Part 1: The Motivating Forces
Health Care Reform: To Be or Not to Be? The call for a new national health care system reflects the inability of the current system to provide access to all) control costs) and maintain quality. by Earle W. Lingle, PhD, and Susan E. Zetzl
The problem of providing satisfactory medical service to all the people of the United States at costs which they can meet is a pressing one. At the present time, many persons do not receive service which is adequate either in quantity or quality, and the costs of service are inequably distributed. The result is a tremendous amount of preventable physical pain and mental anguish, needless deaths, economic inefficiency, and social waste ... .The United States has the economic resources, the organizing ability, and the teclullcal experience to solve this problem.
-Committee on the Costs of Medical Care, 19321
The recent call for health care refonn is not new, as this 60year-old quote demonstrd.tes. Throughout this century, public health officials, health care providers, the general public, and politicians have called for changes in the way medical care Americans spent $1.25 million per is organized, delivered, and paid for in this country. But as the rnintlte in 1990 on heaJth care. years have passed, the inlpetus for change has accelerated. Without chan,g e, medical care costs Why does the health care system need to be changed and U1ill "lOre tlJan double by what does the future hold? What are the general and specifthe year 2000. ic characteristics of current refonn proposals? And what are the potential effects on pharmacy? This two-part series answers some of these questions.
AMERICAN PHARMACY
September 1992/712
Vol. NS32, No.9
Reasons for Health Care Reform
Experts agree that our health care system should be changed for three major reasons: • To increase access to health care for the uninsured and the underinsured. • To contain health care costs. • To improve the quality and efficiency of care and, subsequently, health care outcomes.
Access to Care Access to care is usually measured by the number of uninsured Americans; estimates vary between 31 and 36 million tminsured persons, or approximately 12% to 14% of the U.S. population. Other estimates suggest that anywhere from 48 million to 63 million persons are uninsured for some part of the year.2 Many more Americans have little insurance protection against catastrophic medical expenses. Despite assumptions that the uninsured are persons who are unemployed or ineligible for public funds , only about 17% of the uninsured are in a family where no one is employed (Figure 1).3 This means that a cOlllbination of progranls, one providing incentives for employers to provide benefits and the other providing insurance for the unemployed and their families , could cover the costs of medical care for all Americans. However, using the existing health care systelll, which has fueled today's health care crisis, is controversial.
Health Care Cost s Americans will spend as much on health care this year as they spend on gasoline, cars, tnlcks, and their parts, plus our entire military combined. 4 National health expenditures increased to approximately $666 billion in 1990.5 In other words, America spent $1.8 billion per day or $1.25 million per minute in 1990 on health care. And the future is even more bleak. It is estimated that if our current laws and medical practice remain unchanged, medical care costs will be more than double current costs (to $1.6 trillion) in the year 2000 (Figure 2).5 The more money we Vol. NS32, No. 9 September 1992/713
spend on health care, the less there is for other goods and services, such as education and housing. And we are spending more. In 1980, health care was 9.2% of the gross national product (GNP)-the value of all goods and services produced in this country. GNP grew to 12.3% in 1990 and is estimated to increase to 16.4% in 2000. 5 The cost of pharmaceuticals as a percentage of personal health care expenditures has decreased from 17.6% in 1960 to 9.3% in 1990. 4 Although pharmaceutical prices increased at a greater rate than inflation in the 1980s, expenditures for pharmaceuticals still increased at a lower annual rate than that of hospital care, physicians' services, or nursing home care. 5 But, what is the best way to contain costs? To answer that question, we must understand why health care costs are increasing. • Inflation. In recent years, inflation was the major cause of increases in health care expenditures. From 1980 to 1990, general inflation was estinlated to account for almost 50% of the annual growth. 4 Because this is affected by various factors like Federal Reserve Board policies or world-oil prices, economy-wide inflation is difficult to control through a health care reform package. • Increase in the elderly population. About 12% of the U.S. population is age 65 years or older. This segment uses approximately 30% of medical care services. 6,7 Not only do the elderly use more services on average than the nonelderly, but also the intensity of their care is often much greater and, therefore, more expensive. The Census Bureau estimates that the elderly population will increase to approximately 22% of the population by the year 2030. 6 If the current ratio of elderly to health care services used were allowed to continue, the elderly would use 55% of the services in 2030. Figure 1
Health Insurance Coverage, 1990
Other
Adult Workers
Children of Workers 27%
Sources of Insurance
Who is Uninsured?
Source: Employee Benefit Research Institute.
AMERICAN PHARMACY
• Technological advancements. New technologies are increasingly complex and therefore expensive. For example, magnetic resonance imaging (MRI) is certainly faster, safer, and more accurate than exploratory surgery, and every hospital administrator feels they must have MRI to compete with other institutions. But once MRI is available, more medical resources are consumed, and diagnostic costs go up. The costs are then passed along not only to the users, but also to other patients in higher hospital bills. The technological advancements of the past 20 years will probably be surpassed only by technology that will be developed in the next 20 years. But someone will have to pay for these advancements . • The insulating factor of h ealth insurance. One study showed that 34% of adults with health insurance do not know the cost of their last hospital stay. 8 Seventy-eight percent of the respondents did not know what contribution their employers make for their insurance. Insulated from the realities of health eire costs, patients have little incentive to question the necessity of a medical test or the procedures because of the cost. (However, for outpatient prescription drugs, patients pay close to three-fourths of the total costs out-of-pocket. Thus, they are not insulated from rising drug prices.) Health care providers also shift costs to private insurance companies because of the restrictions placed on government payment for Medicaid and Medicare. Some statistics illustrate why corporate America has become a leader in the call for health care reform: -In 1990, General Motors paid out $3.2 billion in health insurance premiums, more than it paid for steel. 9
-Chrysler says health insurance for its employees adds $800 to the price of each car it makes. - The amount businesses paid for health insurance in 1990 was greater than their corporate profits after taxes. 10 • Th e reimbursement system . Fee-for-service reinlbursement by third party providers encourages the use of more services. For this reason, some health care reform proposals encourage the use of managed care settings to help control expenditures. • Liability concerns. "Defensive medicine" and liability insurance premiums for health care providers increase costs, and these costs are passed along to patients or their insurers. The American Medical Association (AMA) estimates that health care providers are using $ 21 billion worth of unnecessary medical care each year because of phYSicians' concern about potential lawsuits. 9 • Other reasons. The administrative costs of private health insurance, the duplication of services , competition for patients in many areas, fraud and unnecessary care, and the escalating costs of treating AIDS patients all add to increasing health care costs. As these reasons illustrate, this cOlmtry is at a crossroads and lllUSt decide which direction to take to control health care costs. Any health care reform package must address these factors.
Q ual ity JEffectivenes s of Care
The overall quality of health care in America today is probably the highest it has ever been. Unfortunately, this high quality of care is not available to all. Aggregate measures of the population's health status-such as infant mortality Figure 2 rates and life expectancyare no better in this country u.s. Health Care Expenditures than in countries that spend less per capita on health care. Dollars (Billions) %GNP Our main concerns about 2000 20 the quality of care in the Expenditures United States today relate to o % of GNP excessive or inappropriate 1500 ~----~----------------------------~-----15 use of services. These include the variable rates of hospitalization across the 1000 10 o country, overuse or underuse of various diagnostic tests, excessive or inappro500 5 priate surgery (such as tonsillectomies and Caesarean sections), early discharge o o from hospitals because of 1960 1965 1970 1975 1980 1985 1990 1995 2000 reimbursement caps on diagnosis-related groups, variable
•
AMERICAN PHARMACY
September 19921714
Vol. NS32, No.9
Part 2, in October, looks at the types of health care reform proposals being considered, reviews the major components of eight proposals, and predicts the future of pharmacy under health care reform.
results of surgeries, and excessive or inappropriate use of prescription drugs. Ensuring quality of health, however, means different things to different people. To consumers quality may mean the opportunity to choose a provider or insurer; to an insurer it may suggest the appropriateness of the care provided; and to a clinician it may mean the effectiveness of therapy. However, implicit in the concept of quality health care is that services should be cost-efficient and cost-effective because unnecessary, excessive, or inappropriate services do not help the patient and may be harmful or waste the patient's resources. II Few doubt that quality and effectiveness of medical care are inseparable from access to care and the fLmds available to pay for care. To consider the three separately during discussions of health care reform would not only be imprudent, but also counterproductive.
Earle W. Lingle, PhD, is associate professor ofpharmacy administration, and Susan E. Zetzl is a doctoral candidate in pharmacy administration at the University of South Carolina College of Pharmacy, Columbia, S. C
References 1. Committee on the Costs of Medical Care. Medical Care for the American People; The Final Report of the Committee on the Costs of Medical Care, Adopted October 31, 1932. New York: Arno Press; 1972. 2. Friedman E. The uninsured: from dilemma to crisis. JAMA. 1991;265:2491. 3. Sources of Health Insurance and Characteristics of the Uninsured. Washington, DC: Employer Benefit Research Institute; February 1992. 4. Levit KR, Lazenby HC, Cowan CA, et al. National health expenditures, 1990. Health Care Financing Rev. Fall 1991;13:29-54. 5. Sonnefeld ST, Waldo DR, Lemieux JA, et al. Projections of national health expenditures through the year 2000. Health Care Financing Rev. Fall 1991;13:1-27.
Conclusion
6. U.S. Bureau of the Census. Projections of the population of the United States, by age, sex, and race: 1988 to 2080. Current Population Reports. January 1989; Series P-25.
Representatives of insurers, corporations, and the government as well as consumers agree that some changes must occur to increase accessibility to care, reduce costs, and improve the quality of the current U.S. health care system. Without reform, we will continue to spend an increasing amount of our resources on health care instead of other pressing social needs, and it will be increasingly difficult to assure all Americans of access to effective health care. Without a coordinated plan, we cannot control the principle causes of medical care inflation.
7. Rice DP, Feldman JJ. Living longer in the United States: demographic changes and health needs ofthe elderly. Health Society. 1983; 61:364. 8. Anderson K. Why health care costs are tough to cure. USA Today.
March 11, 1991;3B. 9. Castro J. Condition: critical. Time. November 25, 1991;138:34. 10. Levit KR, Cowan CA. Business, households, and governments: health care costs, 1990. Health Care Financing Rev. Winter 1991;13:87. 11. Lohr KN, Yordy KD, Thier SO. Current issues in quality of care. Health Affairs. Spring 1988;7:17.
Ident -A-Drug Handbook
by Jeff Jellin's "Pharmacist's Letter"
T
hiS important new reference book solves the problem of identifying tablets and capsules that do not have their medication name imprinted on them. Imagine, no more confusion when a nurse calls and asks, "What is this little pill with 'XYZ 123' printed on it?"; or when your supplier changes brands; or when a patient presents a tablet or capsule and says, "I need more of these." You just look up the imprinted code number in the Handbook to determine the contents of the medication. The Ident-A-Drug Handbook identifies the approximately 6,000 drug products that are not imprinted with the name of the drug. It lists the code number, dose, manufacturer, and physical description for each drug.
Best of all, each copy is sent with the latest supplement from the publisher so that you get up-to-date information. You can use the Handbook to answer inquiries from physicians, long-term care facilities, schools, law enforcement officers, parents, patients -and other pharmacists - who need to know the contents of various medications. Keep the Handbook right at your fingertips in your pharmacy! $23 • Code AP-T48
~ To order your copy call toll-free 1-800-237-2742 Vol. NS32, No.9 September 1992/715
ED
AMERICAN PHARMACY
Health Care Reform: To Be or Not to Be? The call for a new national health care system reflects the inability of the current system to provide access to all) control costs) and maintain quality. by Earle W. Lingle, PhD, and Susan E. Zetzl
The problem of providing satisfactory medical service to all the people of the United States at costs which they can meet is a pressing one. At the present time, many persons do not receive service which is adequate either in quantity or quality, and the costs of service are inequably distributed. The result is a tremendous amount of preventable physical pain and mental anguish, needless deaths, economic inefficiency, and social waste ... .The United States has the economic resources, the organizing ability, and the teclullcal experience to solve this problem.
-Committee on the Costs of Medical Care, 19321
The recent call for health care refonn is not new, as this 60year-old quote demonstrd.tes. Throughout this century, public health officials, health care providers, the general public, and politicians have called for changes in the way medical care Americans spent $1.25 million per is organized, delivered, and paid for in this country. But as the rnintlte in 1990 on heaJth care. years have passed, the inlpetus for change has accelerated. Without chan,g e, medical care costs Why does the health care system need to be changed and U1ill "lOre tlJan double by what does the future hold? What are the general and specifthe year 2000. ic characteristics of current refonn proposals? And what are the potential effects on pharmacy? This two-part series answers some of these questions.
AMERICAN PHARMACY
September 1992/712
Vol. NS32, No.9
Reasons for Health Care Reform
Experts agree that our health care system should be changed for three major reasons: • To increase access to health care for the uninsured and the underinsured. • To contain health care costs. • To improve the quality and efficiency of care and, subsequently, health care outcomes.
Access to Care Access to care is usually measured by the number of uninsured Americans; estimates vary between 31 and 36 million tminsured persons, or approximately 12% to 14% of the U.S. population. Other estimates suggest that anywhere from 48 million to 63 million persons are uninsured for some part of the year.2 Many more Americans have little insurance protection against catastrophic medical expenses. Despite assumptions that the uninsured are persons who are unemployed or ineligible for public funds , only about 17% of the uninsured are in a family where no one is employed (Figure 1).3 This means that a cOlllbination of progranls, one providing incentives for employers to provide benefits and the other providing insurance for the unemployed and their families , could cover the costs of medical care for all Americans. However, using the existing health care systelll, which has fueled today's health care crisis, is controversial.
Health Care Cost s Americans will spend as much on health care this year as they spend on gasoline, cars, tnlcks, and their parts, plus our entire military combined. 4 National health expenditures increased to approximately $666 billion in 1990.5 In other words, America spent $1.8 billion per day or $1.25 million per minute in 1990 on health care. And the future is even more bleak. It is estimated that if our current laws and medical practice remain unchanged, medical care costs will be more than double current costs (to $1.6 trillion) in the year 2000 (Figure 2).5 The more money we Vol. NS32, No. 9 September 1992/713
spend on health care, the less there is for other goods and services, such as education and housing. And we are spending more. In 1980, health care was 9.2% of the gross national product (GNP)-the value of all goods and services produced in this country. GNP grew to 12.3% in 1990 and is estimated to increase to 16.4% in 2000. 5 The cost of pharmaceuticals as a percentage of personal health care expenditures has decreased from 17.6% in 1960 to 9.3% in 1990. 4 Although pharmaceutical prices increased at a greater rate than inflation in the 1980s, expenditures for pharmaceuticals still increased at a lower annual rate than that of hospital care, physicians' services, or nursing home care. 5 But, what is the best way to contain costs? To answer that question, we must understand why health care costs are increasing. • Inflation. In recent years, inflation was the major cause of increases in health care expenditures. From 1980 to 1990, general inflation was estinlated to account for almost 50% of the annual growth. 4 Because this is affected by various factors like Federal Reserve Board policies or world-oil prices, economy-wide inflation is difficult to control through a health care reform package. • Increase in the elderly population. About 12% of the U.S. population is age 65 years or older. This segment uses approximately 30% of medical care services. 6,7 Not only do the elderly use more services on average than the nonelderly, but also the intensity of their care is often much greater and, therefore, more expensive. The Census Bureau estimates that the elderly population will increase to approximately 22% of the population by the year 2030. 6 If the current ratio of elderly to health care services used were allowed to continue, the elderly would use 55% of the services in 2030. Figure 1
Health Insurance Coverage, 1990
Other
Adult Workers
Children of Workers 27%
Sources of Insurance
Who is Uninsured?
Source: Employee Benefit Research Institute.
AMERICAN PHARMACY
• Technological advancements. New technologies are increasingly complex and therefore expensive. For example, magnetic resonance imaging (MRI) is certainly faster, safer, and more accurate than exploratory surgery, and every hospital administrator feels they must have MRI to compete with other institutions. But once MRI is available, more medical resources are consumed, and diagnostic costs go up. The costs are then passed along not only to the users, but also to other patients in higher hospital bills. The technological advancements of the past 20 years will probably be surpassed only by technology that will be developed in the next 20 years. But someone will have to pay for these advancements . • The insulating factor of h ealth insurance. One study showed that 34% of adults with health insurance do not know the cost of their last hospital stay. 8 Seventy-eight percent of the respondents did not know what contribution their employers make for their insurance. Insulated from the realities of health eire costs, patients have little incentive to question the necessity of a medical test or the procedures because of the cost. (However, for outpatient prescription drugs, patients pay close to three-fourths of the total costs out-of-pocket. Thus, they are not insulated from rising drug prices.) Health care providers also shift costs to private insurance companies because of the restrictions placed on government payment for Medicaid and Medicare. Some statistics illustrate why corporate America has become a leader in the call for health care reform: -In 1990, General Motors paid out $3.2 billion in health insurance premiums, more than it paid for steel. 9
-Chrysler says health insurance for its employees adds $800 to the price of each car it makes. - The amount businesses paid for health insurance in 1990 was greater than their corporate profits after taxes. 10 • Th e reimbursement system . Fee-for-service reinlbursement by third party providers encourages the use of more services. For this reason, some health care reform proposals encourage the use of managed care settings to help control expenditures. • Liability concerns. "Defensive medicine" and liability insurance premiums for health care providers increase costs, and these costs are passed along to patients or their insurers. The American Medical Association (AMA) estimates that health care providers are using $ 21 billion worth of unnecessary medical care each year because of phYSicians' concern about potential lawsuits. 9 • Other reasons. The administrative costs of private health insurance, the duplication of services , competition for patients in many areas, fraud and unnecessary care, and the escalating costs of treating AIDS patients all add to increasing health care costs. As these reasons illustrate, this cOlmtry is at a crossroads and lllUSt decide which direction to take to control health care costs. Any health care reform package must address these factors.
Q ual ity JEffectivenes s of Care
The overall quality of health care in America today is probably the highest it has ever been. Unfortunately, this high quality of care is not available to all. Aggregate measures of the population's health status-such as infant mortality Figure 2 rates and life expectancyare no better in this country u.s. Health Care Expenditures than in countries that spend less per capita on health care. Dollars (Billions) %GNP Our main concerns about 2000 20 the quality of care in the Expenditures United States today relate to o % of GNP excessive or inappropriate 1500 ~----~----------------------------~-----15 use of services. These include the variable rates of hospitalization across the 1000 10 o country, overuse or underuse of various diagnostic tests, excessive or inappro500 5 priate surgery (such as tonsillectomies and Caesarean sections), early discharge o o from hospitals because of 1960 1965 1970 1975 1980 1985 1990 1995 2000 reimbursement caps on diagnosis-related groups, variable
•
AMERICAN PHARMACY
September 19921714
Vol. NS32, No.9
Part 2, in October, looks at the types of health care reform proposals being considered, reviews the major components of eight proposals, and predicts the future of pharmacy under health care reform.
results of surgeries, and excessive or inappropriate use of prescription drugs. Ensuring quality of health, however, means different things to different people. To consumers quality may mean the opportunity to choose a provider or insurer; to an insurer it may suggest the appropriateness of the care provided; and to a clinician it may mean the effectiveness of therapy. However, implicit in the concept of quality health care is that services should be cost-efficient and cost-effective because unnecessary, excessive, or inappropriate services do not help the patient and may be harmful or waste the patient's resources. II Few doubt that quality and effectiveness of medical care are inseparable from access to care and the fLmds available to pay for care. To consider the three separately during discussions of health care reform would not only be imprudent, but also counterproductive.
Earle W. Lingle, PhD, is associate professor ofpharmacy administration, and Susan E. Zetzl is a doctoral candidate in pharmacy administration at the University of South Carolina College of Pharmacy, Columbia, S. C
References 1. Committee on the Costs of Medical Care. Medical Care for the American People; The Final Report of the Committee on the Costs of Medical Care, Adopted October 31, 1932. New York: Arno Press; 1972. 2. Friedman E. The uninsured: from dilemma to crisis. JAMA. 1991;265:2491. 3. Sources of Health Insurance and Characteristics of the Uninsured. Washington, DC: Employer Benefit Research Institute; February 1992. 4. Levit KR, Lazenby HC, Cowan CA, et al. National health expenditures, 1990. Health Care Financing Rev. Fall 1991;13:29-54. 5. Sonnefeld ST, Waldo DR, Lemieux JA, et al. Projections of national health expenditures through the year 2000. Health Care Financing Rev. Fall 1991;13:1-27.
Conclusion
6. U.S. Bureau of the Census. Projections of the population of the United States, by age, sex, and race: 1988 to 2080. Current Population Reports. January 1989; Series P-25.
Representatives of insurers, corporations, and the government as well as consumers agree that some changes must occur to increase accessibility to care, reduce costs, and improve the quality of the current U.S. health care system. Without reform, we will continue to spend an increasing amount of our resources on health care instead of other pressing social needs, and it will be increasingly difficult to assure all Americans of access to effective health care. Without a coordinated plan, we cannot control the principle causes of medical care inflation.
7. Rice DP, Feldman JJ. Living longer in the United States: demographic changes and health needs ofthe elderly. Health Society. 1983; 61:364. 8. Anderson K. Why health care costs are tough to cure. USA Today.
March 11, 1991;3B. 9. Castro J. Condition: critical. Time. November 25, 1991;138:34. 10. Levit KR, Cowan CA. Business, households, and governments: health care costs, 1990. Health Care Financing Rev. Winter 1991;13:87. 11. Lohr KN, Yordy KD, Thier SO. Current issues in quality of care. Health Affairs. Spring 1988;7:17.
Ident -A-Drug Handbook
by Jeff Jellin's "Pharmacist's Letter"
T
hiS important new reference book solves the problem of identifying tablets and capsules that do not have their medication name imprinted on them. Imagine, no more confusion when a nurse calls and asks, "What is this little pill with 'XYZ 123' printed on it?"; or when your supplier changes brands; or when a patient presents a tablet or capsule and says, "I need more of these." You just look up the imprinted code number in the Handbook to determine the contents of the medication. The Ident-A-Drug Handbook identifies the approximately 6,000 drug products that are not imprinted with the name of the drug. It lists the code number, dose, manufacturer, and physical description for each drug.
Best of all, each copy is sent with the latest supplement from the publisher so that you get up-to-date information. You can use the Handbook to answer inquiries from physicians, long-term care facilities, schools, law enforcement officers, parents, patients -and other pharmacists - who need to know the contents of various medications. Keep the Handbook right at your fingertips in your pharmacy! $23 • Code AP-T48
~ To order your copy call toll-free 1-800-237-2742 Vol. NS32, No.9 September 1992/715
ED
AMERICAN PHARMACY
