Challenges to U.S. Health Care Policy in the Early 21st Century

CHALLENGES TO U.S. HEALTH CARE POLICY IN THE EARLY 21ST CENTURY ELI GINZBERG* Introduction I welcomed the invitation of the editor oí Perspectives to write this article, the more so because the journal is published by the University of Chicago, which has been the home of the leading competitive market analysts of the 20th century. In contrast to the Chicago School of market economists, I start with the presumption that the distinguishing characteristic ofthe U.S. health care system during the past century—and probably its continuing most distinguishing feature early into the next century—is its "pluralism," in which government, the nonprofit sector, and the for-profit sector each continue to have important and ongoing roles in the ways in which health care services are produced, paid for, and distributed. The 20th-century Health Care Sector in Quick Review In 1910 Alexander Flexner's report sponsored by the Carnegie Foundation for the Advancement ofTeaching, a nonprofit institution, set the stage for the overhaul of the U.S. medical school curriculum, the vast majority of which schools were part of state or nonprofit universities [I]. The reforms were encouraged and approved by the American Medical Association (AMA) and the American College of Surgeons, which in turn were nonprofit organizations [2]. Several decades later, at the outbreak of World War II, a number of formative influences helped to shape and reshape the U.S. health care sector. The AMA used its power and influence to strengthen fee-for-service arrangements between patients seeking care from physicians and physicians The author wishes to acknowledge Panos Minogiannis for his assistance in developing the references to this article. *The Eisenhower Center for the Conservation of Human Resources, Columbia University, Mail Code 7740, 2960 Broadway, New York, NY 10027.© 1999 by The University of Chicago. All rights reserved. 0031-5982/99/4203-1104$01.00¦ectives in Biology and Medicine, 42, 3 ¦ Spring 1999 | 387 willing and able to provide such care. As part of their professional ethos, most physicians provided part-pay or charity care for patients who were unable to pay their prevailing fee. The acute care hospital sector consisted overwhelmingly of nonprofit community and teaching hospitals, in which the physician staffwas largely responsible for all professional services, with lay trustees focused on making sure that the hospital ended each fiscal year in the black. The AMA, as the principal voice of the medical profession, exercised major influence in association with the deans of the medical schools in controlling the numbers and characteristics of the students admitted, as well as in helping to structure the rules and regulations governing the licensing of their schools' graduates to practice medicine. Further, the AMA and its state associations exercised potent influence on both state legislatures and the federal government to assure the continuing dominance of the medical profession, which strongly opposed any initiatives aimed at altering the in-place fee-for-service system of medical practice. The extent of the AMA's dominance is underlined by the withholding attitudes of the medical leadership toward the early stages of the Blue Cross movement in the 1930s, a movement aimed at enabling middle- and upper-income Americans to insure themselves against costly hospital expenditures. The three decades between the implementation of the Flexner reforms and the entrance of the U.S. into World War II were characterized by a slow upgrading of modern medicine, especially hospital care, in a political climate in which the medical leadership called most of the shots, insuring that their professional interests and goals would continue to dominate. But the half century and more after the end of World War II has witnessed significant changes in the structure and functioning of U.S. health care, the most important developments of which include: • The arrival of the penicillin age, which vastly expanded the potentials of curative medicine. • The rapid growth of hospital insurance and latterly medical care insurance provided for the most part to the under-65 by employers as a fringe benefit. This practice has enjoyed an important federal tax benefit, currently estimated at $100 billion annually, the benefits of which accrue primarily to high-income employees [3]. • The federal government's Serviceman...