Issues in National Health Insurance AVEDIS DONABEDIAN, MD
Abstract: Health insurance, by reducing net price to the consumer and increasing the opportunities for revenue to the provider, has profound effects, among other things, on the volume, content and distribution of services, their prices, and the capacity of providers to produce them. The magnitude and nature of these effects depend, partly, on the design of insurance benefits and, partly, on the nature of the health care system, particularly its current and potential capacity and the methods it uses to pay providers. Those who believe that the unique aim of insurance is to protect against unpredictable expenses attempt to suppress these effects, mainly by imposing financial disincentives to utilization which, in turn, reduce protec-
tion for those who need it most. Those who wish to reform the system have a broader range of objectives which include protective efficacy, cost control, quantitative adequacy, qualitative adequacy, efficiency of production, efficiency of allocation, equity, and redistribution of capacity. An analysis of the effects of insurance in the light of these objectives reveals favorable as well as unfavorable consequences. The provision of comprehensive benefits generates the necessity for a fundamental change in the organization of health services, if the advantages are to be fully realized and the disadvantages minimized. (Am. J. Public Health 66:345-350, 1976)
On every side we are told that national health insurance is an idea whose time has come. The only question that remains seems to be: In what form? Accordingly, we have been flooded with proposals of great diversity, each with its own ardent proponents, and each claiming to be the solution to our problems. What are we to make of these many proposals? How can we penetrate their surface features in order to understand the basic issues that are concealed beneath? This is my subject for this paper. What I shall attempt to do is not to describe and evaluate the various proposals, but to construct an approach to analysis that will help us assess any proposal whatsoever. To do so in a short essay I will have to be selective, and to use a degree of simplification that I would try to avoid in a more leisurely development. We shall begin the process of simplification by postulating that there are two archetypical and opposing views about the nature of our problem, and the contribution of health insurance to its solution. On the one hand are those who believe that our medical care system is essentially sound; that it is in a process of healthy growth and evolution; and that the major role of health insurance is to provide protection
against the unpredictable costs of illness. On the other hand are those who believe that our medical care system has failed to produce health services efficiently or to distribute them equitably; and who regard a national health insurance scheme not only as a means to achieve protection against the costs of illness, but also as a powerful force that should be used to reshape the medical care system itself. Obviously, our assessment of any given proposal will be deeply influenced by which of these viewpoints, and their associated objectives, we accept. But, irrespective of our points of view, it is first necessary to understand the nature of health insurance itself; of the almost demonic forces it can unleash when it is national in scale; and of the complex consequences of these forces as they eddy and swirl throughout the medical care system. For only by understanding these forces can we either neutralize their effects, if it is our object to preserve the status quo, or tame and direct them towards the achievement of our purposes, if fundamental reform is what we seek. If we may be permitted further license to simplify, we could say that health insurance has three major initial effects. First, it lowers the out-of-pocket price that the consumer must pay for covered services. Second, by lowering the out-of-pocket price, it improves the consumer's ability to pay for additional non-covered services. And, third, it facilitates the flow of revenue to the provider, especially when payment is fee-for-service. ' These initial effects combine to alter the behavior of clients and providers. The result is that there are major changes in the volume, content, and distribution of health services utilized, which may be summarized as follows:
Address reprint requests to Dr. Donabedian, Professor of Medical Care Organization, School of Public Health, University of Michigan, 109 Observatory Street, Ann Arbor, MI 48104. This paper, prepared for presentation at the Bi-Regional Conference in Program Planning in MCH (maternal and child health) and CC (crippled children), Seattle, Washington, October 31, 1975, was submitted to the Journal November 13 and accepted for publication December 3. AJPH, April, 1976, Vol. 66, No. 4
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One-more covered services are used; and this, in turn, generates additional use of complementary services, which may or may not be covered, but which the client is better able to afford. Two-the services used are not only greater in volume, but they are also enriched, so to speak, both in technological content and the amenities. Three-the increase in volume and the enrichment are not uniform; there is a decided tendency to favor services that are more fully covered by insurance and, where possible, to substitute these for services that are not covered, or are covered to a lesser extent. Four-the use of services that are less urgent, or are regarded as less critical, is enhanced to a greater degree, because the more urgent services are more likely to be sought irrespective of insurance. Five-as an important corollary to the preceding observation, the use of preventive services is more likely to be enhanced than the use of therapeutic services, assuming that coverage is extended to both. Six-use of services by the poor and by those who were previously uninsured is more likely to be enhanced by the introduction or extension of insurance.2 To summarize, the initial effect of health insurance on out-of-pocket prices leads to a secondary set of effects which comprise a larger volume, an enrichment, and a redistribution of health services; the redistribution being in favor of covered services, of services that are regarded as less critical, and of services to the less affluent. These secondary effects, in turn, have consequences of their own. Of these, the most important are the effects on price and on costs or expenditures. Prices rise because of the pressure of increased demand on limited capacity, and because the demand is for services that are richer in content. Costs and expenditures increase because of the dual effects of the rise in volume and in price, and because the benefits of insurance plans usually encourage the substitution of more costly services for those that are less costly, though equally effective. And this brings us to a fourth generation of consequences. For the rise in prices and expenditures generates both the need and the demand for greater coverage, which, if satisfied, reinforces all the tendencies already set in motion by the original introduction of health insurance. Thus, the process we have described feeds upon itself and, unless checked by external forces, grows progressively more threatening. To find these checks and balances we must examine the properties of the medical care system in general, as well as the features of the insurance plan itself. In both places we find factors that moderate, and others that enhance, one or more of the effects we have described. And these influences may be direct; or they may be exerted indirectly, through pathways of remarkable complexity. Needless to say, the degree of coverage, by determining to what extent out-of-pocket prices are reduced, influences all subsequent events. In addition, the scope of benefits may be such as to encourage certain services at the expense of others, with consequences to cost and quality. The method of paying providers under the health insurance scheme has a profound effect on price and on the volume and mix of serv346
ices provided. Price is additionally influenced by, and influences, the supply of services. The presence of reserve capacity in the system, or the ability and willingness to bring about a rapid expansion in capacity, will moderate the rise in prices, while it encourages increases in the volume of care. Under these circumstances, the redistribution effects are diminished, since everyone can have more. If the system, or parts of it, are already overloaded, or respond to the rise in prices by reducing rather than expanding capacity, as some say physicians appear to do, the effect on price is intensified, the volume of services cannot increase, or increases at the expense of quality, and certain redistributive effects are magnified. The nature and extent of the social redistribution of services is also influenced by the presence of barriers to care additional to direct costs. It is not unusual to find that, in spite of high levels of coverage, differences between social classes persist. Understanding the effects of health insurance, as they are modified by features of the medical care system, is only the prelude to assessment. In order to evaluate a health insurance plan or, more precisely, the predicted consequences of such a plan, it is necessary to examine how these consequences jibe with a set of objectives that one wishes to pursue. I have chosen eight such objectives: protective efficacy, cost control, quantitative adequacy, qualitative adequacy, efficiency of production, efficiency of allocation, equity, and redistribution of capacity. This is not an exhaustive list, but for present purposes of this discussion it will suffice. Everyone agrees that protecting the consumer against the unpredictable costs of illness is a major objective of a national health plan. In fact, some contend that it is the only objective, subject to a concurrent commitment to containing costs and interfering as little as possible with the status quo. Protection is sought against the costs of care or, alternatively, against the consequences of not receiving care should the consumer not be able to afford care. If we examine the concept of protection a little more closely, we can find that it has two components that are separable, though interrelated. The first is protection against unpredictability. This is the primary drive. The consumer seeks, with a passion, for assurance that if he regularly sets aside a certain amount of money for health care, and adjusts his standard of living accordingly, all his medical care expenses will be covered; and that no further and unexpected reduction in his standard of living or social aspirations will occur. That prudent living will prevent economic disaster is at the very core of the Protestant ethic; and the repeatea experience that this maxim fails utterly when illness strikes is a major threat to that ethic. Thus, health insurance touches on the foundations of social morality. The second component in the concept of protection is that the price of attaining the first objective be not too high, either in absolute terms or as a proportion of a family's income. After all, there are other things in life than medical care, and the reduction in the standard of living necessary to assure medical care should not be so large as to impoverish life in every other respect. It is clear that these two aspects of protection are contrary to one another, in the sense that increasing protection AJPH, April, 1976, Vol. 66, No. 4
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against the unpredictable raises the cost of protection. Much of what we say from here on, in one way or another, is implicated in this dilemma, which is most acute for those who are poor. Also implicated is the insurer, irrespective of whether this is a private or public agency. This is because the greater the protection afforded the consumer, the greater the burden of unpredictability and cost to the insurer. The cost, whether to the consumer or the insurer, is itself influenced by the efficiency of production, as it is affected by insurance. How can one tell how protective a plan is? Obviously, the first thing is to look at the scope of benefits and the amount of each service covered. Also obviously, protective capacity is reduced by exclusions, by copayments and by limits on the liability of the insurer. The importance of the services included depends on how costly they are; whether they must be consumed in large bundles within a short period, or are consumed in small amounts spread over a longer time; and what the impact on health is if the services are not received. These properties are themselves dependent on the characteristics of consumer groups and the mix of the illnesses they experience. The complexity of these factors has made it very difficult to measure precisely the protective efficacy of a bundle of benefits when specified as services rather than cash amounts; but some progress is being made in this direction.3 A very rough measure of the protective capacity of a bundle of benefits is the per cent of medical expenditures that it covers on the average. But this average conceals a frequency distribution of coverage. Also, a given average can be achieved either by covering fully the more frequent smaller bills, or by neglecting these in favor of relatively greater coverage of the less frequent but catastrophically large expenditures. Therefore, it is important to know how frequently, during a given year, a family will have to make specified out-of-pocket payments, and how these payments are related to the ability to pay. The measure of ability to pay is itself a subject of lively debate: for example, whether it should also include assets other than income, and if so, what? Far from being a purely technical matter, the choice of the measure of the ability to pay involves some of the most entrenched values of our society. A measure that includes more than current disposable income tends to equalize disparities in wealth, but it also tends to penalize those who through past effort or thrift have accumulated larger assets. Assuming we have all the data we want, we still have to decide what level of protection is enough. I have no good answer to this question, but it seems to me that insurance has failed to achieve its potential unless there is a limit on the client's liability, so that on no account will out-of-pocket expenditures exceed a specified percentage of adjusted disposable income during a specified period of time. Anything less means an unacceptable level of uncertainty for every family. Whether this percentage increases proportionately with income or is progressive depends on our objective of equity, which we shall describe a little further on. What it should be on the average depends on how much we are willing to pay for the protection it represents-which brings us back to the question of costs and the most efficient use of resources. AJPH, Apil, 1976, Vol. 66, No. 4
We have already said that any specified degree of protection has a corresponding cost. This is an irreducible quantity which we cannot circumvent no matter what we do. We must, therefore, focus on those costs that are subject to control, and those expenditures which yield less than proportionate benefits. The insurance scheme itself introduces an increment of cost in order to maintain and administer the system. To the extent that different modes of organizing and operating the insurance scheme vary in this respect, we can have a preference for one mode over another. A more important consideration is that all insurance will encourage use of service and contribute to a rise in prices. Furthermore, as previously stated, the increase in use of service tends to favor services that are considered to be less important as against those that are more so, and of services to the poor as compared to the rich, unless there are barriers to access by the poor. All these changes in the cost and distribution of services have important implications for our several objectives. To the extent that the increase in use of services and price signify access to needed care, and improvements in that care, they contribute to our objectives of quantitative and qualitative adequacy. It is also true, however, that as insurance covers more and more of the costs of care, increased prices are less likely to reflect better care, and the increments in the volume of care become less and less valuable in terms of generating health. Thus, there are diminishing returns; and there is an element of harm, to the extent that unnecessary services expose patients to injury and divert resources from more valuable uses. If the product of the medical care system is considered to be an increment of health, it is clear that the efficiency of production is reduced by the progression of events described. It is also reduced when more costly services are substituted for those that are less costly, but equally effective, simply because the former are covered by insurance and the latter are not. On the contrary, efficiency of production is improved if, because a broad range of benefits is covered, the physician is able to choose, without hindrance, the combination of services which achieves the greatest improvement in health at the lowest cost. This hope has motivated extensions in benefits beyond hospital coverage to include, successively, diagnostic services for outpatients, the services of a physician in the office and the home, organized home care, and care in a skilled nursing home. Unfortunately, the best evidence does not support this expectation.4 Ordinarily, the more generous availability of these services leads to their greater consumption, without commensurate reduction in hospital use, so that overall costs are increased rather than reduced. Not infrequently, hospital use actually increases, presumably because access to non-hospital services becomes the occasion for recommending hospital care, for good reasons or bad. The only striking exception is that the provision of ambulatory care under prepaid group practice is almost always associated with an important reduction in hospital use. But, in this instance, we have the confluence of three factors: a broader range of benefits; an alteration in the method of paying both the group and the physician within the group; and 347
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the presence of formal and informal professional and administrative controls. In the absence of this concatenation, the broader range of benefits appears to represent an equal opportunity to provide care either efficiently or wastefully. A broader range of benefits has contrary effects also on allocative efficiency. On the one hand, the allocation of a larger proportion of resources to less serious, and even trivial, illness is generally inefficient unless it can be shown to contribute to the prevention of illness or its early detection and arrest. On the other hand, it is considered more efficient when insurance encourages the use of services to a greater extent among the poor than the rich, because the former are more likely to have unmet needs of a more serious nature. Allocation according to income, or other social attributes, and equity are related objectives. Equity depends on how much each population subgroup contributes to the costs of insurance and how much it receives in benefits. Traditionally, insurance theory has required that costs and benefits be commensurate in all groups. This is what fairness is considered to demand. But, this is also what is necessary if free competition is to prevail. The consequence is that people who have small means but a high expectation of illness cannot afford to buy adequately protective health insurance. In order to provide adequate protection for everyone, payments must correspond to one's means, while the use of services corresponds to one's needs. This is another concept of equity; it calls for a transfer of funds from one group to another through the intermediacy of the health insurance scheme. Such transfers can, of course, be accomplished through community rating. But, community rating plans cannot survive in a freely competitive market because they are underbid and driven out by the experience-rated competition. Hence, a redistributive form of equity can only be achieved by governmental action. Assessing the redistributive effects of an insurance scheme is a matter of considerable difficulty. This is because it is necessary to obtain information not only about how the plan is financed, but also about the distribution of the use of services and their prices. The information about financing is itself difficult to obtain and interpret. Very often those who seem to pay are not those who actually bear the burden of payment. For example, the tax on payroll which plays such a central part in financing the social security system, including Medicare, far from being borne by the employer, may be borne partly by the employee, as lower wages, and partly by the consumer, as higher prices. Other taxes that go into financing Medicare and Medicaid undergo similar transpositions, so that their resting places may bear little resemblance to their sources. Shifts also occur in the purchase of private health insurance because the contributions of employers are tax exempt, and those of the consumer are exempt, up to a limit. The transfers that occur as a result of the phenomena we have described, when they are revealed, are sometimes seen to be quite unexpected, and even contrary to avowed public policy. According to Feldstein and Allison, the federal government, through tax exemptions on corporate and individual premium payments, subsidizes the purchase of voluntary health insurance by about $2 billion a year; and the distribu348
tion of this subsidy is regressive relative to family income.5 Stuart and Bair have shown that Medicaid does, indeed, transfer resources from the well-to-do to the poor. However, contrary to its avowed purpose, and in spite of a federal matching formula that favors the poorer states, its net effect has been to transfer money from the poor states to the rich.6' 7 By contrast, Medicare has transferred money from the richer states to those that are either poorer, or have a larger proportion of aged, or both. As to transfers among social classes, Medicare is redistributive in favor of the poor during any one year, but its effect over a lifetime has not been studied, as far as the author knows. Nevertheless, the major beneficiaries of Medicare and Medicaid appear to be the families of physicians, each of whom has received a net subsidy of $4,000 each year, mainly in the form of better collections and unexplained increases in price. This subsidy is additional to any improvement in income due to the higher volume of care provided to the beneficiaries of Medicare and Medicaid. The equitable distribution of services may depend, in part, on the supply of physicians and their spatial distribution. We have already suggested that if the capacity of physicians is limited, it is likely that the more serious unmet needs of the poor will take precedence over the more discretionary increment of demand by the rich, so that, by being redistributed, services become more congruent with need. But this occurs only if there are no other barriers to access by the poor. If there are such barriers, there could very well be a paradoxical effect, so that the gap between the poor and the rich is widened rather than narrowed by the availability of insurance benefits. The location of physicians is one important factor in the availability of care. According to some, the purchasing power created by health insurance will attract physicians to areas that had, up till then, not been able to support them. On the contrary, others have argued that physicians are attracted to certain geographic areas which are desirable because they provide professional opportunities and satisfaction, favorable climate, and a variety of social and cultural amenities.8 The major deterrent to all physicians locating in such areas is that, as their numbers increase, it becomes progressively more difficult for them to earn a living. A national health plan, by generating new purchasing power, will weaken this deterrent, and encourage additional physicians to move into the areas which are already richly supplied. Some years ago, Rimlinger and Steele, reasoning along somewhat similar lines, assembled data to show that physicians tend to settle in areas with high per capita income, where they provide fewer services but can charge higher prices.9 More recently, de Vise has argued, with some evidence to support the argument, that the net effect of Medicare and Medicaid has been to favor the location of physicians in the suburbs, as compared to the inner cities, and on both seaboards, as compared to the midwestern states.8 One might add that the method of paying physicians under Medicare would encourage such redistribution because, in the wealthier areas, which already have more than their share of physicians, the customary and prevailing fees are higher, which also makes the copayments larger; clients are more AJPH, Apil, 1976, Vol. 66, No. 4
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likely to pay deductibles and copayments; and the physician can more easily charge and collect fees that are larger than those considered "reasonable" by Medicare. If all this is true, it suggests that incentives that are much more specific than the general availability of benefits are needed to attract physicians to the underdoctored areas, if coercion is to be
avoided. Through a succession of specific examples we have laid bare what I believe to be the essential nature of our problem: that health insurance, especially when it is comprehensive in benefits and coverage, produces a turbulent mixture of desirable and undesirable consequences, which call for the institution of controls that are designed to permit or encourage the desirable, and restrain or eliminate the undesirable. Through an examination of these controls, to the extent that they are specified in the health plan, one can, first, infer the values and objectives inherent in any plan, and second, evaluate the consequences of the controls themselves. Those who wish to achieve protection, but without disturbing the status quo, direct their attention to curbing the increase in utilization attendant upon insurance, which they see as "moral hazard", and which initiates the train of events that they want to arrest at the source. To accomplish this they resort primarily to limits on benefits and to participatory payments by the client. But this weakens the protective power of the plan, and penalizes more heavily the poor, who have the greatest unmet needs and the lowest ability to pay. This selective penalty becomes progressively greater as prices increase; and is further magnified when the rich buy complementary insurance that covers the copayments in the basic plan, but which the poor cannot afford to buy. Participatory payments may have a socially useful effect in selectively repressing the less important segment of care. However, the client's estimate of importance is often incorrect, and any device that is a barrier to access is likely to inhibit prevention, early detection, and timely care. How can one mitigate these disadvantages and yet avoid more direct intervention in the workings of the medical care system? The most promising answer appears to be in proposals like "major risk insurance"'0 and "variable subsidy insurance"." Without attempting to make some fine, but not unimportant distinctions, we find that these proposals have the following key features: (I) a deductible that is graduated to income, but is large enough so that a large initial amount of care is paid out-of-pocket; (2) copayments that are graduated to income; and (3) a limit on total out-of-pocket expenditures during any given year, also graduated to income, beyond which all expenditures are covered by the plan. It is hoped that, in this way, both the costs and benefits will be more equitably distributed with respect to income; that there will be enough client resistance to restrain the rise in prices; that the overall cost of the plan, and the taxes that go with it, will be kept within reasonable bounds; and, above all, that the market for medical care services will remain essentially undisturbed. In order to succeed, such plans require that everyone submit to the test of income; that the poorest families receive subsidies to meet the deductibles and copayments; that many families be helped to spread their share of the bill over AJPH, April, 1976, Vol. 66, No. 4
a longer period of time, when major illness strikes; and that
no one buy complementary health insurance to cover the deductibles and copayments of the basic plan. More importantly, the fundamental orientation of the plan is to leave a great share of what might be called ordinary medical care to the family, subject to all the competing claims against its resources. The emphasis is on protection against the less ordinary expenses, and on assuring that the losses will never become catastrophically large. In fact, once the magic limit on client participation is exceeded, there is nothing to prevent expenditures from soaring, unrestrained, into the wide blue yonder! The opposing orientation is to encourage the very first step toward care, and to do so equally for everyone, so that an early assessment can be made and subsequent care adjusted to need; but without encouragement to unnecessary or harmful medical intervention. Unfortunately, the traditional restraints on benefits are too indiscriminate to achieve this fine adjustment of care to need. Nor have they succeeded in curbing prices and costs. What is needed is more direct reform of the medical care system itself, in order to weaken the urge to provide unnecessary care, and to assure quality, improve productivity, and contain prices. Two concurrent lines of development are necessary in order to bring about the desired effects. The first is to introduce structural change by altering the method of organizing and remunerating the delivery of care. The second is to institute a system for monitoring professional and system performance. Both are necessary because each depends on the other for its full effectiveness. How far the national health plan moves in these directions, and what forms and methods it uses, become vital elements in assessing the plan. A national health plan can, of course, mandate a total reorganization of health care. Generally, it stops far short of that for the present. Instead, it uses its control over the methods and terms of remuneration to give greater rewards to those forms and activities that are in line with its long-term objectives. Whether this approach works depends on how large the difference in rewards is, and how much room there is for the providers to function successfully outside the plan. One last question remains. Medical care needs are so extensible that prohibitively large sums of money can readily be swallowed up by the health care system, if clients and professionals are given a free rein to consume and to provide services, respectively. If the restraints of the market are removed, how are we to decide what is enough medical care? The answer seems to be: in the same way that we decide what is enough public education-through a political decision that sets a limit on the total resources to be made available. This being done, we would expect that this total is reallocated within the system as productively as we know how. In this way, everyone has equal access to medical care that is equally good or, for that matter, equally bad. It is possible, of course, to give special attention to groups that now carry a disproportionately large burden of unmet need, so that they can be made to catch up with the rest.'2 It is also possible to favor any other segment of the population, depending on who holds political power, and what the values and objectives of the powerful are. Thus, the switch from the market 349
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to another method of rationing holds for many the terrifying prospect of a loss in present privilege, even though, in the end, the roster of those who are favored may be seen to have remained remarkably unchanged. Mainly for simplicity, but also for dramatic effect, we have presented many of our issues in the context of two contending ideologies. But our system is not congenial to these antinomies. As usual, we are likely to proceed in steps and by compromise, fashioning a hybrid which seems to fit best with our own traditions. In this creative and challenging enterprise we are all invited to join.
REFERENCES 1. These and other factors that influence use of service are described in Feldstein, P. J., Research on the demand for health services, Milbank Mem. Fund Q., 44:128-162, July 1966, Part 2. There is further discussion of the revenue effect in Monsma, G. N., Jr., Marginal revenue and the demand for physicians' services, pp. 145-160 in H. E. Klarman, Editor, Empirical Studies in Health Economics, Baltimore: The Johns Hopkins Press, 1970. 2. The technological enrichment of services as a factor in higher costs has received particular emphasis in Feldstein, M. S. The Rising Cost of Hospital Care. Washington, D.C.: Information Resources Press, 1971. The differential effects of insurance according to income and illness have been emphasized as important factors in policy in Pauly, M. V. Medical Care at Public Expense: A Study in Applied Welfare Economics. New York: Praeger Publishers, 1971. 3. This difficult problem is discussed in greater detail in Donabedian, A. Benefits in Medical Care Programs. Cambridge: Har1976 (in press). vard University Press, Spring -1
4. The evidence is reviewed in Donabedian, A., ibid. 5. Feldstein, M. S. and E. Allison. Tax Subsidies of Private Health Insurance: Distribution, Revenue Loss and Effects. Boston, Massachusetts: Harvard Center for Community Health and Medical Care, Program on Health Care Policy, Health Care Policy Paper Number 2, October 1972. 6. Stuart, Bruce C. and L. A. Bair. Health Care and Income: The Distributional Impacts of Medicaid and Medicare Nationally and in the State of Michigan. Lansing, Michigan: Michigan Department of Social Services, Research Paper No. 5, Second Edition, September 1971. 7. Stuart, B. C. Equity and Medicaid. Journal of Human Resources, 7:162-178, Spring 1972. 8. deVise, Paul. Physician migration from inland to coastal states: Antipodal example of Illinois and California. Journal of Medical Education, 48:141-151, February 1973. 9. Rimlinger, C. V. and H. B. Steele. An economic interpretation of the spatial distribution of physicians in the U.S. The Southern Economic Journal, 3:1-12, July 1%3. 10. Feldstein, M. S. A new approach to national health insurance. The Public Interest, 23:93-105, Spring 1971. 11. Pauly, M. V. A variable subsidy insurance proposal. In National Health Insurance: An Analysis, Washington, D.C.: American Enterprise Institute, Special Analysis No. 8, pp. 33-48, August 1971. 12. This subject is developed further in Donabedian, A. Models for organizing the delivery of personal health services and criteria for evaluating them. Milbank Mem. Fund Q., 50:103-154, October 1972, Part 2.
ACKNOWLEDGMENT This paper is based on work supported in equal parts by the Carnegie Corporation ofNew York and the Milbank Memorial Fund.
Society for the Scientific Study of Sex to Hold Fourth Annual Regional Meeting The Society for the Scientific Study of Sex, Western Region, will hold its Fourth Annual Meeting at the Town and Country Hotel, 500 Hotel Circle, San Diego, CA, June 11-13. More than twenty papers and six workshops are planned, along with current scientific research, programs on sex education, individual and inter-relationship sex counseling and clinical sex therapy. The event's Program Co-Chairpersons are Rhoda Rand Codner, MS, Rod Hoeltzel, PhD, Robert Reitman, PhD, and Mary Ann P. Sviland, PhD. All abstracts, papers and other presentations should be mailed to: Fourth Annual Meeting, Society for the Scientific Study of Sex, Western Region, 18740 Ventura Blvd., Suite 302, Tarzana, CA 91356. For all other information concerning the Fourth Annual Meeting, please contact Dr. Robert Reitman at the above address.
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Abstract: Health insurance, by reducing net price to the consumer and increasing the opportunities for revenue to the provider, has profound effects, among other things, on the volume, content and distribution of services, their prices, and the capacity of providers to produce them. The magnitude and nature of these effects depend, partly, on the design of insurance benefits and, partly, on the nature of the health care system, particularly its current and potential capacity and the methods it uses to pay providers. Those who believe that the unique aim of insurance is to protect against unpredictable expenses attempt to suppress these effects, mainly by imposing financial disincentives to utilization which, in turn, reduce protec-
tion for those who need it most. Those who wish to reform the system have a broader range of objectives which include protective efficacy, cost control, quantitative adequacy, qualitative adequacy, efficiency of production, efficiency of allocation, equity, and redistribution of capacity. An analysis of the effects of insurance in the light of these objectives reveals favorable as well as unfavorable consequences. The provision of comprehensive benefits generates the necessity for a fundamental change in the organization of health services, if the advantages are to be fully realized and the disadvantages minimized. (Am. J. Public Health 66:345-350, 1976)
On every side we are told that national health insurance is an idea whose time has come. The only question that remains seems to be: In what form? Accordingly, we have been flooded with proposals of great diversity, each with its own ardent proponents, and each claiming to be the solution to our problems. What are we to make of these many proposals? How can we penetrate their surface features in order to understand the basic issues that are concealed beneath? This is my subject for this paper. What I shall attempt to do is not to describe and evaluate the various proposals, but to construct an approach to analysis that will help us assess any proposal whatsoever. To do so in a short essay I will have to be selective, and to use a degree of simplification that I would try to avoid in a more leisurely development. We shall begin the process of simplification by postulating that there are two archetypical and opposing views about the nature of our problem, and the contribution of health insurance to its solution. On the one hand are those who believe that our medical care system is essentially sound; that it is in a process of healthy growth and evolution; and that the major role of health insurance is to provide protection
against the unpredictable costs of illness. On the other hand are those who believe that our medical care system has failed to produce health services efficiently or to distribute them equitably; and who regard a national health insurance scheme not only as a means to achieve protection against the costs of illness, but also as a powerful force that should be used to reshape the medical care system itself. Obviously, our assessment of any given proposal will be deeply influenced by which of these viewpoints, and their associated objectives, we accept. But, irrespective of our points of view, it is first necessary to understand the nature of health insurance itself; of the almost demonic forces it can unleash when it is national in scale; and of the complex consequences of these forces as they eddy and swirl throughout the medical care system. For only by understanding these forces can we either neutralize their effects, if it is our object to preserve the status quo, or tame and direct them towards the achievement of our purposes, if fundamental reform is what we seek. If we may be permitted further license to simplify, we could say that health insurance has three major initial effects. First, it lowers the out-of-pocket price that the consumer must pay for covered services. Second, by lowering the out-of-pocket price, it improves the consumer's ability to pay for additional non-covered services. And, third, it facilitates the flow of revenue to the provider, especially when payment is fee-for-service. ' These initial effects combine to alter the behavior of clients and providers. The result is that there are major changes in the volume, content, and distribution of health services utilized, which may be summarized as follows:
Address reprint requests to Dr. Donabedian, Professor of Medical Care Organization, School of Public Health, University of Michigan, 109 Observatory Street, Ann Arbor, MI 48104. This paper, prepared for presentation at the Bi-Regional Conference in Program Planning in MCH (maternal and child health) and CC (crippled children), Seattle, Washington, October 31, 1975, was submitted to the Journal November 13 and accepted for publication December 3. AJPH, April, 1976, Vol. 66, No. 4
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One-more covered services are used; and this, in turn, generates additional use of complementary services, which may or may not be covered, but which the client is better able to afford. Two-the services used are not only greater in volume, but they are also enriched, so to speak, both in technological content and the amenities. Three-the increase in volume and the enrichment are not uniform; there is a decided tendency to favor services that are more fully covered by insurance and, where possible, to substitute these for services that are not covered, or are covered to a lesser extent. Four-the use of services that are less urgent, or are regarded as less critical, is enhanced to a greater degree, because the more urgent services are more likely to be sought irrespective of insurance. Five-as an important corollary to the preceding observation, the use of preventive services is more likely to be enhanced than the use of therapeutic services, assuming that coverage is extended to both. Six-use of services by the poor and by those who were previously uninsured is more likely to be enhanced by the introduction or extension of insurance.2 To summarize, the initial effect of health insurance on out-of-pocket prices leads to a secondary set of effects which comprise a larger volume, an enrichment, and a redistribution of health services; the redistribution being in favor of covered services, of services that are regarded as less critical, and of services to the less affluent. These secondary effects, in turn, have consequences of their own. Of these, the most important are the effects on price and on costs or expenditures. Prices rise because of the pressure of increased demand on limited capacity, and because the demand is for services that are richer in content. Costs and expenditures increase because of the dual effects of the rise in volume and in price, and because the benefits of insurance plans usually encourage the substitution of more costly services for those that are less costly, though equally effective. And this brings us to a fourth generation of consequences. For the rise in prices and expenditures generates both the need and the demand for greater coverage, which, if satisfied, reinforces all the tendencies already set in motion by the original introduction of health insurance. Thus, the process we have described feeds upon itself and, unless checked by external forces, grows progressively more threatening. To find these checks and balances we must examine the properties of the medical care system in general, as well as the features of the insurance plan itself. In both places we find factors that moderate, and others that enhance, one or more of the effects we have described. And these influences may be direct; or they may be exerted indirectly, through pathways of remarkable complexity. Needless to say, the degree of coverage, by determining to what extent out-of-pocket prices are reduced, influences all subsequent events. In addition, the scope of benefits may be such as to encourage certain services at the expense of others, with consequences to cost and quality. The method of paying providers under the health insurance scheme has a profound effect on price and on the volume and mix of serv346
ices provided. Price is additionally influenced by, and influences, the supply of services. The presence of reserve capacity in the system, or the ability and willingness to bring about a rapid expansion in capacity, will moderate the rise in prices, while it encourages increases in the volume of care. Under these circumstances, the redistribution effects are diminished, since everyone can have more. If the system, or parts of it, are already overloaded, or respond to the rise in prices by reducing rather than expanding capacity, as some say physicians appear to do, the effect on price is intensified, the volume of services cannot increase, or increases at the expense of quality, and certain redistributive effects are magnified. The nature and extent of the social redistribution of services is also influenced by the presence of barriers to care additional to direct costs. It is not unusual to find that, in spite of high levels of coverage, differences between social classes persist. Understanding the effects of health insurance, as they are modified by features of the medical care system, is only the prelude to assessment. In order to evaluate a health insurance plan or, more precisely, the predicted consequences of such a plan, it is necessary to examine how these consequences jibe with a set of objectives that one wishes to pursue. I have chosen eight such objectives: protective efficacy, cost control, quantitative adequacy, qualitative adequacy, efficiency of production, efficiency of allocation, equity, and redistribution of capacity. This is not an exhaustive list, but for present purposes of this discussion it will suffice. Everyone agrees that protecting the consumer against the unpredictable costs of illness is a major objective of a national health plan. In fact, some contend that it is the only objective, subject to a concurrent commitment to containing costs and interfering as little as possible with the status quo. Protection is sought against the costs of care or, alternatively, against the consequences of not receiving care should the consumer not be able to afford care. If we examine the concept of protection a little more closely, we can find that it has two components that are separable, though interrelated. The first is protection against unpredictability. This is the primary drive. The consumer seeks, with a passion, for assurance that if he regularly sets aside a certain amount of money for health care, and adjusts his standard of living accordingly, all his medical care expenses will be covered; and that no further and unexpected reduction in his standard of living or social aspirations will occur. That prudent living will prevent economic disaster is at the very core of the Protestant ethic; and the repeatea experience that this maxim fails utterly when illness strikes is a major threat to that ethic. Thus, health insurance touches on the foundations of social morality. The second component in the concept of protection is that the price of attaining the first objective be not too high, either in absolute terms or as a proportion of a family's income. After all, there are other things in life than medical care, and the reduction in the standard of living necessary to assure medical care should not be so large as to impoverish life in every other respect. It is clear that these two aspects of protection are contrary to one another, in the sense that increasing protection AJPH, April, 1976, Vol. 66, No. 4
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against the unpredictable raises the cost of protection. Much of what we say from here on, in one way or another, is implicated in this dilemma, which is most acute for those who are poor. Also implicated is the insurer, irrespective of whether this is a private or public agency. This is because the greater the protection afforded the consumer, the greater the burden of unpredictability and cost to the insurer. The cost, whether to the consumer or the insurer, is itself influenced by the efficiency of production, as it is affected by insurance. How can one tell how protective a plan is? Obviously, the first thing is to look at the scope of benefits and the amount of each service covered. Also obviously, protective capacity is reduced by exclusions, by copayments and by limits on the liability of the insurer. The importance of the services included depends on how costly they are; whether they must be consumed in large bundles within a short period, or are consumed in small amounts spread over a longer time; and what the impact on health is if the services are not received. These properties are themselves dependent on the characteristics of consumer groups and the mix of the illnesses they experience. The complexity of these factors has made it very difficult to measure precisely the protective efficacy of a bundle of benefits when specified as services rather than cash amounts; but some progress is being made in this direction.3 A very rough measure of the protective capacity of a bundle of benefits is the per cent of medical expenditures that it covers on the average. But this average conceals a frequency distribution of coverage. Also, a given average can be achieved either by covering fully the more frequent smaller bills, or by neglecting these in favor of relatively greater coverage of the less frequent but catastrophically large expenditures. Therefore, it is important to know how frequently, during a given year, a family will have to make specified out-of-pocket payments, and how these payments are related to the ability to pay. The measure of ability to pay is itself a subject of lively debate: for example, whether it should also include assets other than income, and if so, what? Far from being a purely technical matter, the choice of the measure of the ability to pay involves some of the most entrenched values of our society. A measure that includes more than current disposable income tends to equalize disparities in wealth, but it also tends to penalize those who through past effort or thrift have accumulated larger assets. Assuming we have all the data we want, we still have to decide what level of protection is enough. I have no good answer to this question, but it seems to me that insurance has failed to achieve its potential unless there is a limit on the client's liability, so that on no account will out-of-pocket expenditures exceed a specified percentage of adjusted disposable income during a specified period of time. Anything less means an unacceptable level of uncertainty for every family. Whether this percentage increases proportionately with income or is progressive depends on our objective of equity, which we shall describe a little further on. What it should be on the average depends on how much we are willing to pay for the protection it represents-which brings us back to the question of costs and the most efficient use of resources. AJPH, Apil, 1976, Vol. 66, No. 4
We have already said that any specified degree of protection has a corresponding cost. This is an irreducible quantity which we cannot circumvent no matter what we do. We must, therefore, focus on those costs that are subject to control, and those expenditures which yield less than proportionate benefits. The insurance scheme itself introduces an increment of cost in order to maintain and administer the system. To the extent that different modes of organizing and operating the insurance scheme vary in this respect, we can have a preference for one mode over another. A more important consideration is that all insurance will encourage use of service and contribute to a rise in prices. Furthermore, as previously stated, the increase in use of service tends to favor services that are considered to be less important as against those that are more so, and of services to the poor as compared to the rich, unless there are barriers to access by the poor. All these changes in the cost and distribution of services have important implications for our several objectives. To the extent that the increase in use of services and price signify access to needed care, and improvements in that care, they contribute to our objectives of quantitative and qualitative adequacy. It is also true, however, that as insurance covers more and more of the costs of care, increased prices are less likely to reflect better care, and the increments in the volume of care become less and less valuable in terms of generating health. Thus, there are diminishing returns; and there is an element of harm, to the extent that unnecessary services expose patients to injury and divert resources from more valuable uses. If the product of the medical care system is considered to be an increment of health, it is clear that the efficiency of production is reduced by the progression of events described. It is also reduced when more costly services are substituted for those that are less costly, but equally effective, simply because the former are covered by insurance and the latter are not. On the contrary, efficiency of production is improved if, because a broad range of benefits is covered, the physician is able to choose, without hindrance, the combination of services which achieves the greatest improvement in health at the lowest cost. This hope has motivated extensions in benefits beyond hospital coverage to include, successively, diagnostic services for outpatients, the services of a physician in the office and the home, organized home care, and care in a skilled nursing home. Unfortunately, the best evidence does not support this expectation.4 Ordinarily, the more generous availability of these services leads to their greater consumption, without commensurate reduction in hospital use, so that overall costs are increased rather than reduced. Not infrequently, hospital use actually increases, presumably because access to non-hospital services becomes the occasion for recommending hospital care, for good reasons or bad. The only striking exception is that the provision of ambulatory care under prepaid group practice is almost always associated with an important reduction in hospital use. But, in this instance, we have the confluence of three factors: a broader range of benefits; an alteration in the method of paying both the group and the physician within the group; and 347
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the presence of formal and informal professional and administrative controls. In the absence of this concatenation, the broader range of benefits appears to represent an equal opportunity to provide care either efficiently or wastefully. A broader range of benefits has contrary effects also on allocative efficiency. On the one hand, the allocation of a larger proportion of resources to less serious, and even trivial, illness is generally inefficient unless it can be shown to contribute to the prevention of illness or its early detection and arrest. On the other hand, it is considered more efficient when insurance encourages the use of services to a greater extent among the poor than the rich, because the former are more likely to have unmet needs of a more serious nature. Allocation according to income, or other social attributes, and equity are related objectives. Equity depends on how much each population subgroup contributes to the costs of insurance and how much it receives in benefits. Traditionally, insurance theory has required that costs and benefits be commensurate in all groups. This is what fairness is considered to demand. But, this is also what is necessary if free competition is to prevail. The consequence is that people who have small means but a high expectation of illness cannot afford to buy adequately protective health insurance. In order to provide adequate protection for everyone, payments must correspond to one's means, while the use of services corresponds to one's needs. This is another concept of equity; it calls for a transfer of funds from one group to another through the intermediacy of the health insurance scheme. Such transfers can, of course, be accomplished through community rating. But, community rating plans cannot survive in a freely competitive market because they are underbid and driven out by the experience-rated competition. Hence, a redistributive form of equity can only be achieved by governmental action. Assessing the redistributive effects of an insurance scheme is a matter of considerable difficulty. This is because it is necessary to obtain information not only about how the plan is financed, but also about the distribution of the use of services and their prices. The information about financing is itself difficult to obtain and interpret. Very often those who seem to pay are not those who actually bear the burden of payment. For example, the tax on payroll which plays such a central part in financing the social security system, including Medicare, far from being borne by the employer, may be borne partly by the employee, as lower wages, and partly by the consumer, as higher prices. Other taxes that go into financing Medicare and Medicaid undergo similar transpositions, so that their resting places may bear little resemblance to their sources. Shifts also occur in the purchase of private health insurance because the contributions of employers are tax exempt, and those of the consumer are exempt, up to a limit. The transfers that occur as a result of the phenomena we have described, when they are revealed, are sometimes seen to be quite unexpected, and even contrary to avowed public policy. According to Feldstein and Allison, the federal government, through tax exemptions on corporate and individual premium payments, subsidizes the purchase of voluntary health insurance by about $2 billion a year; and the distribu348
tion of this subsidy is regressive relative to family income.5 Stuart and Bair have shown that Medicaid does, indeed, transfer resources from the well-to-do to the poor. However, contrary to its avowed purpose, and in spite of a federal matching formula that favors the poorer states, its net effect has been to transfer money from the poor states to the rich.6' 7 By contrast, Medicare has transferred money from the richer states to those that are either poorer, or have a larger proportion of aged, or both. As to transfers among social classes, Medicare is redistributive in favor of the poor during any one year, but its effect over a lifetime has not been studied, as far as the author knows. Nevertheless, the major beneficiaries of Medicare and Medicaid appear to be the families of physicians, each of whom has received a net subsidy of $4,000 each year, mainly in the form of better collections and unexplained increases in price. This subsidy is additional to any improvement in income due to the higher volume of care provided to the beneficiaries of Medicare and Medicaid. The equitable distribution of services may depend, in part, on the supply of physicians and their spatial distribution. We have already suggested that if the capacity of physicians is limited, it is likely that the more serious unmet needs of the poor will take precedence over the more discretionary increment of demand by the rich, so that, by being redistributed, services become more congruent with need. But this occurs only if there are no other barriers to access by the poor. If there are such barriers, there could very well be a paradoxical effect, so that the gap between the poor and the rich is widened rather than narrowed by the availability of insurance benefits. The location of physicians is one important factor in the availability of care. According to some, the purchasing power created by health insurance will attract physicians to areas that had, up till then, not been able to support them. On the contrary, others have argued that physicians are attracted to certain geographic areas which are desirable because they provide professional opportunities and satisfaction, favorable climate, and a variety of social and cultural amenities.8 The major deterrent to all physicians locating in such areas is that, as their numbers increase, it becomes progressively more difficult for them to earn a living. A national health plan, by generating new purchasing power, will weaken this deterrent, and encourage additional physicians to move into the areas which are already richly supplied. Some years ago, Rimlinger and Steele, reasoning along somewhat similar lines, assembled data to show that physicians tend to settle in areas with high per capita income, where they provide fewer services but can charge higher prices.9 More recently, de Vise has argued, with some evidence to support the argument, that the net effect of Medicare and Medicaid has been to favor the location of physicians in the suburbs, as compared to the inner cities, and on both seaboards, as compared to the midwestern states.8 One might add that the method of paying physicians under Medicare would encourage such redistribution because, in the wealthier areas, which already have more than their share of physicians, the customary and prevailing fees are higher, which also makes the copayments larger; clients are more AJPH, Apil, 1976, Vol. 66, No. 4
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likely to pay deductibles and copayments; and the physician can more easily charge and collect fees that are larger than those considered "reasonable" by Medicare. If all this is true, it suggests that incentives that are much more specific than the general availability of benefits are needed to attract physicians to the underdoctored areas, if coercion is to be
avoided. Through a succession of specific examples we have laid bare what I believe to be the essential nature of our problem: that health insurance, especially when it is comprehensive in benefits and coverage, produces a turbulent mixture of desirable and undesirable consequences, which call for the institution of controls that are designed to permit or encourage the desirable, and restrain or eliminate the undesirable. Through an examination of these controls, to the extent that they are specified in the health plan, one can, first, infer the values and objectives inherent in any plan, and second, evaluate the consequences of the controls themselves. Those who wish to achieve protection, but without disturbing the status quo, direct their attention to curbing the increase in utilization attendant upon insurance, which they see as "moral hazard", and which initiates the train of events that they want to arrest at the source. To accomplish this they resort primarily to limits on benefits and to participatory payments by the client. But this weakens the protective power of the plan, and penalizes more heavily the poor, who have the greatest unmet needs and the lowest ability to pay. This selective penalty becomes progressively greater as prices increase; and is further magnified when the rich buy complementary insurance that covers the copayments in the basic plan, but which the poor cannot afford to buy. Participatory payments may have a socially useful effect in selectively repressing the less important segment of care. However, the client's estimate of importance is often incorrect, and any device that is a barrier to access is likely to inhibit prevention, early detection, and timely care. How can one mitigate these disadvantages and yet avoid more direct intervention in the workings of the medical care system? The most promising answer appears to be in proposals like "major risk insurance"'0 and "variable subsidy insurance"." Without attempting to make some fine, but not unimportant distinctions, we find that these proposals have the following key features: (I) a deductible that is graduated to income, but is large enough so that a large initial amount of care is paid out-of-pocket; (2) copayments that are graduated to income; and (3) a limit on total out-of-pocket expenditures during any given year, also graduated to income, beyond which all expenditures are covered by the plan. It is hoped that, in this way, both the costs and benefits will be more equitably distributed with respect to income; that there will be enough client resistance to restrain the rise in prices; that the overall cost of the plan, and the taxes that go with it, will be kept within reasonable bounds; and, above all, that the market for medical care services will remain essentially undisturbed. In order to succeed, such plans require that everyone submit to the test of income; that the poorest families receive subsidies to meet the deductibles and copayments; that many families be helped to spread their share of the bill over AJPH, April, 1976, Vol. 66, No. 4
a longer period of time, when major illness strikes; and that
no one buy complementary health insurance to cover the deductibles and copayments of the basic plan. More importantly, the fundamental orientation of the plan is to leave a great share of what might be called ordinary medical care to the family, subject to all the competing claims against its resources. The emphasis is on protection against the less ordinary expenses, and on assuring that the losses will never become catastrophically large. In fact, once the magic limit on client participation is exceeded, there is nothing to prevent expenditures from soaring, unrestrained, into the wide blue yonder! The opposing orientation is to encourage the very first step toward care, and to do so equally for everyone, so that an early assessment can be made and subsequent care adjusted to need; but without encouragement to unnecessary or harmful medical intervention. Unfortunately, the traditional restraints on benefits are too indiscriminate to achieve this fine adjustment of care to need. Nor have they succeeded in curbing prices and costs. What is needed is more direct reform of the medical care system itself, in order to weaken the urge to provide unnecessary care, and to assure quality, improve productivity, and contain prices. Two concurrent lines of development are necessary in order to bring about the desired effects. The first is to introduce structural change by altering the method of organizing and remunerating the delivery of care. The second is to institute a system for monitoring professional and system performance. Both are necessary because each depends on the other for its full effectiveness. How far the national health plan moves in these directions, and what forms and methods it uses, become vital elements in assessing the plan. A national health plan can, of course, mandate a total reorganization of health care. Generally, it stops far short of that for the present. Instead, it uses its control over the methods and terms of remuneration to give greater rewards to those forms and activities that are in line with its long-term objectives. Whether this approach works depends on how large the difference in rewards is, and how much room there is for the providers to function successfully outside the plan. One last question remains. Medical care needs are so extensible that prohibitively large sums of money can readily be swallowed up by the health care system, if clients and professionals are given a free rein to consume and to provide services, respectively. If the restraints of the market are removed, how are we to decide what is enough medical care? The answer seems to be: in the same way that we decide what is enough public education-through a political decision that sets a limit on the total resources to be made available. This being done, we would expect that this total is reallocated within the system as productively as we know how. In this way, everyone has equal access to medical care that is equally good or, for that matter, equally bad. It is possible, of course, to give special attention to groups that now carry a disproportionately large burden of unmet need, so that they can be made to catch up with the rest.'2 It is also possible to favor any other segment of the population, depending on who holds political power, and what the values and objectives of the powerful are. Thus, the switch from the market 349
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to another method of rationing holds for many the terrifying prospect of a loss in present privilege, even though, in the end, the roster of those who are favored may be seen to have remained remarkably unchanged. Mainly for simplicity, but also for dramatic effect, we have presented many of our issues in the context of two contending ideologies. But our system is not congenial to these antinomies. As usual, we are likely to proceed in steps and by compromise, fashioning a hybrid which seems to fit best with our own traditions. In this creative and challenging enterprise we are all invited to join.
REFERENCES 1. These and other factors that influence use of service are described in Feldstein, P. J., Research on the demand for health services, Milbank Mem. Fund Q., 44:128-162, July 1966, Part 2. There is further discussion of the revenue effect in Monsma, G. N., Jr., Marginal revenue and the demand for physicians' services, pp. 145-160 in H. E. Klarman, Editor, Empirical Studies in Health Economics, Baltimore: The Johns Hopkins Press, 1970. 2. The technological enrichment of services as a factor in higher costs has received particular emphasis in Feldstein, M. S. The Rising Cost of Hospital Care. Washington, D.C.: Information Resources Press, 1971. The differential effects of insurance according to income and illness have been emphasized as important factors in policy in Pauly, M. V. Medical Care at Public Expense: A Study in Applied Welfare Economics. New York: Praeger Publishers, 1971. 3. This difficult problem is discussed in greater detail in Donabedian, A. Benefits in Medical Care Programs. Cambridge: Har1976 (in press). vard University Press, Spring -1
4. The evidence is reviewed in Donabedian, A., ibid. 5. Feldstein, M. S. and E. Allison. Tax Subsidies of Private Health Insurance: Distribution, Revenue Loss and Effects. Boston, Massachusetts: Harvard Center for Community Health and Medical Care, Program on Health Care Policy, Health Care Policy Paper Number 2, October 1972. 6. Stuart, Bruce C. and L. A. Bair. Health Care and Income: The Distributional Impacts of Medicaid and Medicare Nationally and in the State of Michigan. Lansing, Michigan: Michigan Department of Social Services, Research Paper No. 5, Second Edition, September 1971. 7. Stuart, B. C. Equity and Medicaid. Journal of Human Resources, 7:162-178, Spring 1972. 8. deVise, Paul. Physician migration from inland to coastal states: Antipodal example of Illinois and California. Journal of Medical Education, 48:141-151, February 1973. 9. Rimlinger, C. V. and H. B. Steele. An economic interpretation of the spatial distribution of physicians in the U.S. The Southern Economic Journal, 3:1-12, July 1%3. 10. Feldstein, M. S. A new approach to national health insurance. The Public Interest, 23:93-105, Spring 1971. 11. Pauly, M. V. A variable subsidy insurance proposal. In National Health Insurance: An Analysis, Washington, D.C.: American Enterprise Institute, Special Analysis No. 8, pp. 33-48, August 1971. 12. This subject is developed further in Donabedian, A. Models for organizing the delivery of personal health services and criteria for evaluating them. Milbank Mem. Fund Q., 50:103-154, October 1972, Part 2.
ACKNOWLEDGMENT This paper is based on work supported in equal parts by the Carnegie Corporation ofNew York and the Milbank Memorial Fund.
Society for the Scientific Study of Sex to Hold Fourth Annual Regional Meeting The Society for the Scientific Study of Sex, Western Region, will hold its Fourth Annual Meeting at the Town and Country Hotel, 500 Hotel Circle, San Diego, CA, June 11-13. More than twenty papers and six workshops are planned, along with current scientific research, programs on sex education, individual and inter-relationship sex counseling and clinical sex therapy. The event's Program Co-Chairpersons are Rhoda Rand Codner, MS, Rod Hoeltzel, PhD, Robert Reitman, PhD, and Mary Ann P. Sviland, PhD. All abstracts, papers and other presentations should be mailed to: Fourth Annual Meeting, Society for the Scientific Study of Sex, Western Region, 18740 Ventura Blvd., Suite 302, Tarzana, CA 91356. For all other information concerning the Fourth Annual Meeting, please contact Dr. Robert Reitman at the above address.
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