Healthcare reform - round two - Viewpoint - Column

Healthcare Financial Management, July, 1999 by Richard L. Clarke

Health insurance premiums again are increasing at double-digit rates. Recent polls suggest that consumers increasingly are dissatisfied with cost containment techniques used by managed care plans. And many state legislatures have passed or are actively considering bills aimed at increasing consumer protection from perceived abuses of managed care companies. This is not what was supposed to happen.

Seven years ago, the Clinton Administration began a massive effort to reform the financing of healthcare services in the United States. The effort was led by the First Lady, Hillary Rodham Clinton, and resulted in a year-long debate on the appropriate role of government in controlling healthcare costs and ensuring access to healthcare services for all Americans.

The effort failed. It failed primarily because many in Congress believed the public did not want government to be involved in the healthcare services marketplace more than it already was. And at that time, managed care contracting appeared to be containing costs, as evidenced by a decline in premium increases. Market forces, led by managed care, appeared to be accomplishing what the Clinton Administration felt only government could do - control the cost of healthcare services.

Now, with financial losses mounting, managed care companies are implementing steep premium increases to defray increasing medical care costs and maintain at least some profit margins. Providers of healthcare services complain that care is being managed too tightly, adversely affecting quality. As previously noted, consumers feel that managed care restrictions limit their ability to participate in their healthcare decisions. Their displeasure is being expressed both to their legislators and their employers, which often pay a majority of the premium amount. Employers feel they are caught between a rock and a hard place as they attempt to manage their health insurance costs, while trying to keep their work force happy and productive. And the number of those without health insurance coverage continues to increase at an alarming pace. No one appears to be satisfied.

So, is it deja vu all over again? Will healthcare reform again be part of the U.S. presidential debates? Probably This time, however, I believe the discussion will not center on the role of government in cost containment. Neither will managed care be the focus of the debate about solutions to the health system's problems. This time, I believe the consumer will be the primary focus.

Perhaps the most important lesson of the past five decades of health insurance and government programs is that price and other imposed controls generally are not effective. Price controls distort the economic value of the services being rendered, and other controls, such as utilization management, often are viewed as arbitrary and unfair. Within most markets, consumer economic decisions keep a balance between cost and value and between supply and demand. I believe the next major national debate on healthcare reform will recognize this fact and focus on how to unleash the power of consumer decision making.

The power of consumers has the potential to change the fundamental relationships among the providers of services, the consumers of services, the employers, the health plans, and the government. For example, the definition of the customer for providers of health services changes radically if the consumer has increased choice. Providers will need to focus on attracting customers, not managed care contracts or key physician groups. Quality and value will be defined by what the consumer perceives, not what the medical profession defines. And the full range of patient experience will be what shapes that perception, not just health-related outcomes. Likewise, other relationships will change as radically as the decision-making function moves from a few health plans or employers to the consumer.

So, I believe the next national debate on healthcare reform will center on how to enhance the consumer's role and voice in health services decision making. The outcome of that debate may change the fundamental relationships that have existed for more than five decades.