Wounded Profession: American Medicine Enters the Age of Managed Care

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All health care providers should read this detailed account of the historical, present, and future of health care, and it should be required reading for all students of health care. General readers; upper-division undergraduates; graduate students; faculty; researchers, and professionals.? Help Centre. My Wishlist Sign In Join. Be the first to write a review.


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Syntax Advanced Search. About us. Editorial team. Sandra J. Edit this record. Mark as duplicate. Find it on Scholar. Request removal from index. Revision history. From the Publisher via CrossRef no proxy journals. Configure custom resolver. The Ethical Impacts of Managed Care. George W. Morrison - - Journal of Business Ethics 12 6 - Laurie Zoloth - - Journal of Medicine and Philosophy 24 5 — Additionally, the Canadian health care system is characterized by universal coverage, i.

Some factors which explain the relatively high health care expenditure in the U. The poor health of Americans in comparison to citizens of other countries seems mainly attributable to income, which is much more unequal in America than in other countries 3 World Bank The relationship between income and health status is supported by several studies Starfield ; Bach et al. Ross et al.

Health care in the United States - Wikipedia

The present article decomposes health care expenditure into different supply and demand factors. Several demand components, such as hospital care, are excluded from the analysis, because the available data does not allow eliminating the potentially large double counting. For example wage costs are also reflected in household expenditure on hospital care.

Summary determinants of health care expenditure in the U.

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Sum of factors causing higher expenditure in the U. Sum of factors causing lower expenditure in the U. The difference in health care expenditure between the U. This can imply flaws in the measurement of the differences but also that other factors are relevant. The figures in Table 1 are only rough approximations of the magnitude of the differences. The sum of the different factors explaining the difference in health care expenditure excludes double counting, as far as possible.

This article starts with a snapshot of the American health care system. It is followed by a section dealing with supply factors such as investment, development of wages in relation to productivity, administration costs and other cost containing institutions in health care, such as managed care, the gatekeeping function of the general practitioner and waiting lists in elective health care.

The final section includes a conclusion and some discussion notes. Single-payer coverage in Canada permits the use of global budgeting and rationing Evans To provide health care the different provinces contract directly with physicians and hospitals Health Canada This system resulted in public expenditure on health of The share of private funding of health care equals Private funding is made up firstly by pocket payments, secondly by private insurance, and thirdly by other private funds such as non-profit institutions serving households, philanthropic and charitable institutions.

Their share in total health care expenditure is Private health insurance in the U. According to Enthoven , federal tax subsidies undermine cost-consciousness in the market for private health insurance. The employer based insurance system in the U.

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  • Private insurance covered This employer based insurance market provides insurance coverage to about two-thirds of the population under 65 years of age. Insurance is universal for those over 65 years of age. In The insurance provided to employees at the workplace is usually part of the compensation package. There is a tax incentive for this type of coverage, because health benefits are not treated as taxable incomes. This implies that most private health insurance is provided through some form of managed care organization.

    The remaining part has medical coverage on a fee-for-service basis NCHS Besides employer based insurance, medical coverage is provided by the government, through Medicare and Medicaid among others. Medicare is focused on the elderly and Medicaid is focused on the poor. Finally, individuals can always choose private insurance themselves. This is an option chosen by some self-employed persons, but some workers also purchase insurance plans on their own from a source other than their employer Rodriguez and Wiens-Tuers There is a wide range of studies concerning the explanation of health care expenditure: Some studies integrate two or more different variables while other studies concentrate on the analysis of separate variables.

    Investment, pharmaceutical prices, income in relation to productivity, administration costs, law suits, direct-to-consumer advertising, primary care and waiting lists are examined separately in the following sections. Total investment defined as business assets with an expected use of more than 1 year that generally are depreciated, in health care in Canada and the U.

    The spread of new technologies is relatively unrestrained in the U. Assuming that country differences in medical equipment ratios per capita also reflect differences in use of corresponding technologies, the figures in Table 3 suggest that conventional X-ray techniques are used more often in Canada than in the U.

    Other than investment, the difference in health care expenditure between the U. Consequently, assuming that this estimate is representative for all pharmaceutical expenditure and that this estimate might be held constant, expenditure on prescription drugs is 0. Although the fact that price increases for pharmaceuticals in Canada were higher in the 5 years after the Canadian regulations for generic drugs in May than price increases in the 6 years before the introduction Anis et al.

    To understand the lack of pharmaceutical price regulations in the U. In other words Canadian patients have poorer access to new drugs less than 5 years in the market , compared to patients in the U. However, according to Angell , this is not necessarily negative. Growth rates in percentages per year of value added and of wages and salaries per full time equivalent fte employment, in Canada and the U.

    If wages and salaries in Health and social work had followed the wage rise in Manufacturing in the U. This is 4. In Canada the effect is lower: it equals 3. According to Fuchs and Hahn , net physician income was about onethird higher in the U. Keeping both figures constant for , and given that , doctors were professionally active in NCHS , this explains 0. The fact that physician income is lower in Canada may be because, among other things, the fees of Canadian physicians are set by a monopsonist province governments while those in the U.

    Administration costs prove to be a significant variable to explain the difference in health care expenditure between the U. The first has less economies of scale in administration than the latter because competition among providers of health care, on the one hand, and competition among insurers of health care on the other, result, among other things, in extra expenses in billing and administrative operations of health care providers who have to deal with s of payers and different rules and prices. Total national administration costs in health care are 0.

    Whereas the OECD definition of health care administration is restricted to the activities of private insurers, central and local authorities and social security, Woolhandler et al. Using the same broad definition, this big difference is also reported by Himmelstein et al. This is substantially more than would be needed to provide full insurance coverage. Not only administration costs, i. For example, insurance companies have high costs in determining the applicant risks and in preventing moral hazard of the insured. Partly these costs are already incorporated in the previous section on administration costs.

    The same goes for negotiating costs for the employers or individual applicants and costs of monitoring how insurers treat their employees. This section is limited to the costs considering liability of health care workers. According to Anderson et al.

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    The costs of medical liability are higher than the direct written medical malpractice insurance premiums alone. Among other things, state costs and administration costs are involved. These total national medical malpractice tort costs are 0. Assuming that the ratio of total malpractice costs in the U.

    The costs mentioned above only include the explicit costs of the malpractice system. The costs do not include the cost of defensive medicine, i. Although these indirect costs are unknown, raw estimates are available. Defensive medicine raises medical bills for patients and increases insurance costs for employers and it takes money away that small businesses could use to invest and expand.

    This estimate is based on a study by Kessler and McClellan The findings have never been replicated. Compounding the uncertainty about the magnitude of spending for defensive medicine, there is little empirical evidence on the effect of medical malpractice tort controls on spending for defensive medicine and, more generally, on overall health care spending. Most is targeted toward physicians NCHS According to Scherer total prescription drug advertising and promotional outlays in the U.

    There are several strategies to contain health care costs, including, among other things, the strengthening of primary care practice and planning of elective health care. These devices have been implemented to a higher degree in Canada than in the U. Starfield If the U. Physicians were reimbursed on a fee-for-service basis, and patients had nearly unlimited choice.

    This changed with the introduction of managed care, which was encouraged by the Health Maintenance Organization Act of Consequently, gatekeeping in primary care has the potential to reduce health care costs because it may reduce hospitalization and it may facilitate a more appropriate use of specialists Bodenheimer and Fernandez Baicker and Chandra a , ignoring possible differences in clinical training of primary care workers, conclude that health care in U. Patients may view gatekeeping with suspicion because they fear that rationing if not restricting the use of health care resources ultimately works to the detriment of their health.

    This may explain some of the aversion to gatekeeping. But gatekeeping is not mandatory. If patients accept that the deviation of the least costly pathway is shifted back to them through out-of-pocket surcharges, or co-payments they can always opt for a more expensive pathway. So, at least in theory, even under the HMOs patients retain free choice. However, this is a conservative estimate, because it only includes savings due to higher process-quality. The estimate does not include the quality benefits of heavier emphasis on primary care. Waiting lists can be the result of a policy to improve efficiency.

    In these cases, supply of health care is artificially scarce, i. Less underemployment may result in lower prices. A positive relation between waiting lists and productivity is endorsed by Siciliani and Hurst They show that countries with long waiting list have the lowest number of acute care beds, practicing specialists and physicians per 1, of population. This relation is statistically significant. Although one would expect that higher productivity rates eventually result in lower prices, Bell et al.

    Percentage of patients waiting for elective surgery more than 4 months for those with elective surgery in the past 2 years, in Canada and the U. If the productivity gain of waiting lists is indicated by the OECD a , total productivity gain amounts to 0.

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    Beside supply side factors there are also demand side factors that influence the amount of resources diverted to health care Sato Demand related factors include, for example, income, age, uninsurance, fat intake and smoking. Notwithstanding that the insurance system affects the costs of health care, as is mentioned in the paragraph on the Canadian and the U.

    Prices in health care are subject to public policy in Canada and consequently influence supply and demand. However, this effect cannot be compared with market equilibrium as generated in the U. Usually, aggregate health expenditures are related tomeasures of national income. For example the study by Poullier et al. That is why the present analysis sticks to Consumer Expenditure data. Expenditure on Health Care by total average expenditure and age in the U. Consumer Expenditure Survey in — data are transformed to logarithmic values. Secondly, aging of individuals is related not only to special diseases but also to a longer period of recovery from an illness or an operation.

    Because most people die at an age of 65 and over, and because proximity to death has a significant influence on health care outlays, it is not strange to find that expenditure on health care rises with aging of population Seshamani and Gray ; Batljan and Lagergren Since income in the U. Census Bureau a ; BLS The finding that income and health care expenditure are positively related is not selfevident.

    Poverty negatively affects the health status of individuals Ross et al. Therefore, it is plausible to expect that lower income groups spend more on health care than higher income groups. However, this is not supported by the empirical data. Consequently other variables are at stake. The positive relation is likely a reflection of the institution that access to sophisticated health care, expensive well-trained physicians and well-funded hospitals is highly influenced by income.

    Additionally, aged people can be rich. These charges to rich residents are Higher charges to the rich equals 0. Minorities with the lowest income have the highest uninsurance rates, NCHS and the uninsured receive less care and are more likely to suffer adverse consequences due to delayed or postponed care.

    In consequence, access and quality problems in health care disproportionately affect people at the bottom of the income ladder and this is reflected in heir health status: Black or African American minorities prove to have lower life expectancy and higher infant mortality rates than the white Americans NCHS According to the U. This suggests that there is a high degree of free choice about whether to have coverage.

    For example, the household could include more than one nuclear family, as well as extended family relatives, e. Since a household includes all those who share a housing unit, the incomes of several unrelated individuals sharing an apartment for example, would also be counted together. Because both measures of income result in a growth in the number of uninsured among people in the highest income bracket in , it is clear that some free choice still exists. Considering uninsurance among the lowest income brackets, it is likely that this is not always by choice: Firstly, because employer based insurance plans are not portable, employees lose their coverage as soon as they leave or lose their employment.

    Secondly, some of the uninsured simply cannot afford the cost of coverage. Specific factors influencing demand for health care in the U. The latter is likely to have resulted in a relatively high number of physically and psychologically wounded war veterans for example those who served in Vietnam and Iraq and consequently in higher health care expenditure. Money value of drug consumption, income and age, in the U. However, pharmaceutical prices in the U. S, are higher than in Canada. A comparison of drug consumption between both countries requires a correction for price differences.

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    Lower drug consumption in the U. Total spending at current prices is 0. Price differences of 14, Medical literature e. Chick proves that there is a relationship between bad habits associated with lower classes such as heavy drinking and mortality. Heavy drinking is associated with increased mortality. The figures on obesity in Canada are This conservative estimate of obesity related expenditure results in a higher expenditure on health care in the U. Possible tobacco and alcohol consumption related mortality per , population, in the U.

    The direct health care costs related to alcohol and tobacco in Canada were 0. If alcohol consumption and tobacco consumption in Canadawere as high as in the U. Finally, a large number of veterans and a large number of injuries due to firearms are two possible factors contributing to the relatively high health care expenditure in the U.

    enter This organization provides hospital care for military veterans through the use of global budgets Feldman and Lobo It is an example of a health care delivery system that enhances primary care Ferrer et al. Health care expenditure by The Department of Veterans Affairs accounts for 2. These shares are higher than the proportion of veterans in total population, which is about 0.

    This indicates that HIV-related expenditure and mental health spending are relatively high for veterans. Total health care expenditure by the Department of Veteran Affairs health care expenditure is only 0. Because these figures do not include all health care expenditure for veterans it cannot be concluded that the health care expenditure of veterans is higher than average expenditure.

    This makes a comparison with the health care expenditure of veterans in Canada meaningless. As to health care expenditure in relation to firearms injuries there is only data for the U.

    Given the number of injuries and the mean medical cost, gunshot injuries in the U. This equals 0. Census Bureau b. Supply factors seem to explain a larger part of health care expenditure than demand factors. The impact of other factors may be small in relation to total health care expenditure, but most of them are still substantial since every 0. The different factors that explain the difference in health care expenditure primarily seem to be a manifestation of the national cultures.