Health Care at Risk: A Critique of the Consumer-Driven Movement
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Duke University Press Books
Health Care at Risk: A Critique of the Consumer-Driven Movement

Health Care at Risk: A Critique of the Consumer-Driven Movement

by Timothy Jost


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Health Care at Risk: A Critique of the Consumer-Driven Movement

In Health Care at Risk Timothy Stoltzfus Jost, a leading expert in health law, weighs in on consumer-driven health care (CDHC), which many policymakers and analysts are promoting as the answer to the severe access, cost, and quality problems afflicting the American health care system. The idea behind CDHC is simple: consumers should be encouraged to save for medical care with health savings accounts, rely on these accounts to cover routine medical expenses, and turn to insurance only to cover catastrophic medical events. Advocates of consumer-driven health care believe that if consumers are spending their own money on medical care, they will purchase only services with real value to them. Jost contends that supporters of CDHC rely on oversimplified ideas about health care, health care systems, economics, and human nature.

In this concise, straightforward analysis, Jost challenges the historical and theoretical assumptions on which the consumer-driven health care movement is based and reexamines the empirical evidence that it claims as support. He traces the histories of both private health insurance in the United States and the CDHC movement. The idea animating the drive for consumer-driven health care is that the fundamental problem with the American health care system is what economists call “moral hazard,” the risk that consumers overuse services for which they do not bear the cost. Jost reveals moral hazard as an inadequate explanation of the complex problems plaguing the American health care system, and he points to troubling legal and ethical issues raised by CDHC. He describes how other countries have achieved universal access to high-quality health care at lower cost, without relying extensively on cost sharing, and he concludes with a proposal for how the United States might do the same, incorporating aspects of CDHC while recognizing its limitations.

Product Details

ISBN-13: 9780822341017
Publisher: Duke University Press Books
Publication date: 08/22/2007
Pages: 288
Product dimensions: 6.30(w) x 9.40(h) x 1.00(d)

About the Author

Timothy Stoltzfus Jost is the Robert L. Willett Family Professor of Law at the Washington and Lee University School of Law. He is the author of Health Care Coverage Determinations: An International Comparative Study and Disentitlement? The Threats Facing Our Public Health-Care Programs and a Rights-Based Response. He is the editor of Readings in Comparative Health Law and Bioethics and a coauthor of Health Law: Cases, Materials, and Problems, now in its fifth edition.

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Copyright © 2007 Duke University Press
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ISBN: 978-0-8223-4101-7

Chapter One

Our Broken American Health Care System

Criteria to Judge a Health Care System

The consumer-driven movement has been able to gain purchase as a policy initiative because of a widespread consensus that our health care system is in desperate straits and in need of a radical change. This chapter examines the problems plaguing our health care system to which the consumer-driven movement offers a solution. Chapter 2 lays out the consumer-driven solution, and later chapters examine the appropriateness of that solution to our problems. I will revisit the problems examined here in chapter 10, which compares the performance of the American health care system with the systems of other countries. When placed in a comparative light, the performance of the American system is even more distressing. Recognizing that there will be some overlap between these chapters, I begin by considering our own system in isolation.

Most health care policy experts identify three touchstones by which the health care systems of countries should be evaluated: access, cost, and quality (European Economic and Social Committee 2004). First, do all those within the system have access to health care when they need it? Second, is health care available at reasonable cost given the resources of a nation, and are increases in the cost of health care from year to year kept to reasonable levels? Third, is the health care of acceptable quality? Does it achieve the best possible outcomes, and are avoidable errors kept to a minimum?

Judged by each of these standards, the health care system of the United States fails dramatically. First, by one recent count nearly forty-seven million Americans lack health insurance, and the number is growing (DeNavas-Walt, Proctor, and Lee 2006, 20). Of course not all of the uninsured lack access to all necessary health care, but many face severe access limitations. Even many who do have insurance still experience serious difficulties in affording needed health care products and services. Second, the cost of our health care system is now approaching $2 trillion, or 16 percent of our gross domestic product, and is growing at unsustainable rates (Catlin, Cowan, Heffler, Washington, and National Health Accounts Team 2007, 143). Finally, the quality of American health care is seriously deficient. One example is the conclusion by the Institute of Medicine that from 44,000 to 98,000 Americans die every year from medical errors (Institute of Medicine 2001b, 1). In sum, the American health care system is in trouble.

There are other criteria by which a health care system can be judged. One of these, given particular emphasis by CDHC advocates, is freedom of choice. Another criterion might be whether patients are treated with respect; whether, for example, they are allowed to make decisions with respect to their own health care and whether their medical information is kept private. Yet another criterion is whether the system encourages innovative research regarding medical problems, their causes and cures, and whether it stimulates the creation of new medical products and procedures. Judged by some of these criteria the American health care system does reasonably well; judged by others, it scores rather poorly.

This chapter examines the performance of the American health care system with respect to each of these criteria, focusing first on the central concerns of access, cost, and quality. Readers already familiar with the problems of the American health care system may wish to skip this chapter. But because CDHC advocates minimize the seriousness of the problem of access to health care, which they do not convincingly address, and because they only partially address other problems that plague the American health care system, it is necessary to fully explore the seriousness of these problems before moving on to the CDHC prescriptions.

Access: The Forty-six Million Uninsured

In 2005, according to estimates by the Census Bureau, 46.6 million Americans lacked health insurance at some point (DeNavas-Walt, Proctor, and Lee 2006, 20). This number has grown significantly over the past half-decade, as employer-sponsored coverage has declined dramatically and public coverage has not expanded quickly enough to fill the void (Holahan and Cook 2005, W5-499-W5-502). The number of the uninsured is likely to grow to 56 million by 2013 (Gilmer and Kronick 2005, W5-148). This is the most serious problem facing the American health care system, and a problem that CDHC largely ignores.

To get an accurate perspective on the problem of health insurance in the United States, however, one needs a movie, not a snapshot. If one examines the phenomenon of un-insurance over time, one sees that many more people-almost 82 million, or one-third of all non-elderly Americans-were uninsured at some point during 2002 and 2003 (Families USA 2004, 3). One also sees a very dynamic picture-people moving from private to public insurance, from public to private insurance, or among private insurers; people lacking insurance for long periods, perhaps the entire two years; and people uninsured for a single short period, or for repeated short periods (Short and Graefe 2003, 247-49). Most of those uninsured at any one time have been uninsured for a year or more (over 80 percent according to one survey), and many of those currently insured were uninsured during the previous year-sixteen million according to one survey (Collins, Davis, Doty, Kriss, and Holmgren 2006, 4-5).

Although health policy discussions commonly draw a bright line between the insured and the uninsured, the ultimate issue is access to health care, not insurance. The degree of difficulty experienced in gaining access to health care varies tremendously among both the insured and the uninsured. Just because a person is uninsured does not mean that he has no access to health care. But neither does the mere fact that one is insured mean that one can gain access to health care without difficulty or undue expense. It is necessary, therefore, to examine in greater detail the experience of both the uninsured and the privately and publicly insured.

About 80 percent of uninsured Americans are either employed or in the household of someone who is employed (Glied 2001, 91). Most American employers offer health insurance, although many, particularly small businesses, do not (Kaiser Family Foundation / Health Research and Educational Trust 2006, sec. 2, p. 1). But most of the employed uninsured do not have health insurance available from their place of employment. Many are low-wage, part-time, or seasonal employees or work for very small businesses (Institute of Medicine 2001a, 60-62, 67-70; Fronstin 2006b). Other uninsured people are in fact eligible for health benefits at their place of employment, but decline the offer rather than pay the employee's share of premiums.

Many uninsured Americans are otherwise disadvantaged. The uninsured tend disproportionately to be drawn from minority groups-especially Hispanics. Uninsured adults are also more likely than the insured to report fair or poor health (Graves and Long 2006, 3). Most uninsured persons have very low incomes: 25 percent are from households with incomes below the poverty level, and 54 percent from households with incomes below 200 percent of the poverty level (Cover the Uninsured Week 2006).

The picture is complicated, however. For example, 17 percent of America's uninsured are from households that earn $75,000 a year or more (Cover the Uninsured Week 2006). As an increasing number of Americans have become independent contractors, consultants, contingent or temporary employees, and "1099 workers," and as whole industries have moved away from a traditional full-time employment model, many of the uninsured are middle- or upper-class Americans who simply do not have access to traditional employment-related insurance (Schwartz 2004, 18-28). Yet others are reasonably well off but temporarily between jobs. Very few, however, choose to be uninsured because they believe insurance to be unimportant. In one recent survey, 1 percent of non-elderly adults reported having "no need for insurance," while most others polled reported primarily the high cost of insurance (54 percent) or job-related reasons, such as loss of employment (41 percent), for being uninsured (Graves and Long 2006, 4).

Many of the uninsured are young people who have not yet entered the employment market or who are working at low-wage jobs. During the period from 1996 to 2000, two-thirds of young adults aged nineteen to twenty-three went without insurance coverage at some point, and almost a quarter were uninsured for more than two years. (Collins, Schoen, Kriss, Doty, and Mahato 2006, 4). Young adults are often healthy, but many are not. Three and a half million women aged nineteen to twenty-nine become pregnant every year, one-third of HIV diagnoses are made among young adults, and traumatic injuries requiring emergency room visits are much more common among young adults than among children or older adults. When offered health insurance, nearly three-quarters of employed young adults take it up (Collins, Schoen, Kriss, Doty, and Mahato 2006, 5-7).

A significant proportion of older Americans are also uninsured. More than half of adults aged fifty to sixty-four in households earning less than $25,000 have been uninsured at some time since turning fifty. More than one-third of older adults in working households either have had a problem with a medical bill in the past twelve months or are paying off accrued medical debt (Zeldin and Rukavina 2007; Collins, Davis, Schoen, Doty, and Kriss 2006, viii).

Many of the uninsured (particularly children) are eligible for Medicaid or for their state's SCHIP program, but are not enrolled. Bureaucratic barriers, including burdensome application procedures, frequent and onerous redeterminations, and lack of enrollment education efforts on the part of the states, discourage enrollment (Mann and Westmoreland 2004, 416, 419). Some potentially eligible people would rather not identify themselves to the government. The onerous proof-of-citizenship requirements recently adopted in the Deficit Reduction Act of 2005 are likely to increase further the rolls of the uninsured. In some states, moreover, certain categories of persons potentially eligible for Medicaid are not covered unless they are desperately poor (Kaiser Family Foundation 2005b).

The experience of being uninsured varies. Healthy middle-aged executives who are temporarily between jobs may also get by without any ill effects. But even higher-income uninsured Americans suffer. They are significantly less likely than insured Americans to receive recommended medical services (Ross, Bradley, and Busch 2006, 2032-33). They often run into financial trouble because of medical costs. One recent study of uninsured persons found that problems with medical bills and debt were most frequent among those with higher incomes. Almost half of working-age adults with incomes of $40,000 or more who had been uninsured at some time in the previous year reported problems with medical debt or bills (Collins, Davis, Schoen, Doty, and Kriss 2006, ix).

The "insured," on the other hand, are also far from monolithic. At the one extreme, employees of large employers still covered by collective bargaining agreements may have first-dollar medical coverage through a preferred provider organization (PPO) with a comprehensive network and no requirements for utilization review, supplemented by pharmaceutical, dental, and vision coverage with minimal cost sharing, as well as a flexible spending account (FSA) or health reimbursement account (HRA) to cover any costs not otherwise covered. At the other extreme, individuals and families insured in the nongroup (individual) market may have deductibles as high as $10,000, co-insurance as high as 50 percent, co-payments of $200 a day for hospital coverage, exclusions for preexisting conditions, and no coverage for mental health, maternity, or prenatal care (America's Health Insurance Plans 2005b, 11, 13, 17, 26). Adults in the nongroup market are at much higher risk for high financial burden than those with group coverage or public insurance (Shen and McFeeters 2006, 207-8). The Tonik "thrill-seeker" plan offered by Blue Cross of California covers four physician visits a year, has a deductible of $5,000 and an emergency room co-payment of $100, and covers only generic drugs. An uninsured person in an area with a good safety-net system may in fact have better access to health care than an "insured" person with this level of exposure. The access difficulties experienced by low-income, privately insured persons are quite similar to those experienced by Medicaid recipients (Coughlin, Long, and Shen 2005, 1081-82).

In between these extremes are many people insured through HMOS or PPOS with limited networks of available providers, significant gaps in coverage, and high cost-sharing obligations. Deductibles and co-payments have increased dramatically in recent years, and additional forms of cost sharing, such as separate deductibles for hospital care, are becoming common (Kaiser Family Foundation / Health Research and Educational Trust 2006, sec. 7, pp. 1-2). Recent research has demonstrated that a significant number of Americans experience serious financial problems because of health care expenses, and that most of them are insured. Nearly two-fifths of Americans report serious problems paying for their own or their family's medical care, including half of Americans earning less than $50,000 a year (Schoen, How, Weinbaum, Craig, and Davis 2006, 6, 7). One-third of working-age adults are either paying off accrued medical debt or have had medical bill problems in the previous year, and three-fifths of these were insured (Collins, Davis, Schoen, Doty, and Kriss 2006, viii). Nearly three in ten adults report that there was a time in the preceding year when they did not have enough money to pay for medical care; 62 percent of these were insured (USA Today / Kaiser Family Foundation / Harvard School of Public Health 2005). Many Americans have credit card debt attributable to medical expenses (Zeldin and Rukavina 2007). Some lose their homes when they cannot pay off home equity loans they have taken out to cover their medical debt, or find themselves unable to rent apartments because their credit rating has been ruined by medical debt. About half of all bankruptcies have some medical cause (Himmelstein, Warren, Thorne, and Woolhandler 2005). Most bankrupts with medical debts are insured.

Disparities in the extent of insurance coverage would not matter so much if third-party health care financing were not so necessary for getting health care in the United States. In general the uninsured get less health care than the insured, and get it later, when it is often less effective (Wolman and Miller 2004, 399-400). Because of the Emergency Medical Treatment and Active Labor Act (EMTALA), it is possible for even the uninsured to gain access to emergency care in the United States without health insurance (Furrow, Greaney, Johnson, Jost, and Schwartz 2000, 512-23). Care provided under EMTALA is not free, however, and some choose to forgo it rather than incur further medical debt. It is much more difficult, moreover, to gain access to preventive or primary care or care for chronic conditions than it is to get emergency care. Over one quarter of uninsured adults with chronic medical conditions reported no visits to health professionals in the twelve months preceding a recent survey (Urban Institute / University of Maryland 2005, 4). One-quarter of Americans with below-average incomes have to wait six days or more to see a doctor when sick, compared to only 13 percent of Americans with above-average incomes (Huynh, Schoen, Osborn, and Holmgren 2006, 7). Among uninsured Americans of working age, 60 percent report not filling a prescription, not seeing a specialist when needed, skipping a medical test or treatment, or not seeing a doctor for medical problems because of lack of insurance (Collins, Davis, Schoen, Doty, and Kriss 2006, 9). Americans with medical debt are also much less likely to get needed medical care than those who do not have problems with medical debt (Doty, Edwards, and Holmgren 2005).


Excerpted from HEALTH CARE AT RISK by TIMOTHY STOLTZFUS JOST Copyright © 2007 by Duke University Press. Excerpted by permission.
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Table of Contents

Preface ix

1. Our Broken American Health Care System 1

2. The Consumer-Driven Prescription 17

3. Consumer-Driven Health Care Advocates: Who They Are and What They Believe 27

4. Consumer-Driven Health Care the First Time Around 42

5. The Nonaccidental System 54

6. The Origins of Consumer-Driven Health Care: A Short History of American Health Economics

7. The Theoretical Foundations of Consumer-Driven Health Care 86

8. But Does It Work? The Evidence for and against Consumer-Driven Health Care 119

9. Legal, Ethical, and Regulatory Issues Presented by Consumer-Driven Health Care 150

10. Are Consumers Our Only Hope? How Other Countries Organize Their Health Care Systems 166

11. How to Fix Our Broken Health Care System: Where Do We Start? 189

Notes 205

Bibliography 225

Index 253

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