Archives
Editorial
Managed Competition: A conundrum for Sr Alice
Jane Shoebridge
Nursing (Social Science), Faculty of Health Sciences, Flinders University of South Australia, SA
Article Text
'Managed competition' in a nutshell is health policy designed to protect the public while promoting private profit. Construed this way it should not be too difficult to sort out our response to it as individuals and as nurses. But it is clever policy and may present many nurses, like Alice, with a conundrum.
Managed competition is a regulatory framework in which central government guarantees funds for basic health care, and insurers and deliverers of health care must compete for business. The framework creates what health economists call 'internal markets'.
First mooted in the late 1970s by Alain Enthoven of the Graduate School of Business at Stanford University, managed competition is popular with health economists serving conservative OECD [Organisation for Economic Cooperation and Development] governments. A variant is on the agenda of options for Australia, courtesy of the Industry Commission report on private health insurance (February 1997).
Managed competition is a compromise between public and private health systems but differs from Australia's universal mandatory health insurance system Medicare, its mixed public and private market of providers and its regulation of private health insurance through the community rating principle. Community rating means everyone opting for a category of cover must be charged the same premium, no matter how old or young, potentially healthy or sick.
Why do we need to change? Proponents of managed competition say it would stop cost-shifting (between private and public, State and Federal systems), challenge medical monopoly and over-servicing by substituting economically more efficient workers and improve coordination of care. The main reason, however, is 'adverse selection'.
The private health insurance industry is complaining about dwindling reserves. Unemployment and wage stagnation mean people can no longer afford premiums and Medicare's success means many people have lost the reason to have private insurance. Private funds have lost younger, healthier subscribers and have been left with a pool of older, sicker people who they argue make too many claims. Fewer members mean even higher premiums so yet more people leave. Insurers are especially insulted by people who plan to have procedures soon after joining their funds and then leave. Since the community rating principle means insurers cannot, at any rate should not, selectively target the old 'moral hazards' for extra high premiums or tempt the young with bonuses, they are locked into a downgrade spiral of 'adverse selection' and losing money.
It should not surprise us then that a neo-conservative government would rescue private health insurance with public sponsorship under the rubric of managed competition.
How would it work?
Health insurers are called 'purchasers' or 'budget holders'. They could be government or private corporations, including partnerships of doctors, who actively purchase health services and pharmaceuticals on behave of their customers. To keep its last election promise to 'maintain Medicare', government would have to pay private and public health insurers the same risk adjusted capitation rate from taxation revenue for the same range of basic only health care. However, above this base level of care, private insurers could charge extra premiums for extra costs and services. What a conservative government would do to the capitation rate for public health care were it re-elected, becomes a very important question.
The health workforce of nurses, doctors and others, whether independent or collectively employed by hospitals and community health agencies would be called health care providers. Providers' work becomes a product competitively costed for the market by rational calculations such as diagnostic related group (DRG) or casemix. To win contracts from budget holders, providers' bids must undercut competitors. Since funding for hospitals would no longer be guaranteed by government, public hospitals will be forced to compete with private hospitals. Lower paid substitutes for high-cost skilled labour would be essential for economic viability. Changes to the trade practices act will enable employers to break professional monopolies in order to do just this.
The public would be defined variously as consumers of a health care product, customers of a heath agency or subscribers to a pre-paid health insurance plan. Customers would be encouraged to shop around each year for the best value for money before signing up with a budget holder for a year's supply of health insurance. Those signing with a private insurer will pay once, not twice, for basic health care. Those individuals who don't sign up for private health insurance will be automatically covered by Medicare. Over time, public patients would become a residual category. We would have to put the principle of solidarity at risk and created a two-class health system.
How would the DRG/casemix system be used?
The DRG system has an ambiguous relationship to productivity. Because its database is useful for predicting costs, management uses it to calculate efficiencies. Efficient providers are those who increase turnover but off-set the added costs. In the current Australian context, complex cases requiring more intense and heavy nursing care with predictably higher costs, are steered into the public hospital even if privately insured. Simpler private cases, with predictable short-term needs are steered into the private system. Under managed competition, once members and contracts are signed up, the private system of insurers and providers would be assured not only that bills are all paid (no risk) but doubly assured of predictable patient/bed turnover.
The state would not only underwrite but actually pay for private provision of basic health care at a level yet to be defined. The private insurer will only need to underwrite the extra premiums. This is a recipe for the highest possible predictable profits. It explains why the multinationals are so attracted to the Australian public/private hospital honey-pot.
Where has managed competition been used and with what consequences?
The Thatcher government used managed competition to quasiprivatise the British national health service(s) in the 1980s. Commentators speak of confusion in rules for contracting, difficulties due to chronic underfunding and no evidence that competition in health care markets actually achieves cost efficiency. The British Labour Party promises to close 'internal markets' and end competition if elected to government.
The Swedish national health service experimented with versions of managed competition in the early 1990s with demonstrably contradictory outcomes. One county council (Stockholm) was threatened with cost blowout when private doctors' fees ran out of control.
The Dutch are experiencing major problems with insurers whose interest in profits has been found to conflict with their obligations to ensure members receive the expected level of care.
International critics of managed competition point out that neoclassical theory underpinning it derives from conservative models of perfectly free enterprise commodity markets, unachievable in real-world conditions and ethically and logically problematic in the field of health. No matter how nice the language it is dressed in, competition guarantees relative winners and losers.
What are the consequences for nurses' work?
Nurses would be very obviously affected by the need to win contracts. Individuals may win or lose but the majority would 'win some, lose some', thus making managed competition an ethical and political conundrum. Already pressured by complex and heavy patient loads, the public hospitals will be forced to speed up turnover to match private hospitals. In both systems, nursing work would further intensify and the workforce would re-stratify into enskilled and deskilled work.
Registered general nurse job security could be traded for contract work. Employees would have to trust employers to deal with budget holders without selling out. The role of unions would be critical. If, as individual nurses have put it in recent conversations, nurses in the private sector are inhibited, even intimidated from organising in their collective interests to challenge top-down management, then in the contractual environment of managed competition, we could predict nurses in both sectors could be vulnerable to frank exploitation.
At the enskilled peak of the nurse workforce pyramid, advanced specialist midwives, community mental health, child health, remote area, women's health and gerontological nurses may find their advanced level skills suddenly respectable and marketable substitutes for medicine. Hospitals may substitute specialist nurses for doctors in certain clinics and redeploy clinical nurses to visit patients sent home ever earlier, substituting home for hospital accommodation. At the de-skilled end, hospitals which re-locate recuperating patients into hotel, hostel and home accommodation are substituting nurses with untrained personnel, and in the case of home care with unpaid work.
Alongside the proposal for managed competition, a series of government funded 'coordinated care' plans are being trailed in five States and the Australian Capital Territory. The plans are for people in the early stages of long-term illness or need, especially the elderly, or people struggling with difficult social and health problems. Their manifest aim is to integrate the mess of community based aged care. But, if institutionalised within a managed competition framework, these public plans would magically relieve the private insurers of their 'adverse selections' and their 'morally hazardous' burdens of care, would they nor?
In trial reports I have read, general medical practices coordinate care. So, if between them managed competition and coordinated are plans enable doctors to be budget-holders for the population's primary, secondary and tertiary levels of health care, are we witnessing a state-sponsored medical renaissance? Or will risk-adjusted capitation rates and contracts bring medical servicing and fees under government control to the point where the state finally wins?
In the battle over the financing of health care, will nurses be casualties or victors? Will district nurses transform their permanently community-based jobs into contracts with general practitioners? Will hospital registered general nurses sacrifice their high-skilled jobs so a deskilled workforce meets contracts for 'basic health care'? Will registered nurses spend their wages and unemployment benefits on specialist credentials bought from employer-university partnerships?
Occasional correspondence from 'Wonderland' found in the file:
Dear Sr Alice
Will you be my very own practice nurse?
Your ever-admiring budget-holding Hatter.
Dear Dr Hatter
With gratitude-but how fast must I drive, compute and continually upgrade my education to stay in the same place?
Your skeptical Alice
If we go with managed competition to win cheaper private premiums in the short-term, we gamble public health care and public jobs. The framework could be used as a ladder to bring down the best of Medicare's public spirited equality of access to high quality care. Step one down to Medicare as a mere safety-net insurance designed to catch those who cannot afford to insure privately. Step two down to safety-net insurance for hospital treatment only, requiring uninsured people to pay up-front fees to see a private general practitioner or a doctor in the outpatients' clinic of public hospitals. Step three down to governments' refusing to repair holes in the public hospital safety-net. At this point, not only would the public be seriously at risk but also the education and research functions of the major teaching hospitals.
Meanwhile, the private ladder upwards will have incremental steps providing ever more profitable conditions for insurers. One serious suggestion in the Industry Commission report is to require people who join a private fund at age 65 years or over to wait five years before they can claim a benefit for a pre-existing condition!
There is a moral alternative to economically dry, rational, cold-hearted policy designed to promote private interests with public funds. The proportion of GDP spent on the public health care system as a whole can and should be increased, with special attention to the aged care sector. The talk of 'crisis' in Australia's spending on health care is a wild exaggeration; we spend less proportionally of GDP than the OECD average. Over the past decade, recurrent expenditures have steadily shifted proportionally from the public hospitals to private hospitals, medical services and pharmaceuticals. The current swing to the right is endangering our universal, equitable, high-quality health service. The public and their Alices need care, not competition.
eContent Home