Health Care Reform in the 1990s: An Analysis of the Problems and Three Proposals
Scuka, Robert F., Social Work
There is widespread discussion of whether the U.S. health care system is in a state of crisis. A consensus on this has not been reached but appears to be slowly emerging. It perhaps reached a critical breakthrough with the special U.S. Senate election in Pennsylvania in November 1991. Many political analysts regard health care as the single most important issue that crystallized voter preference in that election, and the ensuing public debate during the 1992 presidential election only substantiated the impression that a sufficient critical mass in public opinion would necessitate a positive political response to this public policy problem.
Of course, political events tell nothing about what the response is likely to be or whether the political calculations that inevitably must be made will result in a response that goes beyond stopgap measures and patchwork changes to embrace a comprehensive reform that addresses the underlying problems facing America's health care system. As a consequence, it is important to consider some of the reforms that have been proposed in response to the public concern over the state of health care in America and to identify how well these alternative proposals address the underlying problems. This article does three things: (1) It discusses the problems that constitute the crisis in American health care; (2) it delineates the criteria by which any health care reform proposal should be evaluated; and (3) because the crisis in U.S. health care is as much a political as it is a public policy problem, the article evaluates three proposals for reform considered by the U.S. Congress.
The proposals to be evaluated include the Universal Health Care Act of 1991 (H.R. 1300), proposed by Representative Marty Russo (D-IL), hereinafter referred to as the Russo bill; Senate bill S. 1227, sponsored by Majority Leader George Mitchell (D-ME), hereinafter referred to as the Senate bill; and the Pepper Commission report on Access to Health Care and Long-Term Care for All Americans (U.S. Bipartisan Commission on Comprehensive Health Care, 1990), hereinafter referred to as the Pepper Commission Report. These proposals represented two of the major alternatives in the current policy debate: the "single-payer" model (the Russo bill) and the "play or pay" model (the Senate bill and the Pepper Commission Report).
Factors Contributing to the Health Care Crisis
The crisis in American health care comprises a number of distinct problems, but this article will focus on two fundamental issues: absence of universal access and excessive costs.
Absence of Universal Access
The absence of universal access to health care constitutes for many the number 1 problem in America's health care system. Access is restricted on the basis of employment; ability to pay; current level of health; and, most significantly, ability of certain individuals to obtain health insurance (for example, those with pre-existing conditions). Recent estimates indicate that between 32 million and 37 million Americans are without any health insurance and that another 25 million have only minimal or inadequate health insurance (Cohn, 1991).
Ironically, Medicare contributes to the problem of nonuniversal access by creating a select population guaranteed adequate access and denying other groups such access. Some refer to this as America's two-track system in health care. However, the problem goes deeper. The United States has a multitrack system that includes private employment-based health insurance policies; Medicare for elderly people; Medicaid for poor people; and a grab bag of leftover or no options for those who are unemployed, underemployed, self-employed, or employed by companies that offer no health insurance benefits. The current employment-based system is predicated on the assumption that health insurance is a fringe benefit rather than a fundamental right.
Another factor contributing to the problem of nonuniversal access is the widespread practice by health insurers of restricting or denying coverage to individuals with prior health problems (pre-existing conditions). Insurers argue that these individuals are excluded to contain costs and minimize increases in health insurance premiums. The policy successfully accomplishes both goals by limiting insurers' liability. But this success is attained at the cost of denying access to those most in need of health care and by undermining the very rationale of insurance: to minimize the consequences of unfortunate life events by spreading their economic cost over the largest possible population. For many, this practice is perhaps the most frightening and inhumane aspect of the present system of health insurance coverage in the United States.
The excessive costs of health care, both to the individual and to the nation, constitute the second major problem in America's health care system. For the individual, cost can become a significant stumbling block in two ways: (1) Premiums for privately purchased health insurance for those who neither have employment-based coverage nor qualify for Medicare or Medicaid can effectively price the individual out of the health insurance market, and (2) copayments and deductibles can impede access to health care even for those who have health insurance.
The rise in health care costs is threatening to overwhelm the U.S. economy. In 1990, total national health expenditures were estimated to represent 11.5 percent of the gross national product (GNP), compared with 7.6 percent in 1970 and 9.5 percent in 1980 (Dye, 1987). A Washington Post article cited a U.S. Department of Commerce report predicting that the figure would rise to an unprecedented 14 percent in 1992 (Sawyer, 1991). By comparison, Canada experienced a rise in health expenditures over the same period of 7.4 percent to only 8.9 percent of the GNP (2.6 percent less than the United States)--and this was under a universal access, single-payer health care system (U.S. General Accounting Office [GAO], 1991).
One contributing cause to this runaway inflation in health care costs in the United States is the extra administrative expenditures associated with maintaining a private insurance system comprising many insurers. One study estimated that in Canada administrative costs equal 6 percent of the total health care budget, whereas in the United States administrative costs equal 22 percent (Himmelstein & Woolhandler, 1986). Moreover, Americans spend more per capita (U.S.$26) to administer Medicare and Medicaid alone than Canadians spend per capita (Can$21) to administer their entire universal system of comprehensive health care coverage (Evans et al., 1989).
A second contributing cause to the high cost of health care is the increasingly high cost of sophisticated medical technology. When linked to the absence of cost controls, there is significant duplication in medical technology expenditures because competing health care providers want to provide the best and most up-to-date testing and treatment modalities to their patients. However, this practice also reveals the significant social and economic costs of allowing market-driven mechanisms to control spending for advanced medical technology on a nationwide basis.
A third factor contributing to the increased rate of expenditures on health care is the unregulated increase in rates charged by physicians and institutional health care providers for medical services. Some success has been achieved in controlling medical service costs under the Medicaid program by means of standard fee schedules. Former Secretary of Health and Human Services Louis W. Sullivan also announced radical changes in the Medicare system that would establish a much tighter national fee schedule for physician fees and major medical services (Rich, 1991).
Moreover, the absence of both a universal fee schedule for medical services and cost controls on major medical technology expenditures leads to a fourth contributing cause of the exorbitant cost of health care in the United States: the absence of comprehensive goal setting and policy implementation at the national level. Indeed, it can be argued that lack of national goal setting is the most significant problem affecting the U.S. health care system.
Criteria for Evaluating Reform Proposals
By what criteria should competing proposals for health care reform be evaluated? Criteria proposed in this article are not beyond controversy, but they follow implicitly from the preceding analysis. Moreover, these criteria clearly point up the need for a comprehensive reform of the U.S. health care system. The health care crisis is of such magnitude and the long-term consequences of inaction are so pronounced that nothing short of a radical overhaul of the entire system will satisfactorily address the problems.
The proposed criteria for evaluating the adequacy of any health care reform proposal include the following:
* Does the proposal provide universal health insurance coverage so that no U.S. citizen or legal resident is deprived of access to health care because of the lack of coverage?
* Does it eliminate the current link between employment status and health insurance coverage? People in a variety of employment-transition circumstances need to obtain alternative insurance, and job mobility is constrained when coverage is an impediment to leaving or changing jobs (GAO, 1991). The disincentive to people's leaving welfare--the loss of Medicaid benefits--is a major problem in welfare reform as well (Fox & Leichter, 1991).
* Does the proposal eliminate cost-sharing features such as copayments and deductibles that could indirectly impede access to health care because of out-of-pocket costs?
* Are pre-existing medical conditions prohibited as a condition for restricting or excluding individuals from health insurance coverage?
* Is universal access to adequate primary health care given precedence over providing specialty care services for a limited population? This criterion is predicated on the principle of distributive justice, which argues that burdens and benefits should be equitably distributed within a given society (Rawls, 1971). Applied to health care, this means that no one should receive extraordinary care until everyone receives minimally adequate primary health care.
* Are controls imposed on the purchase of expensive medical technology by institutional care providers to limit the inefficient and costly duplication of resources? Precedent for such controls is to be found in various state certificate of need laws, which regulate the provision of certain health care services by institutional providers.
* Is a nationwide system of standard fee schedules for physicians and institutional providers established to control the rising costs of physician fees and major medical services?
* Is global health care planning established to set goals and implement health care policy at the national level, thereby establishing for the first time a truly comprehensive and integrated U.S. health care system?
Proposals for Health Care Reform
Anything short of a universal access, single-payer system with national standards would constitute a set of patchwork adjustments that would not correct the problems that exist in U.S. health care.
Of the three proposals discussed--the Russo bill, the Senate bill, and the Pepper Commission Report--only the Russo bill presented a comprehensive reform proposal. (Table 1 provides a summary analysis of all three proposals.) The following comparative analysis explains how the Russo bill met the criteria of adequacy for a health care reform proposal and why the Senate bill and the Pepper Commission Report failed to meet these criteria, relying on analyses by Manchester (1991), Citizen Action (1991), and the National Association of Social Workers (NASW, 1991).
Universality of Coverage and Independence from Employment Status
Only the Russo bill unambiguously had as its fundamental premise the creation of a universal public insurance program. The Russo bill eliminated the link between employment status and health insurance coverage because every American would be guaranteed coverage regardless of employment status. There is some concern, in light of experience with Medicare and Medicaid, that increased ease of access to medical care would contribute to inflationary pressures on health care costs (Dye, 1987). The Canadian experience appears to demonstrate that increased access contributes to some added inflationary pressures, but less than might be expected, and certainly far less than the current U.S. rate of health care inflation (GAO, 1991).
By comparison, the Senate bill fared poorly on both criteria. The key mechanism of the Senate bill was a play or pay approach that would have compelled businesses either to provide health insurance. to their workers or to pay into a public fund to help defray the costs of providing insurance to uninsured people. Unfortunately, this system would perpetuate the link between employment status and health insurance coverage.
Moreover, the Senate bill also failed to provide for universal coverage because it would not have automatically provided insurance to those who are not otherwise covered; instead it adopted a punitive system of withholding personal tax exemptions and other federal assistance from those who fail to apply for the public insurance plan.
The Pepper Commission Report proposed to provide universal coverage by supplementing the present job-based insurance system with a new public plan that would cover all who remain uninsured. This would accomplish the goal of universal access, but only by perpetuating the present multitrack, employment-based system of health insurance coverage, with all its attendant disadvantages.
Only the Russo bill truly eliminated the indirect impediments health care caused by out-of-pocket costs. The bill would have done away entirely with deductibles, copayments, and annual out-of-pocket limits. By comparison, the Pepper Commission Report failed to eliminate this indirect impediment because it retains both a flat rate deductible for individuals and families and the traditional 20 percent copayment for most services. (Prenatal care and some other preventive services would have been exempted.)
The Senate bill offers a compromise by proposing the elimination of deductibles and copayments for those living below the poverty line, the use of a sliding scale for those living between 100 percent and 200 percent of the poverty line, and the traditional deductible and copayment system for all other individuals. In addition, the Senate bill retains a $3,000 annual out-of-pocket limit.
Pre-existing Medical Conditions
The Senate bill places limits on the use of exclusions, rate variations, and the denial or non-renewal of group policies for pre-existing conditions without actually eliminating these practices; the Pepper Commission Report apparently prohibits such practices, but the comprehensiveness of the prohibitions is unclear. Because the potential for abuse in any multiple-insurer, employment-based system seems clear, only a universal access, single-payer system like that proposed by the Russo bill would eliminate exclusion problems.
Adequate Primary Health Care
Providing adequate health care for all may require imposing controls on expenditures for expensive medical technology. Rationing is implied in the TABULAR DATA OMITTED Russo bill, but rather than eliminating certain medical services, it would limit the use of certain high-cost services in light of limitations on resources and the realization that not all uses of available medical technology are cost-effective (for example, the widespread use of expensive diagnostic technology in low-risk cases) or medically warranted (for example, heart bypass surgery, of which as much as 40 percent are medically unnecessary) (Russo, 1991).
Rationing as envisioned by the Russo bill may also have entailed determining "the priority for patients needing specialty surgical procedures" (GAO, 1991, p. 53). Emergency cases would not have failed to get treated, but medical determination of how pressing the need for treatment was would have been required, non-life-threatening situations would have been given lower priority for treatment, and certain uses of expensive diagnostic technology and certain elective surgical procedures (such as cosmetic surgery) would not have been included as a universal benefit but would have been available as a privately purchased option (GAO, 1991).
Society's ability to pay for health care is not unlimited, and implicit rationing already occurs in the United States, for example, through insurance company prescreening and approval of expensive medical procedures (GAO, 1991). The innovative but controversial Oregon Health Care Plan proposed to guarantee near-universal access by mandating a minimum entitlement to basic health care and imposing certain limits on benefits to contain costs (Fox & Leichter, 1991).
Conversely, adequate primary health care, made available on a universal basis, would cover all medically necessary care (with certain hospital length or other customary limitations) and would place the emphasis on preventive and wellness care. Although the Senate bill and the Pepper Commission Report both recognize the importance of preventive care and prenatal and well-baby care, and although the latter also addresses issues surrounding long-term care, only the Russo bill proposes to cover all preventive care while also establishing a Long-Term Care Payment Review Commission to advise on budgeting and fee schedules for long-term care.
Global planning is predicated on the assumption that resources are limited, necessitating comprehensive national planning to control expenditures. Such planning would govern the use of expensive medical technology to prevent the inefficient and costly duplication of services by institutional health care providers; control inflation in physicians' fees and major medical services by establishing a nationwide system of standard fee schedules for physicians and institutional providers; and cap the total national health care budget by creating a federal agency that would, in consort with parallel state agencies, establish global budgets for each state, and in turn for each local institutional provider, to limit expenditures at all levels. (For an analysis of how Canada's adoption of universal fee schedules and global budgets has successfully curtailed the rate of inflation associated with physician's fees, major medical services, and gross health care expenditures at both the federal and provincial levels, see Evans et al., 1989.)
The Pepper Commission Report failed to address global planning. The Pepper Commission placed itself in an uncomfortable position by recommending policies on universal access and long-term care that would have totaled $66.2 billion but neglecting to make proposals to fund these increased expenditures.
The Senate bill recognized the problem of rapidly increasing health care spending, but its only proposals to deal with this problem included standardizing insurance forms, promoting limited preventive care, setting nonbinding expenditure goals, and encouraging negotiations between providers and consumers. The bill did not address mandatory limits on expenditures for medical technology; a nationwide system of fee schedules; or global budgets at the national, state, and institutional provider levels to control total national expenditures on health care. Moreover, although the Senate bill's play or pay mechanism would have recouped some of the costs of providing universal access to health care, it nonetheless perpetuated all the administrative complexities and inefficiencies of a multiple-insurer, employment-based health insurance system. In this sense, the Senate bill would have resulted in a$net increase in total national spending for health care and thus, like the Pepper Commission Report, would only add to the problem of health care inflation.
By contrast, the Russo bill's adoption of a universal access, single-payer system, coupled with mandatory limits on medical technology expenditures, mandatory national fee schedules for physicians and institutional providers, and global health care budgeting, would have created a framework that had the potential to bring health care inflation under control and to provide truly universal access to care without increasing total net spending. The Russo bill combined a comprehensive set of reforms on national health care policy formulation and implemention with the creation of a public insurance program that would guarantee universal access to care. This single insurer--single payer feature is important not only because it guarantees universal access but also because it is the key to eliminating the wasteful duplication in administrative costs associated with maintaining a private insurance system of more than 1,500 insurers. The GAO (1991) estimated that the savings in administrative costs to the United States in adopting a system of universal coverage together with a single-payer plan ($67 billion) would more than offset the expense of establishing universal coverage and eliminating cost-sharing provisions ($64 billion). Moreover, the Canadian experience gives every reason to suppose similar success can be achieved in the United States (Bigelow & McFarland, 1989; Evans et al., 1989).
Of the three proposals discussed, only the single-payer system represented by the Russo bill held the prospect of comprehensively reforming the American health care system to control costs and provide a system of universal access at no additional net cost to the nation's economy. This reform proposal would indeed radically alter some basic features of America's health care system. But it would not, as some claim, establish socialized medicine in the United States; the Russo bill would leave the actual provision of health care in the hands of independent physicians and institutional health care providers. In this respect the Russo bill parallels health care practice under the Canadian system in that neither calls for the review of specific clinical decisions but both allow physicians to continue determining their own practice patterns (Evans et al., 1989). What the Russo bill would have done is establish for the first time a truly integrated national system of health care that sets goals, establishes priorities, mandates spending limits and reimbursement levels for physicians' fees and services provided, and provide universal access to health care by eliminating all financial obstacles to seeking such care.
One implication of this proposal for the social work profession is that with the adoption of a single-payer health care system social workers also would become subject to a universal system of fee schedules for professional services provided. Many in the profession may bemoan this development, but the reality is that it is already happening on an ad hoc basis under the market-driven mechanism of managed care. The only difference is that under a formal single-payer system, such fee standards would become universal rather than operate arbitrarily as they do now.
Moreover, the Canadian experience demonstrates the advantage of a universal system of fee schedules created through negotiations between health care providers and the government; in principle, the fee schedules provide a reasonable and adequate level of compensation for all participating professionals (Evans et al. 1989). In marked contrast, the current market-driven mechanisms of managed care and prospective payments in the United States in effect leave health care providers at the mercy of an unregulated health insurance industry. The larger issue, which U.S. society has yet to face squarely, is whether it is prepared to limit the role of the profit motive in the delivery of health care to create a universal system that both guarantees access and limits overall costs. Health care providers, including social workers, must be willing to accept the premise that a greater public good outweighs narrow parochial interests and that there should be limits on providers' ability to set their own rates--a principle already operative in the regulation of public utilities.
The long-term consequences of failing to undertake a comprehensive reform of the U.S. health care system are exceedingly high because demographic trends connected with the aging of the American population will only exacerbate the present crisis. According to a report issued by the Population Reference Bureau, the number of people over age 65 will more than double, from 30 million to 65 million, between 1990 and 2030 (cited in Vobejda, 1992). According to another report, issued by the Alliance for Aging Research, Medicare costs alone will increase sixfold from 1990 to 2040 (cited in Vobejda, 1992). The need is clear. The question is whether the American political system is capable of responding with something more than another patchwork attempt to plug gaps in a health care system that is becoming increasingly resistant to such stopgap measures.
The jury remains out, but the developing debate during the 1992 presidential campaign and the ensuing response to the election of President Clinton alternatively give one cause for guarded optimism and considerable concern. When this article was written, neither the scope nor the outline of President Clinton's proposal for health care reform had been announced.
Since his election President Clinton has developed a proposal, the Health Security Act, which includes proposals for universal access, managed health care, preventive health care emphasis, portability, and long-term care. In addition, Democrats and Republicans from both Houses of Congress have put forward various plans, but the tenor of the debate is not encouraging. Indeed there is genuine reason to fear that the obstructionist voices opposed to health care reform may gain the upper hand politically and defeat any meaningful reform.
The difficult political question for President Clinton will be the extent to which he chooses to challenge the established interests in the medical, pharmaceutical, and health insurance industries, as well as members of Congress, to provide the United States with a health care system that guarantees universal access while controlling costs. This story's outcome remains to be told, but public discussion of these issues has reached a level that enables the country to evaluate all proposals--and their disposition by Congress--on the basis of a model that holds the promise of genuinely solving the crisis of U.S. health care in the 1990s.
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Robert F. Scuka, MSW, PhD, is coordinator of clinical and educational services, National Institute of Relationship Enhancement, P.O. Box 5795, Bethesda, MD 20824.…
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Publication information: Article title: Health Care Reform in the 1990s: An Analysis of the Problems and Three Proposals. Contributors: Scuka, Robert F. - Author. Journal title: Social Work. Volume: 39. Issue: 5 Publication date: September 1994. Page number: 580+. © 2009 National Association of Social Workers. COPYRIGHT 1994 Gale Group.