Anticipating Health Care Reform

ROCHESTER, NY (08/13/2009)(readMedia)-- Health care reform is grabbing headlines this summer and INQUIRY journal joins the current debate with a set of timely papers discussing issues critical for effective reform.

The papers, "Aspects of Health Reform," examine core economic principles that policymakers must consider as they redesign the American health care system: efficiency, equity, adverse selection and moral hazard. The articles were commissioned by the Economic Research Initiative on the Uninsured (ERIU), an effort funded by the Robert Wood Johnson Foundation (RWJF) and housed at the University of Michigan from 2001 to 2008.

INQUIRY's series opens with an introduction co-authored by former ERIU Director Catherine McLaughlin, now with Mathematica Policy Research, Helen Levy of the University of Michigan, and Brian Quinn of RWJF. The contributions include:

• "Employer-Sponsored Health Insurance and the Promise of Health Insurance Reform," by Thomas C. Buchmueller and Alan C. Monheit - This paper discusses how the United States arrived at its employment-based system and looks at the efficiency gains and losses of keeping it. The main issue explored is whether employer-sponsored insurance (ESI) can have a viable role in health system reform or whether it will have to be modified - or even abandoned - as policymakers work toward efficient provision and equitable distribution of health coverage.
• "Mandates and the Affordability of Health Care," by Sherry Glied - This essay notes that while most people have an idea of what it means for something to be affordable, there is no standard economic definition of "affordability." Glied discusses the concept of affordability as it has been applied toward publicly supported housing and food, and then lays out the ways in which health care differs. The affordability issue is important because reform proposals are considering subsidies and mandates for expanding insurance coverage.
• "Risk Selection and Risk Adjustment: Improving Insurance in the Individual and Small Group Markets," by Katherine Baicker and William H. Dow - The problem of adverse selection has plagued the individual and small group markets--- that is, sicker people tend to want to buy insurance and thus drive up premiums for healthier people, leading the latter to potentially disenroll from coverage. This paper explores alternative approaches that policymakers have been considering to alleviate adverse selection: individual and employer mandates, government-sponsored purchasing pools, risk adjustment, and reinsurance. The authors suggest broader use of flexible risk adjustment schemes to improve insurance markets.
• "Beneficial Moral Hazard and the Theory of the Second Best," by Kevin D. Frick and Michael E. Chernew - This paper challenges the idea that moral hazard associated with health insurance --- increased use of medical care and engaging in riskier behaviors --- is always detrimental to welfare. The authors use the "theory of the second best" to show why insurance-induced consumption of medical care may in some instances actually improve welfare: insurance may offset market power and excessive prices; insurance can increase some positive "externalities," such as vaccines; and insurance can mitigate misinformation that often leads to underuse of medical care.

Other research papers in INQUIRY's summer issue:

• "Does High Caregiver Stress Predict Nursing Home Entry?" by Brenda C. Spillman and Sharon K. Long - This study found that elders with highly stressed primary caregivers were more likely than their counterparts with less stressed caregivers to enter a nursing home for long-term care over follow-up periods of up to two years. Physical strain, the disruptive nature of caregiving---such as disturbed sleep and erratic behavior by the person under care---and financial hardship were the biggest predictors of stress. The authors conclude that strategies for reducing the burden on caregivers might help avoid or defer nursing home placement.
• "Single Specialty Hospitals and Service Competition," by Kathleen Carey, James F. Burgess, and Gary J. Young - Results of this study show that general hospitals are beefing up their offerings of services to compete with specialty hospitals in their markets. The presence of specialty hospitals also has been linked to greater growth of high-technology diagnostic imaging services in local general hospitals.
• "Quality-Based Payment for Medical Groups and Individual Physicians," by James C. Robinson, Stephen M. Shortell, Diane R. Rittenhouse, Sara Fernandes-Taylor, Robin R. Gillies, and Lawrence P. Casalino - This analysis found that during the 2006-2007 period, 52 percent of large medical groups surveyed in the United States received bonus payments from insurance plans based on quality and patient satisfaction. Medical groups with such external pay-for-performance incentives were more likely to pay their primary care physicians and specialists according to quality and satisfaction measures. Groups facing capitation payment incentives to control costs were more likely to pay their physicians a salary and less likely to pay based on productivity than groups whose insurers paid on a fee-for-service basis.

Other summer features:

• "The McNerney Forum. The Accountability of Nonprofit Hospitals: Lessons from Maryland's Community Benefit Reporting Requirements," by Bradford H. Gray and Mark Schlesinger - This paper describes how new community benefit reporting requirements affected Maryland's hospitals and suggests some of the issues that may arise when similar requirements are implemented for hospitals nationally in 2010.
• "The View from Here: Reality Bites Health Reform" - Editor Alan Monheit outlines some of the "harsh economic and political realities" that pose the greatest challenges to crafting successful health care reform

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INQUIRY, the journal of health care organization, provision, and financing, is a peer-reviewed scholarly publication. Now in its 46th year, it is published quarterly by Excellus Health Plan, Inc. Press releases and article abstracts are available on the INQUIRY Web site at http://www.inquiryjournal.org/ under "Current Issue Table of Contents."