Neither Public Nor Private: A Health-Care System Muddling Through ...

America?s hybrid health care system is inefficient, but it?s the best we?ve got.

The United States is unique among
developed nations in the extent to which it has resisted a government-run
health care system. Nevertheless, it has often been said that the United States has
the most heavily regulated health care system in the world. What does this mean?

In fact, our health care delivery
and finance systems are mixed public and private. Health care professionals
practice independently or in groups, while hospitals and other health care
facilities are privately owned (although most are at least nominally
?non-profit?). About thirty percent of Americans are publicly insured?primarily
through Medicare and Medicaid?but public programs are often administered by
private insurers. Sixteen percent of Americans are uninsured, but most of the
rest are insured through employment-sponsored insurance, heavily subsidized through
tax expenditures to the tune of roughly $200 billion a year.

Both our delivery and financing
systems are heavily regulated. Moreover, not only are our delivery and financing
systems a public-private mix, so is our regulatory system. Hospitals are
regulated primarily by The Joint Commission, a private entity founded by and
still dominated by physician organizations. Hospitals and physicians must
comply with the utilization and payment rules of many different private
insurers.

Health care regulatory programs
are imposed for many reasons, but four reasons stand out. First, many programs are justified as
necessary to address well-understood market failures. The minimum coverage requirement
(individual mandate) in the Affordable Care Act (ACA), for example, was enacted
to discourage ?adverse selection??the tendency of only unhealthy people to buy health insurance if insurers must accept all applicants. Pharmaceuticals
are regulated because few consumers have the information or ability to
assess their safety or effectiveness. Second, we regulate because we are using
private delivery and financing systems to accomplish public goals. Because the ACA relies on private
insurers to cover uninsurable individuals, it prohibits health status-based underwriting. Federal law requires private hospitals to provide emergency care regardless of the ability of patients to pay, because Congress has been unwilling to provide a tax-funded public program to pay for it. Third, regulatory programs exist because we are paying for privately
provided care and insurance using public funds, and must ensure that public
funds are properly spent. Finally, much of health care regulation is best
understood as special interest protection. Restrictive ?scope-of-practice? laws, enacted by legislatures at the behest of special interest trade groups, protect the professional privilege of doctors and specialists while restricting public access to less expensive providers, like nurse practitioners and midwives.

Our problems are exacerbated
because, as the Bipartisan Policy Center?s
Julie Barnes pointed out in a March
2012 ?America the Fixable? essay, we pay for most health care on a
fee-for-service basis. This creates incentives for physicians to provide as
many discrete services as possible to maximize payment (a tendency often
justified by an asserted fear of malpractice litigation). Moreover, hospitals,
laboratories, imaging facilities, and drug companies are often eager to reward
physicians for ordering their products and services. Attempts by the fee-for-service
Medicare program to control the amount or payments physicians receive to a ?sustainable growth
rate? were stymied as utilization of services grew rapidly and intensive lobbying defeated attempts to
reduce prices accordingly.

To combat these incentives, the
federal and state governments have adopted a host of very complicated and often
redundant statutes prohibiting kickbacks, self-referrals, and fraudulent and
abusive claims practices, while private insurers impose pre-service approval
and post-service utilization review for some procedures.

Not surprisingly, we have a dysfunctional
health care system. We spend far more per capita and as a percentage of our GDP
than any other country in the world. Despite this, 50 million Americans lack
any certain means of paying for their health care, resulting in thousands of
premature deaths and bankruptcies every year. Finally, the quality of American
health care is not exceptional?we do very well with some things, like detecting
and treating some kinds of cancer, but lag behind other countries in other
respects and have a poor record for patient safety and medical errors.

What should be done? A purely
private system of health care financing would solve some problems, but cause others.
It would make all but the most basic health care inaccessible to many, perhaps
most, Americans?a result most Americans would find unacceptable. Alternatively,
we could move more toward a publicly financed system, the approach taken by all
other developed nations. This solution brings its own well-documented problems,
which vary from country to country?but it does allow much greater control over cost
and facilitates broader access. The public solution runs contrary to the
political culture of the United
States, however, and is adamantly opposed by
powerful interest and ideological advocacy groups. For the present, our mixed
system must muddle along.

We can take steps, however, to
reduce the regulatory burden. Most importantly, we can move away from
fee-for-service payment. The ACA creates a Center for Medicare and Medicaid
Innovation to experiment with alternatives such as bundled payments, and some projects
are already underway. The ACA?s Accountable Care Organization initiative
encourages the sharing of savings among health care institutions and
professionals, and represents the first time that multiple federal agencies,
including the IRS, Federal Trade Commission, Department of Justice, HHS Office
of Inspector General, and Centers for Medicare and Medicaid Services have
worked together to create a pathway through the regulatory thicket.

Private insurers are also
encouraging better integration and coordination of care. The Kaiser-Permanente
system has for decades efficiently provided high-quality care, integrating
health care financing and delivery. Integration of delivery and financing
eliminates an entire system of regulation, while integration of professionals
and institutions, with payment for both on a basis other than fee-for-service
eliminates the need for another layer of regulation.

We cannot wholly eliminate the need
for health care regulation. Feasible changes in the way we deliver and finance
health care could substantially reduce the regulatory burden. In particular, we
need to reduce friction at the public-private interface, which can be
accomplished in part by moving away from fee-for-service payment. Although the ACA
imposes additional regulations on our financing system, it also contains within
it initiatives that could in the end significantly reduce regulation. We need to keep making progress
along these paths.

Article source: http://www.theatlantic.com/health/archive/2012/05/neither-public-nor-private-a-health-care-system-muddling-through/257123/

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