I. BACKGROUND
The current efforts in reform have seen two proposals emerge. Both primarily address the issues around coverage and tried to resonate with American vote bank. This is quite akin to catching a tiger by its tail because the serious cost repercussions associated with addressing coverage is likely to bring on a financial disaster in the near future. A look into the social stratification will help us understand the economic and social preferences of the country.
A. Creation of classes - America has been neither a collectivist (socialist) nor an individualist (capitalist) state. History of America is dotted with experiments in creation of a mixed economy and welfare state - a system that permits private property at the discretion of government planners. As a consequence three classes of people have been created. First - a class that survives on the wealth sourced from the working class - typically includes the indigent and “habitually” unemployed (people who have no motive to earn a livelihood). Second - the working class which is a taxpaying, law abiding segment (includes the non working retirees). Third - a class of government planners and wealthy influencers who are typically at the top of the food chain. [1]
B. Social/Industrial/Economic/Movement – There has been a gap between the healthcare reformers and their political constituencies. So while grass root activism has won minor changes, it has not been able to alter the very nature of the system [2]. The demographics of the patient population, a 500 billion USD insurance industry, vested interests of the members of the Congress to get re-elected, gullibility of the people and dissemination of misinformation by media are some of the factors to be recognized while providing a critical analysis of the health reform.
The raison d'etre of the health reform is to make available a good quality healthcare infrastructure for the people of America and that is possible only when the reform is based on quality frameworks that will reduce cost and make it meaningful for people to get insured. The remainder of the paper will outline one such possible framework.
II. THE ECONOMIC AND SOCIAL FACTORS AT PLAY
The healthcare system today is unstructured and has misplaced financial incentives. The economic theory of “morale hazard” has played out among the players in the current system. As a result the system has been abused by all those who participate in it. Some of the current social and economic factors at work are listed below.
• Social factors
o Aging population, a small percentage of which is consumes most of the healthcare expenses
o Indigent, uninsured and underinsured population resulting in a skewed flow of finances for episodes of care.
o Distorted ratio of care givers between primary and specialty levels
o Providers preferring more number of diagnostic tests to appease patient sentiments and to practice defensive medicine
o Death is viewed not as a natural phenomenon but rather a scientific challenge that needs to be overcome.
• Economic factors
o Cost of care high with respect to outcomes in care rendered in comparison with other developed nations
o Insurance providers have more interest in return on equity than providing indemnity for patients. Currently there are no cross-state plans.
o High cost of medication and lack of medication management
o High cost of education leading to debts that the doctors seek to recover through fee for service reimbursements. The fee-for-service payment mechanism has been recognized as a challenge.
o High cost of compliance for numerous regulations, liability insurance and technology.
o Medication errors, re-admissions and death.
o Declining economy and earnings but increasing sickness is draining the state exchequer.
o Misplaced competition currently focuses on shifting of cost among government, insurer and provider. The competition must be brought back into the provider space so that they are able to bring value to the patients through low cost and high standard of care. This single value driver will give them competitive advantage and consequent market share. Transformation in this segment will positively impact other areas of the healthcare system.
III. STATE OF THE CURRENT REFORM
Coverage Pros
• Requires individuals to have health insurance. It is enforced through individual mandate and by raising the income limit for Medicaid eligibility. Insurance is proposed to be made available through state seeded health gateways or health exchanges. Includes penalties for non compliance and subsidies/exception for special cases
• Employers mandated to offer health insurance or pay a penalty if employee chooses to buy from exchange. Employers to pay at least 60% of the premium.
• Insurers cannot deny coverage on grounds of pre-existing conditions in non group market. Create a high risk pool for all people with pre-existing conditions and cover them through consumer driven co-operatives.
Coverage Cons
• Constitutional hurdle in warranting health insurance as a prerequisite for citizenship.
• Penalty may be lower than the overhead of providing insurance. This could also lead to unintended consequence like retrenching regular employees in favour of subcontractors.
Cost Pros
• No annual and lifetime limits on coverage. Limit on annual spending by the enrollee. Issue community rated insurance plans (premiums charged differ only on basis of age and gender)
• Higher scrutiny of insurance companies.
• Employ payment bundling to contain cost.
• Public option as a competition to private insurance companies
Cost Cons
• Will warrant major regrouping of the insurance companies and the providers. Smaller independent practices will have to merge into larger networks.
• May cause people to defer buying good insurance plans until they become sick.
• Insurance companies will find work around to “cherry pick and lemon drop”
• Younger population likely to pay inflated premiums for coverage not suitable to their circumstances.
• Government run program have historically shot over their budgets [3].
Quality Pros
• Explore bundled payment
• Preventive medicine and evidence based research
Quality Cons
• Objectives are not quantitative and the efforts may not give instant results.
• Unless quality drives are not driven by value directives (low cost, acceptable standard of care resulting in patient well being), it can be counterproductive.
• Hospital and physician services each account for about one third of private healthcare spending [7]. The outcomes do not commensurate to the level of spending seen.
The diagram below depicts a schematic interplay of different actors in healthcare. Though the issues of quality are quite pervasive, this paper will limit itself to the application of quality in the provider space. The problem statement is as follows: What needs to be done in the provider space to ensure every American can get affordable medical care based on their needs (and not on preferences, tastes or wants). In the diagram below, the arrows leaving the rectangle show an outflow of money (Expenses) and the arrows incoming to the rectangle show and inflow of money (Income)
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