 Policy Debate: Is there a need for health-care reform?
Issues and Background
I will follow that system of regimen which, according to my ability and judgement,
I consider for the benefit of my patient, and abstain from whatever is deleterious and
mischievous.
~ Hippocrates
Health-care reform was one of the major issues in the 1992 U.S. Presidential campaign. While
no major reform bill was passed during Bill Clinton's two terms in office, health-care reform
has remained a major topic of congressional debate.
The ultimate source of much of the health-care reform debate has been the
rapid rise in the cost of medical services during the past 30-40 years.
During most of this period, the rate of medical cost inflation substantially
exceeded the overall inflation rate. While the increase in medical costs
is partly the result of an improvement in the quality of medical services,
it has substantially reduced the ability of non-insured low-income individuals
to acquire medical services. In the early 1960s, total health expenditures
in the U.S. accounted for approximately 5-6% of GNP. By 1990, approximately
12% of U.S. GDP was devoted to health-related expenditures. (A
chart showing health-care expenditures as a share of GDP over time
is provided by Physicians for a National Health Program.) This
problem is expected to become more severe as the baby-boom generation
ages and requires a higher level of medical expenditures.
Traditional private insurance coverage in the United States consisted of a fee-for-service
system. Under this system, insurance companies paid all or a given percentage of the costs of
most medical services. Individuals selected their own physicians and the physicians decided what
services were appropriate. This system, unfortunately, results in a moral hazard problem that
exists because individuals who do not face the full cost of medical services (as a result of
their insurance coverage) tend to overconsume medical services. Physicians concerned about the
rising cost of malpractice insurance might be expected to engage in excessive medical testing
(particularly since they know that their insured patients do not have to pay for the tests).
To deal with this moral hazard problem, insurance companies have generally responded in recent
years by raising deductibles and copayments. Patients faced with a large deductible or
substantial copayments will tend to consume fewer medical services. They will, however, always
have an incentive to consume more services than would be consumed in the absence of insurance
coverage. As a larger share of the population became covered by private or governmentally
provided Medicare and Medicaid insurance programs, medical costs rose rather dramatically during
the 1960s, 1970s, 1980s, and early 1990s.
In response to higher medical costs (and the consequent increase in the price of traditional
health insurance programs), health maintenance organizations (HMOs) and other managed care
arrangements have become a dominant feature in the health-care marketplace during the 1990s.
Participants in such plans must first receive the approval of their primary care physician and
the insurance company before receiving any specialized medical treatments. Physicians
participating in such plans receive fees that are set by the insurance company. These fees are
generally less than the fees charged to other patients. While such managed care arrangements have
been successful in substantially lowering the rate of medical cost inflation in recent years,
they have also substantially limited consumer and physician choice. The approval process required
by these plans have also resulted in administrative expenses that are among the highest in the
world. Concerns about the quality of care provided under managed care has resulted in pressure for
the passage of a Patients' Bill of Rights. As of 8/9/01, the House and Senate have passed different
versions of this bill. It appears that a compromise bill will be approved in the near future.
While some of the best health care in the world is available in the U.S.,
not all individuals have access to the same level of medical care. The
infant mortality rate in the U.S. is among the highest among developed
economies. In 1990, the infant mortality rate of 9.2 per 1,000 live births
in the United States was twice as high as Japan's rate of 4.6. This is
partly due to the lower quality of prenatal care received by low-income
mothers. (More information on infant mortality rates among developed economies
is available in Chapter 4 of
International Health Statistics: What the Numbers Mean for the United
States.) Unemployed individuals, low-income workers, homemakers,
discouraged workers, and members of minority groups are substantially
less likely to have insurance coverage.
Several proposals for health-care reform involve a form of national health insurance. A popular
variation of this plan involves the replacement of the current system of private health
insurance with a single payer system (as in the Canadian system). Other proposals rely on a
market-based system of national health insurance in which all companies would be required to
provide a standardized insurance plan to all applicants without regard to their health status.
In several proposals, all employers would be required to provide health insurance for all of
their employees.
Another proposal for health-care reform involves the encouragement of medical savings accounts.
Under a medical savings account system, individuals purchase a high-deductible catastrophic
insurance policy and deposit the remainder of the funds that would otherwise be used to purchase
traditional health insurance or HMO coverage in a medical savings account. The funds stored in
the medical savings account would be used to fund current and future medical expenses (until the
annual deductible is reached). Funds that remain in this account when the individual reaches
retirement age may be used to pay for medical or other retirement expenses. Advocates of this
approach argue that it removes the moral hazard problem associated with traditional insurance
coverage and results in a more efficient use of medical services. Opponents argue that the
encouragement of medical savings accounts through tax subsidies does not remedy the problem of
inequitable access to medical services. High-income and healthy individuals gain more from such a
system than do low-income individuals and those with chronic illnesses. If this plan is available
as an option, healthy individuals would select it while those individuals with higher medical
expenses would select traditional insurance or managed care programs. This would raise the cost
of alternative insurance programs as healthier individuals opt out of these plans.
Primary Resources and Data
- American Medical Association
http://www.ama-assn.org
The American Medical Association (AMA) website contains extensive information on a variety of
health care topics. Abstracts and selected articles from AMA journals are available on this site.
Information about the AMA's position on a variety of health reform proposals can also be found
here.
- U.S. Department of Health and Human Services
http://www.os.dhhs.gov
The Department of Health and Human Services is the executive department charged with coordinating
health care policy. This web site contains information about programs sponsored by the
Department.
- Centers for Medicare & Medicaid Services (CMS)
http://cms.hhs.gov/
The Centers for Medicare & Medicaid Services (formerly known as the
Health Care Financing Administration) is charged with administering
Medicare, Medicaid and Child Health Insurance Programs. This web site
contains extensive information about these programs and a large collection
of health
care statistics and data related to these programs. One of the nice
features of this site is its provision of online health
care indicators including a medical sector price index, a hospital
price index, and a prescription drug price index.
- Office of Technology Assessment, "International Health Statistics: What the Numbers Mean for the United States"
http://www.wws.princeton.edu/~ota/disk1/1994/9418_n.html
This November 1993 study conducted by the Office of Technology Assessment of the U.S. Congress
provides a comparison of the state of health care in the United States with health care in other
developed economies. Reasons for the relatively poor performance of the U.S. in these
international comparisons are examined in this study.
- Office of Technology Assessment, "An Inconsistent Picture: A Compilation of Analyses
of Economic Impacts of Competing Approaches to Health Care Reform by Experts and Stakeholders"
http://www.wws.princeton.edu/~ota/disk1/1993/9308_n.html
In this June 1993 study, the Office of Technology Assessment examines alternative estimates of
the economic impact of a variety of proposed health-care reform plans. It is found that the
existing studies provide widely varying estimates of the costs and benefits of each approach.
This document, however, provides a very nice summary of the advantages and disadvantages of a
variety of alternative programs.
- World Health Organization Statistical Information System (WHOSIS)
http://www3.who.int/whosis/menu.cfm
The website of the World Health Organization Statistical Information System contains online
cross-country statistics for a variety of health-care indicators. Links to other sources of
health-care statistics and data are also provided at this site.
- University of Michigan Public Health Library, "Statistical Resources on the Web: Health"
http://www.lib.umich.edu/govdocs/sthealth.html
This page, provided by the Health Statistics Library at the University of Michigan, contains an
extensive collection of links to U.S. and international providers of health-care statistics.
- MedWeb Plus
http://www.medwebplus.com/
MedWeb Plus provides an extensive collection of links to health care
and medical information on the Internet. The
health policy links alone make this site a useful place to visit.
- Oath and Law of Hippocrates
http://www.pbs.org/wgbh/nova/doctors/oath.html
This site contains the text of a standard translation of the oath and law of Hippocrates, a
celebrated Greek physician. A popular modern version of this oath is also contained on this page.
- Managed Care Terms
http://www.amso.com/terms.html
This glossary of managed-care terms will be useful for those who are unfamiliar with the jargon
of the managed-care literature.
- Dr. Jeremy Rogers, "The United Kingdom National Health Service"
http://www.cs.man.ac.uk/mig/links/NHS/nhs.html
In this document, Dr. Jeremy Rogers describes the evolution of the U.K.'s National Health
Service from its inception in 1948 until the present day. Since the U.K.'s system is one of the
earliest national health-care systems, an examination of its history can provide useful
information about some of the advantages and shortcomings of such a system.
Different Perspectives in the Debate
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