Pergamon

Policy and practice review

Federalism, implementation and equity: the importance of place in American health care reform

Bruce Wood Department of Government, Victoria University of Manchester, Manchester h4i3 YPL. UK

‘Place’ matters in American health care. The debates surrounding the Clinton reform plan have inevitably largely focused on federal, nation- wide approaches but. in practice, the provision of health care services on the ground remains a brightly col- oured patchwork quilt of diversity and is likely to remain so for many years to come, whatever the precise new system finally approved by the federal government. This patchwork is partly random, determined by the individual decisions of citizens and employers, but is partly geographi- cally systematic, reflecting the varied policies of the 50 state governments.

The American health care ‘system’ has frequently been styled ‘pluralist’, with both governments and markets

playing significant roles. Most

Americans carry health insurance as part of their employment package. Many are highly dependent on two public schemes: the federal Medi- care programme and the 50 state Medicaid programmes purchase care for the elderly and the poor, respec- tively, which together account for 40% of total US health care spend- ing. The provision of services lies

very largely outside of government. Doctors are self-employed and hos- pitals are run by for-profit corporate chains or not-for-profit organizations

(for a succinct overview of American health care see Ham et ul., 1990, Ch.

5). This pluralist approach has led to

major problems of access and of spiralling costs (at 14% of GNP the USA’s spending compares with fig- ures of &9% in European coun- tries), and the Clinton plan seeks to tackle both simultaneously. It aims to achieve 100% access to a basic package of care through mandatory employer-based insurance, a payroll tax and governmental underwriting of any who still fall through the net. Costs are to be contained through the creation of large-scale regional purchasing ‘alliances’ and an expan- sion of existing schemes of ‘managed care’ under which bodies such as Health Maintenance Organizations (HMOs) operate more on a capita- tion basis (or close-ended budget per patient) than on a fee-for-service (or open-ended) pricing system. As pub- lic debate proceeds amendments continue to occur, and the fate of the

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Clinton plan remains in jeopardy. Whatever the outcome, a longish lead-in period of phased imple- mentation is apparent, and doubts remain about the extent to which the additional costs of providing access to the 37 million presently uninsured Americans will be offset by savings from the extension of managed care and introduction of health alliances.

Inter-state diversity

It is well known that the majority of Americans either themselves pur- chase health insurance or, more commonly, are covered through employer-based packages. The costs of insurance policies, and the ben- efits they offer, vary quite consider- ably. Employees, for instance, may be expected to meet anything from 0 to 50% of employment-based pre- miums. Part-time workers may or may not be included and co-payments and deductibles (the amounts patients have to pay towards treatment costs-- ‘co-payments’ are a proportion of the total bill; ‘deductibles’ are the first so many dollars of a bill) vary widely. Place variations here are

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Policy and pracfice review

largely spatially randomized, but not

entirely so. States, as well as admi- nistering Medicaid services for the poor, can also seek to regulate cer- tain aspects of private insurance. In some states, for example, insurers are required to offer cancer screen- ing and pre-natal care without re- cipients having to pay any deducti- bles (Kirkman-Liff and Lewis, 1992, p. 270). Insurance premiums may vary marginally from state to state owing to the tax policies of govern- ment (state tax levels on premiums range from 0 to 4%). Systematic public policies thus help determine the precise colours of the patchwork.

For the American poor, however, place is far more significant. As potential Medicaid beneficiaries they are extremely dependent on the very disparate policy approaches of the 50 state governments (‘extremely’ but not entirely dependent because the federal Medicaid framework within which states must operate-or obtain a ‘federal waiver’does lay down certain minima as require- ments in exchange for federal grant- aid). These disparate attitudes to- wards health care often reflect the political culture and traditions of the state. In rural, poor southern states conservative politics are common, regardless of whichever party is in power.

Arizona, for example, did not par- ticipate at all in Medicaid until the 1980s and still has a unique scheme, whereas Hawaii legislated for uni- versal access through employer- based insurance as long ago as 1974. Detailed research in 1993 for the Kaiser Foundation found that sever- al states (Alabama, Nevada, Illinois and South Dakota were prime exam- ples) had made almost no attempt to enhance access to health care for the uninsured through insurance-based cover while others (Massachusetts, Florida) were ‘jostling for the lead in health reform’ and Hawaii, having strengthened its requirements on employers in 1989, had only 2% of its population uninsured (Inter- governmental Health Policy Project, 1993). By 1994 some seven states had passed comprehensive reforms designed to obtain universal access, though several are yet to be im-

plemented, partly on cost grounds. Meanwhile the proportion of unin- sured Americans, usually cited as 17%, varies widely from state to state and can be as high as 25% in the poor southern states but is only 8-10% in the more prosperous north-eastern seaboard states (Gray, 1994).

States’ provision of Medicaid ben- efits spans an enormous range (Kirkman-Liff and Lewis, 1992, table on p. 267). Income levels for basic eligibility-the state definition of ‘poor’-vary sixfold (and help to explain the differences in uninsured numbers). Rationing of services is by no means restricted to the controver- sial and infamous case of Oregon (Klein, 1992). In some 31 states Medicaid beneficiaries cannot obtain occupation therapy; in 23 and 15 states heart and liver transplants, respectively, are excluded. Patients can receive no more than a limited number of physician visits in 29 states. Only 19 states include clinical preventive services among the ben- efits provided to adult Medicaid reci- pients (Gold, 1992). Seven states will not even provide hearing aids!

A major preoccupation of state governments is with cost contain- ment. Medicaid and associated pub- lic projects have risen dramatically in cost. By 1991 they accounted for no less than 21.4% of state and local government revenues compared with only 14.8% just 3 years earlier (Cowan and McDonnell, 1993, table on p. 235). A significant reason for Florida proceeding with politically highly controversial legislation man- dating employer-based insurance was that Medicaid expenditure had actually overtaken spending on the state’s public schools system (Gray, 1994). Health care has thus become top of the political fiscal agenda in many states.

This cost explosion helps to account for the extensive use of rationing, noted above. Yet, surpri- singly, in other aspects of Medicaid provision enormous and seemingly costly variations continue to exist and to add to the patchwork quilt. In 1989 only 9 states were making the use of Health Maintenance Organ- izations (or other varieties of what

are usually seen as economic systems of ‘managed care’) compulsory. Even more curious, 22 state Medi- caid systems were not utilizing HMOs at all. And the inter-state variation in physician fees is almost beyond belief. The 27 states that lay down fee schedules have set them at, on average, just under half the amounts private physicians would

charge. But 19 states still allow physicians to set their own fees, on the basis of their usual rates (‘pre- vailing charges’). Consequently the examination of a new-born baby attracts Medicaid fees ranging from $10 to $236. One of the smallest of inter-state ranges, for mammogra- phy, covers a fourfold fee differen- tial (Colby, 1994). Effective cost containment policies clearly have

some considerable way to go. What are we to make of this patch-

work quilt with its staggering variety of public policies which impact dif- ferentially from state to state on insurers, employers, taxpayers and patients? It clearly illustrates some

of the possible consequences of organizing the nation state on the basis of a federal constitution. In so doing it also raises major issues of public policy, two of which will be discussed here: implementation and equity.

Federalism and implementation

Federalism as a system of govern- ment has been seen as embracing five main advantages. These include checking the abuse of government power; sensitivity to the diverse needs of Americans; increased parti- cipation in politics; the ability to innovate and experiment with public policies; and a heightened respon- siveness of government (Dervick, 1992). It is not difficult to construct a case for health care fitting comfort- ably within this framework, with its variety of inter-state provision both reflecting local circumstances and acting as a laboratory within which policy innovation can be tested. Re- search on federal Medicaid waivers, for example, found that many were actually initiated by the federal gov- ernment as ‘research-oriented de-

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views are far more complex and

pragmatic than had been thought (Jacobs and Shapiro, 1994). They even include some positive data ab- out equity: ‘that strong moral con- cern for the uninsured is a strong public value’, though not alone strong enough to generate sufficient support for a Clinton-type national health care scheme (Blendon et al., 1994).

The move from voluntary to man- datory insurance will not on its own end such geographical inequity as has been found in this paper. Poten- tially the very existence of federalism poses a threat to the concept of America-wide equity. Much depends on the amount of discretion accorded to states in the administration of the new health cart system. What is apparent is that ‘one lesson from Medicaid should be clear: a lack of uniformity means a lower level of social equity and solidarity within members of the same continent-wide community’ (Kirkman-Liff and Lewis, 1992). Hence, the authors suggest, federally imposed ‘uni-

formity may be essential from an equity perspective’. This. however, would imply a shift away from the recent health care tradition of ‘joint’ federalism under which federal gov- ernment became significantly in- volved in what had previously been viewed as a ‘domestic’ or state-level issue. Place, however, remains cru- cial in the dynamics of American

politics and no federal government, however strong, is likely to ‘go it alone’ on health care. Some form of federal-state compact is likely, with a national basic framework of policy and state discretion over the details. The balance of power between the two remains unclear, but is crucial in terms of equity of provision.

One outcome does, however, seem certain. The very size of the USA coupled with its traditions of federalism, pluralism and enterprise effectively prohibit the introduction of the type of uniformity of health care provision found in unitary states such as the UK. Variations may be reduced; significantly greater social and geographical equity may be attained-but the patchwork quilt will remain, if with slightly more

monstrations’ and such waivers ‘left an unmistakable imprint by provid-

ing the groundwork for future

changes in federal health policy’ (Dobson et al., 1992).

Against this, what of the costs of variety? Dervick argues that ‘feder- alism has conspicuously failed to do what might most confidently have been expected of it. It has not pro- vided a stable set of understandings about how to distinguish the national

from the local.’ Although not specifi- cally addressing health care, she cites the defiance of California over the introduction of federal regulations covering nursing home standards, a course of action which has led to ‘irrational. inappropriate variation’ (Sparer, 1993). Other recent dis- putes have included Oregon’s re- quest for a federal waiver to enable it to experiment with a new approach to Medicaid rationing-for over 2 years the issue went back and forth

before the incoming Clinton admi- nistration finally agreed. The con- temporary debate about the prop- osed employer subsidies and the associated federal redistribution for- mula under the Clinton reform plan has led to strongly voiced disapprov- al for largely pragmatic, political reasons from several mid-west and north-east states who see themselves as potential ‘losers’ under a needs- based formula which would direct large grants towards the south, where poverty levels are higher. James Morone accounts for much of the policy failure on cost contain- ment along similar lines: the Amer- ican constitution is ‘thick with checks and halances’ and ‘not a policy apparatus designed for swift or con- certed action’ (Morone. 1993).

The successful implementation of radical health care reform over the coming few years will be difficult enough to achieve in the face of opposition from many business and health care provider interests. States’ interests add a further and potentially a very important com- plication. It was noted earlier that some states have shown little interest in tackling the two key issues of access and cost containment and are openly sceptical of change. Others, like Florida and Massachusetts, have

embarked on controversial reform programmes which go further than the current Clinton plans, at least in

enhancing access to care for the un- insured, and which have taken up extremely large amounts of political resources and energy. Not unnatur- ally ‘each state which has endured the agony of reform will try to defend its legislation’ (Gray, 1994). A suc- cessful national reform programme will have to accept the continuation of a patchwork quilt and systematic variety: place will remain significant in American health care provision and regulation, whatever the details of any reform blueprint.

Federalism and equity

The Clinton reform plan also raises issues of equity, some of which sit uneasily alongside the experience of federalism. Hillary Clinton, its ma- jor architect, unequivocally sees this as the moment to ‘provide health security to every American [through] comprehensive benefits that are spelled out in law and can never be taken away’ (Clinton, 1994). a call which suggests a reduction in the present variety of provision from place to place. At the same time the aim is to minimize increases in health care spending. Hence the plan must both include effective cost con- tainment measures and focus on cost-effective medical techniques in order to reallocate resources (Meyer et al., 1993). This means, in short, that there will be both winners and losers.

Conventional wisdom has it that Americans view health care as a market commodity, not as a right, and that they are self-interested, anti-tax and unwavering opponents of government regulation. Hence the concept of equity may initially seem inapplicable in the case of health care. The Clinton reforms alter this, however, by seeking to move to-

wards at least minimal equity of basic access to care-between families. classes, genders and geographical areas. And the conventional wisdom may not, after all, be a complete barrier to achieving change: detailed reworking of numerous public atti- tude surveys suggests that the public

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muted colours. ‘Place’ will continue to matter in American health care.

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