GOALS OF REFORM
Most would agree that a national health system reform needs to address these four elements: • A health “safety net” for all residents, irrespective of age, health status, or employment status • Mechanisms that promote cost containment • Choice for patients and providers • Ease in administration Consider the four elements in order: Safety net—Large portions of the U.S. population receive inadequate health care by almost any criteria. While Medicare provides almost universal health care for those over age 65 and Medicaid/CHIP are making great inroads into the population under age 18, millions of Americans lack access to levels of health care that even the most conservative analysts would view as adequate.
Cost containment—The United States spends well over one in six dollars of its GDP on health care, and expanded coverage will almost certainly increase that ratio. While some analysts have argued that this amount may reflect consumer preferences for high quality health care, there are clearly avenues relating to administrative costs, and ineffective treatment, that could reduce overall health care costs. Further, few Americans would desire cost containment at the expense of the quality of the health care. Choice for patients and providers—The failure of President Clinton’s reform initiative in 1994 made it clear that Americans will reject any national health insurance policy that can be characterized as “one size fits all.” A successful plan must provide choices of providers and treatments. Ease in administration—Consider the weekly trip to the supermarket. The decision as to where to shop and what to buy, while constrained by budgets and the prices of the goods, is administratively simple. People go where they shop, buy what they need, and need not deal with bureaucrats. Contrast that to current health insurance systems, with different application forms, insurance forms, cards, and a myriad of questions about who pays for what, and whether what one has paid will be reimbursed. While purchasing health care is obviously more complicated than purchasing food, any national health care policy that simplifies the process would be desirable. Many reform proposals face the dilemma whether to fund coverage by individual mandate, employer-employee mandate, or general revenues. An individual mandate is a law that requires individuals to buy health insurance for themselves, with subsidies for those who cannot afford it. The subsidies usually would be funded out of general revenues. Employer-employee mandates would require taxes on wages for the employee’s share. The employer’s share may also fall on the employee in the form of lower wages. Subsidies out of general revenues would provide for the unemployed. Those who advocate a Canadian-style system seek a single-payer system with government revenues providing most of the NHI. Yet another alternative is the medical savings accounts method of payment that would allow people to set up a tax-free savings account out of which they can pay the out-of-pocket costs of their health care. Usually, these systems entail health insurance with high deductibles and coinsurance. Some plans define a minimum acceptable insurance level, with people allowed to purchase more extensive coverage if desired and if they can afford it. Others define one plan to fit all. In early debates, many plans featured universal coverage. As support for universal coverage waned in Congress, more plans offered lesser goals for reaching the population.
Basic Issues in Reform
Any reform program must difficult questions. One fundamental question is service coverage. Clearly, as more services are covered or mandated and more provider types are included, the costs will increase. Figure 23-1 shows a health care system that allocates its resources to goods and health at Point A. It would be best, of course, if A were on the production possibility frontier of efficient production for health and all goods, the solid line PP, but there are many reasons that it is probably not. Ineffective treatments, needless tests, and excessive paperwork, may all provide less health (and other goods) than possible, so that we see an interior frontier indicated by the dashed line PP. 1 Assume that the society determines to provide a safety net for all residents, increasing the amount of health goods provided from H0 to H1. The economic cost of providing H = H1 - H0 of health is the amount of G given up, or ¢G = G0 - G1 at point B. If we could control costs, or provide health more efficiently, society might plausibly reach a point like B or B, on the efficient frontier. One of the underlying goals of reform would be to move to a more efficient production of health from health care. A related issue is whether there will be cost-sharing for covered services and, if so, what type of cost-sharing arrangement will occur. The question of who is covered can be equally difficult to address. At any time in the United States, there are millions of foreign students, visitors, and temporary workers as well as millions of illegal immigrants. The difficulty of determining the covered population in some cases is evidenced by the acrimonious debate over care provided (and paid by governments) to undocumented workers and their families. A third major issue is how to fund health reform. Will it rely on general tax revenues or will funding come from mandates on businesses and/or individuals? In either case, where will the burden of funding ultimately rest? The most challenging issue is to determine whether health reform will build largely on the existing framework of government programs and private employment-based insurance with most of the reform effort aimed at cost-containment and reducing the pool of uninsured. Other proposals, especially market-oriented proposals, attempt to attain these goals by weakening the link between private insurance and employment.
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