Public-utility model of health care reform
San Francisco Chronicle
January 2, 2003
The Universal Approach
Affordability is basic in health-care reform
By Jerry Flanagan and Frank Smith
California needs a system-wide plan to resolve growing inequities in health care. One middle-ground solution would be a public-utility model, which would strictly regulate profiteering in health care to achieve universal coverage and cost-efficiency. It would retain private delivery with strict public control and address the public's biggest concern: affordability.
Such a model would appoint an independent commission to implement a three-part plan:
-- Cost control and stability: The overall aim of rate-setting would be to assure that providers, hospitals and health plans are sufficiently reimbursed to maintain financial stability and that net revenues do not exceed reasonable requirements for profit and reinvestment.
-- Universal access: A new state health plan would provide care for all who do not have access to, or choose not to utilize, benefit plans provided by employers. Competition between the state and private plans would help stabilize premium costs.
-- Modernize quality oversight: A single state agency would be responsible for setting quality standards, collecting data and reporting outcomes. Outcome reports would be fed back into the rate-setting process so that providers and plans with the highest outcomes would be rewarded.
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/01/02/ED216823.DTL
Comment: The "public utility" model of health care reform is now receiving considerable attention in California. It emphasizes cost stabilization through regulatory rate setting. And for those without private insurance, it would mandate participation in a public plan.
The most important reason that this model is receiving attention is that it is recognized that our health care system must be made affordable. Although rate setting of prices is an important factor in determining program costs, it is difficult to see how the other factor, utilization rates, would be controlled under this model. It can be anticipated that the number of services would increase, and global health care costs would continue to escalate. Rate setting through quality standards and rewards that addressed over-utilization might have some impact, but we still do not know how to differentiate, with any precision, a high rate of beneficial services from excessive, inappropriate utilization.
Regulated public-utility rates can control electricity, natural gas or water over-utilization through punitive rates for higher utilization levels. But in health care, requiring individuals with greater needs to pay more would impair access due to lack of affordability. Though a health care public-utility commission might set rates, it shouldn't establish policies that prevent appropriate utilization.
The public-utility model might be used to set health plan rates, but then that merely includes the insurer along with the providers in the battle for the division of funds under the global budget that would be determined by the authorized premium rate multiplied by the number of plan participants. (Currently, the insurer escapes this by calculating anticipated payments for plan benefits and then adding on administrative costs and profits.)
Why leave in place the flawed policies, inequities, and expensive administrative inefficiencies inevitable with this fragmented system? Instead, why not accept the concept that a global budget is inevitable, and then allow a public administrative agency to mediate the fight over the funds? At least it would be the patients' health care providers instead of large private insurance bureaucracies that would be receiving the funds. More funds for providers could pay for greater utilization by patients.