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Part ITI Managing Care in the United Kingdom and Canada

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F riority S e1d n g in a Tic e dab use d S y stc m Alan Williams The British beaMb care system is of prickly interest because ~ teas, Tom Us inception iD 1948, sought to reconcUe widespread access to beaRb cage wi1b ~ tight, centraHy controlled budget Before considering bow weH or iD ~ teas performed in that respect ceded key Azures need lo be home . . ID mlDO: 1. The N~iona1 Heabb Service (NBS) is commuted to providing care according to need, Dot according to wilUngness or acuity to pay. It Cows within ~ strong, but iU-deOned, eg~it~ian ideology. 2. The NBS provides Tout go percent of aH beaMb cage far Bdtisb citizens; the phv~e sector concentrates mainly on providing elective sur- gery for those who wish to avoid NBS mating lists and for those Boo Tab to improve on 1be general level of hospital amenides. Pdv~e treatment is provided in large paw by doctors Boo spend most of tube time in the OHS. 3. The NHS teas a centraHy determined, 1~-ADanced, heed annual budget, ~bicb is disidbuted geogr~bicaMy 10 regional (=d distinct) beabb ~tbobties. Dis~ibudon Chows ~ formula based mosUy on (weigbted) population but to some extent also on geogr~bic visions in depdv~ion and mo~idity/monabty rues. These beabb ~tbobties Be responsible far the provision of ~1 the beabb cage in tube Lea and for coor~naUng the provision of do~cHi~y support services limb local ~tbobties (see below).

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so ALAN WILLIAMS 4. The total NHS budget is approximately 6 percent of the gross na- tional product (GNP), of which approximately 60 percent is spent on hospi- tal services. Local authorities, who are formally outside this centrally tax- financed system, provide many health-related services for the domiciliary support of ill and disabled people (services that are very important in the care of the elderly and certain other vulnerable groups). 5. Apart from accidents and emergencies, the patient's first point of contact is always with the general practitioner (GP), who acts as the "gate- keeper" for the system. Every patient is registered with a GP (in principle if not in practice). Under the NHS system, there are small charges for primary care prescriptions, somewhat larger charges for dental and oph- thalmic services, and no charges for hospital care. Thus, billing is totally absent, which significantly reduces both the system's administrative over- head and its knowledge of how much things cost. NHS hospital doctors are salaried employees, and GPs are independent contractors. most of whoop. _ _ 1 _ ~ _ ~ . . ~ . ~ _ . salaries come from capitation fees paid for the patients registered with them. Fee-for-service charges are rare; they are used only when it is desirable to encourage specific activities (such as home visits or night calls). 6. Political support for this system is strong among the public and among health care providers. The system, however, is widely believed to be underfunded and forced to make painful decisions that it is thought could be avoided if funding could be increased. PROBLEMS OF THE BRITISH HEALTH CARE SYSTEM It will be obvious from the above that the British health care system has no problem with cost containment, if by that is meant controlling total costs. Instead, two other issues predominate: (1) is the right amount being spent on health care? and (2) is good value being received for the money that is spent? The present state of knowledge about the marginal benefits of health care spending precludes an accurate answer to the first question. The second question is more interesting, and most of this paper will be devoted to addressing it and exploring its ramifications. The broad response of most observers to this question is that surprisingly good results are achieved, considering how little is put into the system. Others might argue, this author among them, that the results are good largely because so little is put in. Before considering the way the system works, some general observa- tions are in order about optimization subject to constraints (i.e., about the discipline of economics). The resources devoted to health care must be diverted from other valuable uses; therefore, it is not rational to extend health care provision to the point where all the good that could be done is being done. The system should stop providing health care when the extra health benefit to be gained is of approximately the same value as whatever has been given up to provide the extra resources for health care. This

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PRIORITY SETTING IN A NEEDS-BASED SYSTEM 81 principle demands that health care alternatives be ranked in order of cost- effectiveness; in a system with a fixed budget, the choosing of which ser- vices to fund proceeds by starting at the top of the list and working down it until the point in this priority ordering at which the money runs out. Once the system's budget level is set, the optimization problem is one of estab- lishing (and implementing) priorities in cost-effectiveness terms. It is here that this paper's first background point becomes crucial. In a private health care system that seeks profitability (or at least to break even), optimization requires that alternatives be subjected to financial appraisal- that is, to systematic analysis of the revenue and expenditure implications of each alternative. The precise pattern of the rationing that ensues will be the result of (somebody's) willingness and ability to meet (at least) the estimated expenditures. Here, the "somebody" may be an individual, an insurer, a charity or foundation, or a public agency, and they may or may not be in a position to judge the likely effectiveness of treatment when deciding how much to pay. In fact, the multiplicity of actors in this system is likely to lead to great variability in such judgments. But in a public system that has explicitly rejected willingness and ability to pay as a ration- ing device, and that has its revenue fixed according to the population for which it is responsible (rather than according to what it does for them), optimization needs to be informed by economic appraisal. That is, it should be guided by systematic analysis of the benefit and cost implications of alternatives; rationing thus will be guided by (somebody's) assessment of a person's ability to benefit (i.e., by "need" for treatment) in relation to the costs (which will be borne by the citizenry at large). In practice, these economic appraisals have unfortunately limited their consideration of cost implications to the implications for the NHS budget (because that is the constraint uppermost in people's minds), and in practice, the "somebody" who assesses need, at both the clinical and community levels, has for the most part been a doctor. To do this job properly, doctors should know not only about the effectiveness (in outcome terms) of the treatments at their disposal, and how their patients value these various outcomes, but also about the benefits of all the other treatments the system provides for other patients, and how benefits to one patient are to be weighed against benefits to another. Needless to say, no one has this information, but doctors be- lieve that because of their clinical experience they are best placed to fill the void. Consequently, it has been their priorities that have driven the system (with little regard to costs). Concern about costs has been left to the man- agers in the health authorities or in the hospitals, who, because they had little or no influence over (or even knowledge about) the priorities that were being applied by doctors in the use of the system's capacity, found themselves having to make rather arbitrary decisions about increasing or decreasing that capacity, in order to balance their predetermined (fixed) budgets.

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82 ALAN WILLIAMS The gatekeeper role mentioned in point number 5 at the beginning of this chapter requires the GP to be the initial "needs-assessor" (once the patient has decided that he or she "needs" to see a doctor, i.e., that he or she might benefit from such an encounter). If the GP refers the patient to a hospital doctor, a second needs assessment takes place, and at this point an important conflict of interest manifests itself. Can the doctor simultaneous- ly act as the patient's agent and the system's agent? Or, to put the point differently, should the doctor be expected to mediate the conflict between the interests of the citizen-as-taxpayer (in keeping costs down) and the interests of the citizen-as-patient (in getting the best possible "free" care)? Can he or she do so evenhandedly, when the citizen-as-patient is sitting there and the citizen-as-taxpayer is vicariously represented only by a busy, somewhat remote manager who is rather detached from the pressures of clinical work and probably located in a different building? Although the majority of British doctors seem comfortable with this role most of the time, every now and again a protest is heard; occasionally, a doctor asserts that it is his role to do everything he can for the patient in front of him, no matter what the cost, and that that is what he proposes to do, because for him to do anything else would be unethical. A brief excursion into medical ethics seems called for here. Put suc- cinctly, medical ethics require a doctor to do no harm, to preserve life, to alleviate suffering, to respect the autonomy of the patient, to tell the truth, and to deal fairly with patients. It is accepted that these principles often conflict and that one of the skills required of doctors is to exercise appropri- ate judgment as to where to strike a compromise between them in any particular clinical situation. The injunction to deal fairly with patients differs from the others in that it requires a comparison to be made between what is done for one person and what is done for another. In a regime of fixed budgets, to offer a treatment to one person, regardless of the cost of that treatment, implies that no account is to be paid to the inescapable consequence that some other patients will be denied treatment, and that those sacrifices by others will be commensurate with the costs that are being disregarded. This approach is not consistent with "dealing fairly" with patients, which, at the very least, requires that the needs of other potential patients be weighed in the balance of treatment decisions. Thus, the argument that it is unethical for doctors to play the gatekeeper role is untenable (which is not to deny that the role might actually be played in an unethical way by some doctors). Let us return to the main theme, however, which is the setting of prior- ities in a needs-driven system. As will be evident from the foregoing, need is defined as the capacity to benefit (people cannot need something that is of no benefit to them). But the capacity to benefit from any health care activity varies (among treatments, among patients, and even among practi ~ _1_. 1 rat, r

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PRIORITY SE1TINGINA NEEDS-BASED SYSTEM 83 tioners) and might be so small in relation to its costs as not to be worth providing. In other words, needs must be prioritized, and some will, inevi- tably and quite properly, remain unmet. Thus, if the people on waiting lists are those whose capacity to benefit from treatment is smaller than those who are not kept waiting, this constitutes evidence that the system is work- ing rationally (not that it has failed nor that it needs more money, for even with more money there would still be marginal cases on waiting lists). A more legitimate cause for concern would arise if those on waiting lists would benefit more from early treatment than many of the people who were not being forced to wait. The general point remains, however: the mere existence of waiting lists, or their size, or even the length of the wait, is not important. What is important is the size of the benefits that are being denied to those who are waiting, compared with what other people are receiving that is, a comparison of needs. It is necessary to determine how benefits are to be measured in a need- driven system. The first factor to keep in mind is that what people want is not treatment per se but improved health. Improved health means the ex- tension of one's life expectancy or a better quality of life, or both. Because each is valued, people may be willing to trade off one against the other. Health-related quality of life is judged by examining such characteristics as mobility, self-care, pain, distress, and ability to perform normal, accus- tomed social (including work) roles. Measuring the benefits of treatment requires estimates of the effect of treatment on these various characteristics of health, which, in principle, are encapsulated in the concept of the quali- ty-adjusted life year (or QALY). Yet disappointingly little is known in these terms about the health benefits to be derived from most treatment for most people. So at the very heart of the priority-setting process is a great information void, which renders the system vulnerable to priority setting by less appropriate means. The recent discovery and promotion of outcomes research is a belated response to this information void. THE "REFORMED" BRITISH EIEALTH CARE SYSTEM On All Fools Day 1991, the reforms of the NHS that had been instituted by the Thatcher government went into effect. Their principal feature is the separation of the demand side of the market for health care from the supply side. On the supply side (the providers) are the hospitals, the primary care doctors, and the community services. On the demand side (the purchasers) are the health authorities and those GPs who have been permitted to become budget-holders.) There are some obvious anomalies here, such as the am iThis means that certain large group practices will receive part of the hospital budget, which allows their GPs to purchase certain hospital services on behalf of their patients.

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84 ALAN WILLIAMS biguous role of primary care doctors and the designation of community services as providers when they are not really part of the system at all but are run by local authorities. (Despite recommendations that the government received to expand and strengthen the community care system, Mrs. Thatch- er prevaricated in regard to this because she could not agree to any strength- ening of the role of local government in Britain.) There are also some less obvious anomalies- for example, certain hospitals (and a few other provid- ers) enjoy a special status as self-governing trusts, which exempts them from some of the restrictions (e.g., on pay and conditions of staff, access to capital, etc.) placed on hospitals that remain within the main NHS system. Generally, however, the idea is that providers will compete with each other for contracts drawn up by the purchasers, who will choose the provider that offers the best deal. Each purchaser's task is to assess the need of the particular population for which it is responsible, set performance criteria for potential providers (which should relate to quality as well as quantity), and evaluate the bids against policy objectives and budget constraints. Certain services (e.g., accident and emergency) must be provided locally, but others (especially elective surgery) might be "bought in" from hospitals outside the geograph- ic boundaries of the purchasing health authority. Clearly, this kind of competition is more viable in large urban areas than in more sparsely populated areas, and it depends on the providers' not forming informal cartels. More crucially, however, it depends on the ability of purchasers to specify the content of contracts in the manner required, which leads one to the information void mentioned earlier. If need means capacity to benefit, purchasers must know what is beneficial and what is not, and just how beneficial the beneficial things are in relation to the costs. They must also monitor performance in outcome (rather than process) terms, a task of no small difficulty, given a situation in which even medical audits directed at technical competence have been voluntary, nonthreatening edu- cational activities pursued only by enthusiasts who set their own local stan- dards and operate in a rather informal (and highly secretive) manner. Even now the official position is that audits are to be strictly professional affairs in which managers are not to be told anything that might enable them to identify individuals who are performing poorly. It is likely to take at least a decade to generate a data base that will enable any of these changes to operate in a manner that is even passably systematic, and for the first few years, even with determination and goodwill, the reforms are unlikely to move beyond the level of ritual. In the new system, the rationing or priority-setting role is vested firmly in the purchasers, but to make their chosen priorities effective they will have to specify the case-mix of each hospital specialty and check on patient selection criteria and quality of performance. It is not clear quite how this

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PRIORITY SE~ITING IN A NEEDS-BASED SYSTEM 85 is going to happen if the rhetoric surrounding the protection of clinical freedom and the voluntary and confidential nature of medical audits is to be taken seriously. Making doctors budget-holders may force them to think in terms of priorities and cost-effectiveness, but it will not necessarily lead them to adopt the particular priorities, or notions of effectiveness, held by the health authorities. IMPLICATIONS FOR TECHNOLOGICAL ADVANCE IN MEDICINE In principle, it is clear that what makes a technological innovation a technological advance is that it proves to be beneficial in cost-per-QALY terms. To determine whether an innovation can make such a leap in status, it should be introduced initially in a controlled manner in which it is used only in the context of a carefully designed evaluative trial that is conducted by independent researchers, with full disclosure of data, and financed out- side the main therapeutic budget of the health service. Only when such a test has been passed should the innovation move into the armamentarium of practicing clinicians, and possibly even then only with restrictions on its use. But it is necessary here to distinguish between those innovations that require the use of (expensive) specialized resources, be they drugs, devices, or people, and those that can easily be accommodated within the existing resources for everyday clinical activities. In the latter case, there are few effective sanctions that can be applied at a managerial level to enforce independent evaluation, and the only early indicator that something differ- ent is happening may be a change in patient selection, as an interested clinician seeks more cases on whom to practice the innovation. In the British system, this is most likely to be noticed if the waiting lists for certain conditions lengthen because these cases have been squeezed out to make room for the innovative ones. Health authorities have learned, when new appointments are made, to monitor as closely as possible the likely implications of clinicians' research interests. Even if formal evaluation could be enforced prior to general dissemina- tion of an innovative practice, there are some obvious disadvantages, main- ly to do with delay. It may take quite a while to establish rigorously a clear gain to patients, and even longer to be sure that there are no adverse effects over the longer term. Given the variety and complexity of manufacturers' pricing policies, it may not be easy to extrapolate from the cost data in the trial to the costs that are likely to be faced when the innovation becomes more widely disseminated. Indeed, if it is known that a particular cost- effectiveness ratio has been established by purchasers as the cutoff point between what can be afforded and what cannot, manufacturers may well use

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86 ALAN WILLIAMS the results of the trial to price the technology at a level that is as close to that ratio as possible, even though the true cost of producing it is much lower. An additional problem common to all trials is that the results ob- tained by well-disciplined practitioners observing punctiliously the protocol of a scientific trial may not be replicated when the technology is being used in the "real world" of clinical practice. Nevertheless, the system does have to move in the direction of earlier, more formal cost-effectiveness analysis of emerging new technologies. One sign that this has already been accepted is the current burgeoning interest of the drug companies in quality of life measurement and cost-effectiveness analysis. Inevitably, however, their interest is more strongly motivated by marketing considerations than by a desire to improve the efficiency of the health care system or to enhance the methodology of cost-effectiveness analysis, although both of those benefi- cial side effects may follow incidentally. The increasing pressure for earlier and more formal economic appraisal has come from dissatisfaction with the existing situation. Health authorities see themselves confronting collusive activity among manufacturers, practi- tioners, and patients, which prevents or delays systematic evaluation and leads to the weakly controlled dissemination of well-marketed but poorly evaluated new technologies. Manufacturers encourage and exploit the de- sire of practitioners to improve their performance by offering something that helps them resolve some diagnostic, monitoring, or therapeutic difficul- ty of which they are acutely aware, given the current state of the art of medical practice in their particular field. In addition to the desire to help their patients, practitioners are motivated to pursue innovative technologies by the various professional "perks" associated with them, such as subsi- dized attendance at professional conferences in sometimes delightful loca- tions and personal association with published research findings. The pa- tients themselves can usually be induced to go along with the latest "advance" (especially if it has also been promoted in the media as the latest technolog- ical wonder). NHS qualms about the costs of, say, radiological equipment (which nowadays may include qualms about the associated operating ex- penses as well as about capital costs) can be overcome by "giving" the capacity to the service during the experimental phase. Unless it proves to be positively harmful, the technology becomes incorporated into routine practice in the experimental sites, and possibly elsewhere. through the in fluential grapevine of the conference circuit. ~1 ~ALA 1~__1~C _ _,1 ~. 1 ~ . . . . By the time the stage is l~i"~ll~U Wll~ll tI1~ ~leal~n au~norlly itself nas to pICK Up the costs, it will have become politically quite difficult to discontinue it on cost-effectiveness grounds, especially if the media can show a handful of people who have benefited dramatically from the innovation. The constraint of its fixed budget has adc; the DliLlbll bySt~l no~onous~y slow, compared with most countries of equivalent wealth, in diffusing expensive new technologies throughout the system. Yet that very system also offers opportunities, by virtue of its ._^,l~ ~ 1~ D~:~l ~3 ~

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PRIORITY SEATING IN A NEEDS-BASED SYSTEM 87 monopsonistic position within the United Kingdom, for guiding this diffu- sion in a purposeful way. Unfortunately, effective strategies by which to exploit these opportunities have yet to be developed. RATIONING HEALTH CARE: IS IT ETHICAL? This much-asked question is always puzzling because it is so oddly formulated. If by rationing is meant deciding who is to get something and who is to go without, then rationing, like death, is unavoidable. No one asks, is death ethical? Instead, practitioners do (and should) ask, when they have some influence over the situation, whether it is ethical to allow (or cause) someone to die in a particular manner at a particular time rather than in some other manner at some other time. So it should be with rationing. The appropriate question is whether it is ethical to impose a particular kind of rationing on a particular community at a particular time, as opposed to imposing some other kind of rationing on that community at that time. Before answering this question, it is necessary to examine the particular ideology that a community wishes to bring to bear on its health care system. Essentially two such ideologies are relevant in this context, the libertarian and the egalitarian. In the libertarian view, access to health care is part of the society's reward system, and as a general rule, people should be able to use their income and wealth to get more or better health care than their fellow citizens, should they so wish. In the egalitarian view, access to health care is every citizen's right (like access to the ballot box or to the courts of justice), and it ought not to be influenced by income or wealth. Each of these broad viewpoints is typically associated with a distinctive configuration of views on personal responsibility, social concern, freedom, and equality, as set out in Table 6-1. The ascendancy of either of these broad viewpoints would generate a distinctive health care system whose characteristics would be very different from those of a system shaped by the other viewpoint. A system shaped by the libertarian ideology would establish willingness and ability to pay as the determinants of access; this kind of access would be best accomplished through a market-oriented "private" system (provided such markets can be kept competitive). In an egalitarian system, equal opportunity of access for those in equal need would be the determining rule, and because this requires the establishment of a social hierarchy of need independent of who is pay- ing for the care, it would be best implemented through a system of public provision of care (provided the system can be kept responsive to social values and changing economic circumstances). Table 6-2 lists the essential characteristics of each kind of idealized system. Note that the success criterion to be applied to the egalitarian system is the level and distribution of health in the community.

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110 MORRIS L. BARER AND ROBERT G. EVANS years to match the growing supply of physicians (Barer and Evans, 1986). Because these two forms of capital are complementary, this asymmetry creates continuous political pressure through physician claims of system underfunding, "shortages," and "waiting lists." The Canadian centralized process of capital approval, however, has Because limited the diffusion of diagnostic and therapeutic technology. physicians cannot generally receive lump-sum or fee-based funding for cap- ital acquisitions, much of Canada's high-tech capacity is restricted to public hospitals. In turn, all hospitals in each province must go through provin- cial, and often regional, approval processes that provide at least the poten- tial for rational planning of the acquisition of such equipment. The hospi- tal- and physician-based pressures to have every conceivable piece of new equipment at every hospital are similar to those in the United States. But the diffusion outcomes, the rates of utilization, and the implications for overall hospital costs are quite different in Canada (Detsky et al., 1983, 1990; Rublee, 1989~. Even when hospitals manage to raise local funds for a CT (computed tomography) scanner, for example, the provincial ministry of health is un- der no obligation to provide the necessary operating funds. In such a case, the hospital must reallocate monies from within its global operating budget or raise the operating funds as well. Taking the former route runs the risk of raising Questions within the mini~trv At how the h^~^it~1 fnllr`A the ~ _ A ~ ~ A ~ ~ ~ ~ ^ ~ ~ = all. t,-~ 1 V ~. Al ~ At 1 ~ necessary --slack In a budget about which it is constantly complaining ---a ~ I- = Although hospitals are raising money for capital expenditures with increas ing frequency, such situations remain the exception. As noted earlier, Canada plays a minor role (on a world scale) in the development of medical technological capital. Most of it simply arrives at the border. Canada has not controlled access to new knowledge in fact, how could it? Instead, in the manner described above, the macro approach to health care management controls the number of "embodiments" of that new knowledge in new machinery. To date, as suggested above, the record is mixed. How successful Canada has been depends on where one sits, and on one's perception of the value of more, relative to lesser amounts, of different types of health care capital. Some American observers find much to envy in the Canadian approach (Marmor et al., 1990~. Others argue that the limitations on the availability of new high tech capital in Canada are a serious drawback to the Canadian system; to support their contention, these observers point to the alleged flow of Canadians in search of high-tech interventions south of the border or to long waiting lists for high-tech inter- ventions. No one suggests that the management process is perfect (Iglehart, 1990~. Every health care system is a dynamic set of solutions to the continu- ing emergence of a series of connected and complex problems. The choice of a health care management approach is a choice among alternative sets. . . ~

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MANAGING CAPITAL, CAPACITY, AND COSTS IN CANADA 111 FROM MACRO- TO MICROMANAGEMENT AND BACK AGAIN? Largely absent until recently within this macromanaged system has been micro- or clinical management. Provincial ministries of health generally have been more or less content to manage overall costs and the allocation of funds. Although decisions have been made about the availability and loca- tion of new technology, those decisions have been based more on financial and political factors than on effectiveness or efficiency evidence. There has been virtually nothing that looks or feels like "managed care," as it is understood in the United States. Whether this is better or worse than other alternatives, and whether Canada should (as it appears now to be doing) put more energy into micro- management initiatives (e.g., technology evaluation, continuing competence programs for physicians), depends on the goals of technology and system management. New technologies offer a variety of cost and outcome possi- bilities, but there are few instances in which information on these possibili- ties is known in advance of application. For the rest, policymakers must attempt to acquire it after the technologies are put into use, all the while hoping that they (and the population to which they are accountable) do not get too badly "burned" while the evidence accumulates. (Of course, in many cases the evidence never accumulates, but management decisions must still be made.) Interventions (including any new approach to clinical diagnosis or ther- apy) may have one of several effects: a. reduce health care costs while improving or leaving unaltered the health status of recipient patients; b. increase health care costs but produce substantial and unequivocal improvements in the functional capabilities of recipients; c. increase health care costs and produce small, positive, often diffi- cult-to-measure increments in the health status of some segments of the patient population;l or d. whatever their costs, produce no or negative effects on health sta tus. Health care managers in any system should welcome all possible occurrences of type (a) interventions. The management of type (b) technologies can be assisted by technology evaluation, but care must be taken in generalizing 0Welch has labeled these the "epsilon effects." 1lThe vendors of services, however, are often less supportive; as emphasized earlier, re- duced costs translate into reduced incomes for some vendors. If these vendors are in a position to insist that absence of harm be proven to their satisfaction before the new technology is introduced, type (a) changes may be slow in coming.

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112 MORRIS L. BARER AND ROBERT G. EVANS results from one setting to another, let alone across countries. Furthermore, many evaluations are themselves quite costly. The primary problems of health care system management do not, how- ever, come from type (a) and (b) interventions. Most of the micromanage- ment (and research) efforts are intended to identify and eliminate type (d) technologies indeed, they have no place in any health care system. The great danger in this approach is that a single-minded preoccupation with type (d) interventions may skew the application of management energy out of all proportion to their relative importance. Category (c) may be more important quantitatively than the other three categories combined. More- over, clinical ingenuity and technological progress are likely to ensure a growing stream of such interventions (Wennberg, 1990~. Although category (c) interventions produce small benefits for individ- ual patients, collectively, the high costs of the health gains they offer may swamp the benefits. Heroic measures for the late-stage Alzheimer's disease patient come to mind as an example of a situation in which extremely costly interventions may extend life for a few hours, days, or even weeks (Calla- han, 1987~. Most people, if they were given the choice at earlier stages in their lives, would choose a different process for the final stage of life.12 But a person may not have that choice, because new technologies continue to make more things possible and because they are there they will be used. The problem with many category (c) interventions is that the ethical imperatives within the health care sector malice it exceedingly difficult, if not impossible, to make choices against such "epsilon interventions." Cost- effectiveness evidence is unlikely to be available to the management pro- cess, because many of these everyday interventions are not individually important enough to warrant the use of limited evaluation research resources. The only practical way to reduce the occurrence of category (c) interven- tions is to reduce the capital and capacity that makes them possible. How does Canada manage category (c) and (d) interventions? There seems to be little doubt that Canada lags behind the United States in identi- fying category (d) technologies. As noted earlier, the macromanagement approach has provided few management incentives, and in fact powerful political disincentives, to look over the clinician's shoulder. Some evi- dence suggests that Canada has better addressed the epsilon problem within 12There are, in fact, two conceptually distinct issues here. Life extension per se does not necessarily represent improvement in health status. The person concerned might feel, and genuinely be, "better off dead." An intervention that appears to belong in category (c) when measured only by life expectancy may actually fall into class (d). However, even for "authen- tic" class (c) interventions, the relation of benefit to cost may be such that a representative individual, looking forward in life, might reasonably judge that he or she would prefer to forego the possibility of such interventions.

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MANAGING CAPITAL, CAPACITY, AND COSTS IN CANADA 113 the hospital sector than has the United States (Detsky et al., 1983, 1990; Barer and Evans, 1986; Anderson et al., 1989~. But it may be less success- ful in other areas- for example, by providing more physician services for and institutional care of the elderly. As for high-technology diagnostic equipment, Canada's approach of "controlled technological diffusion" has. at least in relation to the United States, controlled technological diffusion. The jury is still out, however, on whether this has made Canadians better or worse off than their better-endowed American neighbors (Evans et al., 1991~. The American managed care approach to category (d) interventions is able to muster political and financial support because it is identifying and promoting the elimination of unequivocally "bad buys." In comparison, the Canadian macromanagement approach may be coming under increasing po- litical pressure as the social consensus on which it rests is threatened by the asymmetry of information dissemination to the public. Much of what Cana- dian patients (like their American counterparts) learn about the possible benefits of interventions comes from their vendors, for whom doing better means doing more. The predictable result is a growing public perception of an underfunded health care system, bled white by continual financial cut- backs. There is no informational counterpart to the provincial financial and managerial roles. Provincial ministries of health are loath to become in- volved in an organized effort to counter the claims of vendors because they fear that they cannot possibly succeed-that they will be perceived as sim- ply projecting a message consistent with their responsibility to control costs, without much regard for outcomes. The research and policy analysis com- munity, which might be expected to assume this role, is too small and, more fundamentally, with few exceptions does not yet see this as a legitimate or appropriate task (Lomas, 1990~. At the same time, the number of "promotional" voices continues to grow far more rapidly than the population, and more rapidly than the real rate of economic growth of the country. Canada, as has been mentioned, has done little to manage its human health capital in a manner consistent with its approach to health care system management. Continued tight con- trol over hospital capacity and over medical care budgets, in the face of a rapidly expanding physician supply, offers very few possible outcomes. That of "loosening the public purse strings" seems unlikely and, on current evidence, unjustifiable. That of forcing physician incomes down, perhaps precipitously, would be politically hazardous, and not necessarily fair to the large majority of the profession. Yet those are the two stark options. They ensure a continuing climate of public conflict. There is, in fact, a third option, favored by many vendors. The constant pressure of the human capital who depend on an ever-expanding health care system for their own survival and prosperity frequently produces renewed

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14 MORRIS L. BARER AND ROBERT G. EVANS calls for the introduction of private-sector funding. As Iglehart (1990) noted recently, Canada is alone in the Western world in its "resistance to private funding." User fees, in various forms, are an idea that continues to surface, even in Canada. They are proposed regularly by the medical pro- fession, allegedly as a means of reducing cost pressures. In reality, they are seen by the profession as a means to increase expenditures, while reducing public cost pressures. Nor are vendors the only advocates of greater expenditures through direct access to patients' private resources. It appears that a growing num- ber of relatively well-off Canadians are becoming convinced by the ven- dors' arguments that public funding cannot or will not support ready access to first-class care for themselves and their families. They are realizing that a limited schedule of user fees will give them an advantage: preference for services, and thus first call on the public funds that will always form the backbone of any health care system.~3 In the end, the funds all come from the same source; thus far, Canadian governments have recognized this and stood by the principle of universal access on equal terms and conditions. Yet this, too, may be about to change. Recent federal legislation in Canada (Bill C-69) will dramatically reduce the federal contributions in- tended for provincial health care. The bill froze such contributions for a period of 2 years, and this freeze has recently been extended so that it will now be in place until 1995. The legislation was introduced and passed with surprisingly little fanfare or outcry, either from federal opposition parties or from the provinces, under the cover of a major (and continuing) constitu- tional crisis. Given historical, federal all-party support for the Canadian medical and hospital insurance programs, the relative silence from the op- position parties suggests that they have not yet fully recognized the poten- tial ramifications of the bill. The glue that holds the system together, that ensures adherence to a common set of principles by all provincial plans, is the federal fiscal role. As that erodes, as the contributions from the federal government become less important, provinces are more likely to go their own ways. In the end, it may be the federal government itself, rather than the medical profession, that drives the wedge of private funding into the door. In the process, however, it may destroy the whole system, a possibil- ity clearly recognized by the profession in its public opposition to Bill C- 69. In the view of these authors, this legislation represents a major threat to the Canadian system of financing health care, a threat perpetrated by a federal government increasingly seen by Canadians as slowly disembowel- ing Canada. The implications for the possibility of macromanagement of i3This statement includes the American system, in which the rhetoric of private funding obscures the major public role in subsidizing and regulating the "private" system.

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MANAGING CAPITAL, CAPACITY, AND COSTS IN CANADA 115 health care in Canada are not good. Nevertheless, whatever system (or country) emerges over the longer term, the need for such management will not disappear. THE FUTURE OF HEALTH CARE MANAGEMENT IN CANADA Despite these looming dark clouds, macromanagement is likely to con- tinue to dominate the Canadian health care economy for the foreseeable future. But nothing inherent in the Canadian approach guarantees efficien- cy or effectiveness in the use of health care resources. The outcome-of what gets done, to whom, where, by whom, with what complementary re- sources, and with what effects is not necessarily, or even likely to be, the outcome that one might observe if one were able "objectively" to rank all possible interventions and then allocate resources to them up to the current global expenditure ceilings. Macromanagement may be crucial to global cost control, but it is not sufficient to produce the patterns of care sought by micromanagement initiatives. Canada's record with macromanagement, if viewed from the perspec- tive of cost control, is quite good in comparison to the United States, but unimpressive in comparison to any other country. To a large extent, the current condition of the health care economy is a product of medical educa- tion and funding decisions (capital commitments) made in the late 1960s and early 1970s. The demographic projections on which those medical school enrollment decisions were based were made in the early 1960s; it has been known for nearly 20 years that they were grossly in error (too high by about 35 percent by 1991; Barer and Stoddart, 19911. But capital commit- ment is politically far easier than capital contraction. The incentives to encourage adjustment in the face of new demographic information simply were not in place. Macromanagement in Canada over the next decade may begin to look more like that in the United Kingdom, as budgeting and management re- sponsibilities are decentralized. But the challenges for smaller managerial units will be no less daunting than those presently faced by the centralized provincial authorities unless those authorities are willing at the same time to make some hard capital decisions that cannot be made locally. Yet what of micromanagement? It is at best misleading, at worst dis- honest, to promote the notion that micromanagement, if only there was enough of it, would achieve macrocontrol. As Wennberg (1990) has noted, "The inventive nature of the medical mind, the endless possibilities for plausible theories, and the urge all physicians feel to work for and be help- ful to their patients combine to make it impossible for outcomes research to keep up with the flow of new medical ideas" (p. 1204~. Grumbach and Bodenheimer (1990) describe this phenomenon as the "continual attempt

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116 MORRIS L. BARER AND ROBERT G. EVANS [by physicians] to extend the borders of the medical pasture" (p. 121). Micromanaged care will continue to change the shape and composition of the health care pie; it is unlikely, however, to have much effect on its size. In this, it seems remarkably (and depressingly) similar to basic medical research. In that sphere, as each "insulting" organism is identified and a clinical assault mounted, three others emerge.l4 Continued uncertainty about the specifics of appropriate care seems likely to hinder the effort for some time to come (Grumbach and Bodenheimer, 1990~. Clinical management in Canada is the object of increasing interest and effort, but resources are not being channeled into this arena because of a belief that it will replace the need for macromanagement. Rather, outcomes research, the development of clinical practice guidelines, clinical compe- tence assurance activities, and the like are seen in the Canadian context as tools for guiding resource allocation and organization within global bud- gets not as replacements for those budgets. No amount of micromanage- ment or outcomes research can tell a society how much of its scarce real resources should be devoted to health care. There will always be more inter- ventions that produce "epsilon effects" than can possibly be evaluated.l5 A commitment to maintaining a system of global budgets still leaves the problem of setting and controlling them. The present Canadian ap- proach of bilateral negotiation and, in the end and if necessary, imposition may not be sustainable politically in the absence of new policy directions for capital management. A reduction in the rate of production of new physicians seems an essential starting point. But even that simple step will require a new, heretofore elusive, national consensus. Physicians are a national resource, budgets a provincial responsibility. The elements push- ing stakeholders toward such a consensus may now be there: the present fiscal climate, a growing understanding of the broader (non-health-care) determinants of population health (Evans and Stoddart, 1990), the increas- ing range of questions raised by research on outcomes and procedural var~a- tions regarding the population benefits of ever-larger allocations of limited public funds to health care (Roos and Roos, 1990), and a common sense of political fatigue from the prospect of having to manage an ever-larger med- ical community. The hope is that these elements will finally come together 140pportunistic infections of AIDS patients offer the clearest example of this phenomenon. As the patient's T-cell count progressively declines, new infections gain a foothold. Increas- ing research efforts find new treatments for each, which are effective only until the count falls sufficiently to bring on the next infection. 15What is transpiring in the United States suggests that micromanagement is being saddled with a far more onerous burden. Outcomes research and managed care appear to be the replacement for the lost promise of, first, more regulation and, then, more competition (which was, in fact, more regulation in a different package) as vehicles of cost control.

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