American Journal of Law & Medicine

Foreword: health care reform in the United States - the Presidential Task Force. (Implementing U.S. Health Care Reform)

The United States is on the verge of major health care reform. Hillary Rodham Clinton has led a cabinet-level task force, assisted by a large health policy committee. During the 1992 Presidential campaign, Bill Clinton rejected previous reform proposals that focused on a single-payer health insurance system modelled on the Canadian system(1) or on a system in which employers would be required to provide health insurance or pay into a fund for the uninsured ("pay or play").(2) Mr. Clinton proposed a system of "managed competition,"(3) first developed by the Jackson Hole group in the late 1970s.(4) The Presidential Task Force on Health Care Reform built on the concept of managed competition by combining it with global expenditure budgets.

Managed competition restructures the market for health care services into competing, prepaid health plans, giving providers built-in incentives to offer a comprehensive benefits package at the lowest cost.(5) It is a purchasing strategy that uses rules for competition to award more subscribers and revenues to those health plans that provide higher quality care at a lower Cost.(6)

Scholars have presented compelling critiques of the current health care system on philosophical,(7) public health,(8) and financial(9) grounds. The system has failed to provide universal access to health care with an equitable sharing of benefits and burdens. An estimated thirty-seven million people do not have health care coverage, with many more people inadequately covered.(10) Disparities in access to health care have been shown on grounds of socioeconomic status,(11) race and ethnicity,(12)and gender.(13)

The current system has also failed to control escalating health care costs relative to health care expenditures in other countries. The United States spent more than $666 billion on health care in 1990, approximately 12% of the nation's gross national product ("GNP").(14) Health care expenditures are projected to reach $1.6 trillion, between 16 and 18 percent of the gross domestic product ("GDP"), by the end of the decade if effective controls are not instituted.(15) These figures stand in stark contrast to the percentage of GNP that is devoted to health care in countries such as Canada, Germany, Great Britain, and Japan; they devote from 5.8% to 8.7% of their GNP to health care.(16)

Economists have repeatedly pointed to the reasons for escalating costs in the U.S. health care system: (1) high administrative costs fueled by bewildering numbers of third-party payers, ranging from government programs, such as Medicaid and Medicare, to not-for-profit and for-profit insurers, each with its own reimbursement policies, reviews, and paperwork;(17) (2) lack of global budgets at the federal, state, or local levels, and a lack of systematic policies for prudent allocation of resources based on the cost-effectiveness of treatments; (3) escalating use of advanced technology, such as imaging machines and bone marrow transplants, without systematic outcomes research that demonstrates its benefits relative to costs; and (4) few incentives for choosing lower-cost alternatives at the point of service because consumers seldom bear, or are even completely aware of, the actual costs of treatment.(18)

Failure to control health care costs has ethical as well as economic implications. amount that a nation can afford to spend on a wide range of services is limited. While resource allocation decisions are highly complex, as a general matter, imprudent allocation of health care resources can detract from resources for equally important services, such as housing, food, education, and social services.

While it is relatively easy to criticize the current health care system in the United States, constructing a new one is fraught with complexities and tradeoffs. The plan proposed by the Presidential Task Force should be measured against the two overarching goals that drove the reform efforts: providing high-quality care while controlling escalating costs, and providing universal access with an equitable sharing of benefits and burdens. This Essay focuses on the objectives of universal access, equity, justice, and choice. In particular, I inquire as to whether the design features of the new system are likely to fulfill these objectives.


As this Symposium went to press, President Clinton had not made the design decisions for health care reform. The exact specifications of the new health care system depend on the package that the President will send to Capitol Hill and the changes that Congress will make in the reform package. Some of the basic structures and organizing principles of the new system that are being considered by the President are already the subject of intense public scrutiny.

The design being considered would involve new relations between the federal government and the states, between the public and private sectors, and between health care financing and delivery.(19) The federal government would establish the parameters of the new system through national legislation, regulation, and guidelines, with implementation occurring principally at the state level. State flexibility would become a hallmark of the new system, with states having considerable leeway in implementation. Provided that states follow national parameters (as described below), they probably could establish very different kinds of health care systems, ranging from a single payer to managed competition within a budget. Given the strong preference among many health policy experts for a single-payer system,(20) it is extremely important to emphasize the states' authority to implement such a system. A large state, for example, might consider establishing a system of managed competition in urban areas, and a single-payer system in rural areas where effective competition is constrained by the small number of consumers and providers.

The new system will provide the right to health care to all citizens and lawful residents of the United States, all of whom will receive health security cards, transferrable to any area of the country. The card would also guarantee access to health care independent of employment or other eligibility criteria. Therefore, the new system will address the American public's concern for long-term security in health care -- coverage would be portable and move with the individual if he or she changed jobs or lived in another part of the country.

A. New System Structures

The basic structures being considered for the new system are the National Health Board, Health Alliances, and Accountable Health Plans ("AHPs"). Broadly speaking, the National Health Board would establish federal parameters for purchasing, providing, and accessing care in the new system; Health Alliances would, on behalf of consumers in their regions, contract with plans to provide high-quality, low-cost care within their budgets; and AHPs would provide care on a prepaid, per capita basis.

1. National Health Board

The National Health Board is likely to be a quasi-governmental authority (perhaps structurally similar to the Securities Exchange Commission), established at the federal level, with members appointed by the President. It would provide or implement federal standards for the overall design and operation of the new system. Its functions would include: determining a comprehensive benefits package that might change over time; establishing national, state, and/or Health Alliance budgets; setting rules for managed competition that protect the interests of consumers; setting rules and guidelines for the prudent allocation of resources, particularly for highly expensive treatments that provide little benefit; and establishing a uniform data reporting system to help measure the performance and quality of competing health plans. The National Health Board might establish panels on specialized areas, such as ethics, data protection (privacy), or public health.

2. Health Alliances

Health Alliances are conceived as aggressive purchasers of health plans on behalf of large numbers of consumers. At an earlier stage in Task Force deliberations and in relevant literature, they were referred to as Health Insurance Purchasing Cooperatives ("HIPCs") or Purchasing Cooperatives.(21) Health Alliances would act as collective purchasing agents for all consumers in the new system. Medicaid recipients will likely be "folded into" the new system. Large employers (with 1,000 or more employees) will probably be permitted to "opt out" of the Alliance system or act as their own Alliance.

At least one Health Alliance will operate in each state, with perhaps 100 Alliances throughout the country. Alliances would be subject to state regulation, perhaps organized as not-for-profit organizations. Alliances would not deliver care or directly pay providers. They would contract with a number of health plans, including Health Maintenance Organizations ("HMOs"), Preferred Provider Organizations ("PPOs"), and a traditional free-choice-of-provider indemnity plan. Since Health Alliances would control a dominant part of the market for health care services in their regions, they should be able to negotiate strongly for lower-cost, higher-quality services for consumers.

B. New System Financing

Financial contributions for the new system will be shared by employers, consumers, and government. The most likely option would be for each Health Alliance to set an annual, community-rated premium based on the least expensive plan in the region that provides a satisfactory standard of care ("the benchmark plan"), or on a weighted average of the least expensive plans. …

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