Daniel Wikler, Ph.D.
Professor, Program in Medical Ethics, University of Wisconsin Medical School, 1300 University Avenue, Madison, Wisconsin 53706, USA
1. Problems in the American Health Care System
The American health care system works well in many ways. Hospitals are numerous and superbly equipped. Most physicians are specialists with long years of training. Research facilities, both public and private, are the world's most productive.
Nevertheless, Americans are generally agreed that the health care system is in need of fundamental reform. It is too expensive; at 14% of Gross Domestic Product, we spend much more than any other nation. Prices in the health care field have inflated at twice the general rate for over a decade. Moreover, these huge sums still leave a seventh of the population uninsured and an equal number in danger of bankruptcy should serious illness strike. Nor is the nation's health as good as we would like. Infant mortality and longevity fall short of many less wealthy nations. Health conditions of men in Harlem, the black district of New York, are comparable to those in Bangladesh. Health care delivery in the poor sections of large cities is often sparse and chaotic, even in the face of epidemic conditions with respect to drug use, AIDS, and tuberculosis.
It is well known that America's health care system is the most fully privatized among industrialized nations. Health care bills for most Americans are paid either by insurers, usually paid in turn by employers, or directly by the employers themselves. A minority, chiefly the elderly and some of the poor, are insured by the government. There is a division of opinion over whether the predominance of private insurance is the source of the health care system's problems. The multiplicity of insurance plans, and their associated costs, has burdened the system in paperwork and other administrative costs, now estimated at 25% - by far the world's highest.
The American government has attempted to control costs by a mixture of regulation and market measures. Regulation, including price controls, proved ineffective or unenforceable. During the past fifteen years the government has encouraged competition among providers of care and among insurers; but this too has failed to stem the rise in costs.
Particularly worrisome has been the "skim and dump" practices of private insurers and providers. Each insurer has sought to avoid patients with expensive medical problems. Companies profit when the people they insure avoid illness, and they gain competitive advantage when the "undesirable" patients are insured by rival companies. Insurers attempt to "skim the cream" of healthy patients and "dump" those who will need expensive care. Individuals with diabetes or emphysema are routinely refused insurance when they apply as individuals. The result is that patients most in need of health insurance are often those least able to obtain it. People with existing medical conditions who have insurance through the workplace experience "job lock": they cannot make otherwise desirable changes in employment because they will be uninsurable once they leave their present employer. Loss of health insurance has become a chief source of distress when employees lose their jobs, and most major strikes in recent years have been over health insurance.
Patients without health insurance generally receive care for emergencies, and hospitals budget around 5% for "charity care". But Americans have now become used to the "wallet biopsy" (pre- admission financial screening), and some hospitals tried strenuously to "dump" or transfer uninsured patients, until a Federal law made the practice illegal. In this system, virtue was punished, since facilities which cared for patients without regard to ability to pay lacked the funds to modernize, and as a result lost insured patients to competing hospitals.
2. The Politics of Health Care Reform
Public pressure for health care reform increased enormously once the middle class came to see the system's failings as problems for themselves rather than problems affecting primarily the poor. President Clinton successfully employed the theme of "health security" in winning popular support for his reforms.
However, there is no consensus on how to achieve the two goals of universal access and cost containment. The most conservative proposals call for individuals to use their personal savings to buy insurance in the marketplace. The most liberal favour a system of national financing modeled on the Canadian system. President Clinton has endorsed a market-based approach developed by a group of economists and insurance experts which was funded by large insurance companies. His plan combines the conservative strategy of private initiatives with the liberal goal of universal access to comprehensive care. It has won the respect of moderate Republicans and Democrats, but is opposed by less-moderate elements in both parties.
3. The Health Security Act
The Health Security Act is based upon the concept of "managed competition", simple in its definition but complex in its execution. Managed competition relies on the market to keep prices low and quality high. At the same time, the system regulates the market to ensure that consumers are not exploited and that everyone is covered.
Consumers in the medical marketplace are at a disadvantage in many ways. They cannot easily judge the quality of the services they buy, and they rely on the seller (usually the physician) to know when and what to buy. The lack of a standardized insurance package makes price comparison difficult. Consumers with low incomes cannot afford insurance at all, and those judged by insurance companies to be at high risk for expensive care cannot afford the very high rates insurers demand of them - if they are offered insurance at all.
The Clinton plan seeks to overcome each of these problems through regulation. The information imbalance between provider and consumer is addressed by the creation of new organizations called "health alliances". The alliances will certify insurance plans and monitor the quality of the services provided. Moreover, the alliances pool the consumers' funds, permitting them to dictate lower prices to providers. Each alliance will offer consumer- members a choice of insurers. Every insurer will offer the same, very comprehensive benefits package. Some plans will offer pre-paid "health maintenance organizations", in which the insurer and the providers (hospitals, clinics, and doctors) are one company. Others will insure in the traditional, fee-for-service manner, with insurers reimbursing providers for services used. Consumers will choose on the basis of price and quality (as revealed by the alliances' data), along with convenience, pre-existing relationships with physicians, and subjective factors.
Access to care will be provided by a number of regulations and provisions. Insurers will not be allowed to refuse coverage for any consumer, regardless of risk. The government will provide the required premiums for the poorest Americans. Employers will be required to pay 80% of the cost of the average price of insurance plans offered to consumers through an alliance. The government will subsidize small businesses and the self-employed.
A mixture of market and regulation approaches also is relied upon to control costs. Employees pay all the costs of insurance above the employer contribution, so they have an incentive to choose the lowest-cost insurance plans. A national health planning board will set target prices for each area; if competition fails to keep prices below the target levels, the alliances may demand a rebate from the expensive insurers.
The Clinton administration promises that every American will have access to a comprehensive program of health care, and that the huge rise in health care costs will be moderated. Few Americans argue with these goals. Moreover, the proposal includes much-needed reforms in many details of health care delivery, ranging from preventive care to prescription drug coverage. However, not all Americans favour the distribution of costs imposed by the plan, and others doubt that the plan will be able to achieve its goals. In addition, some critics maintain that the plan is much inferior to alternative proposals, and that if the plan fails the health care system will be further from the ideal than it is at present.
Most of those presently uninsured work for small businesses, which under the new plan will be saddled with significant health insurance costs. Their owners are predictably in opposition to the President's plan. So too are the small health insurance companies. The Clinton plan is likely to reduce the number of insurance plans in the market from the present 1500 to a small fraction of that number. Some Republican leaders have proposed an alternative reform in which participation by employers would be voluntary; however, their plan would not provide universal access to care.
Much of the criticism of the plan centres on its complexity. It is one of the longest and most detailed legislative proposals in American history. The central structure of the plan, built on the four sectors of patients, alliances (the purchasing cooperatives), insurers, and providers is understood by few Americans. Though the plan aims simplify the system's administration, it may in fact increase already-high administration costs.
Perhaps the chief concern of critics on all sides is that the plan will not succeed in containing costs. The President expects many, perhaps most, Americans to join pre-paid health plans ("health maintenance organizations" or HMOs), which his advisers believe save money, but other experts are not convinced that they do. Perhaps competition among insurers will bring prices down, as theory dictates, but the competition strategy has a mixed record to date where it has been tried. The President's backup cost-control instrument, the target prices, may be difficult to impose in the face of opposition by providers and insurers; in any case, "ceilings" of this sort often become "floors" as each seller tries to come in just under the limit.
Failure to contain costs would be worrisome for several reasons. The huge inflation rate in American health care has diverted funds from investment, education, and other important uses. It cannot rise indefinitely. If the government decrees a limit on expenditures, there is no guarantee that costs would be contained by desirable measures, such as administrative efficiency or lower reimbursement to insurers or providers. The latter might seek to transfer the burden to patients, who are less able to defend their interests, by rationing the care they provide.
If costs continue to rise steeply, the burden on employers and taxpayers might prompt demands that individuals bear more of the costs of their care. This in turn could make access to care impossible for the less wealthy and for those with expensive health care problems, as at present. This sequence of events did in fact doom the reform enacted in the state of Massachusetts under the direction of Michael Dukakis, the Democratic nominee for President in 1988.
Not all observers are convinced that the Clinton plan will prevent the "skim and dump" abuses of the present system. Though insurers must accept all buyers, they may be able to select among potential customers through selective marketing, as they do now. The Clinton plan calls for penalties for these practices, but it is unclear that they will be effective. There is also concern that the low-cost and high-cost insurance plans will be quite different in quality and in access to services (for example, in waiting lists). This could lead to a two-tier health care system, particularly because income has become less equally distributed over the past twelve years.
The Clinton plan reflects his political strategy. It is rumoured that the majority of its authors personally favoured a government-financed plan like Canada's, which offers free choice of doctor, very low administrative costs, and less interference with physicians' clinical choices. It is enormously popular among Canadians. However, the President and his advisers considered this reform politically impossible. Health insurers, who cannot operate in Canada, are implacably opposed, and the mood of the electorate is opposed to new taxes (though the Clinton plan's requirement of employer contributions is a tax under a different name).
Proponents of a Canadian style, "single payer" system, and I am one, face a difficult political choice. If the Clinton plan, for all its faults, is the only reform likely to be enacted, then we should support it. The plan must first be accepted by Congress, however, and the political compromises needed to win those votes may render the plan much less attractive. If the plan is enacted and then fails, moreover, we may be in a worse position than now. Health care reform will have been discredited, and the domination of health care by large, private insurance companies will be greatly enhanced.
As I have mentioned above, the Clinton health care proposal is a melding of two points of view which have been considered inherently opposed. Among industrialized nations, America's health care system is at once the most expensive, the least just, and the most privatized. Many critics believe these characteristics are linked by cause and effect. In order to achieve the social goals of universal coverage, and the equally important goal of cost- containment, these critics belive that the United States must turn to a nationalized system. Those who defend market solutions, however, insist that our problems stem not from our reliance on profit but by our failure to use markets more effectively. When joined with a commitment to provide universal access to care, market mechanisms can, in their view, lead to effective, lower-cost medical care available to all. The President's plan pursues social goals through largely private means.
As other nations struggle to maintain universal care in the face of rising costs, the President's proposal, if enacted, will furnish a closely-watched experiment. The United States is currently a largely private system moving in a social direction. Most other countries have socialized systems, but are very interested in private alternatives. In my own view, medicine works best, from both a moral and an economic standpoint, if patients are patients instead of "buyers", doctors are doctors instead of "providers" and "sellers", and investor-owned insurance companies have little or no role at all. Perhaps we shall see whether the humanity of the health care system depends on the means used to pay for it.