10 May The U.S. spends more money per capita? on healthcare when compared to other developed countries. Both state- and federal-level alternatives highli
The U.S. spends more money per capita on healthcare when compared to other developed countries. Both state- and federal-level alternatives highlight access to care and cost of care. The ACA has impacted all health policy options. Review Case 5, “Key Features of the Affordable Care Act, by Year,” in Chapter 5 of your textbook.
- Are the key issues of the law highlighted? Provide a rationale.
- What are the key changes to the implementation of the ACA over the years?
- What are some of the debates concerning the ACA? Provide scholarly research
What Are the Governmental Alternatives?
The United States has tried an alphabet soup of health policy options: HSAs, HMOs, IPAs, PPOs, POS plans, ACOs, and so on. Health care analysts often must look beyond specific organizational and financial alternatives and address issues at a higher level and deal with the threads of economic and political thought behind different proposals while considering the overall criteria of access, cost, and quality of care.
Politicians and businesspeople from outside the health care sector advocate many alternatives. To offset their tendency to ignore professional issues, in this chapter we discuss alternatives affecting professional status and roles and institutional responses to them. Table 5-1 presents an array of federal alternatives organized by their primary criteria—access, quality, or cost—and then by the economic philosophies behind them. The items in this array are not intended to be either mutually exclusive or collectively exhaustive; rather, the table provides a framework for looking at both the broad policy picture and specific health care actions taken at various times and places. Later in the chapter, another table (Table 5-3) summarizes policy alternatives added by state and local governments. Many of these alternatives were included as provisions of the Affordable Care Act (ACA). They are still included here, partly because they may be subject to reconsideration in the future.
Table 5-1 Illustrative Federal Government Health Policy Options
Access to Care
• Administered systems
• Universal coverage
• Expand or reduce eligibility or benefits
• Mandate coverage and services
• Captive providers
• Control insurance industry practices
• Mandate employer-based insurance coverage
• Consumer-driven competition
• Implement insurance exchanges
• Encourage basic plans with very low premiums for low-income workers and “young invincibles”
• Mandate individual coverage
• Allow states flexibility to reallocate federal funds for vouchers
• Oligopolistic competition
• Expand or contract coverages in entitlement and categorical programs
• Allow states to reallocate federal uncompensated care funds
• Eliminate ERISA constraints on the states
• Expand the capacity of the system
Quality of Care
• Administered system
• Mandate participation in quality improvement efforts in federal plans and programs
• Add more pay-for-performance incentives
• Select providers and programs on the basis of quality excellence
• Consumer-driven competition
• Encourage or mandate transparency of quality reporting in federal plans and programs
• Oversee licensure and credentialing of foreign-trained providers
• Oligopolistic competition
• Work reporting of quality care and adverse events into purchasing specifications for federal programs and disseminate to the public
• Encourage wider use of health information technology
Cost of Care
• Administered system
• Use full bargaining power in negotiation of fees and discounts
• Limit eligibility and covered services in entitlement and categorical programs
• Consumer-driven competition
• Change policy on tax-deductible status of employer-paid health premiums and individual health expenditures
• Support individual medical savings accounts
• Privatize parts of Medicare, Medicaid, and other federal programs
• Implement information technology and price transparency in federal programs and promote parallel industrial efforts
• Support consumer information reporting and database availability
• Oligopolistic competition
• Expand managed care/disease management
• Subsidize capacity reductions
• Constrain anticompetitive practices
• Other interventions
• Research, development, and deployment
• Treatment methods (e.g., National Institutes of Health)
• Delivery system methods (e.g., information technology)
• Provider quality and availability
• Health and safety regulation
• Support malpractice (tort law) experimentation
• Bundle payments for services
• Special situations and opportunities
Governmental alternatives are grouped according to their approach to the health care marketplace: (1) administered systems, (2) consumer-driven competition (assuming near-perfect markets), and (3) oligopolistic competition. These market positions, as reflected in the distribution of buyer versus seller market power and how these have played out through health care policy schools of thought, have been presented elsewhere.
The federal government, especially, has a large number of programs that make indirect investments in health care. Some of these programs, such as the National Institutes of Health (NIH), the Agency for Healthcare Research and Quality (AHRQ), the Centers for Disease Control and Prevention (CDC), the Patient-Centered Outcomes Research Institute, and the Center for Medicare & Medicaid Innovation, focus on research and development. Others focus on education or health care information technology initiatives. State and federal spending programs also influence the supply and training of health professionals and provide for traditional public health services. These have been placed into a fourth section, as they seem to pertain to all alternative economic value systems.
5.1 FEDERAL-LEVEL ALTERNATIVES
Access to Care: Administered System Alternatives
The government may try to influence the behaviors of the other actors in the health care arena, but in the end it is patient payments, insurance premiums, and tax revenues that cover the costs of the health care. Much of the financial risk still falls on the taxpayers. Because a national government tends to respond to political pressures, government-administered systems tend to focus on access needs and then on costs. These two issues may take priority over other quality-of-care criteria such as continuity of care (McLaughlin, 1998).
In the United States, the public sector makes very heavy expenditures in health care, even though the private-sector portion is also large. In fact, World Health Organization data indicate that the United States not only spends more per capita on health care than most other countries, but actually spends more public money per capita than Canada and the United Kingdom, which ostensibly have universal public coverage (see Table 5-2 ).
Table 5-2 Comparison of Public and Total Expenditures in Selected Countries, 2012
* Using Purchasing Power Parity adjusted international dollar rate.
Source: Data from: World Health Report 2012. Accessed June 2012 at: http://www.who.int/gho/publications/world_health_statistics/2012/en
Most countries operate with a nationally funded, controlled, and administered health care system. In Canada, each province manages its own universal coverage. Although nearly all countries have a policy on paper that promises universal coverage, only the developed countries have the resources to fulfill such promises.
Under a single-payer system, coverage is provided almost exclusively through tax revenues. In reality, there is often a parallel private sector based on private insurance or personal payments and a set of private providers. This allows those who can afford it the option of bypassing any supply constraints. In many less wealthy countries, health professionals work for the government part of the day and see private-pay patients at other times. This is because government revenue is not sufficient to pay health professionals even a middle-class wage for their government service. Even in countries where this private sector is technically illegal, it is usually tolerated as a reality of life. Where the coverage is universal and the resources are not sufficient, the services are just not delivered and/or a rationing scheme is put in place, especially for procedures that can be postponed.
Universal coverage is not synonymous with single payer. It can be financed by direct government payment, by mandatory insurance schemes (with mandates placed on employers, consumers, or both) or vouchers allowing subsidized purchase of insurance directly by the consumer, or by a combination of these. President Clinton’s Health Security plan was designed to provide near-universal coverage but preserved the existing system of employer-based coverage. The Obama administration’s Affordable Care Act followed a similar path. Alternatives for implementing consumer-centered care tend to favor vouchers because some policy experts think that vouchers lessen the tendency of insured patients to ignore costs and allow consumers a better match between their preferences and the coverage they purchase (Feldstein, 2005). They also favor insurance with high deductibles and coinsurance for similar reasons.
Expand or Reduce Eligibility or Benefits
The U.S. government pays directly or indirectly for more than 45% of health care costs. In recent years, the proportion covered has been slowly increasing as more children are covered each year and the Medicare drug benefit has begun to take effect. Some federal programs are paid from trust funds; others are funded through taxation. A number of optional services can be provided under Medicaid if the states decide to participate. As their budgets dictate, governments may add or subtract from their list of optional services and covered populations. For example, the Trade Act of 2002 created a new category of coverage—displaced workers who became uninsured—in the form of Health Coverage Tax Credits, which paid 65% of the premiums for most COBRA continuation coverage plans of former employers or private health plans arranged by the states. The credits could go directly to the households or be advanced monthly to the insurer. Uptake has been slow, however, because the enrollees facing reduced incomes still have to fund the other 35% of the premium.
The ACA expanded income eligibility for premium subsidies and copay offsets considerably. It also mandated Medicaid coverage for all individuals, including those without children, who earn up to 133% of the FPL. The Supreme Court overturned that mandate, but many states are participating on a voluntary basis and receiving additional federal funding.
Mandate Coverages and Services
One way of moving toward universal coverage is to require that employers provide coverage for their employees and demand that individuals purchase coverage when that is not available. These mandates can come with a wide variety of carrots and sticks, including premium subsidies for individuals with low incomes and firms in sectors where margins have not supported offering benefits. Unless the purchasing pool comprises the bulk of the population, insurers are likely to experience all sorts of adverse selection problems. This issue becomes more serious when barriers to moving in and out of coverage are lowered—for example, by prohibiting preexisting condition exclusions. If people are able to obtain insurance almost instantly when they become sick, why would they maintain coverage when well unless it was mandated? These mandates were implemented in Massachusetts under Governor Romney and in the ACA under President Obama.
Qualifying plans under the ACA must offer a basic benefit package that includes preventive services, maternity benefits, and behavioral health care. The act specifies other plan characteristics that must be met by participating insurers and providers.
Providers can become captives of the governmental system if they are employed by the government or if they operate in a government-controlled marketplace. Canadian physicians are not employed by the federal or provincial governments, but are unlikely to have much of a practice unless they participate in their province’s single-payer system. In the United States, a number of governmental systems employ physicians, including military services, the Department of Veterans Affairs, the U.S. Health Service, and the National Health Service Corps, but, altogether, the federal government employs less than 3% of the nation’s physicians. The majority of employed U.S. physicians work in the private sector for hospitals, academic medical centers, HMOs, and other integrated-service organizations. The federal government funds a number of health centers in underserved urban and rural areas. State and local governments participate in supporting the staff of health departments and health centers for low-income patients.
Control Insurance Industry Practices
The provisions of the ACA severely curtailed the flexibility of health insurers to underwrite and otherwise limit their risks. These include provisions requiring insurers to offer coverage for dependent children up to the age of 26, prohibiting them from excluding preexisting conditions or rescinding policies for people with high-cost illnesses, and limiting the waiting periods that can be imposed on new enrollees. These risks still have to be dealt with, especially the issue of adverse selection, which is what necessitated inclusion of the individual mandate.
Mandate Employer-Based Insurance Coverage
Just about every country that has aspirations for universal coverage within a competitive market system relies on employer-based insurance. Some systems also rely, in part, on community-based and affinity-based insurance systems as well. Employers may arrange for the insurance individually or in industry groups.
Access to Care: Consumer-Driven Competition Alternatives
Under this philosophy, the national government’s role is to try to mitigate those factors that make the market imperfect. Appropriate government activities would include reducing regulations that influence the market and ensuring that there are adequate numbers of competing providers (the supply side), that buyers and sellers are free to move in and out of the market, and that both buyers and sellers have maximum access to both services and relevant information about price and quality.
Implement Insurance Exchanges
The array of plans available to employees in the United States has usually been shaped by employers’ selections. Employers typically choose their offerings from among alternative plans offered by a single insurer. Opting out of company-sponsored plans has meant loss of the benefit. Individuals and small firms have been at a disadvantage unless they could join some kind of pool that was large enough to bargain effectively. Insurance exchanges offer the potential of both wide choices of insurers and pooling for bargaining power. They appear to be a necessary condition for an individual mandate in U.S. markets.
Encourage Basic Plans with Very Low Premiums for Low-Income Workers and “Young Invincibles”
One of the thornier problems in health policy is the free-rider issue. Among the uninsured population are many young, healthy adults who have access to insurance but choose to go without it because their expected health care costs are considerably below the premium levels available. They might be lured back into the insurance market by very low premium plans that cover only their likely health events, such as trauma and infectious disease. This is, of course, a double-edged sword, because such programs might also motivate other healthy workers to leave existing programs, thus exacerbating the adverse selection problem posed by the remaining enrollees. If the individual mandate is repealed, or if the so-called young invincibles, the working poor, or both choose to pay tax penalties rather than purchase insurance, the merits of offering low-cost basic plans will continue to be an area of inquiry for policy analysts.
Mandate Individual Coverage
This serves to force individuals rather than just employers to make insurance and health care service purchasing decisions. It also ensures that younger individuals are paying into the system on a regular basis. However, it cannot work unless people can afford those premiums, and so they have to be accompanied by premium and cost-sharing subsidies. One could also place this intervention under oligopolistic competition because it expands the market for private insurance contracts and should stimulate participation of young individuals in employer-sponsored plans.
The ACA contained both (Kaiser Family Foundation, 2012, p. 2):
Eligibility: Limit availability of premium credits and cost-sharing subsidies through the exchanges to U.S. citizens and legal immigrants who meet income limits. Employees who are offered coverage by an employer are not eligible for premium credits unless the employer plan does not have an actuarial value of at least 60% or the employee share of the premium exceeds 9.5% of income. Legal immigrants who are barred from enrolling in Medicaid during their first 5 years in the United States will be eligible for premium credits. Premium credit: Provide refundable and advanceable premium credits to eligible individuals and families with incomes between 100–400% federal poverty level (FPL) to purchase insurance through the Exchanges. The premium credits will be tied to the second lowest cost silver plan in that market area and will be set on a sliding scale such that the premium contributions are limited to the following percentages of income for specified income levels:
Up to 133% FPL: 2% of income 133–150% FPL: 3–4% of income 150–200% FPL: 4–6.3% of income 200–250% FPL: 6.3–8.05% of income 250–300% FPL: 8.05–9.5% of income 300–400% FPL: 9.5% of income
Increase the premium contributions for those receiving subsidies annually to reflect the excess of premium growth over the rate of income growth for 2014–2018. Beginning in 2019, further adjust the premium contributions to reflect the excess of premium growth over CPI if aggregate premiums and cost-sharing subsidies exceed 0.54% of GDP. Cost-sharing subsidies: Provide cost-sharing subsidies to eligible individuals and families annually to reduce the cost-sharing
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