The eternal triangle: cost, access, and quality - medical care

There is an ancient folk song, "The Two Magicians," which tells of a running contest in which a male magician seeks to win the heart of a female magician. To get away from him, she transforms herself into a series of things--a sheep, a cloud, a shrub, a sailing ship. He responds by becoming something that has access to whatever she has turned herself into--a ram, a bolt of lightning, the morning dew, a captain. Thus, no matter what she turns herself into, she cannot escape him.

Health policy in the United States has been chasing its tail in a similar vein almost since the health care system in this country took shape--that is, if the reader will concede that it has shape, which may be more of a concession than would be wise.

Although cost, access, and quality have taken turns in the spotlight, until recently quality did not spark as much interest as the other two, simply because until recently it was difficult to do much about quality other than to accept providers' word that it was first-rate--and to empower the plaintiff's bar to lower the boom when that claim proved unjustified.

However, there seems to have been a change of late in the power-sharing arrangement among the three: cost has gained the upper hand and is reluctant to relinquish it, even with access and quality clamoring for attention. This is certainly the perception of health care providers, who continue to fear that efforts to control the cost of care will diminish both access and quality.

That argument is less persuasive today than it was in the past. As a result, providers have good reason to worry, for their pleas may be falling on deaf ears. The American Medical Association, for example, vociferously opposed the 1990 congressional proposal for "expenditure targets." The AMA called the proposal "rationing" and said both access to and quality of care for Medicare beneficiaries would be seriously compromised. Congress nodded, smiled benignly, and passed "volume performance standards," which were virtually the same as expenditure targets.

Is cost the master for good, with all other concerns in health care doomed to be sacrificed on its altar? The question can be answered in three ways. First, cost is indeed in the cat-bird seat right now and is likely to remain there for quite a while, which is the logical result of what has been going on for the past 10 years. Second, cost has so much influence on access and quality that it is no longer possible to address one without addressing the others. Third, some of the disasters that are poised on the horizon were bred by factors that have nothing to do with cost but rather with covert social and political agendas that have done a great deal of unrecognized damage.

Cost as King

It is easy for providers to forget that the cost of health care has always been recognized as a problem by at least some analysts; after all, the Committee on the Cost of Medical Care was impaneled in 1927. The public has fretted about the cost of care, government has fretted about the cost of care, and, once we invented them, nongovernment third-party payers have fretted about the cost of care. What is new is that the size and the shape of health care costs have changed. In 1970, we spent $75 billion; in 1990, we will prove to have spent in the neighborhood of $660 billion.

Furthermore, who pays the bills has changed in a critical way. We started out, centuries ago, largely paying out of pocket. Government became a major direct and indirect payer as a source of public hospital care and of subsidies for private providers. Nongovernment third-party payment got rolling in a big way in the 1930s and 1940s, and government's role subsided. But when Medicare and Medicaid were passed in 1965, government came back into the picture in a major way; the public share of health care spending went from 25 per cent in 1965 to 42 per cent in 1989. It will likely pass 50 per cent in this decade.

And when public money is being spent, attitudes about expenditures change. When providers lament that it is seen as good when General Motors' output increases but bad when Memorial Hospital's output increases, they forget that General Motors pays taxes, whereas Memorial Hospital does not, and General Motors produces private revenue, whereas Memorial consumes public revenue.

Add to that three major policy phenomena of the 1980s:

* First, the Reagan Administration decided that it could cut taxes while increasing spending massively and that no major debt would result. This turned out to be something of a miscalculation. (Of course, David Stockman, then Director of the Office of Management and Budget, later confessed that this was not a miscalculation, but rather a deliberate attempt to cripple human services programs by creating a deficit so large that no new social programs could be initiated for years and years. If this was the strategy, it succeeded admirably.)

* Second, human services were placed on the back burner in favor of buildups in defense and other sectors. And although health care providers--especially physicians and hospitals--are reluctant to admit that they are part of the human services sector, in policy terms, they are. Over the course of the decade, then, what happened in health care, and what happened to health care, became less and less a matter of public concern. That set the stage for payer moves on providers.

* Third, providers enthusiastically helped build their own gallows. They welcomed prospective payment and made a killing on it at first. They welcomed deregulation, which led to higher ceilings on capital expenditures and to the demise of organized planning. They smiled when more fiscal responsibility for health care funding was transferred to the states, thinking that they could more easily influence their state legislatures. And, quite frankly, they allowed their personal politics to influence their hopes for health policy. Health care executives and physicians tend to be ideologically conservative, and the majority of them vote Republican. Yet it is congressional Democrats that have saved providers' hides in recent years.

Providers started calling their field an "industry," piled up enormous debt in the capital markets, overexpanded, showed less willingness to serve the uninsured poor, and did little or nothing to save struggling public and inner-city facilities that were victimized by the politics and policies of the 1980s.

And one day they looked up and found that they had a 65 per cent hospital occupancy rate, an unbelievable debt level, an appallingly maldistributed medical indigence problem, a physician glut, and a large number of state and federal legislators who wanted to take away hospital tax exemptions.

Equally if not more important, the rate of inflation during the "regulatory" 1970s was just over 100 per cent; during the "competitive" 1980s, inflation in health care was approximately 128 per cent. Regulation did not work very well, but competition didn't work at all. And providers have proven singularly unable to account for where the money went.

So policy makers' and payers' obsession with cost is neither sudden nor misplaced. Cost is on center stage because it is wrecking budgets, frightening employers, infuriating governments, and threatening the entire health care system. And although private payers can nickel-and-dime and engage in all kinds of guerrilla cost containment, public payers can take more direct action, which has happened with both Medicare and Medicaid. Given an aging population, economic uncertainty, and the deficit and national debt, the worst is likely yet to come.

It is also probable that providers will not have the freedom to decide how the will live with cost limits that they had during the laissez-faire Eighties. Jettisoning the poor out of the system and milking marginal boutique health services are not likely to be popular approaches. State and local governments will not tolerate the former, and private payers will not tolerate the latter.

The Gang of Three

The second aspect of the cost issue is that cost, quality, and access are functions of each other in ways that providers do not always recognize. The relationship of quality and cost has long been seen by providers as one of "more is better." That was certainly the underpinning of the AMA's argument that if you cut costs--or even cut the double-digit rate of inflation in physician services--quality will automatically suffer. This argument has lost most of its credibility, simply because there is little evidence to show that quality suffers in staff-model HMOs or other settings that have conservative patterns of care.

Of course, what constitutes high quality has been one of the great debates of the past few years and will continue to be so. All that means, for our purposes, is that we cannot demonstrate that either good or bad quality results from more conservative patterns of care--although I strongly suspect that in most cases, a reasonable level of conservatism is in the patient's interest. So, at this stage, those who say "less is better" and those who say "more is better" are in a standoff, which means that the people who write the checks, who tend to be on the side of conservatism, will prevail.

Quality and cost are interrelated in two other ways. One is that some payers, notably the federal government, seem to have a great deal of trouble telling the two apart. One recent example is that the Health Care Financing Administration has advocated less stringent quality standards for HMOs, which, not coincidentally, are HCFA's favored strategy for reducing costs. Managed care is trumpeted as a higher quality service as well as a higher quality service as well as a cheaper one. In the global sense, it is probably neither. HMOs are less expensive in terms of hospital use and specialist referrals, but if the HMO pockets the difference, the effect on payer expenditure is nil. And if payers try to ratchet down on them--as Medicare and Medicaid have--the HMO can always refuse to contract, or individual hospitals refuse to contract, or individual hospitals and physicians can refuse to contract with the HMO. Nevertheless, HCFA continues its crusade for different quality standards for managed care.

The fact that cost and quality are intertwinted does not mean they are one and the same. Clearly, there are times, as in the overuse of cesarean section and coronary artery bypass grafts, when less is better. There are also times, as in pitifully low immunization rates and lack of access to mammography for low-income women, when more would obviously be better. At times, spending less will produce better results; at other times, spending more will do the same. Payers who cannot tell the difference between cost and quality could lose their ability to use money to influence how, and how well, care is provided.

The other entanglement of quality and cost--the enormous amount of money being spent on the quest for quality--is ironic indeed. The move to define quality in consistent, quantitative terms may not have been much of a boon to patients (not yet, anyway), but it certainly is making the consultants happy.

An entire industry has blossomed, selling this or that approach to quality, this or that software package, this or that magic bullet. Conferences, consultations, books newsletters, and gurus abound. Although much of this does represent a sincere effort to define and improve the quality of health care, the pursuit is also adding significantly to the cost of care. Would that one-tenth of what we are spending on for-profit quality activities were available to health services researchers to garner some real answers about what constitutes good care!

The relationship of cost and access is less subtle. The more that health care costs, the fewer the people who can afford it. The more that health care costs, the fewr uninsured patients that even the most socially responsible hospitals can afford to treat. The more that health care costs, the more desperate will be moves by employers and insurers to limit their expenditures, which has led to an orgy of underwriting, exclusions, testing, caps, ceilings, and other measures that have, not surprisingly, produced even more uninsured and underinsured individuals.

Cost has skewed the issue of access in another important way. Because health care accounting is so byzantine, eccentric, and inconsistent from one provider to another, it is very difficult to know how much care is being provided now to the uninsured poor, and at what cost. As a result, the potential cost of coverage and/or direct care for the 30 to 40 million uninsured Americans is almost always presented as "new money," based on the costs of care for those who are insured. When seen in that light, the thought of universal access tends to throw payers and policy makers into cardiac arrest.

The fact is that most of the uninsured do receive at least some care from hospitals and, to some extent, physicians. To assume that covering them would break the bank is unwarranted. But as long as the cost of care is so huge, it presents an emotional barrier to access as well as a logistical one.

Thust cost, access, and quality have become functions of each other, as part of the natural progression of the system and the ever-longer shadow cast by cost on all other parts of health care. It is from this interweaving of the three that the campaign for broader access has become the campaign for "health care system reform," as analysts and advocates alike become more sensitive to the fact that the search for quality will inevitably have an impact on cost, and that the access crisis is rooted in the cost crisis.

Of course, saying that all three must be addressed at once can also be interpreted as an attempt to blunt that effort, because it appears to be a much bigger job than attacking them one at a time. But we would have ended up taking on all three anyway, not matter which one we had selected as the first target.

Hidden Agendas

The final aspect of the cost-quality-access dilemma is the least acknowledged, but it may be the most important. Forces having little or nothing to do with any of the three are affecting the direction of health care in ways just as powerful as payment policies or estimates of the uninsured or clinical practice guidelines.

The first item on the list is that the American way of making policy has proven singularly ineffective in health care. Policy making in this country has a thousand faces, but among its consistent traits are the "wait-and-hurry-up" syndrome, in which nothing is done until crisis looms, and then everything must be done in a rush; what James Mongan, MD, Executive Director of Truman Medical Center, Kansas City, Mo., calls "raging incrementalism," or the tendency to creep up on problems, step by step, rather than just rearing back and swallowing them whole; and the ongoing attempt by every unit of government to get every other unit of government to take responsibility for things without getting any money to go along with it.

Although these practices may well be the price of democracy, they have not served health care well. The crisis mentality has been unproductive because it means sudden broad swings in how health care is financed and overseen, making a complete hash of any attempts at long-term planning, which in health care is the only kind of planning that makes any sense.

The incremental approach has been unsuccessful in that, although its subtlety allows actions to be taken without the eruption of controversy, it permits a whole new set of problems to emerge while the old ones are being incrementally addressed. And the shell game among levels of government has led to there being more holes in the safety net than there is net. Each time the accountability shifts, more people fall out the bottom.

James Tallon, the majority leader of the New York State Assembly, has said that the last unsettled relationship in American politics is the one between the states and the federal government, and that the battleground continues to be Medicaid. This can be demonstrated by the fact that Congress keeps passing Medicaid mandates (in what I believe is a sincere attempt to improve access for the very poor), while governors arre drowning in a sea of red ink.

As Barbara Matula, Medicaid director in North Carolina, has said, every time she sequesters money for a new program, here come three more federal mandates that wipe out the funds. Furthermore, mandates often redirect the money toward middle-class nursing home patients and their families and away from the destitute women and children whom Medicaid was designed to serve.

The second obstacle that interferes with the resolution of issues involving cost, quality, and access is that of exemptions--the fact that our way of dealing with inadequate policy is to get o the baling wire and chewing gum, rather than trying to make better policy. Bruce Vladeck, PhD, President of the United Hospital Fund of New York, points out that Medicare prospective payment was supposed to be "a self-correcting market-oriented system" that instead is "tying itself into knots and looks more and more like the Internal Revenue Code" as it is adjusted in order to deal with public hospitals and other disproportionate share providers, rural hospitals, AIDS providers, and other situations that require exemptions. Although all policies lead to exemptions, because no policy is so perfect that it works in all situations, health policy increasingly consists of exemptions with a little policy thrown in as glue to stick them all together. This not only invites gaming of the original policy; it requires it.

The third set of obstacles is neither naive nor clumsy; it is simply ugly. It involves the degrees to which society in general and providers in particular really want to see answers to the dilemmas that plague us. Do providers really want th uninsured poor to have access to care? Are they willing to give anything up to achieve this end? There is an apparent ambiguity in providers' attitude, wh too often seems to be that it is fine that health care costs rise to 20 per cent of the GNP, but we simply cannot afford to care for the poor.

Our private health care system is decidedly middle-class, and in a society that is increasingly divided into enclaves of race, class, and income, that system is increasingly peopled by those who do not wish to treat anyone different from themselves. This attitude, as much as underpayment concerns, underlies the maldistribution of physicians and the skewing of losses on the medically indigent and Medicaid onto a small minority of facilities.

Because the cost crisis and the access crisis are twinned, it is inevitable that some form of universal coverage will develop within the next few years, for economic reasons more than moral ones. As Ron Anderson, MD, Director of Parkland Memorial Hospital in Dallas, Texas, has said, "We will never get costs under control until everyone is covered." Reforms that are enacted will likely be passed under the banner of access, rather than of cost, but the overall costs of the system will be constrained rather forcefully.

Along with these changes will come the basic requirement that providers take all who come to them. There are glimmerings of this in growing pressure for physicians to participate in Medicare and in moves in some eastern states to compel physicians to take at least some Medicaid clients. If providers continue to resist moves toward universal coverage and universal access (which are different, as any student of Medicaid will attest), those moves will almost certainly contain draconian restrictions on providers' right to select whom they will treat.

Providers have long claimed that their avoidance of the uninsured and underinsured poor was based solely on financial concerns. In the absence of financial barriers, as will be the case under universal coverage, it will be interesting to see if those who were disdained for so long will finally be welcome.

The Coming Showdown

It is apparent that cost, rather than being a bogey man whom providers discount at th same time that they are both its victims and its beneficiaries, is properly the central concern of policy makers and payers in this country. Indeed, providers should count themselves lucky that they are paid, for the most part, by third parties, or they would have been among the first targets of the tax revolt, had taxpayers realized the degree to which they subsidize this expansive, well-fed system.

Cost, in that it threatens both quality and access, is the enemy; it is also the fulcrum on which meaningful health policy and system reform will be balanced. It is the issue around which several key conflicts have crystallized and may well be resolved: the states versus the federal government, the private sector versus the nonpoor, and competition versus regulation. As most of these conflicts are coming to a head, it would behoove providers to be part of the debate and part of the solution, given that they have been part of the problem from the beginning. In order to play such a productive role, however, providers must first look the enemy--cost--in the face and realize that what they seen in its eyes is their own reflection.

Emily Friedman, a Chicago, Ill.-based health policy analyst and writer, is a frequent commentator on health care delivery issues.

COPYRIGHT 1991 American College of Physician Executives
COPYRIGHT 2004 Gale Group