HEALTH
HEALTH POLICY CHOICES FOR THE 1990s
PROLOGUE: Health care in the 1990s will be vastly different than it is today. An aging population, the looming physician surplus, a more restrained federal role in health care, declining philanthropic spending, technological advances, and a plethora of new outpatient treatment facilities will all force changes in the health care system.
In this article Robert J. Blendon, senior vice president at the Robert Wood Johnson Foundation, singles out the trends most likely to change the health care system, describes the shape of the system likely to emerge, and identifies the key health policy choices that will face us by 1995. Two issues will stand out above all others, he predicts: Who will pay for the care of the nation's uninsured poor? And who will pay for the special medical problems facing the middle class, especially for high-technology medical procedures, and for long-term care of their elderly parents? At this stage, the answers are by no means clear.
Forecasting future events in health has proved a very imperfect science. Two decades ago few would have predicted that by 1986 the nation would not have enacted a national health insurance program. Nor would it have been predicted that during the past 10 years, a period noted for its limits to growth and restrained expectations, the United States would spend more for health care than it did during the prior 47 years combined, and that these expenditures would exceed 10 percent of GNP. Despite increasing efforts to rationally plan the nation's health affairs, the health care enterprise has grown rapidly and unpredictably.
While it is thus especially hazardous to make even the most general predictions, I will proceed nonetheless in the hope that this analysis will provide a framework for assessing some of today's major trends in health care and for examining some of the important choices facing the nation.
My forecast focuses on three issues: the major forces most likely to change the U.S. health care system over the next decade; the direct impact of these on the health care system, particularly on hospitals; and some of the critical policy choices of the mid-1990s likely to emerge from these trends.
These projections are derived in part from a collection of independent forecasts. 1– 13 Some of the forecasts apply mathematical equations to historical trends to predict changes in health care fields, and in many cases subjective judgments about future political or economic events or technological changes are included in weighing these data. Some of the other forecasts rely on opinions of expert panels. This analysis also draws on my studies of public views on the current state of the nation's health care system and government's role within it, as reflected in 15 national opinion polls conducted between 1981 and 1984. 14
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From these studies and projections we can identify the major forces most likely to change the U.S. health care system. Some are demographic, some economic, and others relate to changing views of the public and private role in health care.
The emerging physician surplus. The nation's long-standing doctor shortage has clearly ended. The number of physicians is continuing to grow at a rate three times that of the general population and is projected to increase by more than 50 percent between 1980 and the year 2000. By 1995 every aspect of the health care system will feel the effects of this physician surplus.
The growing number of older elderly. By 1995 the number of Americans over age 75 will increase by 30 percent. This growing segment of our population will predominantly consist of elderly women living alone, more than half of whom may be widows, and many of whom may be suffering from serious infirmities.
The increasing number of HMO insurance plans. Over the next 10 years a variety of new types of health maintenance organization (HMO) insurance programs will create incentives for physicians and patients to manage health problems outside the hospital. Estimates suggest that by 1995 between 15 and 20 percent of the population will be enrolled in an HMO—a sharp increase from today's 8 percent. This trend is likely to be accelerated by significant federal efforts to increase incentives for the elderly and the poor to join HMOs. In addition, another 5 to 10 percent of the population will be participating in more loosely organized managed care arrangements, such as those that now exist in Tennessee, or in new types of preferred provider organization (PPO) health plans, both of which will contain strong incentives to use hospitals less frequently.
Restructured health insurance benefits: reduced hospitalization coverage, better outpatient benefits. Today's private and public health insurance policies will be restructured over the next decade. Individual patients will pay more of their own inpatient hospital bills as the share paid by third-party health insurers declines, but patients will have better out-of-hospital insurance coverage.
The introduction of new technologies, surgical techniques, and drugs that may sharply increase the frequency of organ transplants and artificial implants. By the mid-1990s many of today's experimental and high-cost “medical miracles”—such as heart, kidney, liver, and pancreas transplants and artificial implants to enhance hearing and vision—will become part of established medical practice and may be routinely performed in specialized centers. Because of strong public support for these high-technology procedures, they will be diffused across the country despite continued ethical and economic concerns about them. Opinion polls today show that 90 percent of the population favors the continued development of organ transplants.
The increased availability of proprietary capital for the direct delivery of care. Contrary to the popular belief that the health care field may soon suffer a severe capital crunch, by the mid-1990s major new capital will be available in this field. Much of this new capital will be proprietary, coming increasingly from Wall Street. A large share may go toward the direct delivery of care, with the nonhospital parts of the health care system—such as HMOs, home care, outpatient diagnostic centers, urgent care centers, and nursing homes—expanding most rapidly. For-profit hospitals will become a more powerful force in U.S. health care, increasing their share of hospital bed ownership from about 8 percent today to 15 percent by the mid-1990s.
The continuing problem of rising health care costs. Despite all that is being done to slow the growth of health care costs, the nation's health care outlays are projected to increase from $387 billion in 1984 to $660 billion in 1990, reaching almost $2 trillion by 2000 (14 percent of GNP). This means a doubling of the nation's health spending every seven years and an increase in per person expenditures from $1,500 in 1984 to almost $7,000 in 2000. Over the next 10 years health care prices will not rise as rapidly in comparison with general inflation as previously. But because of the aging of the population, improved medical technologies (such as transplants), and the availability of more and better trained health professionals, the volume and technical complexity of new types of services will grow and with them, the nation's overall health expenditures.
The more restrained role of the federal government in health. Starting in the late 1970s opinion polls showed a major change in public attitudes about social issues. In response to the perceived threats to the nation's standard of living posed by sustained inflation, increasing unemployment, declining industrial productivity, and overseas business competition, economic concerns began to overshadow earlier interests in health and human welfare programs. These concerns ushered in a new view of government responsibilities and priorities. As a result, federal and state governments have redirected their actions toward resolving the nation's stagflation problem.
This switch in priorities has had significant effects on health care. First, it has resulted in a de facto moratorium on proposals for national health insurance. Second, the government's health care agenda has become dominated by one concern: reducing the costs of medical care. Third, it has led to restrictions on public sector spending for programs that serve poorer citizens. Last, it has precipitated a major change in government's attitude toward health care.
Public policies have gradually shifted to treating health care as if it were simply another private sector activity within the general economy. The growing interest in deregulation as a means to improve economic performance (for example, in the airline, trucking, telephone communications, banking, and natural gas industries) has led to similar proposals for health care. Thus, we have seen an end to the ban on advertising by health professionals, a curtailment of government health planning and regulatory activities, the encouragement of for-profit hospitals, and proposals to use government tax and expenditure policies to encourage market forces and competition in health care delivery. While the national deregulatory experiment continues, decisionmakers in Washington are grappling with reducing a $200-billion-a-year federal deficit. Collectively, these trends suggest that through the mid-1990s the country is unlikely to embark upon any major new publicly supported health care program or to undertake a comprehensive federal regulatory program. Likewise, the enactment of any form of national health insurance program seems even more remote.
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The declining role of private philanthropy. Real growth in philanthropic spending in health care will continue to decline gradually. Private philanthropic expenditures, which represented 4.5 percent of the health care dollar in 1960, may drop to 2 percent by the 1990s. This means that philanthropic giving will not be a major source of new capital funds or free-care subsidies for the nation's nonprofit institutions in the 1990s as it was in the past.
No set of institutions will be more greatly affected by these forces than the nation's hospitals. The direct impact is likely to be fourfold. First, while the nation's hospitals struggle with occupancy problems, the health care landscape will be transformed by the burgeoning of new out-of-hospital health care facilities. These facilities—which will include urgent care centers, surgical centers, ambulatory care centers, rehabilitation institutes, freestanding diagnostic or imaging centers, hospices, and alcohol treatment centers—will serve as alternatives to inpatient health care. Many of the new entities will be owned by for-profit companies, some by groups of physicians, and others by hospitals or hospital chains.
Second, despite an aging population, admissions to general hospitals will be 10 to 15 percent lower in 1995 than they are today. The sharpest decline in the use of hospitals, possibly as much as 20 percent, will be for Americans under the age of 65.
Third, the average length of a hospital stay will continue to decrease through the 1990s. This trend, along with the decline in hospital inpatient admissions, means that the nation's hospitals could have between 100,000 and 200,000 unused hospital beds by 1995—the equivalent of about 1,000 average-sized community hospitals standing empty.
Fourth, there will be a decrease in the number of hospitals serving as charitable institutions in their communities. Because of growing concerns with costs, competition, occupancy, and reduced government payments and philanthropic contributions, the nation's voluntary nonprofit hospitals may increasingly be managed as private businesses. They will provide only minimal amounts of uncompensated care and limited subsidization of high-cost procedures such as organ transplants or related long-term care services, and they will play a reduced role in the education of health professionals.
A number of critical policy choices may emerge in the mid-1990s from the confluence of these forces and trends. By that time the graying of America will be more visible, the Gramm-Rudman-Hollings years will have passed, Social Security and Medicare will no longer be part of the federal budget deficit process, and the nation is likely to have begun examining the problems created by its rush in the 1980s to deregulate all areas of prior governmental responsibility.
In this new environment a number of questions are likely to become matters of public concern and debate. These include: What are we going to do about the nation's surplus of physicians? Its excess supply of hospital beds? The continuing problem of rising health care costs? Two issues, however, will stand out above all others: Who is going to pay for the care of the nation's uninsured poor? And who is going to pay for the special “catastrophic” medical problems of the nation's middle class?
Who is going to pay for the care of the nation's uninsured poor? Since the 1960s the United States has been gradually adopting a three-track system of health care financing. The first track is private health insurance for the employed and their families. The second is public insurance for the poor on the welfare rolls, the disabled, and the retired. The third is a system of governmentally subsidized public hospitals and neighborhood health centers, coupled with a major commitment of more than 6,000 philanthropically supported nonprofit hospitals, to provide free or subsidized care when necessary to the poor not on welfare or to the uninsured. This three-track system has taken different forms across the country. In some communities it provides access to the same physicians and hospitals for people in all income ranges; in others, separate institutions care for large segments of the community's poor and unemployed. Nevertheless, with only marginal changes it is a system that could protect most of the population against the unpredictable costs of illness and provide access to basic health care.
However, by the mid-1990s this three-track system may be breaking down in some communities, and we may see a new class of Americans, the “medically homeless”—more than half of whom may be children. A number of forces are at work here:
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- Because of fiscal pressures on federal and state governments, the proportion of the nation's poor and near-poor covered by Medicaid may decline. The trend is already apparent: between 1975 and 1983 the proportion of low income Americans insured by Medicaid fell from 63 to 46 percent. While the number of uninsured poor increases, the number of publicly supported neighborhood health centers may continue to decrease.
- Likewise, private giving may be a smaller source of revenues for the charity care offered by nonprofit voluntary health care institutions.
- For reasons described earlier many of the nation's voluntary nonprofit hospitals may be providing substantially less free care by the mid-1990s. In some communities this phenomenon is already apparent. Between 1980 and 1982 the proportion of the nation's poor without either Medicaid or private health insurance coverage rose by 20 percent, while the amount of free care provided by the country's hospitals increased by less than 4 percent. During these same years the majority of the nation's hospitals remained in good financial health and in fact saw, on the average, their net surplus or “profits” increase.
- The growth in the number of for-profit hospitals may reduce the amount of free care available in some communities. This will occur if the for-profits replace or weaken the voluntary nonprofit or public hospitals now providing substantial amounts of uncompensated care. Communities that have no municipal hospital may encounter special difficulties. Today one-third of the nation's 100 largest cities have no public free-care institution, and their poor depend on nonprofit hospitals.
- One of the indirect mechanisms by which the nation finances care for the poor may also change. Historically, middle-class Americans have overpaid for their health care services, and these overpayments have subsidized care for the poor. For many years this has been considered a legitimate and acceptable way for nonprofit colleges and church-related schools to finance the enrollment of low-income students and for hospitals to provide free care to the poor. However, in the face of rising health care costs, business and union groups may increasingly resist paying these cross-subsidies. By the mid-1990s many private company and union health insurance policies may prohibit shifting the costs of medical care for the poor to their members' health insurance policies.
These trends suggest that the question of who will pay for health care for the uninsured poor may be the most critical issue of the 1990s. There are already some indications of the seriousness of the problem. In a 1982 study 1 million uninsured families reported that someone in their family needed medical care but did not receive it for financial reasons. Some 300,000 of these uninsured families reported that someone in their family was refused medical care for inability to pay. 15, 16
The federal government will have four choices in responding to the needs of the 35 million to 40 million Americans who are likely to be uninsured by the mid-1990s. It can (1) leave the situation unresolved and continue the current de facto moratorium on expanding insurance coverage until sometime in the future, (2) enact some form of comprehensive national health insurance, (3) provide direct grant funding to designated hospitals and community clinics for the care of the uninsured population, or (4) selectively expand existing public and private health insurance programs to cover all or part of the uninsured population.
Should the federal government choose the last option, the relatively clear separation of the uninsured into distinct employment-related groups will lend itself to a number of narrowly focused proposals for government action. These include legislation requiring universal private insurance coverage through employers for employed persons, a proposal that would encompass half of all those uninsured; legislation requiring continuing health insurance coverage by employers for the unemployed previously on their payrolls; and legislation expanding Medicaid eligibility for individuals and families without a household head in the labor force or for those who are unemployed for long periods of time.
Who is going to pay for the special “catastrophic” medical problems of the nation's middle class? The nation's poor are not the only ones who will have difficulty paying for health care in the 1990s. By that time the middle class may also be actively seeking assistance from both government and the private sector to resolve the major health care problems facing them—the lack of insurance coverage for organ transplants and artificial implants and for nursing home and in-home care for their retired parents.
Today 85 percent of the population has some form of private or public health insurance. However, these policies generally do not provide payment for many organ transplants or artificial implant procedures, which are still considered experimental. These very expensive procedures must be paid for out of limited research or philanthropic funds. When these procedures become technologically more feasible in the mid-1990s, will the nation's employers, unions, and taxpayers be prepared to have Medicare, Medicaid, Blue Cross, union health programs, the Kaiser Health Plan, and other insurers pay between $30,000 and $150,000 per procedure to make them widely available?
A similar question may arise relating to the extraordinarily high costs of extended nursing home care or in-home care for elderly patients. The problem of paying for this care may become known as America's middle-class disease. The population over the age of 75, the group most likely to need long-term nursing home care, is the fastest growing population group in the country today. By the mid-1990s it may be common to find adults in their sixties with a parent in his or her eighties needing long-term institutional care or alternative arrangements.
Today there is no private long-term care insurance available, and this service is not paid for by Medicare. Most nursing home care is financed by private family resources, and 40 percent is paid by Medicaid, the nation's fiscally strapped insurance program for the poor. By the mid-1990s a number of trends—longer life expectancy, earlier discharge of the elderly from hospitals, and more people over the age of 75—will make particularly acute the question of who is going to pay the $15,000 to $25,000 annual cost for the middle-class elderly in need of long-term care.
By that time government will be confronted with two very different philosophies on how it should respond to the catastrophic health problems facing the nation's middle-class. On one side will be those who suggest that government should actively assist individuals and families in removing the financial barriers to the receipt of needed transplants, nursing home care, and in-home health services. The choices here would include providing the elderly and the poor with expanded coverage for organ transplants and implants (when medically appropriate) under Medicare and Medicaid, and legislatively requiring similar private health insurance benefits for the employed and their families. Long-term care choices would include major tax subsidies to employed and retired individuals to purchase private long-term care insurance, tax credits for people who provide support in their homes to the infirm elderly (including nonrelatives), and the enactment of a Medicare benefit extending Social Security-related coverage to some of these services.
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On the other side will be those advocating a very different set of policies related to the nation's continuing inability to control its health care costs. Despite 10 years of cost-control efforts, by the mid-1990s health care will have climbed from 10 to 13 percent of GNP with no end in sight to these spiraling outlays. To those concerned primarily with costs, the adoption of some painful treatments will be required. These may include proposals to ration high-cost equipment and medical procedures, such as transplants, and even possibly to limit their availability to the nation's oldest citizens. Other proposals might involve substantially delaying government approval of new expensive technologies and transplants, and barring extension of publicly funded health insurance or tax benefits into these newer areas. Another approach might be to make explicit, through eligibility policies for government welfare programs, that children are primarily responsible for the long-term care of their elderly parents.
These are my speculations about what will be the nation's health policy issues in the mid-1990s. By its very nature, future forecasting is inherently gloomy in that it does not take into account attempts of responsible groups to ameliorate national problems before they become more serious. What is clear, however, is that a combination of improvements in medical science and treatment practices, more and better trained professionals, changing demographic trends, and a sharp shift in the nation's economic and political direction are leading to a period of accelerated change in the nation's health care arrangements—perhaps the most significant in the post-World War II period. My hope is that by drawing attention to some of these disparate developments and suggesting their potential impact on U.S. health care, some of the nation's private and public decisionmakers might be prompted to take actions today that could lead to a better situation than the forecasts now predict. ⇑
NOTES:
The views expressed in this article are those of the author, and no official endorsement by the Robert Wood Johnson Foundation is intended or should be inferred. This article is partially drawn from a book chapter by the author entitled “Policy Choices for the 1990s: An Uncertain Look into America's Future,” in The U.S. Health Care System: A Look to the 1990s, ed. Eli Ginzberg (Totowa, N.J.: Rowman & Allanheld, 1985), 5–27.
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Robert J. Blendon received an M.B.A. from the University of Chicago in 1966 and an Sc.D. from Johns Hopkins University in health services administration and public policy in 1967. He has served in the Department of Health, Education and Welfare and on the dean's staff at Johns Hopkins School of Medicine, and has taught at that university's School of Public Health. In addition to his current position at the Robert Wood Johnson Foundation, an independent philanthropic organization in the health care field, Blendon is also on the part-time faculty ofPrinceton University's Woodrow Wilson School of Public and International Affairs. He has written extensively on health policy.