Is universal health coverage possible? - Alain Enthoven's consumer choice proposal - Special Report - The 1990s: What's Ahead for Health Benefits - illustration

Business & Health, Dec, 1989 by Karen Hunt

Is universal health coverage possible?

Alain Enthoven thinks it is--if purchasers insist on making the health care system more efficient and change existing financial incentives.

Since the mid-1970s, Alain Enthoven has been one of the leading members of this country's health care policy brain trust, a small, informal, and exclusive group of individuals, mostly from universities and think tanks.

But Enthoven isn't an ivory-tower academic, despite his title: the Marriner S. Eccles Professor of Public and Private Management in the Graduate School of Business at Stanford University.

At Stanford, he's chairman of the benefits committee where he grapples with the real world dilemma of providing high quality, affordable coverage to the university's 10,000 employees. He also serves on the state of California's health benefits advisory council.

What's more, Enthoven has experienced corporate pressures from the inside, having headed up Litton Medical Products for a time.

When it comes to politics and government, Enthoven is no babe in the woods either. During the Kennedy and Johnson years, Enthoven was one of "McNamara's Whiz Kids." As assistant secretary of defense, his job, as he describes it, was "point man on trying to bring cost effectiveness to the Pentagon. I learned that the ideal weapons system is built in 435 congressional districts and doesn't work."

Government's potential

The experience has given him some definite ideas about the government's potential to manage health care. "People have to give up the fantasy that someday, somehow, we'll bring in the government to get health care costs under control," he says. "That's a ridiculous idea. Government is anti-cost effective."

He is staunch in his belief that "we're not going to get cost effective care in this country unless we get every purchaser interested in it and seeking it out--seeking value for money."

As Enthoven sees it, the incentives aren't right to make employers, the government, and consumers demand cost efficiencies.

Early this year, Enthoven and his colleague Richard Kronick presented their ideas for changing the health care system. The proposal, called "A Consumer-Choice Health Plan for the 1990s: Universal Health Insurance in a System Designed to Promote Quality and Economy," was published in two articles in The New England Journal of Medicine, January 5 and 12.

Hill attention

The proposal, which is getting a lot of attention on Capitol Hill, evolved from one Enthoven made in 1978 at the request of President Jimmy Carter's Secretary of Health, Education and Welfare Joseph Califano. Ideas from that version surfaced in at least a half dozen different health insurance bills introduced in the late 1970s by liberals, moderates, and conservatives alike.

The new proposal

The new proposal, in a nutshell, recognizes the "paradox of excess and deprivation." While the country spends more than 11 percent of the gross national product on health care, we still have some 35 million people who have no health insurance.

"To an increasing degree, the present financing system is inflationary, unfair, and wasteful," the authors say. "In its place we need a strategy that addresses the whole system, offers financial protection from health care expenses to all, and promotes the development of economical financing and delivery arrangements. Such a strategy must be designed to be broadly acceptable in our society."

The proposal calls for everyone who isn't covered by Medicare, Medicaid, or some other public program to be able to buy affordable coverage either through an employer or a "public sponsor."

"To attack the excess," the authors propose "a strategy of managed competition in which collective agents, called sponsors, such as the Health Care Financing Administration and large employers, contract with competing health plans and manage a process of informed cost conscious consumer choice that rewards providers who deliver high quality care economically."

Employers' role

In a recent interview with Business & Health, Enthoven described how the plan would affect employers.

"The main thing for employers in the proposal is that we'd limit the amount of tax-free contribution to health insurance. We're not saying the whole thing becomes taxable."

The consumer-choice plan doesn't specifically require private employers to offer choices, but Enthoven says, "It would work better if they did.

"I find that offering choices and a defined contribution is just smart management from the employers' point of view."

Wrong incentives

Enthoven says the way most employers structure what they'll pay toward health insurance is sending the wrong message to employees, providers, and insurers.

"I'm trying to get people to understand that the group purchaser who has been totally passive must get very active. In fact, employers should apply principles of rational economics. For example, sometimes people say if cost effective HMOs are such a good idea, why haven't they grown faster and taken over? For one thing, the employers, the large group purchasers, still insist on paying more money, often substantially more money, on behalf of those employees who choose the costly, inefficient plan.