History of Health Policy and Development of the U.S. Health System The history of health

History of Health Policy and Development of the U.S. Health System The history of health policy development in the United States had its beginnings at the state, as opposed to federal, level, with few exceptions. These exceptions, beginning with the Sailors and Marines Act of 1798,1 addressed the narrowest of constituencies. State-level action began with a series of medical licensing laws passed circa 1800, abolished circa 1830, and re-established post-Civil War. Prior to post-Civil War era licensing regulations, the practice of medicine lacked standardization, with almost anyone who desired to practice medicine being able to open a practice and assume the title of doctor. With the rise of several alternative options to allopathic medicine, including homeopathic (1796), osteopathic (1874), naturopathic (1895), and chiropractic (1895) medicine in the 1800s, the public was not always certain about what they were getting when receiving treatment from a “doctor.” Doctors of Medicine were concerned about distinguishing themselves from alternative practices with the establishment of licensing laws based on ensuring the quality of treatment received from individuals claiming the title of “doctor.” While ensuring quality is the claim every trade group uses when seeking licensure, economists view licensure as a restraint of trade or a legal method for keeping the “undesirables” out of the business (AMA, 1847). Ironically, there were legal disputes among the alternative forms of medicine, such as the 1907 lawsuit in Wisconsin in which a chiropractor was jailed for practicing osteopathic medicine (State of Wisconsin v. Morikubo).The Bill for the Benefit of the Indigent Insane in 1854 was the second recorded federal healthcare legislation. This bill’s intent was for the federal government to provide land for the establishment of asylums for the insane, deaf, and dumb. It was passed by both houses of Congress but vetoed by President Franklin Pierce (D), who viewed this as a federalism issue. He claimed that the states, not the federal government, should be responsible for social welfare concerns. Little, if anything, happened in the United States for another 70 years, with the next mention of federal involvement in healthcare provision being Theodore Roosevelt’s presidential platform in 1912. The third piece of federal healthcare legislation was the Promotion of Welfare and Hygiene of Maternity and Infancy Act (1921). Also known as the Sheppard-Towner Act, this progressive piece of legislation, which passed both houses of Congress and was signed by President Woodrow Wilson (D), provided federal funding for maternal and child care.During this same 70 years, Germany and Britain enacted social support legislation that would eventually be replicated by the modern industrial world and would ultimately influence the United States. In an effort to gain the support of labor, German Chancellor Otto von Bismarck was the first to propose social support legislation and have it passed into law. The Sickness Insurance Law (1883) established sickness funds paid for by the employee (2/3) and employer (1/3); the Accident Insurance Law (1884) was employer-funded and precursor to workers’ compensation laws; and Old Age and Disability Insurance (1889) was an old-age pension plan and precursor to Social Security in the United States. About 40 years later, British Prime Minister David Lloyd George sponsored the enactment of several social service policies, including the National Health Insurance Act (1920) that provided laborers protection against illness costs and unemployment. Brief History of Payment In the United States, health insurance had its beginnings in the 1860s through the late 1920s in a series of disability insurance offerings (sickness funds) by a variety of insurance companies that were designed to protect laborers from loss of wages, as opposed to payment for medical costs.2 The Baylor Plan, established in 1929, was the first organized health insurance plan, cost 50¢ per month or $6 per year, started so university professors could pay their hospital bills. The Baylor Plan was soon followed by a flurry of similar plans that were ultimately chartered by state laws as Blue Cross plans. A decade later in 1939, physician payment was organized in a similar manner under Blue Shield plans. While it may seem intuitive to assume that physicians would welcome these insurance products that ensured payment, the opposite was what actually happened. Physicians were vehemently opposed to these plans, fearing the payer’s intervention between them and their patient, and frequently cited that they were “… opposed to anything that intervened between the physician-patient relationship.”There was quite a bit of administrative and legislative activity during the Franklin Roosevelt (D) and Harry Truman (D) presidencies that sought to enact national health insurance legislation. However, none of it was fruitful. Both Presidents faced considerable and aggressive lobbying efforts against national health insurance by the American Medical Association (AMA), who continued with their campaign regarding the sacredness of the physician−patient relationship saying that no one should intervene in that relationship. President Roosevelt (D) was concerned enough about the aggressive physician lobbying that he dropped his consideration of including health insurance as a part of Social Security legislation, for fear of it causing the legislation to go down in defeat. The quest for national health insurance received its final blow with the defeat of President Truman’s (D) Fair Deal (1949). With this defeat, the Democrats realized they needed to change strategies and, while pursuing the ideal of national health insurance in some format, they began to do so on an incremental basis. Three significant healthcare laws passed under President Truman (D): the National Mental Health Act (1946) established the National Institute of Mental Health, the Hospital Survey and Construction Act (1946), also known as the Hill-Burton Act, had a goal of establishing 4.5 beds per 1000 people and required participating hospitals to provide uncompensated care, and the Federal Water Pollution Control Act (1948) provided federal funds for the elimination of waste from tributaries.Due to post-World War II wages and price freezes, employers were unable to provide their employees with additional cash wages. In an effort to provide some type of pay increase, employers began providing employees with non-cash wage benefits in the form of health insurance coverage. In 1949, the Supreme Court upheld a National Labor Relations ruling allowing benefits to include in collective bargaining, and in 1954, health insurance premiums were declared a tax exemption for businesses.During the decades of the 1940s and 1950s, the public became aware that healthcare needs of the elderly were often not addressed, or addressed in a limited fashion, due to their lack of financial resources. Thus, the Kerr-Mills bill (1960) was passed to provide funding for states to care for the poor elderly, and although the bill was helpful, it was incomplete. The major healthcare legislation that came from the 1960s is Medicare (1965) and Medicaid (1965). The battle for these two bills was legendary, with the AMA opposing them until after their passage, and was remarkable and exemplary for how President Lyndon B. Johnson (D) managed the legislative and implementation processes. This legislation ushered the United States into the provision of national health insurance for the general population, albeit to limited populations.The 1970s and 1980s continued to witness a flurry of legislative and administrative activity, with the result of the activity primarily being incremental increases in programs ensuring access and legislation addressing the increasing cost of healthcare services. The most significant of these legislative actions was the Social Security Act of 1983 (Prospective Payment Act) that ushered in bundled payments based on diagnostic and historic data. The hospital prospective payment system was introduced as Diagnostic Related Groups (DRG) in 1983; the Outpatient Prospective Payment System consisting of Ambulatory Payment Classifications (APC) for hospital-based outpatient services and Current Procedural Terminology (CPT) for other outpatient-based services were launched in 2000.One federal law enacted in the 1970s—not often associated by the public with health care, although it has had profound, long-term effects on state-level healthcare reform efforts—is the Employee Retirement and Income Security Act (ERISA). ERISA was intended to accomplish (in addition to many other goals) two healthcare goals: to establish a legal requirement for basic health insurance portability and to preempt state insurance regulators from oversight of “self-insured” health plans. Although ERISA established a legal basis for health insurance portability, it was found to be ineffective in practice. Today, we refer to this health insurance portability as “COBRA” after the 1985 Consolidated OmniBus Reconciliation Act (COBRA) that strengthened the requirement for insurers to offer portability at a stable price for a set time period.The long-term effect of ERISA that most affected healthcare reform efforts at the state level (prior to Chapter 58 of Acts of 2006 of the state of Massachusetts) was the preemption of state insurance commissions from oversight of self-insured health plans. Prior to ERISA, state insurance commissions were believed to hold regulatory oversight over these plans. This was due to the phrasing used to describe these employer benefit plans as “self-insured.” The term is a layperson’s phrase that means the absence of an actuarially determined financial instrument. The high capital requirements necessary to operate self-insured health plans restrict this option to medium or large firms. The preemption of state oversight of these “health insurance” plans removed the richest source of employer-based covered lives from healthcare coverage risk pools. It was not until the 2006 Massachusetts healthcare reform that a state found a path around this preemption (see Section PPACA).The 1990s were noteworthy for continued activity addressing cost and access to care with four remarkable additions. The first of these additions was an administrative act, with President George H.W. Bush (R) establishing the National Committee on Quality Assurance (1990) that broadened the federal government’s list of concerns from access and cost to include quality.One of the healthcare system’s greatest obstacles has been defining quality. Providers do not seek to provide poor care, yet they have trouble defining quality care. Most recently, quality has been defined by adherence to evidence-based practices and the patient’s perception of the care episode. The next noteworthy action was the attempt by President Bill Clinton (D) to establish a national health system through this Health Security Plan (1993). This plan was burdened with a number of political problems and, ultimately, never made it to legislation.The third noteworthy action was the Health Insurance Portability and Accountability Act (HIPAA) (1996) that was passed by both houses of Congress and signed into law by President Clinton (D). This law, which was designed to provide portability of health insurance and administrative simplification, updated the confidentiality law of 1970. The fourth activity was an attempt to control healthcare costs by a shift from fee-for-service payment to capitated payment under managed care companies. While the managed care companies were successful in controlling costs, the treatment restrictions they implemented to achieve those cost savings were so draconian that they resulted in over 1000 state laws that essentially said, “You can’t do that.” As a result of this backlash, managed care companies greatly moderated their approach and introduced Preferred Provider Organizations (PPO) that have become the most common type of health insurance over the past 20 years.The year 2000 to the present saw a continued activity on the access, cost, and quality themes with three major legislative actions. The first was the Medicare Drug Improvement and Modernization Act (2003), signed into law by President George W. Bush (R), primarily known for providing prescription drug coverage for Medicare recipients. The second legislative action was the American Recovery and Reinvestment Act (2009) that included the Health Information Technology for Economic and Clinical Health Act (HITECH) (Title XIII) that provided incentives for the implementation of electronic medical records throughout healthcare organizations in a meaningful fashion. The third legislative action was the Patient Protection and Affordable Care Act (PPACA) (2010) that sought to increase access for uninsured individuals, decrease cost, increase incentives for quality, and provide incentives to test innovative care delivery and payment models. This act has been noted for the polarizing politics that surrounded its development and passage (no Republicans voted for it) and the ineptitude and variability, demonstrated in its aggressive implementation (e.g., health insurance exchanges), and the substantive legal challenges it has endured. The HITECH and PPACA are noteworthy for the coercive negative reimbursement associated with several of their programs (e.g., meaningful use, value-based purchasing, ACO negative risk sharing).Undoubtedly, the past 100 years have witnessed a flurry of administrative, legislative, and judicial action regarding how health care is delivered in the United States. The United States has moved from President Franklin Pierce, who in 1854 stated that social support matters were the responsibility of the state, to legislation that has shared that responsibility with the states (Medicaid), to moving more aggressively toward federal responsibility (PPACA). As evidenced by current political turmoil, this journey is not over and will certainly continue through national shifts in political aptitude and power. PPACA3 The passage of the Patient Protection and Affordable Care Act (PL 111-148 and PL 111-152) was an attempt by Congress to increase access, increase quality, and decrease the cost of healthcare services. Its subsequent signing into law by President Barack Obama (D) on March 23, 2010, was the natural culmination of over 100 years of iterative policy decisions and development (see Chapter 1, Table 1.1). Upon close examination of the PPACA, it is clear that there is nothing new in this law. Every policy idea in this law has either been tried at a lower level of government or been discussed in policy circles for decades. For a quick summary of the title names and numbers of subtitles, parts, and sections, see TABLE 2.1. In the following sections, we provide three policy development examples: first, how states worked as innovators leading the way on coverage of children up to 26 years of age; second, how a policy progresses through iterative steps with the concept of an individual mandate and health exchange beginning with the Republicans during the Nixon (R) administration and ending up as a Democratic concept in the PPACA; third, how the administrative branch used Medicare waivers as a tool for testing innovative ideas during the George W. Bush administration that resulted in the CMS Innovation Center and Accountable Care Organizations (ACOs). Coverage of Dependent Children up to 26 Years Age Title I (A)(II)(2714) of the PPACA provides for the coverage of children “… until the child turns 26 years age.” As with many other sections of the PPACA, this idea was adopted from similar statutes enacted by 31 states (NCSL, 2016). These states had a variety of requirements for children to be between the ages of 19 and 25 years and to be either single, dependent, in college, or some combination of these three. In contrast, the PPACA allows any child between the ages of 19 and 25 years to continue to get coverage through their parent’s health insurance regardless of marital status or dependency. The restrictions of this plan include limitation of the coverage to the child and do not include coverage of a grandchild (child of the child) or spouse. Levine, McKnight, and Heep (2011) found that the state plans resulted in an increase in insurance coverage for the 19-25 years age group of approximately 3%. Meanwhile, the PPACA has demonstrated an increase of this same age group of 10%, or 3.2 million young adults, resulting in decreasing the uninsured rate for this age cohort from 30% in 2010 to 14.9% in 2016 (Gallop, 2016; NCSL, 2016). Health Insurance Exchanges A major premise of the U.S. health system is that access to healthcare services is linked to payment and payment is linked to possession of health insurance. In an effort to address the uninsured, Congress mandated that all Americans have health insurance or pay a penalty (tax), unless the purchase of health insurance posed a significant hardship, defined as 8% of gross adjusted income. Congress also provided expanded Medicaid for individuals under 138% of the poverty level and an individual market health insurance exchange for individuals between 133% and 400% of the federal poverty level. In an effort to blunt the financial impact to low-income families, Congress provided premium subsidies, with the largest of the subsidies going to individuals and families between 133% and 250% of the federal poverty level.The concept of an exchange for the purchase of health insurance was alluded to by Butler (1989) in his discussion of a conservative plan for healthcare reform that advocated for a transfer of the tax credit to individuals, including a mandate for coverage and some type of purchasing alliance, and described by Enthoven (1993) in his discussion of managed competition. Just prior to the enactment of the PPACA, the Massachusetts Health Plan (2006) included a mandate for the possession of health insurance coverage and the Massachusetts Corridor (exchange) for the purchase of individual policies. One lesson learned from the Massachusetts Plan was the need for counselors to assist individuals in the sorting out of insurance needs and options (AHRQ, 2013). This resulted in the PPACA provision of grant funding to train navigators to provide this assistance to individuals seeking policies on the Health Insurance Exchange (Marketplace; PL 111-148 (III)(F)(3510)).Implementation of the Health Insurance Marketplace was challenged by a number of barriers, including Supreme Court challenges to the individual mandate, Medicaid expansion regulations, vendor performance, management oversight and involvement, and time. Within hours of President Obama signing the PPACA into law, lawsuits were filed by state attorney generals and industry groups to block the law and to question the constitutionality of portions of the law, such as the individual mandate. These lawsuits were combined in National Federation of Independent Businesses et al. v. Sebelius, Secretary of Health and Human Services, et al.(No. 11-393) including Department of Health and Human Services et al. v. Florida et al. (No. 11-398), and Florida et al. v. Department of Health and Human Services et al. (No. 11-400); argued: March 26, 27, and 28, 2012, and decided: June 28, 2012. In this case, the Supreme Court ruled in part for the United States that the individual mandate and the tax (penalty) were constitutional and in part against the United States that the requirement of the states expanding Medicaid or losing all Medicaid funding was too coercive. This ruling had several practical implementation ramifications, including at minimum, a loss of 2 years of preparation time for development of the exchange and a flurry of legislative activities in the states as they debated if or how to expand Medicaid.When the Health Insurance Marketplace opened in the fall of 2013, 24 states had developed their own exchanges and 36 defaulted, either completely or in some type of hybrid fashion, to the federal exchanges. The initial debut of federal health insurance marketplaces was bereft of technical and design precision, resulting in multiple consumer delays and frustrations. The Department of Health and Human Services (HHS) immediately began a process of addressing and remediating these problems with changes in vendors and CMS managers that addressed these problems. Unfortunately, the negative consumer experiences had already sullied the exchange, despite continuously improved technical performance during the initial and subsequent years. Development of the federal health insurance exchange was a complex process that included the functions of linking the various private insurance options with income verification through the IRS and citizenship through the Department of Homeland Security. One argument in favor of the vendors is that due to the legal challenges, they were deprived of adequate time to appropriately develop and test this IT infrastructure. The counterarguments include vendor incompetence, lack of CMS management supervision, and political unwillingness to delay implementation to provide additional time for IT development. Regardless, the functionality of the exchanges has steadily improved and is now working fairly well (from a consumer lens), although not all of the intergovernmental department links have been established.The prime rationale for the health exchanges was to allow a greater number of individuals the option, although a mandatory option, to gain access to healthcare services via the purchase of a health insurance policy meeting a predefined minimum standard. There is no doubt that the uninsured rate has dropped since the implementation of expanded Medicaid and the Health Insurance Marketplace (see TABLE 2.2); however, the increase in the number of individuals possessing health insurance policies has underperformed estimates by the CBO, while the number of individuals added to the Medicaid roles has exceeded expectations. Two reasons (one negative and one positive) have been frequently cited as the cause for the under enrollment in the health insurance exchanges: (1) under enrollment of the 18- to 35-years age group and (2) an unexpected number of small businesses continuing health insurance to their employees as opposed to dropping coverage, paying the penalty for not offering coverage, and sending their employees to the Health Insurance Marketplace. Finally, the insurance product defined by the PPACA has a set of 10 requirements, a set of actuarial values for consumers to choose from, and a requirement that rate increases be approved by both the state insurance regulatory agency and CMS. The actuarial values are 90% (platinum), 80% (gold), 70% (silver), and 60% (bronze). What the actuarial value means is that the insurance plan would pay for the actuarial value and the consumer would be responsible for the remaining portion. Another requirement written into the PPACA was that these plans had to be based on a community rating that included age, gender, and smoking history, with a 1:3 spread being the maximum allowed difference in premiums. The factors of a new product, narrow allowable actuarial rating knowledge, and competitiveness resulted in these products having very low initial prices. The result of these low prices and the effect of adverse selection resulted in large annual losses for insurance companies. Due to the large losses, several insurance companies exited selected unprofitable markets, completely exited the health insurance exchange, or requested large annual premium increases that have frequently been approved. TABLE 2.3 demonstrates the national averages and increases for these insurance plans. Accountable Care Organizations Accountable Care Organizations (ACOs) appear in Section 2706 Pediatric Accountable Care Organization Demonstration Project and Section 3022 Medicare Shared Savings Program of the PPACA. In both of these sections, the ACOs must “… be willing to become accountable for the quality, cost, and overall care …” (Sec. 1899 (2)(A)) of their assigned beneficiaries. This accountability for the care of these beneficiaries is achieved through deliberately planned coordination of beneficiary care.ACOs can best be understood by first gaining an understanding of “Care Organizations” and then a discussion of “Accountability.” Care Organizations have been around for a long time and refer first to a group of physicians who have agreed to work through a network concept to provide coordinated care for a group of beneficiaries. Care Organizations can take the organizational form of highly organized business models, such as large multispecialty group practices (e.g., the Mayo Clinic or Cleveland Clinic) or a network of independent physician practices that have agreed to work together in a coordinated manner. Two federal examples of Care Organizations are HRSA-sponsored rural networks and the Geisinger Cardiac Trial (Medicare Waiver). In both of these examples, the act of coordination of care and fluid communication that accompanied it has resulted in greatly reduced fragmentation of care, increased quality of care and health outcomes, and financial savings of several million dollars.The initial literature on ACOs described groups of physicians that would come together as a legal entity and then enter into additional network agreements with other institutional providers, such as hospitals (Bard & Nugent, 2011). As this concept matured, physician groups found themselves to be undercapitalized and underprepared as professional managers needing to establish and manage these complex organizations. While organizing a network of physicians remains the core concept of ACOs, the organization and management of them has been absorbed by health systems that have greater capital and managerial resources. Since 2010, hospitals and health systems have embarked on a process of vertical integration that has included the purchase of physician practices, allowing them to develop the organizational depth necessary to develop ACOs and positively respond to many other PPACA care coordination and payment provisions. Once a care organization has become a legal entity, it can begin to bill Medicare for services and take on the “accountability” role for the “… cost, quality, and overall care …” of Medicare beneficiaries.4ACOs are an organizational model still under fee-for-service payment, but with risk component associated with the quality of patient outcomes. CMS has a very detailed process for ACOs to determine their performance benchmarks and an equally detained process for determining quality performance. Under the Shared Savings Program, ACOs can agree to a one-sided (positive risk) option with payment ranges of 2%-3.9% or two-sided (positive and negative risk) agreements with payment options of 2%. CMS recommends that organizations with limited to no experience managing care coordination, quality, and patient outcomes choose the one-sided risk option until they gain adequate experience. The two-sided (risk) shared savings program is only suitable for organizations that have extensive experience managing patients in a coordinated manner, including robust tracking of patient quality and outcomes. For example, two-thirds of the initial ACO programs (CMS referred to these as Pioneers) have left due to their inability to absorb the negative risk. All of the “exited” organizations from the Pioneer ACO program are well-developed and well-managed healthcare organizations. These organizations remain committed to the ACO model but are simply not yet able to sustain the risk associated with the Pioneer ACO program. For CY 2015, the mean shared savings for the remaining Pioneer ACOs was $3 million, with a range of savings from $24.5 million to $1.6 million. Physician Payment: Usual, Customary, and Reasonable to MACRA The federal government entered into the realm of physician payment with the passage of Medicare and Medicaid in 1965. Medicare was patterned after the 1960s-era Blue Cross and Blue Shield program. Thus, physician payment followed suit, patterning physician payment on these same plans and paying physicians based on usual, customary, and reasonable charges. Usual, customary, and reasonable charges paid physicians whatever they billed, so long as it was in line with similar bills for physician services or procedures within the geographic area.Due to the lack of payment controls built into this payment model, physician payments grew at a steady and rapid pace, resulting in Medicare Part B (75% payment for physician services) becoming the largest domestic program funded through general revenues by the mid-1980s. Congress addressed this rapid physician payment growth in the Omnibus Reconciliation Act of 1989 (PL 101-239) by establishing a physician fee schedule based on the value of physician services provided. The model for valuing physician services was established through Resource-Based Relative Value Scale (RBRVS), which considers “… the relative value of the work, practice expenses, and malpractice risks associated with each physician service” (PL 101-239), and took into consideration geographic variation, inflation, changes in demand, service-related technology, and inadequate access. This bill also sought to cap payment for physician services by setting the increase in unit service inversely proportional to past increases in service quantity. This rationale resulted in the establishment of Medicare Volume Performance Standards (MVPS) in 1992 that initially decreased the growth rate in payment for physician services. Eventually, surgeons and primary care physicians found these caps to be disadvantageous, petitioned Congress, and received separate surgical and primary care caps.Decreased growth in physician payment did not last long, causing Congress to address rapidly growing physician payment again in the Balanced Budget Act of 1997 (PL 105-33). This legislation replaced the Medicare Volume Performance Standard with the Sustainable Growth Rate (SGR). The SGR calculation included (1) the estimated percentage change in fee for physician services, (2) the estimated percentage change in the average number of Medicare fee-for-service beneficiaries, (3) the estimated 10-year average annual percentage change in real gross domestic product per capita, and (4) the estimated percentage change in expenditures due to changes in regulations (Spilberg, 2014). As with MVPS, the SGR initially controlled physician expenditures; however, beginning in 2002, the SGR resulted in a negative increase of 4.8%, with the subsequent 12 years of negative increases culminating in a 2014 negative increase of 20%. Congress did not allow any of these negative increases to proceed, and, as a result of physician lobbying, passed legislation every year from 2002 to 2014 to reverse the negative increase and provide for a modest annual increase of no more than 2%. Finally, in 2015, both parties in Congress and the physicians had enough of this annual event and passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).MACRA is a bipartisan statute commonly referred to as the permanent doc fix that passed by wide margins in both chambers of Congress (House R-212 & D-180; Senate R-46, D-44, & I-2) and was signed into law on April 16, 2015. MACRA consolidated physician reporting and payment into either the Merit-based Incentive Payment System (MIPS) or the Alternative Payment Models (APM). MIPS consolidated reporting by replacing Physician Quality Reporting System, Meaningful Use, and the Value-Based Modifier and adding Improvement Activities. The Physician Quality Reporting System (PQRS) was established in 2006 as part of the Tax Relief and Health Care Act (PL 109-432) to provide incentives for reporting quality data to Medicare. These quality data were based on a list of quality measures that were chosen by and appropriate for the type of practice. Meaningful Use came out of the American Recovery and Reinvestment Act of 2009 (PL 111-5) and incented physician practices and other healthcare organizations for acquiring and using an electronic medical record in a meaningful way. Meaningful use incentives were staggered over a series of years, with reporting requirements increasing in number and complexity over time and the rewards of participation more generous to the voluntary early adopters and coercive to those who resist

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