Harvard Health Policy Review Volume 2, Number 1 [Note: This online edition of the Spring 2001 issue is slightly modified from the original version only to accommodate formatting changes. All the content of the pieces remains the same as the original unless noted in text.]
Editor’s Note As the new administration and Congress now face the task of drafting healthcare legislation, it is interesting to speculate how, or if, the political calculus has changed since the Presidential campaign. In our Fall 2000 issue, we focused on the healthcare proposals made by the two major candidates. Since it is often said that "campaign promises are made to be broken," one need not be overly cynical to ask to what extent those positions reflected the immediate need to win votes, rather than deeply held convictions. Now that the election is over, will there be changes in the landscape, as actual legislation is developed? Since legislation, once signed into law, has real-life consequences for all Americans, one would hope that objective merit would prevail over short-term political advantage in the legislative drafting process. The reality, of course, is that political calculations are never off the table. Terry McAuliffe's remarks, upon being chosen Chairman of the Democratic National Committee, are a useful reminder that practical strategies for winning the 2002 Congressional elections are already being considered. Both parties will, at least in part, view any significant legislative proposal from a political perspective. Further complicating matters, the dividing line between objective merit and political motivation is often hard to discern. Since reasonable minds can disagree on the most effective means to achieve any given end, where does objectivity end and political expediency begin when, for example, one tries to define the roles that government bureaucracies, third-party payers, drug companies, physicians, and patients themselves should play in making healthcare delivery decisions? Questions such as these will abound as Congress turns its attention to the subject we have chosen as the theme for our Spring 2001 issue: Medicare and the adequacy of healthcare services for our senior citizens. This topic received much attention during the election and remains politically sensitive. Although both the Bush and the Gore campaigns argued that Medicare needs a major overhaul, some experts question the very premise of this debate, arguing that the current system works extremely well. One of these experts is Dr. Bruce Vladeck, former Administrator of the Health Care Financing Administration (HCFA) from 1993 to 1997, who opens our Symposium on this subject with an emphatic defense of the current model. Based on Vladeck's analysis, one could conceivably speculate that the whole subject of Medicare reform was instigated simply to attract senior-citizen votes. On the other hand, responses to Vladeck's analysis are offered by Dr. Marsha Gold of Mathematica Policy Research in Washington, D.C. and by Dr. Â
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Harry Cain, former Executive Vice President of the Blue Cross and Blue Shield Association. Gold examines Medicare from the perspective of its beneficiaries, while Cain directly challenges Vladeck's defense of Medicare, arguing that "Medicare as currently operating is a menace to the future of health care in this country." Our Spring issue also discusses other topics of concern to our nation's growing population of senior citizens. Nancy-Ann Min DeParle, the HCFA Administrator from 1997 to 2000, and John Rother, Director of Legislation and Public Policy for the American Association of Retired Persons (AARP), contribute their perspectives on the state of health care for the elderly. Separate articles address such topics as the quality of nursing homes, long-term care and the Program for All-inclusive Care for the Elderly (PACE). In addition to our central theme, this issue of HHPR contains papers on a variety of topical subjects by recognized experts and by graduate and undergraduate students. For example, the problem of the uninsured is described in an article by Professor Uwe Reinhardt of Princeton University. The American response to foreign health systems is examined in an article by Harvard Professor Robert Blendon and Minah Kim. An interesting picture of the health care challenges facing developing countries is presented in a paper on the current state of pulmonary health care in Tibet. Articles on the antismoking movement and stem cell research in the United States are also included. The national interest in these last two topics was emphasized by the prominent roles they played in the January confirmation hearings of Wisconsin Governor Tommy Thompson to be the new Secretary of Health and Human Services. A final note: the staff of the HHPR is deeply grateful for the many readers who were prompted by our first issue to submit comments. This response has confirmed our belief that many people on and off the Harvard campus are interested in better understanding health policy issues. We plan to institute a "Letters to the Editor" feature in our Fall 2001 issue. If you have a reaction to any of the articles published in HHPR, or if you would like to learn about health policy issues not yet covered by HHPR, we would appreciate hearing from you. Clay Ackerly Editor-in-Chief Spring 2001
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Table of Contents Features: Medicare Symposium Medicare Works Bruce Vladeck, PhD 5 The Medicare Menace Harry Cain, PhD 13 Medicare from the Beneficiaries’ Eyes Marsha Gold, ScD 22 Concluding Remarks Bruce Vladeck, PhD 29
Features: Interviews Interview with Nancy-Ann Min DeParle Interview Conducted by David Sclar 30 Interview with John Rother Interview Conducted by Andrea Magyera 38
Features: Health Care for the Elderly Policy Considerations for Nursing Home Quality Ralph Leonard, MD 44 The Critical Condition of End of Life Care in the United States Andrea Magyera 55
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Comprehensive Care for the Elderly: Is PACE the Answer? Y.K. Gary Chu, OD and Jocelyn Pan, MPH 64
Health Highlights When It Comes to Health Policy, Americans Are Not British Robert Blendon, ScD and Minah Kim 71 Current Issues in Mental Health Policy Colleen Barry 75 Health Care in Tibet: Clinical and Policy Perspectives Marsh Maish, MD 84
In Focus Why Are There so Many Uninsured Americans? Is the Problem Permanent? Uwe Reinhardt, PhD 92 Implications of Policy Decisions on Human Embryonic Stem Cell Research in the United States Stephanie Oestreich 107 Smocking and Health: The 1964 U.S. Surgeon General’s Report as a Turning Point in the Anti-Smoking Movement Michael Housman 119 ________________________________________________________________________ © 2001 by President and Fellows of Harvard University. All rights reserved. No part of this publication may be reproduced in any form without permission in written form from the publisher.
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Medicare Works Bruce Vladeck, PhD For those of us engaged in the delivery of health care outside the Washington beltway, there is a certain air of unreality to Washington discussions of Medicare. We certainly have plenty of quarrels with how much Medicare pays for certain services, what it does and does not pay for, and how it operates, but to listen to the Washington debate you would think that Medicare was some sort of anachronistic relic inferior in every way to the modern and creative private insurance industry. Calls for "reform" of Medicare by many in Congress amount to efforts, implicit or overt, to further privatize it by handing it over to the insurance industry. Compared to how the private sector actually appears to be working these days, however, that would leave many beneficiaries and most providers of service substantially worse off. The fact is that in many basic, but very important ways, Medicare works, reasonably to extremely well. And it works a lot better on those dimensions than anything else in the contemporary American health care system. Out here in the real world, Medicare appears to work pretty well in at least the following regards: • For people over 65, it provides universal coverage; • Once people enroll in Medicare, they stay in Medicare, without getting bounced in and out of insurance status, or bounced from plan to plan; • Medicare beneficiaries are about the only Americans who really have a choice about where to get their care, whether or not to enroll in a managed care plan, and which plan to enroll in; • Medicare is entirely portable within the United States; beneficiaries can get care, and providers can get paid, no matter where they are when illness strikes; • Medicare pays its bills; • Medicare provides the financial backbone for teaching hospitals, rural hospital and clinics, and much of the rest of the essential infrastructure of the health system; • While there are lots of specific technical and philosophical problems, Medicare's pricing systems for hospitals, physicians, and many other services provide the publicly available and accepted template for price negotiations or fee setting for most other payers; • For those of us engaged in research about health services or health policy, Medicare data, for all its limitations, is the most complete, accurate, and accessible data available in this country; • Far from least, Medicare has made possible the development and provision of an extraordinary range of services to older Americans - and the outcomes, in improved health and decreased disability, are demonstrable; • And finally, Medicare beneficiaries, unlike a growing proportion of other Americans, are highly satisfied with their health insurance. Medicare as Insurer Within recent memory, the fact that Medicare provides health insurance to essentially
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every American over the age of 65 (as well as everyone with end-stage renal disease and a large fraction of the permanently disabled) merely meant that the elderly differed from the rest of the population in the source of insurance. Now, having health insurance at all is a more notable characteristic. In the ninth year of what was the longest sustained economic boom in American history, almost one in five Americans under the age of 65 has no health insurance whatsoever. That proportion has grown steadily over the past decade. One can only imagine how rapidly it will grow now that the economy has finally weakened. While shifts in the political climate and a growing sense of nihilism about the possibility of broad social reform may have dampened efforts to achieve universal health insurance in the United States, no one argues that this is not still a desirable goal. With the recent political changes in South Africa, the U.S. is now the only industrialized nation in which a large proportion of the working-age population is uninsured. In that regard, Medicare is now one of our last links to the rest of the civilized world. From the point of view of providers of health care, services to the uninsured represent a growing and potentially unsustainable financial burden - even though, controlling for differences in health status, the uninsured are far less likely to seek and receive health care when they need it. And even when some form of subsidy is available to providers to defray some fraction of the costs of caring for the uninsured (in many parts of the country, the most generous such subsidies are those provided by Medicare) obtaining payment requires considerable administrative hassle for both patients and providers. Reliance on employment-related fringe benefits as the principal vehicle for providing health insurance to the non-elderly also means that - in a world of relatively frequent employment changes, heightened efforts by employers and insurers to coordinate benefits among family members, and changing patterns of family relations - even people who never go without health insurance are likely to encounter changes in health insurers, with concomitant changes in how they get their health care. These effects of ordinary labormarket and family "friction" are exacerbated by the growing willingness of employers to switch healthcare coverage - or induce switches in healthcare coverage - for their employees from one limited-panel plan to another. No one has done a full accounting of the economic, psychic, and healthcare costs imposed on individuals and health care providers by this kind of churning in health insurance, but most of us non-Medicare beneficiaries have become accustomed to periodic disruptions in coverage that, at a minimum, cause considerable hassle for the minority who actually read their plan information, and at a maximum can severely disrupt patterns of care for people with significant chronic conditions who have become highly dependent on relationships with particular physicians or hospitals. Most Medicare beneficiaries do not have these problems. And Medicare does not impose these hidden costs on providers of service. With some limited exceptions to be discussed below, the only Medicare beneficiaries required to change their healthcare arrangements because of changes in their health insurance are those who choose to do so, by voluntarily electing to enroll in managed care plans, changing plans, or returning from managed care into fee-for-service. The
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rhetoric of "consumer choice" or "patient choice" dominates much of the contemporary health policy debate, but most Americans who get their health insurance through employment have very little choice about their healthcare plans. In 1997, 57% of privately insured individuals had no choice of plans. When the dominant model of health insurance was a pure indemnity system, it made little difference for most consumers, since they could get their medical care from any physician or hospital willing to see them; but almost all private insurance is now "managed" at least to the extent of limiting the number of providers for whom insurance payment is available. Medicare beneficiaries are almost all among the shrinking minority of Americans who really do have a choice in their health insurance arrangements. In the fall of 1998, when a number of HMOs announced that they were withdrawing from Medicare participation as a result of changes in payment and regulations created by the Balanced Budget Act of 1997, more than 400,000 Medicare beneficiaries were involuntarily terminated from their plans, and had to make other arrangements, although almost all of them had the option of enrolling in another Medicare HMO in addition to returning to fee-for-service Medicare. An enormous hullabaloo resulted, complete with congressional hearings and reams of newspaper stories. Yet this experience affecting fewer than 2% of Medicare beneficiaries got so much attention precisely because it was so unusual - in Medicare - although it is so common in private insurance that it hardly ever receives any public attention at all. The gradual disappearance of indemnity-style insurance in the private sector has posed an additional problem for many American families. In this most geographically-mobile of societies, indemnity insurance plans were largely indifferent to the site at which service was rendered; medical care away from home, at least in the United States, was generally covered to precisely the same extent as medical care in one's hometown. The same generally does not apply to limited or closed-network plans. Every family with a kid in college has had at least one experience with this issue, as have many people who must travel extensively for professional reasons. From the provider's perspective, "foreign" insurers are always a headache, and frequently a source of non-payment. Fee-for-service Medicare, of course, is completely portable within the United States. Indeed, one of the reasons for the relatively smaller penetration of managed care enrollment in the Medicare population, compared to the privately-insured, is precisely the issue of out-of-area coverage: as more and more retirees spend parts of the year away from their primary residences, the inability of the managed care industry to develop effective reciprocity or out-of-area coverage arrangements, for a population always vulnerable to needing services, is a major deterrent to managed care enrollment. Medicare as Payer Even though they are the ones responsible for printing it (or more commonly, in the contemporary world, creating the relevant electronic blips), the government of the United States, and the people who make policy for it, have almost no conception of cash. The budgeting process for the government of the United States of America pretty
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systematically ignores the time value of money, and the expenditure control mechanisms in the Executive Branch concentrate on funds that are "obligated" rather than those that are actually expended. In general, there is a lot to be said for the virtues of accrual accounting, but health care remains largely a cash business, for the simple reason that most of the costs incurred by providers of health care, from the largest hospitals to the smallest physician offices, are for compensation to individuals who expect to be paid in cash or its paper or electronic equivalents every week or two. Because of insurance, healthcare providers are rarely paid in full at the time they deliver a service (and incur the associated personnel and other costs); generally, the provision of service only creates the opportunity for the provider to generate a bill. Cash flow is thus a constant preoccupation of all but the most affluent or incompetent healthcare providers. Although it receives almost no attention within the Washington policy community, the fact that Medicare pays most of its bills quickly and completely is indispensably important to most hospitals and home health agencies as well as many larger physician practices, equipment suppliers, and others (although recent changes in the administration of the Medicare home care benefit have caused traumatic cash flow problems for many home care agencies). By law, Medicare is required to pay "clean" claims within 27 days when they are submitted on paper, and within 14 days when they are submitted electronically, as the overwhelming proportion of Medicare claims now are. "Clean" claims are those that are technically accurate, and that are not pulled out of the process for manual medical or program integrity review, and indeed it is incontrovertible that, until recently, Medicare was paying too high a proportion of claims quickly and automatically, at least from the viewpoint of optimal program administration and prevention and detection of fraud or abusive practices. As in home health, recent efforts to tighten up on the Medicarepayment process have reduced the rapidity of Medicare cash flow for many providers. But even slowed down as much as it has, Medicare still pays faster and more completely than most private insurers. Not unrelatedly, it also pioneered the implementation of electronic billing and remittance systems, thus not only facilitating cash flow but also reducing paperwork and administrative expenses. Private insurers, including private managed care firms, do understand the time value of money; indeed, that is how they make their living. In the not-so-distant past, insurers could be reasonably confident that they would make money if their total claims experience was no greater than their total premium revenue, so long as premiums were paid sufficiently far in advance so they could optimize the float. When the major customers of private insurers, the larger employers, caught on, they discovered the virtues of self-insurance, which allowed them to keep the float for themselves. By the late 1970s, when inflation and interest rates were high, they began more systematic efforts to hold onto their cash. When combined with the advantages of operating plans under federal ERISA law rather than state insurance regulation - advantages that have existed since ERISA was enacted in 1972 but were not fully ratified by the courts or fully recognized by employers until much more recently - the power of cash flow has led almost every employer of more than a few hundred people in the United States to self-insure for those
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health benefits not delivered by capitated plans, employing insurance firms only as thirdparty administrators to manage provider networks and process claims. In turn, one of the reasons so many traditional health insurers have sought to get out of the indemnity business and into managed care - or out of health care altogether - is that, in a world in which the employers hold on to their cash, the profitability for insurers has dried up. But if the increasing sophistication of large purchasers and third party administrators about cash flow has had an adverse effect on the providers of service, the impact pales in comparison to the payment practices of many HMOs. For a whole variety of reasons, HMOs in many markets are simply not paying their bills from providers on a timely basis, or at all. The essence of HMO administration, in its most common contemporary form, is the interposition of a review process between the submission of a provider claim and its payment. In theory, and sometimes in practice, this review provides the HMO an opportunity to discourage unnecessary or marginally necessary services, alter the practice styles of wasteful or inefficient physicians, and even improve the quality of care. In practice, this delay often permits HMOs that are not terribly well-managed - or that are trying to inflate quarterly financial results, or that are simply short on cash - to defer payments of valid claims for many months while they are bounced back and forth through a series of real or fictitious internal processes. More basically, HMOs are put "at risk" by contracting to provide medical services to an enrolled population in exchange for a fixed monthly premium, a risk that is often exacerbated by competitive pressures in the HMO market to keep premiums low. But HMOs have managed to transfer a sizable proportion of that risk to the providers from which they purchase services both through such formal mechanisms as partial payment withholds or "shared risk" pools or, not infrequently, by simply defaulting on their payment obligations altogether. In New Jersey alone - not a state characterized by an especially high penetration of managed care plans - in just the last year and a half providers have had to settle for pennies on the dollar of money owed to them when two separate HMOs became insolvent, went into bankruptcy, or otherwise walked away from their payment obligations. In a competitive private insurance market, some competitors are bound to fail, and without significantly stronger protections than now exist those failures will continue to have an adverse emotional and often practical effect on their enrollees and a calamitous financial effect on the providers of service with whom the HMO did business. Not only does Medicare pay more quickly than just about any other third-party, but to certain classes of providers it pays more generously as well. As the largest single health insurance program in the United States, and the most important governmental health care program, Medicare can not simply get away with the cheapest possible price. It also has an obligation to contribute to the infrastructure of the health care system itself. Thus, Medicare pays more than it otherwise might to teaching hospitals, which helps subsidize the educational, scientific, and intellectual infrastructure that supports the entire health care system for all Americans, but in proportional terms its subsidies to small rural hospitals are even greater. Without those subsidies, many such facilities could not Â
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survive, which would leave their communities - including not only the Medicare beneficiaries who reside in them, of course, but all their residents without nearby hospital services. Similar, if less generous, subsidies are also provided to hospitals, both urban and rural, that treat relatively large numbers of low-income people; primary care outpatient clinics in rural areas; and even independent health practitioners in rural communities. However solid the public policy rationale may be, there is no question that certain political forces have contributed to the development and maintenance of some of these subsidies in the Medicare system. But that is just to say that, as a public program, Medicare does not, and probably should not, behave like a neoclassical economic firm. Consider the alternative: a growing body of evidence that, as the private health insurance market has become more competitive in the last decade or so, the supply of "public goods" like charity care for the poor or clinical research in academic medical centers has been reduced. In general, several studies have shown, the higher the penetration of private managed care plans in a given market, the lower the amount of research and charity. However much Medicare actually pays to providers, the formulas it employs to determine how much it will actually pay for particular services are detailed, complex, and arcane. They are understood in full by only a small number of cognoscent within the Health Care Financing Administration and the provider and consulting community, and widely derided for their length, mathematical complexity, and obscurity. Yet they are literally indispensable. In this kind of society, a public program engaged in the expenditure of billions of taxpayers' dollars must shape its spending decisions to reflect a myriad of interests and concerns, and must do so in a way that is intellectually defensible, publicly accessible, and reproducible. More relevantly, for the purposes at hand, Medicare's payment formulas literally are the state of the art, not only in terms of theirsophistication, but because most other payers rely heavily on them. In most of the United States, for example, the much maligned Resource-Based Relative Value Scale on which Medicare sets its physician fee schedule is employed, in some variation or another, by most private insurers to set or evaluate their physician payments. In the New York market, along with many others, HMOs negotiating with physicians or their representatives set their fees as a percentage of the Medicare fee schedule. Advocates for replacing the current Medicare program with one that would resemble the Federal Employees Health Benefits Program frequently advance their arguments by pointing out how much smaller the FEHBP administrative structure is than Medicare, thereby ignoring, among many other things, the fact that most of the private insurance plans participating in FEHBP use Medicare payment methodologies for some if not all of their provider payments, and even those that don't use Medicare rates are legally permitted to impose them if they are unable to reach alternative contractual agreements with providers (an authority eagerly sought by FEHBP itself). Medicare and the Public Good As a public program, Medicare makes available to essentially anyone a wealth of data Â
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about the health care system and how it is used by its beneficiaries, while at the same time maintaining an unsurpassed record of protecting the confidentiality of individual beneficiaries (an accomplishment made at least somewhat easier, no doubt, by the nature of the criminal penalties in the Federal Privacy Act for unauthorized dissemination of beneficiary-specific data). Again, this was not such a big deal a decade or so ago, when the Health Care Financing Administration made little effort to make its data publicly accessible, and when there were plenty of alternative sources. But changes in the private health care system, especially in combination with continued stringency in government budgets, have led to the drying up of many other data sources. Public data repositories in communities throughout the country have gone out of business as health insurers and providers increasingly treat information about enrollees, utilization, payment, and revenues as proprietary competitive information. But any individual anywhere in the world who wants some basic information about providers of health services, expenditures (by all payers), or patterns of utilization by Medicare beneficiaries need only to go to the HCFA web site. Researchers or others who want more detailed data on facility costs and revenues, healthcare utilization, or the relationship between beneficiary characteristics, utilization, costs, and outcomes must go through a slightly longer, more complex, and more expensive process to get the data, but they can get it. Information is also, in many ways, a public good, one which becomes particularly important in an informational society in the information age. And while many apologists for private insurers and health plans claim to support requirements that they make much more information about health care and the health system available to the public, the fact is that those insurers and plans are not doing so, even when required by law. Data derived from the Medicare program itself is only one of the sources from which it has become increasingly clear over the last several years that Medicare works, perhaps surprisingly well, on the most basic and important dimension of its performance as well. Medicare beneficiaries are substantially healthier than they used to be, and they are getting more healthy all the time. Their life expectancy has increased and will continue to; rates of disability have fallen dramatically; diseases that used to literally or figuratively destroy the lives of older people can now often be successfully treated, even cured. Of course, not all of the improvements in the health of older Americans can be fairly attributed to Medicare. Improvements in medical practice, socioeconomic and behavioral changes, and perhaps most importantly scientific progress undoubtedly deserve the lion's share of the credit. But the portion of that improvement that can be accurately credited to Medicare is surprisingly high. Manton, et al found, for example, that while life expectancy for most Americans still trails that of their counterparts in other Western nations, for people over the age 65 the United States does pretty well. And it does even better for people over 80. And much of that difference, Manton argues, is due to the availability of Medicare, and the continued willingness of Medicare to pay for technologically intensive services (such as joint replacements or cardiac surgery) for people in their late 70s and 80s.
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It is perhaps no wonder, then, that the overwhelming proportion of Medicare beneficiaries report themselves moderately to highly satisfied with their health insurance. For the purposes at hand, it is especially worthwhile to note that Medicare beneficiaries are about 50% more likely to report themselves satisfied with their health insurance arrangements than people with private coverage - even though the insurance benefits in most private plans are now substantially more generous than Medicare's. In other words, Medicare works reasonably well in the opinion of the most important judges - its beneficiaries. In their positive feelings towards Medicare, beneficiaries are not, in fact, very different from younger Americans, who continue to overwhelmingly support the program, and to rank it among the most important things that government does in this country. In a democratic society, that is not an unimportant consideration. There are many things wrong with Medicare as it is currently configured and operated. Most basically, it covers a diminishing proportion of the healthcare costs of its beneficiaries, due to an outdated structure of copayments and deductibles, the absence of any ceiling on individuals' out-of-pocket liabilities, and most especially, under current circumstances, the absence of any coverage for outpatient prescription drugs. The reliance on payroll taxes to support a large share of Medicare's expenditures clouds its financial future in a world in which non-wage income and healthcare costs generally grow faster than wages. And the political intensity with which Congress and the White House seek to micromanage Medicare operations make it difficult for program managers to effectively deploy or employ modern data processing, purchasing, or medical monitoring techniques. But in the debate about Medicare's future, it is important to be reminded of what works and what is worth saving as well as what is wrong. On a number of important dimensions, it is certainly far from clear that any of the real-world alternatives could do any better. And in the general context of contemporary American health policy, undertaking major changes to one of the few things that is working seems a rather backwards way to proceed. Endnotes 1
Supported by The Commonwealth Fund, a New York City-based private independent foundation. The views presented here are those of the author and not necessarily those of The Commonwealth Fund, its directors, officers or staff. Reprinted from New Jersey Medicine, March 2000 (Lawrenceville NJ: Medical Society of New Jersey). Š 2000 Medical Society of New Jersey. Used with permissions. Bruce Vladeck, Ph.D. is currently the Director of the Institute for Medicare Practice. He is also Senior Vice President for Policy of Mount Sinai NYU Health as well as Professor of Health Policy and Geriatrics at the Mount Sinai School of Medicine. From 1993 through September 1997, Dr. Vladeck was the Administrator of the Health Care Financing Administration (HCFA) of the U.S. Department of Health and Human Services.
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The Medicare Menace Harry Cain, PhD It is hard to imagine a stronger defense of the Medicare program than that offered by Bruce Vladeck in his paper, "Medicare Works." Vladeck brings to the subject an extensive knowledge of and experience with the program, an articulate writing ability, and the passion of a true believer. He is a "publichizer" of the first order [1]. Moreover, one has to agree with Vladeck's view that Medicare has been of huge benefit to America's senior citizens, and to their sons and daughters. For millions of them it has been literally a lifesaver, as well as major financial relief. Medicare has also been, especially in its first two decades, a boon to American hospitals and physicians, helping them on to great prosperity. One must also agree that America's private market in health care today is struggling; healthcare costs have begun to rise again faster than the CPI; there are mergers, acquisitions, company failures, and political outcries over "managed care" everywhere; a third of the 160 million Americans covered by employer-based plans have no choice of coverage type; 42 million are not covered by insurance at all. There certainly is "friction." Most of the industry is trying to acquire the discipline of a market - for the first time - and it is neither a pretty sight nor a heartwarming experience [2]. Nonetheless, in my view, Medicare as currently operating is a menace to the future of health care in this country. My basic argument is two-fold: • Only a market system (a regulated market system) based on price competition, can possibly foster enough innovation, efficiency, and responsiveness to keep our enormously complex healthcare industry evolving to the point where high quality service is available and reasonably affordable for all [3]. • While a very strong regulatory role for the government is required to set the framework for the healthcare market, and to assure that the market serves everyone, the current Medicare program is not only going in the wrong direction, it is harmful to the entire healthcare industry. Someday soon it will become injurious to the U.S. economy. To put it bluntly, Medicare now promotes price distortions throughout the industry, degradations of healthcare service, cheating, bounty hunting, abuses of governmental power, physician despair, mistrust of government, public ignorance, and consumer dependence. Unduly harsh and intemperate words? I would have thought so, a few years ago. Now, you be the judge. And bear in mind that, contrary to Vladeck's assertion, there are better ways to do this job. The example he dismisses, the Federal Employees Health Benefits Program (FEHBP), serves millions of Americans who are also dependent on the Federal government for their healthcare benefits, and has outperformed Medicare every which way. The two programs are designed very differently, and none of the criticisms of Medicare listed below can also be made of the FEHBP. But that is another subject, which has been addressed elsewhere [4]. Here the focus is on what is wrong with Medicare - not
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this or that Medicare policy, but the total structure. A Bill Of Particulars Before getting to the central argument, some of the facts that Vladeck cites in Medicare's behalf cry out for more discussion. My favorite five are these: 1. "Medicare pays its bills." It would be more accurate to say that Medicare pays what it decides its bills should be. The size and governmental power of Medicare allow it to act as a monopsonist, and it does so. In its early days Medicare paid fee-forservice charges (for doctor services) and reasonable costs (for hospital services), as did most of the private sector at that time. Not surprisingly, doctors and hospitals began to take advantage of such largesse, and total costs got out of hand. With a long series of regulatory changes, the government dramatically changed its approach. Now it tells the providers how they will calculate their bills to the government, what part the government will pay, and what part others will or will not pay, in enormous detail. 2. The Medicare payment formulas now used by the government, Vladeck admits, are "widely derided for their length, mathematical complexity and obscurity. Yet they are literally indispensable." I agree with that, given the structure of the Medicare program, but I think Vladeck greatly underestimates the harm they cause. For the uninitiated, note that the Medicare rules and regulations make the IRS code look concise and harmless. The Medicare "code" is many times the length of the IRS', and arguably even more complex (as impossible as that sounds). As Vladeck himIself noted, when describing 1997 Medicare amendments in which Congress tried to adjust payment formulas to help both rural areas and urban teaching hospitals, "the result was, in essence, a series of simultaneous equations that could not be solved [5]". The complexity and obscurity of the Medicare payment rules have become a nightmare for most providers, not because accurate calculations are so difficult, but because mistakes are now routinely defined by government investigators as "noncompliance" subject to civil and criminal penalties for "false claims" (pay treble damages). Many Congressmen are fond of claiming that the major cost problems of Medicare are due to "fraud and abuse" (a truly ignorant claim - and self-serving, for it deflects attention from Congress' role in the Medicare debacle). Therefore, in a serious effort to check the rapid growth of Medicare spending, the government has funded major increases in the investigative agencies. More troublingly, the investigative agencies are now allowed by law to keep part of whatever monetary penalties they extract from their prey, in order to expand their investigative activities. In the West, that is referred to as "bounty-hunting." (And I'm not even getting into the new law that offers bounties to patients for turning in their physicians if any potentially fraudulent activity might be uncovered [6]). Once caught in the "false claims" web (and remember, the rules are so complicated that literally everyone associated with the program is at risk of being snagged) there are Â
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huge incentives to settle with the government out of court, even if one feels totally blameless and innocent: the cost (money and time) and risk (bankrupting fines if the judgment goes against you) are so high that prudence argues against challenging the government investigators in a court case. Under these circumstances, as one might guess, the bounty hunters are having a field day. Providers are having to eat the high costs of hiring the expertise needed to try to assure compliance, and many, especially physicians in smaller practices, are just having nightmares. The level of provider antipathy toward Medicare - what often comes across as genuine hatred, especially in the western part of the country - is now reaching dangerous heights. At some point, I believe, physicians by the droves are going to say, "Enough!" (though perhaps not in the northeast, where abuses of governmental power seem to be better tolerated [7]). The critical point here, I believe, is that these governmental actions are not simply unfortunate aberrations that should be stopped or moderated. They are natural consequences of Medicare's design. "It must follow as the night the day," as Shakespeare might have muttered. 3. Another argument Vladeck offers in defense of Medicare's complicated payment rules is that private sector payers, such as the Blue Cross Plans, now use them, indeed "rely heavily on them." I would argue that private payers who did not use those rules would be stupid. If the biggest payer in the world sets out payment rules for all the providers, rules designed to minimize the bill as much as possible, and then requires all the providers to comply, by law, or go to jail, why wouldn't the smaller payers take advantage of that? They would, and they do. That does not make it good for the healthcare economy. 4. Under "Medicare and the Public Good" Vladeck argues that one of Medicare's benefits is the tremendous amount of otherwise unavailable information and data it provides to researchers and others trying to understand the industry. No argument there, but do we need a huge, government-run health insurance program to do that? Somehow the Securities and Exchange Commission makes available tons of information on all publicly traded companies, information on which millions of Americans make their investment decisions. 5. Vladeck asserts, "Medicare beneficiaries, unlike a growing proportion of other Americans, are highly satisfied with their health insurance." Well, that depends on how you phrase the question. Do they understand the governmental power behind Medicare, and how it works, and what rules their doctors have to live with? No (and to this point, who cares?) Do they like being able to go to any doctor they like (good, bad or indifferent)? Absolutely. Do they like not having prescription drug coverage? No. Do they like not having an out-of-pocket cap on catastrophic expenses? No. Does Medicare+Choice look good to them? Not any more. Do they like to have to buy supplemental insurance to fill in gaps in Medicare, as two thirds of them do? No. Would they prefer having Medicare to nothing at all? Be serious. What's Really Wrong with Medicare? The real menace of Medicare lies in the combination of the size of Medicare, backed by Â
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the power of government, and its design, with the decision-making structure that flows therefrom. The size and power of Medicare are such as to easily distort the healthcare marketplace, the consequences of which will ultimately be harmful to everyone. By size and power I refer particularly to: • The population covered. While numerically the Medicare population is less than 15% of the U.S. population, its need for and use of health care is nearly equal to all the rest of the population combined; soon, in this regard, Medicare beneficiaries will outweigh everybody else combined. • The providers covered. At least 90% of the providers (hospitals, doctors, home health agencies, etc.) have essentially no option. They must participate or starve (or leave the industry). Dollars spent. In any and every community, Medicare is many times larger than the next largest buyer. The annual aggregate Medicare expenditure now exceeds a quarter of a trillion dollars. • Force of law. For everyone touched by the enormous flow of Medicare dollars, this is not a voluntary business; "You will obey our rules, or pay a large fine, or go to jail. Your choice." Medicare's design is to guarantee to all eligible beneficiaries a set of defined benefits, and then to vest in government all the risk, and thus all the decisions, for honoring that guarantee. Medicare's basic programmatic decisions are made in Congress. The scope of Congressional decision-making is not confined to basic policy direction, as the 110,000 pages of Medicare law and regulation awesomely demonstrate. Here is a 5% sample of the 123 Medicare amendments enacted by Congress last month (December 2000). These are the section headings of 6 of the 123 new sections, with none of the text (the year 2000 was not an unusually active year for Congressional tinkering with Medicare). Section 103. Coverage of Screening Colonoscopy for Average Risk Individuals Section 111. Acceleration of Reduction of Beneficiary Copayment for Hospital Outpatient Services Section 201. Clarification of No Beneficiary Cost-Sharing for Clinical Diagnostic Laboratory Tests Furnished by Critical Access Hospitals Section 212. Option to Base Eligibility for Medicare Dependent, Small Rural Hospital Program on Discharge During 2 of the 3 Most Recent Audited Cost Reporting Periods Section 502. Restoration of Full Home Health Market Basket Update for Home Health Services for Fiscal Year 2001 Section 606. Permitting Premium Reductions as Additional Benefits under Medicare+Choice Plans [8].
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The new laws under those sample headings - which no doubt will require further elaboration in subsequent regulations - should convey a flavor of the kind and level of the annual Congressional decisions on this subject. Many Medicare defenders decry the level of micro-management that Congress exerts, but if Congress didn't do it, HCFA would. So the basic problem would remain. Beyond the huge volume and incredible minutiae of law and regulation, what are the consequences of using a congressional decision-making process (or any central, national, political, micro-management process)? 3. Many key Medicare policies languish decades behind the "state of the art," or the current best thinking in the industry. For example, when Medicare began, in the 1960s, most private health insurance (on which Medicare was modeled) did not cover outpatient prescription drugs. Within five years the private sector had corrected that and had begun routinely to cover them. Medicare still doesn't cover them, nearly 40 years later. The same is true with catastrophic protection. The government could not figure out how to do it, balancing all the political forces, so it didn't happen. 4. The decisions made by Congress are necessarily political. Congressmen must be attuned to the relative "clout" of the various interests involved. And every interest group in a trillion-dollar industry is now involved. In recent years, Medicare consumer groups have been more powerful than provider groups, so adjustments in the benefits and costs of Medicare have tried to protect consumers more than providers, though sizeable campaign contributions from provider interests have kept them rather protected as well. (An example on the "consumer" side: various Medicare rules now not only reduce what Medicare pays for services, and require providers to file all the claims, but also prohibit beneficiaries from paying more than Medicare allows (physicians are prohibited from accepting more payment) to provide more or different services. The result, according to the testimony of many physicians, is that the amount and quality of service are eroding. Maybe so, say the Medicare defenders, but at least everybody should be getting the same decreasing level of service. Politics and equity triumph over economics and service. 5. Those decisions also often fail to accomplish even what was intended. For example, Congress adopted new rules in 1997 with the aim of slowing down the rate of growth of spending for home health services. Oops. Missed the mark by 400%. Home health spending in 1997 was $17.5 billion, but only $9.7 billion two years later. This "slowdown" created enormous problems both for beneficiaries and for home health agencies, many of which were forced out of business. (When Medicare defenders proudly proclaim how well Medicare has been holding down its costs, remember how it is done.) Most people, of course, do not know how Medicare is designed. For those who do know, especially in the Washington-based health policy community, Medicare has been in place so long, and its benefits to the retired and disabled so widely admired, that its design is taken for granted. Moreover, most everyone who knows enough to really criticize the program is also, to some degree, dependent on it, as a participating provider, Â
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a contractor, a supplier, or just a believer. Biting the hand that feeds is not good form. Complaints are heard about specific policies, but not about the total structure. So let us try to illuminate the problem from another direction. Transpose the Design to Another Venue Social Security, our national income security program for retirees, has massive and welldeserved public support in this country. But most of us recognize that the decreasing ratio of workers to retirees, combined with the always-increasing cost of living, pose significant long-term financial challenges to the Social Security program. There are many arguments as to how we should handle those challenges - but thank heaven they are all focused on only a fiscal question: how can government continue to secure enough money to fund at least minimally adequate retirement income for Social Security beneficiaries? That is a very difficult question, but imagine, if you can, how much more difficult the question would be if Social Security were designed as Medicare is! If that were the case, then instead of sending the eligible retirees their monthly checks, Social Security would simply issue each retiree a card. The card would guarantee to the retiree what a reasonable pension should buy, if needed. Presumably, the card would guarantee, at a minimum, adequate housing, clothing, transportation and food. Of course, to assure equity and prevent abuse, each of those guarantees would have to be defined very carefully. Food, for example, would have to include all the ingredients of adequate nutrition, and could not neglect any significant component of U.S. agriculture. At the subcategory level, "meat", for example, would have to explicitly include chicken, pork, beef, buffalo, rabbit, and ostrich. A clear decision would have to be made regarding every type of animal. One could foresee many congressional arguments over whether to include horses, dogs and rats. What to include in the guarantee, based on experience, and new scientific knowledge, and a growing army of interest groups, would have to be reconsidered by every Congress every year. (Collectively, all of the interests impinging on that question would be known as the "Social Security-Industrial Complex").Unfortunately, that would only be the beginning. Government would soon discover that it could not afford to allow the prices of those guaranteed items to fluctuate with the market. Price controls would have to be established. But even with thoughtful price controls, dislocations would arise. To stick with the food example, one can envision that certain restaurants in rural areas, and in downtown urban areas, which have unusually high percentages of low-income patrons who are not yet on social security, would need special treatment to assure those restaurants' continued economic viability. For such "Disproportionate Share Restaurants" (DSRs) Congress would devise some sophisticated solutions, subject to annual modification. Government would further discover serious inconsistencies between what is and what should be, given the program's objectives. For example, most snack foods are bad for retirees' nutrition, but they taste good and are cheap. Lean beef, on the other hand, is Â
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quite nutritious, not so popular, and expensive. Congress would probably be persuaded to adjust the prices to make lean beef cheaper and snack food more expensive. Congress would then have to prohibit lean beef vendors from adding a surcharge, and prohibit snack food vendors from offering discounts, otherwise the objectives of congressional policy could be thwarted. Congress' ability to do those things, of course, would depend on the power of the snack food and lean meat associations headquartered in Washington. Now imagine making hundreds of thousands of decisions like that, with detailed rules to back them up, rules that are law. Eventually, of course, government would conclude that it needs a large corps of investigators to assure that the laws are being obeyed. In this imagined Social Security situation there are so many opportunities for wrongdoing, so many potential lawbreakers, that the investigators need help. Why not offer rewards to any and every citizen who can detect and report possible violations to the authorities? Hell of an idea! The Social Security Administration could even make a grant to the AARP to set up programs to train the elderly on how to spot and report deviations (such as their grocer charging more for broccoli than the amount allowed). Ultimately, the reader might agree, the imaginary scheme described above would cause the economy to fail, as similar schemes caused all the economies in Eastern Europe to fail. But until that time, if one surveyed the beneficiaries of the imagined Social Security program, one would probably find them fairly satisfied. That imaginary, nightmarish approach to Social Security is the actual design of Medicare. Conclusion Although this critique of Medicare comes from a pro-market perspective, it does not disparage the basic concept of Medicare. The idea of a governmentally guaranteed comprehensive health insurance program is a good one; it is unquestionably needed; it should remain one of Government's highest priorities, and it is not inherently antithetical to a market driven system. It is the design and the reach of the program that make all the difference [9]. If the design is focused on setting a floor, of assuring some minimum purchasing power for all, then the dynamics of a market can still thrive. But that will always mean that there will be market "frictions," and some people will not do nearly as well as others in obtaining all the medical services they want and need. That is the cost of a market. Medicare as currently designed has evolved to the point of trying to control as much of the industry as possible, both to constrain government spending and to assure that market-type inequalities do not arise. That is an understandable but not a sustainable road to travel, and we are paying a high price for trying it. If, as Vladeck asserts, Medicare in its current form is "...now one of our last links to the rest of the civilized world," then let us let the rest of the civilized world slip away.
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Harry Cain, Ph.D. retired as Executive Vice President, Blue Cross and Blue Shield Association, Chicago, effective Jan 1, 1999, and is a part-time faculty member at the College of William and Mary Graduate School of Business.
Endnotes 1. H.P.Cain. "Privatizing Medicare: A Battle of Values." Health Affairs (March/April 1997): 181-186. When I tried to contrast the views and values of "privatizers" and "publichizers" in the healthcare industry, Bruce and his support of Medicare were among my role models for the publichizer side of the ledger. I see that his views have not changed. 2. For an excellent portrayal of current market dynamics, especially among physician organizations, cf., James C. Robinson, The Corporate Practice of Medicine, Univ. of CA Press, 1999 3. Space does not allow reiterating the whole rationale for preferring markets over command-and-control regulation. The central point is that price competition not only creates incentives/rewards for innovation, speed, efficiency, and consumer responsiveness, but also achieves coordination of all the parts of complex economies without central control and its attendant, unavoidable erosion of individual liberties. The "high tech" revolutions now underway, I would argue, are magnifying the differences between the private/decentralized and the public/centralized approaches to social and economic progress. 4. H.P.Cain. "Moving Medicare to the FEHBP Model, or How to Make an Elephant Fly." Health Affairs (July/August 1999): 25-39. The essay tries both to demonstrate that FEHBP is the superior model and to acknowledge that Medicare can't get there from here - the political heat of Medicare (and the "Medicare-Industrial Complex") will not now allow it to happen - until enough people realize the long-run cost of Medicare's current design. 5. Bruce C. Vladeck. "The Political Economy of Medicare." Health Affairs (Jan/Feb 1999): 33. 6. Cf., the Medicare Incentive Reward Program for Fraud and Abuse, enacted under the Health Insurance Portability and Accountability Act of 1996. This type of bounty hunting is kindred spirit to the "Qui Tam" laws that reward employees for reporting their employers to the authorities for possible fraudulent activities. The Qui Tam cases I am aware of have ultimately been settled out of court, with huge fines paid by the companies charged. The sums of money, in my opinion, have been bonanzas for the government and for the "reporting parties," and way out of proportion to the alleged abuses perpetrated by the companies in question. Given the incentives pushing all the parties to the transactions, however, those outcomes are not surprising. 7. One should not go overboard with sympathy for the providers. To some large degree, Â
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they are getting what they bargained for. The history of hospitals and doctors demonstrates that they are no fans of a price competitive market. So, in exchange for Medicare's "any willing provider" protections, they have accepted governmental price setting and all that goes with it. 8. Excerpted from the first six Titles (pp. 1-31) of the Statement of Managers for the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000. 9. Parenthetically, trying to tack on to the traditional Medicare design some "market features" does not work, as the Medicare+Choice experience has demonstrated. Examining that experience would require another paper, the conclusion of which would be that the government brought its Medicare mindset to "managed care." Beneficiaries had to be protected from every potential abuse, and HMOs were viewed as just another set of providers that needed to be controlled. Indeed, even more controls were needed for HMOs, for they offered more comprehensive, better integrated care. Thus Medicare needed extensive rules to govern not only HMO prices, benefits, accounting practices, and appeals processes, but also their marketing, enrollment, customer service, executive compensation, quality measurement, etc. - all of which create tremendous opportunities for the "compliance inspectors" to catch wrongdoers. Now, is that a market or what?
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Medicare from the Beneficiaries’ Eyes Marsha Gold, ScD In the context of the United States healthcare system, the Medicare program has many unique features, as Dr. Vladeck points out. His article, however, focuses for the most part on how Medicare has operated historically as a program, rather than on how healthcare coverage looks to Medicare beneficiaries now. In this Commentary, I present basic data on this subject, drawing on results of a recent national survey of Medicare beneficiaries conducted between March-June 2000 with support from the Robert Wood Johnson Foundation (Gold et al 2001).1 I highlight four "facts" about the Medicare population and its insurance options that are important to consider in thinking about whether and what future reform of the Medicare program is warranted. My basic conclusion is that while the debate over restructuring the Medicare program to encourage a fixed contribution with competition among many diverse plans may have merit as a vehicle for reconciling diverse philosophical views about the role and desirable structure of social insurance, the impetus for such a debate stems from politics and philosophy rather than from beneficiaries, most of whom are relatively satisfied with their coverage. What many beneficiaries want is a simpler set of choices that are affordable, provide them with financial protection, and address the limitations in Medicare's current set of benefits. Fact # 1 The Medicare population is less healthy than the general population, with generally low to moderate incomes and diverse healthcare needs. Medicare aims to provide acute care coverage to the elderly and to some individuals under the age of 65 who qualify for the program by virtue of their disability or particular medical needs (Kaiser Family Foundation 2000). Almost thirty-six percent of beneficiaries characterize their health status as fair or poor, including 62 percent of those who are under 65 and disabled. Almost half (48 percent) of all Medicare beneficiaries have had a condition lasting at least three months that has resulted in their seeing a physician more than two times in the past year and has also led to taking medication for at least three months. Fourteen percent have a condition or impairment that creates a need for help with personal care, 30 percent need help with routine activities (for example, household chores, shopping), and 29 percent report having conditions they say seriously interfere with their independence, participation in the community, or quality of life. Medicare beneficiaries vary widely even within particular subgroups. For example, among those 85 and older, 15 percent rate their health status as excellent, while 37 percent say it is only fair or poor (the rest -48 percent- say it is very good or good). These characteristics mean that Medicare beneficiaries use, on average, substantially more healthcare resources than other Americans. As a result, Medicare beneficiaries are likely to be concerned both about their average anticipated healthcare expenses, as well as the risk of unanticipated larger expenses. But most beneficiaries have only moderate incomes: more than a quarter (27 percent) have household incomes of $10,000 or less annually. Seventy-nine percent have incomes of $35,000 or less. Only 10 percent have Â
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incomes of more than $50,000. Low-to-moderate incomes limit beneficiaries' ability to finance healthcare coverage. Thus, payments for healthcare services are likely to have to compete with other basic needs. The characteristics and healthcare needs of the Medicare population are extremely varied. When Medicare beneficiaries are offered multiple coverage options, individual products may draw an unrepresentative mix of beneficiaries. When this biased selection occurs, payments for individual products are likely to be inequitable unless they are adjusted to reflect differences in the anticipated healthcare utilization of those who join. Yet, available techniques for making such adjustments are highly limited and unsatisfactory. Selection is more likely to be "skewed" when the benefits offered in different options vary dramatically, particularly since Medicare beneficiaries often have chronic conditions that mean they can predict to some extent the use of services, especially in the near future. Thus, risk selection is a serious issue, especially in considering proposals to reform Medicare by offering premium support for a more varied set of health coverage options in the private market. Fact # 2 Medicare remains a complex program for beneficiaries to understand. From its beginning in 1965, Medicare has been a complicated system for beneficiaries to understand and to navigate, even though in some ways it is less complex than other forms of coverage, as Dr. Vladeck notes. It is a public program with claims administered by private carriers; it has been divided into two "Parts" (A and B), each covering different types of healthcare providers and relying on different financing; and it has been supplemented by optional private insurance covering some of the medical services that Medicare does not cover. This includes substantial cost sharing on hospital stays (the deductible and annual day limit), coinsurance requirements that effectively equal 20 percent or more of the costs of most services, and the exclusion of coverage for most outpatient drugs. Beyond these exclusions, there is also a focus on acute care, which means that most long-term care services are not covered either. Even before the recent changes in the Balanced Budget Act of 1997 which expanded choices for Medicare beneficiaries, studies showed that beneficiaries had only a poor understanding of the Medicare program (Blendon et al 1995; Hibbard and Jewett 1998; and Murray and Shatto 1998). Although considerable attention has focused on Medicare's exclusions - such as pharmaceutical benefits or certain kinds of nursing home and home health services - only 68 percent of the beneficiaries we surveyed in 2000 knew that Medicare does not pay for all of enrollees' healthcare costs. Seventy-five percent knew beneficiaries could get additional insurance to pay for some things Medicare does not, but only 60 percent had heard of Medicare supplemental insurance (sometimes called Medigap). And only 58 percent of beneficiaries had ever heard of a Medicare HMO, including only 62 percent of those who reside in counties where such options exist. This means that before Medicare beneficiaries can consider their choices, they first need to understand their basic benefits under Medicare.
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Fact # 3 The use and structure of supplemental coverage substantially complicates choice. Although policymakers tend to think of Medicare as a uniform program, the use of supplemental coverage to compensate for Medicare's excluded benefits means that Medicare beneficiaries face different choices depending on their circumstances. Consequently, supplemental coverage options complicate Medicare beneficiaries' choice of coverage. The following are outlines of various forms of supplemental coverage and their characteristic populations. About a third of Medicare beneficiaries now have some form of group coverage through their (or their spouse's) former employer/union based. When they so qualify, individuals often have access to a relatively comprehensive set of benefits that supplement Medicare, often at a reduced cost because the former employer subsidizes all or part of the premium. But individuals seeking to benefit from supplemental insurance are constrained by the health plan options offered by their employer. Beneficiaries need to understand, for example, that if they want these benefits they can only join an HMO offered through their subsidized employer's plan. While they could, in theory, join any Medicare+Choice (M+C) plan offered by Medicare, if they join as an individual they may be forced to forego the supplementary benefits offered by their former employer if that coverage is not set up to integrate with the M+C plan. Most other Medicare beneficiaries basically have a choice between a Medicare HMO, if one is offered where they live, or one of the ten subsidized Medigap options if they qualify. In 2001, 63 percent of beneficiaries reside in counties where a M+C managed care plan choice is offered, down from 72 percent in 1999 (Gold 2000). For the most part, choice of a Medicare HMO exists only in urban areas. The vast majority of Medicare HMO members come from the pool of individuals who don't have access to employersubsidized coverage. These persons are attracted to Medicare HMOs because, historically, they have offered an attractive package of supplementary benefits for no additional cost, or for only a small premium. Beneficiaries, many of whom have low to moderate incomes, have been willing to restrict their choice of provider to gain such benefits because the alternative form of coverage through Medigap is relatively expensive, even for a plan which excludes valued benefits such as prescription drugs. Though there are exceptions, individuals seeking Medigap coverage also may face a health screening. Recently, however, beneficiaries have had to contend with both a reduced number of HMO offerings and less generous packages for those that remain (though they still are a good value compared to Medigap coverage) (Cassidy and Gold 2000). Finally, some beneficiaries may qualify for publicly subsidized coverage. Those with sufficiently low income or assets can qualify for Medicaid. Those who qualify in full are eligible, at no cost, for benefits that not only fill in Medicare's cost sharing but also provide coverage for pharmaceuticals and other benefits (such as long-term care services)
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which Medicare does not cover. Medicare beneficiaries with somewhat higher incomes may qualify for a reduced set of Medicaid benefits designed to pay the Medicare Part B premium and/or certain supplemental charges for physician or hospital services, but not pharmaceuticals and other benefits excluded from Medicare. In addition, those with veteran status may qualify for insurance coverage through health programs operated by the military.
[We apologize that a figure is absent from this text here. We will try to fix this ASAP.] These various circumstances mean that while Medicare may be a relatively straightforward program, the situation of Medicare beneficiaries seeking more comprehensive coverage and less financial risk than Medicare offers is far more complicated. Necessary considerations about supplementary coverage include: where one lives (which influences the Medicare HMO choices available and state Medicaid and other programs offered), one's eligibility for employment-based retirement benefits and the structure of particular plans, one's income and assets (which affects which public programs they qualify for), and one's lifestyle and medical care preferences (which determine how much of a constraint a locally-based network of providers creates). When one seeks information on his choices, he may also need to consult with a variety of organizations, each of which is responsible for a different program. At the time of our survey, 17 percent of all Medicare beneficiaries were covered only by Medicare. Thirty-four percent had coverage through their former employer, their spouse's former employer or a union, 21 percent had Medigap coverage, 14 percent Medicaid coverage, and 6 percent had coverage from the military. Sixteen percent were in a Medicare HMO. Though most (78 percent) Medicare beneficiaries had only one form of coverage, 16 percent had two forms, and three percent had three or more forms. Medicare beneficiaries, therefore, must identify not only what forms of coverage they qualify for but also how eligibility for one form (such as employer coverage or Medicaid) influences their eligibility for others (such as a Medicare HMO). Unfortunately, most education available to beneficiaries provides little insight on this topic. Fact # 4 Most beneficiaries don't think about their choices now and those who do are disproportionately more vulnerable. While the various forms of supplemental insurance introduce complicated choices into Medicare beneficiaries' coverage decisions, more than half of Medicare beneficiaries either never think about their choices for Medicare HMO/supplemental coverage or only think about them at the time when they first become eligible for Medicare. Forty-four percent say they have never thought about their options for insurance coverage. Another 14 percent say that they last thought about it when they first became eligible for Medicare (Figure 1). Presumably, more beneficiaries may be thinking about their choices now that healthcare costs are rising. Moreover, Medicare HMO options are changing, and HCFA Â
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has started to more actively distribute information on choices. Nonetheless, only 15 percent of Medicare beneficiaries reported in early 2000 that they had seriously thought about their options to join a Medicare HMO or to get supplemental coverage between September15, 1999 and spring 2000.
Why aren't more beneficiaries seriously considering choice? The main reason is that most individuals like what they now have (Table 1). This is especially so for individuals who either had employment-based group coverage or who lived in a county with a choice of a M+C plan. Not surprisingly, those without any supplemental coverage are less satisfied, but their inability to afford anything else is a common reason for not considering choice. Fifty-two percent of those who lacked supplemental coverage said they did so either because it was too expensive or because they could not afford it. Individuals lacking supplemental coverage are much more likely to think seriously about their choices, though they may not make a change at least in part because of their limited financial situation. Those lacking supplemental coverage have unique characteristics. Compared to all Medicare beneficiaries, those without supplemental coverage are more likely (1) to qualify for Medicare by virtue of disability (and are under 65), (2) to have incomes under $20,000 per year, (3) to be African-Americans, (4) to have less than a high school education, and (5) to be in fair or poor health. Compared to all Medicare beneficiaries, those lacking supplemental coverage are twice as likely to rate the value of what they get for what they pay as fair or poor (33 percent versus 15 percent). And though only 5 percent of all Medicare beneficiaries rate their experience with current coverage as four or less on a 10-point scale, 14 percent of those without supplemental coverage give such ratings. Thus, those with no supplemental coverage are substantially more dissatisfied with their coverage than other Medicare beneficiaries. Conclusions
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In general, Medicare beneficiaries are a vulnerable population whose characteristics enhance their need for health services, yet limit their ability to afford the costs of such care or to easily consider the choices they face. While Medicare is a uniform program nation-wide, the existence and structure of the Medicare supplemental market complicates the choices that Medicare beneficiaries face and means that they must tailor their consideration to their particular circumstances. Furthermore, rapid changes in offerings, especially in recent years, may warrant reconsideration of certain choices. Yet, historically, few beneficiaries have considered their choices annually, if at all. In addition, those for whom choice is more salient - those lacking coverage from a former employer, for example - may find the consideration of such choice more difficult because their characteristics limit their ability to confront such choices or to afford the available options. Policymakers seeking to reform Medicare would be wise to consider carefully the characteristics of Medicare beneficiaries and their preferences in determining how best to structure the program in the future. It is probably less the number of choices offered by Medicare than their quality, clarity, and affordability that concerns Medicare beneficiaries. Policymakers concerned about addressing these issues basically have two choices: (1) expand benefits in the Medicare program so that the unique (among insurance policies) and confusing need for a complex Medicare supplemental market is either eliminated or better integrated with Medicare choices; or (2) undertake more limited reform so that Medicare beneficiaries with moderate incomes that are high enough to disqualify them from Medicaid have access to more affordable coverage choices. The decision between these two options rests as much upon philosophy about social insurance as on fact. Nonetheless, an argument can be made that in the long-run, the first choice - expanding Medicare benefits - may result in a more stable solution than the second - supplementing Medicare with income-targeted supplemental benefits. While expanding Medicare benefits would not be inexpensive, the fact that most Medicare beneficiaries generally have moderate incomes means that a universal program is more likely to reach those in need. Furthermore, such a strategy is consistent with the current structure of payroll tax financing of Medicare - during their working lives, individuals contribute to the program and unlike Social Security, there is no limit on the income that is subject to this tax. Thus, even better off Medicare beneficiaries can rightly argue that they have earned the right to coverage - coverage that may become increasingly important to them as employer-based retiree benefits become less common. Expansion through the Medicare program also has the benefit of simplifying choice, an attractive feature given the characteristics of Medicare beneficiaries which limit consideration of complex choices. Realistically, political and financial support for expanding Medicare sufficiently to meet the needs of all beneficiaries is unlikely. Therefore, an attractive compromise solution could be (1) expanding Medicare to offer all beneficiaries prescription drugs coverage and better protection on total out-of-pocket spending so that Medicare benefits more closely mirror those in employment-based coverage while also (2) expanding the protections Medicaid now offers moderate and low-income Medicare beneficiaries. These
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reforms would address the most serious current limitations of the Medicare program. Despite Dr. Vladeck's defense of the current Medicare program, these changes are needed to modernize the Medicare program and to assure that Medicare continues to deliver on its commitments to the elderly and disabled who count on the program for health coverage. References Blendon, R. et al. "The Public's View of the Future of Medicare"Journal of the American Medical Association v. 240, no. 20, 1995, pp. 1645-1648. Cassidy, Amanda and Marsha Gold. "Medicare+Choice in 2000: will Employees Spend More and Receive Less?" The Commonwealth Fund, July 2000. Gold, Marsha. "Trend Reflects Fewer Choices." Fast Facts #4: Monitoring Medicare+Choice Project at Mathematica Policy Research, September 2000. Gold, Marsha, Michael Sinclair, Mia Cahill, Natalie Justh, and Jessica Mittler. Medicare Beneficiaries and Health Plan Choice 2000 Washington DC: Mathematica Policy Research, January 2001. Hibbard, Judith and Jacqueline Jewett. "An Assessment of Medicare Beneficiaries' Understanding of the Differences between the Traditional Medicare Program and HMOs." Public Policy Institute 39805, AARP, June 1998. Kaiser Family Foundation. "Faces of Medicare." (#1481) Kaiser Family Foundation 1999. Murray, Lauren and A. Shatto. "Beneficiary Knowledge of the Medicare Program." Health Care Financing Review (v.20, no. 1, 1998): 127-133.
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Concluding Remarks Bruce Vladek, PhD I thank Marsha Gold for her thoughtful and informative comments, and especially for emphasizing the needs of Medicare beneficiaries for greater financial protections than the program now affords. Her suggestions on ways to help meet those needs seem to be very much on point. I also agree with Harry Cain that efforts to control fraud and abuse in Medicare which were developed to address a very real and very malignant problem - have gotten out of hand, especially in their application to individual physician practices. There are ways to address that problem, however, without throwing out the baby with the bath water. My own particular preference would be to change the law to make clear that the False Claims Act does not apply to Medicare claims. That would eliminate the bounty hunters and whistle blowers, and the propensity for regulation by intimidation that some of the law enforcement agencies have demonstrated. On the other hand, I'm not really sure how Cain would propose to solve the other problems he identifies with Medicare - which seem to consist primarily of the fact that it is complicated and subject to detailed Congressional oversight. Welcome to the twentyfirst century! Should we amend the Constitution to limit Congress's prerogatives over 15% of the federal budget? Or simply give the money back to beneficiaries in the form of vouchers - something that we know will not work, and that beneficiaries don't want? Cain, like others, advances the model of the Federal Employees Health Benefits Program as a potential alternative to the existing design of Medicare. Like many advocating such a position, he distorts the facts concerning FEHBP, especially the level of cost increases it has experienced in the last decade and the continuing withdrawal of plans. As Gold notes - and as I noted in my article - there are many things wrong with Medicare that should be fixed. Most importantly, the benefits have to be improved, and coordination with supplemental policies strengthened. But if Cain's alternative is a hypothetical private market of a kind that has never existed and never can exist, I, and most beneficiaries, would prefer to keep what we now have.
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Interview with Nancy-Ann Min DeParle Interview Conducted by David Sclar HHPR: Let's begin with a macro-level question. There's a lot of talk in the world of health policy about a "crisis" in health care. Are we approaching a crisis in long-term health care in particular? NMD: Having worked in and around health care policy for more than a decade, I am very reluctant to use the word crisis because it seems to me that it's overused in health care and in other contexts as well. If demographic and economic and health care trends continue as they have been, which is a big if, then we are facing an extremely challenging period in which it's going to be quite apparent that we've not figured out how to finance long-term care, nor really what the government should be providing or what individuals and families should be expected to bear. We've been really fudging the issue for the last twenty/thirty years through a combination of Medicare and Medicaid for addressing patients' long-term care needs. Those two programs probably shouldn't be bearing the full extent of the load, and we can tell from the demographics of the aging baby boomer population that there are going to be a lot of people who will need and want some sort of assistance. I'd like to think that the health status of those people is going to be better. So maybe it will be later in life that they will need some sort of assistance, maybe what they'll need will be something along the lines of personal care assistance or home health, as opposed to a nursing home, per se. But there are going to be needs, and we haven't figured out how we're going to finance them. Unfortunately, we haven't done a lot to encourage people to think about it themselves, and it's a subject that even the Baby Boomers don't seem to want to talk about. People don't want to think about that period in their lives; it's very hard, even for policy makers. I think those people who specialize in this area feel frustrated because people don't want to face the issue. There is hope on the horizon: there are some bipartisan efforts, President Clinton has had proposals, Senator Kennedy has been very commited to making progress, and I believe President Bush has some proposals to extend some tax credits and to do some other things to encourage people to think about their long-term care needs for when they get older or become disabled. Those kinds of things will help, but I don't think we've fully faced up to the extent of the problem. So while I would not call it a crisis, yes, I think we're facing a major challenge there that we haven't even begun to think about seriously. HHPR: You mentioned that Medicare and Medicaid are currently sharing most of the load. Is there a way to take the load off them in particular or is that goal included in the other legislation you mentioned? NMD: The other legislation is designed to encourage individuals to go ahead and purchase long-term care insurance, for example, so that when they need home health care or a nursing home, they already have insurance for that eventuality. Medicare only covers Â
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nursing home care on an intermittent basis. It doesn't really cover long-term care. Medicaid does cover it, but only for poor people, and the way most elderly get into a nursing home and are covered by Medicaid is by spending down all of their assets. And so the theory behind these legislative efforts is to try to get people to plan in advance so that they've paid for some insurance up front and they don't have to bankrupt themselves and their families before they are eligible for some assistance. And consistent with the principles of insurance, the earlier one begins to purchase a policy, the lower the premiums, the more affordable the whole proposition is. Additionally, the more people who do it, the more affordable it will be for everybody. Because we just don't have that kind of a long-term care insurance market in this country yet, tax incentives are being debated as a way of getting us to that point, and as I said, I think there is some bipartisan agreement on the issue. Right now, what we have is just a system that has arisen where some people who need nursing home care are getting it privately, but it's $50,000 a year if someone really has to be in a nursing home around the clock. Some people pay privately, but a lot of the longterm care costs end up being borne by Medicaid. That isn't really the way that it should be; there should be more advance planning, and it shouldn't necessarily be the state or federal government's responsibility. There are other things that could be done. You could expand benefits under Medicare. Tax credits, I think, are a good starting point. It's a shame that we didn't get it done 20 years ago, because then we'd probably have a more robust market out there. But we need to do it now. Medicare Reform HHPR: There are a lot of legislators talking about Medicare reform. As you know, we have an article in this issue by Dr. Bruce Vladeck, in which he disputes those criticisms and says that Medicare actually works quite well. What are your thoughts on whether or not Medicare "works" or what kind of reform is necessary? NMD: Well, I agree with Bruce in that I think it is always easy to say that programs need reform, but then I think that you need to step back and ask some questions about what it is we are trying to do here and precisely what trade-offs the reform would entail. From the perspective of the beneficiary, what would make this program better? It's clear that beneficiaries need prescription drugs. That's a form of reform that I can agree to, and there's lots of different ways to do that, and there should be a debate about that. It's also clear that the program, while fiscally healthy for the next 20 years or so, will need additional revenues to be solvent in the future. We'll have enough to last through the first wave of the baby boomers' retirement through 2025, but after that, we'll need more money. It's prudent right now to begin thinking about how we would do that. What's the appropriate mix of costs that we should expect beneficiaries to bear? Is the tax structure sustainable? Are there changes we could make to the way we pay providers that would be more cost effective? All those things need to be looked at on a continuous basis. But I have trouble with some of those reforms that have been proposed, because it seems to me that those reforms are really designed more to privatize the program. I simply don't accept that the government's role in this program has been oppressive or negative. Can
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there be improvements? Yes. But I think that in a program of this magnitude that has done so much good for so many people - all you have to do is look at the health and economic statistics for seniors now and before Medicare was enacted to see that it has done a lot of good - the government has an inherent role. And I think turning it over to the private sector in the way that some have suggested would not only be a mistake, but would also end up costing us a lot more. So, the issue is, are there things we can do to make the program more efficient and better for beneficiaries and to make it even more fiscally solvent for the future? Reform that meets those standards would be something I would be in favor of. But all the talk about the program being in a crisis - I don't buy that at all. I think that Medicare is actually as healthy as it has ever been, and we have to be very honest about what we're doing. My recommendation would be that we keep first and foremost in our minds, as we approach any reforms the question of, "How will this affect beneficiaries? Will this really help them? Medicare Prescription Drugs HHPR: You mentioned that the creation of a Medicare prescription drug benefit is on the forefront of the reform agenda. Both of the candidates during the Presidential campaign talked about providing a Medicare prescription drug benefit. Is that a debate you expect to continue into this year? And is there a possibility that the new administration could pass a prescription drug benefit this year? NMD: Well, both candidates did promote prescription drug benefits, but the benefits were quite different. Given the [close] outcome of the election, it isn't clear which benefit people are really for. Maybe that's because this is a difficult question. I'm not sure there is a consensus yet on how to do it, and, in fact, I believe there is not a consensus either in the congress or among the American people. There is a consensus that it is needed. So, yes, I think that means there is going to be a lively debate about it this year. President Bush said that he was going to put together a commission to give him a report within ninety days, so I expect we'll have that report and perhaps even some hearings about it in Congress by this spring. But it still promises to be a very difficult discussion when it comes to actually crafting legislation that can pass the Congress. There are some polarizing issues about, again, to what extent should the government be involved in this, should we just give out vouchers or allow people a certain amount of money to spend toward prescription drugs, or should there be a defined benefit with uniform premiums and co-pays? The Democratic view has been that, like the rest of Medicare, there should be a defined benefit program and prescription drugs should be integrated into the Medicare program. The Republican view has been to have something more removed from the traditional Medicare program. Among the Democrats, there are a lot of concerns about that. So whether or not something can pass this year, I think, is an open question. I guess I would have to say, at this point that I doubt there's enough time to work out that kind of consensus. But I would expect there to be an important debate about it. The Next HCFA Administrator
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HHPR: I have a couple of questions pertaining to the Health Care Financing Administration (HCFA) where you were Administrator from 1997 to 2000. I'm wondering if you have anyone in mind who you think is a likely successor to your post as Administrator. Also, what are the most important skills involved in the job? What challenges is that the next Administrator going to have to face? And do you have any advice for that person? NMD: Well, I haven't thought about a specific person - there are a number of people who would be very good in the job. The type of person who would enjoy it is someone who is prepared to manage a challenging set of programs: there's Medicare, obviously; there's Medicaid; there's the State Children's Health Insurance Program; and there are a whole set of issues related to hospital standards, nursing home standards, and insurance markets. It's a very rich mix of health policy issues. It's a unique job in the government in that most jobs are either pure policy or operations. Generally, agencies are either making payments or they're thinking about policy and how legislation should be worded. There's usually more of a clear division. The HCFA Administrator really does both. You have to be interested in managing the place and making sure the trains run on time. And, for us, the trains running on time means Medicare payments get paid because when you're responsible for essentially 1/3 of the health care economy, if those dollars don't flow, it has a paralyzing effect. But, at the same time, in addition to all the operational aspects of the job, there's a lot of policy involved, there's a lot of issues about what's best for beneficiaries. How do you best educate beneficiaries about Medicare? How do you make sure people get the treatments that they need? If there are things that the law doesn't allow us to provide, then what is the agency's role in trying to promote that, such as trying to promote a prescription drug benefit for our beneficiaries? So there's a unique mix of policy and operations, and the kind of person who would enjoy it would be a person who can shift back and forth between those challenges. Also, a great deal of the job involves working with Congress, so that's I think an important skill, or at least, it's important that the person enjoy being involved in the legislative process. You also have to really be open to building a team in the agency. There are some incredibly smart and hardworking people, some of whom have been there for many years, others of whom are more recent, who are really just looking for leadership. And if the person develops a few focused priorities and asks people to achieve them, I think they'll have a good time because HCFA staff really will work hard to help them get there; that, at least, was my experience. HCFA Reform HHPR: Legislators and interest groups such as AdvaMed, which represents the medical device industry, have urged for the reform of HCFA. They often point to a report by the Lewin Group which came out in October and said that it takes between 5 and 15 years for technologies that have been found safe by the FDA to actually get approved by HCFA for coverage by Medicare. So do you see the reform of HCFA as necessary? And are there some ways to make the coverage process for Medicare smoother? Â
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NMD: Yes, AdvaMed commissioned that report, and I'm sorry I did not get the chance to meet with the analysts who were working on the report, because it seemed to me that they should have the benefit of knowing the most recent developments and thinking within the agency [HCFA] with regard to approving new medical technologies. They did meet with some HCFA staff, but apparently they chose not to use the information that we gave them. So we, in fact, wrote a brief response to their report pointing out that they failed to take into account some of the changes we've made in the last few years to try to more quickly approve new medical technologies that can be beneficial to Medicare beneficiaries. There are two main points that we tried to make in response, that I think were particularly missing, that I think people need to understand about Medicare and it's role in approving new technologies. First of all, the FDA and Medicare have quite different mandates and different roles. The FDA's role is to determine whether a new device or technology is "safe and effective" theirs is sort of a baseline determination of whether it is safe for people to use and does what it's supposed to do. That is a different determination than whether something is legally covered by Medicare. For example, the FDA has determined that many prescription drugs are safe and effective, but, by law, they're not covered on an outpatient basis by Medicare. So there are technologies that are out there that the FDA would say meet their standards, but we are not authorized to cover them. Similarly, there are technologies that the FDA would say are safe and effective, but that our clinical staff and the experts who advise them [the Medicare Coverage Advisory Committee] would say do not meet the Medicare law's standard of being "reasonable and necessary" for the treatment of a disease. Or they may say, "Legally we could cover this, but it is not something that is an appropriate thing for the population that we cover (i.e. people who are disabled and people who are over 65) or it's not as effective as some other things that we already cover." So maybe HCFA will cover it, but we won't pay the amount that the industry wants us to pay. That's where the arguments really get complicated. What the industry often would like is for the FDA to say something's safe and effective and for that to mean that Medicare automatically covers it. The problem is that we're responsible for making sure that the trust fund doesn't run out of money. We're like any other insurance plan; they also don't like it when insurance companies decide not to cover things or pay less than they believe is appopriate. They would like the private insurance market to just take the FDA's determination and say everything's covered. But you can't do that if you're responsible for making sure that people are getting services that are appropriate for them, and that are legally authorized to be covered. So that's part of the issue, and the other issue I think is the payment level. They would like us to pay whatever they want, and the view of most insurance companies, including HCFA is that we want to pay a fair price and an adequate price, but maybe not necessarily the price that the industry would like. So one reason it takes a while sometimes is because HCFA may decide when we're going to cover something, but if you come to us and say, "I have a new technology and it's going to cost $4000," the agency won't necessarily accept that. HCFA looks at the data for where its been used and how
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much people have paid for it - other insurers or other hospitals or whatever - and then makes a decision about what is a fair amount to pay. That's another real bone of contention with the industry. We made a lot of changes in the last two years to make the coverage process much faster and much more open, where now any citizen can petition, (and this is all on our internet site, medicare.gov) for coverage of a new technology or an item, and within 90 days, we will make a decision. If its something that's obvious, then the staff can make the decision, but if its something that is not clear, we've established something called the Medicare Coverage Advisory Committee (MCAC), which has a number of panels covering various categories of items and services that Medicare covers. They look at the critical evidence and peer-reviewed literature and results, and they're experts in their field, such as Barbara McNeill, for example, who's an M.D. and chief of health policy research at Harvard Medical School. Those people are the appropriate ones to be looking at something and recommending whether Medicare should cover it, and if so, if Medicare should pay for every type of utilization or just for certain types. In fact, I think, if anything, we have a process that's better than the private sector. But the industry would like it to be even faster and they'd certainly like us to pay more. What they need to understand is that Medicare's decisions are not the same as the FDA's decisions because there's a different lens through which we need to assess a new product. Secondly, they need to understand that Medicare must make sure that it's making a fair and adequate, but not excssive payment. The PACE Program HHPR: You know, we're publishing an article in this issue of the HHPR about the PACE program. Do you have any knowledge of the program or how successful it has been? It sounds like it's still pretty small at this point, so do you expect it to expand? NMD: It is pretty small. The last time I looked at this was sometime last spring. We've been a little surprised, given the interest in the BBA in expanding the program, that there have not been more sites that have come forward to request the funding. The way it works is on a community basis, so the state works together with a community to identify places where there are groups of frail elderly, people who would otherwise qualify for a nursing home, which means they really are very sick. The point is to keep them out of a nursing home by using an array of services, which are not all traditional Medicare services and not all traditional medical or health services. And the results have been I think pretty good, and some of the sites show that it is a positive thing for beneficiaries. It's not cheap, by any means, but in some cases it does cost less certainly than some kinds of nursing home care. And the beneficiaries, I think most importantly, do like it because they aren't in a nursing home, they're able to stay in their community, and they're also getting a wider array of services. What it takes is the various levels of government working together and then coming to HCFA. The BBA made it a lot easier to get approved as a case site. What happens is the money from the federal government for Medicare and from the states for Medicaid gets
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pooled together to pay for this set of services. In a sense, Medicare money is being used to pay for services it wouldn't usually pay for, but the idea is that the Medicare program also saves money because PACE enrollees are people who are most likely to be hospitalized and most likely to be using other Medicare services. So, yes, I think the program has worked well, and I would like to see it expanded even more. But it's one of those things that requires a lot of coordination and a lot of community commitment. In the places where that has been present, and the one I'm thinking of is On Lok, a site in San Francisco, in those places it has worked very well and there's been a community infrastructure and a real commitment to it. So, I don't necessarily see this as something that's gonna wind up in every community around the country, but it's certainly something that's been beneficial in the places where it has developed. Nursing Home Quality HHPR: Great. Well, we also have an article in this issue about the quality of nursing home care. Can you say a few words about nursing home quality? NMD: I think there's good news and bad news. Since the law that was enacted in 1987 [Nursing Home Reform Act (NHRA)] and the regulations that the Clinton Administration put out in 1995, there have been improvements made in the quality of nursing home care. We know this from some of the clinical indicators that we have. For instance, there's a dramatically lower utilization of restraints, which was quite a prevalent process before the law was changed. There's a lower incidence of bed sores - the kinds of things that occur when people aren't getting adequate care. Having said that, nutrition in nursing homes is not what it should be, and people's quality of life isn't what it should be. We've made some significant improvements in the last two years through an initiative that we started in the Clinton Administration in the summer of 1998. The General Accounting Office (GAO) has received our initiative and concluded that there have been some significant improvements but more needs to be done and we need a sustained focus. I hope and trust that the Bush Administration will continue this important work to improve the quality of care in our nation's nursing homes. Health Policy Careers in Government HHPR: Before we end, I want to ask you this last question because we have a lot of undergraduate and graduate students who are reading the journal, and I expect they would be interested to hear your thoughts on what it's like to work for the government. You worked both at the Office of Management and Budget (OMB) and later as the Administrator of HCFA, so if someone is interested in health policy and interested in going into the public sector, is there anywhere in particular in the government where you recommend they start out? NMD: Well, I think the White House Office of Management and Budget is a terrific place to start out. Young people there, right out of graduate school, can get an incredible experience and incredible responsibility, and it's also a place where you really have to be
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able to do rigorous analysis and know the numbers and know the facts about whatever program you're responsible for. I've been in situations where I've gone to Capitol Hill to negotiate a Medicare bill and I've taken with me a 25 year-old person who is the expert on Part B of Medicare, and during the meeting, we all - the Speaker of the House and everyone else - will turn to that person and say, "Well, how much would it save if we did x?" or "What would the impact be?" So you get an opportunity very early in your career to become a real expert on a given issue. It's very hard work, but you get a lot of responsibility and a lot of exposure to public policy. I think that's a great place to start. HCFA is also a great place to work. It would be slightly different, though, in that many of the entry-level jobs at HCFA would probably be more concentrated on what I describe as the operational aspects of Medicare as opposed to policy and numbers and analysis. But people at HCFA have the good fortune of coming to work every morning and knowing they have a chance to improve some of the (if not the) most significant social programs our country has ever enacted, programs that have helped hundreds of people to live healthier, more secure lives. You will be very lucky if part of your career includes such engaging and compelling work. Nancy-Ann Min DeParle, JD, MA served as Administrator of the Health Care Financing Administration and Associate Director for Health of the White House Office of Management and Budget in the Clinton Administration. She was a Fellow of Harvard's Institute of Politics in the Fall of 2000, and currently works as a consultant in Washington, D.C.
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Interview with John Rother Conducted by Andrea Magyera HHPR: Could you give us a brief summary of how you see the AARP's role in healthcare policy? AARP: The AARP is a membership organization for people 50 and above, and we do a lot of polling of our membership. Health care consistently ranks at the top of their concerns and among the top issues on which they want the AARP to be an advocate. Their concern is not limited to one specific area - really it covers the entire health care system. We've been active, of course, in Medicare and prescription drugs, but we're also interested in expanding coverage to more uninsured Americans, long-term care, issues of health care safety and quality, a managed care Bill of Rights, quality in nursing homes and other kinds of managed care, and FDA issues as well. I don't think there's another organization that is engaged in as broad a range of health care issues as we are. HHPR: How do you provide this service to your members? Is it through mailings? AARP: We do three things relating to health care that our members seem to value. The first is a piece that I'm in charge of - our advocacy with regards to public policy. We are active not only in Washington, but also in states around the country. Second, we are a principal source of heath care information - not just advocacy information, but information that deals with health care practices, how to find a good doctor, and how to exercise and take care of yourself. We have quite a lot of information going out on a regular basis through our publications or specialized forms of communication to our members. Finally, we also make various kinds of discounts available to our members primarily insurance related. So, if they want to, they can purchase medical or long-term care insurance through the AARP and have the assurance that we are monitoring that very carefully to make sure that it meets the best consumer standards. HHPR: How large is the AARP's membership and what percentage of the nation's over50 population do you represent? AARP: Right now we're a little under 50% of the total over-50 population. That adds up to somewhere between 34 and 35 million members. HHPR: And you're just getting to the start of the Baby Boom generation. AARP: Yes, we think we're going to be over 40 million in just a few more years. Medicare Reform HHPR: Moving on to my second question, we have an article in this issue in which Dr. Bruce Vladeck argues that the Medicare program is working well. I am wondering what is the AARP's stance on Medicare and the benefits that it has given to its seniors. How does it feel about reform plans? Â
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AARP: Medicare has certainly done an amazing job of assuring our seniors that they will have health insurance protection and that they have access to mainstream health care services. But it is falling further and further behind in its ability to provide true economic security. On average, about half of total costs for health care are paid by Medicare and half are outside of Medicare. That's because Medicare doesn't cover prescription drugs or long-term care services. We have a growing problem there, one that Congress will address in part this year through a prescription drug benefit. We also have a program that it is, in some cases, pretty old and inflexible. It's locked into an old encounter-based, feefor-service type system. It doesn't really promote innovations in health care delivery that could be very beneficial. HHPR: What is your stance on Medicare HMOs? AARP: We have felt at the AARP that Medicare HMOs are an important option, particularly for low-income seniors, and they have been very helpful in limiting out-ofpocket costs. They also provide some potentially important benefits in terms of coordinating care within a much broader benefit package than Medicare provides. Not all that potential has been realized, and there are problems with how HMOs have been paid. The result is that we haven't gotten the kind of benefit from HMOs that they are capable of delivering, and the program has not received a fiscal benefit because HMOs have generally enrolled healthier than average people. So, there certainly are some issues to be addressed, but I do think that it is important to keep the option there. Medicare Prescription Drugs HHPR: Moving on to the Medicare prescription drug issue, when would you think a workable policy could pass? What do you think it would include? How generous do you think it would be under this new administration? And what do you think the timeline is for the next 5 years in health policy for the elderly with regards to this huge issue? AARP: Well, the important thing is that both parties at the presidential and congressional levels have made clear commitments to act on Medicare drug coverage, and I don't believe they can go back to the voters in 2002 without having acted. I think there is a real sense that they have to do it this time. But, it may take two years for that to happen. It could go faster, but there are lots of reasons why I think it will probably take the full two years to enact a drug benefit. Most of the drug benefit plans that have already been proposed are not generous at all. They usually involve a 50% co-pay, so they are much less generous than private coverage would typically be for those of us below 65. The key, though, is that the support for this program has to be generous enough to attract most Medicare beneficiaries to enroll. If it's not, and only people with high drug costs enroll, you have adverse selection and then you don't have a sustainable program from a fiscal point of view. We're walking a tightrope here -- it has to be generous enough to attract most beneficiaries, while at the same time, given the expense that's likely, and given Â
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competing demands for the surplus, I'm sure this Administration and Congress are going to have to find ways to address cost containment on an ongoing basis. HHPR: Do you feel that the Bush Administration proposal would be sufficient or do you think modifications need to be made to it? AARP: There's really not a proposal from the Bush Administration; there are campaign statements that are not specific enough to really let you know what they have in mind. In talking with the incoming members of the administration, it's clear to me that this set of campaign statements is going to have to be revised in order to have a program that will work, both from a political level and in terms of fiscal stability over time. In other words, they're going to have to commit more resources to it than they've been prepared to commit so far, and they are going to have to reach across the aisle and stay flexible on program design. Medicare HMO Difficulties HHPR: Let's turn to the subject of Medicare HMOs. I'm from Wisconsin, and I recently interviewed the Vice President of Blue Cross/Blue Shield of Wisconsin. She stated that their plan is facing difficulties and, consequently, will most likely pull out in the 2002 coverage year. Do you think that the problems that are occurring with Medicare HMOs nationwide, with them not being able to sustain their coverage nationwide even if they want to, could be the critical event that results in passing this prescription drug bill? AARP: I think most people see them as separate issues. At the end of the last congress, Congress threw quite a bit of money at the HMOs to try to keep them in the program. We don't know whether or not that will be successful. HHPR: You mean through the floor increases? AARP: That's right. It seems unlikely that throwing more and more money will do it. I personally think that we're going to have to move to a system of payment based on competitive bidding. The HMOs won't like that, but it's a more stable approach over time, and it would allow plans that want to be in the program to stay in the program. The AAPCC has just about run its course, because of the regional differences in payments and because the plans have just not been able to make it work. I think we're at the end of the day for those formula-based payments. Nursing Home Quality HHPR: Maybe we should turn to the nursing home debate and how the AARP feels about what's going on right now with end of life care. More specifically, what issues are related to the quality and availability of care to the elderly? What does the AARP think should be done to improve the current state of nursing home care? AARP: It's ironic, isn't it, that no one wants to be in a nursing home, yet we get feedback from our members that their greatest fear is that they or a loved one will be forced into a Â
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home with substandard care. There's a tremendous anxiety level about the fact that care in nursing homes is often so poor. There's a lot of anger directed to the homes, and unfortunately in many states these homes are getting paid at a level that makes it practically impossible for them to deliver high quality care. Too often, we're just trying to avoid the disaster. Our approach has really been three-pronged. First, we've strengthened oversight and state regulation of nursing home quality directly. Second, we've mounted big campaigns in California and Texas, for example, and we'll be doing that in other states where we see that there's a quality problem as well. Number two, we've been pushing almost across the board in every state for the development of alternatives to nursing homes, particularly at the home and community-based level, which of course are much more popular, and usually only receive a fraction of the funding that nursing homes get. Third, we've been working with the Last Acts Coalition that is funded by the Robert Wood Johnson Foundation on end of life care, and we were very closely associated with the Bill Moyers series that was on TV this year. We've tried to give a much higher level of visibility to some of the questions involved in end of life care, so that people can make some of their own choices on a more informed basis. Hospice, or pain management practices, for example, are areas where we're trying to encourage people to talk to their family members and their doctors before the need arises, but that's obviously a longerterm educational project. End of life care, like much of the rest of health care in this country, is pretty sub-optimal in most areas. HHPR: Specifically with regard to nursing homes, how do you think they could be improved other than by perhaps increasing finances? AARP: Actually, there are some particular things that could be done in terms of how a nursing home is run. We've been very interested, for example, in moving away from the medical model to a more residential kind of model. Assisted living is something that has taken off as an alternative to nursing home care. Or even within the nursing home, allowing or encouraging people to have more of their personal possessions, even pets, to get away from the dehumanizing environment that is there. Ultimately the quality of care in a nursing home is related to staff issues, and the typical nursing home has about 100% staff turnover every year. Until we can pay people more and give people a reason for staying employed at the nursing home, we're not going to be that successful in addressing some of these issues. A lot of the time it comes down to recruiting and retaining a good staff. HHPR: How would you say that the coordination of care could be improved? AARP: Firstly, everyone needs a medical home. They need someone who understands the total picture, and someone who can take some responsibility for coordinating all of the elements and care for complex situations, and that's rare today. Of course, the responsibility often falls on the individual themselves or on a family member to try to put all the pieces together, and that can be an overwhelming job. I think the best situations I
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have seen have involved multi-disciplinary teams -- a social worker, nurse, doctor, and physical therapist working together. We don't have a financial system that encourages that to happen and we need one. It's not going to be easy. End of Life Care HHPR: Turning to the end of life care issue in more depth, do you think that we're approaching a crisis in end of life care, not immediately, but in the near future as people are living longer and as the Baby Boom population is aging? AARP: Actually, I think that there is a change in the culture of medicine that may help a lot in terms of end of life care. I may be too optimistic, but I think that in the past it was, "if we can't cure them, we'll ignore them." What I'm seeing today is much more interest in palliative care and helping people through a good death, or at least a comfortable death, a kind of more humanistic attitude within medicine. If we can work with that and continue to foster it, while it won't solve all the problems, it will make a big difference. HHPR: Is the AARP doing anything to educate its members about end of life care? I'm not sure if you mentioned that as one of your divisions earlier? AARP: Yes, as a matter of fact, if you went back and looked at our magazine, Modern Maturity, in September, we featured the Bill Moyers end of life TV program, and we had a whole series of articles all related to end of life care. For years, it has been an issue people really weren't comfortable talking about. But the reception among our members was very positive. We've made a major effort this year, and I hope that it will lead to other things. HHPR: That's excellent. In closing, I was wondering if you could discuss euthanasia a little bit and the stance of AARP on euthanasia as an end of life care option? AARP: Well, it's end of life, but I'm not sure it's care. I think that it may have been the case a few years ago that certain people just had no humane way to die, and that assisted suicide or euthanasia was the only option -- there were no other options. I'm not sure today that that is the case. Thanks to advances in pain management, it's rare now that someone needs to die a bad death. In other words, the need may be diminishing to even consider euthanasia or assisted suicide. From AARP's point of view, the issue is so divisive, there's no consensus among our membership. It's almost an impossible issue for us to take on. However, it could be that the experience in Oregon and other places is reflective of a broader social change to be more accepting towards euthanasia. I want to restate what I said earlier, that as the medical profession becomes more attentive to and more supportive of hospice and pain management at the end of life, the perceived need for something to go beyond that is going to diminish further. Technology and Health Care
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HHPR: Is there anything else you would like to add? AARP: One thing is that the rate of technology and technological change in health care is going to pick up and pick up substantially. Some of it is going to be pharmaceuticalbased, and some of it is going to be in genetic therapy and new imaging techniques. I really feel that the health care system ten years from now is going to be substantially different than the one we have today, and again after another ten years, it's going to be amazingly different. I conclude that the technology advances alone mean that we'll never have a truly stable health care system because the science changes so fast. The trick is to have a system that's flexible enough to keep up with those changes, because the American public certainly wants this new stuff. The second point is that health care is getting ever more expensive. That's true whether we're talking about private health insurance or whether we're talking about Medicare or Medicaid. The fact is that even in a time when we're cutting taxes, we're going to need to pony up more for health care across the board. I think one of the real challenges in the healthcare system is not about health care at all, but it's about how we keep the economy strong enough so that we can afford to pay for the health care that we're all going to want. That care is clearly going to be more expensive than what we have today. Hopefully it will keep us healthier than we are today, but we're clearly going to have to pay more for that outcome. HHPR: Do you think that these two points could be tackled through public education or similar programs? The public's not always ready to embrace changes. Do you think that the public understands this? AARP: I think that the American public is very pro-technology, and it seems to embrace every new drug or every new therapeutic discovery very quickly, so I'm not too worried about public acceptance. What I'm worried about is the willingness of the public to pay the premiums or pay the taxes. I don't think the health care system can just sit back and say, "That's not our problem." It is their problem, very much so. It's going to mean that we're going to have to pay more attention to waste and unnecessary care, and to make sure that the care that is necessary actually gets delivered. HHPR: I'd like to thank you very much for your time and cooperation. AARP: You're welcome. John Rother is the Director of Legislation and Public Policy for the AARP. He has a BA from Oberlin College and a JD from the University of Pennsylvania.
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Features: Health Care for the Elderly Policy Considerations for Nursing Home Quality Improvement Ralph Leonard, MD Despite an annual cost of nearly 90 billion dollars, nursing homes in the United States continue to attract media attention for providing unacceptably low care for their 1.6 million residents (USHHS 1999). The problem of nursing home quality variation has been recognized for more than 30 years, but as the population ages, the number of people who will depend on that care makes nursing home quality a growing public health concern. In the last five years, several large studies on nursing home quality have been conducted and some of the most innovative legislation has been enacted. The continuing challenge for policymakers in the coming years will be to improve quality while minimizing expenditures. This review describes the major theories, relevant economic concepts, and associated studies on the determinants of nursing home quality. In addition, this paper summarizes recent and proposed cost-containing policy options that may improve quality by using regulations and market forces. Magnitude and Severity of the Problem A study funded by the Health Care Financing Administration (Harrington 1999) recently revealed statistics concerning U.S. national nursing home residents, nursing home facility characteristics and facility deficiencies for the last eight years. In the survey, more than sixty percent of nursing homes were sited for being below the standard of federal regulation (commonly known as a deficiency), of which 9.5 percent were considered to put residents at immediate risk for harm. Table one shows the categories and national percentage averages of deficiencies for the 16,500 nursing homes. There have been some notable improvements in the care provided by nursing homes in the last ten years. These improvements are a result of reductions in the use of physical and chemical restraints (which in turn reduce the frequency and severity of associated side effects from these restraints), an increase in the rate of routine health assessment and a downward trend in the total average percent of deficiencies in nursing homes. These improvements are probably due to the Omnibus Reconciliation Act of 1987 (OBRA), which required Medicaid or Medicare sponsored facilities to use the Resident Assessment Instrument and comply with numerous other provisions intended to improve resident care (Fries 1997, Hash 1998). The downward trend in the average percentage of deficiencies may be a result of both harsher Federal penalties for nursing homes that are deficient (enacted in 1995) and of state imposed penalties. Although there has been a slight improvement in some categories, the current rate of violations for all parameters is still unacceptably high and can lead to suffering, unnecessary hospitalizations and escalating costs which are largely funded by the public.
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Since the boom of the nursing home industry in the early 1960s, research has been conducted to determine the causes of nursing home quality variation (Greene 1981, Holmberg 1968). However, only recently has the issue of staffing shortages been widely accepted as a potential cause of these problems (Linn 1977, Cohen and Spector 1996, Harrington et al 2000).1 Since fewer nurses and nursing aides must provide the same amount of care for the residents of a facility, the volume and intensity of work that nursing assistants do, which is already labor intensive and low-paying, is accentuated. The working conditions and compensation that nursing home staff receive are important for three major reasons. First, employees who are injured may endure morbidity such as back strain, causing some to miss work or to quit. Second, some of those who do continue to work under these conditions admit that the stress of the job impacts their relationship with residents and may even be a risk factor for inflicting abuse (Pillemer 1989, Sheridan 1992). Finally, a high rate of turn-over among nursing assistants (often more than 75% but even up to 400% per year in some regions) thwarts the teaching and internal quality improvement by nurses and senior managers, and may contribute to their own 40% annual turn-over rate (Sheridan 1992, Banaszak-Holl 1996, Singh 1998).
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Nursing home deficiencies are correlated with lower quality of care and staffing shortages, and have a disproportional representation among the for-profit nursing home industry (Linn et al., 1977, Greene 1981, Spector and Takada 1991, Davis 1991, Cohen and Spector 1996, Mukamel 1997, Davis 1998, Spector 1998, DeParle 2000).1 This may seem counter-intuitive, however, since it is the for-profit sector of most U.S. industries that provides superior products, service and efficiency. Thus, debate exists as to whether the poor staffing and building aesthetics common to nursing homes are due to a sub-cost Medicaid reimbursement or an intentional profit maximizing strategy. Because actual industry profits are not easily ascertained, one can only speculate from growth trends, bankruptcies and limited studies. Before 1998 it was generally believed that the nursing home industry was profitable, in large part because of government reimbursement for residents' costs as reported by nursing homes. In just 10 years, the payments from Medicaid to nursing homes increased from $0.5 billion to more than $13.5 billion under this fee-for-service/cost system and "payments for ancillary services [grew] at a pace five times that of service usage" (Pelovitz, 2000). Because of the escalating costs, Medicaid changed the reimbursement to the Prospective Payment System (PPS) as of July 1998, which is analogous to the Diagnosis Related Group (DRG) used by hospitals. A single fee is now paid for a diagnosis rather than individual itemized expenses, which has dramatically reduced expenditures. But, prior to the PPS, system many nursing homes expanded, and with the subsequent change in reimbursement, have since had financial problems which have resulted in their operating under the protection of Chapter 11 bankruptcies while they attempt to solve financial problems (Pelovitz 2000). HCFA asserted that the bankruptcies do not imply poor profit but rather over-expansion during the more profitable years prior to PPS (Pelovitz 2000). Although some nursing homes may seem to have been abandoned by owners, there is evidence that their profits are being maximized as much as possible. For example, until the law preventing nursing home eviction was passed just under a year ago, nursing homes were forcing the discharge or transfer of many of their Medicaid reimbursed residents (Hash 1999). One can speculate that a given nursing home may have intended to increase the proportion of private pay residents from whom they collect a higher daily price than they would from Medicaid residents; for once a resident has expended his assets and become eligible for Medicaid, the profits for the nursing home are reduced. However, while it would seem that a nursing home would not be able to maximize its profit with just Medicaid residents, the existence of facilities which have only Medicaid residents suggests that at least breaking even is possible (Saphir 2000). Yet even if nursing homes are unable to obtain their ideal profit, one would still expect them to increase their quality to maximize their profits. However, such a conclusion assumes a functioning free market; only then can an optimal state for both supplier and consumer be reached. In contrast, the nursing home industry epitomizes the market failure in the greater health care system because it too fails several requirements for the existence of a free market. More specifically, a free market can only function optimally Â
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when it is not obstructed by asymmetric information, barriers to entry, externalities, or related factors.2 Information asymmetry implies that either the consumer or producer has an informational disadvantage about the quality of the proposed product or service, its worth and other options. Nursing homes are perhaps the extreme example within the health care field of the producer's asymmetric information advantage since thirty to forty percent of nursing home residents are cognitively impaired (Harrington 1999). Such impairment may hinder a prospective resident from effectively distinguishing between the quality of facilities when choosing a nursing home. Another information disadvantage that may be contributing to poor care is referred to by economists as the principal-agent problem (Baumol & Blinder 2000). This problem is pervasive throughout many markets and occurs when the direct recipient of the good or service (the principal) gives up decision-making authority to someone else (the agent). In the case of nursing homes, this may apply in two ways. First, since many older prospective nursing home residents are either unwilling or unable to visit facilities before picking one, they give that choice to a family member or social worker who may make a different choice than they would have (Mukamel 1997, Spector 1998). Second, since most residents are not private-pay, they must restrict their selection of nursing homes to those that choose to accept Medicaid. Because few residents change homes of their own volition, these decisions are usually binding until death or discharge, and so may reduce a profit-motivated incentive to "please the customer" as seen in industries that depend on consumers returning by choice (Spector 1998). Thus, both aspects of this principal-agent problem reduce the amount of personal choice among nursing homes available to a resident. One of the major reasons for the lack of competition among nursing homes is the excess demand of Medicaid residents (Vitaliano 1994, Folland 2000). This demand is thought to be due to the presence of entry barriers against other nursing homes based on state-limited supply of beds, as per the Certification of Needs (CON) status that is granted to a few providers (Nyman 1994). CON was originally created to limit Medicaid spending, and was federally mandated up until 1987 after which it was optional but still common. One might still expect some competition among nursing homes that operate at less than full occupancy, but this expectation assumes that nursing homes have economies of scale, i.e. that doubling their services should more than double their revenue. However, most nursing homes do not have economies of scale except in non-service expenditures where chain-operated nursing homes may use their large purchasing power to get bulk discounts on products such as linen and food (Vitaliano 1994). In addition, with the barrier of CON creating excess demand, there would appear to be minimal incentives for a nursing home to invest profits in human resources or building aesthetics. Policy Options The foregoing discussion highlights the importance of industry structure for the provision Â
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of long-term care. Although the current nursing home industry does not have a free market because of information asymmetry to prospective residents and entry barriers to potential competitors, government intervention may restore the market to a 'second best' state, which may improve quality and contain costs.3 All of the above points have been recognized since the 1970s but only in the last five years have policies of this nature been adopted (Ruchlin 1977). Allow prospective residents full knowledge of the facility Reducing information asymmetry is a strategic priority that HCFA is using to improve accountability and quality. Medicaid has attempted to address this issue with Nursing Home Compare, a free web-based report of a nursing home's violation history and comparison to neighboring facilities in a chosen area (Medicaid 2000). There have been over 1.3 million visits to the web site since its creation, and while it is still limited by the completeness of reports, this service along with other advice and on-line services is a major attempt to re-inject the competitive spirit into the nursing home industry (Block 1999). The program might be more helpful if the details and presentation were more thorough and user-friendly (such as the rather expensive on-line facility assessments provided by the company Nursing Home Info), if primary physicians were educated about it and if more families were encouraged to use it in selecting a nursing home (Nursing Home Info 2000, Medicaid 2000). Prospective residents who are unaware of Nursing Home Compare or who do not have a computer or an advocate with Internet access may not be better off with this system. Barrier reductions While information asymmetry may be the greatest reason that the quality of nursing homes is so low, it is largely held that the chronic excess demand resulting from barriers to competitive firms (primarily through the Certificate of Need registration) accounts for much of the low overall nursing home quality. Many states have eliminated this barrier and, coupled with further incentives and regulation if needed, this may increase nursing home competition and quality (Zinn 1998). Minimal standards of care Although the free market may approximate the most efficient means of doing business, the multitude of problems mentioned above may predispose for-profit homes to maximize their profits rather than another parameter, such as quality. Regulation has proven very effective in ensuring minimal standards of care for the assessment and treatment of residents (Hash 1998, Phillips, Fries 1997). With new findings from the HCFA studies, the President and Congress intend to increase minimum staffing requirements (DeParle 2000, Harrington 2000). Developing shorter and equally effective forms might improve staff availability to residents by reducing the time spent consuming paper work that was required under earlier regulations. Regulation enforcement
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Regulation enforcement has been a persistent problem in the nursing home industry. In 1995, HCFA implemented the enforcement component of the 1987 Omnibus Reconciliation Act (this act revamped the manner in which State and Federal governments supervised nursing homes) and reasserted its commitment with increasingly uniform enforcement objectives in 1998. Part of the reason for enforcement problems comes from the fact that many states do not have enough inspectors to evaluate complaints in a timely fashion or to perform the necessary follow-up evaluations. Another reason for ineffective regulation enforcement is that inspections are usually not impromptu and traditionally occur during weekday office hours. HCFA now plans to hold unannounced inspections on weekends and nights when staffing is usually poor and of low quality, so evaluations will reflect a given facility's usual practice (USHHS 1999, HCFA 2000). Stricter penalties for repeat violators Before 1995 many nursing homes were fined for violations but the fines were minimal and did not appear to encourage permanent resolution of the problem. With much stricter penalties (now up to $10,000) and more serious consequences for repeat offenders, there may be improvement in regulation adherence and care (Spector 1991, USHHS 1999). Financial incentives for the NH owners The proposed higher staffing requirements may diminish profits in the industry and may even cause for-profit firms to leave the industry or prevent others from entering. Since the majority of nursing home residents receive Medicaid, it may be necessary to preserve nursing home profits by using government strategies such as tax reductions or increasing the amount of reimbursement paid by Medicaid to nursing homes (HCFA 1999). If the market were to become more competitive, nursing homes might emulate innovations that are very different in design and activity of most nursing homes, but are more similar to hospitals or institutions (Thomas 1999, HCFA 1999). Cost containment Perhaps the best method so far for containing the cost of supporting the nursing home industry has been to reduce its size (Green 1993 et al, Davis 1998). This unexpected relative reduction (i.e., compared to the expected nursing home resident occupancy) has occurred in the last ten years as more of the elderly receive home health care or move into assisted living facilities instead of nursing homes (Bishop 1999). There has also been a growing interest in the private sector for long-term health care insurance which allows one to receive continuous homecare in the event of a condition that would have otherwise necessitated nursing home placement. Long-term care (LTC) insurance has great potential for reducing public funding, but is only bought by 6% of the population (Jones 1999). Some economists suggest a 100% tax deduction for this insurance and greater education of the public on the assets spend-down requirement that
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occurs once admitted to a nursing home, so consumers will more carefully consider LTC insurance (Folland 2000). Summary Substandard nursing home quality has been recognized since the growth of the nursing home industry 35 years ago. With the aging population, the potential burden of suffering and public costs could become enormous if the present system is not improved. It is not yet clear what balance between the power of the free market and government regulations will improve the quality of nursing homes in a cost-containing manner. The success of regulations on affecting objective measurements such as restraint use, routine health assessments of residents and the general downward trend in the average national percentage of other nursing home deficiencies is encouraging. With the recent data associating staffing shortages and nursing home deficiencies, policy makers may be able to target this and improve the standard of care further. While regulation is necessary, it alone can not hope to be as efficient in producing a high standard of care as can a competitive market. Perhaps policies targeted at attempting to remove barriers from entry and further reduce consumer information asymmetry will spur nursing homes to challenge each other to meet an ever-increasing standard of acceptable care at an appropriate cost. Ultimately, all public health policies are a manifestation of our collective values. Effective debate should include more than just the technical aspects of the solutions, but should be transparent to the ethics upon which they are based: what is the extent to which we are willing to guarantee rights and life quality to the aged? These questions are certainly of interest to public health practioners, but if current trends continue, nearly 50% of us over age sixty five will spend some time in, live or die in a nursing home (Cobbs 1999) - which may make the problem of nursing home quality quite personal. Ralph Leonard, MD is an MPH candidate at the Department of Health Policy and Management at the Harvard School of Public Health Endnotes 1. There is less consensus as to whether nonprofit nursing homes provide better service and have better outcomes for their residents (Davis 1991). Some authors suggest that many nonprofits are actually 'for-profits in disguise' meaning that their primary intent is still profit maximization and they use a nonprofit status to attract a higher percentage of self-pay residents from whom they can obtain greater payments than those paid by Medicaid (Hirth 1999). It is speculated that a nonprofit nursing home could attract more prospective residents because the public seems to be aware that there may be a conflict of interest between profit maximization and providing high quality care to a resident who is unable to discern or report poor quality. Nonprofits generally have longer waiting lists and do have a higher percentage of private-pay residents (Spector 1998). 2. These three are the primary causes of market failure in a healthcare model. However, Â
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there are other factors which can contribute such as a monopolistic or oligopolistic industry, the presence of non-monetary motivations, uncertainty and absence of uniformity in health care quality. (Folland, 2000). 3. The competitive market is believed to be the most efficient method by which a society may reach an equilibrium of supply and demand that maximizes its mutual gains (called the First Fundamental Theorem of Welfare Economics). If the original equilibrium is deemed unacceptable by society as a whole, then the market can be used to reach a different optimal equilibrium if there is redistribution of initial endowments (called the Second Theorem of Welfare Economics). However, in the presence of market failures (e.g., barriers, information asymmetry) one cannot assume that policies which correct the failures will in fact restore the power of the competitive market to maximize mutual gains (this is called The Theory of the Second Best). For example, it may be that eliminating barriers to entry of new firms into the nursing home industry (by eliminating CONs) could reduce the quality of care even further. It is not always apparent what a single correction of market failures may do, and one may need to make simultaneous corrections, such as with quality regulation (Folland 2000). Acknowledgments Special thanks to Sam Aires, a graduate student in the Kennedy School of Government, Harvard University, for helpful comments and suggestions. Special thanks also to the Countway librarians Suzzie Conway, Anna Gitlezman and Carol Mita for their assistance. References Banaszak-Holl J., Hines M. "Factors associated with nursing home staff turnover." The Gerontologist (1996), 36(4):512-517. Baumol W., Blinder A. "The market mechanism: shortcomings and remedies." Microeconomics: Principles and Policy, eighth edition. Dyrden Press, New York, 2000. Bishop C. "Where are the missing elders? The decline in nursing home use, 1985 and 1995." Health Affairs (1999), 18 (4): 146-155. Block, R. "Improving oversight and quality of nursing home care." Testimony before the US Special Senate Committee on Aging, June 30, 1999. Cobbs E., Duthie E., Murphy J. (Eds) "Financing, coverage and cost of healthcare of older persons." Geriatric Review Syllabus: A core curriculum in Geriatric Medicine., Fourth Edition (1999): 47. Cohen J., Spector W. "The effect of Medicaid reimbursement on quality of care in nursing homes." Journal of Health Economics(1996): 15:23-48.
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Davis, MA. "On nursing home quality: A review and analysis."Medical Care Review (1991) 48(2): 129-166. Davis M., Freeman J., Kirby E. "Nursing home performance under case-mix reimbursement: responding to heavy-care incentives and market changes." Health Services Research, 33:4 (October 1998, Part I): 815-834. DeParle, N. "Nursing home staffing." Testimony before the US Special Senate Committee on Aging, July 2000. Folland S., Goodman A., Stano M. "The Role of nonprofit firms."The Economics of health and health care, third edition. Prentice Hall, Upper Saddle River 2001: 399-418 Folland S., Goodman A., Stano M. "Hospitals and Long-Term Care." The Economics of health and health care, third edition. Prentice Hall, Upper Saddle River 2001: 399-418 Folland S., Goodman A., Stano M. "Equity, efficiency and need."The Economics of health and health care, third edition. Prentice Hall, Upper Saddle River 2001: 399-418 Fries BE., Hawes C., Morris JN., et al. "Effect of the National Resident Assessment Instrument on selected health condition and problems." Journal of the American Geriatric Society (Aug 1997) 45(8):994-1001. Greene V., Lovely M., Ondrich J. "Do community-based, long-term-care services reduce nursing home use? A transition probability analysis." Journal of Human Resources (Spring 1993) 28(2):297-317. Greene V., Monaha D. "Structural and operational factors affecting quality of patient care in nursing homes." Public Policy (Fall 1981) 29(4):399-415. Harrington C., Carrillo H., Thollaug S. "Summer Nursing Facilities, Staffing, Residents, and Facility Deficiencies, 1991 through 1997." January 1999. Dept of Social and Behavior Sciences UCSF. http://www.hcfa.gov/medicaid/nursfabk.pdf (accessed Nov 2000) Harrington C., Zimmerman D., Karon SL. et al. "Nursing home staffing and its relationship to deficiencies." Journal Gerontol B Psychol Sci Soc Sci (Sept 2000) 55(5): 278-87. Hash, M. "Preventing improper evictions of nursing home Medicaid residents." Testimony to the US House Commerce Subcommittee on Health 1999. Hash, M. "Nursing home quality." Testimony before the US Special Senate Committee on Aging. July 28, 1998. Health Care Financing Administration. "HCFA Announces new Medicare payment rate for nursing homes." HCFA press office (July 30,1999).
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Health Care Financing Administration. "Problem nursing homes to face immediate sanction." HCFA press office (December 14, 1999). Health Care Financing Administration Guide to Choosing a nursing home. http://www.hcfa.gov/medicare.nurshm1.htm (accessed Nov 16, 2000). Health Care Financing Administration. "HCFA announces new Medicare payment rate for nursing homes." HCFA press release office (July 30, 1999). Health Care Financing Administration. "Innovative state and HCFA nursing home initiatives." http://www.hcfa.gov/medicaid/nhi/nhihmpg.htm (accessed Nov 16, 2000). Hirth R. "Consumer information and competition between nonprofit and for-profit nursing homes." Journal of Health Economics (1999): 219-40. Holmberg, R.H. and Anderson, N. N. "Implications of ownership for Nursing Home care." Medical Care (1968) 6:300-307. Jones, C. "Despite Tax Break, Group LTC Market Stalls." Life Association News (1999):32-35. Linn M., Gurel L., Linn B. "Patient outcomes as a measure of quality of nursing home care." American Journal of Public Health. (1977) 67:337-344. Medicare Nursing home compare. http:// www.medicare.gov/NHCompare/home.asp (accessed Nov 22, 2000) Medicare Nursing Home Checklist. http://www.medicare.gov/Nursing/Checklist.asp (accessed Nov 22, 2000) Mukamel D. "Risk-adjusted outcome measures and quality of care in nursing homes." Medical Care (1997) (4):367-385. Nursing Home Info Home page http:www.nursinghomeinfo.com (accessed Nov 14, 2000) Nyman J. "The effects of market concentration and excess demand on the price of nursing home care." Journal of Industrial Economics (June 1994) 42(2):193-204. Pelovitz, S. "Nursing home bankruptcies." Testimony before the US Special Senate Committee on Aging, September 25, 2000. Phillips CD., Morris JN., Hawes C. et al. "Association of the Resident Assessment Instrument (RAI) with changes in function, cognition, and psychosocial status." Journal of the American Geriatric Society (Aug 1997) 45(8):986-93.
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Pillemer K., Moore DW. "Abuse of Patients in Nursing Homes: Findings from a Survey of Staff." The Gerontologist (1989) 29(3):314-320. Ruchlin HS. "A new strategy for regulating long-term care facilities." Journal Health, Politics, Policy, and Law (Summer 1977) 2(2):190-211. Saphir A. "Rebuilding from the rubble." Modern Healthcare (May 2000) 1;30(18):72-74 Sheridan J., White J., Fairchild T. "Ineffective staff, ineffective supervision or ineffective administration? Why some nursing homes fail to provide adequate care." The Gerontologist (1992) 32(3): 334-341. Singh, D., Schwab R. "Retention of administrators in nursing homes: what can management do?" The Gerontologist (1998) 38(3): 362-369. Spector W., Selden T., Cohen W. "The impact of ownership type on nursing home outcomes." Health Economics (1998) 7: 639-653. Spector WD., Takada HA. "Characteristics of nursing homes that affect resident outcomes." Journal of Aging and Health (Nov 1991);3(4):427-54. Thomas W, Stermer M. Eden. "Alternative for the future." Balance(July/August 1999): 14-17 US Dept of Health and Human Services. "Assuring quality care for nursing home residents." HCFA Press office December 14, 1999. Vitaliano D., Toren M. "Cost and efficiency in nursing homes: a stochastic frontier approach." Journal of Health Economics (1994) 13:281-300. Zinn JS., Weech RJ., Brannon D. "Resource dependence and institutional elements in nursing home TQM adoption." Health Services Research (June 1998) 33(2 pt 1):261-73.
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The Critical Condition of End of Life Care in the United States Andrea Magyera End of life care is described by the World Health Organization as "the active total care of patients whose disease is not responsive to curative treatment."1 In such care, "the control of pain, of other symptoms, and of psychological, social and spiritual problems is paramount."2 End of life care is a very complex division of health care because it involves two primary parties in preparing a person for death with comfort: the patient and the caregiver. Moreover, it is erroneous to believe that end of life care is only a reigning issue in the minds of the elderly, or those facing old age. Rather, end of life care sparks dilemmas in health care delivery for the elderly, terminally ill children and newborns, severely ill psychiatric patients, and those in prolonged comas.4 For the purpose of this paper, however, the primary focus will be on end of life care for the elderly. The time of preparation that is addressed in end of life care is also known as the "transition phase," and it is unique to this area of medicine. The transition phase in the minds of patients, caregivers, and families marks the distinction between curing and healing. When someone is dying, a cure is no longer possible, but a consoling form of healing, consisting of appropriate, humane and compassionate care, is both possible and extremely important.5During the transition phase, ongoing discussions between clinicians, patients, and patients' families become vital, as does shifting the goal of treatment from curing the patient to preserving his comfort and dignity.6 Patients who know they are dying seek comfort, closure, family support, and quality services.7 Since death and the transition phase are universal, end of life care needs to develop and grow as a division of the U.S. healthcare system. This paper will examine end of life care in the United States and observe its systems' assets as well as its faults. It will also search for ways to improve end of life care in the United States. The United States: Current Challenges Overall, the system of long-term care in the United States is poor, due to extremely high costs and minimal government assistance. When one looks at long-term care in the U.S., one finds that the Medicaid program does provide long-term care for its beneficiaries. This care, however, usually results from Medicare beneficiaries "spending down" their resources on regular long-term care and then meeting the requirements to receive the government provisions. Moreover, the division of end of life care within the U.S. healthcare system has received particular criticism for its lack of pain relief, poor communication, and limited education of providers. Before attempting to improve end of life care, one must examine trends in causes of death in the population as a whole. Americans, together with other citizens of the world, are living longer, which is a mark of success in both public health and medical care. The problem, however, is that the last few years of a person's life are now being marked by progressive illness and disability.8 Americans are primarily dying from heart failure, obstructive lung disease, stroke, dementia, or cancer, and less often from infections, Â
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accidents, and organ system failures, which were major causes of death in the past.9 The key difference is that while the killers of yesterday were quick and destructive, today one is more likely to follow a longer road of debilitation. This begins with a diagnosis, then weight loss, shifting to being bed ridden, and finally, to death. Most people live for years with a diagnosis and gradually are faced with the functional limitations of their illness, such as the inability to work, self-care disability, and repeated hospitalizations.10 Does the above description of end of life care meet the actual desires of Americans? Sixty-one percent (61%) of Americans polled say that they want to avoid a drawn-out death and they emphasize their fear of being "kept alive."11 Dying in a hospital would fulfill these fears for many people. Therefore change and improvement are needed. In the late 1980s, the Robert Wood Johnson Foundation began the Study to Understand Prognoses and Preferences for Outcomes and Risks of Treatment (SUPPORT). This $28 million dollar project concluded that America's end of life care system was poor, and that people were dying in pain without the proper do-not-resuscitate orders (DNR) or advanced directives that are needed to fulfill final wishes.12 The study also found that family needs were not being properly addressed and that the high costs of care were not being noticed. Clearly, the end of life care system in America is facing problems and the situation is raising concerns, even for average citizens. Over half of Americans polled believe that the United States is doing a poor job of involving families in the decision making process, providing pain relief, respecting dignity, and controlling the costs that are encountered.13 Primary Roles in End of Life Care As mentioned above, the two central players in end of life care are the patient and the caregiver. The first actor to be considered is the patient. Studies have been done in the United States to determine the wishes of patients encountering the end of life. There are five factors that have been found to be most important to dying patients.15 The first is to receive adequate pain and symptom management. Next is to address the desire of the patient to avoid inappropriate prolongation of dying. A third factor is to allow the patient to feel in control of the situation. The fourth factor is to allow the patient to relieve the burden on loved ones, and the final factor that is deemed important to those dying is to strengthen relationships and communication with their loved ones. One can conclude that these elements would be important to most patients. Everyone needs dignity, respect, compassion and attention in the difficult times of facing death. The caregiver is the second primary role in end of life care. This role is carried out by physicians and nurses. The main functions of the caregiver are to respect the wishes of the patient, provide high quality and continuous care, give adequate pain relief, and to address any psychological, social and spiritual needs of the patient.16 The physician needs to be willing to offer therapy that is not always traditional, such as alternative medicine, in areas such as meditation and acupuncture. The physician also needs to make the crucial decision as to when to provide access to hospice care.
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While the role of the physician is important, it is the nurse who provides most of the direct care when dealing with an end of life patient. Undergraduate nursing students need to be trained in several aspects of delivering health care in the end of life setting. Not only do they need to be able to address physical, psychological, social and spiritual needs of patients at the end of life, they should also be able to combine all of these skills in order to provide an overall end of life care approach.17 Nurses should provide care, comfort, and counseling to patients and family members. They are a valuable source of stability for all when times are hard. They are needed to manage pain and anxiety as well as to provide assistance with suffering, grief, loss, and bereavement.18 Three Areas for Improving End of Life Care Now that the two primary roles in end of life care have been examined, we will explore what areas of end of life care in the U.S. are in need of improvement. Pain relief, communication skills, and education improvements are three areas on which to focus, since some frightening statistics have been presented when analyzing these areas in the U.S. end of life care system. For example, forty to fifty percent (40-50%) of terminally ill patients are found to suffer moderate to severe pain.19 Is this acceptable? It should not be, for although death is approaching, end of life care should be a time of approaching peace and tranquility. Even worse, seventy-six percent (76%) of oncologists surveyed admitted their lack of knowledge about pain management.20 How can we be administering high levels of care when our otherwise most skilled providers are not educated in this area? In a 1997 Gallup poll, it was shown that more than seventy percent (70%) of individuals polled claim to have a fear of dying in pain, alone, or without the chance to say good-bye.21 Americans should not be faced with unnecessary fear of pain when they are approaching the end, therefore, pain relief in our country must be improved. One reason why caregivers do not provide adequate pain relief is that they fear the negative side effects of addiction. But this theory is not rational, for by the time symptoms of addiction surface, the patient will likely be close to the end of life and the consequences of dependency would not occur. In a survey sponsored by the Mayday Fund, "more than two-thirds of Americans said that high doses of pain medications, including narcotics, should be used for people experiencing severe pain, even when they were asked to consider the possibility of addiction."22 Actors in the health care system should listen to the people and open the lines of communication, for the people are saying that they want higher levels of pain relief. The next area of care in need of improvement is communication. Communication is essential for an end of life care system. Caregivers need to listen to the desires of the patient, for when one is dying providing them with the most comfort and compassion possible is most important. A survey by the American Geriatric Society found that eighty-two percent (82%) of responding physicians felt that physicians should be responsible for initiating discussions on end of life material.23 Physicians are the link between patients' desires and the care that is administered, and it is necessary for them to
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be aware of their patients' wishes. Clearly, we need dramati improvement in this area, for as found by the People's Medical Society, "only forty-seven (47%) of doctors knew when their patients preferred to avoid cardiopulmonary resuscitation (CPR), and forty-nine percent (49%) of people who wanted CPR to be withheld did not have DNR written on their charts."24 The final area in need of improvement is education. Education of providers is an essential key to improvement of the U.S. end of life care segment of the health care system. Education should take place not only on the level of the physician and nurse, but also the pharmacists, social workers, mental health professionals, and clergy.25 End of life care is clearly a complex, cross-disciplinary area of medicine. In 1998, a review of the 50 topselling textbooks from several medical specialties was conducted, and a search was undertaken for the presence and adequacy of content in the 13 different end of life care domains. Only twenty-four and one-tenth percent (24.1%) of information presented in the textbooks was deemed helpful.26 Clearly, improvement in the area of textbook content, residency training, and questions on licensing exams would improve the system. Dying is an extremely important part of life for both the patient and the patient's family; therefore, medical education on dying should be improved in order to provide better care.27 Hospice Care Hospice is a form of high quality alternative care that could prove to be a solution to the end of life care dilemmas in the United States. Hospice care is a unique form of care for the terminally ill. It is an opportunity for those in end of life care to face death with the support of family members, friends and healthcare professionals. The psychological and spiritual needs of the patient, as well as adequate levels of pain relief are the focus of this alternative care.28 Hospice care is built upon the ideas of teamwork and partnership between the caregivers and the patient as well as family. Hospice care focuses nearly as much on the grieving family as it does on the terminally ill patient.29 Basic foundations of care in hospice are similar to those mentioned above in regard to general end of life care practices, in that the focus of coordination, 24 hour attention, and sensitivity to the desires of the patient and family are primary goals.30 A study performed by the American Geriatrics society found that ninety-one percent (91%) of families whose family member died after receiving hospice care had positive comments, while fifty-one percent (51%) commented positively on nursing home care.31Hospice is a comforting way for all those involved in end of life care to prepare for eventual death. However, despite some of its positive outcomes, hospice care is used only to a limited degree. Hospice only serves about twenty percent (20%) of the terminally ill, with seventy percent (70%) of those patients being cancer victims.32 In order to improve end of life care in the United States, this division of care needs to be expanded. In 1998, there were 3,100 hospices in the United States, servicing a total of 540,000 patients.33 Unfortunately, the promotion of hospice care in the United States is not occurring as vigorously as one might hope. Rather, hospice programs are facing a
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decrease in usage due to Medicare financing rules that are set up by the government. End of life care financing in the United States, particularly that of hospice care is problematic. As described above, most long-term care is provided for the elderly only if they have spent down their assets to qualify for Medicaid. However, hospice care is unique. Medicare covers the costs of hospice care for patients who have been diagnosed as terminally ill with less than 6 months to live.34Having Medicare cover aspects of end of life care is a positive part of the system; however, it is very difficult for physicians to determine how much time a terminally ill patient has to live. These Medicare financial restrictions negatively impact hospices, for if patients live past six months, the hospice will not be reimbursed. In addition, current financing plans often do not cover symptom relief, family support and counseling services, three aspects of care that were described earlier as being vital parts of end of life care.35 One may question the true value or accuracy of Medicare coverage. Basic Medicare covers the diagnosis and treatments of illnesses that are deemed medically necessary, but clearly it is far from comprehensive healthcare coverage for the elderly. In fact, about three-fifths of seniors have some form of supplemental insurance to help them meet deductibles, co-payments, or other uncovered services.36 On the other hand, medical care in the last year of life is extremely expensive. It accounts for about eleven percent (11%) of the healthcare budget and twenty-seven percent (27%) of Medicare's funds.37 With this enormous amount of spending, should not the end of life care system produce better results? The question is presented: Is this the right time for incremental change in the United States in regard to end of life care and the financial structure that supports it? What solutions, hospice or otherwise might we move towards in order to attain improvement? Conclusion As Carolyn Tuohy argues in her book, Accidental Logics, "what drives change in health care systems lies in an understanding of the "accidents" of history that have shaped national systems at critical moments in time, and in the distinctive 'logics' of the systems thus created."38 Thus, we should look back over time in order to understand the developments that have shaped the health care system and divisions of end of life care in the United States. One needs to learn from their mistakes and form new plans in order to move ahead. Better end of life care is possible in the United States. But in order for changes in the payment and coverage structures to occur, the government will have to increase and adapt its role. Increased government awareness and intervention in this segment of the health care system is both necessary and beneficial to outcomes. The primary goal of end of life care is to provide the patient with the best care possible. The level of care in the United States could increase drastically if improvements are made in the areas of education, pain relief, and communication. Communication is especially vital, for it is the only way that a person's true desires can be fulfilled. Citizens should take the initiative to determine their end of life care wishes. Making personal decisions Â
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about do-not-resuscitate orders (DNR's), advanced directives, and living wills should be a mandatory part of our health care system, for it would lead to a higher quality level of care. The questions raised as to how to attain the highest level of end of life care are complex and difficult to address. But the primary importance of the issue is evident. There are several ways in which improvement can be reached, and as the Baby Boom generation continues to age and people live longer, the U.S. will have to embark on a new path. The path dependency that has developed in the U.S. is inefficient both structurally and financially, and it is not leading to a good future. As Victor Fuchs points out in his book Who Shall Live, "as financial and moral pressures mount, we probably will see the right to death with dignity transformed into an expectation and eventually into an obligation."39 As a nation, we need to learn from our past and work for improvement. We need to set our sights on providing patients with access to a higher quality end of life care system. Andrea Magyera is a junior at Harvard College. Endnotes 1. Gwinn, Robert. "Family Physicians Should Be Experts in Palliative Care." American Family Physician (February 1, 2000). 2. Ibid. 3. Kelner, Merrijoy; Martin, Douglas, Singer, Peter. "Quality End of Life Care: Patients' Perspectives." The Journal of the American Medical Association (January 13, 1999): Vol. 281, No. 2. 4. Cohn, Felicia; Frager, Geri; Leventown, Marcia; Lipson, Michael; Sahler, Olle Jane Z. "Medical Education About End of Life Care in the Pediatric Setting: Principles, Challenges, and Opportunities."Pediatrics 2000 (March 2000):Vol. 105. 5. Schroeder, Steven A. "Dying Patients and Their Families." Vital Speeches of the Day (March 1, 2000). Foley, Kathleen. "A 44-Year Old Woman with Severe Pain at the End of Life." The Journal of the American Medical Association (May 26, 1999):Vol. 281, No. 20. 6. "A 44-Year Old Woman with Severe Pain at the End of Life." Finvcane, Thomas. "How Gravely Ill Becomes Dying: A Key to End of Life Care." The Journal of the American Medical Association(November 3, 1999):Vol. 282, No. 17. 7. Forlini, Janet Heald; Lynn, Joanne. "Serious and Complex Illness in Quality Improvement and Policy Reform for End of Life Care." Americans for Better Care of the Dying.
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8. Ibid. 9. Ibid. 10. Kabcenell, Andrea; Lynn, Joanne; Milne, Casey; Nolan, Kevin; Schall, Marie. "Quality Improvements in End of Life Care: Insights from Two Breakthrough Series Collaboratives." 11. Napoli, Maryann. "A Grassroots Movement to Change End of Life Care." Health Facts (March 31, 1999):Vol. 24, No. 3. 12. "Dying Patients and Their Families." 13. Ibid. 14. "Dying Patients and Their Families." "Quality Improvements in End of Life Care: Insights from Two Breakthrough Series Collaboratives." Greene, Jan. "A Better Ending." Hospitals and Health Networks(March 2000):Vol. 74, No. 3. Foubister, Vida. "Medical Experts Agree on Guide for End of Life Care." American Medical Notes(February 7, 2000). 15. Jacobs, Michelle; Lynn, Joanne, Rutchick, Renie. "How Can We Get Quality Care?" Choices: The Newsletter of Choice in Dying(March 31, 1999):Vol. 8, No. 1. 16. "Dying Patients and Their Families." "Quality Improvements in End of Life Care: Insights from Two Breakthrough Series Collaboratives." "Evaluating Quality of Care-A Checklist." Choices: The Newsletter of Choice in Dying (March 31, 1999):Vol. 8, No. 1. "Medical Experts Agree on Guide for End of Life Care." 17. "Nursing Colleges Point to Needed Skills for End of Life Care."1998 U.S. Department of Health and Human Services: Public Health Reports (July/August 1998). 18. Ibid. 19. "How Can We Get Quality Care?" 20. "A Grassroots Movement to Change End of Life Care." 21. "A 44-Year Old Woman with Severe Pain at the End of Life." 22. "The War on Pain." People's Medical Society Newsletter(August 31, 1998):Vol. 17, No. 4. 23. Clark, Jack; Glante, Leonard; Kern, Donald; Lamberton, Victoria; Markson, Lawrence; Stollerman, Gene. "The Doctor's Role in Discussing Advance Preferences for End of Life Care." The Journal of the American Geriatrics Society (April 1997):Vol. 45,
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No. 4. 24. "Doctors Ignore End of Life Wishes." People's Medical Society Newsletter (February 28, 1996):Vol. 15, No. 1. 25. "Dying Patients and Their Families." 26. Fair, Joan; Hardic, Grace; McPhee, Stephen; Rabow, Michael. "End of Life Care Content in 50 Textbooks From Multiple Specialties." The Journal of The American Medical Association(February 9, 2000):Vol. 283, No. 6. 27. McCarthy, Michael. "U.S. Patients Do Not Always Get the Best End of Life Care." Science and Medicine (June 14, 1997). 28. Cohn, Felicia; Ratcliff, Margaret. "Hospice With Grace."Corrections Today (February 2000). 29. Naierman, Naomi. "Debunking the Myths of Hospice." Choices: The Newsletter of Choice in Dying (September 30, 1998):Vol. 7, No. 3. 30. "Peaceful Death: Recommended Competencies and Curricular Guidelines for End of Life Nursing Care." American Association of Colleges of Nursing. 31. Danis, Marion; Garrett, Joanne; Hanson, Laura C. "What is Wrong with End of Life Care? Opinions of Bereaved Family Members." The Journal of the American Geriatrics Society(November 1997):Vol. 45, No. 11. 32. Etheredge, Lynn; Lynn, Joanne; Wilkinson, Anne."Financing Care for those Coming to the End of Life: Current Barriers and Opportunities for Improvement." (February 10, 2000). 33. Gwinn, Robert. "Family Physicians Should be Experts in Palliative Care." American Family Physician (February 1, 2000). 34. "Serious and Complex Illness in Quality Improvement and Policy Reform for End of Life Care." 35. Ibid. 36. "Financing Care for those Coming to the End of Life: Current Barriers and Opportunities for Improvement." 37. Ibid. 38. Tuohy, Carolyn Hughes. Accidental Logics: The Dynamics of Change in the Health Care Arena in the U.S., Britain, and CanadaNew York, 1999.
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39. Fuchs, Victor R. Who Shall Live? Health, Economics, and Social Choice Singapore, 1998.
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Comprehensive Care for the Elderly: Is PACE the Answer? Y.K. Gary Chu, O.D. and Jocelyn Pan, M.P.H. The U.S. population is aging. The elderly (persons over 65) currently represent 12.8% of the U.S. population, and this population is expected to double by the year 2030.1 Moreover, the older population within this group (85 years old and above) has a higher life expectancy than previous generations. As a result of these trends, more resources need to be allocated to care for the elderly, and the U.S. needs to examine ways to provide them with both high-quality and cost-effective health care. Medicare Long-term Care: Current trends Medicare, as it is currently financed, has been found to discourage the management and coordination of care. In its omission of prescription drug coverage and its favoring of acute care over interventions for functional status, medical costs are escalating uncontrollably for older adults and their families. Moreover, Medicare has not kept pace with medical advances, new care strategies, and accompanying coverage needs, including interventions for sensory impairment and psychiatric care. Optimal management of chronic illness requires close coordination with long-term care services, but today's financing policies encourage fragmentation and cost shifting.2 In addition, long-term services for older adults represent a substantial share of total healthcare spending in the US and an area of major concern for state policymakers. Nursing home and home health care accounted for almost 12% of personal health expenditures in 1995 and approximately 14% of all state and local health care spending. Importantly, neither private insurance nor Medicare cover long-term care to any significant extent, and few older adults have private long-term care insurance. The disabled elderly must rely on their own resources or, when these are depleted, turn to Medicaid or state-funded programs to pay for their long-term care. Because of the high cost of long-term care, Medicaid coverage for long-term care provides a safety net for the middle class as well as the poor. Medicaid long-term care expenditures for the elderly are projected to more than double in inflation-adjusted dollars between 1993 and 2018 - due to the aging of the population and to price increases in excess of general inflation.3 PACE Program: Beginnings "PACE", the Program of All-inclusive Care for the Elderly, is a program that has recently been developed as an alternative to the long-term care services provided by traditional Medicare and Medicaid. PACE is a fully integrated managed care system that was pioneered in 1971 by On Lok Senior Health Services4 in San Francisco's Chinatown. Provision of care for the elderly at that time was found to be somewhat fragmented and disparately located. On Lok became the country's first adult day care offering an array of services that stress the entire well being of an individual. What started out in 1975 as an in-home support and primary care service caught the attention of the Health Care Financing Administration (HCFA). The unique involvement of an interdisciplinary team of health workers and social services became the model of long-term care provision that Â
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HFCA decided to test in the form of a demonstration project four years later. In 1983, On Lok obtained waivers from Medicare and Medicaid to test its new financing method for long-term care. The organization took full financial risk in providing a full scope of care for each member in exchange for a fixed capitated income from Medicare and Medicaid for each enrollee.5 This proved to be very successful: On Lok documented to HCFA that the cost of care for their members was 15% less than that for fee for service Medicare enrollees. On Lok's success served as a model to HCFA for the provision and financing of health care for the elderly. As a result, in 1986, PACE was started as a demonstration project. A decade later, with the passage of the Balanced Budget Act of 1997, PACE became a permanent provider - under Medicare and a state option under Medicaid - of comprehensive medical and long-term care services to the frail elderly in need of nursing home care. In the past three years, states have become increasingly interested in offering PACE as an alternative to fee-for-service (FFS) long-term care. Therefore, the cost effectiveness of the program needs to be assessed in order to provide evidence for its long-term viability to potential sites. This paper will consider the PACE program's cost saving to date as well as its potential viability for long-term success. PACE Program: Enrollee Profile The PACE model has made a timely entrance in the provision of care for frail elderly and those in need of long-term care. The number of PACE sites has grown steadily since the first replication site started operation in 1990. As of December 1999, there are 25 PACE sites operating, reporting a combined census of 6045. An additional 8 sites are in an operational "pre-PACE" phase of development during which they are capitated for longterm care services and Medicare reimbursement is fee-for-service.
PACE enrolls elderly who are certified for nursing home care with a minimum age of 55 years old. Enrollees are generally frail, have multiple medical problems (see table 1), and may have limited psychosocial and economic support. They represent a population at high risk for hospitalizations and nursing home placement. The goals of treatment for this fragile population are to stabilize chronic medical conditions and to optimize functional Â
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status. With attention to clinical monitoring, it is hoped that early detection and treatment can reduce morbidity and mortality and avoid long and costly hospital stays. PACE Program: Features
The program pools Medicare and Medicaid funds to provide a broad spectrum of acute and long-term care services for older patients through the use of interdisciplinary teams of health professionals. The PACE model includes in-home services, day care, laboratory and ambulance services, skilled nursing facility care, medical specialty services (see table 2), and restorative/supportive services. The integration of Medicare and Medicaid funds have allowed for flexibility in offering services not routinely covered by these plans. In particular the monthly fixed payments per enrollee provide for: • • • • • •
physician visits prescription drugs rehabilitation services personal care workers hospitalization nursing home care, if needed. Other services not covered by Medicare or Medicaid include:
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• • • •
social services intervention care management respite care extended home-care nursing
Services are provided in the PACE center, the home, or inpatient facilities. Each PACE center includes a day health center (with all the services offered by a typical, freestanding adult day health center) and a full service medical clinic. An interdisciplinary team consisting of primary care physicians, nurse practitioners, occupational and physical therapists, dietitians, health workers, recreation therapists, and transportation workers is at the heart of the model. The entire team serves as a care manager, and each team member's expertise and contributions enhance the delivery of other teammembers' services. Evaluation of the PACE Program's Cost Savings Evaluations of PACE sites have so far focused on the cost savings to Medicare and Medicaid. The PACE site assumes total financial responsibility for providing all services. Consequently, the provider organization must be able to manage risk, i.e., to monitor clients, services and, costs, and to readily adapt to any type of situation. This provides a powerful incentive to increase the service system's efficiency and effectiveness. PACE providers successfully manage enrollees' use of high-cost inpatient services by providing expanded preventative and supportive services. Some results in cost containment include the following: Hospitalizations • Despite PACE enrollees' level of frailty, their rate of hospital use is comparable to the Medicare 65-plus population which includes healthy older persons -- in 1997, 2,158 days/1000 PACE enrollees per annum vs. 2,080 days/1000 Medicare beneficiaries per annum.6 • PACE enrollees have shorter hospital stays than the aged Medicare population as a whole -- 4.1 vs. 6.6 days.3 Cost savings for Medicare and Medicaid Medicare and Medicaid rate setting methods for PACE produced savings as compared to payers' costs for treating comparably frail individuals in the fee-for-service health care system. 6. Medicare's rate-setting methodology for PACE guarantees a minimum 5% savings. Moreover, costs to Medicare under the PACE model were considerably lower than they would have been had enrollees continued to receive FFS care. Projected costs were 38% less than actual Medicare costs in the first six months following enrollment and 16% less for months 7-12 . This represents savings to Medicare of $6.9 million.9 7. Medicaid capitation payments to PACE yielded states an estimated 5% to 15% saving relative to their fee-for-service expenditures for a comparable nursing home
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certified population. To insure that PACE targets a sufficiently frail population and that enrollees match the rate-setting standard, states verify potential enrollees' eligibility before enrollment. In 1998, the median Medicaid capitation rate for PACE was $2,109 per enrollee per month, with a range of $1,750 to $4,301 depending on locale.4 8. Even more important than the immediate operational cost savings that PACE yields to Medicare and Medicaid is the promise of significant future capital savings. Since PACE is an alternative to institutional care, developing PACE programs to care for an increasingly elderly population could substantially lower future capital expenditures on nursing home construction. Approximately $1.5 million in capital expenditures is needed to develop a PACE site able to serve 250-300 enrollees. This translates to about $5000 per PACE "slot", far less than the cost per bed to build a nursing home.8 Conclusions Now that PACE has been established as a Medicare provider of long-term care and has demonstrated its ability to save the program money, there are several issues that pertain to the program's long-term viability. Potential PACE sites will need to take the following issues into account when deciding whether to make the financial commitment of becoming a provider site. 1. Enrollment One major issue that will determine the viability of PACE is enrollment of clients. In an evaluation of initial findings, one concern over the PACE program was the slower than projected enrollment.10 The most commonly reported barrier to enrollment was potential clients' unwillingness to attend the adult day health center the expected four to five times per week. Such attendance is judged necessary to monitor vital signs, medications and functions of these nursing home eligible clients on a near-daily basis. Client finances are the second most common barrier, including potential clients' unwillingness to contribute a co-payment to the costs of care, to apply for Medicaid, or to release financial information. The third most common barrier is the loss of freedom of choice of providers, due to the "lock-in" of services from other providers. The tension remains between potential clients who are often anxious to keep their own physicians, and PACE administrators who place the lock-in of services as central to the program's ability to manage care and assume financial risks. 2. Preventive health outcomes Further assessments need to be made to assess the gains that preventive and other health services not covered by Medicare have on the health outcomes and functional status of PACE enrollees. There is emerging interest in decision making by a multidisciplinary team and the quality of care that results. Attention has mainly focused on the cost savings to Medicare and Medicaid from decreased hospitalizations. However, other end points in the continuum of care need to be determined to gain a more global perspective on the viability of PACE. 3. Managed care in the US The PACE program's viability will be supported through initiatives in the health care
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system to contain costs and find innovative ways to manage care for the growing elderly population. This is reflected most strongly by many states' interest in including dually eligible Medicare and Medicaid beneficiaries in managed care. Dually eligible persons are caught between two systems whose payment and clinical incentives conflict, producing fragmented care and cost shifting between Medicare and Medicaid. As the PACE model has clearly demonstrated, pooling Medicare and Medicaid funding through integrated managed care delivery systems can enhance the quality of care and reduce conflicts between the two programs. States will continue to pursue managed care for the frail elderly not only because of fiscal issues, but also out of concern for quality. States are coming to realize that a managed care program with a single accountable entity and some good quality indicators might be able to monitor quality more effectively than the fee-for-service system where different parts of long-term care and other services are more fragmented. 4. Recruitment of primary care physicians Recruitment of physicians and other health professionals has been a difficult challenge for PACE sites. PACE programs must compete with large managed care systems and academic medical centers for qualified candidates. It is likely that PACE sites will continue to recruit from internists and family practice physicians, few of whom have received formal geriatrics training. But the continuing shift toward increasing geriatrics training in graduate medical education and the continuing movement toward managed care systems should make the PACE model more attractive to physicians in the future as well as making PACE a more attractive residency training site. Conclusion With the increasing proportion of persons over 85 comprising the US population in the next century, and an increased urgency to contain health care expenditures, the PACE program offers an attractive option to both states and the Federal government. However, in considering the factors that determine its viability in the future, the program will need further evaluation, demonstration and refinement. PACE programs have not been implemented in all fifty states. The reasons are not known. Despite the variability of results to date, vision and passion still appear to remain the keys to ultimate success. On Lok Senior Health Services is still a thriving program today because it is sustained by the original vision of the founders to provide comprehensive health care for the elderly. They have expanded to numerous sites and have forged alliances with other agencies in their mission to care for the elderly. Therefore, a combination of both vision and passion for the cause is a great catalyst in the maintenance of any program that requires coordination on multidisciplinary and multi-governmental levels. The future of PACE or any other programs involved in caring for the elderly will depend on the examination of a variety of issues in order to determine the reasons for variable success and to postulate reasons why PACE is not offered in every state. Factors determining the likelihood of its implementation may include the socioeconomic status of the individuals in a community, as well as the level of family involvement in that community. Programs such as the PACE program will continue to develop over time to meet different communities' needs. With time, research and evaluation, a new framework
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in geriatric care will become better established. Y.K. Gary Chu, OD is a MPH student at the Harvard School of Public Health, an Assistant Professor at the New England College of Optometry, and the Director of the Outreach Service at the New England Eye Institute. Jocelyn Pan, MPH is a doctoral student in the Department of Health and Social Behavior at the Harvard School of Public Health. Endnotes 1. Elderly Profile, Agency on Aging, http://www.aoa.dhhs.gov/aoa/stats/profile/#FutureGrowth. 2. Cassel, C.K., Besdine, R.W. & Siegel, L.C. "Restructuring Medicare For the Next Century: What will beneficiaries really need?" Health Affairs, 18(1): 118-131.. 3. Weiner, J.M. & Stevenson, D.C. "Long-term Care for the Elderly: Profiles of the Thirteen." Assessing the New Federalism States. Urban Institute, June, 1998.. 4. The name "On Lok" means a place of peace and happiness in Cantonese.. 5. On Lok Senior Health Service, http:// www.OnLok.org.. 6. HCFA Bureau of Data Management & Strategy, 1996.. 7. National PACE Association Publications , http://www.natlpace assn.org. 8. Eng, C., Pedulla, J., Eleazer, P., et al. "Program for All-inclusive Care for the Elderly (PACE): An Innovative Model of Integrated Geriatric Care and Financing." Journal of the American Geriatric Society, 45, 1997: 223-232.. 9. Abt Study comparing PACE enrollees to traditional Medicare/Medicaid FFS beneficiaries (1995-97).. 10. Branch, L..G., Coulam, R.F., and Zimmerman, Y.A.. (1995) "The PACE Evaluation: Initial Findings." The Gerontologist 35(3): 349-359.
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Health Highlights When It Comes To Health Policy: Americans Are Not British Robert Blendon, ScD and Minah Kim Over the last few decades, many health experts and national leadership groups have become concerned about the performance of the U.S. health care system. The persistence of high health care costs, a large population of uninsured Americans, wide disparities in access to health care and levels of health across the country, as well as a dissatisfied public have raised the question of whether the nation's health system needs to be fundamentally restructured. [Note: We apologize that table 1 is missing and hope to fix this ASAP.] The search for an alternative to the current U.S. system has aroused interest in the experiences of other industrialized countries in organizing their health care systems. Particular attention has been paid to Canada1 and Great Britain2, countries with strong cultural, language and historical ties to the U.S. Likewise, Germany3, a close ally, trading partner, and leader in the new Europe, is the focus of considerable interest with its tripartite business, labor, government managed health care system. All three of these countries have lower national health spending, universal coverage of their populations, more favorable health statistics (Table 1), and, based on survey data, a more satisfied citizenry4 (Table 2).
Yet, despite numerous papers, comparative research studies, conferences, visits by
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experts and legislators, and newspaper features on the better performance of these systems when compared to the U.S., these nations' systems have not been adopted as models for change in the United States. A number of reasons for this outcome have been offered including the nature of U.S. political institutions which are seen as making anything but incremental change difficult to achieve.5 The unique power of private interest groups in the U.S. resists change that might threaten their current role in the health care.6 In addition, as discussed below, there are important cultural attitudes in the United States that make the citizenry less receptive to health systems on the model of Canada, Great Britain, and Germany, irrespective of their merits.7
First, as shown in Table 3, Americans have an underlying antipathy to reforms that would involve greatly extending the power of government into the day to day activities of the health system. When compared to the citizens of these other countries, Americans are more likely to see their government as already too powerful, not trustworthy, and generally inefficient and wasteful in its activities. The anti-statist political values of the United States have been demonstrated in many political studies.8 The systems found in Canada, Great Britain, and Germany -- where the government is central to the management of the health care system -- conflict with these basic American cultural beliefs. More specifically, compared with these other industrialized countries, Americans prefer a health system where government plays a less central role. As shown in Table 39, Americans are less likely to want a government role in either providing care to the sick or managing hospitals.
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Lastly, the American public is less supportive of government efforts to achieve equity than the publics of these other three nations. For the U.S. to have a health system where everyone, regardless of income, receives the same high standard of medical care requires those with higher incomes to subsidize those with low and moderate incomes, as well as those unable to work at all. As shown in Table 3, when compared to these other countries, Americans are less committed to having those with upper incomes pay higher taxes or to favor policies that would provide a decent standard of living (including medical care) for those who are not employed. Taken together, these cultural differences help explain why Americans, who are so dissatisfied with our current health care system, in the end never embrace health systems such as found in these three other countries. Canada, Great Britain, and Germany have very different health systems, but they all involve a central role for government in management and regulation, and a willingness to have government redistribute resources and tax those who are more successful in order to achieve equity in health care. As a result, Americans learn little from foreign experiences in health policy. Robert Blendon, Sc.D. is a Professor of Health Policy and Political Analysis in the Department of Health Policy and Management at the Harvard School of Public Health and the John F. Kennedy School of Government. Minah Kim is a doctoral condidate in the Political Analysis track of the Ph.D. Program in Health Policy at Harvard University. Endnotes 1. Iglehart JK. "Canada's Health Care System." New England Journal of Medicine 1986; 315:202-8: 778-84. 2. Light DW. "Observations on the NHS Reforms: An American Perspective." BMJ 303(6802): 568-70, September 7, 1991. 3. Iglehart JK. "Germany's Health Care System." New England Journal of Medicine 1991; 324:503-8: 1750-6. 4. Blendon RJ, Benson J, Donelan K, Leitman R, Taylor H, Koeck C, and Gitterman D. "Who has the best health care system? A second look," Health Affairs (Winter 1995): 221-230 5. Steinmo S and Watts J. "It's the Institutions, Stupid! Why Comprehensive National Health Insurance Always Fails in America," Journal of Health Politics, Policy and Law, Vol.20, No.2, Summer 1995. 6. Cigler AJ and Loomis BA. Interest Group Politics. Washington, DC: CQ Press, 1995: 393-406; Johnson H. and Broder DS. The System: The American Way of Politics at the Breaking Point. Boston: Little, Brown, and Company, 1997: 194-224, 643-658. 7. Jacobs L. The Health of Nations: Public Opinion and the Making of American and British Health Policy Ithaca, Cornell University Press, 1993. Â
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8. Nye JS, Zelikow PD, and King D, eds. Why People Don't Trust Government. Cambridge, Mass: Harvard University Press, 1997. 9 International Social Survey Program (ISSP). International Social Survey Program: Role of Government III, 1996. Cologne, Germany: Zentralarchiv fuer Empirische Sozialforschung, 1999 [producers]; Ann Arbor, MI: Inter-university Consortium for Political and Social Research, 1999 [distributors]; The Pew Research Center for the People & The Press. Deconstructing Distrust: How Americans View Government, 1998. http://www.people-press.org/trustrpt.htm. Viewed on October 27, 2000.
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Current Issues in Mental Health Policy Collen Barry The Surgeon General's report on mental health released in December 1999 alerted policymakers and the public to both the impact of mental illnesses on society and the swift pace of technological progress toward improving the health and well-being of individuals suffering from mental disorders. Released in December 1999, Mental Health: A Report of the Surgeon General analyzes and reports on the central findings of a vast body of scientific literature concerning the diagnosis and treatment of mental illnesses. Dating back to its first report on the hazards of smoking in 1964, the Surgeon General's office has been responsible for assessing the state of the literature on vital public health concerns and making judgments about the weight of evidence on the efficacy of health interventions and treatments. Prevalence and Access to Care The Surgeon General's report stresses that mental disorders are health conditions with clinically and economically devastating effects for both individuals and families. Researchers estimated that the indirect costs of mental illness represented a $79 billion loss to the U.S. economy in 1990.1 This estimate primarily reflects morbidity costs in terms of lost productivity ($63 billion), but also includes mortality costs due to premature death ($12 billion), as well as productivity losses for incarcerated individuals and caregiver family members ($4 billion). In a given year, about 19% of the U.S. population has a diagnosable mental disorder, 3% have co-morbid mental and addictive disorders, and 6% have addictive disorders alone. 2Mental and addictive disorders are substantially under-treated. According to the report, about 15% of the adult population use mental health services in any given year. Approximately half of the individuals using mental health services (8%) have a specific mental or addictive disorder as defined by the Diagnostic and Statistical Manual of Mental Disorders (DSM-III and DSM-IIIR).3Therefore, as the Surgeon General's report notes, less than one-third of adults with a diagnosable mental disorder receive treatment.4 Untreated mental disorders can lead to a loss of productivity, familial disruptions, significant personal distress, and disability. According to the Global Burden of Disease Study conducted for the World Health Organization and the World Bank, four of the 10 leading causes of disability for persons age 5 and older are mental illnesses.5 In the U.S., major depression is currently the leading cause of disability. Anxiety and mood disorders are the most prevalent diagnoses.6 The prevalence of anxiety disorders among adults ages 18 to 54 is over 16%, and the prevalence of mood disorders such as depression is about 7%.7 In contrast, schizophrenia affects only about 1% of the population.8 Efficacy of Treatments for Mental Disorders
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The evidence in the Surgeon General's report suggests that a range of efficacious treatments exists for most mental disorders. The report highlights the extraordinary pace and productivity of scientific research on the etiology and treatment of mental illness with particular focus on the brain and behavior. Significant gains in pharmaceutical technology have led to the development of a more effective range of treatment therapies with fewer problematic negative side effects. Both the pace of medical discovery and faster approvals of new drugs in recent years by the FDA have contributed to the increasing use of these therapies. Various psychotherapies, such as psychodynamic, interpersonal, and cognitive-behavioral therapy, are also available. While treatment falls into two general categories, psychosocial and pharmacological, combined usage of the two (multi-modal therapy) can often prove more effective for individual patients. Spending on Mental Health Care National expenditures for the treatment of mental health and substance abuse (MH/SA) in 1997 totaled $82.2 billion, with 86% ($70.8 billion) spent on treating mental illness and 14% ($11.4 billion) spent on substance abuse.9, 10 MH/SA expenditures constitute about 7.8% of the more than one trillion dollars that constitute all U.S. health expenditures in 1997.11 Specialty mental health providers received 71% of total MH/SA expenditures, while general health care providers received 14.3%.12 The remaining 15% covered prescription drug costs (the fastest growing component of mental health expenditures) and administrative expenses of insurers.13 Mental health care spending grew more slowly than overall health expenditures over the last decade. While real health care spending grew by 5% annually between 1987 and 1997, real mental health spending grew by only 3.7%.14 Notably, these trends are reversed for prescription drug spending. The annual 9.3% inflation-adjusted increase in spending for prescription drugs to treat mental illness exceeds the annual 8.3% increase in spending on drugs for all health-related diagnoses.15 The primary explanation for lower relative growth in overall MH/SA spending is the reduction in hospital expenditures. The shift to managed care and price competition among health plans explains much of the reduction in hospital spending. According to the Surgeon General's report, about 72% of Americans with insurance were enrolled in managed behavioral health care in 1999.16 Similarly, enrollment in behavioral health carve-outs has grown over the decade. A recent survey of 50 large HMOs reports that about half of HMO enrollees were enrolled in carve-out plans.17Research suggests that mental health may have been subject to more rigorous managed care cost control methods compared to the health care industry as a whole.18 It remains unclear whether restrained mental health spending signals erosion of insurance benefits and greater barriers to access or increased treatment cost-effectiveness. Delivery of Mental Health Care The Surgeon General's report also reviews the striking changes in the delivery of mental health care over the past few decades. Fifty years ago, a majority of those receiving care
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for mental disorders received treatment from a specialty provider in an inpatient setting. Today, an overwhelming proportion of individuals receiving mental health treatment get care on an outpatient basis. Of the 1.7 million psychiatric patient-care episodes in 1955, 77% were in 24-hour hospital services and 23% were in less than 24-hour services. By 1994, of the nearly 10 million episodes, 26% were in 24-hour hospital services and 74% were in less than 24-hour hospital services.19 Given the complexity and multiple funding sources of the contemporary U.S. mental health system, a primary challenge involves coordinating care and disseminating evidence on treatment efficacy across the continuum of service settings. Role of the Public Sector Federal, state, and local governments contribute substantially to the financing and delivery of mental health care. Public payers funded 58% of MH/SA spending in 1997, a much larger share than the 46% of total health expenditures paid for through the public sector.20 Historically, state and local governments have assumed a particularly large role in financing mental health services. In 1997, state and local governments provided 28% of all MH/SA expenditures, while funding only about 13% of health care services overall.21 In recent years, the federal government has increased its role in financing these services. Expenditures through the Medicaid and Medicare programs constitute 35 and 21%, respectively, of total public sector expenditures on mental health services.22 In addition to Medicare and Medicaid, the federal government provides additional resources through various programs including the Community Mental Health Block Grant, Community Support programs, the PATH program for services to the homeless mentally ill, and Comprehensive Community Mental Health Services for Children. Stigma and Discrimination The Surgeon General's report emphasizes the importance of changing public attitudes to eliminate the stigma associated with mental illness. Advocates for the mentally ill view stigma and discrimination as major impediments to the identification and successful treatment of mental disorders. Perceived stigma related to mental illness prevents individuals from acknowledging and seeking treatment for these conditions. Furthermore, stigma erodes public confidence that mental disorders are treatable. One major survey indicates that a plurality of Americans believe that mental illnesses are just like any other illness; however, 25% of survey respondents would not welcome facilities that treat or house people with mental illnesses into their neighborhoods, suggesting that some level of lingering stigma persists.23 The Surgeon General's report views increasingly effective treatments for mental disorders as the most potent long-range antidote to stigma, noting that "effective interventions help people to understand that mental disorders are not character flaws but are legitimate illnesses that respond to specific treatments, just as other health conditions respond to medical interventions."24 Impetus for Mental Health Parity
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One of the overarching calls to action elucidated in the Surgeon General's report is the need to reduce financial barriers to treatment. It states that "equality between mental health coverage and other health coverage -- a concept known as parity -- is an affordable and effective objective."25 As noted above, despite the effectiveness of modern treatments, a majority of Americans suffering from mental disorders do not seek treatment. In a 1998 survey by the Robert Wood Johnson Foundation, concern regarding costs of care was cited as the number one reason for not receiving behavioral healthcare services. 26 83% of uninsured and 53% of privately insured individuals listed cost concerns as the principal reason for not seeking care.27 Under most health insurance plans, coverage for mental disorders is more restrictive than for physical or somatic disorders. Plans commonly require higher co-payments for outpatient mental health treatment than for other outpatient care. Lower lifetime and annual expenditure limits and more stringent limits on inpatient hospital days for mental disorders are also widespread. In 1993, one study found that 86% of large employers offered plans with more restrictive inpatient mental health coverage and 93% offered a more restrictive outpatient mental health benefit.28 In the Medicare program, for example, outpatient psychotherapy services are covered with a 50% beneficiary copayment requirement as compared to 20% enrollee cost-sharing on other Medicare outpatient services.29 Why Are Mental Health Benefits More Restrictive? Restrictive coverage for mental disorders was motivated by fear among insurers that generous coverage of mental health benefits would lead to high costs due to long-term or intensive psychotherapy and lengthy hospital stays. There is some evidence that consumers are more sensitive to changes in the price of mental health services than other health care services. The RAND Health Insurance Experiment demonstrated that increased utilization of services by consumers in response to decreased out-of-pocket costs is twice as great for outpatient mental health services as for ambulatory health services as a whole.30 Due to sample size, the RAND experiment was not able to look directly at the issue of inpatient spending. However, economists believe that these services are much less subject to consumer demand incentives. Insurers attempted to reduce demand for mental health services by structuring mental health benefit co-payments and expenditure limits in such as way as to increase the outof-pocket costs faced by the consumer. Evidence cited in the Surgeon General's report suggests that while this practice may have discouraged utilization of unnecessary or low benefit care, it also reduced necessary care. There is also evidence to suggest that plans structure mental health benefits to avoid selection of unfavorable or high-risk consumers. Low lifetime or annual dollar limits, for example, send a message to consumers with high expected mental health service use that they may be better off choosing another plan.31 Federal and State Parity Laws The objective of parity legislation enacted at the state and federal levels is to ensure that
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payers provide the same level of benefits for behavioral health care as for general medical care. Over the past 10 years, 28 states have enacted some form of parity legislation. The scope of these laws differs by state. Some states target parity narrowly by focusing on individuals with only the most severe mental disorders or on specific populations such as state public employees. Other state parity laws apply to a broader population of individuals with both mental and substance abuse disorders. Due to the ERISA law, which exempts self-insured companies from state-mandated benefits, these parity laws apply only to a subset of state residents. In 1996, the U.S. Congress passed the only federal legislation to address parity in mental health coverage. Enacted as part of the Health Insurance Portability and Accountability Act of 1996, the Mental Health Parity Act took effect in 1998.32 This law targets one aspect of the inequities in mental health insurance coverage -- catastrophic benefits. Specifically, the act prohibits the use of annual or lifetime limits on coverage for mental illnesses. Unlike state parity laws, it extends to all self-insured companies exempt from state mandates under ERISA. Companies with fewer than 50 employees and those that offer no mental health benefit are exempt from the provisions of the federal parity law. The law also does not apply to other kinds of benefit limits, such as day or visit limits, co-payments, or deductibles. Payers experiencing more than 1% increase in premiums as a result of parity implementation can apply for an exemption. Without congressional action, this law will sunset in September 2001. Preliminary evidence suggests that the federal parity law has not expanded access to mental health services as intended by Congress. In May 2000, the General Accounting Office (GAO) released a report finding that consumers in states without more comprehensive state parity laws have experienced only minor changes in their mental health benefits as a result of the federal law. 33 Based on a survey of employers, the GAO estimated that 9,000 to 13,000 employers in 26 states were violating federal standards under the law. 34 Estimating the Costs of Parity Concern about the feasibility of parity laws focuses on how premiums might be affected by this change in benefits. Various projections have been undertaken to estimate the costs of parity. These estimates vary based on the scope of the parity law under examination (e.g., full or partial parity) and the level of managed care penetration within a market area. An early estimate conducted by the Congressional Budget Office (CBO) in 1996 on the cost of full parity legislation projected that health insurance premiums would increase by 5.3% in indemnity plan-dominated areas and 4% in areas with both indemnity and managed care plans. Other projections on the cost of this legislation ranged from 3 to over 10% increases in premium costs.35 More recently, evidence is increasingly available on the costs of parity laws already implemented. Case studies of five states with parity laws in effect for at least a year indicate a minimal effect on premiums.36 At the federal level, the CBO estimated a 0.4% increase in premiums due to enactment of the Federal Parity Act of 1996.37 The
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projections have proved relatively accurate; the GAO reported this year that very few employers surveyed have experienced higher claims costs due to parity.38 Managed Mental Health Care and Parity Over the last decade, managed care has fundamentally altered the delivery of mental healthcare services. By shifting the focus from demand-side to supply-side mechanisms to control health care costs, managed care profoundly affects the impact of parity laws. Instead of restricting use of mental health services through benefit design, managed care systems use financial incentives, networks of providers, and other administrative mechanisms to limit spending. As the Surgeon General's report notes, management of mental health services has led to dramatic reductions in the cost of mental health care in numerous settings.39 Certain research indicates that use of managed care techniques by insurers may lead to under-treatment or restricted access to services or plans, even in the context of parity laws. Managed care coupled with parity laws allows insurers to control costs by minimizing consumer demand response without restricting coverage through benefit limits or cost-sharing. However, managed care also creates alternatives to benefit design for rationing mental health care.40 Some experts worry that if insurers use techniques to restrict use of services in an effort to control costs, benefit design is no longer the only factor in determining service allocation and parity laws may no longer produce their intended effect.41 Recent Developments on Parity Legislation was introduced in the 106th Congress to extend the 1996 federal parity law. S. 796, introduced in the Senate by Senators Pete Domenici (R-NM) and Paul Wellstone (D-MN), and H.R. 1515, introduced in the House of Representatives by Representative Marge Roukema (R-NJ), would mandate full parity in coverage for mental health benefits. In the executive branch, President Clinton issued an executive order in 1999 mandating full mental health parity in the Federal Employees Health Benefits Program (FEHBP).42 This program covers over 9 million federal employees, retirees, and dependents across the country. The Office of Personnel Management will conduct an evaluation of the impact of this benefit change on cost, access, and quality. Conclusion Dramatic changes have taken place in the field of mental health over the last 50 years, including significant advances in the diagnosis and treatment of mental illness, positive shifts in public views about people with mental disorders, and a transformation in the delivery of mental health services. In recent years, both the states and the federal government initiated legislative efforts to extend parity in benefits to individuals with mental disorders. To date, the scope of these initiatives is limited; however, legislation is pending to broaden the provisions of the existing federal parity law. Some concern persists among payers regarding the costs of parity.
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By minimizing premium changes, managed care reduces the financial barriers to parity. However, some research suggests that use of managed care techniques to manage costs may provide opportunities for limiting mental health services even under parity laws. Evaluation of full parity in the FEHBP will provide an opportunity to assess the impact of full parity in terms of efficiency, equity, access, and quality. Colleen Barry is a doctoral candidate in the Political Analysis track of the Ph.D. Program in Health Policy at Harvard University. This article is adapted from an issue brief prepared for the John F. Kennedy School of Government/Commonwealth Fund Bipartisan Congressional Health Policy Conference in January 2001. Endnotes 1. Rice, D.R. and Miller L.S. "The Economic Burden of Schizophrenia: Conceptual and Methodological Issues and Cost Estimates." Moscarelli Ed. Handbook of Mental Health Economics and Health Policy. Vol. I: Schizophrenia. p. 321-324). New York, NY: John Wiley and Sons, 1996 2. Kessler, R. C. et al. "Lifetime and 12-Month Prevalence of DSM-III-R Psychiatric Disorders in the U.S: Results from the National Comorbidity Survey." Archives of General Psychiatry, Vol. 51, January 1994 3. Ibid. 4. Mental Health: A Report of the Surgeon General. Rockville, MD: U.S. Department of Health Hand Human Services, Substance Abuse and Mental Health Services Administration, Center for Mental Health Services, National Institutes of Health, National Institute of Mental Health, 1999. 5. Murray, C.J. and Lopez, A.D. Eds. The Global Burden of Disease: A Comprehensive Assessment of Mortality and Disability from Diseases, Injuries, and Risk Factors in 1990 and Projected to 2020. Cambridge, MA: Harvard University Press, 1996. 6. Mental Health: A Report of the Surgeon General. Rockville, MD: 1999. 7. Ibid. 8. Ibid. 9. Coffey, Rosanna et al. National Estimates of Expenditures for Mental Health and Substance Abuse Treatment, 1997. U.S. Department of Health and Human Services, Substance Abuse and Mental Health Services Administration, 2000. 10. This report produces estimates according to a methodology equivalent to the National Health Expenditures (NHE) reports produced annual by the Office of the Actuary,
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HCFA. This methodology specifically excludes expenditures for social services totaling about 3 million in 1997. This 1997 data constitutes the most up-to-date information available on mental health and substance abuse spending. 11. Coffey, et al. 12. Ibid. 13. Ibid. 14. Ibid. 15. Ibid. 16. Mental Health: A Report of the Surgeon General. Rockville, MD: 1999. 17. "72 Percent of Insured Americans are Enrolled in MBHOs." Open Minds Behavioral Health and Social Service Industry Report, 1999. 18. Mechanic, David and McAlpine Donna. "Mission Unfulfilled: Potholes on the Road to Mental Health Parity." Health Affairs. Vol. 18(5), Sept/Oct 1999. 19. Manderscheid RW and Henderson MJ, Eds. Mental Health United States. U.S. Department of Health and Human Services, 1998. 20. Coffey, et al. 21. Ibid. 22. Ibid. 23. Borinstein, A.B "Public Attitudes Toward Persons with Mental Illness." Health Affairs, Vol. 11 (1), 1992. 24. Mental Health: A Report of the Surgeon General. Rockville, MD: 1999. 25. Ibid. 26. Sturm R. and Shelborne C.D., "Are Barriers to Mental Health and Substance Abuse Still Rising?" Unpublished Manuscript, 1999. 27. Ibid. 28. Frank, R.G. and Tom M.G. "Economics and Mental Health." Handbook of Health Economics. Eds. A.J. Culyer and J.P. Newhouse, Eds. New York, NY: Elsevier, 2000.
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29. "A Profile of Medicare: Chartbook 1998," Office of Strategic Planning and Health Care Financing Administration, U.S Department of Health and Human Services, May 1998. 30. Manning et al. Effects of Mental Health Insurance: Evidence from the Health Insurance Experiment. Santa Monica, CA: RAND Corporation, 1989. 31. Frank, and Tom. 32. Neisner, Jennifer A. "The Mental Health Parity Act of 1996: Overview and Issues." Congressional Research Services Report for Congress, April 3, 1998. 33. Allen, Kathryn. Mental Health Parity Act: Employers' Mental Health Benefits Remain Limited Despite New Federal Standards. Testimony before the Committee on Health, Education, Labor, and Pensions, U.S. Senate, GAO/T-HEHS-00-113, 2000. 34. Ibid. 35. Sing, Merrile. "The Costs and Effects of Parity for Mental Health and Substance Abuse Insurance Benefits." U.S. Department of Health Hand Human Services, Substance Abuse and Mental Health Services Administration, 1998. 36. Ibid. 37. Ibid. 38. Allen. 39. Bloom, J. et al. "Mental Health Costs and Outcomes Under Alternative Capitation Systems in Colorado: Early Results " Journal of Mental Health Policy and Economics, 1998; Callahan, J.J. et al. "Mental Health/Substance Abuse Treatment in Managed Care: The Massachusetts Medicaid Experience." Health Affairs, 1995; Christianson, J.B. et al. "Utah's Prepaid Mental Health Plan: The First Year." Health Affairs, 1995; Goldman, H et al. "Costs and Use of Mental Health Services Before and After Managed Care." Health Affairs, 1998; Ma C.A. and McGuire T.G. "Costs and Incentives in a Behavioral Health Care Carve Out." Health Affairs, 1998. 40. Frank, R.G. and Thomas G. McGuire. "Parity for Mental Health and Substance Abuse Care Under Managed Care." Journal of Mental Health Policy and Economics, 1998. 41. Ibid. 42. Executive Order: Amending the Civil Service Rules Related to Federal Employees with Psychiatric Disabilities. Office of Personnel Management, June 4, 1999.
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Health Care in Tibet: Clinical and Policy Perspective Mary Maish, M.D. Nestled in the foothills of the tallest mountains on earth, Tibet offers literally breathtaking views from the top of the world. Most people in Tibet live at altitudes greater than 3,500 meters; this imposes a significant burden on the cardiopulmonary system, which in turn challenges the performance of the healthcare system. Unfortunately, the healthcare system currently fails to meet many of the needs of the Tibetan people. It is difficult to predict exactly what changes will have to be made in basic medical care and national health policy in order to raise Tibet to some minimum health standards. Nonetheless, this article aims to enhance our understanding of the Tibetan healthcare system and to address some of its shortcomings. A few months ago, I spent time in Tibet investigating its healthcare system and, more specifically, the status of pulmonary diseases. During this time I identified four major pulmonary diseases that substantially contribute to the morbidity and mortality of the Tibetan people. In addition, I found several areas in which the health system in general is failing to provide adequate services to the Tibetan community. It is clear that changes need to be made to reduce the morbidity associated with pulmonary diseases as well as to improve the quality of Tibetan health care at large. The Tibetan Health Care System Levels of Health Care There are four distinct levels of health care facilities available in Tibet: the prefectural or municipal level, the county level, the township level, and the village level. Tibet is comprised of seven prefectures, each with varying numbers of counties, townships and villages. In my investigations of three of the seven prefectures, I discovered that healthcare resources vary tremendously between these levels as well as between prefectures. At the prefectural level, there are a handful of hospitals with mostly adequate facilities to treat pulmonary diseases. Between the hospitals are several adult ventilators, a good supply of oxygen, nebulizers and inhalers, basic medications and occasionally a pulmonary specialist. Each hospital has its own x-ray and laboratory department. At least one hospital is equipped with a CT Scan facility and a bronchoscope. Almost all are equipped with a few patient care beds, oxygen, intravenous capabilities and medications. The county-level hospitals are more sparsely equipped; there is little available beyond basic laboratory and x-ray facilities. There are also a number of county-level clinics, both private and public, where basic medical needs can be attended to, but more complicated conditions are referred to the hospital. Finally, the two township level facilities I observed were poorly equipped to treat pulmonary diseases; the doctors used only a stethoscope for diagnosis and basic antibiotics for treatment. Pulmonary Diseases In Tibet Â
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While pulmonary diseases are not the greatest cause of morbidity and mortality in Tibet, they are the most widespread. The most common pulmonary diseases found in Tibet are TB, pneumonia, asthma, and lung cancer. Deficiencies in the basic structure and delivery of health care prevent these pulmonary diseases from being adequately treated. In all of China, the Tibet Autonomous Region (TAR) included, Tibet has the highest incidence of TB. Lung cancer is not so prevalent, however, and other parts of China have a much higher incidence. It is difficult to estimate the incidence of either pneumonia or asthma because the former is over- and the latter is under-diagnosed. Risk Factors Along with the extreme altitude, there are many environmental and cultural factors that stress the pulmonary system in Tibet. The dry, dusty air is irritating to the upper airway of the pulmonary system and can predispose individuals to asthma. Although pollution is not yet visible, leaded and diesel fuels, coal and wood burning stoves, and the nearly constant burning of sage incense all contribute to pollution. As in any culture, there are also factors in Tibetan culture that are detrimental to the respiratory system. The most obvious poison is cigarette smoke. Both first- and secondhand smoke effects are significantly contributing to the high rate of pulmonary diseases in this country. In addition, the practice of spitting into public areas, common among the Chinese and Tibetan peoples provides an excellent mode in which to transmit bacteria such as TB. Sharing a meal - that is, eating off the same plate with others - is another simple way pulmonary infection is spread. Tuberculosis In Tibet, an estimated 5% of the population has TB, making this disease perhaps the most significant pulmonary health hazard in the nation. There are many reasons why TB remains a problem in this country. First, there is neither a screening program in place, nor is there any consistency in how patients are identified, treated, and followed-up. Also, there there is a deficiency in patient education with regard to tuberculosis which leads to problems of non-compliance. Finally, the movement of people in and out of Tibet, as well as within the region itself, has vastly increased in the last 50 years. With the recent influx of Han Chinese, Muslims, Mongolians, Turks, and tourists, the amount of TB brought in from other areas has increased and has made the disease more difficult to control. Pneumonia Every respiratory infection in Tibet is diagnosed as pneumonia until proven otherwise. Most doctors I interviewed said that anytime a patient arrives with signs and symptoms of a pulmonary infection they treat that patient with antibiotics. If the patient does not improve, then they consider alternative diagnoses. This is especially true in the rural areas where the facilities are severely limited. Most doctors who suspecte pneumonia perform chest x-rays when the technology is available, while other doctors just treat patients empirically. However, few doctors perform a sputum culture before initiating
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treatment. Treatment regimens vary, but most patients with suspected or confirmed pneumonia are started on IV antibiotics and then converted to oral antibiotics after some improvement. The duration varies from a total of 4-14 days. Asthma Environmental conditions such as cold, dry, dusty air, are common triggers for asthmatics. In Tibet, asthma is under-diagnosed. Most of the doctors I spoke with felt that asthma was not a disease but rather a symptom of another disease. They could not distinguish between wheezing, the symptom, and asthma, the disease. There is a lack of the basic medications and supplies needed to treat this disease, and many patients with suspected asthma are treated with antibiotics. Some physicians admitted that they would not know how to use some of the newer medications and supplies even if they had access to them. This reveals a clear lack of education both in the areas of diagnosis and treatment of asthma. These findings were also confirmed by the work of the Dutch Red Cross. Lung Cancer While lung cancer does not appear to be so prevalent, it is my observation that this disease is also under-diagnosed. The risk factors for acquiring the disease, namely smoking, are clearly present. In their early stages, patients with a cough are treated with antibiotics, but incomplete resolution of the cough is not investigated on a regular basis. Patients who later display symptoms of late-stage lung cancer, including weight loss and malnutrition, often die of respiratory failure with unknown causes. Most doctors agreed that by the time patients are accurately diagnosed, they are severely ill. This is due to several factors. First, patients usually wait until they are critically ill before seeking medical attention because they cannot afford to go to the doctor for routine care. Second, doctors do not have facilities adequate enough to make an early diagnosis, for few places have x-ray facilities, and even fewer have CT or bronchoscopy technology. Finally, when a patient comes in with a cough, doctors think first about pneumonia and only later about lung cancer. Late diagnoses of lung cancer put affected patients' lives at risk. Issues of Health Policy in Tibet While I have focused thus far on pulmonary disease, I will now turn my focus to broader issues of health policy. There are significant defects in the delivery of health care in Tibet, and the fundamental problems of the system are rooted in the most basic components of any sound health policy. The policy issues that need to be addressed are: standards of cleanliness, education and training, affordability, accessibility, and equity. Each is hindering the Tibetan people from achieving adequate health care. Standards of Cleanliness Standards of cleanliness are generally low in Tibet. Sanitation is poor and public spaces,
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including sidewalks and streets, become convenient places to expel waste, human and otherwise. There is little in the way of hand-washing before a meal, or after the use of the toilet. Although poor sanitatioin is not such a concern for the spread of pulmonary disease, it is nonetheless a concern for health in general. The lack of cleanliness standards is even more apparent in the medical realm. Of the 16 health centers I visited, few would be considered clean by western standards and none would be considered aseptic. Conditions are worse in the rural areas. Depending on the time of day, the clinics I witnessed had varying degrees of cleanliness, and the floors were often covered with dirt, spit, and cigarette butts. I saw a few facilities with sinks, but I never saw healthcare professionals actually using them to wash their hands. The operating rooms had a minimum level of sterility. Staff members were required to wear hats, masks, booties, and scrubs, but those were not necessarily clean. The surgical gloves were reused, and there was no autoclave or equivalent form of sterilization system present. Education and Training Education and training of medical professionals is a very serious problem in Tibet. The training of doctors in Tibet comes in as many varieties as there are doctors. I found very little common ground between the doctors in the four levels of health care. There are almost no standards of education that need to be achieved before one can label himself as a doctor except for an exam that must be passed to open up a private clinic. In the rural areas, the situation is even more desperate, with most doctors having had no medical training at all. The training criteria are further complicated by the fact that there are three kinds of medicine being practiced in Tibet: Tibetan, Chinese and Western. (Most doctors practiced both Western and Chinese medicine.) The training for each of these is different, both in place and duration. While the doctors are poorly educated about medical conditions, one also sees this ignorance prevalent among the Tibetan people. This lack of understanding results in delayed care-seeking and non-compliance issues that account for more serious disease. Most laypersons believe the medical wives-tales that are handed down through the generations, so many of them choose not to seek more advanced medical care. Moreover, there is little effort on the part of medical professionals to educate the public about the importance of disease prevention, early intervention, and where to obtain appropriate medical care. Affordability The system of health care in Tibet is currently changing to a community medical system (CMS). In this new system, patients sign up at their community health center and pay a small annual fee plus a co-payment with each visit. Once enrolled, they can use the facilities in their community and will only pay a portion of the costs for physician visits and medication. Patients are encouraged to use the same doctor for routine visits so that doctors can become familiar with the needs of their patients. Those patients who are
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covered by the CMS plan will have access to affordable medical care even at the prefectural level. Those who do not, are required to pay out-of-pocket for services and medications, and if being treated at a hospital, are required to give a 1,000 RMB deposit. Many people, however, are not yet enrolled in the CMS system that has been implemented within the last year. Moreover, unless a person is elderly, disabled, poor, orphaned, or has a family member that served in the military, everyone is expected to pay. For those people living in the larger cities, enrollment will not be difficult and education about the new health system will be possible. However, in the rural areas, however, implementation of this system will be difficult. In many rural areas, people have more than eight children and will not be able to afford to enroll the entire family. It will also be difficult to educate the people in the villages about how the system works and what they will get in return for their money. As a result, most people cannot afford basic medical care at present. Patients wait until they are quite sick before they seek medical attention, and at this point, care becomes prohibitively expensive. For city dwellers, services and medications are available but often not affordable. In the rural areas, patients too sick to be treated by the township or village doctor have to find affordable transportation to the closest county or prefectural health facility. Tibetan transportation, however, is unreliable, difficult to find, and often unaffordable. Once at the hospital, most villagers will not be able to pay the required 1,000RMB deposit, not to mention the final cost for care and medications. Accessibility As indicated above, access to health care is possible in the cities, but in the rural areas is most difficult. Patients who require care beyond that which is provided at the local level are often carried to cities on yaks or in vehicles that are passing by. It is often much too expensive for these individuals to afford transportation, let alone the bills they will acquire when they arrive at the city hospitals. Equity The system, mainly as a result of accessibility issues, is clearly inequitable. Those poeple that can pay for more and have the means to be transported to better facilities clearly have access to better health care. This holds true for the diagnosis and treatment of pulmonary diseases. The diagnosis of TB, asthma and cancer is under-diagnosed everywhere in Tibet, but especially in the rural areas. At the village and township levels, the doctors do not have the facilities or the ability to recognize these respiratory diseases. And if they do happen to make proper dianoses, they have very few means to adequately treat their patients. Problems and Recommendations Problems to Address There are a vast number of problems in the Tibetan health care system that are preventing Â
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citizens from obtaining adequate medical care, especially for the treatment of pulmonary diseases. Changes in the overall structure of the system as well as in the policies that govern this structure are needed to provide sufficient medical services. In addition, changes at the clinical level are critical to improving patient care. The following is a focused list of problems that deserve immediate attention. • Basic standards of cleanliness and asepsis are not met. • Training of doctors is not consistent and is not adequate at the township and village levels. • Health care is not affordable for many Tibetans. • Quality health care is not accessible to most rural Tibetans. • TB remains a significant problem in Tibet, including its diagnosis, treatment and containment. • There is a lack of the basic medical supplies needed to treat routine pulmonary diseases, specifically x-ray machines, ventilators, nebulizers and inhalers. • A lack of patient educatioi leads to poor patient compliance. Recommendations Under ideal circumstances the most salient issues could be addressed simultaneously. With limited time, money and resources, however, not all of the problems I've discussed will likely be eliminated in the near future. The following is a list of recommendations that are needed to help bring better health care to Tibet. 1. Implement standards of cleanliness and asepsis: Guidelines should be drawn up by a group of physicians. Ideally, this group should consist of both Chinese and Tibetan doctors from all different levels and types of health care facilities. They should draw on the standards used by Western countries. Once standards are established, they should be distributed to all physicians. To ensure that the minimum standards are being met, the government should do yearly inspections. 2. Improve Physician Education and Training: a. Basic: A minimum number of years of study in a medical school should be required for all doctors, including township doctors. For those that want to go on to practice in hospitals, an internship should be mandatory. b. Technical: Physicians need to be trained in how and when to use medical supplies. Seminars should be created to educate practicing physicians on how to use basic medical technology. c. Pulmonary diseases: In addition, most doctors need to be educated on the treatment and diagnosis of pulmonary diseases. I recommend that seminars be set up by either the Chinese government or NGOs to teach the proper ways to diagnose and treat the most common pulmonary diseases in Tibet. Funding could be obtained from corporate grants, the government, and, in small part, from the participating doctors themselves. d. Patient education: A national campaign should be developed to: i. Encourage Tibetans to join the CMS system. ii. Encourage patients to see their local doctor early in their illness.
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iii. Encourage hand washing. iv. Discourage smoking. v. Discourage spitting. vi. Encourage disease prevention. vii. Warn people of the risks of communicable diseases. 3. Increase Affordability: With the implementation of the CMS system, it is possible that with outside funding, all Tibetans could afford health care. Grants provided from large corporations and government agencies could be filtered through NGOs. Staff members could go out into the villages and bring the villagers to their CMS center. Here, the villagers could sign up, funded by outside financing, and be educated as to what medical facilities they now have at their disposal. 4. Improve Accessibility: For those who live in the city, health care is accessible. In rural areas, however, transportation to better facilities is unreliable and unaffordable. I propose that each township be affiliated with a county or prefectural hospital. A schedule of transportation can be arranged so that on a weekly or bi-weekly basis a vehicle will go between the township and the hospital exchanging delivery and pick up of specimens and patients. A nominal fee could be charged per patient to help cover costs. The hospitals could also contribute, as they will be generating increased revenue from the patients and lab tests they receive. 5. Focus on Tuberculosis: There are several measures, often overlapping with those recommended for the health care system overall, that could be implemented that would help to better contain and treat this disease, including screening, identification and Registration, treatment, education, follow-up, and incentives to increase compliance. 6. Distribute Supplies: To better treat all pulmonary diseases, asthma and lung cancer specifically, the following supplies need to be distributed: a. Inhalers (Ventolin and Beclamethasone) need to be distributed to all medical facilities including the townships. b. Nebulizers need to be distributed to all hospitals in the prefectures and counties. c. At least one mechanical ventilator should be available in each hospital in the prefecture and county levels. d. Every hospital at the county and prefecture level should have a working xray machine. e. Funding: Some drugs and equipment can be donated from health facilities in other countries that are updating systems. Donations from companies that make the equipment and drugs can also be obtained. Funding for equipment and drugs can come from corporate grants and the government. 7. Increase Screening: Three screening programs, in particular, should be implemented: a. Asthma: Screen all children that enter primary and secondary school by physical exam. Every person under the age of 20 should be screened when he is registered for the CMS. b. Lung Cancer: Promote screening chest x-rays for all high-risk persons (smokers, occupational exposure to carcinogens) over the age of 45. c. TB: Purified Protein Derivative (PPD) testing.
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Conclusion Since the Chinese Cultural Revolution, Tibet, like other parts of China, has been changing rapidly. The health care system is one area where these changes are very apparent, and where the system is currently in a state of disorganized flux. As one might expect, a shift of this measure is often fraught with difficulties, predictable and otherwise. However, when a component of society so fundamental as health is affected, steps must be taken to minimize harm and encourage rapid change that will benefit the people. There is no doubt that the intention of the Chinese government is to bring Tibet closer to Western Medicine and thereby improve the overall health status of the country. But during this time of transition, the Tibetan health care system is functioning poorly. Progress has been made in some areas, but improvements are badly need in other areas. The new system of financing through the CMS should, to some extent, help resolve some of the basic issues of affordability and equity. Yet, the issue of deficient physician education and training, is not being addressed. Without some serious consideration of this critical issue, which I see as most critical of all, health care in Tibet will not improve. An uneducated doctor is as ignorant as an uninformed patient, and the combination is lethal. For improvement to occur, it is imperative the medical and public health communities recognize the extent of this problem and find solutions that will impact not only Tibet, but also other communities and nations who are facing some of the very same problems.
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Why Are There So Many Uninsured Americans? Is the Problem Permanent? Uwe Reinhardt, Ph.D. "I know of no country in which there is so little independence of mind and real freedom of discussion as in America." Alexis de Tocqueville, Democracy in America, Vol. I, Ch. 25 This paper was presented at a recent symposium on the uninsured, convened by the U.S. Chamber of Commerce. Our panel was to explore (1) why there are so many uninsured in this country and (2) what it means for us, the already insured. Not raised was a third, seemingly relevant question, that is, what does a lack of insurance mean for the uninsured themselves. A failure to raise that question, of course, effectively answers the first. In this presentation, I may well violate one or the other sacred tabu described by de Tocqueville in his treatise on freedom of speech in America. In seeking to express my thoughts freely, I may lapse here and there into political incorrectness, for which I apologize at the outset. My excuse is that I received my high-school education in Europe and my undergraduate education in Canada. Thus, I may lack the social graces that keep the discourse on public policy in these latitudes always so utterly civilized - even on the topic of the uninsured. The points I sought to make in my presentation were the following: • The phenomenon of the uninsured is an inevitable by-product of our employmentbased health-insurance system. I know of no health policy analyst who would have proposed that unwieldy system, were we to develop a national health insurance system from scratch. Alas, we are stuck with that system and must forever cope with its fallout. • The nation has not seriously addressed the problems faced by the uninsured - and is not likely to address them soon - because the uninsured represent a politically and economically marginal socio-economic group without much leverage in the commercial or political marketplace. (I say "group" rather "class," lest I be accused of engaging "class warfare.") • We have learned by now that major, bold policy initiatives in health care are unpopular in America, which leaves incremental reform as the only practical alternative. Alas, attempts to solve the problem of the uninsured through incremental steps tend to stumble over the so-called "crowding-in effect," that is, the migration of hitherto privately insured persons into new public programs. An incremental reform is targeted on that day's narrowly selected "objects of compassion (OCs)." The "crowding-in" effect tends to raise the total federal budget cost per originally intended OC to politically prohibitive levels, which often nips the incremental reform in the bud. The result is chronic policy paralysis. • The already insured do pick up through hidden cross-subsidies the incremental cost of health care rendered the uninsured on a charitable basis. Even so, leaving the
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uninsured in their current state is a bargain for the already insured. It is so because uninsured Americans receive, on average, only a fraction (perhaps 60%) of the health care that similarly situated insured Americans get. The idea that covering the uninsured actually will save the already insured money seems dubious. Only the outbreak of serious contagious disease among the uninsured would forge a coincidence of self-interest among the already insured and the uninsured. • We are now embarking upon yet another round of studies, policy conferences and Congressional hearings on the problem of the uninsured. Although this activity may be perceived as "action," it can be doubted that much more than new body counts of the uninsured and some rehashed old proposals will come of the effort, unless the nation slides into a serious recession. A serious recession might drive home to the middle class its own economic vulnerability on this score. It would also stress the providers of health care financially to the point where each special interest group might be willing to countenance Plan B - that is, a reform proposal not entirely of its own making. Short of a major recession, we shall be lucky if, by the year 2010, the number of uninsured stands only at today's level: 40 million or so. A question commonly posed by foreigners at international conferences on health care is the following: "What can explain why, uniquely in the industrialized world, a country that spends close to 70% more on health care per capita1 than does the next most expensive health system in the world (Germany) still leaves close to 18% of its population without the economic, emotional and physiological benefits of insurance coverage?"1 The answers to that overarching question are many-fold. They must be explored and understood to appreciate that this problem is likely to remain a distinct feature of American health care deep into the new century. They also explain why income-based rationing of health care is likely to remain a permanent, officially sanctioned approach to cost control in the United States. It would be hard, on the evidence, to reach any other conclusion. The Employment-Based Health Insurance System At the top of the list of explanations for the chronic problem of the uninsured, I would put our unwieldy employment-based health insurance system. Time and space does not permit an elaboration of that bold assertion here; but I have gone to some length to do so elsewhere.2 If one thinks about it for a moment, it is unreasonable on its face to look to private employers, especially to small firms with a low-wage workforce, as the foundation for a nation's health insurance system. Use of the labor contract between private citizens and private employers as a source of health insurance has to rank as one of the oddest ideas in the development of modern social policy. Even more dubious is the idea to prop up such a system with a tax-preference that any economist would certify as both inefficient and highly inequitable. Many of the problems faced by the American health system today - its Â
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extraordinary expense and the permanent insecurity that it visits on American families can be traced to this awkward approach to private health insurance. For one, the employment-based system offers Americans only temporary insurance that is tied to a particular job in a particular company and that is lost with that job. Second, the private health-insurance industry has never been able to serve the employees of small business firms or individual Americans economically, if at all. At the same time, however, the industry has been forever vigilant to stop initiatives to cover the uninsured, if that initiative might divert clients from the private insurance industry to some new government program. Virtually the only initiatives that the industry would brook would be programs that funnel any public subsidies to the uninsured through the books of the industry. For that reason, these approaches remain the best hope for extending coverage to the uninsured, whether or not they are the most effective and most economical way to achieve universal coverage. Unfortunately, these approaches tend to be not only expensive, but also exceedingly difficult to implement and to administer. (More on that point later in the section on incrementalism.) The Uninsured as a Marginal Socio-Economic Class Year after year, experts on the uninsured have patiently explained to us just who the uninsured are. Year after year, the description is always the same. Properly viewed, the uninsured are not at all a diverse group, as the question posed to this panel implies. About one third of them have high enough incomes to be able to afford health insurance, if it were available to them at the favorable rates of group health insurance. Often they remain uninsured, because the private health insurance sector has never been able to serve individual customers at affordable rates. The majority of the uninsured, however, belong to families headed by the economically homogenous group that we might call "lowincome hard-working stiffs." As such, they represent for the most part a marginal socioeconomic class that has neither economic nor political leverage.3 These uninsured lack economic leverage because, in the parlance of economics, they do not constitute a precious economic resource. The employment of an additional such person usually does not add much to the firm's revenue. It is out of this so-called "marginal revenue product" yielded by the additional worker, however, that his or her take-home pay and other fringe benefits are paid. As every first-year student learns, the total payroll expense booked for a newly hired worker cannot exceed the "marginal revenue product" that worker adds to the firm. To illustrate, if the employment of an extra worker yields the firm an extra net marginal revenue (gross revenue minus additional expenses other than the employee's own wages and fringes) of, say, $ 18,000, then the sum of take-home pay and fringes for that employee cannot exceed $18,000, lest the firm incur a loss on employing that worker. It would be unrealistic to expect the total payroll expense associated with workers who have such a low marginal revenue product to absorb the cost of a health-insurance policy
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that may amount to $6,000 or more for the employee's family. It also follows that a simple government mandate on employers to provide such coverage to all employees would effectively force the employer either to reduce the workers' take-home pay or to dismiss them outright. Either way, it is a brutal tax on workers. Finally, it follows that, if we want to see these families insured, we, the better off, will have to step up to the cashier's window and subsidize them directly and heavily with public funds, through a tax-and-transfer mechanism. Concretely, who are the people under discussion here? They are the taxi drivers who convey us, the waiters and waitresses who serve us, the gas-station attendants who fill our tanks and similarly hard-working people in low-paying service jobs. For the most part, they are easily replaced, often with pliable, imported labor. Because these people are not "precious" to us, economically, and are so easily replaceable through imports, we do not have to be particularly nice to them. Only a very, very tight labor market might induce us to change our perspective, and even then only for so long as the labor market remains very, very tight. A mild recession would quickly cause a relapse into our current attitude. In any event, it is not obvious that Americans are willing to finance, through higher taxes or foregone tax-cuts, the health care of people who can technically be taken for granted. And even if, in its heart of hearts, the American public did wish to be more generous to these low-income families, there is no evidence at all that the policy-making elite would be ready to act on such a wish. The uninsured lack political leverage because as a group they are not noted for high voter participation and, therefore, need not be appeased in the political arena. Their political apathy could be written off as indolence. On the other hand, unlike the powerful interest groups that hold sway over the formation of health policy in this country, the uninsured themselves are too disorganized to concentrate any economic and political might upon legislators. Therefore, their apparent political apathy may be just a rational response to rational expectations, namely, the expectation that their individual votes could never be a match for the economic, hence political, clout of organized interest groups. After all, the perceived dominance of interest groups in the political process is often cited as the reason for voter apathy even among educated American college students.4 Be that as it may, lack of both economic and political leverage has made the uninsured in this country a social class whose yearning for the benefits of health insurance can be disregarded with impunity by the policy-making elite. That simply has to be a major part of the explanation why there are so many of the uninsured, and why their numbers have been inexorably growing. The current flurry of activity in health policy on Capitol Hill illustrates this assertion neatly. That effort deals mainly with sundry rights claimed by the already well-insured middle- and upper-middle classes. To be sure, the legislative priority that Congress puts on this particular facet of health policy is justified in the name of "quality." But surely the most pressing problem with "quality" in the American health system is not "managed care" and the withholding of a few health-care services from well-insured Americans.
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The real quality problem is the lack of access that the millions of uninsured Americans (millions of children among them) have to timely care of the sort no HMO would ever deny. It is also, of course, the fact that the traditional manner of leaving physicians and their patients in charge of determining "medical necessity" has not led to the best quality care that could be had. As a prestigious panel of experts convened by the Institute of Medicine of the National Academy of Sciences has concluded on this point, the problem with the quality of American health is not "managed care," but the overuse, underuse and misuse of health care that has emerged from our traditional reliance on physician autonomy in the practice of medicine.5 The Status Quo as Plan B If there are Americans who take delight in the plight of the uninsured, or who would not like to see them covered under certain conditions, I have not met such Americans. Most likely, they do not exist. On the contrary, at the myriad of conferences on the uninsured that I have attended in the last three decades, there has always been a general attitude of goodwill towards the uninsured, as there will be at this symposium. Surveys of the public in this country indicate the same goodwill. The rub lies in the clause "under certain conditions." Over the years, hundreds and possibly thousands proposals have been crafted to extend insurance coverage to the uninsured. Every politically powerful interest group that derives income from the healthcare process now has on its shelf a ready-to-go proposal in this regard, which we might call its "Plan A." Much thought will have gone into Plan A. As far as the uninsured is concerned, it would certainly be better than the status quo. Any such interest group will countenance also competing proposals put forth by other organizations or by independent policy analysts, but only under one condition: that any such proposals do not, under any imaginable scenario, reduce the economic privilege that would otherwise be enjoyed by the interest group in question under the status quo. If that requirement is not met, then the interest group will always prefer Plan B, the status quo. A fair reading of the history of health policy for the uninsured cannot lead to any other conclusion. Stuart Altman was the first to lament that "everybody's second best solution is to do nothing," after watching the inexorable destruction of the Community Health Insurance Plan (CHIP) that he and his colleagues at the then Department of Health and Human Services had developed under the Nixon Administration. Subsequent health policy analysts who developed renewed health-reform plans under later administrations must have come to that conclusion as well. Over the decades, no group putting forth proposals on the uninsured has been powerful enough to cram its ideas down the throats of other groups. Since every group's Plan B is the status quo, it always triumphs. The result has been an ever-growing number of uninsured, in spite of all of this otherwise well-intentioned activity. If it were not so, would we now have close to 45 million uninsured Americans, including close to 10 million children? The Presence of Pin-the-Tail-on-the-Donkey Insurance
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Travelers from foreign lands that have universal health-insurance coverage often wonder how legislators who so vociferously profess the Judeo-Christian ethic as do American politicians sleep peacefully at night, knowing that they slumber in the midst of some 45 million uninsured Americans, among them 10 million uninsured children. The answer is that for decades these legislators have been soothed by assurances from the hospital industry that, in return for sundry tax preferences and the promise of only tender cost-control policies, these providers will take care of the plight of the uninsured on behalf of the politicians. It has worked reasonably well so far, and thus everyone has slept soundly. It is the case that the United States actually has at least a rough-and-ready, catastrophic, universal health insurance system. Partly voluntarily, partly under legal mandates, our hospitals have for decades operated a crude, catastrophic health-insurance system for the low-income uninsured. Traditionally, the hospital industry has financed this insurance policy through a pin-the-tail-on-the donkey tax, that is, through a set of hidden crosssubsidies extracted from third-party payers paying on behalf of insured patients or from anyone who actually pays anything close to "charges." Congress has nourished this haphazard insurance system further with direct subsidies - notably the "Disproportionate Share" funds - and indirectly through subsidies included in payments for patient care or for residents in training. The latter conduit, incidentally, is truly curious. Properly calculated, the cost of graduate medical education to most teaching hospitals probably is negative. This is so, because residents are the closest approximation to the indentured laborers of yore. Because they must go through this phase or waste years of hard, earlier study, they can be paid very little and have no choice but to work many hours per week for that low pay. All told, then, they must constitute among the cheapest forms of human labor that a hospital can hire. The chief rationale an economist can find for subsidizing graduate medical education is that it acts as a source of funds with which hospitals can support indigent care. Evidently, Congress finds it easier in its heart to approve close to $10 billion a year in subsidies for training one of the best paid professions in the country than to subsidize up front the health-care uninsured Americans. As noted, the presence of this haphazard catastrophic health insurance system has made it possible for federal and state legislators simply to shrug off the predicament of the uninsured, on the soothing mantra that "to be uninsured does not mean to go without care." While this approach to universal catastrophic coverage can be vexatious for individual hospitals, for the industry as a whole it has been useful to the extent that it can be invoked before the Congress and state legislatures as a shield against tough-minded cost-control measures. It may yet be deployed as a shield against the Balanced Budget Act of 1997. Individual teaching hospitals, too, may sometimes feel beleaguered by the problem of the uninsured. On the other hand, they can look to the safety net that they provide for the uninsured as a conduit of teaching material that might otherwise not be there, or that might not be as willing as are the uninsured to function as teaching material.
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Whatever interpretation one may put on the persistence of this haphazard catastrophicinsurance system, and whatever noble or other motives may drive it, it unquestionably has acted as a road block to more reliable, explicit, universal health insurance in this country. Uninsurance as a Bargain It has been estimated that, on average, the uninsured receive about 60% of the health care that similarly situated, well-insured Americans receive. Given the moral solace we extract from the safety net described in the previous section, not having to top off the health care of the uninsured with the remaining 40% of their cost actually constitutes a bargain of sorts for the rest of society. How much we appreciate this bargain can be inferred from the anguished reaction whenever the cost of formally insuring the now uninsured is mentioned in the news. Presidential candidate Bill Bradley's estimate that his newly proposed health-insurance plan might cost about 0.8% of our gross domestic product ($65 billion out of over $8 trillion) caused serious eyebrow raising on the talk shows and in the press. Letting the problem continue as is would save the rest of Americans that much in tax money. Narrowly Concentrated Hardship Finally, many of the uninsured remain in that state for only a limited period. Furthermore, most of them are unlikely to fall seriously ill during their spell of uninsurance. To be sure, there are chronically ill people who are also chronically uninsured. There are also otherwise healthy families one of whose members may fall acutely ill just when the family is without insurance. For these Americans life in America is harsh indeed - much harsher than it would be in any other industrialized country. It is well known that many of these families face bankruptcy, along with physical and emotional suffering. But they are few in number and largely invisible, unless some journalist elevates them to the status of a visible anecdote. The health-insurance industry and the providers of health care have always operated on the plausible hypothesis that truly reliable, universal health insurance in the United States would make the government a much larger player in our health system than it already is. Both segments of the health system fear the regulation and price controls that may come with a larger role of government in health care. There is ample empirical evidence in the United States and around the globe to support that hypothesis. Thus one can view our struggle with universal health insurance coverage also as the struggle over a trade-off between (a) the harsh suffering borne by a few Americans and (b) the economic privilege of a large number of people who derive their income from the process of health insurance and health care and who, if well insured, enjoy the most luxurious health care in the world. One could even throw in a third dimension, namely, the probably slower technical progress of health care under the more tight-fisted fiscal controls that tend to come with government intrusions into health care.
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So far, the politically dominant thought in this country appears to have been that the deprivation and suffering of a few Americans, albeit regrettable, nevertheless is a price well worth paying for the good economic fortune that our health system bestows on so many, and for the rapid technical progress that a less fettered system can sustain. Making that trade-off in this way is purely a moral judgment, of course, whose merits economists are not qualified to judge. The Economic Impact of Uninsurance on the Already Covered The second question to be addressed by this panel is the economic impact that the presence of the uninsured can have on the already insured. That impact can make itself felt through at least three distinct channels. The cost-shift channel: First, when the uninsured fall seriously ill and receive health care whose cost is not fully borne by them, that cost necessarily must be shifted by providers to someone else. To some extent, the providers themselves might absorb some of the cost through lower incomes. That may be true of physicians, for example, but it is unlikely to be true for the hospital sector. Taxpayers will pick up part of the cost through direct public subsidies for indigent care or through sundry indirect subsidies the public sector pays the providers of care. For the rest, the cost is borne by philanthropy or by privately insured patients. Business executives often complain that "employers" themselves bear the cost of the health-insurance premiums they pay on behalf of employees. What might that mean? What is meant by "employers"? Business firms may pay taxes or write cheques for the cost shifts imposed on them, but they never ultimately bear these charges. They always pass that burden on to someone else, either their customers, or their owners, or their employees, or all of them at once. Economists are convinced that even if employers ostensibly pay for the bulk of their employees' health insurance premiums, over the longer-run, the cost of all fringe benefits (including health insurance premiums) is fully shifted backwards to employees through reductions in take-home pay. In the eyes of economists, then, the much-mouthed mantra among business executives that health-insurance premiums make them internationally uncompetitive does not make sense. Nor does it make sense to argue that employers who do not provide their employees health insurance do not pay their fair share of the cost of the uninsured. Fringe benefits, including health insurance, are simply part of the total compensation that is the price of labor in the labor market. Aside from the very short run, when labor contracts are in place and cannot be quickly amended, the size of the compensation paid labor is determined strictly by supply and demand condition in the labor market, not by what health care or other fringe benefits cost.6Fringe benefits are merely one way in which to package total compensation. In short, then, the health care received by the uninsured for which they do not pay is borne by taxpayers, by self-employed Americans with insurance, and by employees of Â
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business firms that provide their employees with health insurance. It is borne neither by "government" nor by "employers." They are merely pumping stations for a flow of funds that always originates in private households and ultimately always ends up in the pockets of people working in or for the health-care sector. The "untimely-care" channel: It is often argued that the uninsured unduly delay contact with the health system in case illness strikes, creating in the process costly catastrophic illness that could have been prevented. Part of the extra cost created in this way is borne by the already insured segment of society through the cost shift. Just how many saving would be yielded through this channel by universal coverage, however, is not well known. The contagious-disease channel: Recent reports in the media about a global threat of contagious diseases suggest a third channel through which the circumstances of uninsured Americans might spill over onto the well-insured. It appears that lack of early intervention and haphazard drug therapy can literally create drug-resistant strains of bacteria that can spill over onto the population at large. Now, that possibility seems more a hypothesis than a fact. But in theory, this threat represents a potential economic and biological threat to the nation's middle- and upperincome classes. A recent television report drew attention to a Russian prison, where drugresistant tuberculosis is literally being bred wholesale through medical neglect of the inmates. Ominously, the program identified a direct linkage between that prison and a site in the United States, to which one of the released inmates had migrated. Medical experts interviewed by the program seemed deeply alarmed by that transmission. If contagious diseases bred elsewhere in the world arrive in the United States via immigration, they are apt to land among the socio-economic classes in the United States who are largely uninsured and who may not be able to afford a sustained regime of drug therapy for potentially contagious disease, such as tuberculosis. Consequently, that channel may one-day serve as a potential spillover mechanism that should give pause to the nation's well-insured middle and upper-middle classes. In fact, that threat alone might one-day trigger serious move toward universal health insurance coverage. Net spill-over impact on the already covered: Purely from the viewpoint of the economic impact that the uninsured have on the already insured, and aside from the potential of contagion, the best economic bargain probably would be to leave the uninsured in their current state. It is so because, with the current, haphazard, catastrophic safety net provided for the uninsured by our hospitals, the uninsured use on average only about 60% of the health care that similarly situated insured Americans use. The savings from timelier health care are unlikely to be that high. A statement of this sort might be judged gratuitously callous. To be sure, the calculus is callous. It is, however, the explanation most frequently given by experts in the media or in the literature for the lack of enthusiasm among insured American voters for universal health insurance coverage. To be sure, the insured evince compassion for the uninsured in every national opinion survey. On the other hand, the easiest way to defeat Â
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proposals for universal health insurance has always been broadcast reminders to the insured that such proposals will ask them either for monetary sacrifices (higher taxes) or other forms of sharing. There really is not a nicer way to describe the phenomenon. On the Prospect of Universal Coverage Conferences on the problem of the uninsured have well-developed patterns that by now have become as ritualistic and predictable as Japanese Kabuki theater. Imagine a particular piece of Kabuki that has run for thirty years in a row. You then have a grasp of health care conferences on the uninsured over the decades. There is always a somber opening sermon, predicting dire fiscal and moral stress for doctors and hospitals, along with fiscal stress for employers and state governors, unless the problem of the uninsured is somehow addressed soon. Depending upon the setting, the fiscal and physical plight of the uninsured will be deplored as well. There follows an elaborate tallying of just who the uninsured is, by many categories. These tabulations always yield the same overall impression: for the most part, they represent low-income working families. Next come the number crunchers who will explain in excruciating detail the exact sources of the X-million increase in the ranks of the uninsured during the past N years: so many because Medicaid rolls have shrunk, so many because employers reduced their insurance offering, so many because they failed to take advantage of employer-provided insurance, so many who are eligible for this or that insurance but cannot penetrate the bewildering forest of rules that need to be understood, and so on. It is highly sophisticated analysis and always illuminating. There follows a series of carefully balanced panels, convened to give voice to select policy analysts and spokes-persons for relevant interest groups. Each of them will bring to the dais two manila folders. One is entitled "Plan A," the approach favored by the particular speaker. The other is labeled "Plan B - Status Quo," just in case. The crescendo of the conference comes with the ever-hopeful closing session entitled "Toward a consensus...." or something like that. This consensus has remained the Holy Grail of health-care symposia all around. The hope that drives this search for consensus is continuously rekindled by the young blood that joins the debate on the uninsured from time to time. As noted earlier, the only viable consensus we seem to be able to reach in regard to the uninsured invariably converges on Plan B - the status quo. Unwilling to admit defeat, however, a few brave souls at these symposia will boldly call for tiny incremental steps toward universal coverage, perhaps unaware that incremental reform in this regard carries with it a high potential for self-destruction. Resigned, battle-scarred workhorses in this campaign shrug their shoulder and say: why not? And off we are on the incremental march towards universal health insurance coverage, as the number of uninsured keeps rising. Â
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Technical Road Blocks to Incrementalism Attempts to approach universal health-insurance coverage through the tiny steps that we now call "incremental" typically stumble over one or two major hurdles: the crowding-in effect, and the marginal-tax-rate effect. Each of them is lethal enough to convert the word "incrementalism" into just another Latin word for "status quo." To appreciate better the obstacles to incremental health policy, imagine that a compassionate White House or a compassionate legislator proposed a health-policy initiative designed to enhance the quality of live of the moment's "objects of compassion" - hereafter simply OCs. The OCs of the moment might be uninsured, unemployed Americans. They might be uninsured Americans between the ages of 55 and 65. They might be uninsured children, and so on. Suppose research has shown that the new initiative would cost the federal government the relatively modest sum of $X per OC (e.g., $ 1,200 per uninsured child). Suppose the number of the OCs of the moment were a manageably small number N. Then the total new federal budget outlay for these OCs would be only $NX, a perfectly manageable sum. In the light of that analysis, the proposed legislative initiative is issued forthwith. Then all hell will break loose. Before even the printer's toner on the legislative proposal has dried, the health-policycost-forecast-simulator of the National Bureau of Economic Research (NBER) or of similar think tanks will spew out scientific simulations showing that, far from costing only $X per OC - or a total budget outlay of only $NX per year - the new policy initiative will actually cost a multiple of m$NX in new annual federal outlays per year, or mX dollars per original OC. The multiplier m can be 3 or more. In the face of this ominous cost estimate, even the program's proponents begin to swallow hard. Sometimes such alarming cost estimates can make the proposal positively DEBA - "dead even before arrival" on Capitol Hill. To illustrate this dynamic concretely, in his "Income-Based Subsidies Won't Work" (The Wall Street Journal, June 17, 1994; p. A14), Harvard economist and NBER President Martin Feldstein argued strongly against the health-insurance proposals then being proposed by Congressman Jim Cooper (D-Tennessee) and by Senator John Chaffee (RRhode Island). Both legislators had proposed income-based subsidies toward the purchase of private health insurance policies. It is instructive to quote Professor Feldstein at length: "Such income-based subsidy plans would be a terrible mistake. They would unnecessarily create a vast new welfare program for more than 50 million people who already have health insurance. They would raise the marginal tax rates of 34 million taxpayers, typically by 20 to 30 percentage points, causing millions of lower-income taxpayers to face marginal tax rates of more than 65%. And they would be unconscionably expensive, costing more than $6,000 of taxpayers' money to provide health insurance to each currently uninsured individual above the poverty level - more
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than $18,000 for a family of three. The total cost to taxpayers at 1994 levels of income and health spending could exceed $170 billion a year." Professor Feldstein identifies two separate Achilles heels for any incremental policy that would seek to expand health insurance coverage through income-based subsidies toward the purchase of private health insurance. First, the reduction in the public subsidy as family income rises has the effect of a marginal tax rate. The more quickly the subsidy evaporates with family income, the steeper the implied marginal tax rate, which comes on top of the explicit marginal income-tax rate and the explicit marginal social-security-tax rate. On the other hand, any attempt to lower the combined marginal tax rate by phasing out the subsidy more gradually, will vastly enhance the pool of families eligible for the subsidy and hence the total budget cost of the program. In this version of Hobson's choice, paralysis often is the viable choice. Second, any narrowly targeted public policy is likely to trigger a so-called "crowding in" effect. In the context of health insurance, incremental initiatives usually draw into the pool, of original OCs people who already have coverage of some sorts within the private sector and, therefore, are not OCs. Professor Feldstein estimated there to be 50 million of crowd-ins (CIs) for the programs he analyzed. This crowding-in effect makes the total new federal budget outlay per original object of compassion (OC) very expensive. In this case, Feldstein's simulator estimated that the total federal outlay per original OC in the Cooper or Chaffee plans would have been about $mX = $6,000, which implies an OC multiplier m of somewhere between 3 and 4 (assuming $X then would have been somewhere between $1,500 and $2,000 per OC). His estimate of the total federal outlay was a prohibitive $mNX = $ 170 billion, in terms of 1994 per-capita costs (X). It is hard to think of a more potent barrier to incrementalism. Sophisticated legislative assistants recognize the CI effect. Along with federal regulators who are equipped with computers and legal talent, they can dream up any number of bureaucratic fences that can be erected around the original OCs, to keep out would be crowding-inners (CIs). That appears to have been done rather successfully with the State Children's Health Insurance Plan (SCHIP) program passed as part of the Balance Budget Act of 1997. Alas, the bureaucratic fences built around the program were so successfully that they appear to have kept out not only the unwanted CIs, but millions of the original OCs as well. And everyone will conclude that government programs just don't work - with dark hints that misanthropic or genetically challenged bureaucrats can kill any good idea. The problem, however, is not bureaucrats. Our government bureaucrats are every bit as smart and well motivated as any who can be found in the private sector. The problem lies in the self-destruct mechanism inherent in the very idea of incrementalism. Even Mother Theresa probably could not make incrementalism work any better. It has always been thus, and it always will be thus. Extensive citation of Martin Feldstein should not be taken to imply that he is the Â
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singular policy analyst who trains the "crowding-in" technique on particular healthreform proposals. Vice President Gore's allies among policy analysts now use that very same technique to devastate Senator Bradley's proposal on universal health insurance coverage. In their attacks on Bradley, they define the "cost" of a reform proposal strictly as "federal budget outlays," rather than as net additions to total national health spending. Once "costs" have been so defined and the crowding-in effect is invoked, it is easy to portray Bradley's proposal as mindlessly expensive per newly insured, relative to the Vice President's much less ambitious proposal. While this line of attack has been effective, especially with the media, it is not conducive to a forthright debate on alternative health-reform proposals, and it is likely to slow the drive towards universal health-insurance coverage in this country. Bolder Policy Initiatives What might set in motion one, or a series of, bolder policy initiatives that would bring the nation noticeably closer to permanent, up-front, universal health-insurance coverage, if not there outright? Such an event could occur if large numbers of socio-economically more significant people tumble into the pool of the uninsured, to make that pool nonmarginal in the eyes of the policy-making elite. It could happen, for example, if the Asian economies recovered quickly and sufficiently to attract again significant capital inflow from the rest of the world. Unbeknownst perhaps to many Americans, the United States is now a large net importer of global capital - to the exact tune of our current account deficit on the international balance of payments (about $ 300 billion or so a year). If that global flow of funds went elsewhere, if American capital flew to Asia and Europe, the resulting shortage of capital in the United States would drive up interest rates sharply. At much higher interest rates, the stock market would not any longer be priced at the yield of about 8% now implicit in the price-to-earnings ratios of the broad market indices. A "correction" of, say, minus 20% in the value of American assets could easily occur. If so, it could infect the real economy (production and jobs) through both, a reduction in planned capital formation and a reduction in consumption. Such a contraction could conceivably toss enough of members of the socio-economically significant classes into the pool of the uninsured to attract the attention of the policy-making elite. Absent such a scenario, however, I really would not expect a quick resolution of the problem of the uninsured. We shall talk about them, to be sure. We shall study them some more, as well. We may have congressional hearings on them on Capitol Hill, once the problems of the already insured have been addressed. We may even attempt a few incremental steps that carry with them the self-destructing mechanism described above. But are we likely to accomplish soon what we have failed to accomplish during the last four decades? I am afraid not. Epilogue In a recent editorial, written long after the preceding remarks were penned, syndicated columnist Mathew Miller pointed out just how far we have come in the evolution of our Â
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social policy. We have moved towards the idea of rationing health care by income class, and away from the idea of universal coverage that would provide all Americans access to health care on roughly equal terms. Commenting on the primary campaign of former Senator Bradley and Vice President Gore, Miller pointed out that Bradley's relatively generous plan for universal coverage resembled in many respects that put forth by President George Bush Sr. in 1992. Bradley's plan, however, was slightly less generous in terms of federal dollars than had been President Bush's plan. Ironically, in 1992 Congressional Democrats had decried President Bush's plan as "tinkering at the margins." It must be noted that President Bush had put forth his plan at a time when the federal government ran a deficit of close to $300 billion. By contrast, in 1999 Senator Bradley had proposed his somewhat similar and slightly less generous plan at a time when the federal government ran a surplus of some $200 billion. Ironically, again, Vice President Gore last year dismissed Senator Bradley's plan as one of reckless spending. He proffered instead a much more modest plan working mainly through Medicaid and SCHIP. To be fair and non-partisan about it, one should add Governor George W. Bush Jr.'s plan seems even less generous than Vice President Gore's in terms of federal dollars, although I must add that I find it difficult to fully understand and price out the Governor's ideas on health reform at this time. But let us not blame these politicians for their retreat from the idea of universal coverage. It is well known that they react strictly to polls and focus group. What we have here is a clear mirror of our soul as a nation. As Victor Fuchs has put it, universal coverage implies cross subsidies from the have's to the non-have's, as well as compulsion to purchase coverage. Because we do not like either, we shall never have universal health insurance coverage in this country. Instead, we are cementing in place a multi-tiered health system with at lest four distinct tiers: For the uninsured, whatever they can obtain in the role of health-care beggars (often nada). For Medicaid recipients and low-wage earners in business firms that do offer health insurance, tightly managed HMOs with cost-conscious gate keepers, heavy reliance on generics and, where need be, yesterday's technology. For the middle and upper-middle income classes, PPOs with varying degrees of restrictions and cost sharing. For high-income families, the traditional, open-ended, completely non-rationed fee-forservice system (with continued tax preference, as now). Medicare beneficiaries will be distributed among the upper three tiers. Can anyone realistically take issue with this forecast?
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Uwe E. Reinhardt, Ph.D., is the James Madison Professor of Political Economy and Professor of Economics and Public Affairs at Princeton University. References 1. According to the latest OECD data, the U.S. per-capita health spending in 1997 was $3,925, or 13.5% of gross domestic product (GDP). Germany (West and East) had the next highest figure with US$2,339 per capita in purchasing-power parity or 10.4% of the GDP. For Canada, the third most expensive country, the comparable numbers were US$2,095 per capita and 9% of GDP. Here it must be noted that Germany's population today is already as old as the U.S. population will be only in the year 2020. See Gerard F. Andersen and Jean-Pierre Pouillier, "Health Spending, Access, and Outcomes: Trends in Industrialized Countries," Health Affairs, May/June, 1999; pp. 178-92. 2. Uwe E. Reinhardt, "Employer-Based Health Insurance: R.I.P., in Stuart H. Altman, Uwe E. Reinhardt and Alexandra E. Shields, eds.The Future U.S. Healthcare System: Who Will Care for the Uninsured?", Chicago, IL: Health Administration Press, 1997; pp. 325-52. 3. The "policy-making elite" includes the legislators who vote on public health policy and the private interest groups who have a strong hand in crafting it. 4. The occasional legislative victory of populism over interest groups cannot invalidate the hypothesis that economically powerful interest groups concentrate their funds on legislatures in the full expectation of a commensurate rate of return. Why else would rational interest groups do it? 5. See Mark R. Chassin, "Assessing Strategies for Quality Improvement," Health Affairs, May/June,1997, pp. 151-61. In this connection, see also Robert S. Galvin, "What do employers mean by 'value?" Integrated Health Care Report, September & October,1998. For a truly alarming assessment of the quality of health care prior to the onset of managed care, see Lucien L. Leape, "Errors in medicine," The Journal of the American Medical Association, December 21, 1994; pp.1851-8. 6. Alan B. Krueger and Uwe E. Reinhardt, "The Economics of Employer versus Individual Mandates," Health Affairs, Spring, 1994; pp. 34-53; also Mark V. Pauly, Health Benefits at Work?, Ann Arbor, MI.: Michigan University Press, 1997.
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Implications of Policy Decisions on Human Embryonic StemCell Research in the United States Stephanie Oestreich Although research with human embryonic stem cells was recognized as one of the most promising fields in science by Science, in 1991 (Bloom, 1999), the issue of public funding remains a powerful determinant in the future of stem cell research. Because federal law prohibits the use of public funding for any research that harms a human embryo, research projects in this area are so far exclusively conducted by the private sector. Recently, promising scientific results have been achieved in this field, and applications in tissue engineering and transplantation are now clearly envisioned. These techniques could have a major impact on the treatment of a variety of still incurable diseases (see below). While a number of very insightful experiments have been conducted with mammalian embryonic stem cells, clinical research will ultimately require the use of human embryonic stem cells. However, ethical issues linked to the production of human embryonic stem cells solely for research purposes pose a challenge to policy makers. Despite numerous promising applications, a significant fraction of the general public is strongly opposed to any research involving human embryonic stem cells. Policy makers therefore must weigh the potential life-saving benefit of this research for the patient versus public concerns and reservations.
In order to balance the advancement of science in this field with ethical concerns, the National Institutes of Health (NIH) revised their funding guidelines. According to the Â
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new guidelines issued on August 23, 2000, federal funding is now available for fetal stem cell research and derivation of these cells. Derivation of embryonic stem cells is still not federally funded and research with embryonic stem cells is only funded if these cells are derived in compliance with the NIH guidelines (Vogel, Science 289 (2000), 1442-1443). This research paper aims to analyze the scientific background that provides a solid basis for policy recommendations. After describing the current status of funding and regulation of human embryonic stem cell research, recommendations will be proposed to establish a persuasive regulatory framework. Scientific Background Recent scientific advances regarding the isolation and successful culturing of human pluripotent stem cell lines have generated great excitement and promise major benefits for public health. Scientific studies have demonstrated that embryonic stem cells can be made to differentiate into any specific cell type, ultimately allowing the generation of tissue that can be used for transplantation therapy without causing any adverse immunological reaction. Such research could also contribute to the understanding of complex events that occur during human development, facilitating gene discovery and drug development. Although recent experimental success has raised expectations for the clinical potential of human stem cells, most experts believe that healthcare benefits will not be realized until after several years of research. They are concerned that during this time the credibility of the field could be damaged by over-optimism and suggest restraint in making exaggerated claims.
In order to provide a solid background for political decision-makers, scientific terms
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must first be explained and clarified. There are essentially three different types of stem cells that are currently employed in scientific research: • Embryonic stem cells, • Embryonic germ cells and • Adult stem cells. Embryonic stem cells can develop into any kind of tissue. Because of this fact they are termed totipotent. Embryonic germ cells are more specialized stem cells, which eventually give rise to the gonads of the embryo. Adult stem cells and embryonic germ cells occur in later stages of development. Adult stem cells, such as blood stem cells, are found in human adults and can develop into more specialized cell types, such as red blood cells. Both adult stem cells and embryonic germ cells are pluripotent, which means that they can give rise to many but not all of the cell types necessary for fetal development. Thus, pluripotent cell types cannot develop into a fetus when placed into a woman's uterus (NIH: Stem Cells - a Primer, 2000). To distinguish between a fetus and an embryo, an embryo in this context is defined as existing in "the period from after the long axis appears until all major structures are represented. In humans, this is from about two weeks after fertilization to the end of the seventh or eighth week." A fetus, on the other hand, is "a developing human offspring in the postembryonic period, from seven or eight weeks after fertilization to the time of birth" (Harcourt Dictionary of Science). Recent success in the field of stem cell research has triggered the hope of many scientists to eventually be able to treat a number of diseases, which are so far either entirely incurable or curable only in conjunction with the significant disadvantages of organ transplantation. Apart from the dearth of organ-donations being very scarce, the patient has to endure a life-long suppression of the immune system to avoid graft-host reactions. A solution to this problem could be posed by advances in stem cell research: a number of cell types (see below) can be developed from undifferentiated stem cells. With tissue derived from these cells, all the diseases in Table 1 might eventually be cured without fear of graft-host reaction because the transplanted tissues being immunologically identical to the patient's own cells. While stem cells are necessary during early human development, pluripotent stem cells are found in children and adults. However on the way to specialization, the potential of pluripotent stem cells to differentiate into other cell types decreases substantially. A number of critics of embryonic stem cell research favor the use of cells in later stages of human development, such as embryonic germ cells or adult stem cells, mostly
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for ethical reasons. However, stem cells from adults may not have the same capacity to proliferate as younger cells do. Additionally, adult stem cells do not exist in all tissues of the body, are often present in small quantities, are difficult to isolate and purify, and their numbers may decrease further with age. In addition, adult stem cells may contain more DNA abnormalities than embryonic stem cells, caused by long term exposure to sunlight and toxins as well as by errors made during DNA replication over the lifetime of the cell. Adult stem cells could also be disadvantaged when compared to embryonic stem cells with respect to their shortened telomeres (the ends of chromosomes). These phenomena might trigger undesirable responses such as apoptosis (programmed cell death) which would undermine the potential utility of adult stem cells in research and medical treatment. Research on the early stages of cell specialization may also not be possible with adult stem cells since they appear to be farther along the developmental pathway than pluripotent stem cells. In order to determine the best source of the specialized cells and tissues of the body for new treatments and even cures, it will be important to study the developmental potential of adult stem cells and compare it to that of pluripotent stem cells (Aldhous, 2000). Embryonic germ cells on the other hand are obtained from fetal tissue after miscarriage or abortion and thus carry a lesser ethical burden than the use of embryonic stem cells. Even though embryonic germ cells have some potential to develop into different types of tissue, these cells have led to abnormalities when introduced into embryos (McLaren, 2000). In addition, scientists have not been able to culture these stem cells for more than 21 days, a fact that clearly limits their use in scientific research. It is crucial that relevant distinctions between the different cell types are made clear to both the public and to political decision-makers by disclosing possible consequences for stem cell research and future applications. The NIH Guidelines In compliance with federal law, the newly revised NIH guidelines state that NIH-funded scientists are allowed to work with pluripotent stem cells. The cell lines used in this research have to be derived by private companies from frozen embryos discarded after fertility treatment. The donor of the embryo must have expressed informed consent and cannot accept any compensation. The NIH guidelines also seek to ensure that embryos are not created specifically for this purpose and that embryonic stem cells are not combined with animal cells. In addition, any attempts of reproductive cloning and the use of stem cells to create human embryos are strongly opposed. The NIH guidelines therefore prohibit public funding to be utilized for any of the above mentioned purposes (Vogel, Science 289: 2000, 1442). In determining which types of embryonic stem cell research should be eligible for funding, a number of points are worth considering. First, it is possible that the creation of research embryos will provide the only means by which to conduct certain kinds of research, such as research into the process of human fertilization. Second, as in vitro Â
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fertilization techniques improve, it is likely that the supply of embryos for research from this source will decline. Nevertheless, the NIH has concluded that, from a scientific and an ethical perspective, there is no compelling reason at this time to provide federal funding for the creation of embryos for research. According to the NIH, cadaveric fetal tissue and embryos remaining after infertility treatment provide an adequate supply of research resources for federal research projects. Currently, the derivation of human embryonic stem cells is only permitted in privately funded laboratories. Once a cell line is obtained, the stem cells could be passed on to federally funded scientists. Researchers on federal grants are however concerned that privately funded scientists will gain important insights and advantages through derivation and experimental manipulation of stem cells. NIH-funded researchers will be limited to the cell lines provided by private firms and will not be able to create and tailor cell lines to meet their specific needs. Most scientists and their supporters do not view the derivation and use of embryonic stem cells as ethically distinct activities and believe that it is important that federal funding be made available for protocols to derive such cells. Researchers using human embryonic stem cell lines hope to obtain substantial scientific benefits from a detailed understanding of the process of embryonic stem cell derivation and argue that the methods of derivation may affect the properties of the embryonic stem cells. Those dissatisfied with the current funding policy of the NIH emphasize the close connection in practical and ethical terms between both derivation and use of embryonic stem cells. Oversight and Review of Human Stem Cell Research To ensure that the research involving stem cells is delivering the anticipated benefits and to identify any concerns that may arise, federal oversight at the local, national and institutional level is crucial to assure the public that this research is being undertaken in a controlled and legal manner. When applying for NIH funding, scientists therefore have to submit their research proposals to four separate review bodies. In addition, the newly founded Human Pluripotent Stem Cell Review Group (HPSCRG) seeks to ensure compliance with the NIH guidelines. Despite the promise of the federal agency to work quickly, this process might however impose bureaucratic hurdles and delay research (Davis, 2000). Another problem could arise if the embryonic stem cell lines currently used in federally funded research are not approved for further research according to the new guidelines because the process of their derivation did not occur in compliance with the new guidelines. In such cases some research projects could be substantially impeded and deferred or would have to be abandoned altogether (Kennedy, 2000).
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Anonymous donation of embryonic stem cells to ensure privacy and informed consent of the donor might also conflict with the requirement of the NIH guidelines to trace back and document the precise origins of the cells (Marshall, 1999). Conflicting Opinions The new guidelines of the NIH received support from scientific groups (e.g. the American Society for Cell Biology), patient advocacy groups (e.g. the American Heart Association and the Juvenile Diabetes Foundation International), a number of Nobel laureates, former President Clinton and former Vice President Gore. On the other hand, a number of right-to-life activists, religious groups, the American Cancer Society (ACS), the Coalition of Americans for Research Ethics (CARE), and some legislators oppose the use of embryos in research despite the potential medical benefits. The Vatican issued a highly critical statement on the moral implications of stem cell research and Pope Paul condemned human cloning and embryo experiments (Dickson and Smaglik, 2000). President George W. Bush has stated that his pro-life views would compel him to continue the ban of public funding for stem cell research, but he might not be able to overlook corporate interests in this field. Two British patents which granted the U.S. company Geron the commercial rights to human embryos created by cloning also sparked protests (Hagmann, 2000). The main concerns of the opponents of stem cell research are that abortions could be encouraged by pressuring fertility patients to donate their embryos - violating the premise of informed consent - and that ultimately the most vulnerable members of society, the disabled and aged, are put at risk through new views regarding eugenics or euthanasia. Some even relate this research to the horrible experiments conducted in Nazi Germany and to cloning humans. Most of the conflicting opinions in this area arise between scientists and their supporters and groups who value ethical concerns and the protection of embryos more highly than scientific advances and potential medical treatments. Using a similar strategy to the NIH, opponents of stem cell research simply terminate or do not make any donations that might be used in the field of embryonic stem cell research. The American Cancer Society (ACS) for instance, which raises $500 million per year, has left the Patient's Coalition for Urgent Research (pCURE) since pCURE is lobbying Congress to support stem cell research. The ACS on the other hand had come to this decision through pressure from officials of the catholic church as some 100 lay Catholics had withdrawn from a breastcancer fund-raising event and retracted promised contributions (Wadman 1999). Ethical Considerations Recent developments in human stem cell research have raised hopes for ground-breaking new clinical therapies, but deep moral concerns are related to research involving human embryos. Opinions vary widely about whether the potential benefits outweigh the ethical costs of
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this research. Very few disagree with the view that the human embryo deserves respect as a form of human life, but there is considerable disagreement about the form of such respect and the level of protection of human life at different stages of development. For those who believe that the embryo has the moral status of a person from the moment of conception, any activity that would destroy an embryo is unacceptable. At the other end of the spectrum, some argue that an embryo does not deserve any particular moral consideration. NIH, however, again claims that others accept the special status of an embryo as a potential human being, yet argues that the respect due to the embryo increases as it develops and that this respect, in the early developmental stages in particular, may properly be weighed against the potential benefits arising from the discussed research. Although public policy in a pluralistic society cannot resolve all differences that arise regarding controversial issues, due to the sensitivity of this issue, it is imperative to proceed cautiously and to further stimulate the important public debate about the profound ethical issues regarding this potentially beneficial research. The International Perspective The position of NIH also has to be considered as being a major source of grants for scientific research not only in the United States but also for a number of laboratories abroad. The funding policy of NIH therefore significantly influences the decision-making process in other countries. Other scientifically advanced societies, however, might apply less stringent ethical guidelines (such as those of Great Britain), thus leaving federally supported U.S. scientists in a disadvantaged position compared to that of researchers in other countries (Nature 406 (2000), 815; Kennedy, 2000; Dickson and Smaglik, 2000). New policy statements from these countries therefore also need to be considered carefully. Japanese scientists are not allowed to work with human embryonic stem cells so far, but the Japanese Council for Science and Technology is currently discussing final guidelines for stem cell research. An advisory board of the European Union recommended in November 2000 to fund all types of research involving stem cells, particularly adult stem cells. Work that created embryos solely for research purposes was discouraged since "excess" embryos existed in fertility clinics, which would otherwise be discarded (Vogel, Science 290 (2000), 1673). In the United Kingdom - perhaps the most permissive country - the House of Commons recently passed a law that allowed cloning of embryos up to 14 days of embryonic development (Vogel, 2001). Despite the recommendations of the European Union, the French Government will soon submit a bioethics bill to the parliament that proposes to permit research with human embryonic stem cells and would not explicitly forbid therapeutic cloning of human embryos to create embryonic stem cells (Butler 2000).
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Germany's embryo-protection law prohibits research that harms a human embryo and bans the production of human embryonic stem cells. Although legislation is unlikely to be revised in the near future, the law does not prohibit the import of already-derived embryonic stem cells (Schiermeier, 2000). Policy Recommendations Recent advances in the area of stem cell research suggest substantial clinical benefits over existing treatments, as well as improvements of scientific knowledge in the field of embryonic development. In light of these encouraging results, achieved entirely by privately funded scientists, NIH has revised its funding guidelines in order to permit publicly funded researchers to actively engage in this important and rapidly evolving field. In the long term however, the current guidelines of NIH fail to adequately provide a solution to the issue of providing public funding for embryonic stem cell research. They allow federal funds to be used for the actual stem cell research but not for the derivation of the cell lines. The guidelines satisfy the immediate needs of U.S. researchers while taking ethical concerns of the public into account, but rest on fragile logic. Researchers receiving federal funds will inevitably be using federal grant money to order stem cell lines from private companies who derive them - while the actual derivation is not allowed when using public funding. Federally funded researchers should however be permitted to use public funding also for the derivation of embryonic stem cell lines. This will not only enable government supported laboratories to adjust the properties of these cell lines to their own needs, but also allow them to conduct a number of very clarifying experiments to address basic scientific questions in the field of embryonic development. Reliance on the distinction made between the use and derivation of embryonic stem cell lines leaves the future of the research uncertain, subject to the influence of politics and the courts. Senator Arlen Specter (R-PA) proposed a bill to allow funding for the use and derivation of embryonic stem cells, which would end this ambiguity (Nature 406 (2000), 921; Kennedy 2000), but the Senate rejected it (Science 290 (2000), 261). Specter said that he would reintroduce the bill in the new Congress, but his influence in promoting federal funding for stem cell research might be diminished since he is resigning from his position as chairman of the appropriations panel overseeing the NIH budget (Davis 2000). President George W. Bush will also have significant influence on the decision whether public funding of stem cell research will be continued. He has issued a statement criticizing the new guidelines, although corporate interests will most likely prevent him from banning federally funded stem cell research altogether. The new Bush administration could reject the current distinction that the NIH makes between use and production of embryonic stem cells, or it might require a change in the guidelines at the administrative level. It is therefore not at all certain that the newly issued guidelines will remain unchanged in the near future (Kennedy, 2000; Davis, 2000;
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Aldhous, 2000). Opponents of abortion state that funding stem cell research tacitly supports the derivation of stem cell lines, and as a consequence the destruction of embryos. Pro-life activists also point out that the NIH guidelines do not clarify existing laws, but rather circumvent them. Indeed, federal law prohibits NIH from funding work that harms or destroys a human embryo. However, considering that more than a million electively induced abortions are performed annually in the United States and that the embryos are normally discarded after such procedures, it seems unlikely that an abortion is encouraged solely to donate the embryo for research purposes. Since accurate documentation of the source of embryonic stem cells will represent a task that cannot be completed satisfactorily due to patient confidentiality, assurance of informed consent and privacy of the donor of these cells should be emphasized. At the same time, it must be made clear to the donor that acceptance of compensation of any sort or specification of the purpose of the donation is impossible. Opponents of abortion could also still favor stem cell research since there exists a number of methods to derive stem cells without harming an embryo (Robertson, 1999). These varying views have to be thoroughly considered by policymakers since it will not be possible to liberalize the NIH guidelines without the consent of right-to-life-advocates. Due to the conflicting values stated above it might only be politically feasible to relax the guidelines successively. A thorough but efficient oversight and review process should be established in order to assure the public that stem cell research is conducted in a controlled and scientifically valid manner and that ethical concerns are seriously addressed. Although public opinion has to be taken into account when deciding about the distribution and utilization of federal funds, the NIH guidelines represent an unsatisfying compromise in order to balance the support of stem cell research and ethical concerns of the general public. In addition, the NIH guidelines fail to establish a clear ethical and regulatory framework for the private sector, whose research is not federally supervised or publicly disclosed, thus applying different moral standards to privately and publicly funded research. Interestingly, the focus has been on governance of the federal funding process rather than on national regulation. But, the current NIH guidelines and their funding policy significantly limit the potential of stem cell research, leaving this promising field without the full benefit of the entire American scientific community, much of which operates in institutions that are dependent upon federal sources of support. To promote research equally in the public and private sectors, privately funded scientists should either have to comply with the NIH guidelines or the guidelines should be made more permissive in order not to disadvantage publicly funded research. Strong emphasis must also be placed on adequate caution ahead of the pursuit of economic interests.
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Although it is difficult to ethically control science that is progressing very rapidly, it is crucial that sufficient respect is attributed toward human life even in light of potential medical benefits of stem cell research. When considering the ethical implications of stem cell research, it has to be noted that a number of methods exists that allow the derivation of embryonic stem cells which do not harm an embryo and that such derivation and use of stem cells cannot be separated in neither practical nor ethical terms. In order to eventually achieve clinical benefits and important scientific insights, experimentation with embryonic stem cells, embryonic germ cells and adult stem cells has to be equally permitted for scientists utilizing public funding. Society will have to define clear boundaries to provide scientists with appropriate expectations and requirements when conducting stem cell research. The transfer of an embryo created by cell nuclear replacement into the uterus of a woman (so called "reproductive cloning"), mixing of live animal and human embryonic stem cells or the creation of an embryo solely for research purposes should remain to be strongly discouraged. The guidelines, however, must be revisited as soon as scientific advances, possible new applications and considerations of the general public suggest any regulative changes. It is also important to observe closely the policy decisions regarding stem cell research that are made by other countries, but ultimately the United States have to be aware of their leading role in this field. American decision-makers must consider their influence on the decision making process in science policy in other countries, but also have to distinctively state an independent position in research policy that is tailored to meet the specific concerns of their own country. If the American public decides in the future that the potential benefits of stem cell research outweigh the ethical concerns and that it would like to support progress in this field, the NIH guidelines will have to be revised, becoming more permissive as scientific knowledge and public discussion advance. Stephanie Oestreich is a Ph.D. student in biochemistry in the laboratory of Jack Szostak at HMS and also a student in the Two-Year Master of Public Administration Program at the John F. Kennedy School of Government References Aldhous, P. "Stem Cells - Panacea, or Pandora's Box?" Science. 408: 2000, 897-898. "Awkward Inconsistencies of a Stem-Cell Rule." Nature. 406: 2000, 921. Birmingham, Karen. "UK Approves Human Stem Cell Research."Nature Medicine. 6: 2000, 950 Bloom, F.E. "Breakthroughs 1999." Science. 286: 1999, 2267.
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Butler, D. "France Opens Door to Use of Embryos in Stem-Cell Research." Nature. 408: 2000, 692. Cyrano, D. "Japan May Allow Human Embryo Stem-Cell Research." Nature. 403: 2000, 470. Davis, M. "Stem-Cell Work in the Balance." Science. 408: 2000, 887-888. "Decisions, Decisions." Science. 291: 2001, 25 Dickson, D. "Parliament Gives Green Light to Stem-Cell Research." Nature. 409: 2001, 5. Dickson, D., and Smaglik, P. "U.K. Government Backs Change in Law over Stem Cell Research." Nature. 406: 2000, 815. Frankel, M.S. "In Search of Stem Cell Policy." Science. 287: 2000, 1397. Gearhart, J. "New Potential for Human Embryonic Stem Cells."Science. 282: 2000, 10611062. Hagmann, M. "Protest Leads Europeans to Confess Patent Error."Science. 287: 2000, 1567-1569. http://www.harcourt.com/dictionary/def/3/4/9/7/3497900.html http://www.harcourt.com/dictionary/def/3/8/9/4/3894300.html Kennedy, D. "Two Cheers for New Stem Cell Rules." Science. 289: 2000, 1469. Kornblut, A.L. "Bush Says He Opposes Using Fetal Tissue from Abortions." Boston Globe. 27 January 2001, A13. Lenoir, N. "Europe Confronts the Embryonic Stem Cell Research Challenge." Science. 287: 2000, 1425-1427. McKay, R. "Stem Cells - Hype and Hope." Nature. 406: 2000, 361-364. McLaren, A. "Stem Cells: Golden Opportunities with Ethical Baggage." Science. 288: 2000, 1778. National Institutes of Health Guidelines for Research Involving Human Pluripotent Stem Cells, 23 August 2000. http://www.nih.gov/news/stemcell/stemcellguidelines.htm
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NIH: Stem Cells - a Primer, May 2000. http://www.nih.gov/news/stemcell/primer.htm Robertson, J.A. "Ethics and Policy in Embryonic Stem Cell Research." Kennedy Institute of Ethics Journal. 9.2: 1999, 109-136. Saegusa, A. "Japan Bans Human Cloning." Nature Biotechnology. 18: 2000, 366. Schiermeier, Q. "...but Germany Remains Unmoved." Nature. 406: 2000, 815. Shapiro, H.T. "Ethical Dilemmas and Stem Cell Research."Science. 285: 1999, 2065. Smaglik, P. "Embryo Stem-Cell Work Gets NIH Go-Ahead."Nature. 406: 2000, 925. Triendl, R. "Japan to Permit Stem Cell Research." Nature Medicine. 6: 2000, 239. Varmus, H. "The Challenge of Making Laws on the Shifting Terrain of Science." Keynote Speech at the Whitehead Policy Symposium 2000. Vogel, G. "British Parliament Approves New Rules." Science. 291: 2000, 23. ---. "Stem Cells: New Excitement, Persistent Questions." Science. 290: 2000, 1672-1674. ---. "Researchers Get Green Light for Work on Stem Cells."Science. 289: 2000, 14421443. ---. NIH Sets Rules for Funding Embryonic Stem Cell Research.Science. 286: 1999, 2050-2051. ---. Harnessing the Power of Stem Cells. Science. 283: 1999, 1432-1434. Wadman, M. "Charity Cools over Stem Cells after Boycott by Catholics." Nature. 400: 1999, 493. Wadman, M. "Protesters Seek U.S. Ban on Embryo Stem-Cell Work." Nature. 400: 1999, 96.
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Smoking and Health: 1964 U.S. Surgeon General’s Report as a Turning Point in the Anti-Smoking Movement Michael Housman On Saturday, January 11, 1964, the U.S. Surgeon General Luther Terry approached the podium of the State Department auditorium to deliver the results of an exhaustive literature review through a 387-page report entitled "Smoking and Health: Report of the Advisory Committee to the Surgeon General of the Public Health Service." There, the government sealed off 200 reporters and the ten members of the Surgeon General's Advisory Committee on Smoking and Health from the rest of the world. Inside the auditorium, Terry offered a two-hour exegesis on the report, which amplified the one paramount judgment that "cigarette smoking is a health hazard of sufficient importance in the United States to warrant appropriate remedial action."1 The committee's report made front-page headlines throughout the country and was featured prominently on news broadcasts. Nevertheless, the press almost uniformly predicted that while smoking rates might decline in the immediate future, the smoking habit would inevitably prevail and the American public would not permanently change their use of tobacco products. More than thirty years later, smoking rates of American adults have been cut almost in half from 46% to 25% and it appears inevitable that this decline will continue. What caused the media to make such erroneous predictions? What separated this report from the numerous other reports and studies that had been written long before it? Three major explanations emerge to distinguish this striking phenomenon: (1) the legitimacy, authority, and objectivity of the Surgeon General; (2) the meticulous accumulation and aggregation of scientific evidence that characterized the study; and (3) the widespread campaign that publicized the findings of the report. As a result, despite its rather predictable conclusions, Luther Terry's famous announcement marked an important turning point in the anti-smoking movement, precipitating a decline in smoking that has lasted to the present day. The Report In May of 1962, President John F. Kennedy spoke at the very same podium in the State Department auditorium. In response to a question about health hazards attributed to smoking, he responded, "That matter is sensitive enough and the stock market is in sufficient difficulty without my giving you an answer that is not based on complete information, which I don't have."2 A few weeks later, after examining material gathered by the Public Health Service, Kennedy instructed Terry to go ahead with a plan he had proposed in April to appoint an Advisory Committee on Smoking and Health. After consulting with the tobacco industry, private health organizations, and several federal agencies, Terry picked ten distinguished scientists (who had not taken public positions on the health effects of smoking) to hold nine meetings between November 1962 and December 1963. They reviewed more than 7,000 articles, including 3,000 research reports, and reported its findings two months after Kennedy's assassination.3
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On Saturday, January 11, 1964, newsmen, government workers, and tobacco industry spokesmen "puffed self-consciously on cigarettes" in the lobby and corridors outside the State Department auditorium after nine "no smoking" signs had been fastened to the walls inside.4 Meanwhile, Terry delivered the conclusions of the project for which the principal finding was as follows: Cigarette smoking is associated with a 70% increase in the age-specific death rates of males. The total number of excess deaths causally related to cigarette smoking in the U.S. population cannot be accurately estimated. In view of the continuing and mounting evidence from many sources, it is the judgment of the Committee that cigarette smoking contributes substantially to mortality from certain specific diseases and to the overall death rate.5 The committee also found that "cigarette smoking is causally related to lung cancer in men; the magnitude of the effect of cigarette smoking far outweighs all other factors. In comparison with non-smokers, average male smokers of cigarettes have approximately a 9- to 10-fold risk of developing lung cancer and heavy smokers at least a 20-fold risk."6 Additionally, the committee concluded that "cigarette smoking is the most important of the causes of chronic bronchitis in the United States, and increases the risk of dying from chronic bronchitis and emphysema."7 Furthermore, it "established that male cigarette smokers have a higher death rate from coronary artery disease than nonsmoking males."8 It even went on to state that while the causative role of cigarette smoking in deaths from coronary artery disease had not yet been proven, "the committee considers it more prudent from the public health viewpoint to assume that the established association has causative meaning than to suspend judgment until no uncertainty remains."9 This statement revealed the rather liberal nature of the committee, which chose to assume a causative role in the absence of more evidence rather than taking a wait-and-see stance. In doing so, the committee implicated cigarette smoking as a leading cause of heart attacks, which was the nation's number one killer at the time (577,000 deaths in 1962). Overall, the report indicted cigarette smoking on a number of different offenses and constituted very bad news for the more than seventy million regular smokers in the U.S. Nevertheless, the report itself did not mark a dramatic shift from the conclusions that most other projects studying smoking had made. This was the case for the two reasons stated specifically in the discussion of the project's phases. First, the committee was to make an "objective assessment of the nature and magnitude of the health hazard by critically reviewing all available data but would not conduct new research."10 In other words, no original research was performed in conjunction with this study and all conclusions were subsequently drawn from literature that had already been made publicly available. Second, "recommendations for actions were not to be a part of the committee's responsibility" as it was recognized that "the many possible recommendations for action would extend beyond the health field and into the purview and competence of other Federal agencies."11 Terry's call for "appropriate remedial action" was the limit of the report's policy recommendations as it went no further than any other scientific studies of a similar nature. For these reasons, the Surgeon General's report did not represent a significant departure from the findings of previous work on the effects of smoking. Â
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The Initial Reaction At the conclusion of the press conference, reporters rushed to the phones to call in the story. The next day, the report received front-page coverage throughout the country.12 After devoting several pages to discussing the content of the report and the details of Luther Terry's speech, all major media sources made their own predictions regarding the short- and long-term effects of his announcement. In its January 12, 1964 issue, the New York Times ran an article entitled "Cigarettes Peril Health, U.S. Report Concludes; 'Remedial Action' Urged" which included a sub-section entitled "Smoker in Street Largely Defiant" that described the reaction of smokers to the report. In a series of interviews, almost all smokers said that they would continue to smoke unfettered by the new information. As justification for this stance, they gave such reasons as, "I can stop drinking, but not smoking," "Because I've got strong lungs," "I love these stinkers," and "Everyone needs a certain amount of pleasure and smoking is a little pleasure I think I'll continue."13 The article concluded by saying that while smoking rates might drop temporarily, they would almost certainly rebound shortly thereafter and continue to rise as they had in the decade prior to 1964. The January 12, 1964 issue of the Los Angeles Times featured the headline "Report Calls Smoking Definite Health Peril." It included two smaller articles with the titles "Americans Knew Smoking Hazards Long Before Report Was Started" and "Tobacco Report Effects Awaited: Initial Drop in Sales Predicted but Habit is Expected to Prevail." The first began by explaining that "Americans received plenty of advance warning about the hazards of cigarette smoking long before the Surgeon General's report was released Saturday in Washington."14 It cites numerous studies conducted by the Public Health Cancer Association, American Cancer Society, World Health Organization, American Heart Association, and American Medical Association that had been conducted years before and arrived at conclusions almost identical to those of the Surgeon General's report. The second article predicts that "the government's report on smoking and health will probably cut significantly into sales - perhaps 10 % initially...but experience both here and in Britain suggests that the drop will be short-lived."15 The article points out that tobacco was the nation's fifth largest crop whose revenues in 1963 brought in $8.08 billion of which 40% went to taxes and the article's author simply could not foresee a sizeable decrease in store for this rapidly-growing industry. Moreover, these predictions weren't limited to major newspapers as the major magazines such as Newsweek and U.S. News & World Report made very similar statements. In the January 20, 1964 issue of Newsweek, an article called "Cigarette Smoking is a Health Hazard..." includes a lengthy description of the Surgeon General's report is followed by a brief discussion of the public's initial reaction. The authors state that "although tobacco stocks no doubt will dip and cigarette sales drop in the initial public reaction to the report, there is every reason to believe the industry will survive, as the British industry did after the equally strong Royal College of Physicians report in 1962."16 Similarly, the January 20, 1964 issue of U.S. News & World Report includes an article entitled "Here's the Latest on Tobacco and Health" which discusses the committee's findings after which it states the following:
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Experience suggests that, every time a special study like the present one is published, there is a period when smoking declines. This is followed by a renewed, even steeper, rise in smoking. This happened in the U.S. in 1954. It happened most recently in Britain in 1962, where a Government report was followed by an official campaign urging people to cut down, or cut out, their cigarette smoking. In both countries, the slump in cigarette sales lasted only about a year. After that period, the only change in smoking habits that held on was a switch to filter cigarettes.17 Both Newsweek and U.S. News & World Report use the British example as justification for the claim that this report would not significantly alter smoking rates in the country, at least in the long run. Upon examination of four separate media sources written directly after the Surgeon General's report, it appears remarkable that all of them make very similar forecasts concerning the fate of the smoking habit and the tobacco industry. Their justifications may have varied considerably as some stated that Americans already knew about the health risks of smoking, while others asserted that Americans simply could not give up a habit so ingrained in their culture, and still others pointed out that previous experience with similar reports has shown that the short-term decline in smoking would not be sustained for very long. Regardless, the media generally agreed that the report generated by the Surgeon General's Advisory Committee on Smoking and Health could not possibly make a permanent dent in an industry that had generated record profit levels year after year since World War II. The Sustained Reaction The sustained reaction to Luther Terry's announcement was a far cry from what the media and almost everyone else had expected. Although its conclusions came as no surprise to Terry or to others familiar with the research, they had a noticeable impact on the country's smokers. Cigarette sales fell immediately. In New York State, cigarette tax revenue for January was about 5% less than in January 1963, and February's total was down 18% from the year before.18 Nationwide, per capita cigarette consumption fell 3.5% between 1963 and 1964. Per capita consumption remained relatively constant in 1965 and 1966, dropped for four consecutive years, and rebounded slightly in the early 1970s. But it never returned to the 1963 peak of 4,347 cigarettes smoked per capita, and in 1974 it began a steady decline that continued for two decades. In 1966, about 46% of American adults regularly smoked cigarettes; today about 25% do.19 Despite some fluctuations in the late 1960s and early 1970s, most scholars agree that while the Surgeon General's report did not single-handedly alter the smoking habits of the American people, it was certainly the pivotal event that precipitated such a radical change. Mark Lender summarizes much of the prevailing thought on the subject when he states the following: The 1964 report of the Surgeon General Luther Terry began a sea-change in attitudes and in smoking behavior. The report explicitly identified smoking as a cause of lung cancer in Â
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men and firmly established the dangers of tobacco in the popular mind. Since then, subsequent reports have further stirred popular concern. The influence of these reports on public attitudes toward smoking would be hard to overestimate.20 However, it is imperative to recall the fact that the scientific studies upon which this report was predicated had already been published and publicized for more than a decade prior to President Kennedy's instructions to Terry. While a number of them had resulted in decreases or smaller increases in cigarette consumption, none had effectively turned the tide against smoking to the extent that this report had done. What caused the predictions of the American media to be so obviously off the mark? What separated this report from the thousands of others upon which it was based? How did this report mark a turning point in the anti-smoking movement? The Explanation It is clear that the 1964 Surgeon General's report signified some sort of departure from previous work in the field as evidenced by the permanent declines in smoking behavior observed in the decades following its release. While the report alone did not accomplish all of this, it marked the beginning of the most concerted, sustained, and successful effort in history to discourage the use of tobacco.21 What allowed this report to play such a pivotal role was the convergence of three factors, including the legitimacy and authority of the Surgeon General's office, the meticulous accumulation and aggregation of scientific evidence characterizing the report that resulted in the claim that a "causal" relationship existed, and the widespread campaign that publicized the findings of the report. While thousands of other studies had been published by individual researchers or partisan organizations such as the American Cancer Society or Council for Tobacco Research (formerly the Tobacco Industry Research Committee), none had the authority, legitimacy, or unbiased nature of the U.S. Surgeon General. At the time, few medical authorities were as well respected as the Surgeon General, and Luther Terry's announcement gave the message significant legitimacy by putting the weight of the federal government behind it. As Allan Brandt points out: The report served the political functions upon which it was predicated. It provided power and legitimacy to the epidemiologic findings; indeed, the report was of fundamental importance in raising the stature of epidemiology as a discipline. It made clear that the government would accept broader responsibility for the determination of risks and for public education to prevent disease. The ability of self-interested parties such as the tobacco industry to disparage such findings was now delimited.22 Additionally, a sizeable majority of the reports on smoking and health that were available at the time had either been conducted or funded by openly partisan organizations and the results of such experiments often correlated strongly with the organization that had initiated them. The issue of trust emerged as an obstacle to the ability of Americans to believe how severe the health risks of smoking actually were. However, Luther Terry quite effectively quelled this concern by allowing the creation of Â
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the committee to be an open process. The participants "compiled a list of more than 150 scientists and physicians working in the fields of biology and medicine" and "during the next month, these lists were screened by representatives of organizations present at the July 27 meeting. Any organization could veto any of the names on the list, no reasons being required."23 Among the representatives in attendance at the July 27 meeting were individuals from all of the major tobacco companies, relevant cancer-related organizations, and government officials. As a result, when the findings from the committee had been published, very few individuals chose to criticize them and even the tobacco companies focused instead upon endorsing Terry's call for "not less but more research."24 All of these factors allowed the Surgeon General's report to differentiate itself from other studies by establishing the credibility of the source from which the controversial message had come. The Surgeon General's report also involved a methodology that had not been employed before, at least within the United States. Rather than generating its own data, it provided a meticulous accumulation of scientific evidence that considered all points of view and generated a coherent and all-encompassing conclusion. With the help of over 144 consultants, the Surgeon General's Advisory Committee on Smoking and Health was charged with the task of reviewing the 7,000 articles and 3,000 reports that were available on the topic. It also considered statements and pertinent information that other interested parties, particularly the tobacco industry, had submitted to it. These studies had come to similar but nevertheless contradictory conclusions as to the extent of the health hazard that smoking posed. The Surgeon General's report accomplished what most other studies had not in that it synthesized the available literature on the topic and provided a "single, authoritative reading of the mounting evidence."25 The American people could now reliably state that smoking increased one's chances of dying in any given year by 70% rather than anywhere from 0 to 100% as individual studies may have contended. Additionally, by virtue of its study design, the committee was able to utilize the wide array of sources in order to establish a causal relationship between smoking and various illnesses, an association that no other study had been able to reliably accomplish. This achievement was based upon the committee's recognition of the "multiple etiology of biological processes" and as Brandt goes on to explain: The report, despite the fact that it offered no new data, nevertheless made a fundamental contribution to the study of causal inference in epidemiological studies. The committee developed a set of criteria for evaluating causal relationships, which has been widely applied since that time. Causal evidence had to be (1) consistent, (2) strong, (3) specific, (4) supportive of appropriate temporal relationship, and (5) coherent. At the press conference announcing the committee's findings, Terry was asked whether he would now recommend to a patient to stop smoking. His answer was an unequivocal "yes."26 Though the tobacco industry would continue to dispute this fact to the present day, the ability of the Surgeon General to declare that "cigarette smoking is causally related to lung cancer in men" marked an important departure from previous studies which had only been able to demonstrate a strong correlation.27 The simple use of the word "cause" gave anti-smoking advocates the ammunition they needed to target cigarettes and the tobacco companies as a public health hazard. As a result of this highly effective methodology, the Â
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Surgeon General's 1964 report gave the American public a single message equating cigarette smoking with death, thus contributing to the dramatic decline in smoking that was observed immediately after the report was released. This decline was also the result of a prolonged and widespread publicity campaign that began the instant that the doors to the State Department auditorium were unlocked. As stated previously, the media seized upon this dramatic development that concerned an issue of national importance, and it proceeded to broadcast the words of Luther Terry to all corners of the nation more than it had ever done before. However, the greatest difference between this report and other studies was the fact that various parties made a concerted effort to widely disseminate its conclusions through the use of resources other than the media. One week after Terry's press conference, the Federal Trade Commission announced that it planned to require health warnings on every cigarette package and advertisement. Congress superseded FTC action with the Cigarette Labeling and Advertising Act of 1965, which required the warning "Caution: Cigarette Smoking May Be Hazardous to Your Health" on all cigarette packages as of January 1, 1966.28 Smokers were constantly reminded of the consequences of their habits. Additionally, within a couple years, a major campaign began against smoking as advertisements were placed on billboards, television commercials, and magazines, making the information about the health effects of smoking widely available. As a result, "virtually no one growing up in America since the mid-20th century could seriously claim not to understand - or at least to have heard about - the health risks associated with smoking."29 The public had been fully informed of the risks of smoking and was allowed make its own decision, which undoubtedly contributed to the decline in smoking observed in the decades following Luther Terry's report. Conclusion Prior to Luther Terry's announcement on the morning of January 11, 1964, almost anyone in the crowd could have guessed what the underlying theme of his speech would be. Ironically enough, once he was finished, almost no one accurately predicted its monumental effects on the smoking habits of Americans. Terry's message was simple as he stated in plain English that "smoking causes cancer" in addition to other health problems. Consequently, cigarette consumption began an immediate and sustained declined which has lasted to the present day as the smoking rate has dropped from 46 to 25%. However, it was not the content of the message but rather its context that separated this report from all others that were available at the time. For the first time, this message was delivered by a well-respected and unbiased medical authority, who reviewed all the available literature on the subject to deliver an all-encompassing statement that was widely publicized to all men, women, and children living in the United States. In these three respects, the Surgeon General's report constituted a remarkable shift from earlier studies and undoubtedly marked the turning point in the anti-smoking movement. However, its impact upon smoking rates must be understood in a broader context. The importance of the Surgeon General's report on tobacco cannot be under-stated as a contributing factor in the emergence of a policy environment receptive to various tobacco control strategies.30 While strategies had existed long before the Surgeon General's Â
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report, no successful anti-cigarette campaign could be waged before the causal link between smoking and health problems had been established and accepted by the public. The Surgeon General's report filled this role and provided the impetus for a movement that resulted in dramatic changes in smoking and cancer incidence rates. Michael Housman is a junior at Harvard College. References 1. U.S. Public Health Service. Smoking and Health: Report of the Advisory Committee to the Surgeon General of the Public Health Service. Washington, DC: U.S. Government Printing Office, 1964. 33. 2. Hunter, Marjorie. "Smoking Banned at News Parley." The New York Times, 12 January 1964: 66. 3. Sullum, Jacob. For Your Own Good: The Anti-Smoking Crusade and the Tyranny of Public Health. New York: The Free Press, 1998. 41. 4. Hunter, 66. 5. U.S. Public Health Service, 31. 6. U.S. Public Health Service, 32. 7. U.S. Public Health Service, 32. 8. U.S. Public Health Service, 33. 9. U.S. Public Health Service, 33. 10. U.S. Public Health Service, 13. 11. U.S. Public Health Service, 13. 12. Brandt, Allan M. "The Cigarette, Risk, and American Culture."Sickness and Health in America. 3rd ed. Ed. Leavitt, Judith and Numbers, Ronald. Madison, WI: The University of Wisconsin Press, 1997. 494. 13. Robinson, Douglas. "Smoker in Street Largely Defiant." The New York Times, 12 January 1964: 66 14. Nelson, Harry. "Americans Knew Smoking Hazards Long Before Report Was Started." The Los Angeles Times, 12 January 1964: A3. 15. Toth, Robert C. "Tobacco Report Effects Awaited: Initial Drop in Sales Predicted but
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Habit is Expected to Prevail." The Los Angeles Times, 12 January 1964: A2. 16. Bocker, Dorothy. "Cigarette Smoking Is a Health Hazard..."Newsweek, 20 January 1964: 50. 17. Chandler, William. "Here's the Latest on Tobacco and Health."U.S. News and World Report, 20 January 1964: 45. 18. Sullum, 53. 19. Sullum, 52. 20. Lender, Mark E. "A New Prohibition? An Essay on Drinking and Smoking in America" Smoking: Who Has the Right? Ed. Schaler, Jeffrey A. and Schaler, Magda E. Amherst, NY: Prometheus Books, 1998. 82. 21. Sullum, 52. 22. Brandt, 499. 23. U.S. Public Health Service, 9. 24. Allan, John. "Tobacco Institute Says Report 'Is Not Final Chapter' in Debate Over Health Issue." The New York Times, 12 January 1964: 66. 25. Brandt, 498. 26. Brandt, 499. 27. U.S. Public Health Service, 32. 28. Sullum, 53. 29. Lender, 82. 30. Jacobson, Peter D. et al. "Historical Overview of Tobacco Legislation and Regulation." Smoking: Who Has the Right? Ed. Schaler, Jeffrey A. and Schaler, Magda E. Amherst, NY: Prometheus Books, 1998. 48.
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