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Health Law and Policy
University of Illinois School of Law
Hyman, David A.

Hyman Health Law Fall 2016

Part 1- Framing the relationship between law and the health care system

Chapter 1: Law and the American Health Care System

I. Overview and Background

U.S. spends a lot on medical care- $2.5 trill per year, and 17% of GDP and likely to rise
U.S lacks a central organizing apparatus for delivering health care or an org plan to determine how it should be distributed
Current system- mix of private and public financing, fed and state regs, tax-exempt and for public institutrions and incentives to over- and under-spend alike
Tradeoffs between investements in reducing the cost of care, improving its uality and expanding access to health services.
Deficiencies: ineffective (too costly), does not provide adequate levels of quality of care (concerns over patient safety) and leaves too many without access to health care (the uninsured)
4 Conceptual paradigms- economic (standard competitive model), professional (professional self-regulatory norms), rights based (social justice) and institutional (comparative institutional analysis)- all of these compete for dominance in shaping how it is organized, financied and delivered
Three big issues are cost, quality and access

Ryan goes into the three on pgs 3-6

A. History

1. The Eras of Health Care Delivery

4 distinct eras: 1) professional dominance (1945-65) physicians control most aspects, largely private sector, minimal gov, self regulating, legal upholds physician control and defers, 2) Second era (1965- till mid 1980s)0 federal government gets involved as purchaser, provider and regulator, focuse on controlling spiraling health care costs and improving quality of care, 3) Third era (mid 1980’s to present) private sector increases role, managerial control and market forces, power struggle between physicians and managed care organizations (MCO’s), courts defer to political process, physician autonomy and control eroded, 4) consumer directed health care (CDHC) is now emerging, more responsibility on individual patients to control costs
Health Care market is changing- trend towards consolidation into larger health systems and insurers. Alignment of physicians and hospitals into large Accountable Care Organizations, heavily regulated industry, and new legal challenges
Clash between focus on individuals vs focus on serving patient populations

2. The Changing Institutional Setting of Health Care Delivery

Fee for Service- hospitals used to be solo practioners, under commercial insurance plans, patients were charged for each service they received from their physician, hospital or other provider.
Managed care (MCO) Managed Care Organization- advent of managed care, market-based alternative to a governmental national health insurance program

If health care providers are forced to assume responsibility for the costs of the services they perform they will be more likely to keep costs under control, while maintaining or improving the quality of care provided.
Patient pays monthly premium to MCO in return for a defined set of benefits regardless of whether the patient acutally used total more or less than the amount of the premium.
They use some cost- containment practices, aggressive utilization review (review of service physicians have provided), capitalization (where enrolled pays a fixed amount per month, which MCO calls a covered life in return for all of the care the enrollee needs); and preauthorization (requiring the MCO’s authorization before providing medical treatment)

So fee for service providers have an incentive to overuse health care services because more they use the more money they get. But MCO’s are trying to impose limits through the cost containment initiatives and the have federal law permitting selective contracting- MCO can contract with a network of physicians- supposed to result in higher quality of care at lower prices.
Types of models of MCO’s

HMO- Direcly employs the physicians who then deal exclusively with HMO members as patients
Group model HMO: organization contracts with multi-specialty physician group practies to provide care for its members, arrangement exclusive
Network model MCO- organization contracts with one or more indepent practice groups to provide care for its members, this arrangement is not exclusive so contracting physicians can treat patients who are not members of MCO
Independent practice association (IPA)- individual physicians form network to contract with MCO to provide care for plan members. Contracts with multiple MCO’s, patients need to coordinate care through a primary care organization (gatekeeper)
Preferred Provider Organization (PPO)- network of providers willing to accept discounted fee-for-service rates or capitalized payment arrangements, plan contracts with individual physicians, hospitals and other providers to deliver care for plan members at a reduced rate. You can seek care from anyone in the network of preferred providers and the plan will pay whatever costs physician orders at an agreed upon rate. Usually they negotiate low reimbursement rates and monitor utilization pattersn
Point of Service Plan (POS)- higher premiums, similar to IPA, they can also see physicians who are not part of the plan network, usually at additional financial cost to the member

Core concept between organizational forms is integration, want to tightly link. Look to integration- 1) payment mechanisms that encourage low cost, but high quality care – (a) capitation- provider paid a fixed fee per member/ per month to provide appropriate patient care regardless of volume or cost of that care (b) bundled payment arrangent- payor pays the physician or hospital a fixed amount to cover the entire episode of care.
Consumer Direct Health Care (CDHC)- (1) patients expected to exert greater control over spending decisions (2) patients expected to take responsibility of what treatment to seek and how much to receive

Risk shifted to the individual patients
Core component is High Deductible Health Plans (HDHP’s) and health savings accounts (HSA’s)
Goal is that a market driven system will result in lower costs and increased qualtify of care because patients more sensitive to costs
Also more availability of data- info would expose insurers and physicians so they can comparison shop
Slow growth- 13% shares of EE’s using HSA’s
But stand alone care centers are filling the primary care gap (Walgreens and Wal-Mart have minute clinics)
CDHC’s have a whole new set of legal challenges- what if a patient and doctor differ on a treatment decision,should the case be under contract or tort principles? do physicians have defenses like cavat emptor (assumption of risk)

Era of consolidation, integration and fragmentation-

Consolidation into larger health care systems and large health insurance companies, integration of health systems and physicians- align the delivery of health care to provide higher qualtity at lower cost
Accountable Care Organization (ACO)- attempt to provide health care through integrated health care networks that include physicians and health systems in collaborative relationships. Alignment with physicians- purchasing practices or contracting with larger multi-speciality groups.
Also health care systems are facing pressure to engage the community to improve populations health- not just health of individual patient

But for now the health care enterprise remains fragmented- both in delivery and financing- absence of unified decision maker. Fragmented- “medical care is not coordinated across treatment sites and providers, patients medical history is not readily available through common electronic platform and care is typically provided by a host of specailists each focused o

parate price

3) Extensive presence of nonprofit (charitable) health care providers and codes of professional ethics constraining the profit maximizing function.
4) Plus the good isn’t truly private, it serves to an extent as a public good plus society wants to limit negative externalities
5) Government has involvement- supply side- regulatory requirements like licensure and certificate of need programs fcreate barriers to entry, on demand side- govermnets substantial participant in Medicate, Medicaid and as a producer through VA and Indian Health Services influences price throughout history.

So much deviation- so a competitive environment wont be easy. BUT three economic questions (1) output- how much should be spent on medical services and what’s the best composition (2) production- what’s the best way of producing these services and (3) distribution- how should services be distributed to individuals. First two are efficiency and third is equity issue

2. Professional Norms

Questions of whether self regulation of phsyicians are good or bad.
Physicians are a constant (80% of medical spending and determine how much and on whom health care dollars may be spent), they are central to the health care enterprise and are responsible legall and ethically for patients well being, concerns over preserving patient trust.
Policy concern is that physicians are able to create a demand for their services because patients are in no position to contest treatment recommendations.
Conflict between individual’s health care needs and policy objectives to preserve scare resources for patient population

3. Social Justice

Social justice has to do with ensuring health care access to health care for all Americans. Based on the fundamental moral importance.
Two issues: 1) is health care a right? and 2) how do we apply distributive justice priniciples to health policy dilemmas.

Pg 48- 51

4. Comparative Institutional Analysis

How to examine more closely the interaction between various institutions both market and non-market
Which institution among imperfect alternatives is best suited to achieve the specified policy goals?- the market, the political process (legislative and regulatory) or the courts?
Each of these institutions leads to different responses. They approach health care issues in different ways. Health Policymakers look at how to allocate finite resources- economic terms to contain aggregate health care costs vs the courts whicha re concerned with protecting individual liberties and rights
Just like there is market failure there is government failure as well pg 52
In addition to government regulation- private sector oversight occurs- voluntary way to assure certain national standards are emt.
Demand side- HC is econ good just like any others, market imperfections call for targeted responses
Supply side- HC is too different from any other good, patients are not consumers have no cue what they need- they should not be shaping the market.