Health Policy and the Disadvantaged

Health Policy and the Disadvantaged

by Lawrence D. Brown (Editor)
Health Policy and the Disadvantaged

Health Policy and the Disadvantaged

by Lawrence D. Brown (Editor)


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This important collection of essays, originating in a 1989 conference on the disadvantaged in American health care, provides incisive commentary on U.S. health care policy and politics. Examining public responses to health crises and analyzing the political logic of the American community, this volume charts the immobility of U.S. health policy in recent years and points to its disastrous consequences for the 1990s.
Focusing on the particular needs of disadvantaged groups—the elderly, children, people with AIDS, the mentally ill, the chemically dependent, the homeless, the hungry, the medically uninsured—these essays develop strong policy statements. The authors describe the growth in U.S. health care programs, from Kerr-Mills to Medicare, Medicaid, and subsequent revisions, and stress the serious omissions resulting from incremental policy expansion, both in identifying disadvantaged groups and in implementing programs. They report the weakness of the U.S. health care system compared to systems of other technologically developed countries.

Contributors. Deborah A. Stone and Theodore R. Marmor, Judith Feder, Alice Sardell, Bruce C. Vladeck, Michael Lipsky and Marc A. Thibodeau, Daniel M. Fox, William E. McAuliffe, M. Gregg Bloche and Francine Cournos, Lawrence D. Brown, James A. Morrone

Product Details

ISBN-13: 9780822399148
Publisher: Duke University Press
Publication date: 08/01/2012
Sold by: Barnes & Noble
Format: eBook
Pages: 222
File size: 495 KB

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Health Policy and the Disadvantaged

By Lawrence D. Brown

Duke University Press

Copyright © 1991 Duke University Press
All rights reserved.
ISBN: 978-0-8223-9914-8


Health Care of the Disadvantaged: The Elderly

Judith Feder

Abstract. This chapter explores threats to the maintenance and expansion of public commitment to financing health care for the elderly. Threats come from rising costs that increase financial burdens, especially on low-income elderly; efforts to contain costs that may undermine benefits; and financing initiatives that treat the elderly as the sole revenue source for addressing problems in that age group. A review of these threats provides lessons not only for sustaining and improving health care for the elderly, but also for policy toward equally or more disadvantaged groups.

Relative to other population groups considered in this volume, the elderly are decidedly advantaged. Unlike others, they are the beneficiaries of a universal, publicly financed health insurance system—Medicare—that pays their medical bills, regardless of their incomes, and assures them access to mainstream medical care. Furthermore, as a large and organized constituency that votes, the elderly are politically advantaged. That advantage is nowhere more evident than in the budget battles of the 1980s, which left Medicare and social Security relatively unscathed while other social programs were decimated.

Political commitment to health care for the elderly does not mean the elderly are not deserving of special attention. Without government's commitment, the elderly would be sorely disadvantaged, given their considerable health care needs. And despite government's commitment, many of their needs, most especially in long-term care, go largely untouched.

However, questions about health care policy toward elderly people are somewhat different from questions asked for other disadvantaged groups. For others, the major question is whether and how to establish adequate financing for health care needs; for the elderly, the primary question is whether the current public commitment can be sustained and extended. This paper will explore that question, first by examining threats to government protection of the elderly that emerged in the 1980s, and then by considering how experience with existing programs may inhibit expansion to cover long-term care.

Despite the existence and even expansion of the Medicare program in recent years, Medicare's protection has been eroded by the continuing and growing financial burden of costs the program does not cover, by efforts to control public expenditures, and by innovations in financing—"self-financing"—that treat the elderly population as the only appropriate revenue source for solving problems in their age group.

The politics and policy associated with these developments not only have implications for Medicare's survival and improvement but also offer the following lessons, which go beyond the elderly to policy toward equally or more disadvantaged groups: (1) efforts to assure universal, non-means-tested programs should not ignore the fact that provision of adequate protection must take income into account; (2) cost containment designed to make and keep social programs affordable should be carefully designed and monitored so that preoccupation with costs does not overwhelm commitment to benefits; and (3) segmentation of the population into distinct "problem" groups should not become a segmentation of financing sources that undermines basic principles of insurance and social justice.

The financial burden of out-of-pocket expenses

Medicare was established in 1965 to assure elderly people affordable health insurance protection. Without insurance, medical costs impeded many people's access to care and constituted a sizable financial burden to those who received care. Medicare aimed to remedy these problems through a government insurance program that paid the bulk of hospital and physician bills for almost all the elderly, at rates set to reflect what hospitals cost and what physicians charged.

There is little doubt that with these policies, Medicare contributed to a marked improvement in access to care for the elderly, to the increased sophistication of that care (through support of improved technology), and (though there is more debate on this subject) to longer life expectancy for elderly people. However, Medicare never eliminated the elderly's responsibility to pay for their medical care. Beneficiaries pay a premium to finance a portion of their physician services and pay cost sharing on both physician and hospital care. As health care costs have risen (in part because of Medicare's generous policies toward provider payment), the burden of these payments has risen as well.

Increases in the burden of cost sharing under Medicare date from the beginning of the Medicare program and, for the most part, represent the unintended consequences of rising medical costs. But in the 1980s cost sharing was increased in order to reduce program costs to the federal government. The changes the Reagan administration proposed for Medicare were not the provider payment reforms that later received so much attention; rather they were proposals to shift financing from government to beneficiaries (Feder et al. 1982). Despite congressional resistance to many administration proposals, in the 1980s alone liabilities for cost sharing on services that Medicare covers more than doubled (Prospective Payment Assessment Commission 1988).

Critics of Medicare coverage have frequently observed that the elderly spend as large a share of their incomes on health care today as they did before Medicare was enacted, when spending on noncovered services as well as on cost sharing for covered services is taken into account. Those who make this observation sometimes ignore how much more (and better) health care the elderly are buying today; but they are right in emphasizing that Medicare, even supported by the welfare-based Medicaid program which pays cost sharing for the poorest elderly, has not eliminated the financial catastrophe associated with acute illness.

In 1986, more than one-fifth of the elderly spent more than 15 percent of their per capita incomes out-of-pocket on medical care (not including long-term care). More than one-tenth of the elderly spent more than 20 percent of their income out-of-pocket. About half of these expenses were on services that Medicare covers. The remainder went to acute care services Medicare excludes—most notably, prescription drugs.

These out-of-pocket burdens did not go unnoticed in the 1980s. Although the early 1980s brought efforts to increase cost sharing, the late 1980s brought legislation to curtail it. In 1988, Congress passed the Medicare Catastrophic Coverage Act, touted as the largest Medicare benefit expansion since the program's enactment.

The "catastrophic" benefit initially proposed by the Reagan administration was aimed at improving Medicare coverage along the same lines as improvements in private insurance policies—that is, by setting a cap on dollars spent out-of-pocket. Congress expanded the initial administration proposal to cover a larger proportion of elderly beneficiaries and to provide coverage for prescription drugs, not previously included in Medicare, once a substantial deductible had been met. Even with the expansion, the cap can be characterized as protection against very large medical bills (roughly $2,000 in hospital and physician bills, and another $600 in prescription drug expenses).

Although a minority of beneficiaries experience such large expenses (Congressional Budget Office 1988), the new benefits offer true insurance protection against the risk of very large bills that all beneficiaries face. But the catastrophic expenses described above—measured as a proportion of income—do not typically come from large medical bills. Instead they come primarily from smaller expenses by relatively low-income people. Almost all the elderly spending more than 15 percent of their income on medical bills had per capita incomes below $10,000. Two-thirds of them experienced "catastrophic" burdens from expenses less than $1,500 on all medical expenses, only some of which would even be covered under the cap. Consequently, the cap does not reduce their exposure to financial catastrophe at all (Feder, Moon, and Scanlon 1987).

This outcome reflects a continuing problem with Medicare, noted a long time ago by Davis (1975)—that is, the inequity of seemingly equal treatment in the benefit structure. While availability of Medicare to all the elderly regardless of income may constitute a political strength for the program, it may also leave the lower-income elderly inadequately protected.

The lessons from this review are twofold. First, as long as there is cost sharing, equal benefits will not provide equal protection against financial catastrophe. Income must be recognized in designing protection, as long as a program does not cover all costs. Second, a segment of the elderly population remains underinsured, despite the enactment of catastrophic protection. Protection of this population will continue to erode as health costs rise. Enhancing their protection should be kept in mind as the nation explores expansion of insurance coverage for the population under the age of 65.

The risks of cost containment

Unfortunately, the second source of erosion of Medicare benefits comes from efforts to contain cost increases that produce the growing out-of-pocket burden just described. Medicare cost-containment efforts that began in earnest in the 1980s could be applauded as a means to assure fiscal solvency for the Medicare program. Indeed, they have served in large part as a congressional alternative to administration-proposed increases in beneficiaries' financial contributions.

There is no question that rationalizing methods to pay providers is desirable, that we should move from a system in which government allows providers to determine how much they will be paid (their costs or their charges) to a system in which government makes decisions on the amount it is willing to pay. But in making that decision, government has demonstrated a willingness to assume, more than to assure, that it is setting the "right" price—that is, a price that is adequate to assure access to efficiently delivered care.

This assumption is reflected in the design of Medicare's Prospective Payment System (PPS) for hospitals. PPS pays all hospitals a price per hospital case (or diagnosis) that is independent of each hospital's costs. The price is set to represent the average cost of a diagnosis across all hospitals (though distinctions are made between urban and rural hospitals and to reflect differences in geographic or other factors affecting some costs). Using the average means that some hospitals are paid more than costs and some are paid less. All hospitals can keep whatever profit they earn from keeping costs below the rate they are paid.

Although there is debate about the success of PPS in controlling hospital costs over time, there is little question that constraining rates and allowing profits did indeed promote a slowdown in hospital cost increases when PPS went into effect. The slowdown was particularly marked among hospitals that were paid less than their costs. Furthermore, using average costs as a payment rate created winners and losers among hospitals, thereby dividing and conquering the hospital industry as a political force and allowing Congress to constrain rate increases over time. As a result, more and more hospitals face more and more pressure to constrain their costs.

This experience is indeed a political victory for cost containment, viewed in terms of government's ability to control its spending. But from the beneficiary's perspective, the approach and experience raise some serious questions. The PPS method assumes that hospitals it "squeezes" are less efficient than the hospitals it rewards. On the surface, penalties seem to be greatest on the hospitals that are least efficient. Evidence indicates that hospitals under the greatest fiscal pressure from PPS have been hospitals with the longest lengths of stay and highest costs per case—which may be suggestive of the inefficiency PPS aims to discourage. However, it is not clear that these hospitals' higher costs are due primarily to inefficiency. PPS aims to take other costs into account by adjusting average costs for a variety of factors including local wage rates, teaching, disproportionate volume of care to the poor, and cases involving especially high costs or lengths of stay. The resulting rates are intended to represent the "fair" price for efficiently delivered care. However, adjustments are not sufficiently precise to accommodate the differences hospitals face in prices for the goods and services they must buy; nor do they even aim to adjust for other factors that can affect cost per case—specifically, differences in the severity of illness for patients with the same diagnosis and differences in the quality of care provided. Measuring these is difficult, but failure to include them in the rate calculations means that higher costs may not simply represent greater inefficiency but a difference in patients or quality of patient care.

PPS further assumes that hospitals are responding to payment constraints by increasing efficiency, rather than by reducing access or quality of care. There is some reason to question this assumption. It is not at all clear that discharging patients "sicker and quicker," as PPS encouraged, is desirable. This critique is not meant to imply that PPS is a mistake. Although it could be designed to save as much with less disruption of patterns of care, its overall goal of limiting rate increases has merit. Rather, the goal is to highlight the risk that preoccupation with winning the battle against providers in order to control rates can override concern about the implications of expenditure control for people and care.

This tendency is not unique to PPS; it is reflected in debates about Medicare vouchers, capitated payments to so-called organized systems of care, and, most recently, methods of paying physicians. In all these areas, there is the risk that government's focus on limiting spending, rather than on achieving value for the dollar, can erode the access and quality that a public program ought to assure.

The lesson from this Medicare experience, like the lesson from cost sharing, has implications that go beyond the elderly. Efforts to promote new programs to insure the uninsured or to assist underserved groups invariably promise "innovative" financing that will keep new spending under control. This promise has become a necessary component of advocacy in an era of fiscal conservatism. But advocates must be sure that their efforts to sell fiscal responsibility will not produce mechanisms that ultimately undermine the capacity of new programs to assure access to quality care.

The limits to "self-financing"

The final source of erosion facing Medicare in the recent past relates to program financing and comes from Congress's experience with the catastrophic legislation. The financing for the new benefits in that legislation departed from traditional Medicare financing in two respects: (1) financial contributions from beneficiaries varied with their incomes, and (2) beneficiaries themselves had to bear the full costs of the benefit increase (that is, the cap).

The first change, varying costs with income, is not in itself an erosion. It may, as indicated below, represent a relatively equitable means of financing improvements in Medicare coverage. However, its introduction in conjunction with the second departure—so-called self-financing—created a political uproar that may have serious repercussions for future Medicare financing and benefit expansion.


Excerpted from Health Policy and the Disadvantaged by Lawrence D. Brown. Copyright © 1991 Duke University Press. Excerpted by permission of Duke University Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents

Introduction / Deborah A. Stone and Theodore R. Marmor 1

Health Care of the Disadvantaged: The Elderly / Judith Feder 6

Child Health Policy in the U.S.: The Paradox of Consensus / Alice Sardell 17

Health Care and the Homeless: A Political Parable for Our Time / Bruce C. Vladeck 54

Domestic Food Policy in the United States / Michael Lipsky and Marc A. Thibodeau 67

Chronic Disease and Disadvantage: The New Politics of HIV Infection / Daniel M. Fox 89

Health Care Policy Issues in the Drug Abuser Treatment Field / William E. McAuliffe and Kathleen Ackerman 105

Mental Health Policy for the 1990s: Tinkering in the Interstices / M. Gregg Bloche and Francine Cournos 143

The Medically Uninsured: Problems, Policies, and Politics / Lawrence D. Brown 184

Epilogue: Tales of Trouble / James A. Morone 192

Index 197

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