Question

Discuss in detail one example of how specific interests in the healthcare industry affect decisions toward the delivery of healthcare in the United States.

Answer 1

The health care sector in the United States consists of an array of clinicians, hospitals and other health care facilities, insurance plans, and purchasers of health care services, all operating in various configurations of groups, networks, and independent practices. Some are based in the public sector; others operate in the private sector as either for-profit or not-for-profit entities. The health care sector also includes regulators, some voluntary and others governmental. Although these various individuals and organizations are generally referred to collectively as “the health care delivery system,” the phrase suggests an order, integration, and accountability that do not exist. Communication, collaboration, or systems planning among these various entities is limited and is almost incidental to their operations. For Americans to enjoy optimal health—as individuals and as a population—they must have the benefit of high-quality health care services that are effectively coordinated within a strong public health system.

Health insurance products and benefit structures that increase consumerism are helping to manage benefit costs. With the increased financial responsibility, consumers are reevaluating how and when to spend on healthcare services. Changes in the healthcare marketplace going forward are requiring patients to spend more of their own money on their medications. They are no longer uninvolved players in the selection of treatment and the use of drugs or health services. The pharmaceutical industry is discovering that it is important to understand the behavior of its consumers if it wants to meet sales expectations. Drug manufacturers can no longer expect to have commercial success by simply proving that their drugs meet the established measures of safety and efficacy with traditional clinical customers (ie, providers). Manufacturers must now understand consumer behaviors if they want to meet the increasing demands of patient expectations.

Health care is not the only, or even the strongest, determinant of health, but it is very important. For most Americans, having health insurance— under a private plan or through a publicly financed program—is a threshold requirement for routine access to health care. “Health insurance coverage is associated with better health outcomes for adults. It is also associated with having a regular source of care and with greater and more appropriate use of health services. These factors, in turn, improve the likelihood of disease screening and early detection, the management of chronic illness, and the effective treatment of acute conditions”.

Several organizations develop and evaluate quality measures, and an even larger number of public- and private-sector organizations use different measures for evaluating and reporting on the performance of providers. Public measure developers include the Centers for Medicare & Medicaid Services and the Agency for Healthcare Research and Quality; nonprofit private developers include The Joint Commission and the National Committee for Quality Assurance. These organizations use a transparent approach to give the public an opportunity to review and comment on their draft measures, to refuse to use proprietary measures, and to make their measure-scoring mechanisms transparent.

A fundamental shift in healthcare economic risk is taking place, driven by an aging population and the increasing incidence of behaviorally induced chronic conditions. Health systems, which include people, institutions, and resources that deliver healthcare services to meet the health needs of target populations, are evolving with the market and delivery innovations to meet the challenge of managing healthcare risk through a growing emphasis on primary care, integrated care models, and pay-for-value reimbursement. As operating margins continue to narrow, revenue constraints are becoming a pressing issue for many healthcare organizations. Partially in response, health systems are increasing in scale by engaging in horizontal integration through hospital mergers and acquisitions. Scale could drive more efficiency, could improve the spreading of financial risk across the system, and could reduce operating costs across the enterprise.

The primary objectives of any health delivery system are to enable all citizens to receive health care services whenever needed, and to deliver health services that are cost-effective and meet pre-established standards of quality.

The federal government is the largest single payer of health care in the United States, accounting for more than a quarter of all U.S. spending on health care. Having a single entity provide so much of the revenue for an industry gives that entity outsize influence in that industry. Consequently, as the nation’s largest payer, the federal government is able to significantly shape and move the health care market. Whether it is the Centers for Medicare and Medicaid Services (CMS) determining which treatments and technologies are worth covering and how much they are willing to reimburse for them; the Agency for Healthcare Research and Quality (AHRQ) mandating quality and safety standards; or the new Affordable Care Act (ACA) exchanges setting the standard for benefit packages throughout the health insurance market, it is clear that government agencies and their mandates play a powerful role in guiding the provision of health benefits and the overall construct of the market.

In recent years, a number of health policy trends have highlighted the significant role the federal government plays as a payer of health care:

• The federal government’s role as both regulator and payer of the insurance industry has resulted in several key insurance mergers over the past year, which has reshaped the country’s health insurance market;
• The government encourages businesses to serve as test cases for government preferred payment models such as bundled payments and ACOs;
• The federal government’s role as the dominant health care payer has a variety of powerful effects on reimbursement to providers—most notably through Medicare, but also in terms of the potential cost shifting that occurs and is borne by private payers;
• The federal government’s ACA exchange plans serve as a benchmark for private plans, which has a ripple effect in setting prices for other insurance plans, as well as for employers determining levels of coverage;
• The Federal Employee Health Benefit Plan (FEHBP), influences not only the shape of health plans provided, but also who is providing them;
• The government’s dominant payer role shapes the face of innovation adoption. For example, when it comes to telehealth, Medicare reimbursement models are determining how new technology will be integrated in the practice of medicine; and
• The government’s Agency for Healthcare Research and Quality (AHRQ) sets national health care quality standards, which play a role in payment models.

One of the major ways in which the federal government’s payment role shapes our health care industry is in its impact on large insurers. This influence takes place in a number of ways that go beyond the federal government’s role as a regulator. It is the government’s role as a revenue source that makes it so important to the insurance industry. Another way that government influences business models is by encouraging businesses to serve as test cases, or guinea pigs for government preferred payment models such as bundled payments and accountable care organizations.

The federal government’s role as the dominant health care payer also has a variety of powerful effects on reimbursements to health care providers. These influences manifest in both the public and the private sector. Within the public sector, the problem of “dual eligibles” approximately 9 million Medicare beneficiaries under 65 who are also eligible for Medicaid as well has been known to present funding challenges to both programs, not to mention coordination of care problems for the beneficiaries themselves. These problems arise because of the incentives to engage in “cost shifting” between the two programs. A nursing home dealing with a costly patient who is reimbursed via Medicaid might seek to transfer such a patient to a hospital, which is reimbursed by Medicare. The hospital, for the very same reasons, might seek to transfer its own costly patients to a nursing home. This hypothetical example is only one of a multitude of ways that health care providers cost shift within the two programs. States also engage in this behavior, as they have been found to encourage transferring patients from Medicaid-reimbursed care—the costs of which are split with the federal government to Medicare-reimbursed care, for which the federal government pays without a state split. Compounding matters is the fact that dual eligible patients tend to be both poorer and sicker than average, increasing costs for both the health care providers and the government programs themselves. In this way, the dual eligible uncertainty, created by having government as such a large payer, can wreak havoc on patients who fail to receive the coordinated care they need, and create administrative nightmares for providers.

Government reimbursement levels have an impact on private sector spending in an additional way. Because reimbursements from government programs like Medicare and Medicaid are lower than the average cost of serving those patients, providers charge privately insured patients higher rates in order to recoup their costs. This increase in private sector prices to adjust for government payment levels is called “cost-shifting,” and it is a controversial concept.