University of South Carolina School of Law
Professor Jacqueline Fox
Health Care Law: Outline
I. General Overview: Basic Structure and Central Themes
The Patient-Provider-Insurer Triangle
i. As patient/surrogate: This can be ourselves (patient) or our dependents, parents, spouses, etc. (surrogates). The person that is ultimately responsible for seeking out and making decisions about care.
ii. As purchaser: Note that the patient may not actually be paying directly for healthcare. May come from insurance (provided by government, parents, employer, etc.) or direct from the provider.
1. Hierarchy of single person providers of health care: doctor (e.g., general practitioner or specialist) nurse (physician assistant), EMT/paramedic, non-traditional/traditional healer (e.g., acupuncturist, priest), social worker, family member or friend (e.g., home health care), self-medication.
a. Note on Self-Medication:
i. This is always your first line of defense in health care: self-diagnosis and self-treatment or –medication. For example, if you skin your knee you put on a band-aid. If you have a headache you take aspirin.
ii. Importantly: This is a huge part of health care that we don’t know how to value.
b. Note on Hierarchy, generally:
i. As you move down the list you see decreasing degrees of formal, Western medical training. There are also varying degrees of regulation.
ii. There are also qualitative differences among individuals within categories.
2. Consider: Who is your provider?
a. Is she young (don’t go to the hospital in July, when all the new interns and residents arrive) or is she old (Many docs don’t keep up with medical literature as they practice, so their knowledge and techniques may be out of date)?
b. Is she a specialist, and why did she choose that specialty (was it because of need or for other, e.g., financial or availability, considerations)?
i. [See pg. 29, “Variations in Physician Practice”] ii. See also “Variation in Practice” section below.
ii. Institutional Providers:
a. Generally: large sector of health care (about 40% of health care dollars) and heavily (tax) subsidized.
b. Two Levels of Care: Inpatient (e.g., ER) and Outpatient (e.g., ambulatory care, clinics)
c. Two Kinds of Care: Emergency and Non-Emergency
d. Three Kinds of Hospitals: non-profit, government, for-profit.
i. Note that non-profit hospitals comprise roughly 2/3 of hospital beds AND
ii. Are generally divided into three sub-categories (academic hospitals, religious non-profit, and standard non-profit).
2. Specialty Hospitals
a. Generally: large trend in the last ten years where specialty groups spin off to start their own hospitals.
b. Possible Motivations: search for profit center, “cream-skimming” (take the best – least sick – patients away), or seeking to extract more money from the main hospital?
c. Examples: dialysis centers, radiology centers, cardiology centers, etc.
3. Nursing Homes
a. Distinct from Hospitals:
i. Insurance Coverage: most hospital care is covered by insurance, whereas most nursing home care requires separate long-term care insurance for coverage.
ii. Profit: Two thirds of all hospitals are not-for-profit (note: same for hospices), whereas two thirds of nursing homes are for profit.
b. Two Types of Nursing Homes:
i. Skilled Nursing Facilities (SNFs)
ii. Long-Term Care Facilities (LTCs)
1. Note: this is often what is traditionally thought of as a “nursing home.”
2. When the elderly get sick they frequently go from a hospital (acute care) to a SNF (for specialized, short-term treatment) and then to a LTC (or a “nursing home”).
4. Home Care / Assisted Living: Hire somebody to come into your home and provide care or assistance.
5. Hospice or Palliative Care: Non-therapeutic care. Only palliative care for patients with terminal conditions.
6. Other Institutions:
a. Schools, jails, or mental health. Note that provision of care might be mandatory in confinement settings.
b. Independent standing Clinics (“Minute Clinic”): provide ambulatory care in between doctor and hospital. Often adjunct institutions in Wal-Mart, CVS, etc.
c. Experimental Clinical Trials: Conducted by academic institutions, drug companies, etc. Providing some medical benefit but not exactly clear what or how much.
iii. Other-Medical Providers:
1. Examples: Drug or Pharmaceutical companies, diagnostic labs, device manufacturers, etc.
2. Legal Implications: Additional regulation by FDA (note: FDA only regulates marketing; not drug development or price) of providers in this category.
3. Insurance Implications: Insurance often contains separate pharmaceutical drug coverage, although not always (e.g., Medicare Part D).
4. Labor vs. Capital Providers: Like any other production process you need capital (raw materials) and labor (workers). These providers supply a large portion of capital (along with traditional medical institutions), in part by employing individual providers (labor; doctors and nurses).
iv. Non-Medical Providers:
a. Family, friend, self: This can go here or in the individual-medical provider category.
b. Public Sanitation: E.g., 80 years ago the engineer who installed a sewer system in a local town was doing more for your public health than your doctor.
c. Environmental Health Organizations: changes in Environmental Law and environmental quality have a huge impact on health.
d. Nutrition: important and underappreciated. Can be done at schools, home, work, through the government, etc. Can be thought of as improving internal environment. (See Lewontin).
e. Occupational Health: Safety of working environment as distinct from physical / external environment.
f. Education: A huge factor in explaining differences in health status between groups: education level.
i. Note on Correlation vs. Causation: Malani doesn’t know why education is correlated with better health. But even if it is purely a correlation effect, and not evidence of causation, this is still important.
2. Health as an End or Goal
a. Malani does not view health as an end in itself. There are other things, apart from health, that are worthy goals.
b. People repeatedly make tradeoffs between marginal increases in health and other goods (e.g., convenience, cost, quality of interaction, etc.). Sometimes health is a very important priority (e.g., when you’re feeling ill) but, often, it isn’t the top priority (e.g., choosing risky behavior – skiing, drug use, sex, etc.).
c. Query: What is an end in itself?
i. The economist (Malani) answers “utility,” which might roughly translate to happiness.
ii. (me) A more nuanced answer might include, for instance, principles of distributive justice.
d. Query: What is the end of the U.S. healthcare system?
i. Trick question. There is no single healthcare system in this country.
ii. Generally speaking, some groups / elements of the system view healthcare as an end in and of itself, while others don’t.
1. Incentives play an important role.
2. E.g., the number of children born on Dec. 31st (for tax purposes) or the paucity of weekend births (because Doctors are at home).
e. Query: So should we invest more resources in things other than healthcare, a sector that is already, roughly, 16-20% of our economy? Should there be more rationing of healthcare dollars in light of other important goals?
i. See section on healthcare reform.
ii. See Norm Daniels reading. (my take on Daniels:) Argues for rationing or limit setting by making rationing decisions explicit and promoting openness and accountability. Is this compatible with a certain bounded rationality problem: people don’t act as if healthcare is an end in itself but when asked, especially in certain situations (e.g., bedside, when sick) they claim that it is the end, and that rationing is not appropriate?
Outside of the Triangle:
i. Note that overlaid on the patient-provider-insurer triangle is another public policy structure. Individuals and organizations at this level are not directly providing care, but they are influencing the health care system are important to its understanding.
1. WHO: Worldwide healthcare policy setting.
2. NIH: may be involved in the development of technology or knowledge that other organizations commercialize and make available. Similarly with research university.
3. Advocacy Groups: lobbying legislatures (Federal and State) to reapportion healthcare spending. Influence media and public perceptions of healthcare.
The Role of the Government (in the patient-provider-insurer triangle):
i. As a patient:
1. May act as a surrogate (purchasing healthcare if you are a government employee, e.g., in the Army, etc.).
2. May also impact relationship between you and your surrogate (e.g., child or parent), you and your insurance provider, or you and your healthcare provider through various regulation, licensing, etc.
3. May restrict or regulate healthcare procedures / treatments (e.g., medical marijuana, abortion?, etc.) from existing, which limits self-medication options.
ii. As a provider: May be a direct provider (e.g., VA system, NIH research and development) but, more importantly, it regulates providers (e.g., doc licensing, Certificates of Need for hospitals, tax rules, FDA regulation of pharmaceuticals and medical devices, environmental and workplace regulations, etc.).
iii. As an insurer: Creates limitations on what insurance benefits can (or must) and cannot be provided. Note that this is also, in effect, a limitation on patients (availability of healthcare procedures).
iv. Result: The government impacts all three corners of the triangle, as well as the relationships along the legs of the triangle. And the government is also operating above the triangle, at the public policy layer as well.
v. Miscellaneous Notes:
1. In Medicaid the government acts as the insurer and patient (in the sense that it buys / pays for the insurance) at the same time.
2. The government’s role could certainly be different. It could, in theory, actually replace certain nodes. E.g., insurance as in the Canadian system or insurance and providers as in the U.K.
Central Analytic Themes of the Course (G
(me) Is there something counterintuitive that aims to solve a problem by restricting and discouraging the distribution of information?
b. (Malani) If the point of insurance is, ultimately, to respond to risk aversion, then we might want to encourage pooling (by limiting information) to reduce the risk of being adversely selected against. Even if we could have perfect information we might not want it.
iii. Note: To really eliminate adverse selection the best method is to go with a single-payer system, which creates just one giant pool (as in the UK or Canada systems)
i. Generally: Something done by one actor that has an impact on other actors, causing them to care about the original actor’s behavior. Externalities can be both positive and negative.
1. Infectious disease: positive externality: vaccine prevents others from getting the disease; negative externality: risky behavior might cause others to become infected.
2. Pollution: positive externality: curbing pollution can have widespread effects for current and future generations; negative externality: failing to curb pollution can produce costs that aren’t paid for by the producer, or incorporated into the price of the good or service.
3. Insurance Pooling: positive externality: risk is reduced by pooling groups together; negative externality: risky behavior uses up the insurance pool funds and drives up subsequent premiums (moral hazard problem).
4. Altruism: positive externality: encourages us to help the sick and uninsured; negative externality: encourages free-riding which can raise costs for others, including altruists. Only those uninsured who cannot afford insurance are deserving of altruism.
iii. Uninsured: Provides a link between insurance pooling and altruism.
1. Link: When the uninsured show up at the ER for treatment they take treatment funds away from the insured (negative externality of insurance pooling). But why do we pay for this emergency care in the first place? Altruism.
2. Counter-argument: If the uninsured receive insurance they might wind up in your insurance pool. At that point their risky behavior might not increase your tax burden (negative externality of altruism), but it might drive up your insurance premiums even more (negative externality of insurance pooling).
iv. Government Intervention:
1. Generally: Government may use regulation, taxation, and legislation to control risky behavior and curb negative externalities (or incentivize behaviors with positive externalities). Note that this is a very paternalistic approach to healthcare.
2. Examples: Alcohol or cigarette taxes (negative) or tax credits for hybrids (positive).
3. Counter: If they don’t impose the right regulations then they might inadvertently create inefficiencies or negative outcomes (See “Pay-for-performance” critique).
i. Medical Productivity:
1. Query: If we are spending 16%-20% of our GDP on healthcare, are we getting sufficient return on our investment?
2. One answer: David Cutler, Harvard Economist. On average we are spending less than $100,000 per additional year of life expectancy. And $100K/yr is a good benchmark figure for life years.
a. Critique: That figure is only an average. It says nothing about specific treatments or therapies, which might be horribly inefficient.
b. Generally: this debate is becoming increasingly important as healthcare costs continue to rise as a percentage of our GDP.
ii. Competing Risks
1. Generally: Investing in technology to cure one medical problem may only uncover other or further medical problems.
2. Example: In the 1970s Medicare started covering End-Stage Renal Disease (ESRD). Since there has been a marked increase in the number of people diagnosed with ESRD.
a. Explanation: Increased diagnosis (due to avail. of coverage) might explain a small part but, generally, fewer people are dying from other diseases (e.g., heart disease) and reaching a stage of life where ESRD kicks in. Normally heart disease will kill you before kidney failure, but if we are preventing heart disease then ESRD is more of a problem.
b. Result: Consider what other health risks are present when calculating the expected benefit of any healthcare technology.
iii. Variation in Practice
1. Generally: Different providers do different things to address the exact same person with the exact same symptoms / ailment. (See “Two Schools” section)
2. Relevancy to cost: Is one approach better than its alternatives? If so, is variation in practice defensible, or should there be an acknowledged “best practice” (with appropriate exceptions)?
a. But be careful to keep in mind that what seems to be variation in practice might represent unobserved variations between individuals that warrant different practices.
3. Note variation in practice across income groups, racial groups, gender groups, etc. is a different problem.