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A Dictionary of Health Policy Terms

Public Citizen Health Letter


July 2009

The debate on health reform is creating a new vocabulary. Some of the new words or phrases are “old wine in new bottles“; others provide “handles“ for innovative concepts. With so much wonky-talk making its way to the Internet and print media, consumers need a glossary to understand what policy-makers are talking about. Here, we present some of the terms that are being bandied about with increasing frequency.

Accountable care organization
Adverse selection
Bending the curve
Best practices
Bundled payments
Carve out
Cherry picking/ Cream-skimming
Choice
Comparative effectiveness research
Consumer-driven health care
Consumer “buy-in”
Cost containment
Crowd out
Disease management
Electronic health records, other IT Technology
Evidence-informed case rate (ECR)
External effects
Free riders
Gateway
Global budgets
Guaranteed issue
Health savings accounts (HSAs)
Hidden taxes
Incrementalism
Individual responsibility
Insurance exchange
Individual mandate
Market-based care
Market-driven solutions
Medical home
Medicare-for-all
Open-ended payments
“Pay or play”
Penalties/fines
Prometheus payment model
Purchasing pool
Queueing
Rationing
Shared responsibility
Single-payer
Socialized medicine
Universal coverage

Accountable care organization: Better known by its acronym (ACO), this type of organization comprises a group of health providers responsible for the quality and cost of health care delivered to a given population. Avoiding the fragmentation that undermines accountability, ACOs most often include one or more hospitals, primary care physicians and specialists. Under the model, providers are held accountable for the quality of care they deliver to patients and may receive bonuses for providing high-quality, low-cost care. They may also pay penalties for any care that fails to meet quality standards. The ACO is based on the premise that providers should be accountable for decisions about capacity (e.g., number of specialists, bed supply) that ultimately affect spending. Moreover, providers within an ACO have a vested interest in coordinating care and monitoring one another, because any gap in the network of services would affect their shared patients and reflect on the ACO as whole.

ACOs have been tried under Medicare, and have succeeded in enhancing quality and keeping the lid on costs. The Medicare Payment Advisory Commission (MedPAC), is supporting the expansion of ACOs. It is also establishing the conditions under which ACOs would work. These include a minimum size (at least 5000 patients) and a structure to make joint decisions on capacity, among others.

ACOs can be voluntary or mandatory. Under the voluntary model, Medicare provides physicians with rewards and few, if any penalties. This modality is therefore referred to a “bonus-only” design. It has met quality objectives but has not generated savings. Under the second type of ACO, provider participation would be mandatory and there would be both bonuses for good performance and penalties for bad performance. Shared savings (the result of modified practice patterns and constrained capacity) and penalties could fund the bonuses.

Adverse selection: is an insurance term referring to the tendency for an insurance plan to attract those at higher risk, who will have higher claims than the average. Those at lower risk may decide that the insurance is too expensive to be worth their while. When there is adverse selection, pegging premiums to the average will not suffice to cover the anticipated claims, because those who have bought the policy are at higher-than-average risk. And raising the premiums is not a solution, as insurance will then become even less attractive to those at lower risk, thereby exacerbating the problem of adverse selection. Making the purchase of insurance compulsory or, most optimally, having government-funded insurance for all, reduces adverse selection because it pools all risks and does not allow those who are healthier and at lower risk to opt out.

Bending the curve: Given soaring health care expenditures, covering the uninsured needs to be accompanied by cost-control measures. “Bending the curve” is seen as a reasonable goal, and refers to slowing down the rise in health expenses. The idea is not to reduce overall costs, but rather to slow down the pace of increase.

Best practices: are activities that, having been rigorously evaluated, demonstrate success, have had a favorable impact, and can be replicated. In medicine, these can vary by type of patient, practice, situation and context. Nevertheless, there are a number of activities that have been tested and are generally accepted. These can cover disease prevention, screening, treatment and rehabilitation. Best practices become the “gold standard” against which other interventions are measured.

Changing technology and an ever-expanding knowledge base are constantly modifying practices. What is “best” at one time may therefore become outmoded or obsolete. And because “best practices” vary by condition or age group, providers need to both stay up-to-date and match their interventions to the patients they serve.

Bundled payments: Practitioners and policy-makers are increasingly recognizing that paying doctors and hospitals on a fee-for-service basis conflicts with the goal of providing access to affordable care. Fee-for-service rewards volume, often to the neglect of quality and value. It is intrinsically inflationary, and generates excessive services. These then become the norm, to the detriment of both patients and budgets.

Recognition that “more” is not necessarily “better” is now informing the debate on how to pay providers. One alternative is a bundled payment system which covers costs of care across different settings of a patient’s episode of illness over a given span of time. This payment system, also called “episode-of-care” payment, would be based on the current distribution of cumulative fee-for-service costs per episode. Medicare is already piloting bundled payment for some inpatient services as well as for some surgical services. Other providers are also experimenting with the modality for different diagnoses and chronic illnesses. The expectation is that, if successful, other payers would also adopt this payment approach.

If properly designed, bundled payments can enhance coordination of care, decrease unnecessary services, reduce costs and increase accountability. But the logistics of “bundling” may be challenging. Some health care episodes lend themselves more to this type of payment than others: they have a clear beginning and end and a predictable intensity of care. Operational decisions concerning bundling include deciding what procedures and practitioners are part of the “bundle,” how to deal with differences in services and how to address the possibility of a patient switching providers mid-episode. (See also evidence-informed case rate and Prometheus payment model).

Carve out: Used as both a noun and verb, this term describes the services that are excluded from any service package, or the process of exclusion.

Cherry picking/ Cream-skimming: refers to the process by which insurers try to cover only those who are “good risks.” This may occur when an insurer has more information about consumers’ expected costs than the consumers themselves, and designs a marketing strategy to primarily enroll those who are healthier. The strategy may also include explicitly excluding those who are unhealthy or at greater risk of becoming unhealthy (see adverse selection, above). Cherry picking is a way for insurers to cut their losses and bolster their profits.

Choice: is as American as apple pie. In the health policy arena, however, the word is usually a code for the provision of a variety of options, some of which offer skimpy services or deceptively low premiums. Although appropriate and timely information is essential to true choice, many plans violate this basic tenet. They are confusing, complicated and jargon-ridden; as a result, patients often have problems finding out what is covered and under what circumstances.

At the policy level, an insistence on “choice” often serves as the rationale for avoiding a uniform service package and universal coverage. It is also the entry point for strengthening health savings accounts (see below). Attempts to privatize Medicare also parade under the banner of “choice.” This accounts for the creation of Medicare Advantage Private Fee-for-Services plans. These cover extra benefits and cost more than traditional Medicare. Indeed, Medicare pays an average of 12 percent more for those who enroll in Medicare Advantage plans than it pays for beneficiaries who are covered under traditional Medicare. These plans have been beset by aggressive, inappropriate marketing activities. After many senior advocates complained that some beneficiaries were inadvertently finding themselves in plans in which they did not want to enroll, whose coverage they did not understand, seven insurance companies agreed to stop marketing private Medicare plans temporarily. Nevertheless, there is still much confusion disguised as “choice.”

Comparative effectiveness research: focuses on the rigorous assessment of the relative safety, effectiveness and cost of treatments or other interventions to address a given condition. This type of research is designed to identify what works for whom and at what cost. Decisions concerning what services to cover and at what cost would be based on the findings of this research. At present, the Agency for Healthcare Research and Quality conducts such research; their findings are used to improve health care quality for public programs such as Medicare, Medicaid and SCHIP. Other types of comparative effectiveness research are conducted by academic institutions, insurers and providers. The results of these studies often determine “best practices” (defined above).

Consumer “buy-in”: This phrase, used to justify greater cost-sharing, assumes that paying out-of-pocket will make consumers more aware of the costs of health care, thereby making them more prudent consumers. Additionally, “buying in” is intended to reinforce their role as stakeholders in the delivery of care. The problem is that this makes consumers responsible for deciding their spending priorities (most often with limited information), distinguishing between needed and unneeded care and unbundling complementary services that work only as a package.

Cost-sharing has more of an adverse effect on those in poor health. It promotes delays or decreases in health care, resulting in adverse health outcomes. A 1999 study on the burden of Medicaid drug copayments found that elderly and disabled Medicaid recipients who resided in states which required copays had significantly lower rates of drug use than their counterparts in states without copayments. The main effect of the copay was to reduce the likelihood that Medicaid recipients would fill any prescription during the year, and the burden fell disproportionately on the ill. A more recent compilation of studies on cost-sharing and use of prescription drugs found that cost-sharing is associated with lower rates of drug treatment, lower adherence rates and more frequent discontinuation of therapy. Moreover, for patients with certain conditions (e.g., congestive heart failure, diabetes, schizophrenia), higher cost-sharing means more use of medical services, thereby offsetting any savings accrued from lower drug expenditures.

Cost-sharing also affects providers who serve low-income patients. Providers are placed in the uncomfortable position of charging those they know cannot afford to pay, or assuming a financial loss for care to the poor.

Consumer-driven health care: This term characterizes health schemes that give greater responsibility to patients for the costs of their health care. Usually, this takes the form of higher co-pays or deductibles, which are intended to make the consumer more cost-conscious. These high-deductible plans are often paired with health savings accounts (see below).

High-deductible plans have a number of perverse effects. Because they pay for high-ticket items rather than for more basic services (e.g., amputations rather than visits to podiatrists), they distort the supply and demand of care. In addition, cost-sharing can raise barriers to care, which in turn lead to late or no services (see also Health savings accounts). Moreover, high deductibles tend to have a differential impact on women, who have a greater need for preventive services, not all of which may be covered. A recent study compared out-of-pocket expenditures for maternity care under five different plans, four of which had high deductibles. The researchers found “tremendous variation” in the financial burdens the plans impose, and concluded that “women and families could be left with thousands of dollars of expenses from maternity care even with an uncomplicated birth, resulting from the high deductibles and cost sharing requirements in these plans.”

Cost containment: Because many politicians, researchers and analysts agree that much medical care is ineffectual or inappropriate, cries for cost containment come from a variety of sectors and results in strange bedfellows. Conservatives favor cost-containment measures as a way of shrinking the public sector and unleashing market forces. More politically progressive segments of the population consider cost containment as a tool to better monitor health care, avoid unnecessary services and free up resources that can then be used to cover more persons or broaden the scope of services provided. Because many disparate and even conflicting measures fall under the rubric of “cost-containment,” it is best to ask Cui bono? (To whose benefit?) when assessing these strategies.

Cost-containment strategies also differ in terms of their target: some are aimed at consumers, others at providers. Those that seek to modify consumer behavior try to reduce consumption of services (see Consumer-driven care, above). Others address physician behavior by reimbursing them for certain outcomes rather than the number of services they provide. At present, for example, Medicare is carrying out an experiment which rewards doctors “for the quality of care they deliver rather than how many tests and procedures they perform.” The idea is to provide financial incentives to encourage doctors to help patients avoid costly hospital stays or emergency care through more timely monitoring of conditions and better coordination of services. Of 10 physician groups taking part in the experiment, which is still in process, all improved care for patients during the first year, but only two earned bonus payments because of monies saved. It is therefore unclear if the financial incentives work or not. Remaining issues include the fact that physicians were uncertain as to what they had done to generate savings, and rewards went to organizations rather than to the individual doctors.  

Crowd out: is a phenomenon in which a new public program or the expansion of an existing public program prompts some privately-insured persons to drop their private coverage and benefit from the public subsidy. “Crowd out” also occurs when public programs act as an incentive for employers to reduce their contributions to employees’ health care coverage.

Disease management: Under most health systems, a small fraction of those covered account for a large share of all costs. Thus, for example, 4 percent of Medicaid enrollees consume half of all Medicaid expenditures. Similarly, a survey among a group of large employers found that 72 percent of workers and their families accounted for only 11 percent of employer health-care expenditures annually, while the top 4 percent of users represented 49 percent of total employer costs. Program administrators are therefore eager to make a dent in the demand from those “high users” in order to reduce their disproportionate expenditures on this fraction of their enrollees. “Disease management” has been proposed as a tool to do this, and many providers are experimenting with ways to manage those with specific diagnoses or who are frail or have multiple chronic conditions. The aim is to improve health and prevent disability as well as to keep costs in check. 

Because of its potential, disease management has become somewhat of a growth industry, and established plans have incorporated disease-management efforts within their offerings. At the same time, for-profit companies have sprung up to sell their services to employers and health plans who want to keep their employees healthy and their medical costs down. As self-contained entities separate from health care, these companies promote patient education and more effective self-management through phone calls and the Internet. In 2005 two thirds of employers with staffs of 200 or more offered disease management as part of their job-based insurance plans; more than 20 states have some kind of disease management for their Medicaid enrollees.

There is growing interest in assessing the efficiency and efficacy of these programs, and several studies have focused on whether or not they improve health and lower costs. Studies looking at disease-management initiatives in the Group Health Cooperative in Seattle and in the Kaiser Permanente program in Northern California found that quality of care improved, but there were no cost savings. A current, ongoing study by Mathematica Policy Research is testing whether disease management can lower costs and improve patient outcomes and well-being in the Medicare fee-for-service population. To date, the researchers have found that, while both patients and physicians are very satisfied with the efforts, few programs have had any detectable effects on patients’ behavior or the use of Medicare services. Only one program had statistically significant reductions in hospitalization, and none reduced costs. The available data therefore suggest that, whatever the benefits of disease management on patients’ health, they do not necessarily translate into savings.  

Electronic health records, other IT Technology: Digital patient records provide a way to store a person’s medical history, including chronic conditions, test results, prescriptions, contraindications, diagnoses, procedures and physicians’ comments. Some “smart cards” can hold the equivalent of 30 pages of medical records. The Secretary of Health and Human Services has called this technology “the most important thing happening in health care.” EHRs have also received the blessing of Senator Hillary Rodham Clinton, and former Republican leaders Bill Frist and Newt Gingrich. What is it about EHRs that unites otherwise political opponents? Undoubtedly, the promise of easily portable, complete information that can be shared, searched and analyzed is appealing to researchers and decision-makers alike.

Nevertheless, the changing dynamics triggered by this technology could have unexpected costs. While a RAND Corporation study found that EHRs could reduce errors and save about $80 million a year, other experts caution against overstating the cost-saving aspects of the electronic record. As economist David Cutler has pointed out, “there is money to be saved, but it is not going to be cheap.” Even cost-saving products require an upfront investment, and EHRs will achieve their payoff only over the long-term, if at all. Physicians in solo practice or in small groups may find it prohibitive to shift to EHRs without passing on the costs to consumers. While efficiency may be seen as socially desirable, many individual providers will lack the financial motivation to streamline and upgrade their practices. Another potential inflationary effect of the electronic technology is that better information may lead to more care for more people and create a demand for given drugs in small markets.

Moreover, some experts feel that too much emphasis is being put on the “technological fix” that EHRs and other health-related IT represent, and that we should not be lulled into thinking that it is a substitute for real reform in how care is delivered and paid for. In short, while health information technology has the potential to improve quality; reduce the costs associated with inappropriate care and medical errors; and boost administrative efficiency, information-sharing and decision support, it is not a panacea for the system overall.

Evidence-informed case rate (ECR): is a type of bundled payment in which the amount is clinically-derived and risk-cushioned. It has an explicit profit margin built in. The ECR defines the boundaries of typical care and establishes a base payment for all services within the recommended clinical guidelines. The Prometheus payment model (see below) uses this rate. The expectation is that the rate will promote coordination among providers involved in an episode of care and produce better outcomes for patients. This type of bundle is still experimental and will be carefully assessed.  

External effects: are benefits or costs that accrue to a person because of someone else’s action. If your neighbor plants a beautiful garden that enhances the views from your house and increases the value of your property, you benefit from the external effects of his actions. The health care field is rife with examples of external effects. Immunizations provide external benefits, because they reduce the likelihood that others will get the disease, even if they are not immunized themselves. Some one who gains an external benefit, or benefits from a public good without paying for it, is sometimes, pejoratively, called a free rider (see below).

There are also many cases of external costs — e.g., air-pollution, second-hand smoking, contagious diseases — in which what others do (or refrain from doing) have a negative effect on our health and well-being. External costs often provide the justification for regulation or taxation. Foregoing health insurance has external effects, and imposes costs on others: when an uninsured person goes to an emergency room, or receives care that is uncompensated, other payers make up the difference in the long run. Hospitals and other health providers may therefore raise their fees to make up for those who fall into their “bad debt and charity pool” because of lack of coverage.

Free riders: are persons who consume more than their fair share of a resource, or shoulder less than a fair share of the costs of its production. In health care, “free riders” are those who do not contribute to the total costs of the services but nevertheless receive the same benefits of those who, in effect, “pay their dues.” Mandates which require everyone to be covered reduce, if not eliminate, the number of free riders. The imposition of mandates therefore appeals to those who feel that mandatory coverage is fairer than asking everyone else to pick up the health care costs of those who choose not to buy it.

Gateway: is another name for an “insurance exchange” (see below).

Global budgets: set expenditure caps for certain types of services. This gives providers some flexibility in allocating resources while providing them a target beyond which they could not be reimbursed. Global budgets increase accountability, and self-monitoring and reduce overuse of resources. Because providers face a zero-sum game in which more for one necessarily means less for others, global budgets keep everyone honest.

Some countries such as France, Sweden and Switzerland use global budgets to control hospital operating expenses. Others (e.g., Canada and the UK) use global budgets to cover both hospital and physician expenditures.  

Guaranteed issue: is an insurance term that means that an insurer cannot exclude anyone from coverage because of past history or health status. When some plans are allowed to deny coverage and others are required to accept everyone, the latter are at a disadvantage because of adverse selection against them.  

Health savings accounts (HSAs): This mechanism, ostensibly aimed at encouraging the uninsured to acquire coverage, allows those who buy high-deductible plans to deposit money, tax-free, into savings accounts that can be used to pay medical bills. If you don’t spend the money in the account, you get to keep it. This “solution” has been touted by the Bush administration as a tool to address the dwindling number of persons who have employer-sponsored health coverage. This proposal was best described by Stephen Colbert on Comedy Central: “It’s so simple. Most people who can’t afford health insurance also are too poor to owe taxes. But if you give them a deduction from the taxes they don’t owe, they can use the money they’re not getting back from what they haven’t given to buy the health care they can’t afford.”

These accounts benefit mainly the more affluent segments of the population, who have more to gain from tax breaks. Moreover, HSAs encourage the healthy and the wealthy to drop out of company health plans, further undermining the weakened system of job-related coverage by depriving the insured pool of those who are at less risk for illness and high-cost care.

Hidden taxes: refer to external costs that are imposed on the population at large (see external effects above). In the health care arena, they refer to the costs that providers impose on covered patients in order to cover the expenses of providing care to the uninsured. 

Incrementalism: This refers to any policy that proceeds gradually in stages, usually by covering a growing group of people or an expanding array of services.

Many national health plans began as incremental efforts: some covered only workers in certain occupations, gradually expanding coverage to cover the entire labor force and then the rest of the population. When the United States enacted Medicare and Medicaid, some expected that this would be the first step in achieving universal coverage. And when Medicare was extended to cover those with end-stage renal disease in 1972, there was some discussion concerning whether the United States would be the first country to provide universal coverage on a disease-by-disease basis.

Incremental change has been hailed as “the American way” of addressing health care. Some have proposed covering children first and having them age into an expanding system. Others have suggested that progress is more likely to proceed on a state-by-state basis. In addition to creating a patchwork of systems that stop at state boundaries, the latter option will exacerbate existing geographical disparities. Moreover, state programs are relatively impotent to make the changes that are necessary to cover everyone and control costs. Only a national program will have the leverage to do this, and only a national program will give meaning to the concepts of “one nation,” equal opportunity and equal protection.  

Individual responsibility: This phrase is being used to describe a requirement that everyone be insured against health care costs. A more subtle meaning of the term is that those who do not obtain insurance should be imposed a financial cost or penalty.

Insurance exchange: refers to a mechanism for linking those seeking insurance with an array of options. It is intended to serve as a clearinghouse where buyers and sellers meet. The best known health insurance exchange at the state level is the Massachusetts “Connector.” This exchange does not regulate or purchase insurance, nor does it negotiate rates with carriers. Its main role is to facilitate transactions among parties. This includes providing information to consumers so that they can compare plans and assess trade-offs.

Individual mandate: This refers to a state requirement that all residents buy health coverage or face financial penalties, and is similar to the requirement that all licensed drivers have car insurance. In 2006 Massachusetts became the first state enacting legislation mandating such coverage. Other states, however, are considering similar legislation. Passed with surprising bipartisan support, the Massachusetts law requires all uninsured persons within the state to buy coverage by July 1, 2007. [All businesses with more than 10 employees that do not provide insurance are also mandated to contribute up to $295 per employee per year to the state (see Pay or play, below)]. The legislation stipulates that individuals who do not comply with the insurance requirement lose their personal tax exemption; furthermore, they face fines for each month that they are uninsured. There is one loophole, however: no one is compelled to buy insurance if he or she cannot find affordable coverage. Initially, the state did not define what “affordable” meant. But subsequent research has defined the upper bound of affordability at 8.5 percent of income, which is what middle-income people pay for health insurance, including cost sharing. This loophole in effect exempts a sizeable fraction of the uninsured —20 percent — from the mandate, thereby excluding them from coverage. At present, enrollment of those previously uninsured has been lagging. Because almost half of the uninsured in Massachusetts are single males, the state has enlisted the Boston Red Sox in its publicity campaign, thereby stressing the need for Massachusetts’ residents to “get in the game.”

Market-based care: is based on a confluence of consumers and health care providers such that the purchasing power of the former will shape the scope, distribution, and price of the services provided by the former. Market-based care is touted by McCain, who argues that the system needs to be based on consumer choice, personal responsibility and provider competition. There are good things to be said about each of these in some contexts such as lower and lower-priced computers, etc, but each runs into difficulties when the “goods” that are being marketed are health services: the public health goal is to prevent disease and avert the need to consume many of these “goods” altogether. Consumers facing a medical problem usually have limited choices, and these are framed and determined by their physician. Once a consumer chooses a provider, it most often is the provider who decides what services the patient needs, and when and where to obtain these. Moreover, choice is often limited by ability to pay, and only those with complete coverage and unlimited resources are in a position to “choose.” “Personal responsibility” is usually a way to blame-the-victim and eschew any control over services provided. And so-called provider competition is limited because consumers are unable to weigh their options and determine what is best for them.

Market-driven solutions: These solutions seek to transfer to consumers the monies now spent on their behalf for the purchase of health care. Those who favor this approach argue that the health sector has much to learn from other sectors of the economy, and that following the lead of other manufacturing and service industries will produce the “quick, courteous, consistent, low-cost service” that has made the United States globally competitive in other markets. Yet, even some who are pro-market concede that health care is the part of the public sector where market forces have had the most limited success, largely because of distorted incentives and information failures. In addition, most often it is doctors rather than patients that decide what care is needed, and how much of it. Indeed, it is estimated that physicians control over 80 percent of health care spending on hospital care, prescriptions, nursing home, testing and their own services.

Paul Krugman has succinctly pointed out that the health care insurance market does not work because of three things: risk, selection and social justice. “Risk” refers to the fact that, in any given year, only a small part of the population will incur major medical costs. Those who happen to be at high risk need good insurance if they are not to go bankrupt. But the insurance business is market-driven to cover only the healthy, pay out as little as possible for health care and raise prices for the unhealthy. It therefore selects the “better risks” that will place fewer demands on the health system and cost less. “Social justice” refers to the widely held value that no one should be denied care because they can’t afford it. So government subsidizes a growing proportion of health care, although the United States does this imperfectly, in a far-from-transparent way, and, most often, grudgingly.

Donald L. Bartlett and James B. Steele describe the problem as follows: “The market functions wonderfully when we want to sell more cereals, cosmetics, cars, computers, or any other consumer product. Unfortunately, it does not work in health care, where the goal should hardly be selling more heart bypass operations. Instead, the goal should be to prevent disease and illness. But the money is in the treatment — not prevention — so the market and good care are at odds.”

Medical home: is the current lingo for a primary care provider that would serve as a point of entry and source of continuing care. Primary care practices would be charged with care coordination, care management and referrals to appropriate care. A patient’s medical home would also have a complete and easily accessible medical record, thereby minimizing the fragmented information systems that jeopardize integrated care.

Medicare-for-all: is a short way to describe a national health system which covers everyone through single-payer financing (see Single-payer, below). This proposal builds on the foundations of the program enacted 42 years ago and therefore capitalizes on the familiarity and popularity of the current Medicare. Moreover, Medicare is run much more efficiently than private insurance plans: it operates with less than 5 percent overhead, compared with the 15-30 percent dedicated to administration and profits in commercial health insurance plans. This would fundamentally change the way in which care is provided and paid for by getting businesses out of health care altogether. As Ezekiel Emanuel and Victor Fuchs have stated in their support of this option, “Health care is not part of [businesses’] core competencies but something they use as part of their labor relations. It creates job lock and distorts employers’ hiring and firing decisions.”

Open-ended payments: refer to the way providers are paid at present: doctors and hospitals bill insurers for services rendered, with no limit or cap on what they can bill. If patients are covered by insurance, the carriers then have to sort out whether or not the payments are for covered services, and pay the agreed-upon fee for each service. Because this can be a labor-intensive process, U.S. net insurance administrative costs more than doubled between 2000 and 2008. The current system not only defies budgeting, but also siphons off a growing proportion of the health care dollars for administration. In international comparisons, the United States spends significantly more on high administrative overhead as a share of national expenditures and per person.

“Pay or play”: refers to proposals adopted or under consideration by states that require businesses to provide workers health insurance (“play”), or pay into a government fund that will do it for them. The latter is most often called a Fair Share Health Care Fund. In some states, the legislation has been limited to very large employers (e.g., those with 10,000 employees or more); but other states (e.g., Massachusetts) have cast a broader net in an attempt to cover more of the uninsured. The proposal has elicited a variety of responses from different interests, and there are conflicting opinions even within the business community. While some employers regard “pay or play” as an ideologically offensive mandate, others see it as a way to protect their own interests. The latter are those who cover their employees but are undercut by competitors who have lower labor costs because they do not provide health insurance to their workers.  

Penalties/fines: are often imposed on those who opt not to buy health insurance in a health plan in which coverage is mandated. In some cases (e.g., Massachusetts), the initial penalty involves loss of a personal tax exemption; after that, those who do not have insurance face fines for every month that they are without health insurance. This penalty may increase over time, as a disincentive to those who do not buy coverage. During the 2008 presidential primary debate, candidates Clinton and Obama have bickered about this. Because the Clinton plan includes an individual mandate and the Obama plan mandates coverage only for children, the former includes penalties and the latter doesn’t. Obama accuses Clinton of not having said what the penalties entail, and suggests these would be an added burden on those who do not get coverage because they cannot afford it.  

Prometheus payment model: is a bundled payment modality that is being piloted in the private sector under the sponsorship of the Robert Wood Johnson Foundation. The model relies on evidence-informed case rates (see above) and is initially limited to five procedural diagnoses and five chronic illnesses. The latter include congestive heart failure, chronic obstructive pulmonary disorder (COPD), asthma, coronary artery disease and hypertension.

Purchasing pool: is a device that facilitates more than one employer or group of individuals coming together to collectively purchase health insurance. The assumption is that, by aggregating a large number of smaller purchasers, pools can achieve economies of scale and exert greater leverage in negotiating lower premiums with health plans. The experience with purchasing pools has not been very promising, however. Indeed, pools face a “Catch-22” situation: they need to be large and cohesive in order to be successful in negotiating prices, but they do not become large and cohesive without a good track record insuring at lower prices.

Queueing: results when the demand for a given good or service exceeds its supply, and some customers have to wait to acquire it. In practically all countries including the United States (although this is more acute in some than others), transplant patients are placed on waiting lists to obtain scarce organs. In health care, queueing often takes more “subtle” forms. Thus, for example, you may be sick and need to see a physician today, but you may not be able to get an appointment for another three weeks.

Rationing: is a process by which scarce resources are distributed. Who gets what depends on the system and how it operates. When it comes to health care, few countries can afford do to as much for their populations as is technically feasible. Some services may be therefore be rationed because they are considered less necessary than others. Others may be restricted according to medical need, age or likelihood of success. In cases in which services are sold on the market, services are in effect rationed by price: those who are not able to pay a given price must therefore do without. We therefore have implicit rationing at present.

Much more explicit rationing, unique to the United States — although we spend well in excess of $2.2 trillion a year on health and can hardly be described as having “scarce resources” — takes the form of the 47 million and counting people who are uninsured.

At least one state has embraced the “luck of the draw” to decide who gets care. The Oregon Health plan, intended for those whose incomes are too high to qualify for Medicaid but too low to afford private health insurance, is using a lottery to decide who is covered. With a few thousand slots available and more than 80,000 registered for the lottery, rationing in this case is simply a matter of chance.

Although food rations mean that everyone gets what he/she needs, “rationing” health care is interpreted as some being deprived of care and is therefore politically toxic. Candidates favoring extending coverage have therefore done careful acrobatics to make the case that their policies would not entail any sacrifices. Instead they repeatedly state that repealing the Bush tax cuts would provide the revenues needed to expand coverage, and that a more efficient system (e.g., avoiding unnecessary care, greater emphasis on prevention, control of chronic diseases) would reduce costs in the long run. 

Shared responsibility: has become a code for indicating that individuals, employers and government will all have to do their part to pay for health care for all. While this may seem self-evident, this makes explicit the fact that health reform will have a fiscal effect on all stakeholders. “Shared responsibility” is also being used to distinguish an approach that gives a government a key role, in contrast to the “You’re on your own” approach which would rely primarily on tax incentives to expand coverage.  

Single-payer: describes a financial system in which one entity acts as single administrator, collecting all health bills and paying out all health care costs. This would streamline administration, eliminating the complexity of having thousands of intermediaries with different billing systems, forms and requirements. A single-non-profit plan is based on the original concept of insurance: creating a large buying pool to spread the financial risk of sickness so that no one faces a crisis when a health need strikes. The public agency would negotiate and pay the bills, exerting the leverage provided by being a powerful buyer to control costs and insure quality control. It would not employ providers or own health care facilities. At present, both traditional Medicare and the Veterans Health Administration operate as single payers, thereby cutting their administrative expenses. Single-payer systems have been praised not only for their managerial simplicity but also for serving as “the ideal vehicle for implementing an egalitarian social ethic.”

Socialized medicine: in its strict definition, this refers to a health care system in which the government funds and manages health care directly, employing providers and owning hospitals and other facilities. At least parts of the British National Health Service (NHS) and the health care systems of Spain and Finland can be called “socialized medicine.” Even in the NHS, which is often seen as the prototypical example of socialized medicine, general practitioners are independent contractors rather than government employees. In the United States, “socialized medicine” is often used by those enamored by market medicine as a “boo word” or bogeyman, and is part of the inflammatory rhetoric seeking to scare constituents and predispose voters against many types of health care reforms. This election year, Giuliani was particularly quick to brand many proposed changes as “socialized medicine.”

The term is often used incorrectly to describe all publicly-funded health care with universal coverage. Most systems that meet these two criteria do not have socialized medicine, as defined above; instead, the government pays, regulates, and monitors health services but does not operate the production of health care. Medicare is a single-payer system that provides care to part of the population, but it is not socialized medicine: practitioners are not government employees, and hospitals are not publicly owned. The systems of the Veterans Health Administration and of the Department of Defense, however, are examples of socialized medicine, albeit for only a narrow segment of the population.

Because of politicians’ inaccurate or willful misuse of the term in speeches and debates over many years, some people are unsure as to what socialized medicine is. Still, the phrase has lost much of its pejorative connotation. Indeed, a recent (February 2008) national poll conducted by the Harvard Opinion Research Program found that, among those who said they understood the term, 45 percent said that the health care system would be better if the U.S. had socialized medicine; 39 percent said it would be worse. 

Universal coverage: means that everyone is covered. Few proposals accomplish this. But calling plans “near universal” or “quasi-universal” is a contradiction in terms.

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