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week_five_lecturepp.pptxMCHM 6301: Health Care Policy Analysis
WEEK 5:Evaluation of Political Feasibility, Economic Viability, and Analysis of Values
Overview
Political Feasibility -
Four Variables involved:
The main actors
Inputs into the policy arena
The interplay of actors and inputs
The threshold for adoption
Actors influenced by inputs interact with other actors to combine political leverage and achieve critical leverage mass
Overview 2
Economic and Financial Viability –
4 important points to consider:
How much will it cost?
What value will we be getting for our money?
How does that value compare with other alternatives under consideration?
If it is something we want to do, how will we pay for it?
Starr’s Policy Trap
People see Medicare and other programs not as insurance but as a privilege that has been earned and paid for
They don’t want to see that privilege disturbed
Oppose any change that isn’t the devil they know.
Agenda Setting
Set of circumstances must be identified as a problem—influencing factors include:
Public opinion/voter attitudes/political mood
Media coverage
Emerging social movements
Interest group mobilization
Availability of potential policy solutions
Arising threats (real or perceived)
Economic changes
New research finding
Critical evaluations of program
Level of sympathy for affected population
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Key Government Actors
Federal
Congress: The Legislative Body
The President: Chief Executive Officer
Bureaucracies: Administrator/Regulators
Judiciary: Federal Court
State Governments
Local Governments
United States Congress
Arguably most powerful branch
It alone has power to make laws and budgets
Relative authority has been growing
Senate and House rules differ slightly
Bulk of work gets done in committees
Policy committees
Budget committees
Conference committees
Complexity makes major reforms easy to stop
The President
Does not make policy but has tremendous capacity to influence policy as a leader
Initiates annual budget process
Crafts policy initiatives (State of the Union)
Influence depends on political capital
Electoral margin of victory
Party’s representation in Congress (majority?)
Public opinion (polls)
Can exercise veto authority
Directs executive agencies—executive orders
Bureaucracies
Report to president but Congress writes budget and provides significant oversight
Draft policy proposals and influence legislation (provide data and expertise)
Can mobilize networks, constituencies
Make administrative law (rules and regs)
Federal Courts
Play critical role on issues of:
Federal preemption
Constitutional protections
Interstate commerce
94 district courts in 12 regional circuits
Each circuit has own Court of Appeals
State Governments
Often leaders in formulating health policy
Major purchasers of health insurance and health care—health is largest cost driver
Serve as test markets for reform efforts
Like smaller version of federal government in many ways, but not all
Governor may have line item veto
May have term limits
State Governments—2
Three key differences:
State’s are not able to run budget deficits
Many allow initiatives and referenda
Have less access to media
Local Governments
Even more variability than states
Increasingly looking for local solutions to health problems
Hillsborough County Health Care Plan
San Francisco City/County plan
County Executive Ron Sims proposal in Seattle area (King County, WA)
Nongovernmental Actors
The public
Interest groups
The media
Scientists and other experts
The Public
Politicians constantly try to read the prevailing winds of public opinion
Voting public not same as general public
Public opinion shapers often target small number of well-informed, engaged and influential individuals to influence others
Public often supports idea of reforms but support is “soft”—they can be talked out it
Interest Groups
Most important actor after Congress?
Partners throughout policy making process
Work with all three government branches
Explosion in # of health interest groups
Occupations or health-related companies
Advocate for people with specific afflictions
Advocate for general population or subgroups
Interest Groups Tools
Modern groups have access to many tools
Old-fashioned direct lobbying
Political action committees
Direct democracy (initiatives, referendums)
Grassroots lobbying (mobilization)
Cross-lobbying (influence other groups)
Coalition-building
Research and reports
Framing of an issue (communications)
The Media
Exerts influence in three principle ways
Setting the frame: Rely on and establish frames to make stories interesting to readers
Sorting and delivering data and information: In face of information overload, sort and prioritize information and establish relevance
Setting the agenda: As example, New York Times heavily promoted managed competition leading up to Clinton health plan
Scientists and Other Experts
Policy makers try to make rational decisions (or rationalize ones already made), so they need data, researchers and research findings
Evidence-based medicine carries into policy making, increasing the leverage of experts, data
Research and data from variety of sources
Academic research (best if peer-reviewed)
Raw data collected by agencies, insurers, etc.
Reports and studies by think tanks, interest groups, manufacturers, consultants, academic policy centers (all may have ideological or financial bias)
Political Feasibility Tools
Authorizing environment map (addressed earlier)
Analyzing three streams of policy process
Conducting a force field analysis
Determining whether costs and benefits are concentrated or diffuse
Delphi method
Force Field Analysis
Concentrated or Diffuse?
The Delphi Method
Iterative process to solicit expert estimates, unbiased by social standing
Politicians ideal panel members but observers’ participation easier to obtain
Dror suggests 3 questionnaires, 3 panels
Estimate comparative feasibility of alternatives
Predict time frame and conditions required
Evaluate leverage of various actors
Highly qualitative so subject to human error
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Agreeing in Detail on Delivery System Involved
“The devil is in the details” has to come out here.
We are now talking not about the results of demonstrations but of something that has been prototypes – i.e., approximates normal conditions in the field
Sometimes this causes the team to go back and revise its effectiveness estimates
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Selecting the Analytical Approach
There are many measures of effectiveness and utility:
Cost per unit
Cost per quality adjusted life year (QALY)
Cost effectiveness analysis
Benefit/cost analysis
Cost/utility analysis
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A Suggested Hierarchy
Establish the cost (burden) of the illness
Given very similar outcomes, do cost minimization analysis
If outcomes have similar metric, but are different, do a cost-effectiveness study
If there are significant differences in the programs, do a cost-benefit study
If quality of life after survival is important parameter, do cost utility study
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Basic Issues
Determining relevant costs – charges are seldom the way to go.
Usually want to find the marginal cost, the cost of adding one or more units of output
Doesn’t usually come out of health care costing systems which are mainly concerned with distributing fixed costs according to insurer’s overall volume.
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Marginal Analysis
Supply and demand sensitive
Figure 11-2 shows an example in which the supply shift changed demand as well as the relationship to a planned budget.
Analysis often comes back to measuring marginal benefits in dollars because utilities are hard to capture, especially were multiple beneficiaries are involved.
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Preferences and Utilities
Direct Measures
Standard gamble
Time tradeoff
Rating scale
Indirect Measures
General utility questionaires
Disease specific instruments
Agreeing on Resources Required
Start with the physical resources used (persons served, servings per person)
Price these out once you have the numbers
Then add in fixed (the wait staff and the cook) or allocate costs (capital amortization and overhead services)
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Determining Relevant Costs
Two approaches
Aggregate all costs using each alternative
Computing marginal = incremental costs leaving out all irrelevant coss
Usually the better alternative focusing on detailed process analysis.
Real problem comes with data, especially hospital data loaded with heavy allocated overheads
Published charges are useless and relevant costs may not be recorded by the accounting system.
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Agreeing on Outcomes Produced
Must face up here to the technical and political uncertainties
Uncertainty may be handled by:
Branching alternatives (decision trees)\
Sensitivity analysis often coupled with simulation methods to incorporate subjective or observed probability distributions
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Determining Present Values
A dollar received today is worth more than one received ten years from now.
NPV is the sum of the annual values each discounted back to the present at an appropriate rate
For example, OMB mandated two analyses, one a 3% and one at 7%
May represent two components, cost of capital and inflation effect.
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Inflation Adjusting
Adjust both costs and revenues annually to represent appropriate inflation rates.
Need not be the same
HC cost inflation rate tends to exceed CPI by about 2%
May be due in part to Baumol effect – services harder to improve efficiency that good production
May be due to lack of competition
Also have to compensate for added technology
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Comparing Competing Alternatives
Ratios (CBA/CEA) are important, but also need to look at:
Availability of financing
Relationship to competitive strategy
Fit with current operations
Impact on cash flows overall
Impact on loyal providers
Compare on numbers, then add intangibles in (figuratively)
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Comparing Alternatives - 2
Sometimes potential projects are put into categories like:
Necessary for health and safety
Necessary due to regulations
High priority in terms of organizational goals
Medium priority
Low priority
Only low and medium priority project likely to be chosen just by the numbers
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Financing Feasibility
Look at overall demand for capital
Does the best alternative improve capital situation or hinder it?
Large investments are likely to require multiple sources of funding
Be careful not to threaten current expectations by over-investing in one effort
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Cleverly and Cameron Target Areas for Financial Planning
Revenue estimation
Capital budgeting
Financing of operations and capital investments
When forward planning adjust for inflation and increasing technology requirements
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Accounting Systems Needs
Revenue, costs and capital requirements
Adjust for inflation and technology growth
Supply IRR and ROI figures on proposals
Estimate cash flows and working capital needs
Provide procedures for allocating capital
Help establish the appropriate capital structure – debt, retained earnings, etc.
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