Health Care Organization, Policy, and Financing

29 Health Care Organization, Policy, and Financing

I Overview

All health care systems strive to reconcile seemingly unlimited health care needs with limited resources. In an ideal world, health care systems would achieve three goals: universal access, high quality, and limited costs. In the real world, there are tradeoffs; at best, health care systems can attain only two of these three goals at any one time1 (Fig. 29-1).

This chapter examines the fundamental legal, social, and political framework underlying health care in the United States, how it is organized, and how it can provide the greatest value given limited resources. Although the legal and organizational framework of the health care delivery system is different in other countries, the challenges and need to distribute scarce resources are the same.

A Terminology in Health Policy

Health care policy and financing require the use of economic terminology, including concepts such as needs and demand, utilization, and elasticity, often with an array of acronyms (Box 29-1). The need for health care usually is considered a professional judgment. Although the term “felt need” is sometimes used to describe a patient’s judgment about the need for care, more frequently the demand for health care is actually studied. Demand has a medical and an economic definition. The medical definition of demand is the amount of care people would use if there were no barriers to care. The problem with this definition is that there almost always are barriers to care: cost, convenience, fear, or lack of real availability (see later). The economic definition of demand is the quantity of care that is purchased at a given price. For this economic definition to work, there must be an assumption of price elasticity (i.e., an assumption that as prices increase, the demand for a given service will decrease).

Box 29-1 Frequently Used Acronyms in Health Policy with Descriptions

ACO Accountable Care Organization
New care model that includes providers and hospitals cooperating together for better outcomes and taking financial risk for outcomes.
ADA Americans with Disabilities Act
Forbids discrimination based on disabilities and requires employers to make reasonable accommodations for disabled workers.
CAA Clean Air Act
Regulates emissions from area, stationary, and mobile sources.
CERCLA Comprehensive Environmental Response, Compensation, and Liability Act
Also called Superfund Act, established a trust fund for cleanup of abandoned and uncontrolled hazardous waste sites.
CMS Centers for Medicare and Medicaid Services
U.S. federal agency that administers Medicare, Medicaid, and the State Children’s Health Insurance Program.
COBRA Consolidated Omnibus Budget Reconciliation Act of 1985
Allows employees to continue their insurance after job termination.
CWA Clean Water Act
Established pollution control for discharges into U.S. waterways; does not address drinking water (see SDWA).
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Active Labor Act
Law that requires emergency departments to provide initial evaluation and stabilization of all patients regardless of their ability to pay.
EPA Environmental Protection Agency
ERISA Employee Retirement Income Security Act
Regulates the content of established employee health plans.
FIFRA Federal Insecticide, Fungicide, & Rodenticide Act
Enacted in 1996, controls the distribution, use, and sale of pesticides.
FQHC Federally qualified health centers
Community health centers that qualify for special federal grants to treat Medicare and Medicaid patients.
HIPAA Health Insurance Portability and Accountability Act
Calls for standards in implementing a national health information infrastructure and for regulation of the protection of individual health information in such a system.
HSA Health savings account
Individual tax-preferred savings account for health expenses, usually coupled with a high-deductible insurance plan.
MCO Managed care organization
PCMH Patient-centered medical home
Care model in which patients are cared for by a physician-directed team that provides comprehensive care with enhanced access and responsibilities for patient engagement, coordination, and population management.
PPACA Patient Protection and Affordable Care Act
Health care reform bill passed in 2010 under President Obama in an effort to enact universal health care; Supreme Court ruled it constitutional in 2012.
PRO Peer review organization
Also formerly called professional review organization; group of medical professionals or a health care company that contracts with CMS to ensure that services covered by Medicare meet professional standards.
RCRA Resource Conservation and Recovery Act
Established that the Environmental Protection Agency should control hazardous waste “from cradle to grave.”
SARA Superfund Amendments and Reauthorization Act
Expanded CERCLA and established a community’s right to obtain information about hazards.
SDWA Safe Drinking Water Act
Protects surface water and groundwater designated as drinking-water sources.
TRI Toxic Release Inventory
Publicly available database on toxic chemical releases and other waste management activities.

This assumption has been tested in one of the largest social science experiments, the Health Insurance Experiment conducted by the RAND Corporation in the 1970s. In this study, 5809 enrollees were randomly assigned to different insurance plans providing different levels of coverage, deductibles, and copayments. The study found that patients did change their utilization of health care somewhat in response to different insurance levels (i.e., there was some elasticity of health care to price). However, this elasticity was fairly small compared with that of demand for nonmedical goods and services. Furthermore, health care spending was reduced for both necessary care and unnecessary care, which led to worse blood pressure control, vision, and oral health.2 These results call into question the suitability of market-based solutions for health care problems. It also demonstrates how almost any health policy solution usually has negative side effects, called unintended consequences.

Because of the difficulties of measuring demand, what is usually studied is the effective (realized) demand, called utilization. Utilization is usually less than need, so the concept of unmet need was developed. Unmet need can be defined by the following equation:


B Factors Influencing Need and Demand

Demographic factors are among the most important influences on the need and demand for medical care. Foremost is the age of the population, as well as mortality rates and fertility patterns. In the United States a rather sudden decline in birth rates occurred around 1970 with the wide availability of oral contraceptives, and when abortion was legalized (1973). This decline in birth rates accelerated the process of aging of the population due to longer life expectancy. Fertility levels have remained low. The long-term result of reduced fertility may be an extended period in which the proportion of workers in the U.S. population will be the smallest in history. This phenomenon is expected to peak around 2015, when large numbers of the “baby boom” children will reach retirement age. A major concern is whether the smaller number of workers will be able to support the large, older population with such benefits as Medicare and Social Security retirement payments. The expected shortage of workers will also put upward pressure on wages, making care more expensive.

Other factors that influence medical needs and demands include advances in medical technology, especially pharmaceutical and medical devices. As new methods of prevention, diagnosis, and treatment become available and prove to be useful, more providers and more patients will want to use them.

One might expect that the unmet need for medical care would be greatest among the poorest members of society, but that is not always true. People with income below some percentage of the poverty line are eligible for Medicaid (see later). People whose incomes are too high to be eligible for Medicaid are those who do not receive medical insurance in their jobs and are not able to pay for individual medical care insurance policies, and who are considered the medically indigent. They may be able to support themselves until a medical catastrophe strikes, but then they are unable to pay their bills. Many of the medically uninsured (those who have no health insurance) and medically underinsured (those whose health insurance is inadequate) are medically indigent. They are not on welfare, but they cannot financially tolerate major medical bills. In 2011 the medically uninsured population in the United States numbered about 49.9 million people, about 17% of the U.S. population.3

C International Comparison

The United States has a higher growth of health care costs than other countries; it spends almost 50% more on health care than other industrialized countries, including Germany, Canada, and France, which provide health insurance to all citizens.4 In 2008 the United States spent 16% of its gross domestic product (GDP) on health care, more than any other country. Sadly, these higher expenditures do not lead to uniformly superior outcomes5 (Fig. 29-2). What is worse, the United States has made much less progress than other industrialized countries in improving overall life expectancy in the past 40 years.6

A study comparing the quality of health care across industrialized countries found that, as in past years, the United States ranks last or next to last on five dimensions of a high-performance health care system: quality, access, efficiency, equity, and healthy lives.7 The mismatch between health expenditures and health and the inexorable rise of health cost are driving a push to control (i.e., reduce) health care spending.

To understand why we pay so much for so little health and how that could change, it is important to understand the underlying laws and functions of the health care system. Laws build the underpinnings of the health system and the complex environment that generates the conditions for health.8

II Legal Framework of Health

B Environmental Laws

The U.S. Congress passed most important environmental regulations in the 1970s. The Clean Air Act (CAA), passed in 1970 and amended in 1990, regulates emissions from area, stationary, and mobile sources, with recent discussions on whether its scope should include regulation of greenhouse gases. The CAA also established National Ambient Air Quality Standards.

The Federal Water Pollution Control Act, established in 1972 and amended in 1977 to become the Clean Water Act (CWA), established pollution control standards for discharges into U.S. waterways. The Safe Drinking Water Act (SDWA) was passed in 1974 to protect surface water and groundwater designated as a drinking water source. It regulates water and underground injection of waste, protecting groundwater.

The Resource Conservation and Recovery Act (RCRA) gave the Environmental Protection Agency (EPA) control over hazardous waste “from cradle to grave.” It focused only on active and future facilities, not on defunct sites. These inactive sites are addressed through the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also called the Superfund Act. This law created a tax on industries and established a trust for cleanup of abandoned and uncontrolled hazardous waste sites. CERCLA was amended in 1986 through the Superfund Amendments and Reauthorization Act (SARA), which established the community’s right to obtain information about hazards and the Toxic Release Inventory (TRI). The Federal Insecticide, Fungicide, & Rodenticide Act (FIFRA), enacted in 1996, controls the distribution, use, and sale of pesticides.9

D Health Care Financing and Insurance

The Employee Retirement Income Security Act (ERISA) from 1974 regulates the content of established employee health plans. It was later amended by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), which enables employees to purchase employer-sponsored health insurance for a limited time after termination.

1 Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act (PPACA) became law in 2010 and may be the most comprehensive health care legislation since Medicare in 1965. The act offers a mix of regulations covering a wide swath of topics.10 In broad strokes, PPACA does the following:

The PPACA closely mirrors the health reform law passed in Massachusetts in the early 2000s. Not surprisingly, given the political stakes, opinions differ about what the Massachusetts experience has shown. Most analysts agree that the health care reform has expanded the insured pool and increased access to providers, perhaps more so for disadvantaged citizens.11 Views on the impact on costs are more mixed. The reform has resulted in a net cost rather than net savings and has led to an influx of more newly insured patients without expanding the provider pool, which may have increased wait times. Also, the reform has not changed patient behavior or convincingly slowed the growth of health care costs in Massachusetts.12 In June 2012 the U.S. Supreme Court ruled on the balance of federal and state powers in regards to health care, and the extent of federal powers under the commerce clause to enforce the individual mandate (see Chapter 25). The Court held that the individual mandate exceeded Congress’ power to regulate commerce, but was constitutional under the power to levy taxes.13

III the Medical Care System

Aug 27, 2016 | Posted by in PUBLIC HEALTH AND EPIDEMIOLOGY | Comments Off on Health Care Organization, Policy, and Financing

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