Elena Padilla, Ph.D.
Scholar in Residence, Saint Barnabas Hospital, Bronx, New York and Professor Emerita, New York University

Matching Health Policy to Community Interest
Presented at
Envisioning Ethical Atlernatives in Health Care
9 December 1996

Background. There have been two major turn-arounds in American health policy: the first, was the result of a continuing federal initiatives (1950's-1970's) which transformed the health care landscape to improve the availability and access to health care through increased financing for research and development, workforce education, capital construjction, planning and payment for delivery of services. Many of these initiatives placed health care in the public sphere by activationg broadened community participation in governance or advisement as a component of accountability.¹ The second turn around followed in the 1980's when the Federal government reordered its health priorities shifting them to contain steep increases in health care costs:

A government policy of deregulation and market oriented policies put an end to nearly two decades of federal expansion of access to health care delivery and insurance².

The outcome of this shift was the expansion of for profit HMO's and hospital chains. Hospital closures and employee lay-offs followed, health planning disappeared, and community participation was not further stimulated, as the for profit HMO's entered the scene. Employers pressured insurers to reduce their premiums and to cut down employee health benefits. The uninsured grew and eventually the Congress reacted by expanding Medicaid eligibility and authorizing additional payment to facilities providing a disproportionate share of care to poor people. In New York, an elaborate reimbursement system was developed to assure access and to protect the financial stability of hospitals which were the central focus of the delivery of care. Advances to improve the quality of care which also contained costs, such as an increased focus on ambulatory care and more appropriate use of diagnostic tests and advanced technologies, were continued in this context. However, by the end of the decade, health care costs had increased from about $360 billion a year when Reagan took office to over $500 billion a year when his second term ended. Since then, government has basically followed along the same track. Elements in the Clinton health reform plan that had promised relief to spending growth and to inadequate access by restructuring health care delivery, graduate medical education^B and financing methods led to its demise. Since then, health policy has drifted away from goals to address structural problems in health care delivery.

In fact, health care reform was not even part of the debate in the recent national elections. The third turn around will come about when a strategic thrust for a single paying system is developed that can assure universal access and is addressed to meet community health needs and improvement of community health status. This would require community-based health care systems. In the current environment, community health advocates operate in shifting terrains of uncertainty, reacting to external events as pro-market corporate entities and their surrogate interest groups widen doors to political influence by their financial contributions, public relations, and media access³.

The Health Policy Drift. Current health policy reflects divisions in American society regarding the responsibility of government and its capacity or lack thereof to address societal problems effectively. These concerns raise complex questions for which there is no quick fix as is the case of the health care arena. Here is a $1 trillion plus industry that centers on diagnosing, treating, rehabilitating and restoring people to health being turned around as if it were a toy. Although the end point for health care in the physician-patient relation, health care delivery has multiple ramif ications: it is a metaphor for complex, intertwined and autonomous institutions and professionals around clinical activity, undergraduate and graduate medical education⁴, research and community service. It is labor intensive and hires millions of people covering hundreds of occupational titles. It is linked to a vast array of other services : business f irms employing thousands of people provide it with support services. Health care delivery organizations vary in size and scope of services from a solo person to thousands working in hospitals and nursing facilities. Since no individual organization can be self sufficient, they enter into contracts and aff iliations with others. Private organizations have private governance and management and their transactions are privileged, and although mandated to be publicly accountable, violations are widespread. Not all the tax-exempt voluntary facilities discharge their community responsibility and in the past few years the IRS and members of Congress have called attention to the insufficient dedication to charity and their not providing services to the uninsured and underinsured except for legally mandated emergency care. Reportedly, some practice social, racial and economic discrimination⁵. By default, the provision of health care to all including those who lack coverage and cannot pay for it, or who are deemed socially "undesirable" has fallen on public and on a few community-oriented voluntary hospitals and clinics in low income areas. They are the real "safety net".

In the New York region, employment in the health sector reached 360,000 jobs -- surpassing that in banks, real estate, corporate headquarters, publishing, and other large employers. Notwithstanding, job growth has started to decline⁶ with New York City expected to lose about 112,000 health care jobs by 2002.

Here, the industry is changing giddily in what is known as the managed care environment, a code phrase for the influx of market driven for profit HMO's, insurers, management corporations, and eventually, hospital chains. As result, the ideal model of community oriented service is giving way to that of a corporate, profit-making oriented, community dislodged business organization in which the bottom line replaces the trust which was the basis of the doctor-patient relation as insurers supersede medical decisions. This has been the product of powerful forces with capital, political influence and communication capacity pushing for their interests in an arena that historically has been under expert control. The rapid diffusion and public acceptance of market concepts has threatened the already fragile financial stability of the not for profit and public sector hospitals. Capitation payments, negotiated lower premium rates, and a focus on routine care --what was a needed redirection--has had the unintended effect of eroding the utilization and revenue of teaching hospitals as they try to redef ine their roles where efficiency and cost effectiveness are crucial⁷ after having operated in the red or at low margin even with government added benefit⁸. At the community level, federal and state budget cuts and limitations on welfare eligibility and its silent relation to Medicaid⁹, and in New York City, the announced plans to privatize public hospitals threaten further limitations to access, to the dislocation of workers, and community economic and social instability.

Managed care has been seen as a promising alternative for assuring access to care and for controlling costs¹⁰. This has not been the case altogether as its very financial incentives to control costs have become a path to underservice and a threat to quality¹¹. Governmental corrective actions have come slowly and in slivers but welcome such as the Federal law mandating managed care companies to guarantee maternity patients at least 48 hours in the hospital and New York this year passed a law to protect the rights of those enrolled in HMO's and their providers from abuses of insurers and the State has intensified its monitoring of Medicaid managed care plans as the Congress is contemplating a similar step¹². More recently protests have been escalated against ambulatory mastectomies, and against other abuses against patients and their physicians¹³.

The Government Turns to the Market. The institutions, functions and processes of government and the market are different although they interact and may concur on specific issues. The role of government is to pursue the public good, i.e. solve societal problems, and balance conflicting interests through the policy and political processes¹⁴. Yet, public policies are not always effective in establishing balance between competing interests, and may end up by yielding greater benef it to the more powerful and influential interests, without considering the benef its denied to those without access to power and who remain unprotected.

The Market and the Public Policy Process¹⁵

The main institution in the market is the business organization¹⁶ and market forces in turn, are driven to attain profit. Yet, business is also interest group in the policy process, and as such, it can influence the redistribution of resources in pursuit of its own goals while citizens' interests have not been brought into the public policy process.

Health Care and the Market. Health care is delivered locally and unless they have a community base and local constituencies, institutional accountability is dispersed and atomized. It is their community base what compels their accountability. In a market system, where transactions between buyers and sellers are steered by "an invisible hand" led by supply and demand, and are not set by public policies or by social obligations, connections, reputation, or trust, communities of common interest and support are unlikely to develop.

In theory, market prices and quantities are set by a blind competitive bidding process¹⁷. The drive of competition is "to win as big as possible"¹⁸. In a competitive health care market, providers must control their costs since insurers will negotiate to pay lower premiums for services. Providers will vie to produce services eff iciently, at lower costs--making adjustments, i.e. reducing or increasing resources--workforce, services, equipment--, based on consumer demand--not need-- to operate profitably. In words of Richard Scott, chairman, president and CEO of Columbia/HCA.¹⁹

Do we have an obligation to provide health care for everybody? Where do we draw the line? Is any fast-food restaurant obligated to feed everyone who shows up?

In a successful market, health care is a commodity purchased privately for personal consumption. Dissatisfied consumers presumably are "free" to choose other provider(s), at their own risk. Any change in transactions result from competition in the market and not from government§ regulatory action. Yet, in advocating market solutions in health care, both the federal and state governments, have had to make modifications by law and regulation to establish equity. Such modifications have become necessary when there is a market·failure. The diversity of health care delivery, variations in the distribution, quantity and quality of services and in third party payment methods are signs of market failure. So, in spite of opposition to regulation by market oriented providers and payers, it is unlikely that government will pull out altogether from the health care scene since basic transactions in health care delivery involve social, personal and ethical values that are inconsistent with successful markets. Health care is not a morally neutral enterprise. Given the nature of the health care products, the relationship between health care and society, and the collective manner in which health care is financed, there are no true markets in health care delivery, but pseudomarkets or market clones, that mimic the market as they are aided and supplemented by government action. In New York, for instance, a pro-market state government has continued to provide or pay for those tasks that are of no interest to the market and termed public goods, e.g. uncompensated care (or medical indigency), and part of graduate medical education.

For health care markets to operate effectively, the regulatory environment would have to be minimal or non existent and conditions established for market strategies in which consumers have the means and incentives to make a free choice in purchasing servicesls and providers are able to meet such conditions. However, for this to occur, there has to be a horizontal or co-equal relation of exchange between providers and consumers, which in turn would require a society in which services²⁰ would be available to the have's and not denied to the havenot's, and where egalitarian values prevail. Lacking that, and given finite resources, it becomes necessary to strengthen public health measures, public access to health care delivery organization planning, and evaluation of community benefits.

Return to Conference Page