Prior to engaging in this discussion, read Chapters 10 and 11 in your text as well as the “Steps for Effective Discharge Planning” article.

10ch_atlas_disability.pdf

Home >Social Science homework help >Prior to engaging in this discussion, read Chapters 10 and 11 in your text as well as the “Steps for Effective Discharge Planning” article.

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Learning Objectives

1. Gain a broad overview of how the modern U.S. health care system was created

2. Understand how the U.S. health care system is financed through a mixture of public funding, pri- vate insurance, and charity care

3. Understand how chronic conditions have increasingly become the leading causes of morbidity and mortality during the 20th century

4. Understand how cost containment became a major concern in contemporary health care policy and how the prevalence of chronic disease makes cost containment difficult

5. Understand the complex challenges that the contemporary U.S. health care system faces, as reflected in the provisions of the Affordable Care Act of 2010

The U.S. Health Care System and Chronic

Illness and Disability

Chris O’Meara/Associated Press

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CHAPTER 10Section 10.1 Introduction: The Creation of the Modern U.S. Health Care System

10.1 Introduction: The Creation of the Modern U.S. Health Care System

The system of health care delivery in the United States reflects broad patterns in the evolu-tion of medical research and practice that developed over the course of the 19th and 20th centuries within western society. Like other industrial democracies, the United States has had to balance issues of access, cost, and quality in the delivery of health care services (Mechanic and McApline, 2010). As Daniel M. Fox (1993a) argued in his essay “Medical Institutions and the State,” these issues can be framed in economic terms of supply and demand. The supply of medical services depends primarily on three related factors: the role and function of hospitals, the nature of medical education and research, and the regulation of entry and practice of the profession. By contrast, the demand for medical services (i.e., how they are used and by whom) depends largely on how the system is financed. In addressing these demands, the U.S. system has come to rely on a distinctive mix of public and private financing that clearly differentiates it from other industrial democracies; in this respect, the United States is unique in its “patchwork quilt” of health care financing. The Affordable Care Act (ACA) of 2010 tries to make the system of financing health care more uniform; however, in the implementation of the ACA in the years ahead, isolated gaps in coverage may persist—which means this legislation may have to revisited in the future.

Supplying Modern Medicine: From Unregulated Craft to Regulated Profession For centuries, western medicine—both its theories about disease and how it was practiced as a social and economic activity—changed primarily by increments. Before the 19th century, the dominant view held that disease resulted from an imbalance in bodily fluids known as “humors.” Socially and economically, medicine was an unregulated market; nearly anyone could claim to be a physician provided that he (or less probably, she) could convince patients to pay for clinical services rendered. During the 19th century, these long-held views and practices were challenged, primarily because of developments that occurred in Europe.

In the early 19th century, changes in Parisian medical education made hospital training central to medical education. This training combined clinical observation with autopsies. Also, the availabil- ity of a large number of hospital patients made statistical comparisons between therapies possi- ble. As a result, ancient dogmas were shattered: The view of “disease as humorial imbalance” was replaced with the view of “disease in specific locations.” Depletion therapies such as bloodletting were shown to be ineffective (empirical evidence indicated that those who were being bled were dying more frequently than those who were not being bled). Demolishing these archaic views pre- pared the way for a new understanding, which resulted from reforms in higher education (most notably in Germany). In particular, the modern research university was developed in Germany and, in the biomedical context, laboratory research institutes were created to study subjects such as physiology, pathology, and bacteriology.

Seeing these developments, reformers in American medical education upgraded academic stan- dards. During the 1870s, the medical schools at both Harvard University and the University of Pennsylvania extended the medical curriculum from 2 to 3 years. During the 1880s, many aca- demic physicians likewise endorsed improvements in medical education to enhance the standing of the profession overall. In 1890, a national association of medical schools was established; this organization required that medical education last 3 years (for at least 6 months each year) and that laboratory instruction be provided in histology, chemistry, and pathology (Starr, 1982).

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CHAPTER 10Section 10.1 Introduction: The Creation of the Modern U.S. Health Care System

But the decisive event that helped create the contemporary U.S. health care system was the founding of Johns Hopkins University in Baltimore, Maryland. Endowed by the Baltimore railroad investor for which it was named, the university had a medical school from its inception. As Hop- kins wrote to the trustees of the new university in an 1873 letter, Johns Hopkins Hospital should

in construction and arrangement compare favorably with any other institution of like character in this country or in Europe. . . . [and it] should ultimately form a part of the medical school of that university for which I have made ample provi- sion by my will. (as cited in Chapman, 1994, pp. 107–108)

Hopkins died later that year, leaving $7 million to create the university, hospital, and medi- cal school that would bear his name—the largest single endow- ment ever bestowed in the United States at the time.

Daniel Coit Gilman was selected to head Johns Hopkins as its first president. After earning his bachelor’s degree, Gilman had traveled throughout Europe and studied at the University of Berlin, which was founded early in the century as the model research university. In his inau- gural address at Johns Hopkins, Gilman chided proponents of the then-common 2-year system of medical education by noting that “in some of our very best colleges, the degree of Doctor of Med- icine can be obtained in half the time required to win the degree of Bachelor of Arts” (as cited in Chapman, 1994, p. 127). Gilman later proposed a 3-year program of study as a prerequisite for attending medical school.

In addition to Gilman, the other key figure in the early planning stages of Johns Hopkins was Dr. John Shaw Billings. In 1876, the Johns Hopkins Hospital board of trustees paid for Billings to travel to Europe for two months to inspect hospitals. This trip led to a chance meeting with a young American doctor, William H. Welch, who was studying research techniques at a physio- logical laboratory in Leipzig. Billings was favorably impressed by Welch and persuaded President Gilman to recruit him as a member of the medical school faculty; Welch accepted the appoint- ment in 1884. In a similar coordinated effort, Billings and Gilman appointed William Osler (1849–1919) in 1888 as a professor of medicine in the medical school and physician-in-chief in the hospital (Chapman, 1994). Like Welch, Osler had completed his medical training in Europe, where he had learned about new developments in pathology and laboratory sciences (Bynum & Bynum, 2007). Welch and Osler, in turn, hired the other five members of the initial Johns Hopkins Medical School faculty, each of whom was recruited based on research ability, as reflected in scientific output (Bruce, 1987).

Courtesy Everett Collection

Johns Hopkins University Medical School established the framework for training doctors that is still used today. Here four professors sit with the graduating class of 1900.

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CHAPTER 10Section 10.1 Introduction: The Creation of the Modern U.S. Health Care System

In 1893, the Johns Hopkins Medical School admitted its first class of students. Just as high stan- dards had been implemented in the recruitment of faculty, likewise high admission standards were implemented for students: All entering students were required to have a college degree. To earn the medicine medical degree, each student had to complete 4 years of instruction, which involved 2 years of basic laboratory sciences and 2 years of observation on the hospital wards under the supervision of the faculty (Starr, 1982). By conceiving of the graduate school, medical school, and hospital as different facets of a unified educational institution, Johns Hopkins Univer- sity Medical School established the basic framework for training doctors that still exists today, the “teaching hospital.”

Parallel to these education reforms, various states successfully regulated entry into the profession by establishing boards of medical examiners. By certifying that those who practiced medicine in the state had proper credentials, the boards elevated and standardized the body of knowledge a doctor had to master. Eventually, these higher standards required that medical education be extended from 2 years (as had been customary) to 8 years beyond high school. These develop- ments put many medical schools (especially those that relied on tuition as a primary source of income) in a financial bind: The extended curriculum led to a decline in enrollment, and the higher standards required costly upgrades to educational facilities in order to supply laboratory and clin- ical instruction. As the sociologist Paul Starr (1982) observed, these new economic realities killed many medical schools from the late 19th through the early 20th century.

The catalyst that hastened these schools’ demise was a famous 1910 report on the state of Amer- ican medical education authored by Johns Hopkins graduate Abraham Flexner. The background to the Flexner Report was an earlier 1906 study of 160 American medical schools initiated by the American Medical Association’s (AMA) Council on Medical Education. In its report, the AMA approved of the instruction provided at 82 schools; it stated that instruction at 46 schools was inadequate but salvageable and that instruction at the remaining 32 could not be adequately upgraded. Because professional ethics prohibited criticism of fellow doctors, the AMA engaged an outside organization, the Carnegie Foundation for the Advancement of Teaching, to conduct a similar study. Heading the study was Flexner, who visited each of the medical schools in the United States. Many of these schools (known as proprietary medical schools) were primarily a collection of local doctors, often with no formal university affiliation, financed through tuition (which was split among the faculty). In his report, Flexner illustrated many examples of blatant falsehoods in the catalogues of many of these medical schools; some advertised the presence of laboratory facilities that did not exist, libraries that had no books, and medical faculty who did not teach (they were engaged in private practice instead). Flexner’s standard of adequate medical education was clearly predicated on the Hopkins model, with its focus on laboratory and clinical instruction. As he wrote, “The student no longer merely watches, listens, memorizes; he does” (as cited in Bonner, 1995, p. 293). Like the earlier report, Flexner recommended that first-tier institu- tions be strengthened in emulation of the Hopkins model, that second-tier schools be elevated so that they compared to their first-tier counterparts, and that all the remaining medical schools be closed (Starr, 1982).

In response to Flexner’s report, large amounts of foundation money was directed at the first-tier schools and those that Flexner believed could be elevated to first-tier status. For example, John D. Rockefeller gave almost $50 million to improve medical education along the lines Flexner had advocated. Among the salvageable schools that did not receive foundation dollars, state legis- latures stepped in and provided funding so that an adequate number of doctors was practicing in each state. As Robert P. Hudson (1997) observed regarding Flexner’s achievement, “Flexner is properly remembered not so much for the fire that he set as for his blueprint of the new structure which was to arise from the ashes” (p. 206).

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CHAPTER 10Section 10.1 Introduction: The Creation of the Modern U.S. Health Care System

As Fox (1993b) observed, the general features of the health care system resulting from these developments were in place by the 1920s:

• Hospitals grew in size and began increasingly to use expensive “high-tech” equipment;

• Medical and surgical specialties developed and had increasingly rigorous entrance requirements;

• Medical school admission requirements became more stringent (e.g., posses- sion of a bachelor’s degree);

• Hiring, retention, and promotion of medical school faculty became based on laboratory research;

• Teaching hospitals associated with medical schools became the leading providers of health care services in their regions;

• Public health agencies at the local and state level focused on preventing, monitoring, and treating infectious diseases; and

• State-mandated insurance programs provided compensation for workplace- related injuries and exposures to environmental toxins. (pp. 36–37)

Ultimately, these developments structured how health care services were supplied to patients in the United States, including those who suffered from chronic conditions and disabilities.

Financing the System The demand for these services was structured, in part, by how these medical services came to be paid for. As Normand and Thomas (2009) observed, the modern state often plays a role in financ- ing health care by mobilizing funds, developing a method for sharing risks (i.e., insurance), and subsidizing access. Traditionally, modern states have relied on taxation to generate the needed funds and have developed a state-administered system of social insurance to share risks among the entire population. Like other modern countries, the United States has relied on taxes to gen- erate revenue; however, it has never enacted a state-run system of national health insurance. Instead, the general population has relied primarily on private health insurance; however, the U.S. government has provided funds to cover designated vulnerable segments of the population who are unlikely to receive coverage from the private sector.

In contrast to the United States, other industrial democracies created publicly administered pro- grams in the late 19th and early 20th centuries. In 1883, Germany enacted a health insurance law that established compulsory health insurance financed by premiums for its industrial workers. Paid in advance, one third of the premiums was paid by the employers and two thirds were paid by the employees (Porter, 1999). Soon, other European countries followed Germany’s lead: in 1891, Sweden enacted voluntary health insurance legislation; in 1892, Denmark created workers’ voluntary insurance; in 1910, France created a universal state retirement system; and in 1911, the British enacted the National Insurance Act, which funded coverage for medical care through payments from employers and employees (Porter, 1999). In 1948 in Great Britain, the National Health Service Act 1946 went into effect, establishing the present-day National Health Service in England and Wales.

Although various groups and politicians have advocated for the creation of universal social insur- ance for health care in the United States, private insurance plans became the norm. One early attempt at private hospital insurance was the Baylor University Hospital plan. Started in December 1929, the program has been described as the “father” of the Blue Cross movement. It enrolled

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CHAPTER 10Section 10.1 Introduction: The Creation of the Modern U.S. Health Care System

public schoolteachers in the Dallas area; in return for a small monthly premium, each enrollee was guaranteed 21 days of hospital care (Starr, 1982). Eventually, the success of this program led all the hospitals in a geographic region to be included in the hospital insurance scheme.

Opponents of compulsory national insurance—such as the AMA and the U.S. Chamber of Com- merce—used the emergence of the Blue Cross plans to argue for the appropriateness of private health care financing arrangements. As one supporter put it, Blue Cross would “eliminate the demand for compulsory health insurance and stop the reintroduction of vicious sociological bills into the state legislature year after year” (Rothman, 1994, pp. 14–15). Blue Cross was further portrayed as a way for the self-reliant middle class to obtain coverage for medical expenses without relying on charity care, which was associated with care provided to the poor in public hospitals (Rothman, 1994).

Although the early Blue Cross and Blue Shield plans were nonprofit, a viable market for health insurance soon led commercial, for-profit health insurers to offer coverage. This market expanded considerably when the federal government passed a series of laws during World War II and after- ward that made private health insurance an especially appealing fringe benefit that large employ- ers offered to workers. During the war, the government limited the ability of employers to raise wages but allowed employers to expand benefits; under this arrangement, offering health insur- ance became an important recruitment tool to attract scarce workers during wartime. In 1949, the government let benefits be part of the “wage package,” which meant labor unions negoti- ated health insurance as part of contract talks. In 1954, the Internal Revenue Service ruled that employers’ contributions towards purchasing health insurance for their workers were not taxable as income for the workers; in contemporary parlance, this money was taken out on a “pretax” basis (Blumenthal, 2006). As a result of these developments, voluntary health insurance expanded considerably during the 1950s and early 1960s to a point where approximately three fourths of all families in America had some form of insurance (Numbers, 1997).

However, lack of coverage was still widespread—especially for the elderly. In the mid-1960s, approximately 85% of the elderly were uninsured (Harrison, 2003; Numbers, 1997). Because the elderly had medical expenses and hospital stays that were twice as expensive as for those below age 65 and were twice as likely to have a chronic illness (Oberlander, 2003), commercial insurers either did not cover them or charged prohibitively high premiums. This widespread lack of insur- ance for the elderly, coupled with multiple failed attempts to enact compulsory national health insurance, set the stage for the enactment of Medicare, a federal program to cover the medical expenses of the elderly.

In the early 1960s, support for Medicare became a central feature of the Kennedy administration’s domestic policy agenda. To increase the likelihood of passage, administration officials portrayed the enactment of Medicare as an incremental reform. They still accepted private health insur- ance as the “normal” way for most Americans to gain access to medical care and reserved the role of government only for segments of the American population who might not have access to employer-based coverage. In his 1963 testimony in support of Medicare, Secretary of Health, Education, and Welfare Anthony Celebrezze argued that the elderly posed a unique problem, because they incurred more medical expenses than the younger population and, because they were no longer part of the workforce, could not participate in employer-funded group health insurance. Celebrezze observed that “this combination of high health costs, low incomes, and unavailability of group insurance is what clearly distinguishes the situation of the aged as a group from the situation of younger workers as a group.” By contrast, Celebrezze declared that “the vast majority of young workers can purchase private insurance protection. . . . I think for younger employed people, voluntary private plans can do the job” (Rothman, 1994, p. 22).

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CHAPTER 10Section 10.1 Introduction: The Creation of the Modern U.S. Health Care System

In the 1964 presidential election, Lyndon B. Johnson won a landslide victory over Barry Goldwa- ter and brought enough political allies into Congress to ensure passage of Medicare. When all sides realized that passage of the bill, in some form, was inevitable, multiple alternative pieces of legislation were proposed by those who opposed the bill in its original form. Eventually, the alter- natives were merged into a single piece of legislation, which passed Congress and was signed into law by President Johnson in 1965. In its final form, hospitalization coverage for the elderly became Medicare Part A; insurance for doctors’ visits for the elderly became Medicare Part B; and federal assistance to the states to provide medical services to the poor became Medicaid (Oberlander, 2003).

With Medicare and Medicaid, the basic infrastructure for financing American health care had been established. In contrast to the European systems, America had developed a fragmented “patch- work quilt” of health care financing:

• private employer-based health insurance for most of the population; • federally funded health insurance for specific subsets of the population:

○ Medicare for the elderly, ○ Medicaid for the poor and long-term disabled, ○ Veterans Affairs to cover the medical needs of former service people; and

• charitable support for those not covered by the other two categories.

Figure 10.1: Insurance coverage for the United States population, 2011

As the figure indicates, approximately half of the 2011 population in the United States was covered by employer-provided health insurance.

Source: Health insurance coverage of the total population, U.S. 2011. Retrieved from http://kff.org/other/state-indicator/total-population/#. Copyright © Henry J. Kaiser Foundation. Used by permission.

Figure 10.1 breaks down the sources of insurance coverage for Americans as of 2011, based on the U.S. Census Bureau’s Current Population Survey (CPS) supplement, which is the primary source for annual health insurance coverage information. Table 10.1 compares coverage of the different government programs for health care, and Figure 10.2 displays trends in the number of uninsured people under age 65 in the United States from 1978 to 2007.

Employer

49%13%

16% 1%

16%

Individual

Medicaid

Medicare

Other Public

Uninsured

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CHAPTER 10Section 10.1 Introduction: The Creation of the Modern U.S. Health Care System

Table 10.1: Features of major health care insurance programs in the United States

Who qualifies Who administers

What is covered How funded History

Medicare Over age 65 and eligible to receive Social Security

Federal government

Part A: hospitalization; Part B: medical services and physicians; Part D (prescription drug coverage)

Social Security payroll taxes

Parts A and B enacted in 1965; Part D enacted in 2003

Medicaid Below federal poverty line; requirements vary by state

Federal funding in partnership with states

Medical and hospital benefits; treatment of chronic and long- term illnesses

State and federal taxes

Enacted in 1965

Veterans Administration

Military veterans and their families

U.S. Department of Veterans Affairs

Medical and hospital benefits

Federal taxes and military budget

Continental Congress of 1776 established veterans’ health benefits and pensions

Social Security Disability Insurance*

Permanently disabled individuals of working age

Federal government (Social Security Administration)

Medical and hospital benefits (through Medicare)

Social Security payroll taxes

Enacted in 1956

Workers’ Compensation

Employed individuals who have been injured or made ill while on the job

Private employers; regulated by state law

Reimbursement of medical expenses; dependent benefits of families of workers killed on the job

Employees’ paycheck deduction; state insurance funds

State laws passed starting in the 19th century to protect workers

COBRA Continuing Coverage

Members of a group health plan (e.g., former employees, retirees, spouses, former spouses, and dependent children) who lose coverage when employment ends or hours decrease

Group health plan administrator (e.g., employers)

Terms of insurance coverage continue as before

Individuals pay entire premium

Federal Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions passed in 1986

Private Insurance

Employees who qualify (e.g., full time); self-payers

Employers, guilds, unions, and industry associations

Varies depending on terms of policy

Employees’ paycheck deduction; union dues; employer contributions

Market expanded greatly during and after WWII

*Privately funded disability insurance is also offered through many employers, paid for with payroll deductions and employer contributions.

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CHAPTER 10Section 10.2 The U.S. Health Care System and the Paradox of Health Policy

Figure 10.2: Number and percentage of persons under age 65 years without insurance in the United States, 1978–2007

The number of uninsured persons has steadily increased from approximately 23.0 million in 1978 to 43.3 million in 2007.

Source: Cohen, R. A., Makuc, D. M., Bernstein, A. B., Bilheimer, L. T., & Powell-Griner, E. (2009). Health insurance coverage trends, 1959–2007: Estimates from the National Health Interview Survey. National Health Statistics Reports, 17, 5. Retrieved from http://www.cdc.gov/nchs/data/nhsr/nhsr017.pdf

10.2 The U.S. Health Care System and the Paradox of Health Policy

As Daniel M. Fox (1993a) noted, the U.S. health care system embodies a fundamental par-adox: It was designed and financed to treat acute episodes of illness, even though the leading causes of disability and death have increasingly become chronic conditions, for which there is no medical “cure.” In 1900, the leading causes of death were “pneumonia and influ- enza, tuberculosis, [and] diarrhea, enteritis and ulceration of the intestines” (p. 32). In 1940, by contrast, the three leading causes of death were “diseases of the heart, cancer and other malig- nant tumors, [and] intracranial lesions of vascular origin” (p. 32); in 1960, the three leading causes of death were “diseases of the heart, malignant neoplasms, [and] vascular lesions affecting [the] central nervous system” (p. 33). In 2011, it was estimated that chronic conditions of heart disease, cancer, hypertension, stroke, and diabetes accounted for 80% of U.S. deaths and 75% of health care costs (Freudenberg & Olden, 2011). Although the medical terminology has changed, the same diseases in 1940 are the leading causes of death today; the paradox derives from the inabil- ity, at an institutional level, to come to terms with the epidemiological transition from infectious to chronic disease. (For further discussion of the epidemiological transition, see Omran [1971] and “The Biopsychosocial Model” in Chapters 1 and 2.)

19821978 0

P e

rc e

n t

Year

M illio

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1986 1990 1994 1998 2002 2007

Percent uninsured

16.6

Number uninsured 43.3

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CHAPTER 10Section 10.2 The U.S. Health Care System and the Paradox of Health Policy

Moreover, as early as the mid-1930s, chronic disease was recognized as a serious national problem. In 1935–1936, the U.S. Public Health Service conducted the National Health Survey of morbidity, which canvassed 2.8 million people in 19 states. Although individual participants were selected at random, the survey was designed to demographically mirror the United States at the time (Fox, 1993b). Among the technical contributions of this study was a formal definition of disabling illness: an illness “which had kept persons away from work for seven consecutive days or longer during the 12 months preceding the day of the canvass; and other handicapping disease or con- dition including orthopedic impairment, blindness and deafness” (Fox, as cited in Weisz, 2011).

The results of the survey indicated that one person in six had some form of chronic disease. Even though later estimates indicate this figure may have been inflated (the contents of the report emphasized 3 months of illness as the de facto definition of disability), the higher figure was fre- quently cited in later decades to indicate the level of chronic disease in the United States (Weisz, 2011). At the time, those who advocated focusing on chronic diseases were still a minority voice within health policy. Instead, those who shaped policy, while acknowledging these new epide- miological realities, still focused on passing laws intended to cover treatment for acute disease episodes—a strategy that Fox (1993b) called the “politics of incremental accommodation” (p. 47).

Both the structure of medical training and the fee-for-service system implicitly reinforced the focus on specific episodes of illness. The structure of medical training concentrated on introduc- ing the medical student to the full range of diseases. Consequently, little time was left to deal with ongoing disease management even though, as a practical matter, most doctors “manage disease” in private practice. Similarly, when medical students went through a period of residency after earning their degrees, their experience usually centered on a hospital setting. In the hospital, the focus was (by definition) on individuals who suffer from conditions that require hospitalization, treating acute episodes, even if caused by an underlying chronic disease. Finally, doctors were reimbursed by insurance companies based on specific medical interventions performed; the sys- tem emphasized the discrete illness and the specific action taken to relieve that illness.

Despite this focus on acute episodes, the epidemiological reality of chronic disease was recognized implicitly, at the federal level, by the enactment of Social Security Disability Insurance (SSDI) in July 1956. Discussed since the 1930s, the program continued to reflect the politics of accommoda- tion in earlier legislation. Specifically, SSDI tried to expand beyond workers’ compensation (which provided benefits to individuals for work-related accidents) to include disabilities regardless of cause. However, the program required that claimants demonstrate their inability to hold a job, anywhere in the country, because of their impairment. Also, because the final legislation limited eligibility to those over age 50, the program became associated with retirement from work (Ber- kowitz, 1987). While acknowledging that the health care system had to deal with disability per se, the final legislation reflected the realities of local politics. As Berkowitz argued, “In disability, as in social welfare in general, the only avenue of fundamental reform is to add another program to existing programs and cope with the resulting confusion” (p. 227).

Similar accommodation can be illustrated by how Medicare and Medicaid were operationalized. Although they were intended to provide funds to cover acute episodes of illness, in reality, both evolved into leading payers for chronic conditions. Designated as a program for those over age 65, Medicare (of necessity) ended up paying for individuals with chronic conditions, which occur with much greater frequency among the aged. For example, Medicare was amended in 1972 to cover medical expenses for those with chronic kidney disease, such as dialysis and transplantation. But, as Fox (1993b) noted, this change still reflected the “politics of incremental accommodation.” In

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CHAPTER 10Section 10.3 Chronic Disease and Cost Containment

this increment, “end stage renal disease” (the condition covered) was viewed as a final “acute episode” in what was an otherwise chronic condition (pp. 76–77). Similarly, Medicaid was seen as an extension of welfare (i.e., social programs directed to the poor), which meant funds were provided based on medical need. As such, Medicaid came to be a leading payer for those with chronic conditions—not just for the poor, but also for the aged (e.g., those in nursing homes and other long-term care facilities).

Today, no one denies the empirical reality of chronic disease. Research on three leading causes of death (heart disease, cancer, and stroke) are well funded by the National Heart, Lung, and Blood Institute; the National Cancer Institute; and the National Institute of Neurological Disorders and Stroke (all part of the National Institutes of Health [NIH]), respectively. Grants from these insti- tutes support basic researchers in university medical schools, and their studies lay the theoretical foundation for later commercial products that a highly profitable pharmaceutical industry pro- duces to treat these serious chronic conditions. Currently, the treatment of chronic disease (the traditional focus of clinical medicine) is big business.

However, the prevention of these conditions (the traditional focus of public health) still needs more attention. In this respect, the paradox of health policy continues. As Freudenberg and Olden argued (2011), instead of being reactive, contemporary public health strategies should do the following:

1. strengthen and update consumer and environmental protection; 2. support public health infrastructure; 3. improve the built environment (i.e., design buildings and public spaces to promote exer-

cise); and 4. make prevention a health care priority.

As we discuss later in this chapter, efforts to bolster the prevention of chronic disease are built into the Patient Protection and Affordable Care Act of 2010 (also known as the ACA, or “Obamacare”).

10.3 Chronic Disease and Cost Containment

Highly prevalent chronic disease and a fragmented system of financing and delivering health care contribute to rising health care costs. By definition, a chronic condition is ongoing, which means that repeated medical interventions are required to sustain the patient’s health (e.g., a diabetic needs regular insulin injections); these interventions cost money. Every nation’s health care system must deal with the epidemiological transition from infectious to chronic disease as the leading cause of morbidity and mortality (Omran, 1971) and the driver of medical inflation. Among the countries that make up the Organisation of Economic Co-Operation and Development (OECD), the three leading causes of death are heart disease, stroke, and cancer (OECD, 2011).

In the United States, however, medical inflation is exacerbated further by various aspects of a frag- mented delivery system. For instance, without a uniform record-keeping system, providers might not know whether certain tests or procedures have already been performed and order “more of the same,” that is, there might be needless duplication of services. Also, the administrative cost of hiring people to perform medical underwriting (determining the premium to charge a particular

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CHAPTER 10Section 10.3 Chronic Disease and Cost Containment

individual based on that person’s medical history and risk for future illness) adds to expenditures vis-à-vis a system that charges every subscriber the same premium. Finally, members of certain medical specialties (e.g., obstetrics) feel compelled to practice defensive medicine (performing more tests and procedures than might be clinically required to insulate the doctor from a mal- practice lawsuit), which may also contribute (modestly) to medical inflation at the national level.

Compared with other countries, the United States spends a higher percentage of its gross domes- tic product (GDP) on health care than any other member country in the OECD. In 2009, the United States spent 17.4% of its GDP on health care, whereas each OECD country spent 12% or less.

Furthermore, the United States spends a much larger amount per capita on health care than do other nations. As Figure 10.3 illustrates, the United States spent $8,000 per person in 2009, whereas all other OECD countries each spent less than $6,000 per person; many of these countries had a life expectancy at birth of over 80 years, whereas the United States did not (see Chapter 1 for a detailed discussion of life expectancy). These data suggest that part of the medical inflation in the United States is the result of various forms of administrative inefficiency, which does not translate into better overall population health at the macro level.

Figure 10.3: Life expectancy at birth and health spending per capita, 2009 (or nearest year)

As indicated in the figure, the United States has more health spending per capita, but not a significantly higher life expectancy, than the other represented nations.

Sources: Organisation for Economic Co-operation and Development. (2011). Health at a glance 2011: OECD indicators. Washington, DC: Author. Retrieved from http://www.oecd.org/els/health-systems/49105858.pdf; World Bank. (2013). Health expenditure per capita (current US$). Retrieved from http://data .worldbank.org/indicator/SH.XPD.PCAP

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2,000 4,000

R2=0.69

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CHAPTER 10Section 10.4 Promoting Health and Changing Economic Incentives

Although all countries have had to deal with medical inflation over time, the United States has consistently been an outlier by spending more of its GDP (and per capita) than other OECD coun- tries. In 2004, the United States spent 15% of its GDP on health care, whereas Canada, Denmark, France, Italy, Sweden, and the United Kingdom each spent less than 10% of their GDP on health care. In 2001, the United States spent $4,370 per capita, whereas the countries mentioned above (data were not available for Canada in this category) each spent less than $2,400 (Callahan & Wasunna, 2006).

In theory, each of these inflationary pressures has its antidote: If individuals engaged in health- promoting behavior, much chronic disease (and its attendant costs) could be prevented; if a reengineered payment system reduced underwriting costs and unnecessary tests and procedures, then less money would be spent on health care overall (without diminishing the current level of care); and if civil law reforms reduced the number and cost of lawsuits (torts), there might be less medical inflation from defensive medicine. For an overview of health care spending by the United States and other nations, see Figure 1.2, Health Expenditures, total percentage of GDP, in Chapter 1.

10.4 Promoting Health and Changing Economic Incentives

Traditionally, promoting healthy behavior in populations falls under the purview of “public health,” whereas the provision of services to bring an individual back to health falls under the purview of “medicine.” Thus, by reducing the incidence and prevalence of disease, the public health paradigm might be more effective than medical interventions at reducing spending. However, because it is difficult to change behavior at the population level, most discussions of cost containment focus instead on changing the behavior of medical practitioners by reengineering their economic incentives. The remainder of this section focuses on economic incentives among health care providers; the public health focus is discussed in the section on the ACA.

Traditional Fee for Service Following the introduction of third-party insurance, many doctor–patient interactions were com- pensated on a fee-for-service basis; that is, specific fees were compensated each time doctors delivered specified medical services to their insured patients. For much of the century, both pri- vate and government health insurers deferred to doctors’ judgment, assuming that they always had their patients’ best interests at heart.

When health care delivery was compensated on a fee-for-service basis, the most common type of insurance was indemnification, which technically refers to a type of contractual arrangement in which one party (the insurer) agrees to compensate the other party (the insuree) for predeter- mined “losses” or “injuries” that might be incurred in the future. In the context of health insur- ance, indemnity insurance means that the insurance company pays the doctor based on a “cost plus” basis: the doctor is compensated based on an amount that covers the cost of performing the service plus “usual and customary” profit (Relman, 2007). This fee-for-service approach was not fundamentally altered by the passage of Medicare. In fact, to ease AMA opposition, President Johnson assured doctors that the federal government would not interfere with medical practice and that doctors who treated Medicare patients would be compensated with their usual and cus- tomary fees (Relman, 2007).

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CHAPTER 10Section 10.4 Promoting Health and Changing Economic Incentives

Under this system, when doctors ordered more tests and procedures, the costs were not borne directly by the individual patient but by the third-party insurer in the form of higher premiums to its subscribers. That is, the cost was spread among the entire insurance “pool.” In addition to benefiting doctors financially, this system allied well with the professional ethos that doctors should “do everything” that might potentially help a patient. Given these financial and profes- sional incentives, the system was inherently inflationary.

In the last several decades, several approaches have been used as cost-containment strategies by third-party payers (either private or public):

• denying coverage (or charging higher premiums) to those who would likely need med- ical care (who are the greatest insurance risk);

• changing the incentive structure so that doctors are motivated to minimize costs (accountable care organizations are one example);

• empowering the patient to make more cost-effective choices (health savings accounts (HSA), discussed below, help accomplish this); and

• using evidence-based methods to question the professional judgment of doctors when they order expensive tests or procedures that have not been adequately tested in clinical trials.

Community Rating Versus Experience Rating One of the first ways that insurance companies tried to hold down costs was to shift from commu- nity rating to experience rating when setting premiums (Stone, 1994). Community rating is the approach used when health insurance is conceived as a public good; everyone who lives in the same geographical area pays the same premiums. In effect, healthy individuals in the population are subsidizing the medical care for sicker individuals based on the logic of social solidarity: “We are all in this together.” This logic was the foundation for the social insurance systems adopted by European countries in the early 20th century, a system also favored by certain U.S. states, such as New York. Initially, the first Blue Cross plans were funded in this way.

By contrast, when experience rating (or “medical underwriting”) is used, those with a higher risk of illness are charged higher premiums (or might even be denied coverage), while younger, health- ier enrollees pay lower premiums. Although lower premiums may sound like a good thing if you happen to be young and healthy, experience rating contributes overall to fragmentation by divid- ing the community based on health status. Experience rating is used when insurance is conceived as a for-profit enterprise, because the ultimate purpose is to maximize the financial return for the company’s shareholders. If the “products” that are being sold are insurance policies, then (at a minimum) the company must take in more in premiums than it pays out in benefits. However, the company can further increase its profit if it can fragment the insurance pool into differential risk profiles, charging higher premiums to those in subsets of the overall insurance pool who are most likely to make claims (e.g., older subscribers, smokers). Carried to an extreme, this business strategy can lead to denial of coverage to new subscribers who already have a chronic condition or disability that requires ongoing medical care—what the insurance companies have called a preexisting condition.

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Insurance based on the principle of community rating, by contrast, derives from a different set of premises. Over the long run, it tends to generate social cohesion among contemporaries because all pay the same premiums. Also, community rating creates intergenerational solidarity between birth cohorts. Because older people incur more medical expenses than the young, health insur- ance funded in this way means that a portion of young peoples’ premiums are being used to pay for the care of their parents and grandparents, much as the Social Security system spreads payments across generations with the hopes of coverage in old age. However, as today’s young people move through the life cycle, they will eventually reach an age where their own medical expenses will, in turn, be funded by the premiums paid by their children and grandchildren. In other words, ideally, it is a debt that is repaid intergenerationally. Regardless of how it is funded, an individual with insurance has more incentive to seek preventive services (e.g., screening for high blood pressure, cancer, diabetes) earlier in life; these steps, in turn, can lead to earlier detec- tion, better health, and less expensive treatment than waiting until the onset of symptoms.

Once one company in a region is permitted to practice experience rating, then all of its com- petitors will eventually be forced to follow suit. The first company peels away the youngest and healthiest subscribers by offering them identical policies with lower premiums (the higher premi- ums they had been paying were used to subsidize others). This practice forces the other compa- nies in the region (even if they are nonprofit) to raise premiums on their remaining subscribers to cover their revenue shortfall. If a second company can then identify another subset with premi- ums that are higher than necessary based on experience rating, they can offer them a better deal

Case Study: One Patient’s Experience with Treating a Chronic Condition in a For-Profit Insurance System In terms of policy tradeoffs, for-profit health insurance achieves cost containment at the expense of universal access (universal coverage) or adequate medical care. Journalists Barlett and Steele (2004) recounted the story of Musette Batas, a woman who had a history of being hospitalized for Crohn’s disease, a painful inflammation of the intestine. Batas experienced this condition when she was 6 months pregnant in March 1996; her ob-gyn Jeffrey Miller admitted her to the hospital. Even though Dr. Miller requested several days in the hospital to perform tests on his patient, her insurance carrier, Prudential, said that it would cover only a one-night stay. At the end of 3 days, a nurse at the insurance company reviewed her chart and, based presumptively on practice guidelines, concluded that her con- tinued hospitalization was “not medically necessary” (p. 162). Because she could not afford to pay for additional hospitalization, Batas checked out of the hospital. One week later, she was readmitted to the emergency room with high fever and severe abdominal pain. Three days after this second admission, her intestine burst, and she had to be rushed into surgery to keep from bleeding to death. Four days after the surgery, Prudential insisted that Batas be discharged over the objections of her doctor that she was “barely out of surgery, was pregnant, and seriously ill” (p. 170). Eventually, the insurance com- pany permitted Batas to remain in the hospital for an additional week but then claimed that additional hospitalization was “not medically necessary” (p. 170).

Although the insurance company did not completely deny care, many can argue that the level of care it agreed to support was substandard and definitely not enough for Batas to maintain a sustained interaction with a health care professional; for the insurance company, saving money was clearly a primary concern. Ultimately, this story illustrates Deborah Stone’s (1994) point that for-profit insurance “distributes medical care in inverse relation to need, and . . . establishes a system that is perfectly and perversely designed to keep sick people away from doctors” (emphasis original, p. 47).

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CHAPTER 10Section 10.4 Promoting Health and Changing Economic Incentives

and peel them away as well. The original company is forced to raise its premiums once again. This economic logic continues to play itself out until every insurance company in a particular region is using experience rating.

Managed Care Organizations Another strategy to contain health care costs is to replace fee-for-service indemnification insur- ance with what has come to be known as managed care organizations (MCOs), which is any generic type of health insurance or approach for financing health care that uses a variety of mech- anisms to minimize unnecessary health care costs. The specifics differ among organizations, but the mechanisms often create economic incentives (for both doctors and patients) to eliminate a needless duplication of services and keep only marginally beneficial care to a minimum. According to the Agency for Healthcare Research and Quality, in 2003, about half of all insured Americans received their care through an MCO (Stanton, 2003). Today, the percentage is undoubtedly higher. For a list and comparison of various types of MCOs, see Table 10.2.

Table 10.2: Managed Care Organization comparison chart

Requires PCP

Requires Referrals

Requires Preauthor- ization

Pays for out-of- network care

Cost sharing Requires claim filing paperwork

HMO Yes Yes Not usually required. If required, PCP does it

No Low No

POS Yes Usually Not usually. If required, PCP likely does it. Out-of- network care may have different rules

Yes, but may require PCP referral

Low in-network, high for out- of-network

You file out- of-network claims only

EPO No Not usually Varies from plan to plan

No Low No

PPO No No Yes Yes High, especially for out-of- network care

You file out- of-network claims only

Note: PCP = primary care physician (the physician the patient sees regularly and refers the patient to specialists); HMO = health maintenance organization; POS = point of service plan; EPO = exclusive provider organization; PPO = preferred provider organization.

Source: Davis, E. HMO, PPO, EPO, & POS—What’s the difference and which Is best? Retrieved from http://healthinsurance.about .com/od/healthinsurancebasics/a/Hmo-Ppo-Epo-and-Pos-whats-The-Difference-and-Which-Is-Best.htm. Copyright © About.com. Used by permission.

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Historically, the idea for what would become a health maintenance organization (HMO) originated in the 1930s through the collaboration between Dr. Sidney Roy Garfield and the industrialist Henry J. Kaiser. At the time, Kaiser was building an aqueduct in the Mojave Desert, and Garfield was hired as the company doctor. Garfield created a new hospital near the work site. However, many of the workers lacked health insurance and for those with coverage the insurance companies were slow to pay, resulting in a cash-flow problem for the hospital. Garfield then proposed to the insurance companies a system of prepaid capitation (a fixed payment per patient made to a doctor by an organization in return for services provided). The insurance companies would pay Garfield a nickel a day for each worker to cover work-related medical needs. Later, Garfield negotiated with the companies to pay an additional nickel per worker to cover non–work-related medical needs. Because the income stream was constant, Garfield had an incentive to “manage care” through preventive interventions so that medical expenses did not exceed the revenue generated through prepaid capitation.

Between 1938 and 1941, Garfield set up a similar arrangement to cover Kaiser workers building the Grand Coulee Dam in Washington state. During World War II, Garfield created a prepaid capitation system at the Kaiser shipyard in Richmond, Califor- nia. Eventually, his system employed approximately a hundred doctors and provided both industrial and nonindustrial medical care to about 90,000 shipyard workers. When the war ended, this system came to be known as Kaiser Permanente, and policies were now sold to individuals living in the San Francisco Bay area, regardless of whether they were employ- ees of the Kaiser shipyard (Collen, 2001). Although started by a doctor and a prominent industrialist, Kaiser Permanente has remained to the present day a nonprofit HMO.

In HMOs run like Kaiser Permanente, the total bud- get is based in advance on the reimbursement from the prepaid capitation. Consequently, premiums are determined with some certainty, which makes this type of insurance popular among employers as well. In 1973, using Kaiser Permanente as a model, the HMO Act was passed by Congress and signed into law by President Nixon. This act, which constituted

the government’s first attempt to control health care spending, provided grants, contracts, and loans so that managed care insurance plans could be created throughout the country (Relman, 2007). Though not questioning the judgment of the doctor outright, HMOs are clearly designed to “reverse the polarity” so that doctors have incentives to do less rather than more.

Supporters of HMOs argue that the key to reducing costs is to introduce competition, which empowers the patient, or consumer, to make the most cost-effective choice when selecting a

Courtesy Everett Collection

The first HMO began with a collaboration between Dr. Sidney Roy Garfield and industrialist Henry J. Kaiser (pictured).

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CHAPTER 10Section 10.4 Promoting Health and Changing Economic Incentives

health insurance policy. If multiple HMOs compete in the same geographical region, those that provide the highest quality of care with the lowest premiums will be the most frequently selected insurance providers. As the economist Alain Enthoven wrote in 1997, “Since the early 1990s, cost pressures have moderated significantly, and there is no explanation except competitive markets and managed care. . . . [M]arket forces are the only practical means to contain costs while main- taining quality” (as cited in Callahan & Wasunna, 2006, p. 76). By the late 1990s, however, both private and public expenditures on health care had begun to rise again and continued to do so in the first decade of the 21st century (Callahan & Wasunna, 2006; Relman, 2007). In other words, despite some transient effectiveness, HMOs coupled with “managed competition” did not suc- ceed in preventing further medical inflation.

Web Field Trip View interactive charts plotting the course of medical care inflation in the United States available at Metric Mash (http://www.metricmash.com/inflation.aspx?code=SAM). Using data from the U.S. Bureau of Labor Statistics, this graphic provides information about rising medical care costs. Slide the bar, located at the bottom of the graph, or enter a time span manually, from 1 to 70 years.

Critical Thinking Questions

1. How have cost-containment efforts (starting in the 1970s) affected the rate of medical inflation? 2. What events might account for the flattening of the growth trend from 2011 to 2012?

Diagnostic-Related Groups and Resource-Based Relative- Value Scales With the passage of Medicare in 1965, the federal government gained an incentive to reign in health care spending. In the 1980s and early 1990s, Congress used a method (not unlike HMOs) of trying to fix costs in advance through the creation of diagnostic-related groups (DRGs) and the obscurely titled “resource-based relative-value scale” (RBRVS). In 1982 and 1983, legislation was passed that established set fees to be paid through Medicare to hospitals based on the nature of the diagnosis. The theory was that all patients falling into the same DRGs would have their hospi- tal stays compensated at the same rate—regardless of the length of the hospital stay or the num- ber of services provided. In 1992, legislation was passed that compensated each service provided to Medicare patients based on the “relative value” of the service in terms of the time, skill, and effort required. Like DRGs, this approach was designed to hold down costs by introducing greater uniformity into the payment system.

Although these approaches were initially designed to apply to Medicare, they were also adopted by private health insurance companies. As Relman (2007) argued, these efforts, coupled with the introduction of HMOs, may have stabilized health care expenditures briefly during the 1990s. However, they were unable to permanently stem the rise in medical expenditures. Furthermore, there is some debate over whether these mechanisms cut spending fairly: Supporters claim that they eliminate the “fat” (i.e., administrative overhead) from the system, while critics claim they end up holding down costs primarily by denying access to medical care.

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Preferred Provider Organizations In response to what has often been perceived as draconian cost-cutting measures implemented by HMOs, many employers in the late 1990s and early 21st century began to purchase health insurance for their employees based on the less restrictive preferred provider organization (PPO) model. Under this model, employees select a primary care provider from an approved list of doc- tors; however, they are also free to consult specialists (who perform more expensive procedures), provided that these specialists also participate in the PPO network. In addition, they are free to consult nonnetwork providers if they are willing to pay an extra fee. Consequently, the replace- ment of PPO models over HMOs has meant continually rising health care costs rise (Relman, 2007). So, empowering the patient with more options has not necessarily led to cost savings.

Consumer-Driven Health Care: Health Savings Accounts Carrying patient empowerment to its logical extreme is the movement toward consumer-driven health care (CDHC), an approach that has been championed by those who subscribe to a more libertarian political philosophy rather than a liberal or progressive one. CDHC rests on three pillars:

• purchasing a high-deductible (catastrophic) insurance plan; • opening an individual HSA with pretax money; and • providing all relevant medical information (potentially including doctors’ fees) to con-

sumers through a variety of media outlets such as websites, government publications, and private sources. (Relman, 2007)

Operationally, the employee makes an annual pretax contribution to the HSA and can roll over and invest unused portions of the account from year to year. The money can also be used to pur- chase a variety of medical and health-related products and services. Also, the account is portable; it remains with the employee regardless of changing jobs until age 65, when the person qualifies for Medicare. The money used from the account to cover medical expenses remains tax exempt, whereas money used for other purposes is subject to taxation (Relman, 2007). In 1996, Congress authorized the creation of high-deductible insurance plans coupled with HSAs, which were made part of the Medicare Reform Act of 2003 (Callahan & Wasunna, 2006). Implicitly endorsing this individualistic approach to health care financing, President George W. Bush touted these develop- ments as an instance of the “ownership society” (Relman, 2007, p. 100).

Fundamentally, HSAs replace social insurance with individual financing of medical expenses. Because the young and healthy are less likely to need medical care, they are more likely to purchase high-deductible policies to earn more in pretax savings; by contrast, older and sicker individuals have to purchase lower deductible policies with resulting higher premiums. As a result, although HSAs encourage personal responsibility for maintaining good health, they undermine the notion of community rating. Furthermore, because the money used to pay medical bills comes from income earned by the employee, each individual ends up paying for all of his or her own medical expenses over the course of the life cycle; in this respect, it is the antithesis of insurance conceived as a pool of shared risk. Notably, HSAs have survived the enactment of the ACA (discussed later in this chapter) and are becoming an ever more popular choice among employer offerings. However, the ACA has raised the penalty for nonmedical withdrawals from 10% to 20% and does not permit tax-free withdrawals for nonprescription drugs (except insulin) (Lankford, 2013).

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Evidence-Based Medicine Finally, the judgment of the individual doctor has also been subtly questioned through the emer- gence of evidence-based medicine (EBM). Conceived of by a group of reformers within academic medicine, the EBM movement tried to subject many widely practiced therapies to empirical scru- tiny by conducting clinical trials to see whether they were truly efficacious. The Evidence-Based Medicine Working Group (1992) declared that “evidence-based medicine de-emphasizes intuition, unsystematic clinical experience, and pathophysiological rationale as sufficient grounds for clin- ical decision making and stresses the examination of evidence from clinical research” (p. 2420). By showing that much medical judgment was “unsystematic” (i.e., untested), EBM attempted to improve patient care; however, by suggesting that explicit practice guidelines be based on these studies, the movement opened the door for insurers to turn these guidelines into the de facto criteria to determine which procedures and tests they would cover. Some of the major organi- zations responsible for evidence-based research include the Cochrane Collaboration (see http:// www.cochrane.org/about-us) and the Evidence-Based Practice Centers Program of the Agency for Healthcare Research and Quality (see http://www.ahrq.gov/research/findings/evidence-based -reports/index.html).

Commercially, one leading firm developing EBM guidelines is the actuarial company Milliman, whose guidelines have been used by Prudential, Cigna, U.S. Healthcare, Kaiser Permanente, and many Blue Cross Blue Shield plans. Because so many of the nation’s major insurance companies have used Milliman guidelines in determining what procedures are covered, a writer for The New York Times once claimed that the company “has quietly become the supreme court of medical insurance” (Myerson, 1995).

Ultimately, the emergence of EBM and the adoption of guidelines by insurance companies reflect the convergence of an academic culture that values objective evidence (e.g., clinical trials, statis- tical methods) along with cost containment as a major driver of contemporary health care policy. This convergence has subtly undermined the judgment of the individual doctor. However, this trend is not at all unique to medicine. This movement occurs in numerous sectors, particularly the nonprofit sector and grant making. Wherever resources are shrinking, pressure is growing to provide evidence of the efficacy of interventions. (For more on the movement toward EBM and the theory that informs it, see Chapter 1.)

10.5 The Patient Protection and Affordable Care Act of 2010

The ACA can be seen as a metaphor for the contemporary U.S. health care system: an incred-ibly complex law that was produced by political compromises, economic realities, and the epidemiological fact of chronic disease and disability. In the early 21st century, consumers became dissatisfied with their private health insurance carriers. As we have touched on, com- panies denied coverage based on preexisting conditions, terminated policies even for custom- ers who paid their premiums on time, and imposed yearly and lifetime dollar limits on coverage (so-called out-of-pocket maximums). However, within large portions of the U.S. body politic is also a longstanding distrust of the government “takeover” of health care (dating back at least to mid–20th-century campaigns by the AMA against “socialized medicine”) and a preference for

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self-reliance. These two tendencies were on a collision course that culminated in a hard-fought political struggle over the ACA from 2009 to 2010.

As enacted, the ACA distilled the political struggles, economic realities, and epidemiological pro- jections that preceded its passage. Politically, it attempted to build on the patchwork quilt of public and private financing cobbled together over the course of the 20th century. Economically, it attempted to “cut costs while preserving quality of care” and strove to advance the goal of uni- versal coverage—goals that clearly are in tension with each other (Enthoven, 1978, p. 1229). Although the law will not immediately achieve universal coverage, it will gradually reduce the number of uninsured; the Congressional Budget Office (2013) estimates that the number of unin- sured nonelderly will fall from 55 million to 31 million between 2013 and 2023. Epidemiologically, the ACA attempted to prevent and lessen the impact of chronic disease, because these types of medical problems are now universally recognized as driving the entire health care system and its runaway inflation.

The final legislation numbered more than 2,400 pages—making it undeniably one of the most significant pieces of domes- tic legislation produced in the first decade of the 21st century, as well as one of the least fully understood. The ACA is also somewhat in flux, as of this writ- ing, because key provisions have been overturned by the U.S. Supreme Court, and many other aspects of the law are still being written by the U.S. Department of Health and Human Services (HHS). The mechanics of imple- menting any complex law entails continual administrative “tinker- ing,” which means that the spe- cifics of this particular law will evolve for years to come, as the timeline in Figure 10.4 indicates. The political, economic, and epidemiological aspects of the law are considered in turn.

Charles Dharapak/Associated Press

A distrust of government involvement in health care was one factor in the political struggle over the ACA.

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Figure 10.4: Timeline of health care reform, 2010–2020

Health care reform changes will continue to occur during the coming years.

Source: Curry, W. Healthcare reform upheld—What’s next for providers? Retrieved from the Acute Care Continuum at http://www.acutecarecontinuum.com /Home/tabid/84/entryid/39/Healthcare-Reform-Upheld-What-s-Next-for-Providers.aspx. Copyright © The Acute Care Continuum. Used by permission.

New programs: • Temporary retiree reinsurance program. Specific criteria applies; limited funding. • National risk pool, small business tax credit. • $250 rebate for Medicare members who reach the “doughnut hole.” Insurance reforms: • No lifetime benefits limits—based on dollar amounts. • Allowed restricted yearly limits on the dollar value of certain benefits. • No coverage rescissions/cancellations (except for fraud or intentional misrepresentation) • No cost-sharing obligations for preventative services in network. • Must have dependent coverage up to age 26. • Enhanced internal and external appeal processes. • No pre-exsisting condition exclusions for dependent children (under 19 years of age). • New health plan disclosure and transparency requirements.

2010

Insurance reforms: • New uniform coverage documents and standard definitions are developed. • Must have minimum loss ratios. Medicare reforms: • Start of Medicare Advantage cost-sharing limits. • Medicare beneficiaries who reach the doughnut hole to get a 50% discount on brand name drugs. • Primary care doctors and general surgeons practicing in underserved areas, such as inner cities and rural communities, to get a 10% bonus. • Medicare Advantage plans begin having payments frozen. Other: • Yearly fee for brand-name drug manufacturers. • Start of voluntary long-term insurance program giving a cash benefit to help those with disabilities stay in their homes or pay nursing home costs; benefits start 5 years after paying coverage fee. • Increased funding for community health centers to provide care for many low-income and uninsured people.

2011

Hospitals, doctors, and payers encouraged to join forces in “accountable care organizers.” Hospitals with high rates of preventable readmissions facing reduced Medicare payments.2012

• Individuals making $200,000 a year or couples making $250,000 a year would have a higher Medicare payroll tax of 2.35% on earning income—up from the current 1.45%. A new 3.8% tax on unearned income, such as dividends and interest, also added. • Contributions to flexible spending accounts (FSAs) limited to $2,500 a year—indexed for inflation. And the threshold for deducting medical expenses on taxes goes from 7.5% to 10% of income. • Medical device manufacturers have a 2.9% sales tax on medical devices with exemptions for some, like eyeglasses, contact lenses, and hearing aids. • No more deduction of expenses allocable to Medicare Part D subsidy for employers who maintain prescription drug plans for their Medicare Part D-eligible retirees.

2013

Coverage mandates and subsidies: • New individual and employer coverage responsibilities. • New individual affordability tax credits and expanded small business tax credits. Health insurance exchange and insurance reforms: • State individual and small group health insurance exchanges operational. • Guaranteed issue, guaranteed renewability, modified community rating, and minumum benefit standards (“essential benefits plan”) effective. • No more lifetime and yearly dollar limits for essential benefits; no more restricted annual dollar limits for essential benefits. Medicaid and Medicare reform: • Medicaid expanded to cover low-income individuals under age 65 up to 133% of the federal poverty level—about $28,300 for a family of four. • Minimum medical loss ratio of 85% required for Medicare Advantage plans. New taxes on health insurers

2014

New tax (“Cadillac tax”) on employer-sponsored health plans that offer policies with generous coverage levels.2018

Doughnut hole coverage gap in Medicare prescription benefits is fully phased out. Seniors continue to pay the standard 25% of their drug costs until they reach the threshold for Medicare catastrophic coverage.2020

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The Politics of Accommodation As Oberlander (2012) showed, the pursuit of comprehensive health care reform has been an “unfinished journey” for nearly a century. However, he argued that it passed in 2010 because of unique political circumstances (e.g., control of the White House and both houses of Congress by the Democrats). It also passed because the Obama administration and its congressional allies did not repeat the errors of earlier administrations (such as Clinton’s) and legislators (Oberlander, 2010). In particular, Oberlander claimed that two strategies were adopted to ensure passage:

1. pragmatic accommodation rather than pushing for a particular version of the final law, and 2. co-opting rather than antagonizing stakeholders in the health care industry (e.g., pharma-

ceutical and medical device makers).

Whereas the Clinton administration had hoped to reform the health care system via managed competition, the Obama administration emphasized that much of the current system would be preserved, for example, the continued reliance on a system of primarily private insurance for the working-age population. Whereas many progressives in Congress supported a “public option” (a government-run health insurance plan that would be offered along with private insurance plans in the exchanges), it was eventually abandoned by the Obama administration to secure passage of the final act. (Exchanges are state-based insurance markets, administered by a government agency or a nonprofit organization, where individuals and small businesses can purchase private health insurance. Go to https://www.healthcare.gov/families/ for a short video overview.) Simi- larly, congressional Democrats put aside their internal disagreements to ensure passage of the leg- islation; in the Clinton era, by contrast, there had been internal divisions even among Democrats. Whereas the Clinton administration fought the private insurance industry, the Obama administra- tion offered it the “carrot” of more customers and used the “stick” of forcing it to provide coverage to those with preexisting conditions.

After much parliamentary maneuvering in both chambers, the House of Representatives passed the Senate version of the bill (219 to 212, without any Republican votes) on March 21, 2010 (U.S. House of Representatives, 2010), and the bill was signed into law by President Obama 2 days later on March 23, 2010. Subjected to repeated and ongoing (partisan) attacks, the constitutionality of the law was eventually upheld in 2012 by the U.S. Supreme Court based on the taxing authority of Congress (National Foundation of Independent Business v. Sebelius, 2012). That is, the penalty for not carrying insurance coverage was found to be a tax. However, notably, the court struck down the part of the law requiring states to expand their Medicaid programs, leading to another patchwork quilt of coverage for the poorest citizens (see “Web Field Trip: Millions of Poor Are Left Uncovered by Health Law”).

Web Field Trip Visit The New York Times to read “Millions of Poor Are Left Uncovered by Health Law” by Sabrina Tav- ernise and Robert Gebeloff (http://www.nytimes.com/). Also take a moment to review the multimedia located on the sidebar, which includes a map showing where the poor and uninsured live.

Critical Thinking Questions

1. How does this situation of patchy health insurance coverage reflect tension between federal and state governments and the limits of each one’s powers?

2. What can be done to include these uninsured people in the health care system?

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CHAPTER 10Section 10.5 The Patient Protection and Affordable Care Act of 2010

Building on Earlier Developments In its final form, the law tried to build on aspects of the system already in place. To regulate the practices of private insurance companies, the ACA enacted the following provisions:

• Creating a health insurance marketplace (known as exchanges), where individuals can choose among various private health insurance plans based on premium level, the extent of covered services, and other factors;

• Requiring that policies be made available to all individuals, even those with pre- existing conditions;

• Requiring that the nature of coverage be explained to the consumer in “plain language” so that it can be understood;

• Preventing insurance companies from canceling coverage when an individual becomes sick;

• Forbidding the future imposition of lifetime and yearly dollar limits on essential services;

• Protecting the right of the individual to choose his or her own doctor; • Permitting young adults under age 26 to remain on their parents’ health insurance

plan (subject to a few exceptions); and • Guaranteeing an individual the right to appeal a denial of coverage by an insurance

company. (“How Does the Health Care Law Protect Me,” n.d.)

Similarly, the ACA builds on the system of employer-based private insurance. Specifically, it requires that employers offer coverage if they employ 50 or more full-time workers, or pay a penalty (the employer mandate); recently, the start-up date for this requirement has been extended to 2015 (Jarrett, 2013). To create incentives for offering coverage, the law offers tax credits to small busi- nesses with no more than 25 employees and average annual wages of less than $50,000 if these employers purchase health insurance for their workers (Kaiser Family Foundation, 2013b).

In addition, the law expands coverage of Medicaid to non–Medicare-eligible individuals with incomes of up to 138% of the federal poverty line. Note that, in practice, the Medicaid expansion has become optional for states, because the U.S. Supreme Court’s ruling has limited the ability of the HHS to enforce this requirement (Kaiser Family Foundation, 2013b). For a map of states that are choosing to expand, see Figure 10.5.

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CHAPTER 10Section 10.5 The Patient Protection and Affordable Care Act of 2010

Figure 10.5: State Medicaid expansion under the ACA, 2013

The Medicaid expansion is currently optional for states. The information depicted below is based on June 2013 data.

The law tries to tackle the problems of chronic conditions among the poor by creating a new Medicaid state plan option for individuals to be treated at home by a designated home health provider. Enrollees need to fit one of several criteria: have at least two chronic conditions; have one condition and the risk of developing another; or have at least one serious and ongoing mental health condition. To implement this initiative, the law provides participating states with money for two years of home health-related services, for example, care management, care coordination, and health promotion (Kaiser Family Foundation, 2013). For individuals with disabilities requiring institutional care, the law establishes the “Community First Choice Option” in Medicaid to provide community-based support and services (Kaiser Family Foundation, 2013). Also, the law collects racial, ethnic, and language data in order to understand and reduce health disparities. Finally, the law increases payments to Medicaid patients for primary care doctors (HHS, n.d.).

MT ND

WI* MI

KY NC

AZ NM

American Samoa

Guam

Northern Mariana Islands

Currently not expanding

Undecided

Implementing/exploring expansion alternatives

Current plan to expand

MN SD

NE IL

LA MS AL

IN OH

NH MA

RI CT

NJ DE

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CHAPTER 10Section 10.5 The Patient Protection and Affordable Care Act of 2010

Also, the ACA expands on existing programs by amending the Social Security Act so that states have the option of providing “medical assistance for home and community-based attendant ser- vices” if the individual is already deemed eligible for other state plans (e.g., having income less than 150% of the federal poverty line or eligible for nursing facility services; Title II[E], Sec. 2401 of the ACA). In addition, the ACA makes federal funds available to the states to expand Aging and Disability Resource Centers (Title II[E], Sec. 2405). Finally, the law provides enhanced support for the Children’s Health Insurance Program (CHIP), a program that was designed earlier to provide funds for treating children (Title II[B]).

In all these endeavors, the ACA does not create new programs; instead, it expands and changes eligibility requirements for existing programs in order to extend coverage. As Oberlander (2010) observed:

[The law] is a patchwork, reforming our complex, incoherent insurance nonsys- tem with a complex, somewhat coherent mix of subsidies, regulations, mandates, and public and private insurance expansions. The legislation does not so much create a new health system as fill in gaps in the existing system, since the first principle of feasible reform was to build on current arrangements. (p. 1116)

Reengineering Incentives in Public and Private Insurance Markets Just as earlier efforts at cost containment attempted to change the economic motivations of the key players, so likewise does the ACA. However, instead of making cost containment an end in itself, the law tries to reengineer the incentive structures for all relevant stakeholders: private insurance companies, insured individuals, private employers, and the government. In turn, these stakeholders are adjusting their business practices to best compete in the new marketplace being reshaped by the ACA. In these ways, the goal of (near) universal coverage can be achieved. Before the ACA, insurance companies had a strong economic incentive to deny coverage to individuals with preexisting conditions, because they would likely lose money. With the enactment of the law, this denial of coverage is forbidden.

However, insurance companies can try recouping these losses elsewhere, for example, in new customers gained through the individual mandate. Prior to the ACA, a young, healthy individual might have had little economic incentive to purchase health insurance. Now, the penalty for not carrying insurance might change the individual’s cost–benefit calculation and lead the young per- son to purchase insurance from an employer or through one of the state-run exchanges (rather than pay the penalty). This change in individual behavior can benefit society, because a portion of this person’s premiums will subsidize the medical expenses of less healthy individuals in the insurance pool. The individual mandate reintroduces the ethos of social solidarity into the context of a private decision to purchase health insurance.

The ACA targets small private employers that might not have an incentive to offer health insurance because doing so reduces profits. The law provides for subsidies to cushion the revenue loss from offering such a benefit to employees. Before the ACA, less federal money was given to states for Medicaid. Now, greater federal support facilitates various programs to expand coverage (although some conservative states have declared they will not take this money). Specifically, eligibility for these newly covered adults will be fully funded by the federal government for 3 years beginning in 2014, with funding levels eventually phased down to 90% by 2020 (see “Financing the System” in this chapter).

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CHAPTER 10Section 10.5 The Patient Protection and Affordable Care Act of 2010

Cost Containment and Quality of Care The ACA tried to address the twin issues of restraining medical expenditures while preserving quality of care. For instance, the law restructured Medicare payment rates to compensate for prior variations in reimbursements based on region (i.e., higher payments would go to areas with low Medicare fee-for-service rates, and vice versa). Also, to simplify administration, the law adopted a single set of rules to determine eligibility and claim status. Finally, an Innovation Center was created to experiment with different payment arrangements for Medicare, Medicaid, and CHIP (Kaiser Family Foundation, 2013).

To help with the cost of medication, Title VII (Sec. 10609) of the ACA authorizes the U.S. Food and Drug Administration to approve generic versions of drugs and grant manufacturers 12 years of exclusive use before the generics can be introduced. This change prevents manufacturers of brand-name drugs from making slight changes their products just before the generic drug is tested in order to impede the comparison test and delay the introduction of the generic into the market. Finally, giving a nod to EBM, the ACA establishes a nonprofit Patient-Centered Outcomes Research Institute “to identify research priorities and conduct research that compares the clinical effective- ness of medical treatments” (Kaiser Family Foundation, 2013).

Preventing Chronic Disease and Managing Disability To deal with the realities of chronic disease directly, Title IV of the ACA, “Prevention of Chronic Disease and Improving Public Health,” has an ambitious goal. Under the terms of the law, anyone who has a health insurance plan on or after September 23, 2010, must be covered for a variety of preventive services free of charge (Table 10.3; for a discussion of controversy surrounding recom- mended screening tests, see Chapter 9, “Screening: Risks and Benefits”).

Table 10.3: Selected preventive services covered under the Affordable Care Act

For adults (in general)

• Cessation intervention and screening for those who have smoked.

• Screening and counseling for alcohol misuse.

• Screening for cardiovascular disease risk factors (blood pressure, cholesterol, obesity) and appropriate counseling for factors that can be reduced based on behavior modification

• Screening for depression.

• Immunization vaccines for adults.

• Screening for sexually transmitted diseases and appropriate counseling for those at high risk.

For women

• Screening for conditions that can complicate pregnancy, as well as appropriate prenatal counseling for women who might become pregnant.

• Breast cancer screening and counseling as appropriate.

• Cervical cancer screening for sexually active women.

• Domestic and interpersonal violence screening and counseling.

• HIV screening and counseling for sexually active women.

(continued)

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CHAPTER 10Section 10.5 The Patient Protection and Affordable Care Act of 2010

Table 10.3: Selected preventive services covered under the Affordable Care Act (continued)

For children

• Alcohol and drug use assessments for adolescents.

• Autism screening for children at ages 18 and 24 months.

• Behavioral assessments for children of all ages, and depression screening for adolescents.

• Developmental screening for children under age 3, and later surveillance.

• Height, weight, and body mass index measurements for children.

• Immunizations.

• Iron supplements, 6–12 months of age.

• Lead screening for at-risk children.

• Obesity screening and counseling.

• Oral health risk assessment.

• Phenylketonuria screening for this genetic disorder in newborns.

• Sexually transmitted infection prevention counseling and screening for higher risk adolescents.

• Tuberculin testing for tuberculosis.

• Vision screening for all children.

Source: U.S. Department of Health and Human Services. (2012b). Preventive services covered under the Affordable Care Act. Retrieved from http://www.hhs.gov/healthcare/facts/factsheets/2010/07/preventive-services-list.html

These screening tests are designed for the early detection of the leading chronic conditions: for example, high blood pressure and high cholesterol (risk factors for heart disease) and various cancers. Also, many of these prevention services employ counseling for changing behaviors that put an individual at risk for chronic disease. For example, overeating and obesity increase the risk for diabetes, alcohol and tobacco consumption increases the risk for cancer, and certain types of sexual activity increase the risk for HIV/AIDS. Consequently, implementing these prevention strat- egies must rely on a psychosocial approach to disease prevention and management.

In addition to addressing prevention, the ACA calls for the use of electronic medical records and other means to collect and analyze data on individuals who already have disabilities and, indeed, on all patients. Specifically, the law requires that the secretary of HHS:

survey health care providers and establish other procedures in order to assess access to care and treatment for individuals with disabilities and to identify—

(i) locations where individuals with disabilities access primary, acute (including intensive), and long-term care;

(ii) the number of providers with accessible facilities and equipment to meet the needs of the individuals with disabilities, including medical diagnostic equip-

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CHAPTER 10Section 10.5 The Patient Protection and Affordable Care Act of 2010

ment that meets the minimum technical criteria set forth in section 510 of the Rehabilitation Act of 1973; and

(iii) the number of employees of health care providers trained in disability aware- ness and patient care of individuals with disabilities. (Sec. 3101[a][2][D])

Ideally, the data collected on individuals with disabilities are used to inform policy making in the future.

To help defray the daily costs of caring for individuals who develop long-term disability, Title VIII of the ACA creates a “self-funded and voluntary long-term care insurance choice.” Individuals can purchase this policy and pay premiums with their own money; taxpayer funds will not be used. If the individual develops a disability, he or she will receive a daily cash benefit, which can be used for a wide range of services (e.g., community support services, home care). Compensation is based on need and determined by the person’s inability to perform basic activities of daily liv- ing, such as bathing or dressing. In theory, promoting the purchase of long-term care insurance reduces Medicaid spending, because many elderly patients in long-term care facilities apply for Medicaid after they have spent their assets on medical expenses.

Using Bronfenbrenner’s Model to Better Understand the Affordable Care Act In suggesting ways to implement its prevention strategies, the ACA can be seen as drawing on Bronfenbrenner’s micro, meso, and macro perspectives on human ecological systems. At the macro level, Title IV requires the following:

[the creation of a] National Prevention, Health Promotion and Public Health Council . . . [designed to] provide coordination and leadership at the Federal level . . . with respect to prevention, wellness and health promotion practices, the public health system, and integrative health care in the United States [by developing a] strategy that incorporates the most effective and achievable means of improving the health status of Americans and reducing the incidence of pre- ventable illness and disability in the United States. (Title IV, Sec. 4001[a][d][1][2])

This council must produce an annual report to the president and relevant congressional commit- tees containing specific recommendations to improve nutrition and exercise as well as promote smoking cessation to achieve the public health goals of Healthy People 2020, a government pro- gram that has long-term goals to improve the nation’s health. (http://healthypeople.gov/2020 /default.aspx; ACA, Sec. 4001[h][4]). The leading disease killers are heart disease, cancer, stroke, and diabetes. All are chronic conditions, can produce disability, and are influenced by societal and behavioral factors (see chapters 5, 6, and 9 for more in-depth coverage of these ailments).

At the meso level, the ACA tries to prevent chronic disease and disability by awarding grants to school-based health centers (Sec. 4101), state and local government agencies, and community- based organizations. These organizations will implement evidence-based community public health activities that will do the following:

• reduce chronic disease rates, • prevent the development of secondary conditions,

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Chapter Summary CHAPTER 10

• address health disparities, and • develop a stronger evidence base for effective prevention programming. (Sec. 4201[a])

One example of prevention efforts is awarding funds to promote more physical activities at school—a way to prevent or reduce childhood obesity (and the attendant disease for which it is a risk factor).

At the micro level, the ACA supports the creation of pilot programs to provide “an individual- ized wellness plan” to select individuals in at-risk populations who use community health centers (Sec. 4206).

Web Field Trip Visit Families USA and read the Issue Brief, “Wellness Programs: Evaluating the Promises and Pitfalls” (http://familiesusa2.org/assets/pdfs/health-reform/Wellness-Programs.pdf). This document provides further discussion of individual wellness plans. Review the content and then consider the questions provided below.

Critical Thinking Questions

1. Although the idea behind wellness programs sounds good “on paper,” can you identify problems at the level of implementation?

2. How might they be used as a “subterfuge for discrimination”?

Chapter Summary

The U.S. health care system is a product of its history. Conceptually, it was based on advances in medical knowledge forged in Europe over the course of the 19th century. In early 19th century France, a new focus on empirical evidence led to a greater understanding of disease as localized in specific organs, and many widely practiced therapies, such as bloodletting, were questioned. Later, a more fundamental understanding of disease causation was forged in Germany, following the creation of physiological institutes and important bacteriological discoveries.

This reform in medical education and practice was imported to the United States with the found- ing of Johns Hopkins University in Baltimore in the last quarter of the 19th century. The “Hopkins model” required a college degree as a prerequisite for medical study and involved 2 years of lab- oratory instruction followed by 2 years of supervised patient observation in the hospital wards. Following the Flexner Report of 1910 (a survey of all the medical schools in the country), the Johns Hopkins system became the paradigm for medical education throughout the country; by the 1920s, this system of training was firmly in place.

Financing this system, however, has proven to be one of the most contentious domestic policy issues throughout the 20th century and into the 21st. Although many people have called for a system of national health care financing, legislation based on these proposals has been repeat- edly defeated. Instead, an employer-based system emerged after World War II, whereby workers received health insurance coverage as a fringe benefit of employment, and policies were designed and administered by private insurance companies. In the 1960s, a system of public funding for the elderly (Medicare) and the poor or disabled (Medicaid) was grafted onto this private system, creating a patchwork quilt of public and private funding.

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Chapter Summary CHAPTER 10

This fragmented health care system has grappled with managing chronic disease and disability as they became more prevalent in an aging population. Although infectious disease was still a serious concern at the time of the Flexner Report (1910), chronic conditions became the leading causes of death by 1940 and remain so today. Because chronic conditions require ongoing treat- ment, medical inflation became a major problem within contemporary health policy. In the United States, medical inflation has been exacerbated by a system of financing health care that contrib- utes (among other things) to duplication of services, lack of uniformity in compensation levels, and overtreatment and overdiagnosis. In other words, one of the drivers of medical inflation is biology (chronic disease) and the other is economics (health care organization and financing).

Consequently, two main strategies have been used to contain costs: (a) reducing the prevalence and incidence of chronic disease (a public health strategy); and (b) changing the economic incentive structure to achieve a socially beneficial balance among equity (access), quality, and cost. Although public health campaigns have tried to reduce the risk of chronic diseases (e.g., antismoking mes- sages to reduce lung cancer), those who pay for medical services (insurers, government, and other third-party payers) have focused more on a cost-containment strategy, among which are denying health insurance to individuals with preexisting conditions, replacing fee-for-service indemnity insurance with various MCOs, and questioning costly therapeutic interventions using EBM.

In 2010, these practices, coupled with an inability to curtail medical inflation, led to momentum for passing the ACA. Although bitterly opposed by those with libertarian and conservative polit- ical leanings, the law is scheduled to become fully operational in by 2015. The ACA keeps the basic system of private health insurance intact. However, it sets the nation on a path of eventu- ally achieving near-universal coverage primarily through the following requirements: (a) every individual purchases health insurance or pays a penalty (the individual mandate); (b) businesses with more than 50 full-time employees offer health insurance to their workers (the employer mandate); (c) insurance companies cannot deny coverage to individuals; and (d) eligibility require- ments for Medicaid are expanded. Given the complexity of the law and the number of years for final implementation, the specifics will be debated for many more years.

The ACA acknowledges the epidemiology of chronic disease as the leading cause of disability and death in contemporary society. Specifically, the law funds state and territorial health departments to combat the five leading chronic diseases: heart disease, cancer, stroke, diabetes, and arthritis (HHS, 2011). In addition, the ACA requires that insurance companies cover, free of charge, a wide array of screening tests for chronic conditions and provide counseling for those at risk for develop- ing them. Finally, because insurance companies can no longer deny coverage based on preexisting conditions, individuals with chronic conditions have an assurance that the majority of their medi- cal expenses will be covered. Even so, debates about the quality of that care (viewed through the lens of EBM) may still be the subject of debate in policy circles.

Given the fractious nature of American politics, the ACA will probably be amended in the years ahead. What will not change, however, is the underlying biological reality of chronic disease and disability and the high societal cost of managing them. As noted, all modern health care systems must confront the problem of chronic disease; in this respect, the United States is not unique. All nations must also deal with the inevitable tradeoffs that conflicting demands for access (equity), cost, and quality pose. However, how each country deals with these problems is different and is a product of that country’s history. In the United States, that history has involved incremental reform that resulted in a patchwork quilt of public–private health care financing, which became the foundation on which the ACA (in all of its complexity) was built. Anyone who works in this sys- tem must know something of this history and understand how it adds another layer of complexity when dealing with disease and disability at the micro, meso, and macro levels.

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Key Terms CHAPTER 10

Key Terms

accountable care organization A group of doctors, hospitals, and other health care providers who voluntarily come together to coordinate high-quality care for patients (espe- cially chronically ill) in cost-effective ways. For example, they avoid duplication of services and minimize medical errors.

capitation A fixed payment per patient made to a doctor by an MCO in return for services provided.

community rating The practice of charging the same insurance premium to everyone who lives in the same geographical community.

consumer-driven health care (CDHC) An approach championed by libertarians and other reformers. It rests on three pillars: the purchase of a high-deductible catastrophic insurance plan, individual HSAs, and providing all relevant medical and cost information to consumers through a variety of media outlets.

defensive medicine The practice of perform- ing additional tests or procedures to insulate a doctor from malpractice liability. Medical malpractice cases turn on whether a doctor deviated from the appropriate standard of care (e.g., performed the appropriate test, provided the appropriate medical intervention). Hence, some doctors may perform more tests and procedures than they might do otherwise so that, if sued, they have a defense. Although not a leading driver of medical inflation, it is a prob- lem for certain specialties (e.g., obstetrics).

diagnostic-related groups (DRGs) A system designed to achieve cost containment by classifying diseases and medical interventions according to diagnostic categories and then compensating hospitals the same amount for all conditions that fall into the same category. Each condition or intervention is given an estimated value. This system gives hospitals an incentive to refrain from ordering unnecessary tests, because they might end up spending more than they will be compensated based on the DRG criteria.

employer mandate A requirement of the ACA that employers with more than 50 people purchase insurance for their employees or pay a penalty.

evidence-based medicine A reform move- ment begun in academic medicine that argues for the primacy of clinical trials to determine appropriate therapeutic interventions; it deemphasizes the judgment of the individual doctor as unsystematic.

exchanges State-based insurance markets administered by a government agency or a nonprofit organization where individuals and small business can purchase health insurance; created by the ACA of 2010 and implemented in October 2013.

experience rating The practice of charging different insurance premiums to individuals based on the likelihood they will make claims, that is, charging higher premiums to those most likely to make claims.

fee-for-service A way to compensate doctors in which they receive a fixed amount for each medical service they provide.

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Key Terms CHAPTER 10

Flexner Report A 1910 study of American medical schools, which established how many were elevated to the standard of John Hopkins University; a watershed event that shaped all subsequent American medical education.

health maintenance organization (HMO) A type of health insurance in which a fixed fee is paid per enrollee. Because there is a fixed amount of money available to cover the medical expenses of the entire group, incen- tives hold down medical costs. If enrollees use a provider who is not part of the HMO, they have to pay a much higher amount of the med- ical bills themselves.

health savings account (HSA) A system of financing health care in which individuals purchase a high-deductible policy and make regular contributions into an account from which they can withdraw money (tax free) for medical and related expenses.

indemnification A type of insurance in which one party (the insurer) agrees to compensate the other party (the insuree) for future prede- termined losses, or injuries. In health insur- ance, the company agrees to pay the doctor a fixed fee to cover the cost of returning the insured patient to a state of health.

individual mandate A requirement of the ACA that nearly every U.S. citizen or legal resident acquire health insurance (either through an employer or by purchasing it through an exchange) or pay a fine.

managed care organization (MCO) Any generic health insurance or approach for financing health care that uses various mecha- nisms to minimize unnecessary costs. Although the specifics vary among organizations, the focus of MCOs is to engineer economic incen- tives to eliminate duplication of services or only marginally beneficial treatment.

Medicaid A state-administered program that pays the medical bills of the poor (those below the federal poverty line, with requirements varying by state). It is jointly funded by the federal government and the individual states; however, each state decides how the program is administered within its jurisdiction.

Medicare A federal program that pays the medical bills for those over age 65 (and their spouses) who have paid into the Social Secu- rity system during their work life.

Organisation of Economic Co-Operation and Development (OECD) An organization that provides a forum for governments to work collaboratively, promoting economic and social well-being around the world. It was created after World War II in the context of rebuilding a war-torn Europe. Its membership includes economically prominent countries beyond Europe, such as the United States, Canada, and Japan. See http://www.oecd.org/about/

out-of-pocket maximum Yearly and lifetime dollar limits on health insurance coverage.

preferred provider organization (PPO) A system of health care delivery encompassing a network of providers (both generalists and specialists). Enrollees are charged less for services when they use in-network providers; otherwise, they pay a higher share.

proprietary medical school A system of medical education in 19th century America. It involved 2 years of instructions (a year-long series of lectures was repeated twice), was staffed by local doctors often without uni- versity affiliation, and was funded through tuition received from students. The system was designed more to generate income for the doctors and faculty than to enforce academi- cally and medically rigorous instruction.

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Critical Thinking and Discussion Questions CHAPTER 10

Critical Thinking and Discussion Questions

1. Briefly explain what Daniel Fox has called the “paradox of American health policy.” Do you think that a reason for the persistence of this paradox at the policy level derives from continuing to see disease in terms of the “medical model”? (See also Chapter 2.) Do you think that if we looked at disease in more biopsychosocial terms, it might be eas- ier for us to resolve the paradox when formulating health care policy?

2. Do you think that people have a right to health care? Or, do you think that health care is a market commodity like anything else? Why would people who believe that health care is a right tend to favor a single-payer system, whereas those who think it is a commodity tend to favor the creation of individual HSAs?

3. The basic premise behind evidence-based medicine (EBM) is that population-based stud- ies (e.g., clinical trials) should increasingly shape medical decision making. Analyze the phenomenon of EBM from a micro, meso, and macro perspective. Do you find problems and benefits from using EBM when making medical decisions at the level of the individ- ual patient? At the level of the community health center? At the level of national health care policy? Now that you know something about the U.S. health care system and its history, has this changed your perspective from when you first learned about evidence- based practice in Chapter 1?

4. The United States spends more than any other OECD country on health care. However, people in this country actually have a shorter life expectancy at birth than those in many other countries that, like the United States, are also industrial democracies. What factors account for this discrepancy? Do you think it derives from our health care financing and delivery system, from a lack of focus on public health, or a combination of both?

5. The realities of the ACA are actually much more complex than how they are often por- trayed in the speeches of politicians (both supporters and critics). Now that you know something about the specifics of this law, what facts were the most surprising or con- tradictory relative to your earlier understanding? Now that you know something about the history of the U.S. health care system, what do you think will be the most pressing challenges facing this system in the years ahead?

single-payer system A system of health care reimbursement in which a single entity (usu- ally the government) pays all medical bills; usually, it covers the entire population. Canada and the United Kingdom use this model. If, for example, Medicare eligibility were extended to the entire population (rather than just those over 65) and all U.S. citizens got health care through this system, it would be a single-payer system.

Social Security Disability Insurance (SSDI) A program introduced in 1956 that pays bene- fits to workers over 50 who demonstrate that their disability makes them incapable of work- ing. Because of the age requirement, in practice it is associated with retirement from work.

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