Special Report: The Uninsured

Policy-makers still cannot agree on a single solution

At the end of 2003, there was a flurry of reports on the problems of those without health insurance coverage for all or part of each year and what to do about them. The upcoming presidential campaign keeps the issue alive. Here is a summary of the reports and analyses that are likely to be the foundation for any policy changes.

All is not well in Stuart Altman’s view of American health care and the uninsured. "The problem is getting worse, not better, on a lot of fronts," said Mr. Altman, Brandeis University professor of national health policy, at a November briefing of the Council on Health Care Economics. "We’re not making progress. We’re going in the wrong direction. The number of uninsured is growing. And the parallel problem to the increasing number of uninsured is the increasing cost of health care. Whether we’re looking at premium growth or expenditure growth, we’re back to the 1980s in terms of increases in spending," he added. Contrast that, Mr. Altman said, with the fact that for many decades now a vast majority of Americans, usually 75% to 85% of those polled, believe every American should have health insurance coverage.

To show how difficult it is to develop a solution that can win political support, Mr. Altman divides the country into rough quarters. The first, about 25%, believes there should be a single-payer system run by the government, whether it would look like Medicare, or like Canada and Great Britain. The next group, also about 25%, believes in employer mandates, which has been the prevailing structure for most health insurance since World War II ended. The latest version of the employer mandate paradigm is California’s Senate Bill 2, which wants every employer to be responsible for covering all its workers. Small firms and those with low wage bases would be subsidized, but the basic theme is an employer mandate wrapped around a government plan for those not working.

Yet another group, according to Mr. Altman, opposes employer mandates because they distort the labor market or they leave inefficiencies. People in this group believe there should be tax and other incentives to encourage individual responsibility for their own health insurance. The fourth group, perhaps 15% to 20%, is opposed to anything, according to Mr. Altman.

In a political context, he added, a substantial majority, perhaps 60% to 70% of those voting, is needed to pass any significant structural change, and thus it’s easy for the opposition to form a coalition with any group whose idea is dead in the water and stonewall progress. "We allow ourselves to say that if we can’t have our own plan, we’d rather stick with the status quo," he said.

Mr. Altman said it’s not likely that a solution will come until enough Americans feel personally threatened. "Maybe," he theorized, "as the problem grows worse and affects more and more of the middle class, the likelihood of some form of government action will increase."

Paul Ginsburg, president for the Center for Studying Health System Change and vice president Len Nichols described the health care cost-coverage conundrum as the "care we want vs. the care we can afford. "How we finance health care and our leaders’ pervasive unwillingness to confront the difficult trade-offs inherent in containing health care costs and expanding health insurance to cover more Americans contribute to the seemingly intractable nature of the cost-coverage conundrum," they wrote in the center’s annual report, suggesting that for any meaningful discussion, three key factors must be considered:

1. Cost-containment and quality improvement efforts are essential if Americans are to get a better value for the large sums of money spent on health care.

2. If we are to cover everyone, we cannot cover everything, and it’s necessary to make informed choices about which medical services are more beneficial to patients than others.

3. Even if cost trends are slowed, considerable public funding will be needed to expand coverage to the uninsured, whether through tax subsidies, expansion of public coverage, or a combination.

What is striking over the years, according to Mr. Ginsburg and Mr. Nichols, is "the consistency with which leaders in both the public and private sectors have avoided the idea that real cost containment involves real sacrifice — patients going without services that may provide some benefit or physicians, hospitals, and insurers settling for smaller incomes or profits." It doesn’t work, they said, for policy-makers to consider the health care cost problem in terms of waste, fraud, and abuse in hopes that if enough progress is made in those areas, there will be no need for difficult trade-offs.

More people can’t afford care

They noted that, despite an aggregate economic capacity to pay for ever-greater health care spending, an increasing number of individuals can no longer afford health care when society acts as if medical care is a free service. "In our view," they wrote, "a more clinically based form of rationing is needed to avoid pricing health care out of the reach of an increasing proportion of Americans. Though some deny it, we ration care today. The uninsured get much less care than the insured and suffer worse health outcomes because of it, and the insured with ample means get more care than the lower-income insured, although without clear differences in outcomes. The challenge is to ration in a way that is more efficient and more equitable."

Mr. Ginsburg and Mr. Nichols traced America’s long history of rising health care cost trends and noted that even though other industrialized countries devote smaller percentages of their gross domestic product to health spending, their health care costs per capita grew at a rate remarkably similar to those in the United States, and all developed countries are spending an increasing share of the gross domestic product on health and increasingly are worried about cost control, according to the Organization for Economic Cooperation and Development (OECD).

Its commentary says employers’ willingness to deal with cost control varies with the business cycle. When health care costs are rising rapidly, profits are low and labor markets are loose; employers have taken strong actions to control costs only to drop their efforts when the cycle turns.

Employers buying down benefits

With health insurance premium trends high and the economy weak, said Mr. Ginsburg and Mr. Nichols, employers respond by buying down the benefit structure of their plans by increasing patient cost sharing. While employers don’t appear to be interested in revisiting restrictive managed care models, possibly because of the vehement employee opposition to such controls and the lack of visibility of costs to workers, they also are not optimistic that higher cost sharing alone can provide a long-term answer.

State and federal governments deal with costs through two distinct roles, Mr. Ginsburg and Mr. Nichols explained. They are managers of public insurance programs and also are regulators of the health care system. Medicare and Medicaid, they said, have aggressively controlled spending when imperatives to cut budgets were greatest, primarily by reducing provider rates. But rate reductions have been constrained by concerns about beneficiaries’ access to providers and concerns about providers’ financial viability, especially hospitals’. Benefit reductions have not been common, and there has been little interest in controlling utilization of services. Also, except for the 1970s, governments have not been very active in attempts to contain costs systemwide.

Restrictions in other countries

In contrast to what has happened here, according to Mr. Ginsburg and Mr. Nichols, OECD countries use a wider array of tools to limit resource use and expenditure growth. "Until recently," they wrote, "cost sharing has not been used in these countries, often reflecting their social value of solidarity — equal access to something as critical as health care. Direct regulation of prices, involving unabashed use of government’s sole-buyer power, and administrative limits on the acquisition and use of expensive technology are used in place of substantial patient cost sharing in these systems. A recent cost analysis concluded that rates of service use are lower in the U.S. than in OECD countries and that higher services prices and greater service intensity explain much of the higher U.S. spending rate."

With cost pressures likely to increase in this country in the next few years, Mr. Ginsburg and Mr. Nichols said policy-makers are likely to pursue ideas that promise to reduce costs, including federal support for an information technology infrastructure for hospitals and medical practices, plus an expanded role for disease management in Medicaid and Medicare.

"Many of these initiatives have merit because they may improve the quality of care," they wrote, "but we are skeptical about the magnitude of cost reduction. While there certainly will be instances where quality improvement will contain costs at the same time, we doubt that the net impact on costs will be commensurate with the magnitude of the affordability problems.

"More effective ways to cope with limited resources will depend on political, professional, corporate, labor, and opinion leaders articulating the need to confront trade-offs among clinical effectiveness, costs, and equity. Once the rationing imperative is widely acknowledged, a broader and complimentary array of cost-containment tools can be brought to bear in the United States. These cannot and need not extend to the kinds of absolute limits on specific resources and consumer choices used by the centralized systems of most OECD countries. Rather, evidence-based practice guidelines and institutionalized technology assessment can help to inform private benefit package design and differential cost-sharing requirements. In contrast to systems that decide for the patient what services are unavailable because of limited clinical value, a system more compatible with American values would continue to allow broad patient and provider choices, coupled with extensive information about likely clinical value and higher cost sharing when the values are small."

Mr. Ginsburg and Mr. Nichols concluded that, in the end, Americans still will be devoting more of their income to health care than is the case today, but slowing that trend may keep mainstream health care accessible to more of the population. It also could give, they added, considerably more value for the health care dollars spent and help ensure that care will be distributed more equitably throughout society than if nothing is done.

[To access a webcast and transcript of the Council on Health Care Economics and Policy briefing, go to: www.kaisernetwork.org. Download the Ginsburg-Nichols commentary from www.hschange.org. Contact Mr. Ginsburg and Mr. Nichols at (202) 484-5261.]