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14
Health Care Reform:
Some Reflections on Technology
SUSAN BARTLETT FOOTE
Coverage and adoption decisions about medical technology fundamentally
affect the pace of innovation in medicine. The papers in this volume discuss how
these decisions are presently made by a variety of public and private payers. But
there is a broader context for those decisions. There are, for example, enormous
implications for medical technology in the current movement to reform the deliv-
ery of health care in the United States. Indeed, just as innovation is a dynamic
process, so too is the health policy environment. Health care reform was a major
issue throughout the course of the 1992 presidential campaign and President
Clinton has made health care reform a cornerstone of his administration's policy
agenda. This paper provides (1) a discussion of the legislative background for
reform, (2) a model for analyzing the implications of health care reform propos-
als on decisionmaking about medical technologies, and (3) some reflections on
medical technology policy.
LEGISLATIVE BACKGROUND
The legislative process over the last few years has provided an illuminating
lesson on how issues emerge on the national agenda. Although health policy
experts have long debated issues of access, cost, and quality, until recently com-
prehensive health care reform was only sporadically addressed in Congress.
True, there has been some activity in the Senate, chiefly on Medicare and Medic-
aid policy in the Finance Committee and on public health issues in the Labor and
Human Resources Committee. Similarly, in the House, the Ways and Means
Committee and the Energy and Commerce Committee have also addressed these
issues. But these efforts were discrete, relatively modest events.
193
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94
SUSAN BARTLETT FOOTE
From 1989 to 1990, a major breakthrough occurred. The bipartisan Pepper
Commission (named after its first chair, Representative Claude Pepper), recom-
mended legislation to ensure that all Americans had coverage for health care and
long term care. The Commission's final report, released in September of 1990,
made quite detailed recommendations about access issues, but gave few specifics
on how to finance its recommendations. Because of the flaws in identifying
financing mechanisms, the commissioners were divided in their support for the
recommendations (Pepper Commission, 1990~.
While Congress mulled over the problems of access and financing, health
care remained in the minds of the American public. The special election in
Pennsylvania to fill the Senate seat of the deceased Senator John Heinz con-
firmed that health care remained a pressing public concern. The success of
Democrat Harris Wofford, who ran a campaign focused on the need for health
care reform, convinced politicians that the issue of health care had to be ad-
dressed. A spate of legislative proposals quickly followed, joining many that
were already under consideration.
In response to the Wofford victory, a group of Senate Republicans quickly
introduced a reform package that a task force of their party had been discussing
for many months (S. 1936~. House Republicans produced a somewhat similar
proposal later in the summer (H.R. 53251.
There was considerable diversity among the Democratic health care reform
plans in Congress. Democratic bills ranged from a single-payer Canadian-style
system (Wellstone, S. 3207) to the Conservative Democratic Forum's managed
competition, market-based model (H.R. 5936~. Perhaps in consequence, few
plans drew more than a handful of cosponsors in either chamber. Even the
Democratic leadership proposal, commonly known as "pay-or-play" and drafted
by key Democratic leaders (Senators Edward Kennedy, George Mitchell, Jay
Rockefeller, Donald Riegle), failed to draw more than nine cosponsors (S. 12271.
The presidential candidates also weighed in. President Bush gave what was
billed as a major health address in the early spring of 1992, circulated a white
paper entitled "The President's Comprehensive Health Reform Program," which
contained his market-based reforms, and introduced some of his proposals in
legislative form soon thereafter (President's Program, 1992~. The Democratic
presidential nominee, Governor Bill Clinton, also presented a plan. In defining
fundamental reform, Mr. Clinton called for "an appropriate and revised govern-
mental role with a reliance on the private sector" (Clinton, 1992~.
Few of these early plans, however, whether Democratic or Republican, came
to terms with the intractable issue of financing. Not until June of 1992 did bills
with clear and explicit cost-containment appear. In the controversial Stark-
Gephart proposal, the Health Care Cost Reduction Act (H.R. 5502), a national
health budget (or global budget) would be established to control spending. States
could impose cost-containment programs if they came in under the projected
budget. Otherwise the federal government would set maximum rates for hospi
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HEALTH CARE REFORM: SOME REFLECTIONS ON TECHNOLOGY
195
tat, physician, pharmaceutical, and other services. In the same month, the Din-
gell-Waxman "Health Choice" plan was introduced. It proposed to control
spending by relying on overall limits on expenditure growth (or "inflation") that
would be overseen by a quasi-public (Federal Reserve-type) board with represen-
tation from consumers and providers (H.R. 5514~. Despite the rash of legislative
activity, no major health care reform passed in the 102nd Congress before it
adjourned in October of 1992. Why?
The Democratic majority in Congress remained deeply divided philosophi-
cally on how to create a reform proposal. Unable to pass comprehensive reform,
some Democrats resisted efforts to address specific problems in health care, such
as the small group insurance market. Although the Senate managed to pass the
bipartisan Bentsen-Durenberger bill to reform the insurance market for small
employers (S. 1872) twice, the proposal never emerged from the conference
committee.
President Clinton put health care reform at the top of his agenda during the
transition period following the election. His selection of First Lady Hillary
Rodham Clinton to supervise the effort symbolized his personal commitment to
reform. Throughout the spring and summer of 1993, hundreds of members of a
White House Task Force put together volumes of option papers for the adminis-
tration. By the fall, the president and his administration began to market his plan
in earnest. In addition to the president's proposal, the supporters of a Canadian-
style plan reintroduced their bill, and the conservative Democrats and moderate
Republicans supported market-based reform plans.
Immediately before the Christmas recess, a series of major bills was intro-
duced. Prominent among them was Clinton's Health Security Act (S. 1757),
introduced on November 22, 1993. Primary competitors included the Managed
Competition Act, introduced by Representatives Cooper and Grandy in the House
(H.R. 3222) and Senators Breaux and Durenberger in the Senate (S. 1579), and
the Senate Republican task force's Health Equity and Access Reform Today
(HEART) Act of 1993, led by John Chafee (S. 1770) and sponsored in the House
by Representative Thomas (H.R. 3704~. Nineteen ninety-four will be the year in
which these approaches are debated and voted upon.
AN ANALYTIC MODEL
The key issue that distinguishes various approaches to health care reform is
the role of government in the newly designed system. A public regulator model
concentrates health care policy decisions in the hands of government. These
policy decisions could include the setting and enforcing of global budgets, deter-
mining prices for services, and allocating buying responsibility to public agen-
cies.
The most extreme version of the public regulator model is a Canadian-style
system. In it, government becomes the single payer and every citizen is a partici
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196
Public regulator
(government)
SUSAN BARTLETT FOOTE
Private sector
- (market)
Canadian-style
single payer plans
Clinton plan
Managed competition
(bipartisan) plans
FIGURE 14-1 Health care reform spectrum: Government versus the market models.
The figure shows how the various health care plans discussed in the paper fall within the
range of public and private models.
pant in the public program. In contrast, the private regulator model relies on the
private sector to finance and deliver health care. Government retains two roles.
First, it sets the rules for the marketplace through such measures as insurance
reforms to guarantee policy issuance (e.g., elimination of experience rating) and
portability, mandated disclosure of information on cost and quality, and assis-
tance for individual purchasing decisions through the certification of private-
sector group purchasing arrangements.
Second, government can also guarantee financial access for those who can-
not afford to purchase health care. In these market-based proposals, government
provides vouchers or other forms of cash assistance and eligible individuals pur-
chase health plans through purchasing groups. The Jackson Hole Group, a loose
collection of health policy experts and health care providers, inspired the "man-
aged competition" model that is premised on this limited role for government
(Enthoven and Kronick, 19891.
The president's reform plan, which circulated in health policy circles in the
fall of 1993, tried to merge the market-based approach of managed competition
with some of the tools of government control. The bill included references to a
competitive marketplace, but also added global budgets and premium price con-
trols, state-run monopolistic purchasing groups (called health alliances), and reg-
ulatory powers in the hands of a National Health Board and the states.
IMPLICATIONS FOR MEDICAL TECHNOLOGY POLICY
In the early stages of the debate on reform, medical technology issues have
taken a back seat to system reform. This situation stems from the erroneous
premise that medical technology is separate from health care services. Technolo-
gy is often perceived as an independent, cost-raising feature, a problem that one
would turn to after the fundamental work of health care reform has been done.
But medical technology, of course, is not separate from health care: it is health
care. Health care reform plans must consider how the interrelationships of tech-
nology and the provision of health services will affect the form of the health care
system.
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HEALTH CARE REFORM: SOME REFLECTIONS ON TECHNOLOGY
197
At a minimum, the approach to medical technology must be consistent with
the overall philosophy of health care reform. Ideally, it will try to anticipate the
longer-term effects of policies affecting technology on the health care system as
a whole. For example, some supporters of a market-based model of health care
reform have assumed that a federal regulatory board should control technology.
This assumption epitomizes the erroneous view of technology as separate from
health care services and is furthermore inconsistent with a market approach. It is
hard to see how competition could thrive if government regulated all the tools of
the trade.
Some advocates of a government model also assume that a public regulator
will control most of the decisions made about health care services. Among these
decisions are when and how a technology becomes available and the price that
can be charged for it (Wellstone-McDermott American Health Security Act of
1993~. These approaches illustrate a strong distrust of the private sector, and that
attitude spills over into technology decisions at all levels.
The managed competition model will likely be the starting place for discus-
sions of technology policy in health care reform. Managed competition rests on a
careful mix of market forces and government direction. The challenge is to
design a system that ensures the proper balance between government and the
private sector. How can that balance be struck? The analysis is made easier by
using a categorization developed by Blumenthal in which medical technology
issues can be divided into three distinct categories: (1) knowledge development,
such as clinical trials, analyses of cost effectiveness, and quality of life assess-
ments, (2) knowledge processing, such as systems for gathering, validating, in-
terpreting, and disseminating information, and (3) decisionmaking, which in-
cludes questions about who has the power to make decisions on coverage and
payment for the use of a particular technology (Blumenthal, 1983~.
The roles of government and the private sector vary in each of these three
categories. For example, start first with the focus of this volume: coverage and
adoption decisionmaking. In a managed competition model, the health plans are
the appropriate locus of decisionmaking. Each health plan will determine which
specific procedures are appropriate to treat the conditions of individual enrollees.
However, plans must be able to articulate defensible, scientific principles for
their decision to exclude a new technology.
Health plans are in the best position to respond to consumers and their deci-
sions are more accessible to them. Decentralization allows for greater experi-
mentation and diversity, which will result in data that inform further develop-
ments and improvements. Skeptics may argue that the economic incentives in
health plans will lead to decisions to deny coverage (and save money) at the
expense of patients' health. In response, it can be argued that government, par-
ticularly when it is the payer, is in no position to be more generous. The experi-
ence of technology assessment for Medicare beneficiaries is a telling case in
point.
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198
SUSAN BARTLETT FOOTE
To a certain extent, then, one must decide who to trust-government or the
market a decision that divides the health care reform debate. How one answers
that question depends upon one's personal values and experience. Uwe Rein-
hardt (1989) has commented that, in general, Americans tend to trust the private
sector more than government and tend to forgive mistakes more readily when
they occur on the private side.
Even in market-based models, there remains a critical role for government in
technology policy. Government can play a role in assisting decisionmaking. The
National Health Board, or whatever central body is established, could provide a
safety valve for challenges to coverage decisions made by private sector health
plans. Thus, the board could issue explicit, uniform decisions based on scientif-
ic, expert judgments if there were disruptive and contentious variations from plan
to plan or if new, expensive, and highly beneficial technologies were being ex-
cluded on cost grounds alone.
Information is key to the success of any market-based managed competition
model. This requires knowledge development. The current public and private
efforts in technology assessment and effectiveness research the knowledge de-
velopment stage are too decentralized and disorganized to provide the informa-
tion that health care providers and patients need. When a practitioner seeks
information needed to make an important decision, most of the time the neces-
sary information is simply not available. We cannot improve the quality of care,
or potentially reduce the inappropriate use of services, unless we first generate
knowledge.
Government can play an important role in facilitating the development of
knowledge about health care technologies. It can fund and direct clinical trials,
identify areas where additional research is necessary, and coordinate public- and
private-sector cooperation. Many health care plans have developed sophisticated
technology assessment programs. These private-sector activities should be pro-
moted and supported. Unfortunately, to date the federal government's track
record in supporting technology assessment activities has been mixed. It has
generally been reluctant to invest in expenses associated with information devel-
opment. In fact, the politics of government's technology assessment efforts are
sobering (Foote, 1987; Garber, this volume).
Thus, medical technology policy in health care reform plans must include
efforts to reorganize the federal government's many disparate sources of know-
ledge development including the National Institutes of Health, the Food and
Drug Administration, the Agency for Health Care Policy and Research, the Na-
tional Center for Health Statistics, and the Office of Research and Demonstra-
tions at the Health Care Financing Administration.
Finally, government can also play a role in knowledge processing. Informa-
tion about the efficacy, effectiveness, and outcomes of health care services will
help improve decisionmaking at all levels. This activity would require a highly
sophisticated ability to acquire and analyze large databases. Government has
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HEALTH CARE REFORM: SOME REFLECTIONS ON TECHNOLOGY
199
demonstrated some expertise in this regard processing millions upon millions
of Medicare claims, for example. It has also undertaken new efforts to dissemi-
nate this information to providers and patients. It is essential that the government
maintains, and perhaps expands, its contribution to the planning and implementa-
tion of knowledge processing activities.
We must ensure that a dynamic and innovative medical technology industry
will continue to thrive no matter how the health care system changes. The
industry carrot thrive if we do not understand its contribution to the cost and the
quality of health care. We cannot ignore basic issues of technology coverage and
payment that are essential to the design of reform.
The design of health care tools and institutions will necessarily depend upon
the underlying philosophy of the health care reform plan that is adopted. It is
likely that a mix of government and pr~vate-sector markets will emerge. As we
move closer to adopting a reform plan, it is essential that we carefully consider
the desired formulation of this mix. In 1934, Lewis Mumford described the
challenge that we face today:
The gains of technics are never registered automatically in society; they require
equally adroit inventions and adaptations in politics; . . . the machine itself
makes no demands and holds out no promises: it is the human spirit that makes
demands and keeps promises.
We must be as adroit inventing political and economic structures as we have
been in producing technological gains.
REFERENCES
Blumenthal, D. 1983. Federal policy toward health care technology: The case of the
National Center. Milbank Memorial Fund (2uarterlylHealth and Society 61:58=
613.
Clinton, B. 1992. The Clinton health care plan. New England Journal of Medicine
327:80~806.
Enthoven, A., and Kronick, R. 1989. A consumer-choice plan for the 1990s: Universal
health insurance in a system designed to promote quality and economy. New En-
gland Journal of Medicine 320:29-37, 9~101.
Foote, S.B. 1987. Assessing medical technology assessment: Past, present and future.
The Milbank Quarterly 65:59-80.
Mumford, Lewis. 1934. Technics and Civilization. New York: Harcourt, Brace,
lovanovich.
Reinhardt, U. 1989. Respondent: What can Americans learn from Europeans? Health
Care Financial Review (annual supplement): 97-104.
The Pepper Commission: U.S. Bipartisan Commission on Comprehensive Health Care.
1990. A Callfor Action: Final Report. Washington, D.C.: Government Printing
Office.
The President's Comprehensive Reform Program. February 6, 1992.
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Representative terms from entire chapter:
medical technology
