Introduction
Regulation of healthcare in America continues to be a divisive topic. The regulatory process is complex, impacting healthcare payers, providers, and consumers. Polar views on market dynamics and the right to healthcare contribute to the quagmire. Healthcare regulations thus far have been made in piecemeal fashion. As the issues of cost, quality, and access to care grow with the aging of the U.S. citizenry, Federal change may be in store.
• Regulation and Policy - Differences
Regulation and policy are different. According to the Merriam-Webster’s dictionary, a policy is a high-level overall plan embracing the general goals and acceptable procedures especially of a governmental body and a regulation is a rule or order issued by an executive authority or regulatory agency of a government and having the force of law.The former is designed to facilitate decision-making and the latter is designed to control and govern the decisions.
• Need for Regulation and Policy
Regulations are needed for three primary purposes: (1) to promote adherence to standards, (2) to manage and simplify market complexity, and (3) to fill gaps due to private sector inaction.
First, regulations and policies are used to control behavior of certain groups and hold them accountable to set standards. This control is especially necessary in a capitalist market, where the interests of business and consumers conflict. In the case of pharmaceuticals, manufacturers are held to high manufacturing standards. For healthcare providers, association-set standards of care and medical guidelines establish treatment protocols. For insurers and sites of care, Federal, State, and industry-affiliated organizations monitor facilities and processes. Without regulation, variation would naturally exist.
Second, complexity and competing interests invite regulation. The complexity of players in the U.S. healthcare system and the myriad insurance provisions and financing sources led government to simplify Medicare, for example. Medicare recipients were confused by the multitude of overlapping options for supplemental Medicare coverage. Moreover, in many cases, one entity can more effectively make decisions to benefit the whole than numerous decision-making bodies.
Third, as the evolution of Food and Drug Administration (FDA) policies exhibits, governmental regulation can arise to fill private sector gaps. For example, environmental protection policies serve to protect natural resources, the water supply, and air quality from wastes of business and industry. Federal support of research through the NIH provides resources that otherwise would not be provided. Importantly, healthcare coverage provided by Medicaid and Medicare enables targeted, underserved populations such as the poor and elderly to access needed services.
In summary, regulations serve the greater society when private interests fail to do so.
• Reasons for Regulation - Regulators
The main reason for the introduction of regulation on food, drugs, and cosmetics is protection of consumers. Early health regulation dealt with the quality of products on the market. Pieces of legislation meant to protect the citizens from misbranded and adultered foods and drugs and misleading or false claims were enacted in the early 1900s. The death of 107 people in 1937, from a poisonous additive in Elixir of Sulfanilimide, dramatized the need for more safety measures. Product regulation continued to evolve and grow as new public health crises developed and our understanding of health risks grew. Regulation concerning access and cost were slower to develop, but have become the main topics of health policy discussions today.
Unlike governments of other nations, the American government is not the primary driving force in the U.S. healthcare industry due to our capitalistic, market driven society. Healthcare is a right of each citizen in many other countries; this is not the case in America. Most of the American public has health insurance funded by employers or individuals as out-of-pocket expenses. The government only provides healthcare to vulnerable portions of the population such as the elderly, the disabled, the chronically ill, and the poor. Furthermore, government sponsored regulation is only applied when market forces fail or do not function efficiently. Regulation must be enacted when the profit motive overtakes the needs for quality, cost efficiency, and access. (Shi and Singh, 2003, 523).
Government agencies were started to oversee much of the legislated regulations enacted to fit specific needs. Today, the department of Health and Human Services (HHS) oversees most healthcare regulation. Additionally, Medicare uses peer review organizations (PROs) to enforce standards and the Centers for Medicare and Medicaid Services (CMS) regulates costs and coverage. State insurance departments regulate health insurance companies. Hospitals and practitioners are self-regulated, but are still licensed by the States. Doctors are regulated by the their own professional organization, the American Medical Association, and Hospitals accredit each other as meeting standards of the Joint Commission on Accreditation of Healthcare Organizations. (Shi and Singh, 2003, 521).
The Food and Drug Administration (FDA) is the government agency under HHS that regulates drugs, medical devices, and biologics. This regulatory entity’s powers began in the early 1900’s with the Food and Drug Act of 1906, which allowed FDA to regulate a drug only after the drug had been placed on the market by the pharmaceutical company. Years later, after the “Elixir Sulfanilamide incident”, the Federal Food, Drug and Cosmetic Act of 1938 was passed. This law required drug-producing companies to notify FDA before marketing a drug, so that the product could be tested for safety. Following yet another crisis in the early 1960’s in which thousands of birth defects were linked to a product that women were using to alleviate morning sickness, the 1962 Kefauver-Harris Amendments were enacted. The 1962 laws determined the pre-market approval system in which FDA was given the authority to approve products for marketing based on safety and efficacy.
• Regulation Beneficiaries
Primarily, regulations protect the public. For example, through intensive approval processes, agencies such as FDA protect the public from harmful agents by ensuring the safety of products made by pharmaceutical and consumer companies. Government protects the public from the insurance companies (should the companies default on their coverage). Medicare, Medicaid, and Children’s Health Insurance Programs ensure protection for the elderly, indigent, and children by providing them insurance and access to doctors’ offices and hospitals. Regulated funding for programs in medical research (such as the NIH) ensure continued advances in technology of healthcare, and, thereby, availability and quality of care to the general public. Regulation also ensures protection for the people and agencies that are delivering healthcare (e.g., insurance companies are unable to be sued, and regulation of malpractice suits against physicians is under consideration).
• Regulation of Health Care Goods and Services
The number of healthcare goods and services that are regulated either by the U.S. Government or by private groups that set standards for their members has been growing since 1938. Today drugs, dietary supplements, and healthcare services are regulated to ensure high standards of the whole healthcare industry. Different government agencies control the safety of the new products coming to the market, as well as the way services are provided to the citizens.
Regulation of herbal remedies in the U.S. is stated in The Dietary Supplement Health and Education Act (DSHEA) of 1994. Previously, FDA had regulated dietary supplements according to the Food, Drug, and Cosmetic Act of 1938. When Congress passed the DSHEA, which changed supplements’ classification from "food or drug" to "dietary supplement," less stringent standards for regulation for herbal remedies were implemented. FDA does not regulate health related services like health insurance, cost of products and procedures, or reimbursement of health and medical expenses.
While FDA controls mainly healthcare goods, there are several institutions that control the quality of health services provided to patients and fairness of the treatment.
• Development of Regulation
Development of regulation and policy is characterized by some major themes: a mixture of private and public interests, fragmented reform, the involvement of interest groups and the impact of legislators. Due to conflicting interests, reform of the healthcare system is usually a form of compromise. Some influential groups that can affect change in policy include Federal and State legislatures, employers, consumers, insurers, practitioners, provider organizations, and technology producers. (Shi and Singh, 2003, 527).
The Medicaid system exemplifies piecemeal regulatory development. Started in 1965, Medicaid has undergone additions and revisions in coverage through the years as different groups of disadvantaged citizens were identified as needing assistance. Since people had to qualify for Medicaid, some were not covered. Over the years children and pregnant women that otherwise would not have qualified have been added to ensure Medicaid access based on need. Furthermore, Presidential leadership championed most of the major reforms in healthcare like Medicaid. Lyndon Johnson is noted for his role in the creation of Medicare and Medicaid, Reagan for cost control programs and elder care, and Clinton for helping to ensure portability of insurance coverage and patient information security under the Health Insurance Portability and Accountability Act (HIPAA).
The cycle of how policy forms has five components: raising the issue, policy design, public support, legislative design, and legislative decision-making and policy implementation. (Shi and Singh, 2003, 530) After a problem has been identified and there is enough support to ensure that action is taken, the work of designing policies and regulations that will solve the problem is begun. Congress has the power to create “laws that shall be necessary”, the power to tax, and the power to spend. Through these powers, Congress can apply Federal funds and influence to make policy work.
Health regulations must pass through a long process to be enacted due to the checks and balances the U.S. government uses. Most health legislation originates from the House of Representatives given that its committees have the power to fund and control Medicare, Social Security, public health reform, and healthcare providers. Once a bill has public support and is proposed in the House, it is forwarded to the appropriate committees and agencies for hearings. This is the time where special interest can exert a great deal of control over the text of the bill. Once approved in committee, the bill is given to the full House, and a vote is taken to approve the bill with or without the amendments. The bill is then sent to the Senate and the process starts over again. If the Senate approves the bill with new amendments, the House must vote on the entire package again. Once the House and Senate both accept the bill, the President can approve or veto the bill. If vetoed, the bill can be approved by a 2/3 vote of Congress.
Once approved, the legislation is signed into law and it is forwarded to the agency overseeing regulation. That agency publishes proposed regulations and holds hearings regarding how the law will be implemented. Groups that may want to oppose the new law can then start the process of judicial review in the courts. (Shi and Singh, 2003, 533).
• Differences in the Development of Regulation
Since many different organizations enact regulations, logically regulatory developmental differences exist. However, most regulations are spurred by the same thing: public demand. Once public demand for regulation has been heard, there are several different ways regulation can come into being, mainly because there are so many different groups that can be in charge of regulating.
Congress is the key developer of laws that determine how healthcare policy is enacted. Some aspects of healthcare are self-regulated (physician practices), while others are regulated by State organizations (health insurance), Federal organizations (FDA), or a combination of both State and Federal organizations (Medicaid). Not only are there different regulating bodies, there are also different processes within each of these bodies to bring regulations into effect.
Regulations are driven by the country’s health policy at the current time, which is determined by the executive and legislative branches of the Federal government, each individual State government, and special interests. The judicial branch of the government rules on the legality of the policy and legislation as they are enacted.
• Advantages and Disadvantages of Regulation
The advantage of regulation is that it allows many individuals who may not otherwise receive healthcare (due to high costs and limited access) to be treated and cared for, so as to prevent the rise and spread of disease. This again relates back to issues of safety in healthcare. Before regulations were established regarding treatment of the indigent, conditions in which these individuals were cared for were far from ideal. In these early days, almshouses and pesthouses were used as facilities for those incapable of treating themselves. Although they held different functions (almshouses were used to provide food and shelter, and pesthouses were used to house the indigent who were ready to die from severe, contagious diseases), neither provided adequate medical care to this population of the country and most likely increased the likelihood that contagious diseases would be spread to healthy individuals. Regulation also allows for technological advances: the U.S. has the most technologically advanced healthcare system in the world.
However, it is quite costly for State and Federal governments to provide this regulation. Medicare and Medicaid program costs are on the rise, along with other costs of regulation (administrative costs, legal costs, time, etc.). Additionally, even though this regulation exists there are still many Americans who remain uninsured because requirements for regulated programs are so narrowly defined to particular groups of individuals (e.g. salary caps for entering the Medicaid program).
• Is There a Free Market for the Health Care Industry?
A free market implies that the capitalist system should allow businesses to introduce any product to the market. The public will examine these products and deem them successful by “voting” for them with their dollars. This system only works if the public is accurately able to assess the safety and efficacy of these products. Due to the extreme difficulty in determining the efficacy of healthcare goods and services and the vast data collection necessary to track the safety in utilizing these compounds, the public is unable to accurately determine the value of these treatments. The remedy to this problem is to create an entity with the appropriate resources (expertise, manpower, and authority) acting on behalf of the public that evaluates healthcare goods and services for safety and efficacy. This is achieved through the actions of FDA.
• Market Forces and the Health Care Industry
The market for the U.S. healthcare system is an extremely complex one that cannot immediately be examined by the standard microeconomic tools of supply and demand. A public generally uneducated in healthcare utilizes the modern day healthcare system, with treatments selected by physicians, and the final bill paid by a third party insurance or managed care organization. The disjoint nature of this market yields a system where FDA regulation is necessary to examine quality of the products and third party payers are responsible for the negotiation of drug prices. Since the government is the largest third party payer it at times may negotiate more “rigidly” than other organizations are capable, providing it with the lowest pharmaceutical costs.
• Limits of Regulation
Regulation of healthcare in the U.S. is often varied and asymmetrical. It is also controversial, as most conservatives push for deregulation in all industries, including healthcare, while liberals look for the government to have an ever-expanding role. The majority of Americans would agree that some amount of regulation is a good thing. Although FDA is plagued by bottlenecks and increases the costs to bring a drug to market, few people would argue that FDA is an unnecessary institution. Along similar lines, most people appreciate the regulation provided by State health inspectors, State licensing boards, and hospital accreditation. However, the State and Federal regulations that provide for Medicare, Medicaid, and other programs are much more contentious.
Most conservatives believe that in a competitive market, providers would regulate themselves (as do physicians and medical schools), and that those groups that failed to properly regulate themselves would eventually exit the market as their businesses failed. Their solution would be to have the minimum amount of regulation; perhaps just enough to provide for adequate research and information for pharmaceuticals and medical treatments, and to deregulate the rest of the industry enough that free markets could operate. However, this method would not necessarily eliminate or minimize potential harm, as there would be at least a short period of time before word spread that a particular provider or service was untrustworthy or dangerous. On the other side of the debate, liberals would prefer to increase regulation to the point that all aspects of healthcare would be under government control, from universal insurance or single payer plans, to possibly deciding which treatments and doctors consumers have access to. This maximum amount of regulation would at least initially minimize harm, but might eventually stifle innovation and lead to large tax burdens.
As with most issues, the best approach is likely somewhere in between these two positions. We have seen how over-regulation can create slow-moving behemoths such as FDA, but we can also look back to the many deaths and injuries that occurred before FDA was created to protect consumers. Federal regulation of pharmaceuticals is a necessary evil, whose good outweighs harm done.
Since regulation is such a complicated issue, it is one that might best be left to the will of the people. By clearly drawing a line where regulation should start and end, we would be undermining the democratic process laid out in our Constitution. When a significant portion of the electorate finds a need for increased regulation, such as increased powers for FDA, they can send messages to their elected representatives, who will then hopefully act on their behalf. Regulation should also be limited by the same means, with the masses determining the type and amount of government they desire.
• Social Equity and Distributive Justice
The sometimes competing philosophies of market justice and social, or distributive, justice contribute to the complexity of the U.S. healthcare system, healthcare regulations, and policies. In particular, a collision between the two philosophies occurs with respect to healthcare coverage and the nature of the “right” of U.S. citizens to some or all healthcare services regardless of ability to pay.
According to market justice philosophy, equitable distribution of healthcare services occurs as a result of market forces within a free economy. Following economic theory, the cost of healthcare will be directly related to supply and demand. Accessing healthcare services is correlated to an individual’s ability and willingness to pay for them. However, in order for this scenario to hold, a perfect economy must exist: the U.S. healthcare system, as mentioned early, is far from being a perfect market system. As a result, people who are unable to pay for healthcare services face additional barriers and are often unable to access much needed care. Consequently, the greater good of the public’s health as a whole is put at risk, as preventive healthcare services are underutilized, risk of infectious disease rises, and the economy suffers due to lost productivity. A pure market of this type serves the needs of the wealthy yet harms the poor and/or those in rural areas with travel burdens and other resource limitations. (Shi and Singh, 2003, 56).
In contrast, social justice philosophy holds that equitable distribution of healthcare is a responsibility of society. Instead of perceiving healthcare as an economic good, social justice views healthcare as a social good; therefore, removing financial and other barriers to healthcare goods and services is morally just. In other words, improving the health and productivity of the underprivileged will eventually benefit the greater society. Medicare and Medicaid are examples of social justice policies. Over the 20th century in response to public health crises and the undeniable social benefits of improving healthcare services to pregnant women and children, policy was enacted to reduce barriers to care.
The debate in the U.S. over what is equitable access to healthcare will likely continue over the next few decades. Proponents of market justice prefer a laissez faire treatment of the healthcare system; however, the fact remains that preventive care decreases risk of serious, more costly disease and lost productivity to society. If universal healthcare coverage is not legislated, some form of basic preventive care should be made more available to reduce the long-term costs to society of unequal healthcare access. The burden of high healthcare costs and inadequate preventive and chronic care continues to be borne by State and the Federal governments. These growing costs raise the visibility of the issue and the importance of regulatory and policy measures to manage and reduce costs. As the population ages and regulations to improve access to care are put off or made in piecemeal fashion, the likelihood of these costs increasing is high.
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