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Health care has been a prominent topic in the US national political conversation for decades, with no end in sight. The status quo, even before the COVID-19 pandemic exposed flaws in the nation’s public health system, has been too dysfunctional for the issue to fall far down the list of voter priorities. Among other things, a large segment of the US population remains uninsured, and the relentless annual increase in medical care costs in excess of income growth is placing increasing financial strain on households and governments. While these problems have fueled a strong desire for change, there is a divide over how to proceed, which has made reaching consensus elusive. Most Americans are familiar with the views advanced by one side of the debate. Medicare for All, which would have the federal government run a public insurance plan for the entire country, is the paradigmatic reform advanced by those who favor full governmental control. It and similar reforms have been discussed widely in recent years in high-profile political campaigns. The alternative—more reliance on market forces—is less well-known or understood, partly because there is less consensus among those who favor it on what it would entail. This volume attempts to describe in some detail one version of such a plan. It also explains the major features of current US health policy and the relevant history of how we arrived at this point, because the proposed reforms are best understood in relation to the incumbent system. In general terms, the recommended changes would inject more discipline and consumer choice into what already exists rather than replace it with something entirely new. The focus of the recommendations is not on better readiness for the next pandemic or public health crisis. That certainly should be a priority for Congress. However, even if such improvements get approved, the nation’s underlying system of insurance and care providers will remain mired in dysfunction. The focus of this volume is on reforming that system to better deliver services that patients need regardless of whether a pandemic is creating global turmoil.

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Publié par	AEI Press
Date de parution	23 août 2022
Nombre de lectures	0
EAN13	9780844750477
Langue	English
Poids de l'ouvrage	2 Mo

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US HEALTH POLICY
AND
MARKET REFORMS
AN INTRODUCTION
James C. Capretta
A M E R I C A N E N T E R P R I S E I N S T I T U T E
Distributed by arrangement with the Rowman & Littlefield Publishing Group, 4501 Forbes Boulevard, Suite 200, Lanham, Maryland 20706. To order, call toll-free 1-800-462-6420 or 1-717-794-3800. For all other inquiries, please contact AEI Press, 1789 Massachusetts Avenue, NW, Washington, DC 20036, or call 1-202-862-5800.
ISNB-13: 978-0-8447-5045-3 Hardback
ISNB-13: 978-0-8447-5046-0 Paperback
ISNB-13: 978-0-8447-5047-7 eBook
© 2022 by the American Enterprise Institute for Public Policy Research. All rights reserved. No part of this publication may be used or reproduced in any manner whatsoever without permission in writing from the American Enterprise Institute except in the case of brief quotations embodied in news articles, critical articles, or reviews. The views expressed in the publications of the American Enterprise Institute are those of the authors and do not necessarily reflect the views of the staff, advisory panels, officers, or trustees of AEI.
American Enterprise Institute 1789 Massachusetts Avenue, NW Washington, DC 20036 www.aei.org
Contents Cover Title Copyright Contents Foreword 1. The Structured Markets Framework 2. Price Transparency 3. Medicare 4. Medicaid and the Children’s Health Insurance Program 5. Employer-Sponsored Insurance 6. Covering the Uninsured 7. Prescription Drug Pricing 8. The Physician Workforce 9. Political and Administrative Considerations Appendix A. References Appendix B. Source Reports About the Author
Guide Cover Title Copyright Contents Foreword Start of Content Appendix A. References Appendix B. Source Reports About the Author i ii iii iv 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249
Foreword
H ealth care has been a prominent topic in the US national political conversation for decades, with no end in sight. The status quo, even before the COVID-19 pandemic exposed flaws in the nation’s public health system, has been too dysfunctional for the issue to fall far down the list of voter priorities. Among other things, a large segment of the US population remains uninsured, and the relentless annual increase in medical care costs in excess of income growth is placing increasing financial strain on households and governments.
While these problems have fueled a strong desire for change, there is a divide over how to proceed, which has made reaching consensus elusive.
Most Americans are familiar with the views advanced by one side of the debate. Medicare for All, which would have the federal government run a public insurance plan for the entire country, is the paradigmatic reform advanced by those who favor full governmental control. It and similar reforms have been discussed widely in recent years in high-profile political campaigns.
The alternative—more reliance on market forces—is less well-known or understood, partly because there is less consensus among those who favor it on what it would entail.
This volume attempts to describe in some detail one version of such a plan. It also explains the major features of current US health policy and the relevant history of how we arrived at this point, because the proposed reforms are best understood in relation to the incumbent system. In general terms, the recommended changes would inject more discipline and consumer choice into what already exists rather than replace it with something entirely new.
The chapters that follow were originally released as individual reports, but they share several common themes, which made publishing them together in a single volume (with modifications and updates) a natural choice. The reforms reinforce one another and will work most effectively when they are advanced simultaneously rather than as stand-alone concepts.
The focus of the recommendations is not on better readiness for the next pandemic or public health crisis. That certainly should be a priority for Congress. However, even if such improvements get approved, the nation’s underlying system of insurance and care provision will remain mired in dysfunction. The focus of this volume is on reforming that system to better deliver services that patients need regardless of whether a pandemic is creating global turmoil.
The US has resisted joining other advanced economies in embracing full public control of its health system. That might change if no viable alternative is ever presented. I hope the recommendations that follow demonstrate that there is, indeed, another way forward, as market incentives—channeled by effective public regulation—could deliver in the health sector the same benefits seen elsewhere in the economy—that is, innovation and ever-improving productivity that lowers costs and improves the quality of what is being provided to consumers.
1
The Structured Markets Framework
A dvocates of market-driven medical care have a difficult task. They must convince voters that competition and consumer choice in the health sector will deliver better results than full governmental control will. It will not be easy, but it will certainly fail if voters believe market advocates do not appreciate the dangers to patients from a dysfunctional system.
For instance, in a fully deregulated market, sicker patients will have difficulty securing insurance coverage. Government policy must intervene, one way or another, to ensure this vulnerable population has access to effective medical services.
Some distinctions are necessary, however, as not all regulation is beneficial. Many existing rules are ineffective or counterproductive, and the answer to every health system problem is not extending the government’s reach.
Further, competition and incentives can play important roles in the health sector, too, if they are allowed to function in the right context.
Market advocates thus have a clear assignment. They must find the right mix of public regulation and private incentives that will deliver better results than the fully regulated alternative. The starting point for building such a market is understanding why health care will always require public oversight to be accessible to all citizens on an equitable basis.
Grappling with Market Failure
Nobel Prize–winner Kenneth Arrow was one of the most acclaimed American economists of the 20th century. His 1963 assessment of the sources of market failure in medical care was immediately influential and remains relevant today. 1
Arrow offered a clear and precise description of why medical care is ill-suited to an unsupervised market. He focused on the understandable and unavoidable preference among consumers to secure expansive insurance to pay medical bills and the substantial information imbalance between patients and their professionally trained caregivers. These characteristics lead to distortions that make the medical services market challenging for consumers to navigate without government assistance and oversight.
Personal medical expenses can be large relative to annual incomes and highly unpredictable, so it is natural for consumers to seek insurance to protect themselves against expensive episodes. Most patients trust their physicians’ judgments more than their own when making care decisions, especially when the stakes can be existential. The uncertainty of the value of medical care, with so many unknowable factors determining outcomes, reinforces consumers’ preference to shift the financial risk off themselves and onto public or private insurance.
The dominance of third-party payment for services introduces additional distortions. Patients are often price insensitive when they seek and use services because their out-of-pocket costs will not increase with higher-priced care. Insurance plans have deductibles and cost-sharing requirements, but, beyond a certain threshold, all expenses usually are covered by the insurance policies, not the patients.
Aggregate health spending is also heavily concentrated in high-cost cases. In 2016, patients with annual expenses in the top 10 percent accounted for two-thirds of all health costs, and those in the top half for 97 percent. The average annual spending was nearly $50,000 for persons in the top 5 percent. 2 Few consumers want insurance with deductibles large enough to meaningfully influence consumption of such expensive care.
Further, while all patients are vulnerable to unpredictable and costly health problems, some consumers with expensive chronic conditions know at the beginning of the year that they will need services with costs exceeding their annual deductibles even if they avoid other problems. So, when paying for services out of pocket, these consumers tend to be price insensitive because no amount of price shopping will substantially alter their final annual bills.
The consumer preference for insurance and the tendency toward risk segmentation in health insurance markets compel additional public regulation. Private insurers can identify high- and low-risk customers based on their ages and medical conditions and charge premiums accordingly. The