- Email: [email protected]
Health care reform—the current debate
W DEPARTMENTS
Debra Hardy Havens, BS, RN, FNP Washington Representative for NAPNAP Capitol Associates, Inc. Washington, DC
Health Care Reform-The . Current Debate n Debra M. Hardy
Havens
L
ess than 1 year ago, the Conservative Democratic Forum in the US House of Representativesintroduced a bill entitled, the “Managed Competition Act of 1992.” At that time, only a handful of legislators, health policy experts, and industry executives had ever heard about “managed competition. ” Becausethe 1992 Presidential election focused increasingly on health care, managed competition was embracedin part by both the Bush and Clinton camps. Today, it is almost impossible to discuss health care reform without mentioning or hearing the words, managed competition. Further, managed competition is likely to be a component of the President’s proposal on health care reform. Still, few Americans actually know what the concept means.More importantly, few health care providers understand how managed competition may dramatically change the way they provide care and how providers will fit in a new system. Although Congress is holding hearings and reviewing the President’s Task Force on National Health Reform plan, nurse practitioners (NPs) must understand what is meant by managedcompetition and implications if such system were to be implemented. Therefore the purpose of this arti c1e is to provide background information on the idea’s origins, define managed competition, discuss criticisms of the proposal, examine price controls and other options, and finally identify some of the concerns for NPs if such a system were to be put in place.
n
BACKGROUND
The idea for managed competition was born in Jackson Hole, Wyoming, where a group of health care economists have been retreating for the past two decades.The leader of the group, Paul Ellwood, MD, has been inviting policy heavyweights to discuss health care fiJ PEDIATRHEALTH CARE. (1993). 7, 186-91. Copyright 0 by the National Practitioners.
Association
0891-5245/93/$1.00
25/l/47631
+ .lO
of Pediatric
Nurse Associates &
and Robin Zink
naming and how to attack the nation’s health care crisis. Ellwood is the founder and president of InterStudy, a Minnesota-based think tank that has helped shape the US health maintenance organization (HMO) industry. Another leader, Alain E&oven, is a Stanford University professor of management. In the 197Os,Enthoven first proposed health cost control based on “consumer choice” and “managed competition,” with consumers choosing between competing full-service plans. Lynn Etheredge, a former federal budget official and Washington consultant, joined Ellwood and Enthoven to help write the plan. In September 1991, they wrote “The 21st Century American Health System,” the first draft of the managed competition plan. The Jackson Hole Group has a number of clearly diverse interests. Each group meeting focuses on a different topic and therefore draws a distinct crowd. According to Ellwood, “Each of these people brings a different experience, perspective, and knowledge, and eachof them has their own set of followers that are vital to getting [reform] done” (Kent, 1992, p. 11). The original group has grown to over 60 or so groups each agreeing with all or most of the current plan. In the past year, a number of organizations and people have endorsed the idea of managed competition including the Conservative Democratic Forum, former presidential contender Paul Tsongas, The New Y’mk Timzes,Bwiness Week, and some of the advisers on both President Clinton and former President Bush’s staff. Since that time, it remains fairly certain that the new health care reform plan introduced by President Clinton in June will contain many elements of the managed competition plan. n
THE CONCEPT
The original Jackson Hole proposal defined aaged competition as a complex blend of market forces and government regulation based on the premise that the best way to provide high-quality, low-cost care is to get people into managed care systems and to track the out-
186 IOURNAL OF PEDIATRIC HEALTH CARE
Journal of Pediatric Health Care July-August 1993
come of their care (Kent, 1992). In most other markets, consumers choose products of high value and low cost. However, current government policies have skewed the market so consumers cannot or do not choose the best insurance plan for their needs or their bank account. The idea behind managed competition is to restructure our health care delivery system into group purchasers and group providers. The traditional insurance practices of employers and employee purchasing insurance directly from insurance companies would cease to exist. The idea is to band employers and individuals into federally sanctioned health insurance purchasing cooperatives (HIPCs), recently referred to as “health alliances,” to negotiate with groups of health providers. Each of the provider groups would offer a prepriced package of services. Consumers would pick the plans that best fit their individual needs (Figure). One of the last decisions the Task Force will make is whether large companies may “opt out” of these alliances. Each accountable health plan @HP), which could be organized and managed by insurance companies, physicians, or others, would group together doctors, hospitals, clinics, laboratories, and other providers. The hope is that the marketplace would eventually determine price by forcing plans to compete on price and quality to win their business. The following rules would generally apply: n The AI-II’ s would be required to sell coverage to anyone regardless of any preexisting conditions. Furthermore, the AI-II? may not charge consumers from the same region different rates. n All AHPs would be required to offer the same basic benefits package, but each could provide additional services. l Consumers would get an annual “report card” from the HIPC that collects data from each plan and then rates them for price, quality, and consumer satisfaction. Enrollees would be allowed to change plans once each year. n Although conventional private-practice medicine would continue to exist, the designers of managed competition believe most people would be enrolled in managed care-type plans, such as HMOs, because traditional “fee-for-service” medicine would eventually become relatively expensive. n Consumers would pay more out of their own pockets if they wanted to go to doctors who had not joined arrangements that are expected to look much like current HMOs, in which most of the organizations’ doctors are on salary and the consumer gets all of his or her medical treatment for a preset annual fee. n All employers would have to pay for part of the employee’s cost of buying a plan. Estimates of this
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News
187
percentage range from 50% to 80%. The govemment would pay for or subsidize the unemployed (Priest, 1993a). Many different plans and variations on these ideas exist in Washington today. The Administration proposal may differ from the Jackson Hole plan in many ways. Moreover, it appears highly likely that whatever plan emerges from the President’s Task Force on National Health Reform will be called mumqed competition regardless of its contents. Nevertheless, some general ideas keep reemerging in the discussions regarding reform. Managed competition would limit the consumer’s choice of physicians and make it more difIicult to see specialists by placing a “manager” of the plan between the provider and the patient. The manager’s role is to assure that physicians and hospitals use their resources in the most efficient way. Many insurance companies have already assumed this role of managed care by requiring patients to get advance approval for operations and questioning the length of stay or treatment procedures. The role of insurance companies is expected to change dramatically. Paul Ellwood predicts 99% of the companies will be wiped out because they are onIy prepared to be insurance companies and not care managers (Priest, 1993a). Insurers will no longer collect premiums and pay claims. They will organize and manage AHPs made up of hospitals, doctors, laboratories, and other providers in a region. These AHPs could also be organized by hospitals, groups of physicians, and others. Each AHP would be held accountable to certain standards. First, each plan would be required to offer a basic benefit package for one set annual price. It is unclear at this time who would determine what would be included in such a package. Many proposals establish an independent federal government board to determine what services are included. Congress held hearings in March and April to discuss what should be included in the bene6t.s package. However, authors of the Managed Competition Act of 1992 have stated that Congress should not legislate a benefit package, and they prefer to leave those decisions regarding benefits to the medical community or a national health board. Therefore a national health board would be created to function much like the current Securities and Exchange Commission. The board would have the power to regulate plans and approve only those that provide such benefits. The approval would require evidence of a plan’s medical efkctiveness, based on continuing study and public knowledge of patient outcomes and personal satisfaction. Under the original Jackson Hole proposal, the marketplace would force consumers, insurers, providers, and employers to band together and create three stan-
Journal of Pediatric Health Care 188
Legislative
News
Volume
Small Businesses
Individuals
7, Number
4
Large Businesses
Buy insurance directlyfrom AHP
Health Plan Purchasing Cooperative (HPPC)
All AHPsmust offer the same basic
&st Oversee health market Standardize accounting and paperwork
n
FIGURE Managed
for risks among AHPs
Provide wnsumer information on the quality of AHPs
competition.
Source:
da&-setting boards. One board would issue ground rules for insurers. A second board would assessthe medical arts to determine annually what goes into the packageof uniform effective health benefits. The third board would establish generally acceptedpractices for tracking the results of medical care. Under managed competition in the original Jackson Hole proposal, the federal government would limit the
Representative
Jim Cooper
(D-TN).
variation in health plans by putting conditions on the tax exclusion employees now get for employer-paid insurancepremiums. The US Treasury currently loses $48 billion each year becauseof this tax break (Faltermayer, 1992). Managed competition would set a limit on the value of services that could be exempt. Furthermore, the exclusion would only cover a package of uniform effective health benefits, thereby limiting the tax exclu-
Journal
of Pediatric
July-August
Health
Care
sion to probably the lowest-cost plan in an HIPC. To purchase a higher-priced plan, employees would have to pay the difference themselves or their employer would have to be willing to give them taxable dollars to spend (Priest, 1993a). There have been mixed reports to date as to whether or not the Administration is considering taxing insurance benefits. Managed competition is expected to cause major dislocations in the health care industry, which now employs approximately 10 million people. Proponents of managed competition believe that the marketplace will force thousands of people out of work, which they believe is necessary to downsize our medical-industrial complex that consumes $930 billion yearly (Priest, 1993a). n
Legislative
1993
CRITICS
Even with the overwhelming support and sudden interest in managed competition, the plan is not without critics. Bruce C. Vladeck, the newly appointed Administrator of the Health Care Financing Administration, described managed competition as “old snake oil in new bottles” in a September 1992 newsletter (Priest, 1993a). He is concerned that the plan does not confront the problem many Americans have with affording health care. Most of the criticism comes from consumer groups, policy experts, and doctors who are concerned that the plan puts too much power in the hands of a non-medical manager whose first concern is saving money. Some feel it will continue to divert health care dollars to extraneous activities like paperwork, use review, and administration. The critics argue that health plans faced with the pressure to stay competitive may reduce necessary medical services, find ways to scrimp on the standard benefit package, and gradually increase the out-ofpocket burden on individuals to pay for the basic package. Moreover, such a system establishes, in force, gatekeepers who presumably will slow down the rate of health expenditures and access to specialized care and/or services, which is another way of “rationing’ health care. In addition, many critics charge that consumers will be paying more for care while at the same time receiving less choice. By limiting the tax deductibility of health benefits to the value of the lowest-priced plan, managed competition will force low- and modest-income persons into the least expensive but not necessarily highest quality plan. Many are also concerned about the definition of a basicbenefit package. What is in, and what is out? For example, much emphasis has been placed on preventive and primary care. However, what will happen to the management of chronic illnesses, rehabilitation, and services for acute care illnesses? Other issues involve ethical and moral issues that lead to the quality of life versus life-and-death decisions based solely on cost and
News
189
effectiveness. As an example, when is a health care service or therapy considered effective? Who will make these decisions? Although there is a great deal of merit to having a uniform data collection system that focuses on outcomes, even the proponents of having a national system recognize that such a system is years away before we will be able to recognize its benefits. One of the linchpins to a managed competition system is the element of having such a system in place. Furthermore, a strong concern exists regarding the ability of such a plan to work in rural areas, where one in three Americans now live. It is diflicult for providers who work in these areas to imagine any hope of competition for services. Others fear that a few large plans will dominate each market thereby stifling the competition the plan was set to create. Finally, managed competition is an unproven theory. No country, city, or state in the world has ever tried this concept. Evaluation of the outcome of such a system in advance is virtually impossible. Robert Reischauer, Congressional Budget Of&e (CBO) Director, testified before Congress in February 1993 that “it would be extremely difhcult for CBO to estimate the magnitude and the timing of the effects (of managed competition) on national health spending because of the complexities of analyzing a dramatic restructuring on the markets for health insurance and health services” (Priest, 1993a). He further speculated that managed competition would not affect the long-term growth of health care costs. Nevertheless, Reischauer added that, if all Americans could be convinced to enroll in such plans, costs may drop by as much as 10%. Since that time, a new CBO comparison of the Managed Competition Act of 1992 (HR 5936), introduced last year by Rep. Jim Cooper (D-TN), and the Health Care Cost Containment Act of 1992 (HR 5502), introduced last year by Rep. Fortney Stark (D-CA), found that the growth rate in national health expenditures in 1999, currently projected at 9.3%, would be reduced by one-half a percentage point under managed competition and one percentage point by price controls (BNA’s Medicare Report, 1993). According to CBO estimates, HR 5936 would provide health coverage to more of the uninsured and would offer a more comprehensive set of benefits than the average health insurance plan. HR 5936 would cover 15 million to 20 million additional people but not the rest of the current 35 to 37 million Americans who are uninsured or underinsured. n
PRICE CONTROLS AND OTHER OPTIONS
The uncertainty regarding the cost savings associated with managed competition has led the task force to consider other options. The President’s Task Force on National Health Reform has identified a list of more
Journal
190
Legislative
News
than 25 possible financing mechanisms to fund universal
access to care. It has been estimated that the total cost of universal access could be as high as $30 billion or $90 billion by 1997, according to White House sources (BNA Daily Report for Executives, 1993). Most of the savings will be generated in the private sector. The White House is considering a number of tax increases to pay for the reform package. Some of the possibilities include n allowing insurance premiums to rise somewhat faster than intended and taxing the premiums; . raising a corporate tax to capture part of the savings corporations will realize from slower premium growth; n taxiug benefit plans offering coverage above a certain level; n reducing uncompensated care payments; l instituting higher taxes on alcoholic beverages, tobacco products, pollutants, guns, or other products that contribute to health problems; and . creating a tax on non-critical service usage. Price controls or “global budgeting” and a provider tax are also rumored to be considered. With the deficit rising sharply each year, the political climate is such that Congress and the President may be forced to implement some type of global budget that sets spending ceilings to bring health care costs under control. However, managed competition architects strongly disagree that managed competition and global budgeting can be combined succes&lly. Rep. Cooper warned that “the worst thing” that could happen is that the President releases a package that is called managed competition but really represents price controls. Opponents of global budgeting argue that it is inflationary and that it would prohibit consumers from spending their own after-tax dollars. Rep. Cooper believes even the slightest hint of price controls will lead providers to inflate their prices in preparation of what lies ahead. He argues Congress cannot and will not be able to enforce those spending limits. The Task Force has drafted three possible ways to impose price controls. The first is to impose a shortterm freeze on prices charged by all private and public hospitals, doctors, laboratories, equipment makers, nursing homes, and other medical services. The second is to impose caps on insurance premium increases and prohibit insurers from cutting the benefits they offer. Annual premium increases would likely be linked to growth in the gross domestic product. The third is that the task force consider extending Medicare’s existing payment system, or a similar formula to set regionally adjusted prices for individual procedures, to all medical procedures performed by private doctors and hospitals. The Health Care Financing Administration would begin establishing payment rates not already set (for pe-
of Pediatric Volume
Health
Care
7, Number
4
diatric procedures, for example) and could have the system in place 9 months after President Clinton presents his bill to Congress (Priest, 1993b). The Administration argues price controls are necessary for 2 to 3 years, both to reduce spending and to help finance health coverage for the uninsured while comprehensive reforms are put in place. ’ CONCERNS Managed competition has the ability to make a significant impact on the way NPs continue to provide care. Because the concept has been partially incorporated into the Administration’s health care reform proposal, it is important for pediatric NPs (PNPs) to become educated about their role and place in a new system. NPs have made considerable progress over the past 25 years. Apparently this health care reform movement provides considerable opportunity for the NP. Now is the time for NPs to be recognized as front-line providers of primary care. The reform efforts of the President’s Task Force provides NPs the chance to be included in the new health care system from its inception. Thus far, Hillary Rodham Clinton and the task force have been receptive to nursing and the role of NPs. The nursing community and especially NPs must play an active role in the development of health care policy to be sure their services are both recognized and covered. Their services must not continue to be limited to geographic locations, settings, or patient populations. Some of the obstacles faced by NPs in providing care in today’s health care system include conflicting federal and state requirements on supervision/ collaboration and restrictive reimbursement policies that refuse to recognize NPs for their services, significantly reduced payment for services provided by NPs as relative to physician payment, and reimbursement policies that only recognize NP services provided in underserved areas. The new health care system must recognize the valuable role of NPs. Nonphysician providers like NPs and physician assistants cannot be lefi to compete with other providers for a place in the system. If NPs are not recognized as front-line primary care providers in any reform proposal and are left out, millions of Americans who have come to depend on their services will be left without any health care provider. Moreover, assuring a role for NPs in a reformed system will help meet the nation’s goal of guaranteeing universal access to highquality care for all Americans while ensuring consumer choice. It is essential that the new proposal require the effective and full use of all health care personnel, especially NPs and not just physicians, in the reformed health care system. In this way, if managed competition does become a reality, NPs will have the ability to negotiate with the AHPs or other entities to provide care. Should any health care reform plan not recognize NPs
Journal of Pediatric Health Care July-August 1993
as primary care front-line providers, NPs will be put at a distinct disadvantagebecausethey will be competing among other physicians, like physician specialistswho become primary care physicians,for a place in the system. Further, the assumption that NPs could compete in the market is invalid becauseunder current laws, rules, and regulations, the systemhas numerous barriers for NPs and it is not yet a level playing field. Furthermore, as advocatesfor children’s health care, PNPs must assurethat the “basic”benefit packagecover all servicesto care for our nation’s children. Benefits for children and young adults have been outlined in the National Association of Pediatric Nurse Associatesand Practitioners’Accessto Care statement. This health care reform processis not limited to the federal government. State legislaturesacrossthe country are tackling the same problems with somewhat greater speedthan the federal government. Many statesare considered trailblazers for their reform efforts, and their progressis being watched carefully. NPs should contact both their state legislators and members of Congress regarding health care reform. Take time to become familiar with the legislation proposed in June by the President’s Task Force on National Health Reform. Because nursesrepresentone in forty voters, the time is now to
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News
191
make that collective voice heard. Make sure nurses are able to compete in the system that is proposed. The future of the NP may depend on it. Now, more than ever, PNPs need to becomefamiliar with the terminology and keep a vigilant watch on the health care reform debate. Moreover, contact legislators and health care policy makers by letters, phone calls, and meetings to apprise them of your expertise, how you fit into the health care system now, and how it is essentialthat you are specifically included in any new health care system.
REFERENCES BNA’s Medicare Report. (1993, January 22). Munagcd competition will not wmrk wi>bglobal &u&et&~, p. 91. BNA Daily Report for Executives. (1993, February 18). White Howe seafbyth vtius options tojknd comprehensiverefbm, p. G-2. Faltermayer, Edmund. (1992, March 23). Let’s really cure the health system. Fortune, 125, 4658. Kent, Christina. (1992). The gang that shoots straight. Joumd of Americms Health Policy, 2, 9-14. Priest, Dana. (1993a, March 9). A health care primer: How managed competition would work. Wusbington Post, pp. Al, Al 1. Priest, Dana. (1993b, March 17). Medical price caps drafted for Clinton: Adviser has 3 options for short term. Wasbiqton Post, pp. Al, A14.
Debra Hardy Havens, BS, RN, FNP Washington Representative for NAPNAP Capitol Associates, Inc. Washington, DC
Health Care Reform-The . Current Debate n Debra M. Hardy
Havens
L
ess than 1 year ago, the Conservative Democratic Forum in the US House of Representativesintroduced a bill entitled, the “Managed Competition Act of 1992.” At that time, only a handful of legislators, health policy experts, and industry executives had ever heard about “managed competition. ” Becausethe 1992 Presidential election focused increasingly on health care, managed competition was embracedin part by both the Bush and Clinton camps. Today, it is almost impossible to discuss health care reform without mentioning or hearing the words, managed competition. Further, managed competition is likely to be a component of the President’s proposal on health care reform. Still, few Americans actually know what the concept means.More importantly, few health care providers understand how managed competition may dramatically change the way they provide care and how providers will fit in a new system. Although Congress is holding hearings and reviewing the President’s Task Force on National Health Reform plan, nurse practitioners (NPs) must understand what is meant by managedcompetition and implications if such system were to be implemented. Therefore the purpose of this arti c1e is to provide background information on the idea’s origins, define managed competition, discuss criticisms of the proposal, examine price controls and other options, and finally identify some of the concerns for NPs if such a system were to be put in place.
n
BACKGROUND
The idea for managed competition was born in Jackson Hole, Wyoming, where a group of health care economists have been retreating for the past two decades.The leader of the group, Paul Ellwood, MD, has been inviting policy heavyweights to discuss health care fiJ PEDIATRHEALTH CARE. (1993). 7, 186-91. Copyright 0 by the National Practitioners.
Association
0891-5245/93/$1.00
25/l/47631
+ .lO
of Pediatric
Nurse Associates &
and Robin Zink
naming and how to attack the nation’s health care crisis. Ellwood is the founder and president of InterStudy, a Minnesota-based think tank that has helped shape the US health maintenance organization (HMO) industry. Another leader, Alain E&oven, is a Stanford University professor of management. In the 197Os,Enthoven first proposed health cost control based on “consumer choice” and “managed competition,” with consumers choosing between competing full-service plans. Lynn Etheredge, a former federal budget official and Washington consultant, joined Ellwood and Enthoven to help write the plan. In September 1991, they wrote “The 21st Century American Health System,” the first draft of the managed competition plan. The Jackson Hole Group has a number of clearly diverse interests. Each group meeting focuses on a different topic and therefore draws a distinct crowd. According to Ellwood, “Each of these people brings a different experience, perspective, and knowledge, and eachof them has their own set of followers that are vital to getting [reform] done” (Kent, 1992, p. 11). The original group has grown to over 60 or so groups each agreeing with all or most of the current plan. In the past year, a number of organizations and people have endorsed the idea of managed competition including the Conservative Democratic Forum, former presidential contender Paul Tsongas, The New Y’mk Timzes,Bwiness Week, and some of the advisers on both President Clinton and former President Bush’s staff. Since that time, it remains fairly certain that the new health care reform plan introduced by President Clinton in June will contain many elements of the managed competition plan. n
THE CONCEPT
The original Jackson Hole proposal defined aaged competition as a complex blend of market forces and government regulation based on the premise that the best way to provide high-quality, low-cost care is to get people into managed care systems and to track the out-
186 IOURNAL OF PEDIATRIC HEALTH CARE
Journal of Pediatric Health Care July-August 1993
come of their care (Kent, 1992). In most other markets, consumers choose products of high value and low cost. However, current government policies have skewed the market so consumers cannot or do not choose the best insurance plan for their needs or their bank account. The idea behind managed competition is to restructure our health care delivery system into group purchasers and group providers. The traditional insurance practices of employers and employee purchasing insurance directly from insurance companies would cease to exist. The idea is to band employers and individuals into federally sanctioned health insurance purchasing cooperatives (HIPCs), recently referred to as “health alliances,” to negotiate with groups of health providers. Each of the provider groups would offer a prepriced package of services. Consumers would pick the plans that best fit their individual needs (Figure). One of the last decisions the Task Force will make is whether large companies may “opt out” of these alliances. Each accountable health plan @HP), which could be organized and managed by insurance companies, physicians, or others, would group together doctors, hospitals, clinics, laboratories, and other providers. The hope is that the marketplace would eventually determine price by forcing plans to compete on price and quality to win their business. The following rules would generally apply: n The AI-II’ s would be required to sell coverage to anyone regardless of any preexisting conditions. Furthermore, the AI-II? may not charge consumers from the same region different rates. n All AHPs would be required to offer the same basic benefits package, but each could provide additional services. l Consumers would get an annual “report card” from the HIPC that collects data from each plan and then rates them for price, quality, and consumer satisfaction. Enrollees would be allowed to change plans once each year. n Although conventional private-practice medicine would continue to exist, the designers of managed competition believe most people would be enrolled in managed care-type plans, such as HMOs, because traditional “fee-for-service” medicine would eventually become relatively expensive. n Consumers would pay more out of their own pockets if they wanted to go to doctors who had not joined arrangements that are expected to look much like current HMOs, in which most of the organizations’ doctors are on salary and the consumer gets all of his or her medical treatment for a preset annual fee. n All employers would have to pay for part of the employee’s cost of buying a plan. Estimates of this
Legislative
News
187
percentage range from 50% to 80%. The govemment would pay for or subsidize the unemployed (Priest, 1993a). Many different plans and variations on these ideas exist in Washington today. The Administration proposal may differ from the Jackson Hole plan in many ways. Moreover, it appears highly likely that whatever plan emerges from the President’s Task Force on National Health Reform will be called mumqed competition regardless of its contents. Nevertheless, some general ideas keep reemerging in the discussions regarding reform. Managed competition would limit the consumer’s choice of physicians and make it more difIicult to see specialists by placing a “manager” of the plan between the provider and the patient. The manager’s role is to assure that physicians and hospitals use their resources in the most efficient way. Many insurance companies have already assumed this role of managed care by requiring patients to get advance approval for operations and questioning the length of stay or treatment procedures. The role of insurance companies is expected to change dramatically. Paul Ellwood predicts 99% of the companies will be wiped out because they are onIy prepared to be insurance companies and not care managers (Priest, 1993a). Insurers will no longer collect premiums and pay claims. They will organize and manage AHPs made up of hospitals, doctors, laboratories, and other providers in a region. These AHPs could also be organized by hospitals, groups of physicians, and others. Each AHP would be held accountable to certain standards. First, each plan would be required to offer a basic benefit package for one set annual price. It is unclear at this time who would determine what would be included in such a package. Many proposals establish an independent federal government board to determine what services are included. Congress held hearings in March and April to discuss what should be included in the bene6t.s package. However, authors of the Managed Competition Act of 1992 have stated that Congress should not legislate a benefit package, and they prefer to leave those decisions regarding benefits to the medical community or a national health board. Therefore a national health board would be created to function much like the current Securities and Exchange Commission. The board would have the power to regulate plans and approve only those that provide such benefits. The approval would require evidence of a plan’s medical efkctiveness, based on continuing study and public knowledge of patient outcomes and personal satisfaction. Under the original Jackson Hole proposal, the marketplace would force consumers, insurers, providers, and employers to band together and create three stan-
Journal of Pediatric Health Care 188
Legislative
News
Volume
Small Businesses
Individuals
7, Number
4
Large Businesses
Buy insurance directlyfrom AHP
Health Plan Purchasing Cooperative (HPPC)
All AHPsmust offer the same basic
&st Oversee health market Standardize accounting and paperwork
n
FIGURE Managed
for risks among AHPs
Provide wnsumer information on the quality of AHPs
competition.
Source:
da&-setting boards. One board would issue ground rules for insurers. A second board would assessthe medical arts to determine annually what goes into the packageof uniform effective health benefits. The third board would establish generally acceptedpractices for tracking the results of medical care. Under managed competition in the original Jackson Hole proposal, the federal government would limit the
Representative
Jim Cooper
(D-TN).
variation in health plans by putting conditions on the tax exclusion employees now get for employer-paid insurancepremiums. The US Treasury currently loses $48 billion each year becauseof this tax break (Faltermayer, 1992). Managed competition would set a limit on the value of services that could be exempt. Furthermore, the exclusion would only cover a package of uniform effective health benefits, thereby limiting the tax exclu-
Journal
of Pediatric
July-August
Health
Care
sion to probably the lowest-cost plan in an HIPC. To purchase a higher-priced plan, employees would have to pay the difference themselves or their employer would have to be willing to give them taxable dollars to spend (Priest, 1993a). There have been mixed reports to date as to whether or not the Administration is considering taxing insurance benefits. Managed competition is expected to cause major dislocations in the health care industry, which now employs approximately 10 million people. Proponents of managed competition believe that the marketplace will force thousands of people out of work, which they believe is necessary to downsize our medical-industrial complex that consumes $930 billion yearly (Priest, 1993a). n
Legislative
1993
CRITICS
Even with the overwhelming support and sudden interest in managed competition, the plan is not without critics. Bruce C. Vladeck, the newly appointed Administrator of the Health Care Financing Administration, described managed competition as “old snake oil in new bottles” in a September 1992 newsletter (Priest, 1993a). He is concerned that the plan does not confront the problem many Americans have with affording health care. Most of the criticism comes from consumer groups, policy experts, and doctors who are concerned that the plan puts too much power in the hands of a non-medical manager whose first concern is saving money. Some feel it will continue to divert health care dollars to extraneous activities like paperwork, use review, and administration. The critics argue that health plans faced with the pressure to stay competitive may reduce necessary medical services, find ways to scrimp on the standard benefit package, and gradually increase the out-ofpocket burden on individuals to pay for the basic package. Moreover, such a system establishes, in force, gatekeepers who presumably will slow down the rate of health expenditures and access to specialized care and/or services, which is another way of “rationing’ health care. In addition, many critics charge that consumers will be paying more for care while at the same time receiving less choice. By limiting the tax deductibility of health benefits to the value of the lowest-priced plan, managed competition will force low- and modest-income persons into the least expensive but not necessarily highest quality plan. Many are also concerned about the definition of a basicbenefit package. What is in, and what is out? For example, much emphasis has been placed on preventive and primary care. However, what will happen to the management of chronic illnesses, rehabilitation, and services for acute care illnesses? Other issues involve ethical and moral issues that lead to the quality of life versus life-and-death decisions based solely on cost and
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effectiveness. As an example, when is a health care service or therapy considered effective? Who will make these decisions? Although there is a great deal of merit to having a uniform data collection system that focuses on outcomes, even the proponents of having a national system recognize that such a system is years away before we will be able to recognize its benefits. One of the linchpins to a managed competition system is the element of having such a system in place. Furthermore, a strong concern exists regarding the ability of such a plan to work in rural areas, where one in three Americans now live. It is diflicult for providers who work in these areas to imagine any hope of competition for services. Others fear that a few large plans will dominate each market thereby stifling the competition the plan was set to create. Finally, managed competition is an unproven theory. No country, city, or state in the world has ever tried this concept. Evaluation of the outcome of such a system in advance is virtually impossible. Robert Reischauer, Congressional Budget Of&e (CBO) Director, testified before Congress in February 1993 that “it would be extremely difhcult for CBO to estimate the magnitude and the timing of the effects (of managed competition) on national health spending because of the complexities of analyzing a dramatic restructuring on the markets for health insurance and health services” (Priest, 1993a). He further speculated that managed competition would not affect the long-term growth of health care costs. Nevertheless, Reischauer added that, if all Americans could be convinced to enroll in such plans, costs may drop by as much as 10%. Since that time, a new CBO comparison of the Managed Competition Act of 1992 (HR 5936), introduced last year by Rep. Jim Cooper (D-TN), and the Health Care Cost Containment Act of 1992 (HR 5502), introduced last year by Rep. Fortney Stark (D-CA), found that the growth rate in national health expenditures in 1999, currently projected at 9.3%, would be reduced by one-half a percentage point under managed competition and one percentage point by price controls (BNA’s Medicare Report, 1993). According to CBO estimates, HR 5936 would provide health coverage to more of the uninsured and would offer a more comprehensive set of benefits than the average health insurance plan. HR 5936 would cover 15 million to 20 million additional people but not the rest of the current 35 to 37 million Americans who are uninsured or underinsured. n
PRICE CONTROLS AND OTHER OPTIONS
The uncertainty regarding the cost savings associated with managed competition has led the task force to consider other options. The President’s Task Force on National Health Reform has identified a list of more
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than 25 possible financing mechanisms to fund universal
access to care. It has been estimated that the total cost of universal access could be as high as $30 billion or $90 billion by 1997, according to White House sources (BNA Daily Report for Executives, 1993). Most of the savings will be generated in the private sector. The White House is considering a number of tax increases to pay for the reform package. Some of the possibilities include n allowing insurance premiums to rise somewhat faster than intended and taxing the premiums; . raising a corporate tax to capture part of the savings corporations will realize from slower premium growth; n taxiug benefit plans offering coverage above a certain level; n reducing uncompensated care payments; l instituting higher taxes on alcoholic beverages, tobacco products, pollutants, guns, or other products that contribute to health problems; and . creating a tax on non-critical service usage. Price controls or “global budgeting” and a provider tax are also rumored to be considered. With the deficit rising sharply each year, the political climate is such that Congress and the President may be forced to implement some type of global budget that sets spending ceilings to bring health care costs under control. However, managed competition architects strongly disagree that managed competition and global budgeting can be combined succes&lly. Rep. Cooper warned that “the worst thing” that could happen is that the President releases a package that is called managed competition but really represents price controls. Opponents of global budgeting argue that it is inflationary and that it would prohibit consumers from spending their own after-tax dollars. Rep. Cooper believes even the slightest hint of price controls will lead providers to inflate their prices in preparation of what lies ahead. He argues Congress cannot and will not be able to enforce those spending limits. The Task Force has drafted three possible ways to impose price controls. The first is to impose a shortterm freeze on prices charged by all private and public hospitals, doctors, laboratories, equipment makers, nursing homes, and other medical services. The second is to impose caps on insurance premium increases and prohibit insurers from cutting the benefits they offer. Annual premium increases would likely be linked to growth in the gross domestic product. The third is that the task force consider extending Medicare’s existing payment system, or a similar formula to set regionally adjusted prices for individual procedures, to all medical procedures performed by private doctors and hospitals. The Health Care Financing Administration would begin establishing payment rates not already set (for pe-
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diatric procedures, for example) and could have the system in place 9 months after President Clinton presents his bill to Congress (Priest, 1993b). The Administration argues price controls are necessary for 2 to 3 years, both to reduce spending and to help finance health coverage for the uninsured while comprehensive reforms are put in place. ’ CONCERNS Managed competition has the ability to make a significant impact on the way NPs continue to provide care. Because the concept has been partially incorporated into the Administration’s health care reform proposal, it is important for pediatric NPs (PNPs) to become educated about their role and place in a new system. NPs have made considerable progress over the past 25 years. Apparently this health care reform movement provides considerable opportunity for the NP. Now is the time for NPs to be recognized as front-line providers of primary care. The reform efforts of the President’s Task Force provides NPs the chance to be included in the new health care system from its inception. Thus far, Hillary Rodham Clinton and the task force have been receptive to nursing and the role of NPs. The nursing community and especially NPs must play an active role in the development of health care policy to be sure their services are both recognized and covered. Their services must not continue to be limited to geographic locations, settings, or patient populations. Some of the obstacles faced by NPs in providing care in today’s health care system include conflicting federal and state requirements on supervision/ collaboration and restrictive reimbursement policies that refuse to recognize NPs for their services, significantly reduced payment for services provided by NPs as relative to physician payment, and reimbursement policies that only recognize NP services provided in underserved areas. The new health care system must recognize the valuable role of NPs. Nonphysician providers like NPs and physician assistants cannot be lefi to compete with other providers for a place in the system. If NPs are not recognized as front-line primary care providers in any reform proposal and are left out, millions of Americans who have come to depend on their services will be left without any health care provider. Moreover, assuring a role for NPs in a reformed system will help meet the nation’s goal of guaranteeing universal access to highquality care for all Americans while ensuring consumer choice. It is essential that the new proposal require the effective and full use of all health care personnel, especially NPs and not just physicians, in the reformed health care system. In this way, if managed competition does become a reality, NPs will have the ability to negotiate with the AHPs or other entities to provide care. Should any health care reform plan not recognize NPs
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as primary care front-line providers, NPs will be put at a distinct disadvantagebecausethey will be competing among other physicians, like physician specialistswho become primary care physicians,for a place in the system. Further, the assumption that NPs could compete in the market is invalid becauseunder current laws, rules, and regulations, the systemhas numerous barriers for NPs and it is not yet a level playing field. Furthermore, as advocatesfor children’s health care, PNPs must assurethat the “basic”benefit packagecover all servicesto care for our nation’s children. Benefits for children and young adults have been outlined in the National Association of Pediatric Nurse Associatesand Practitioners’Accessto Care statement. This health care reform processis not limited to the federal government. State legislaturesacrossthe country are tackling the same problems with somewhat greater speedthan the federal government. Many statesare considered trailblazers for their reform efforts, and their progressis being watched carefully. NPs should contact both their state legislators and members of Congress regarding health care reform. Take time to become familiar with the legislation proposed in June by the President’s Task Force on National Health Reform. Because nursesrepresentone in forty voters, the time is now to
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make that collective voice heard. Make sure nurses are able to compete in the system that is proposed. The future of the NP may depend on it. Now, more than ever, PNPs need to becomefamiliar with the terminology and keep a vigilant watch on the health care reform debate. Moreover, contact legislators and health care policy makers by letters, phone calls, and meetings to apprise them of your expertise, how you fit into the health care system now, and how it is essentialthat you are specifically included in any new health care system.
REFERENCES BNA’s Medicare Report. (1993, January 22). Munagcd competition will not wmrk wi>bglobal &u&et&~, p. 91. BNA Daily Report for Executives. (1993, February 18). White Howe seafbyth vtius options tojknd comprehensiverefbm, p. G-2. Faltermayer, Edmund. (1992, March 23). Let’s really cure the health system. Fortune, 125, 4658. Kent, Christina. (1992). The gang that shoots straight. Joumd of Americms Health Policy, 2, 9-14. Priest, Dana. (1993a, March 9). A health care primer: How managed competition would work. Wusbington Post, pp. Al, Al 1. Priest, Dana. (1993b, March 17). Medical price caps drafted for Clinton: Adviser has 3 options for short term. Wasbiqton Post, pp. Al, A14.