1991 ^^T^TZ «^ ADVISORY COUNCILS ^iSOCIAL r^ WA SECURITY American Critical Issues in Health Care Delivery and Financing Policy December 1991 DC Washington, Critical Issues in American Health Care Delivery and Financing Policy A Report of the Advisory Council on Social Security December 1991 Washington, DC MEMBERSHIP OF THE 1991 ADVISORY COUNCIL ON SOCIAL SECURITY Chair Deborah Steelman, Esq. Attorney-at-Law Members G. Lawrence Atkins, Ph.D. The Honorable James R. Jones Director of Employee Benefit Policy Chairman and Chief Executive Winthrop, Stimson, Putnam & Officer Roberts American Stock Exchange Robert M. Ball John Meagher Former Commissioner of Parmer Social Security LeBoeuf, Lamb, Leiby & McRae Philip Briggs Paul H. O'Neill* Vice Chairman of the Board Chairman and Chief Executive Metropolitan Life Insurance Officer Company Alcoa Lonnie R. Bristow, M.D. Arthur L. Singleton AMA Board ofTrustees Consultant on Government Theodore Cooper, M.D. John J. Sweeney Chairman and Chief Executive International President Officer Service Employees International The Upjohn Company Union Professor John T. Dunlop Donald C. Wegmiller Harvard University President & Chief Executive Officer Health One Corporation Karen Ignagni Director Resigned, replaced by Department of Employee Benefits John Meagher. AFL-CIO si STAFF OF THE 1991 ADVISORY COUNCIL ON SOCIAL SECURITY Ann D. LaBelle, D.D.S. Executive Director Barbara Cooper Olga Nelson Adele Eley Mary Sue Olcott Robert Lagoyda Teddi Pensinger Arta Mahboubi Virginia Reno Susan V. McNally Nancy Row Brigitta M. Mullican Michael D. J. Zambonato Hi PREFACE The 1991 Advisory Council on Social Security was appointed by Health and Human Services Secretary Louis Sullivan in June 1989 to review the status of the Social Security and Medicare trust funds, as well as to study a range of health care issues, The Council convened 14 meetings, and to assist in the Council's deliberations, substantive, scholarly investigations were undertaken on a broad range ofhealth care issues. Issue analysis background materials were developed to brief the Council members for their meetings and were used as a starting point for debate. Council members were consistently impressed with the quality and focus of these documents, as well as the timeliness of their analysis. In the process, the Council decided that this valuable information would be published for the American public and those with particular interest in health care policy and reform. This report contains 18 analytical papers which served as background briefing documents for Council discussion and formulation of recommendations. The papers represent a comprehensive look at health care issues as they appear at the point in time during which the Council conducted its work. This report is divided into three parts: Access, Cost Containment, and Health Care Delivery in Other Countries. The Access section is further divided into three categories: Problems of Access to Care, Innovative Approaches to Expanding Access to Care, and Approaches for Financing Expansions in Access to Care. The Council thanks Judith Arnold, Jessica Miller, and David Kennell, who had principal roles in this project. Other contributors include Lisa Alecxih, Daniel V N. Mendelson, Kevin Coleman, Robert Atlas, Gary Young, Harry Sutton, Louis P. Garrison, Jennie Best, Mary Beth Fiske, Robert Friedland, Vera Kurlantzick, Robyn Stone, and Leigh Ann White. The Council also thanks David Cooper of the Office of the Assistant Secretary of Planning and Evaluation for his many helpful suggestions, as well as Council staffmembers Barbara Cooper, Robert Lagoyda, Susan V. McNally, Teddi Pensinger, Virginia Reno, and Michael Zambonato, without whose work this report could not have been completed. Ann D. LaBelle, D.D.S. Executive Director Advisory Council on Social Security vi TABLE OF CONTENTS EXECUTIVE SUMMARY 3 PART ONE: ACCESS 15 Problems of Access to Care 15 Profile of the Uninsured and Underinsured 17 Private Health Insurance 41 Public Health Insurance 73 The Role of Direct-Financed Services 103 The Problem of Long-Term Care 123 Innovative Approaches to Expanding Access to Care 139 Health Insurance Reform for Small Employers and High-Risk Individuals 141 Medicaid Expansion 59 1 The Role of Schools in Expanding Access to Care 175 State Initiatives to Expand Access to Care 193 Options for Financing Long-Term Care 211 Approaches for Financing Expansions in Access to Care 233 . . 1 PART TWO: COST CONTAINMENT 289 The Problem of Rising Health Care Costs 291 Controlling the Costs of Administration 319 Containing Health Care Costs Through Supply and Price Controls 335 Managed Care as a Cost-Containment Vehicle 355 Health Care Rationing 393 Cost Containment and Quality of Care 415 PART THREE: HEALTH CARE DELIVERY IN OTHER COUNTRIES 431 2