Alternatives to federal regulatory realignment of health care

Healthcare Financial Management, Jan, 1994 by Christopher J. Kalkhof

HEALTHCARE REFORM

In this article, author Christopher J. Kalkhof puts forth the view that the U.S. healthcare system could be made more cost effective and cost efficient without the implementation of government-directed managed competition strategies. Noting that current private sector initiatives already are forming more cost-sensitive integrated delivery and financing mechanisms, Kalkhof asserts that corresponding realignment initiatives for publicly financed healthcare benefit programs would provide additional incentive and momentum for these private sector efforts without requiring reconfiguration of the healthcare system by the government.

The current crisis in the U.S. healthcare system may be more one of perception than fact. While it is true that in certain areas of the country and for some segments of the population there are real healthcare access and coverage problems, coverage is available in most places and for most individuals. The magnitude of the crisis may not be significant enough to justify the major changes in the healthcare delivery system that will result from present reform proposals.

Many changes are needed in the healthcare system. The system needs to become more effective, physicians and hospitals need to become more cost efficient and price competitive, duplication of services needs to be eliminated, and hospitals need to focus on assuring the appropriateness of care rather than filling beds.

These changes can be accomplished, however, without government-directed healthcare reform. Moreover, healthcare reform proposals themselves raise a serious question: Will any of the proposals adequately address healthcare access for the varied population segments of America?

The most widely discussed reform proposal is the Clinton administration's managed competition approach. Other proposals for reform advocate a Canadian-type, single-payer system--an approach supported by a number of members of Congress and some lobbying groups--and several alternative versions of managed competition.

The common thread among these reform initiatives is the focus on healthcare benefits coverage. The rationale behind these initiatives is that benefits coverage will ensure access to health care. However, benefits coverage in and of itself will not necessarily guarantee that medical care will be accessible, acceptable, available, and affordable for the individual who has the coverage. Nor does it assure continuity of treatment and quality of services.

It is likely that the Clinton plan or a modified version of the managed competition approach to healthcare reform eventually will be passed by Congress. Adoption of a managed competition approach will create a heavily regulated healthcare system. The Clinton plan, for example, calls for creating massive healthcare alliances, one in each state or geographic region or for each major corporation. These alliances will act as insurance pools for large numbers of healthcare consumers and spread risks among providers. As a result, alliances will be able to collect premiums from all employers or welfare funds, contract with designated healthcare plans for the provision of services, enroll eligibles, and enforce cost-cutting directives. In addition, the Clinton proposal will impose a global budget on healthcare spending, restricting increases in insurance premiums to the general rate of inflation by 1999.

If it can be assumed, however, that healthcare delivery and financing processes already are undergoing fundamental systemic change as a result of competitive market forces. The question then becomes: Will the introduction of government-mandated managed competition into the current market-driven evolutionary process increase or decrease the probability of improving provider accessibility, availability, acceptability, affordability, continuity, and quality of care for the individuals the system is intended to serve--the patients?

Healthcare utilization factors

The following variables have been found to promote or prohibit the utilization of healthcare services by families:

* Need, which may be defined as the perceived seriousness of illnesses, chronic activity limitations, and disability;

* Predisposition, which includes behavior, sex, age, education, marital status, race, lifestyle, and so forth;

* Enabling factors, which include economic considerations (e.g., income, out-of-pocket cost, health insurance); organizational opportunities (e.g., existing regional/community delivery systems); and accessibility (e.g., urban vs. rural residence, distance to services, regularly available care when needed, and an adequate supply of healthcare services in the community).(a)

The Clinton proposal and other current reform proposals primarily address economic enabling factors; they do not consider to any great extent organizational or accessibility factors or need and predisposition. The practical impact from a market perspective of a program of healthcare reform that focuses on economic enabling factors or healthcare benefits coverage is a significant increase in demand for services. Increased demand, however, leads to increased production of healthcare services, and thus higher costs. Higher costs run counter to one of the core objective of national healthcare reform, namely, to reduce expenditures as a percentage of the gross national product and reduce the rate of growth of expenditures.