The Role of Public Policy in the U.S. Healthcare SystemPublished in Knowledge@Emory
Everyone who has taken a serious look at the U.S. system of healthcare – and many would say what system? – believes care is too hard to access, too uneven in quality and too expensive. But if the symptoms are easy to see, the root causes and what to do about them can vary widely. Knowledge@Emory talked to academics, doctors, politicians, nurses and businessmen in search of what public policy changes might rescue healthcare from itself.
Charles Frame, Ph.D, is adjunct professor of marketing at Goizueta Business School at Emory University and executive director of the Center for Healthcare Leadership, an interdisciplinary consulting group that promotes leadership and improved organizational performance. Frame is an expert in market research and customer satisfaction and has been a faculty member at the Emory School of Medicine.
The current U.S. healthcare system is an artifact of World War II, when strict wage and price controls left healthcare insurance as the only differentiating benefit employers could offer employees. After the war, the wage and price controls were lifted but health insurance – most often indemnity insurance that paid 100 percent of all expenses – was something unions and employees weren’t willing to give up.
The close association of “job” and “health insurance” still drives much of the healthcare system, says Frame, even as rising costs during the last 20 years have rapidly eroded the concept of full indemnity insurance. Many small and mid-size companies have stopped offering health insurance, and employers that do usually require employees to shoulder some of the costs through a co-pay.
“The American psyche is ‘I’ve worked for these benefits and they are mine. Other people need to work in order to get theirs.’ A lot of countries believe healthcare is a public good – not a free good — but a public good whose provision is appropriate for society as a whole. But in the U.S. it is ‘my’ healthcare, not ‘our’ healthcare,” Frame says.
Linking jobs with healthcare tends to leave those without jobs, or who work at poorly paid jobs, out in the cold. Better-paid jobs tend to include better benefits of all kinds, including better healthcare, leaving a rich-poor divide. That divide neatly mirrors national statistics on overall health status, where people on the lower rungs of the socioeconomic ladder have poorer access to healthcare and are less healthy overall.
Another legacy of employer-paid health insurance is that employees aren’t true consumers of healthcare.
“Indemnity insurance does a very good job of separating the healthcare consumer from what their healthcare really costs,” Frame says. “Traditionally there was almost no payment at all. Now most plans have a co-pay, but it’s just the tip of the iceberg of what is really being paid by the system. The result is we have a couple generations who don’t know what these services cost.”
These and other problems result in a very expensive and disjointed system, Frame says.
Putting the consumer back in healthcare has been a priority of the Bush Administration, which has promoted the use of health savings accounts that allow employees to set aside money to pay everyday medical bills. Money in the account rolls over from year to year, while a high-deductible insurance policy covers catastrophic expenses.
Frame supports this policy direction, noting that once people pay more of their ordinary medical expenses out of their own pockets, they will pay more attention to costs. And as important, healthcare providers, most of whom have never operated in a retail environment, may have to rethink their entire business models and pricing structures, probably operating more like plastic surgeons or optometrists, whose services are rarely covered by insurance.
“It makes sense to have very basic level of healthcare for everybody,” Frame says. “We already have the widespread use of emergency rooms as the final safety net, but it’s an incredibly inefficient use of a costly resource. We need to find better ways to get efficient, cost-effective primary care into the community. Basic care could then be provided much earlier in the process of an illness or chronic condition. This will allow the ER to get back to doing the tasks for which it is designed.
“The key is that we are paying this money anyway. We are paying it through taxes. Why not design the system so we can get more efficiency for what we are paying?”
Frame also advocates revisiting the insurance idea. After all, he says, insurance is an ideal way to spread risk.
“The true concept of insurance lies in the economy of large numbers. The ultimate would be a nationalized system with everyone in the country having to be insured.”
But herding the country into giant risk pools – an idea floated in the early 1990s by the first Clinton administration -- requires a certain amount of coercion that is likely to rub many the wrong way. Still, Frame believes anything that spreads risk across a larger group is a positive step for the system.
Dr. Kenneth Thorpe, PhD, professor of health policy at Rollins School of Public Health. Thorpe is also chair of the Department of Health Policy & Management at Rollins School. During the Clinton Administration, Thorpe was Deputy Assistant Secretary for Health Policy, working closely with Congress on several healthcare reform proposals. Thorpe is a busy author and reviewer who often debates health reform, insurance and financing in national forums and in the media.
Thorpe sees three major areas of dysfunction in the current U.S. healthcare system.
“First, healthcare in the U.S. is way too complex and expensive. Second, we have major problems in how we deliver healthcare services, particularly to patients that have chronic disease, because chronic illness accounts for 80 percent of total healthcare spending. We do a poor job of delivering services to those patients and as a result it costs more than it should. And third, we haven’t tackled head-on the rise in obesity. Obesity alone accounts for about 30 percent of the growth in spending over the last 15 years. It is the biggest single reason why healthcare spending is increasing.”
According to Thorpe, the healthcare system is organized and built to take care of the patients of 30 or 40 years ago, patients who came to the hospital with an acute problem, got better and left. Today’s patient is more likely to have an on-going chronic illness that requires care outside of a hospital setting.
“It’s a system that is very reactive,” Thorpe says, “meaning that we wait for the patient to show up. If we do something to them we get paid for it. The system we need to develop is more proactive, meaning we need to go out and work with chronically ill patients to make sure they are getting the healthcare services they need in order to maintain an active, healthy life.
“We have the wrong delivery mode and the wrong finance model to deal with the patients that are driving healthcare spending.”
Medicare is an example, Thorpe says. Medicare deals almost entirely with the chronically ill, yet it is a fee-for-service system. The kind of continuing care a diabetic routinely requires – home visits from a nurse to monitor blood sugar; reminders from a physician about annual eye exams or hemoglobin tests – are not reimbursable under Medicare, Thorpe notes.
At the same time, Thorpe questions whether current medical training emphasizes the kind of teamwork between physicians and other healthcare workers that is effective in managing the chronically ill.
“I think we are still training physicians to be autonomous, independent decision-makers, where most of the care that they are going to run into is going to require them working in broader professional teams.”
Thorpe isn’t a fan of the idea that patients are consumers who need to do more self-managing.
“They need to be involved and take responsibility for their diet and exercise and sugar levels and blood pressure, but to throw it back solely to the consumer to self-regulate and monitor doesn’t make sense, particularly when you look at where the dollars are being spent.”
Containing future cost increases is going to require slowing down obesity among children and adults. Increased obesity has led to a spike in diabetes, for instance.
“We have spent virtually no time really thinking through issues like best practices for obesity, what programs are effective, how do you design them, how do you get people to participate, how do you sustain participation?
“All the intellectual capital is on how we design benefit packages that weed out discretionary healthcare use. I think that is fine, but I think that is not appropriately aligning investment dollars with the potential impact we can have,” Thorpe says.
To make treating the chronically ill a greater priority, Thorpe would like to see the system pay providers an annual fee for each chronically ill patient. The system already knows what the chronically ill need and can easily measure whether those services are delivered and how each patient fares. That, Thorpe says, leads to competition based on performance.
Finally, Thorpe says the government must force the healthcare system to adopt current information technology and get rid of the paper. It would save money – provided all the players in the system are able to talk to each other -- and it would improve teamwork among healthcare providers.
Thorpe believes frustration with the system is coming to a head, perhaps as soon as the U.S. 2008 elections.
“Like anything, Washington only pays attention to issues when they can’t ignore them any longer. For the last five years we have had absolutely no discussion. Nothing at all has happened on the healthcare front, which is our most pressing domestic policy issue.”
Marla Salmon is dean of the Emory School of Nursing. Salmon has been a professor and dean of the Nell Hodgson Woodruff School of Nursing since 1999. She also teaches at the Rollins School of Public Health. Dr. Salmon has degrees in nursing and political science. As a Fulbright Scholar she studied the development of national health systems of Germany and Kuwait and is currently chair of the World Health Organization’s global advisory group on nursing and midwifery.
In Salmon’s view, the healthcare system’s major problems fall into three main baskets: access, quality and cost.
“Everything about our system works against us,” says Salmon. “It’s not that there aren’t good people trying to do good things but I think that the shortage of nurses and the emerging shortage of physicians and allied health professionals are the canary in the coal mine for the system. When they work in a system that is so dysfunctional, it makes it very difficult.
“There is an enormous amount of frustration for people who see themselves as advocates for care when they are unable to provide even basic services because of a system that is in enormous disarray and makes no sense. Our system is absolutely reflective of the worst side of special interests. Patients have been left out of the equation.”
What hampers reform is that the U.S. has never reached a political consensus about whether health and healthcare is a right, Salmon believes. “Nor have we become comfortable with the idea of a real system that includes prevention, health promotion and care of ill and injured. As a result, we are undecided about the role of government, health professionals, the private sector or patients themselves when it comes to health.”
“I’m not talking about rearguing the socialization of healthcare,” Salmon says. “But I think it goes back to the highly individualistic society and our reluctance to define health and access to healthcare as a right. Without that, it is pretty much a free-for-all. Society hasn’t invested a role for government in developing a system.”
Another consequence of the lack of a system is that there is no systematic way of dealing with problems like the shortage of nurses, currently estimated to be as many as 800,000 by 2020.
Salmon says some of the shortage is due to poor work conditions, but more importantly the system actively discourages nurses. “A number of studies show that nurses often leave their shift feeling they haven’t been able to do something for a patient that was critical to their well being. Other studies show between 15 and 50 percent of a nurse’s time is spent doing non-nursing tasks.”
Changing this equation provides an opportunity to increase productivity and improve job satisfaction and retention, Salmon notes.
In general, Salmon says the system must be reconceptualized into promoting health early in life and becoming a system that is more about lower-cost preventive care than high-cost end-of-life care. Information technology must be brought to the bedside. Education and training in teamwork must be increased. “The corporate world has figured out that human resources are an investment, not a cost. Medicine hasn’t,” Salmon says.
However, the prospects for change are good, Salmon believes.
“No one I know – not even the wealthy – is satisfied with healthcare. The pressure is only going to grow. Healthcare is becoming global and I think there are some good models around – particularly health promotion, disease prevention and elder care in places like Finland and Japan. I am getting a sense that we are open as a society to learning from others.”
Former Senator David Durenberger is founder and chair of the National Institute of Health Policy, a Midwest forum for the study of complex healthcare policy issues.
To former Minnesota Senator Durenberger, the U.S. healthcare system is unique in only one respect.
“The uniqueness of our country over the social insurance-model countries is that we have always believed in the autonomy of the physician, the autonomy of the hospital and, now, the autonomy of the insurance company. We have protected their autonomy and advocated pluralism for the American system.”
So, says Durenberger, there is a wide variety of everything in the U.S. system. He calls this “a fetish for pluralism without any accountability” – meaning there is rarely any pressure for a doctor or hospital to show comparatively better outcomes than the competition – and blames it for why healthcare is so expensive.
“The pluralism we have in medicine only works when you have a real market that plays by some rules and people have both information and resources to make choices. We’ve never had that in the American healthcare marketplace,” Durenberger says. “At least the social insurance marketplaces in other countries reduce the choices to just a few and hold providers accountable for performance.
But limiting choice in healthcare is, well, un-American. Instead we pour innovation and new technology into one end of the system. What comes out the other end, according to Durenberger, is exponential growth in costs.
Without consumer financing and consumer choice, you can’t reap the benefits of a market-based system. Durenberger argues that the Bush Administration has it backwards. They are promoting consumer choice by making consumers pay more of their medical bills out of their own pocket, but the healthcare system does not generate the kind of consumer information commonly used to make other important, costly purchases.
“If you don’t have information and resources to make choices, then choice is not a good thing. If we had to sell healthcare the way we sell everything else we could bring the cost down so that universal coverage, universal access and affordability would not be a problem.”
As an ex-politician, Durenberger says he has become wary of what he calls “silver bullets,” initiatives that promise to fix the system.
“I’ve been in that business twice. In the 1970s we tried to regulate supply and in the 1980s we tried to regulate prices. I don’t believe the money we are spending to subsidize health savings accounts or turning Medicare over to insurance companies is going to pay off in better care for lower cost.”
Thomas McCausland is president and CEO of Siemens Medical Solutions Inc., a supplier of healthcare equipment ranging from imaging machines to information software.
McCausland likes to play a little game with business school audiences. He ticks off the characteristics of an unnamed industry: double-digit annual growth for more than 20 years; touches every person; potential to make lives better and longer; can’t be outsourced; non-polluting; stimulates additional industries with high R&D content; high-paying professional jobs.
“Then I ask, ‘Why wouldn’t you want this business to grow?’ But when I tell them the business is healthcare, they say, ‘Why do we spend so much?’ ”
To McCausland, the biggest problem with healthcare is not how much it costs but the difficulties in assessing the benefits. “If the U.S. population lived 20 years longer than the rest of the world, everyone would say, ‘So what if it costs more?’ ”
If healthcare were a more conventional, less complex, less political business, McCausland says, it would look very different. For example, there might be more hospitals that specialize in treating specific diseases, because by becoming an expert in a particular discipline, outcomes would improve. But healthcare, he notes, is a community-based business that doesn’t have the same tools other industries use to boost quality and efficiency.
Which isn’t to say healthcare can’t improve outcomes and efficiency. “Is it really efficient that 5,000 out of our 5,500 hospitals have cardiac programs? Probably not,” McCausland says.
“One opinion today is that the healthcare system ought to run is that it should be much more market-based. Consumers should be forced to directly pay a lot more of their healthcare costs. Then people would study their options more.”
McCausland understands why many doctors believe people are likely to mismanage their own healthcare the same way they often mismanage their retirement savings.
“Why do people have difficulty managing their retirement funds? Because for years it was taken care of by the government or by their employers. They never had to think about it, much like healthcare. People tend to be competent at things they have the responsibility to handle for themselves.”
An option that some employers are now considering is to hand over the money they pay annually for healthcare benefits and let employees decide how best to spend it according to their own individual circumstances. The company’s responsibility would be to negotiate for the best insurance rates and provide a wide range of healthcare options, as well as providing employee education.
“Some percentage of the population would be more challenged by this kind of system,” says McCausland. “It would be our job to worry about how to help those people as opposed to employees who are comfortable in a more self-service environment.”
Not surprisingly, McCausland is a believer in policies that encourage greater adoption of technology and efficiences through process re-design.
“The possibilities are endless for longer, better lives. We need to have mechanisms to absorb technology – with the proper regulations and controls – so that companies can get returns on the technology they create,” he says.
“Secondly, we must measure effectiveness and quality and show what is the most effective protocol or the most cost-efficient way to treat a disease, then publish it. Published data would help standardize processes and then information technology can be used to make those processes more efficient.
The final step is to use software tools to boost productivity and, more importantly, safety. Software can be an institutionalized way of eliminating human error by accessing patient records at the bedside, monitoring drug interactions and making sure the right patients get the correct medicine at the correct time, McCausland says.
And if all this meant that healthcare spending went from 15 percent of the gross domestic product to 20 percent, McCausland doesn’t think anyone would complain as long as outcomes improve.
“One thing about healthcare is that it is easy to capture costs, but hard to capture the benefits. What is the benefit to society to someone going back to work in two months instead of six months? Or being vigorous at age 60? It’s hard to measure, but instinctively we know it is there.”