Unequal Treatment Confronting Racial and Ethnic Disparities in Health Care (2003) / Chapter Skim
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The Impact of Cost Containment Efforts on Racial and Ethnic Disparities in Healthcare: A Conceptualization
The Impact of Cost Containment Efforts on Racial and Ethnic Disparities in Healthcare: A Conceptualization
Pages 699-721
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This resurgence appears to have been caused by a number of factors, including a spike in demand for pharmaceuticals, increasing consumer dissatisfaction with heavy-handed cost containment techniques used by managed care organizations, and the inability of payers to squeeze additional savings from provider payments. This paper argues that the prevailing cost containment methods have the tendency to cause more harm to racial and ethnic minorities than to others.
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The next section provides a simple framework for categorizing cost containment strategies. The following section examines how various cost containment efforts may negatively affect racial and ethnic minorities as compared with other groups.
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Managed competition, more so than the other strategies, emphasizes both demand- and supply-side measures for containing costs. Demand-Side Approaches In the traditional economic model, demand is paramount.
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One of the more overlooked but intriguing findings of the RAND Health Insurance Experiment, the pre-eminent study of consumer demand for health care services, is that co-payments had a substantial impact on whether or not patients sought care for an illness, but little discernible effect on how much care they received once they sought medical attention (Manning et al., 1987; Newhouse, 1993~. Apparently, it is the physician who controls resource usage once an episode of care commences.
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Table 1 shows how primary care physicians are paid by health plans, and Table 2 shows the same information for specialists. Within the table, "withholds" refers to the situation whereby some of the physician's remuneration is held back and paid only if certain cost containment goals are met, such as keeping down hospitalization and referrals.
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How Health Plans Pay Specialists Northeast/ Southeast/ Mid- South All California Midwest Atlantic Central Plans Markets Markets Markets Markets Predominant payment method for specialists Fee-for-service (total) 75.3% 35.9% 100.0% 94.7% 80.2% Without withholding or bonuses 52.2% 23.8% 57.2% 73.0% 56.6% With witholding or bonuses 23.1 12.1 42.8 21.6 23.6 Capitation (total)
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These are the parts of managed competition aimed at the demand side. Health plans, in turn, need to keep their costs down to remain competitive, and one way they can do so is to pay providers in a manner that induces them to control costs.
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COST CONTAINMENT AND RACIAL AND ETHNIC DISPARITIES This section is divided into two parts: demand-side approaches for containing costs and supply-side approaches. Within each, I will indicate how the use of these techniques is likely to affect racial and ethnic disparities in health care.
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The point was made forcefully by Manning and colleagues (1987) , who asked whether the cost of the RAND Health Insurance Study (over $200 million in today's dollars)
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imposes higher patient cost sharing, which in turn reduces utilization. The implications of relying on patient cost sharing on racial and ethnic minorities are extremely important.
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The RAND Health Insurance Experiment did find some instances in which lower cost sharing improved health status. Some of these included: · Low-income families at elevated risk benefited the most from free care.
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As noted above, the traditional theory posits that cost sharing should be highest for services that are most price sensitive, and indeed, the RAND Health Insurance Experiment found prevention and dentistry to be among the most price-sensitive services (Newhouse, 1993~.5 Application of this theory would therefore discourage usage of preventive care, an area in which racial and ethnic minorities have both the greatest need and ability to benefit. Of all of the cost-containment methods reviewed in this section, patient cost sharing is the one I believe is most problematic for racial and ethnic minorities.
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Consumer Information The second demand-side approach to cost containment is relying on consumer information. As noted earlier, this is manifested mainly by comparisons of the benefits, costs, and quality of health plans, as well as consumer satisfaction.
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Few other countries rely on consumers to make choices among competing health plans. It is quite possible to organize a health care system whereby everyone has the same health plans and cost containment efforts are focused on things other than demand-side strategies.
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Reviews of the literature by Miller and Luff (1997, 2001) , one of which includes literature up to the year 2000, lists just as many studies finding that HMOs provide better quality care and worse quality
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It may be that physicians have stereotypes about racial and ethnic minorities, and apply these generalizations to individuals in the group. They write: "Physicians may fail to correctly incorporate individual diagnostic data, instead being swayed by their beliefs regarding the probabilities of individuals in a socio-demographic category having a given characteristic.
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57~. The findings therefore are consistent with the belief that financial incentives that encourage physicians to reduce resource usage under managed care differentially harm racial and ethnic minorities.
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Traditionally, utilization review has been thought of as a cost containment method because it was originally applied to fee-for-service medicine, in which there often is a financial incentive to over-provide. But it can also be used in a capitated environment to ensure that enough services are being delivered.
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systemwide policies such as regulating the supply of hospital beds, physicians, specialists, and medical technologies. One of the most common methods of cost containment, especially for hospital and physician services, is the use of some kind of global budgets.
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Those who lack that ability therefore, will either use fewer services or spend much more of their income using them. Since racial and ethnic minorities have lower average incomes and, for most indicators, worse health status, demand-side cost containment policies tend to hit particularly hard.
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Thus, while striving to increase the sensitivity of health care providers to existing inequities, we must not put further barriers in the way of racial and ethnic minorities receiving needed health care services. REFERENCES Abel-Smith, B
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Free for all? Lessons from the RAND health insurance experiment.
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1991. Canadian Health Insurance: Lessons for the United States.
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