Introduction to U.S. Health Policy

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Donald A. Barr, M.D., Ph.D. Introduction to U.S. Health Policy: The Organization, Financing, and Delivery of Health Care in America. Third Edition (Baltimore: Johns Hopkins University Press, 2011)

The author is a professor in the Stanford University Department of Pediatrics. The book lives up to its title, providing a comprehensive overview of how health care is organized, financed and delivered in the United States. It places the Patient Protection and Affordable Care Act of 2010 in the context of existing health policy, discussing how the new law would affect each of the topics discussed in the book. Although it is intended as a textbook, it is far more than a recitation of facts. Barr is interested in getting at the underlying principles and institutionalized practices that have shaped our health care system, and the organizational strengths and weaknesses that result from them. He recognizes that the system affects different people in different ways: “From one perspective, we have the best health care available anywhere. From another, equally valid perspective, we are close to worst among developed countries in the way we structure our health care system. Which perspective one adopts depends on the measure of quality one selects.” The system looks very different to a family unable to afford health insurance than to a wealthy family with access to the most technologically sophisticated treatments.

Barr describes four basic principles on which the US health care system has traditionally been based. The first is that “health care is a market commodity to be distributed according to ability to pay.” In a free market, sellers are free to offer any service they can provide, and buyers are free to buy any service they can afford. In theory, competition among sellers on price and quality should enable buyers to obtain good service at a reasonable price. How well this model applies to health care has been the focus of considerable debate. The computer on which I am writing this post is clearly a market commodity. Each time I buy a new computer I can shop around among many sellers, and the information I need to comparison shop (prices, features, product reviews) is readily available. By and large, I feel I get good value at a reasonable price. In contrast, recipients of health care do not generally shop around for treatment on each occasion of illness. They usually establish relationships with insurance plans and doctors, trusting that they will receive appropriate treatment at modest out-of-pocket cost. They have little information with which to evaluate the quality of treatment or its cost before they receive it, especially since different providers may charge very different fees for the same procedure. Buyers in this market are uniquely vulnerable, needing to receive care (sometimes desperately), but in a weak position to bargain over its quality or affordability. Expecting patients to obtain health care on a private market alone would be like abolishing public schools and expecting children to buy their own educations.

The second principle is that “power over the organization and delivery of health care has historically been concentrated in the medical profession.” When Franklin Roosevelt proposed including national health insurance in the Social Security system, the American Medical Association passed a resolution stating that “all features of medical service in any method of medical practice should be under the control of the medical profession.” Doctors are often idealized as scientifically informed, technically skilled and altruistic figures who act in the best interests of their patients. But the market model also makes doctors into self-interested entrepreneurs whose treatment decisions affect their own incomes. (Imagine how much money computer dealers could make if they had similar power to tell me what machine I must purchase.) “Each physician strikes his or her own balance between the needs of the patient and economic self-interest.” When he was editor of JAMA, Dr. George Lundberg suggested that doctors are distributed along a bell-shaped curve with a few “altruistic missionaries” on one end, a few “money grubbers” on the other, and most somewhere in between. He warned, “Caveat aeger–let the patient beware.”

The third principle is that “government has historically had a relatively minimal role in guiding our system of health care.” While most industrial democracies have adopted universal health insurance, “the United States has historically pursued a policy of incrementalism: establishing government-funded programs for specific populations felt to be most vulnerable,” notably the elderly and the very poor. We have stopped short of defining health care as the right of every citizen.

The fourth principle is that “there is no uniform standard of care.” Patients can receive very different care for the same disease, as a result of a provider’s decisions regarding treatment or a patient’s ability to pay. One study found that appendicitis patients with Medicaid or no health insurance had about a 50% greater risk of developing a ruptured appendix than patients in HMOs.

Basing health care on these principles has limited the system’s ability to accomplish three objectives: access to care, high quality of care, and cost-effectiveness of care. The United States has the world’ most expensive health care system, spending 17.3% of GDP in 2009. The closest countries to us were France and Switzerland, with 11.2% and 10.7% respectively. That percentage keeps going up, since health care costs have been rising at a faster rate than GDP itself. More expensive treatments have become available, and American doctors are largely free to adopt them even when their cost-effectiveness is questionable. With regard to quality, the U.S. system has some advantage in extending the lives of people over 80; Barr says that “this is understandable, because the common causes of death for people in this age group–heart disease, cancer, and strokes–are often amenable to high-tech treatment.” Aside from that, the U.S. ranks low on most measures of quality. For example, “the World Health Organization (WHO) combined eight different measures to create a single measure of the overall quality of a nation’s health system. Using this combined measure, the United States ranked thirty-seventh in the world.” The increasing cost of health care, in combination with the reliance on the private market, has limited access to care by making health insurance unaffordable for many families. In the non-elderly population, at least one person out of six was uninsured when the Affordable Care Act was passed.

Chapter 3 of Barr’s book goes deeper into the cultural values and institutions underlying health care, especially by comparing the United States and Canada. While the 18th-century liberal values associated with the American Revolution, especially individualism and distrust of the state, shaped the tradition that appears conservative today, the greater respect for state authority in the Canadian tradition laid the foundation for a larger government role in health care. Canada adopted a system of national hospital insurance in 1957, and a more comprehensive system of health insurance in 1968. The national government shares the cost with the provinces, whose health programs have to meet national standards. The private market for health insurance has been eliminated, but hospitals remain privately owned and most physicians remain independent practitioners. In contrast to the principles underlying the US system, Canadians regard health care as a basic right; the medical profession has more limited power and greater social obligation; government is the “single payer”; and “there is one standard of health care for all Canadians.” Costs are about 9-10% of GDP, and increases in the federal contribution are limited to increases in GDP.

The Canadian system is not without problems. One is “queuing”: Patients may need to go onto a waiting list before they can get certain treatments. (The US has less of a formal queue but more of an informal, income-based distinction between who does or does not receive treatment, especially for non-acute conditions.) Another problem is “churning”: Doctors may encourage more appointments or treatments to compensate for restrictions on the fees they can charge for each service. Doctors in Quebec have won in court the right to sell services outside the publicly funded system, although most Canadians oppose a two-tiered system in which the wealthy can buy services they can’t get–or can’t get as quickly–through the public system.

Another difference that may reflect cultural values is the greater use of costly medical technology in the United States:

In Canada, technology such as MRI is applied sparingly, because it is felt that the added benefit to society overall does not justify the added cost of making it more widely available. In the United States, we typically expect technology to be available to us, despite its position on the marginal cost/marginal benefit curves. It is not fair to the individual, we believe, to deprive her or him of the possible benefits of the test even though they are small compared to the cost.

Not only do US doctors charge over twice as much for their services as Canadian doctors do, but they order more tests, medications and treatments. Part of the explanation is that US patients are over three times as likely to file a malpractice suit, so “physicians have added billions of dollars to our health care budget by ordering extra tests and procedures that add little care but present a stronger defense in the case of a malpractice suit.” But a strong faith in technological fixes and considerable freedom of doctors to seek them are contributing factors as well.

One provision of the Affordable Care Act encourages more comparative effective research (CER) to identify treatments that are most effective. It establishes an independent, nonprofit organization, the Patient-Centered Outcomes Research Institute. The institute is not intended, however, to evaluate alternative treatments based on costs as well as benefits, and to discourage treatments with poor cost-benefit ratios. Many Americans have more access than Canadians to expensive treatments with limited benefits, while some Americans have limited access to even the most cost-effective measures, such as preventive care.


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