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Health care reforms in America: perspectives, comparisons and realities

R.J. Glassock
DOI: http://dx.doi.org/10.1093/qjmed/hcq072 709-714 First published online: 18 May 2010

Abstract

Health care reforms are now a reality in America after a long and tortuous debate. President Obama has achieved a 'victory' unlike anything seen since the term of President Lyndon Johnson, over 40 years ago. The new law brings America closer to universal coverage and access to affordable health care for its citizens, but the cost of the program and its impact on individuals, physicians, hospitals, the pharmaceutical and device industry and insurance companies is not yet fully known. The debate preceding the enactment of health care reform brought up numerous comparisons (often invidious and falsified) between the American system of health care and other systems throughout the world, including the National Health Service in the United Kingdom and Medicare in Canada. This overview examines the issues raised in the debate, perceptions of health care systems on a global basis, provides some perspectives on the reform of health care systems and examines some of the realities underlying these changes for the future of health care in America.

The great generational debate on how to reform the health care system in America came to a dramatic conclusion late in the evening of 21 March 2010 when the House of Representatives approved (by a vote of 219 to 212) a previously approved Senate version of health reform legislation.1 Two days later, President Obama signed the landmark legislation into law and became the first President since Lyndon Johnson in 1965 to accomplish such a major change in the American health care.2 Clarion calls for repeal and lawsuits over its constitutionality appeared quickly after the passage of this historic reform effort. As of this writing it appears that the law may become a significant factor in the mid-term elections of 2010. Issues such as payment for abortion, mandates on individuals and companies to purchase or provide insurance with penalties (‘play or pay’), new regulatory requirements on insurance companies, costs of the new programs and how to pay for them, and the impact of reform on a burgeoning federal budget, including deficits continue to be discussed. Underlying this post-passage debate is the very real and pervasive effect of a slowly reversing recession and continued high unemployment rates. The nature of the debate that preceded passage has had a polarizing effect on American political discourse that will be a challenge, perhaps the greatest one, facing the young administration of President Obama. This grand debate on health care reform proved to be tortuous, partisan and often rancorous; full of accusations and counter-accusations, distortions and invidious comparisons; and burdened by the enormous complexity of the American health care system itself and the environment (a generational economic recession) in which an attempt at change was initiated.

The issues

The stakes in health care reform are enormous. Health care in America in 2009 consumed about one in every six dollars ($2.3-Trillion total) of the gross domestic product (GDP) and the costs are rising at a pace that greatly exceeds general inflation, although the rate of rise has attenuated somewhat since 2006. The venerated Medicare program, a government-funded but privately administered (though fiscal intermediaries) health insurance program for 15-million elderly (over 65 years of age) and disabled citizens (including over 500 000 Americans with end-stage renal disease), is predicted to be insolvent by 2017 or earlier. Medicare spending varies widely in America depending on health status, income level and other regional factors.3 A promise to slow the projected growth of the Medicare program may delay insolvency, but will be difficult to actually accomplish. The Medicaid program, funded jointly by the Federal and State governments, provides care for ∼13-million individuals below a designated ‘poverty level’ of income, is severely strained by the economic crisis and is already greatly underfunded. Payment rates currently in Medicaid are so low than many doctors and hospitals eschew participation, as is their right. The new law will greatly increase the number of Medicaid recipients and thus will require an even greater transfer of federal funds to the states. Premium payments for private (non-governmental) insurance are skyrocketing, and many employers who pay a large portion of the premium costs, are balking at payment increases since these additional costs reduce their competitiveness on the world economic stage. The impact of the new law, and its provisions of new regulations governing private insurance, on the rate of rise in private insurance premiums is not yet known, but many believe that these rates will continue to escalate. Overall expenditures for health care in America have been rising steadily and dramatically, from 6% of GDP in 1965 to almost 17% in 2009 and projected to increase to over 20% of GDP by 2015. The escalating costs are fueled in large part by over abundant use of expensive high-technology, new and costly brand-name pharmaceuticals (including drugs that basically replicate the effects of already available drugs), limits on the availability of generic drugs and the accelerating aging of the society at large. Litigation costs of medical negligence claims and the practice of ‘defensive medicine’ have made a relatively minor impact on rising expenditures, despite the claims of organized medicine to the contrary.4 The fundamental ‘fee-for-service’ model thrives on volume not on quality or efficiency of medical case. All of this has occurred while the uninsured (or underinsured) class has burgeoned to over 47-million individuals, including ∼13-million undocumented (non-citizen) persons (‘illegal aliens’). The new law will provide coverage by making subsidies available to purchase health insurance at affordable rates to ∼32-million of these previously uninsured or under-insured individuals, leaving only the undocumented aliens without some form of either public or private insurance.

The picture of the ‘health care system’ in America that emerged as the debate proceeded was not a pretty one, and the new law seems on the surface to be a step in the direction of correcting many of its most glaring deficiencies, but the fine details of the new law will only become apparent as its provisions are ‘rolled-out’ over the next 5–10 years. The desire to introduce reform into the health care system is not new to American politics. Indeed, for the last 80 years every President has half-heatedly or enthusiastically supported reform beginning with Franklin Delano Roosevelt who attempted, unsuccessfully, to include ‘universal health care’ as a part of his social security program enacted during the ‘great depression’ of the 1930’s.

The American health care system

The ‘dysfunctional’ American health care system that exists in 2010 and is about to undergo its most dramatic change in over 45 years can best be described as a unique hybrid of: (i) privately owned (for-profit) health insurance entities (largely employment driven); (ii) government funded but privately administered insurance plans for the elderly and disabled (Medicare); (iii) a State–Federal insurance program for a portion of the poor (Medicaid); (iv) a mixture of Federal government owned and operated systems (veterans administration, military and Indian health service hospitals and clinics); (v) a scattering of not-for-profit entitles owning hospitals and staffed by salaried physicians (e.g. the Kaiser Permanente System); and (vi) a conglomeration of locally supported (through taxation of the citizens) public hospitals and clinics, largely serving the poor and the uninsured (including non-citizens). Employment-based health insurance (self-insured or purchased via employer from an insurance company) currently accounts for over 60% of the health insurance coverage in America USA (see also Figure 1).5

Figure 1.

Health care coverage in America.5

This ‘patchwork system’ has evolved over many decades. Its individual components are not well integrated. Its ‘fee-for-service’ approaches to payment encourages the dominance of high-technology oriented specialty practice and threatens the viability of primary care practice, by economically dis-incentivizing new entrants into this vital part of an integrated system of care. Control of burgeoning costs in the overall system has resisted mostly half-hearted efforts. Only a few sub-systems have been successful in melding specialty with primary care practice in ways that both control costs and provide tangible benefits of integrated care to subscribers. One of the great anachronisms of the American system was that unlike nearly all other health care systems in the industrialized world, it continued to adhere to the notion that access to affordable health care is a privilege and not a fundamental right for its citizenry. The enactment of the new law partly corrects this persistent anomaly in arguably one of the richest and most developed countries in the world.

Thus, reform of the ‘dysfunctional’ and ‘economically unsustainable’ American health care and health insurance systems has focused on changing the insurance rules, attempting to curtail the ever-escalating costs, and extending coverage to as many citizens as possible—all without fundamentally altering the ‘hybrid’ system of organization, dominated by ‘fee-for-service’ payment methods. Consideration of a single payer system of universal coverage (like Medicare in Canada) and a Federally owned and operated system of universal coverage [like the National Health Service (NHS) in the UK] were quickly rejected as not fitting the American model of ‘free-enterprise’ and were vigorously opposed by political conservatives who believe in limiting government intervention into fundamentally private matters, such as access to and choice of health care providers. Throughout the debate leading to enactment of the new law intense lobbying efforts by stakeholders (organized medicine, hospital associations, insurance entities, pharmaceutical companies, state and local government leaders, constituency groups, labour unions and the like) shaped the structure and complexity of the final legislation. In the end, each gave some and received some (or more than they gave), and the new law remedies some inequities but it creates others. Whether any reform will be successful in restraining the rising and unsustainable costs of health care remains be seen, although promises have been made. Keeping these promises will be another matter for another time.

American perceptions of other health care systems

One of the most striking aspects of the long and rancorous debate over health care reform in America was how the health systems in other countries were characterized and in many instances defamed in the media and in ‘town-hall’ style gatherings. For example, the single-payer, universal coverage Medicare system in Canada, managed at a provincial level in a prospective budgeting process, was widely characterized as ‘rationing by the queue’. Citizens of Canada sacrificed immediate access to a provider of their choice for the assurances that everyone would be covered but not necessarily at their beck and call. Canadians were described as ‘unhappy’ with their system and ‘flocking in droves’ to America for needed care. At the same time many American citizens were sending their prescriptions to Canada to avoid the high costs of drugs prevalent in the American system.

The NHS in England was also characterized, unfairly in my view, as understaffed, underfunded, operated by an inefficient and impersonal bureaucracy, within antiquated facilities having few amenities, with long-waiting times for elective procedures, limiting care for the elderly, lacking in freedom of choice of providers, and practicing covert ‘rationing by the queue’ as well as overtly, via the National Institute for Clinical Excellence program of comparative effectiveness evaluation linked to funding for drugs and procedures. At the same time, in America, comparative effectiveness research was being strongly encouraged by both federal and private funds.6 In addition, clinical practice guidelines promulgated by professional societies and organizations were growing industries in the USA and elsewhere, but in general these were divorced from cost considerations.

Comparisons of health care systems

In a fascinating, recently published and sometimes poignant book7 (also called ‘naive’ by one reviewer8), Washington Post correspondent. T.R. Reid provides unique insights and a wealth of historical information on how the ‘systems’ of health care coverage evolved in the various countries of world.7 Reid notes that the beginning of health care systems can be traced to the ‘Iron Chancellor’ Otto von Bismarck’s pioneering social system inaugurated in Germany in 1883. The Bismarck model, as it is now known, uses a private but not-for-profit system of tightly regulated insurers jointly financed by employer and employee (or subsidized by the Federal government for the unemployed). Both doctors and hospitals are private entities and patients are given free-choice of plans and providers in a tightly regulated system of fees and re-imbursement. The creation of the NHS by Aneurin ‘Nye’ Bevan and Clement Atlee in the UK in 1948 brought forth a new system, known as the Beveridge model after Lord William Beveridge who virtually single-handedly wrote the landmark report in 1942 upon which the NHS was built. Unlike the Bismarck system, most facilities are owned and operated by the government and many providers (except General Practioners; GP) are employees of the NHS. Universal coverage is provided through taxation and a tightly regulated (and highly politicized) budgetary system. ‘Free at the point of delivery’ is a frequently repeated mantra. General practioners contract with the government for global care of panels of patients and access to specialists is controlled. A parallel private system of insurance has evolved but is used by only a minority of citizens. A third model also arose in the post-WW-II period in Canada, created first by Thomas ‘Tommie’ Douglas in the province of Saskatchewan in 1945 and Canada-wide in 1961 called Medicare. It is a universal coverage program in which the central government provides (via the Provinces) a national ‘single-payer’ health insurance in a tightly regulated budgetary system. ‘Out of plan’ care is allowed, as in the NHS. Doctors and hospitals are mostly private. A final ‘model’ system is also described by Reid; the ‘Out-of-Pocket’ model in which the care is provided on a cash basis—those without cash generally go un-served or depend on intermittent and episodic acute care in emergency rooms or charity clinics and hospitals. Outside of America the Bismark plan, or one of its variants, has been the most popular.

In America, all of these models can be found in some form. For the employed, under age 65 years it is like Germany (or France and Japan) except most insurance plans are for-profit (The new law puts a ‘cap’ on administraive cost); for the over 65 year age group, it is like Canada (or South Korea or Taiwan); for the Native Americans, Military or Veterans it is like the UK (and Cuba); and for the unemployed and uninsured it is like many countries that do not have an organized system of public health insurance, such as India, most parts of China and in equatorial Africa. In America, there are also a few models that resemble the NHS—the Kaiser-Permanente System and the Puget Sound Health Care system. These systems adopt an employed staff-model of managed care within a not-for-profit ownership system of hospitals and clinics linked to a premium-based insurance plans. Care is provided in a highly integrated system of primary care physicians and specialists. A full-range of services is available either within the system or on contract to other providers.

Of all of these, the Bismarck model provides the greatest choice of providers except when insurance and care is provided under one corporate umbrellas as is the case in some parts of Japan. The Bismarck model as applied in France is very highly regarded for ease of access, extent of coverage, overall cost, integration of health information systems (‘Carte Vitale’) and outcomes. The health care systems in the Netherlands and in Northern European countries are also highly esteemed and emulated.9

However, regardless of the model system employed, there is general agreement, and much angst, that pressures of escalating cost (largely due to high use of advanced technology) are straining budgets and that rationing of care (either covert or overt) is increasing. Cost-containment remains as an over-riding issue in all systems of care, despite incremental reforms, including the new law in America. No effective plans for controlling ever-spiraling upward costs have yet been put in place—the new law in America is no exception. Government-sponsored universal health care systems, such as those in Canada, are reconsidering a role for private health care and have been largely unsuccessful in reducing costs.

The American hybrid system is viewed by many as fragmented, chaotic, difficult and complex to navigate, and harboring some disturbingly unfair insurance practices. Some of these may eventually be corrected by implementation of the new law, aptly called the Patient Protection and Affordable Care Act (PPAC). Despite its shortcomings, 60–70% of Americans are ‘satisfied’ with their health care, according to polling results. The American system remains as specialty and fee-for-service dominated, expensive (over $7600 per capita per year), and high-technology oriented. Primary care is poorly integrated and electronic information systems are crude and underutilized. Prevention often takes a distant third place behind diagnosis and treatment in priorities for care. It is litigious, profit-driven and rife with ‘defensive-medicine’ and entrepreneurial practices.10 Extra-ordinarily wide geographic variation in costs are well documented,3 and not directly related to quality of care, which is mediocre in too many and excellent in too few sites. Until enactment of PPAC access to affordable care was not guaranteed to everyone leading to de facto rationing based on ability-to-pay. The main governmental support systems for health care are bordering on insolvency and without dramatic changes will be ‘bankrupt’ in the next decade. The bright spots are that America continues as a center of innovation and experimentation in new ways to deliver excellent care efficiently and inexpensively, is a training ground for some of the best doctors in the world and is a major site for research and development of new drugs and procedures. Non-Americans view the American system as wasteful of precious resources, full of redundant capacity, woefully insufficient in terms of access to primary care, only average in overall quality compared to cost (poor in value) and unconscionably out of step with the industrialized nations of the world by denial of the fundamental right to affordable health care for all of its inhabitants. The last of these justifiable criticisms has been, at least in part, corrected by the enactment of the new law.

The future

The reforms signed into law by President Obama charts a new and uncertain path for the unique hybrid American health care system, and may inadvertently create a panoply of new issues. The overall costs of care and the efficiency of the system in which care is delivered will come under increasingly harsh scrutiny, particularly as the unsustainable costs of health care become more evident in each succeeding year. Crossing the moral divide and providing access to basic and affordable health care to nearly all its citizens is perhaps the most significant step taken by America in 2010, even though 13-million persons, mainly undocumented aliens, will likely remain outside the system. Improved emphasis on preventative care, comparative cost effectiveness and electronic medical records might help stem the oncoming financial tidal wave but the long-term economic benefits of these steps is far from clear. Universal health care provided by a single governmental organization seems quite unattainable at present. Fear of uncontrollable budget deficits, added tax burdens and a ‘government’ takeover of one-sixth of the nation’s economy have provided major, and perhaps crucial, resistance to change. Maintenance of free choice of providers, preservation of physician autonomy and reform of the litigation system of injury from sub-standard care is also high on the agenda.

The future of the American health care system, as reformatted by the new law, can only be seen dimly as the implementation phase shifts into gear.11 Retention of the antiquated fee-for-service reimbursement system seems destined to fuel further cost inflation. The effect of mandates (‘play or pay’) on employees, individuals and employers to purchase or provide health insurance and the eventual costs to business is hard to estimate but early data suggests that health care insurance premiums will rise. Opening the flood-gates for issuance of millions of new insurance policies, heavily subsidized by federal and state governments, will only intensify the precarious state of the governmental systems, already strapped for cash. What the broadened access to medical care will do to the insurance industry, the public and private hospital systems and to a medical establishment already bereft of primary care providers can only be guessed. A serious shortage of primary care providers already exists in America, and the effect of new incentives for newly minted doctors to enter primary care instead of specialty careers is largely unknown. Trillions of dollars will have to be extracted from current programs over the next decade or so in order to pay for the newly insured without promoting unsustainable new budget deficits. Will future Congresses and Administrations have the courage to make these cuts and deal with the pain they will create in their constituencies? Only time will tell. It does appear likely that health care reform in America will have to be revisited soon and repeatedly to resolve the issue of costs in a way that promotes value and rational use of limited resources. Stay tuned.

Acknowledgements

The author is indebted to Dr Alan Hull, Dr Christopher O’Callaghan and Dr Christopher Winearls and to Mr Charles Baird for their review of an earlier version of this manuscript and their many helpful suggestions.

Footnotes

  • *Based on a Lecture given at the John Radcliffe Hospital, University of Oxford on 6 October 2009.

References

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