the politics of healthcare and healthcare financing
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The Politics of Healthcare and Healthcare Financing. Greg Shaw Department of Political Science Illinois Wesleyan University. Governments or Markets?. Trust in gov’t nearly as strong a predictor of the presidential vote as party ID (wow!) Trust in Congress Fear of bureaucracy?. - PowerPoint PPT PresentationTRANSCRIPT
The Politics of Healthcare and Healthcare Financing
Greg Shaw Department of Political Science Illinois Wesleyan University
Governments or Markets?Trust in gov’t
nearly as strong a predictor of the presidential vote as party ID (wow!)
Trust in CongressFear of
bureaucracy?
… but should this mean we put our trust in markets?
Unlimited consumer choice?
Is all shopping equal?
Are all shoppers equally competent?
The consumer-driven health care movement
When individuals more directly experience the true cost of the healthcare goods and services they might consume, they consume fewer services, and in a ways that most appropriately meet their needs
• Policy implications:◦ Design policies that more fully expose individuals to
the costs they generate◦ Raise co-payments: individuals will have more skin in
the game◦ Foster comparative shopping: voucher-ize Medicare?◦ Inform consumers of the cost: on the W2 form
employers must list the full price of the insurance premium
CDHC: The basic argument & implications
Unpacking the CDHC Argument
Less consumption? Curtailing consumption for, but
not for under-users?◦ This isn’t a one-size solution
A high knowledge requirement: determining when and how to curtail consumption is hard◦ How good are your self-
diagnostic skills? Who is primarily responsible for
high consumption? Providers, product marketing, insecure consumers, or something else?
Do people defer healthcare purchases when in medical need or crisis? What about services for their kids?
More efficient consumption? Do patients know which
services to select?◦ Do you know the
difference in outcomes between physical therapy and spinal surgery?
Who makes these determinations? That is, when patients go shopping, who decides what goes in the cart?
How to determine where to focus one’s services: is my dermatological health more important than my gastrointestinal health? Where do I add most value? How to decide this for another person?
Can patients haggle effectively and shop comparatively?◦ Do we need a culture
shift?
Q: “Is this medically necessary?”
A: “ … we just routinely do this …”
… notice that there is no way to objectively determine an optimal level of healthcare service consumption
◦Some have argued that this implies everything is subjective, in terms of what services count as “basic” healthcare. Perhaps one can believe this to be true and simultaneously believe that there’s a basic level of care needed to sustain normal longevity and activity levels … but beyond mere survival …?
◦Pushing this argument implies that medical needs are entirely the products of one’s consumer tastes. If one believes this, one also likely believes that there is absolutely no minimum threshold for service provision; fixing a broken arm? … that’s only important if one has an (arbitrarily determined) taste for that particular service.
Before we go much further …
Yikes! Do you believe this?
This study is still the gold standard (large N, good design, cross-time, etc.)
Federally funded; designed to search for ways to save money on the then-still-fairly-new Medicaid program
1974-1982: a 3-5 year experience for 2,000 non-elderly participants
Operated in 6 sites to ensure demographic diversity Nationally representative sample, with exclusion of
persons earning more than $25K (or about $80K in 2006 dollars)
Random assignment to various co-payment levels: zero, 25%, 50%, and 95%
Participants were compensated, so that none was worse off financially relative to any insurance coverage that they had at the beginning of the experiment
$1,000 limit on out-of-pocket (even lower for the poor); full coverage after that
The RAND Corporation Experiment
Demand was somewhat elastic as a function of priceMoving from free to 25% co-pay corresponded to an
average reduction in consumption of 4.25%Consumption under the free plan was 45% higher
than in the 95% co-pay planNo demand elasticity for in-patient services for
childrenDemand elasticity was higher among low-income
participants than among the economically better offDemand elasticity was greater for mental health
services, but otherwise differed little between categories of services
Most of the differences in consumption occurred in the number of initial contacts, not in the number of services obtained once a person visited a doctor or hospital
The RAND Study: Key Findings
Services were grouped into highly effective (trauma fractures, pneumonia), moderately effective (hemorrhoids, hay fever), and less effective (varicose veins)
Participants were not selective among these categories when seeking to reduce consumption: they strongly tended to reduce consumption across the whole range of services
No differences in inappropriate hospital admissions across the co-pay categories
Punch-line: cost-sharing is a blunt tool for controlling consumption
The RAND Study: Key Findings
Supporters pointed to this as conclusive evidence of demand elasticity as a function of price
Lingering questions about the health consequences for the sick - poor (reduced health status when not in the free category … in fact, the sick-poor faced higher mortality rates under cost-sharing, and many of those who lived dropped out, so the findings may understate the impact of cost-sharing on the sick-poor)
The HMO component of the study showed that managed care can reduce consumption approximately as much as can cost-sharing (this speaks as much to limits on providers as it does limits on consumers)
No evidence that higher co-pays reduced risky behavior (such as smoking, not wearing seat belts, alcohol, or less physical exercise); challenging part of the “too much insurance argument”?
This study may not speak to the elderly Medicare population well◦ Service consumption is much higher among the elderly
(they’re less likely to curtail consumption due to their limited resources)
The RAND Study: Implications
A Critique of CDHCPeople do not consume medical services in anything like
direct proportion to their incomes – buying healthcare services isn’t like buying cars or houses◦ The rich don’t consume as much as they can◦ People don’t seem to respond to cost-sharing when it comes to
their kids’ care◦ The poor don’t refrain altogether from consuming (though they
refrain more than do upper-income persons under cost-sharing)◦ People do not tend to be especially price-sensitive: once at the
doctor’s, they consume services in ways that don’t reflect their income
Radical information asymmetry between providers and patients
Approximately 70% of health care dollars are spent on 10% of the population in a typical year, and the healthy 50% of the population consume only 3% of the dollars: imposing cost-sharing on the healthy won’t save us much
A Critique of CDHCDifficulties with haggling: life vs. death, docs
dislike haggling, information asymmetry againCDHC is predicated on reasonably good health
and regular income: ◦ Depending on the version of the argument, this is:
Personally empowering; but also … Anti-risk polling regarding non-catastrophic services
(we’re all on our own) Anti-poor people (they’re on their own)
◦ How does this help individuals who are old and sick? (back to the 70% / 10% problem)
Evolving belief in health as a basic human right (not to be commoditized – think: EMTALA of 1986)
Firm limits on expenditures can control costs:◦The spread of HMOs (mid- to late-1990s)
corresponded with a partial bending of the cost curve
◦Medicare inflation was reduced with the introduction of the DRG in 1983
Insight: patients may not be the ones who can most effectively put the squeeze on expenditures; the organizers of payment systems seem to do this more effectively
Some reflections on costs
Toward an Alternative VisionMarkets produce lots of wealth
and lots of povertyRecognizing the strengths and
limits of the market model for healthcare financing◦Competition where it works, public
provision where it’s neededProviding coverage by other
meansA pragmatic approach: a healthy
workforce (and kids too!)