords Clinton an unparalleled opportunity for leadership on the paramount role of social investment in engendering health. In other contexts, Clinton has rightly emphasized the potent connections between social and medical ills, by seeking full funding of the Women with Infants and Children program, for instance, and by identifying gun control and violence as health care issues. He is the first president in recent memory to make these links, and for this alone he deserves high praise. To go further and include broad-reaching reforms of issues not traditionally seen as health-related in a health care proposal might well be political masochism. But failing to do so may doom cost-containment efforts, leading to public disillusionment with reform. At the very least, Clinton should shape the debate to highlight the connections between social problems and health care.
Of course, nothing would motivate increased federal attention to public health and social investment like full, unvarnished responsibility for the costs of illness brought about by preventable social problems, and a clear connection drawn between the two. By forgoing a single-payer system and retaining private, employment-linked insurance, the Clinton plan layers employers, health plans, insurers, and regional health alliances between the cost of care and the cost of prevention. These layers will mute the economic message that expensive, preventable health care needs might otherwise bring to government. Clinton will need to redouble his efforts for public health investment to counter this misleading silence.
The president has threatened to veto any health care reform legislation that does not include universal coverage. But meaningful universal coverage is not a given; if it isn't fought for, it will be gutted, delayed into the twenty-first century, or simply forgotten. Within Congress, the real threats to the president's plan come from those who are opposed to employer mandates and who would be even more opposed to the financing mechanisms found in single-payer alternatives.
But in seizing the day to fight for universal coverage, advocates should keep in mind that health policymaking is an ongoing, long-term process with a history and a future. The most compelling event in our recent health policy history was the fiasco of the Medicare Catastrophic Coverage Act, passed in 1988 and repealed in 1989 in reaction to voter outrage about its financing and cost. Among the many lessons of this experience, one is that we must create a policy context in which universal coverage is sustainable in the long run, that allows it to become an everyday fact of life in America, as it is elsewhere in the developed world.
Even if we pass a bill with universal coverage, its opponents may well keep on fighting. They will pounce on every indication that reform is costing more than expected and blame the high costs on coverage of the poor and previously uninsured. If, as in the case of Medicare Catastrophic, it becomes clear that those who are paying the most are getting little in return, the ground becomes fertile for frightening the public and Congress into carving away benefits, lowering subsidies for low-income people, or increasing deductibles and out-of-pocket cost ceilings. In essence, this would shift more of the cost of reform to the shoulders of those who need health services most and can afford them the least. Without a doubt, health care reform has a lot more to offer to a lot more people than did Medicare Catastrophic. However, it will also gore the oxen of many more well-funded special interests. Given those interests, sustainable universal coverage requires a plan that resonates to the needs of most Americans, while it attends to the most vulnerable.
While we can maximize the chances for universal access by careful legislative crafting, no plan can, in itself, guarantee such access. It ultimately depends on the decisions and actions of thousands of individuals and organizations. Vigilance, and information to make vigilance possible, will be essential to identify situations in which individuals are being denied their rights and to identify patterns where groups such as the disabled, minorities, and residents of remote areas and inner cities continue to be underserved. The plan must provide protected resources for collection and analysis of essential data on access, quality, consumer satisfaction, and cost. Health plans, health alliances, indeed the entire system, will be truly accountable only if we have sound and democratic ways to set performance standards and equally sound ways to assess and improve system performance.
The Clinton plan is best viewed as a critical turning point in health policy. If we can solidify universal coverage as a fundamental principle, we can move on to the longer term task of increasing the value we get from our health care system, in terms of care and, most important, in terms of the health of the American people.
Who Watches the Watchers?
The health care consumer has officially been discovered. Acknowledging that the current system is responding to the needs of providers, insurers, and drug companies but not to the needs of the American people, the president's Health Security Plan greatly expands the role of consumers as a counterforce to the special interests.
The Clinton plan gives consumers a critical role in determining the direction of the system at the state and local level. A seven-member National Health Board, appointed by the president, will ensure that states conform to statutory standards for benefits and data collection, will enforce overall spending limits, and will develop insurance market regulations. A National Quality Council (without consumer representatives) will develop quality and access standards, including measures of consumer satisfaction.
Within the national standards, states will have broad discretion to act. States will be able to choose a single-payer option or require plans, including large, self-insured corporations, to all pay the same rates. The federal government will distribute funds to each state for health care reform planning. Each state will be required to set up one or more health alliances in their geographic regions.
It is within the alliances that consumers are expected to exert their influence over the system. States will have discretion in determining the form of the alliances. They can be non-profit organizations, public authorities, or state agencies. Individual consumers and employers will each make up half of the alliances' boards. By bringing the buyers of care together, the alliances are set up to act as a counterforce to the providers and insurers.
Under the Clinton plan the alliances will negotiate rates with health plans but will be much more than brokers of health insurance. They will have significant oversight responsibilities with respect to health plans. The alliances will monitor plans to ensure that all enrollees receive the uniform benefit package. Alliances will be in charge of negotiating the premiums with health plans to ensure they live within the overall budget cap. They will play an important role in disseminating information about quality and assisting consumers in making decisions about plans. Alliances will also have great discretion in determining the policies to meet the needs in underserved areas. Additionally, alliances will be required to provide an ombudsman to assist consumers with problems. But unless the capacity of consumers to participate is greatly enhanced, the crafting of a new system will remain in the hands of the special interests.
As now structured, several factors will blunt the effectiveness of consumer participation. First, the alliance boards will represent several interests: consumers, employers, and state government. It is unlikely that the consumer viewpoint will prevail, especially given the structural disadvantage. Other parties, both the regulators and the regulated, are likely to be part of an organization--a business, a hospital, a physician group practice--giving them greater access to resources than consumers have. Moreover, these parties are likely to be part of a network or association--a medical society or a chamber of commerce--that can provide both technical assistance and a means of communication to other organizations with a common interest. Consumers alone lack these institutional connections.
Second, the relative power of the alliance board and staff also limits the effectiveness of consumers. How much authority will really rest with the board, and how much will devolve to the staff in charge of day-to-day operations? Because they lack a connection to outside supporting organizations, consumer board members will depend on alliance staff and be less likely than other parties to maintain an independent viewpoint. In addition, unless consumer representatives are linked to their constituency, there is the danger of co-optation.
The Clinton plan needs to support consumers in a number of ways. Alliance boards must be structured so they are as independent of state administrations as possible and reflect the diversity of the alliance members. There needs to be technical support for consumers on the alliance boards so nonexperts can understand issues that confront them and participate effectively. Most important, the legislation must recognize the need for independent consumer organizations. These organizations will provide support for alliance representatives and organize a consumer constituency that will hold alliances accountable. Creation of such organizations should be required through alliances and should be financed through a dues checkoff on premium payments or through federal grants.