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Schnequa N. Diggs
For complete article see: Schnequa N. Diggs , Health Disparities and Health Care Financing: Restructuring the American Health Care System, 38(4) Journal of Health Care Finance 76 (Summer, 2012) (65 Footnotes)
For more than seven decades there has been a systematic disregard for the health needs of certain groups of individuals. Discrepancies in treatment and privilege based on race/ethnicity, gender, sexual orientation, class, and socio-economic status have been significant players in any portrait of American health care and have helped frame considerations of those who deserve and those undeserving of quality health care. Continuous incidences of inequitable health care practices strongly suggest a need for drastic changes in our current health care system. Although growing interest in social inequalities in health preside, health policy makers struggle to find appropriate intervention strategies to alleviate health disparities. The purpose of this article is to depict a clearer portrait of the American health care system within the context of health disparities and recognize intervention strategies to reduce/eliminate health care disparities. This article concludes with suggestions on how to refinance the American health care system based on equality principles. Key words: health disparities, health care spending, health care financing.
Structural racism and institutionalized discrimination continue to deeply entrench American society. This entrenchment has affected the medical profession, medical education system, our health delivery system, and our health policy system. We can no longer afford to neglect undergirding determinants of health disparities. Although some may refuse to acknowledge that race/ethnicity, gender, sexual orientation, class, and socio-economic status are major determinants of health outcomes, the fact remains that caste, race, and class distorted the nation's hospital system from its beginning. If careful consideration for a major health care reform is ignored, health disparities will continue to worsen and strain our current health care financing system.
The intent of this article is to evaluate the intriguing dimensions of health disparities in order to paint a clearer portrait of the American health care system. Delineating health disparities contributes significantly to health policy formulation and implementation; it also creates initiatives specific to reducing the occurrence of health care disparities/inequalities. In addition, transforming our current health care financing structure would result from those initiatives. The goal of national public health research and practice is to provide equal access to health care to build stronger communities.
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Understanding the Nature and Causes of Disparities
Conceptualizing the intricacies of what actually encompasses health disparities lacks consensual agreement in health care literature. Health disparities and health inequalities are used interchangeably and refer to the gaps in health status (i.e. life expectancy, infant and maternal mortality rates, disease, and other measures) among groups of people based on differences in factors such as gender, race or ethnicity, education, income, disability, geographic location, or sexual orientation that are systemic, avoidable, unfair and unjust. Several researchers suggest comparing one group's health status with the majority, the population average, or the healthiest groups to determine health disparities as others argue for examinations of census tracks to identify area-based health disparities. Arguments against any ideologies associated with racial differences in health care caused from genetic variations among races are countered by arguments suggesting health disparities result from both biological vulnerability and social disparities.
Debate over which paradigm is precedent over others in academic literature and to what extent one defines its meaning has important policy implications on how to measure and monitor collaborative efforts to improve the quality of health provision, financing, and eliminating disparities. Regardless of which paradigm one selects to observe, institutionalized discrimination is a dominant theme in the practice of our current health care system and demands drastic change. Individual and joint considerations of these paradigms of study are necessary to understand the nature of health disparities in America and help to convey corresponding responses that offer a possibility of giving a holistic/comprehensive formulation to a total transformation in the health care policy arena. The subsequent section expands on the two major underlying determinants of health disparities: race/ethnicity and class/socio-economic status.
Racial/Ethnic-Related Disparities
The American dilemma is the conflict between the general American attitude towards race and our heritage of freedom and equality. Race is one of the major determinants of health outcome in America. Race was and is a social category that captures differential access to power and desirable resources in society. Fewer resources are available for minorities, which jeopardizes their quality of life. Race, racism, and discrimination are part of the American way of life in which a certain threshold of acceptance or tolerance exists for discriminatory treatment and behavior. Those identified as undeserving have learned to cope or adapt to perspicuous color lines.
From a historical perspective, socially constructed imagery attempts to degrade the existence of the African American culture. Within the era of scientific dominance, the expendable perception of African Americans has rationalized discriminatory treatment as fitting, proper without evil intent. Notable race-related injustices legitimize notions of those presumed deserving and undeserving of quality health care, extending the legacy of oppression (i.e., the Tuskegee syphilis experiment, which left black men, in particular very distrusting of the health care system). Medical exploitation was justified, and black people were over-utilized for medical demonstrations, risky surgeries, clinical trials and research experimentation. Dehumanizing practices (strategic marginalization) and constant exposure to medical inequalities represent both failure and ethical dilemmas in our current health system.
Various research studies have found discrepancies in the treatment and privilege of health care delivery. Minorities have poorer health outcomes than their Caucasian counterparts. More specifically, African Americans experience poorer health outcomes than any other racial or ethnic group in the United States. Hispanic Americans have the greatest inequality in the availability, use, and quality of health care provisions. The diversity of health needs among people of color and limited access to quality health services significantly contribute to health disparities.
The National Healthcare Quality Report depicts the unequal care provided by health care professionals. Racial/ethnic and socioeconomic measures were ranked in terms of better, same, or worse quality of care, which clearly illustrate large ranking of worse quality of care when white and non-white populations are compared. The same is true for socio-economic status.
Class and Socioeconomic-Related Disparities (SES)
Sentiments of economic, political, and social differences among people entrap every aspect of American life. This leads to another major determinant of health outcome in America, class and socioeconomic status (SES), also referred to as the ignored determinant of health in the United States. Research on SES disparities has been overshadowed by racial and ethnic-related disparities. One could argue suppressing SES-based disparities to racial disparities is a strategic approach used by the government to avoid providing health care subsidies to the less fortunate. Linking SES to health disparities draws too much attention to the government and forces interventions to regulate health provision.
Economic and social barriers to quality health care create a strong divide between middle and low income Americans: the haves and the have-nots. Health care policies tend to favor the wealthy and ostracize those with strong barriers to health services (i.e., no insurance, limited, or no access to services). This rationale helps to categorize class and SES as important predictors of variations in health. A research study illustrated how socioeconomic barriers account for more than half of the reported health cases.
Figure 1. Distribution of Core Quality Measures for Which Members of Selected Groups Experienced Better, Same, or Worse Quality of Care Compared with Reference Group
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Financial barriers directly affect the use and quality of health care and health outcomes. In 2005, federal standards did not require medical providers to collect data on SES, income, or education level--just race. No rationale was provided for this practice; however, the lack of a tracking system challenges monitors and measures of SES-related disparities. Undocumented occurrences and reporting of SES-related disparities severely impede efforts to understand and monitor capabilities to reduce disparities, from a holistic perspective. In other words, data should be collected for both SES and race to truly understand the nature of health-related disparities, which could also guide federal, state, and local government form a comprehensive set of policies to end health care disparities.
Causal Linkages
Access to health care is influenced by social, economic, political, as well as geographical differences. The geographic location plays a significant role in the health divide and health outcomes. Inequalities in geographical location (rural vs. urban, inner-city vs. surburbia; demographic make-up) have a direct link to access to delivery and quality of health services. This point is critical in terms of health care delivery. For instance, if persons live in a minority-specific neighborhood, health care providers are reluctant to provide services. Examinations of linkages between race, environmental concern, health, and justice in communities of color have found race and socio-economic status as important determinants of the location of environmental pollution, degradation, and associated health risks. People of color and the poor are more likely than whites and other more affluent groups to live in areas with poor environmental quality and protection.
Geographical studies utilizing area-based socioeconomic measures (ABSMs) and geo-coding residential addresses are able to map health disparities. This suggests that place has influence over medical practice and intervention strategies should extend beyond the individual to location. This requires an expansion in monitoring capabilities to reduce disparities. Capturing the composition, context, and location of medically undeserving populations and communities is a tactical approach that lends support to policy interventions expanding beyond the individual to determine the allocation of federal funds and incentive programs designed to improve access to quality care. Health inequality and its inequitable service delivery carry an exorbitant price tag. The payoff of restructuring the US data infrastructure to improve measurements of race/ethnicity and class/socioeconomic status can be beneficial when considering long-term health care spending and financing. The section that follows discusses this topic in more detail.
Health Care Spending and Financing
The United States is one of the richest and most powerful nations in the world--one which currently spends more of its resources on health care than any other nation on Earth. In 2000, the United States spent more on health care than any other country in the world. Figure 2 indicates an average life expectancy of 77.5 in the United States (ranked 27th in a global comparison). The United States also has a per capital health expenditure more than double that of Denmark (ranked 26th) and Cuba (ranked 28th), which have equivalent life expectancy averages. Higher expenditures are directly associated with slow economic growth from the recession in March 2001.
Figure 2. The Cost of a Long Life
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Spending Trends and Projections
Fiscal year 2011 federal health care spending reached 23 percent, which is the second largest spending item to national defense at 25 percent. The long-term outlook of national health expenditures (see Figure 3) suggests that in the absence of changes to national federal laws, federal spending on Medicaid will rise to 7.5 percent in 2019, reaching $674 billion by 2017. Cumulative spending on Medicaid benefits is projected to reach $4.9 trillion over ten years. Spending on health care will also rise to 49 percent of gross domestic product (GDP) by 2082.
Figure 3. National Health Expenditures, Average Annual Percentage Growth from Prior Year Shown and over the Projection Period, by Source of Funds, Selected Calendar Years 2007-2019
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Medicaid was initially designed to insure low-income women and children and low-income disabled and elderly individuals. Given our current economic climate, uninsured individuals are now eligible to receive Medicaid benefits. The number of uninsured individuals is steadily rising along with the cost of health care. As a result, public health care spending will be highly influenced by rising rates of unemployed and uninsured individuals, which would increase federal spending on health care. A $7 billion increase in federal funds was allocated to Medicaid. If these trends proceed, equilibrium won't be reached, and slow, private spending will accelerate public spending growth and force it to climb to an estimated $4.5 trillion by 2019, accounting for 20.3 percent of the GDP.
This has the potential to disproportionately impact low-socioeconomic individuals who are unable to secure high paying jobs and rely solely on publicly funded insurance programs. In some instances, medical providers are reluctant to service Medicaid patients since they are reimbursed at a much lower rate than private insurance plans. This has the potential to crowd-out health care providers that serve medical coverage to gain better access to quality care (low-socioeconomic individuals).
Health Care Financing
Classifications of health care systems are delineated within the dimensions of financing, service provision, and regulation. Who finances, provides, and regulates health care services has a remarkable effect on the effectiveness of the health care system. Health care can be financed through a mixture of four prominent sources: taxes, social insurance, private contributions, and out-of-pocket payments, and justified in terms of progressivity. A desirable health care financing is progressive where the system depends on the proportion of total revenues raised from each source and the degree of progressivity of each of these sources.
The United States is not committed to any form of universal health care or equal access to health care. Health care is distributed according to need and financed according to ability to pay. The need and cost of health care directly influence an individual's ability and willingness to pay for health insurance. This health care system has a multiple scheme financial system in which the state, non-governmental, and the market offer insurance contributions and benefits. Broadly speaking, in terms of progressivity of financing sources, direct taxes are progressive; indirect taxes are regressive; social insurance is progressive; private insurance is highly regressive; and out-of-pocket payments are regressive. The public health care system in the United States, is tax-financed through direct taxes (personal income taxes and payroll), which give the appearance of a progressive health care system. However, the majority of the population purchases private insurance or pay out-of-pocket payments for health care and public funds are heavily tax subsidized from private contributions.
Overall, the United States health care system is regressive in terms of the proportion of income spent on health care. As individuals' income increases, the proportion that is spent on health care decreases rather than increases. This forces middle-income and lower-income persons to bear the brunt of the financial burden of health care financing--progressive at low incomes and regressive at higher incomes.
Financing Options for Public Health Care
Three financing options are currently available in the United States:
1. Income-related;
2. Health-related; and
3. Income/health-unrelated, also known as risk-related premiums.
The content in this article is particularly interested in income-related financing. Income-related options are financed through direct and indirect taxes and based on two equity principles: benefits and ability to pay. The benefits principle is essentially stating that those who benefit more should pay more. In other words, the consumption level of medical services determines the costs of services rendered. The application of this principal discriminates against low-income and chronically ill individuals. These persons pay more for health care, which jeopardizes the consumption of goods (food, housing, and education).
The ability to pay principle allows everyone to pay for medical services within their economic capacity. The application of this principle provides an avenue for equal access to health by decoupling payments for utilization and protecting low-income populations against high out-of-pocket payments. This principle raises the concern on the quality of health care delivered. Government-provided tax subsidies have the potential to incentivize the medical profession to deliver quality health services. The lack of tax subsidies increases the vulnerability of disadvantaged populations because health care providers will be less willing to serve their health needs.
Health-related options are financed through coinsurance, deductibles, and no claims, and are generally used as measures of risk sharing. This option can be considered equitable in the sense that health care users are required to pay the same amount across the board (regardless of income or wealth). This however has a huge impact on individuals with low incomes and chronic illnesses who rely on frequent health care usage. Risk-related premiums are not associated with equity principles by any measure because they are not designed to redistribute income from rich to poor and healthy to sick. These premiums are mainly utilized in competitive insurance markets and justified because they help protect private insurance industry from asymmetric information of insurer and the insured.
Our health care system should be designed within the basis of equality. Equality, in a sense that all Americans, regardless of a person's race/ethnicity, class/socioeconomic status, or geographic location, have the birth right to a quality-healthy life. There is a well-established relationship between socioeconomic status and health status, which makes premium averages too high for those with the fewest economic resources and the greatest need. In a perfect world, resources would be allocated efficiently and we would only need subsidies to increase health care status for disadvantaged populations. We live in a world plagued with adverse selection, moral hazard, and asymmetric information, making it hard to determine cost sharing and health care consumption to create an efficient financing system. For this very reason, it is imperative for federal, state, and local government to consider all possible intervention strategies to alleviate health disparities and improve the financial health care system.
Restructuring the American Health Care System
Have a bias toward action--let's see something happen now. You can break that big plan into small steps and take the first step right away.
The American health care system is a highly competitive, complex environment. Restructuring it will require incremental changes and will demand the joint efforts of federal, state, and local governments and various stakeholders in the private sectors. Community-based interventions to alleviate health disparities should be coupled with refinancing strategies at the state and federal level to be effective. Genuine partnerships and networks that leverage resources, share information and collectively make decision can link resources to community demographics and ultimately improve health status through equal access, quality, financing, and the delivery of health care services. From a theoretical perspective, developing networks for community-based participatory research (CBPR) is a prominent alternative to improving health and reducing health disparities. This research approach allows all stakeholders to sit at the table and conjunctively formulate heath policies that will improve our current health conditions.
Interventions to Alleviate Health Disparities
Although the Agency for Healthcare Research and Quality (AHRQ) reported progress in reducing health care disparities, research findings warrant the need to accelerate progress towards achieving higher qualities and more equitable access to quality health care. Our current president is motivated and working diligently to discuss policy options associated with inequalities in our present health system. Failure to warn against inceptions of political evils that sabotage reform efforts will result in status quo.
Policy options should avoid narrow thoughts of health insurance deficiencies and consider broader factors (i.e., inequalities in health results from forms of social injustice and racial discrimination) that have been major determinants on access to quality health care. Our national goal is to eliminate unequal access to quality health care and to build stronger healthier communities. In efforts to achieve this goal there must be a balance between ethical commitment and pragmatic flexibility. Community-based initiatives are essential in reducing health disparities. Initial steps to equality should begin with tracing the occurrence of inequitable behavior, education, and empowering the community to stimulate change.
Improve Data Collection
The current availability of standardized, coordinated data across public and private sectors pertaining to race, ethnicity, and socioeconomic status is insufficient. The initial step towards social justice in health care is to implement laws and regulations guiding data collection activities by clinical information systems--hospitals and ambulatory care, health plans, and government agencies in order to create a national health care database. Movement of improved data collection is crucial to track the occurrence and target improvement initiatives to reduce disparities. Health care needs differ amongst individuals, populations, and geographic locations. These elements are considered when formulating health care costs and local tax revenue sources. Since place (geographic location) is indirectly linked to income and directly linked to access and quality of health care and its delivery; it should be tracked to guide policy-makers in their efforts to provide equality in health care.
Cultural Competency, Capacity, and Empowerment
Racism and discrimination are cognitive behaviors that are the most difficult to change because they are subconsciously embedded in the minds and spirits of the masses and have acquired a certain threshold of acceptance. Mechanisms for changing these behaviors must be structural, cultural, and process and cognitive oriented. In a system that rewards compliance and ostracizes resistance, medical professionals or conservers operate like sardines in a can. We need enthusiastic advocates that push cultural competence, capacity, and empowerment.
In terms of health care, cultural competency is knowing and respecting cultural differences within the population served and using built knowledge in cross-cultural situations.Techniques to enhance cultural competency include interpreter services for language barriers, recruitment, and retention, a more representative diverse health care workforce, cultural and subculture training, and culturally competent health promotion to educate and encourage good health practices. Understanding the diverse needs of the population assist in articulating values to policy makers.
Community capacity and empowerment are two broad perspectives of social protective factors. Community capacity builds on social networking, active participation, leadership, understanding one's history, articulating values, and accessing power. Building consensus is a critical part of community empowerment. Community empowerment is defined as a social action process by which individuals, communities, and organizations gain mastery over their lives in the context of changing their social and political environment to improve equity and quality of life. Community engagement is essential in building capacity and empowerment. If community engagement is not enhanced, community empowerment will not work as a strategy to reduce health disparities.
Refinancing the American Health Care System
Vertical and Horizontal Equity
Health care policy makers should consider refinancing the American health care system through vertical and horizontal equity principles. The application of vertical equity seeks to tax in a proportional way whether progressive or regressive. Currently, the United States is predominantly a privately financed system that is highly regressive in which increases in income reflect decreases in proportional contributions. Measures should be taken to ensure that individuals pay taxes according to their income; people with more ability to pay should pay more.
A transformation into a more progressive tax system will require an internal shift within one or two dimensions of health care system (financing, provision, or regulation). This may require greater reliance on direct taxes such as income and payroll. Political rhetoric attempts to mask the mere mentioning of tax increases due to the negative connotation for middle and low income individuals. Politicians and policy makers will experience high levels of resistance that will challenge the effectiveness of transforming the public health care system into a progressive system.
Consideration of horizontal equity ensures that individuals pay the same amount of income tax with identical distributions of wealth and protects against arbitrary discrimination based on race/gender/different types of work/education, etc. The application of horizontal equity, from a policy perspective, seeks to give equal treatment for equals. The challenge with the concept of equals suggests that the way in which one defines equals determines the effectiveness of this approach in terms of equality of health care finance and delivery. A horizontal equity policy must be sure to explicitly or implicitly set a normative criterion that specifies the meaning of equal(s) that is relevant in all aspects of equality in health care, such as income, gender, race/ethnicity, geographic location, employment, or education. One proposal for achieving horizontal equity suggests implementing a single-payer health care system.
Universal Health Care: Benchmarking the Success of Other Countries
Advocates for universal health care and fair financing urge regulating the market and redistributing resources from the rich to the poor or the healthy to the sick to provide better health opportunities for those in need. The government has tried to regulate the market through the creation of public health insurance plans: Medicare (elderly) and Medicaid (low income). However, it is improbable to control costs in a market-driven system. Valuing health care as a basic right requires focus on efficiency and equity in health care provision, financing, and in the elimination of health disparities. The United States can learn a great deal from benchmarking the success of other countries.
Horizontal equity from a policy perspective is the fundamental approach to restructuring the health care system in terms of both alleviating health disparities and improving access and delivery of health services. France relies on mandatory payroll tax as England relies on general revenue taxation; both countries spend less on health care and have higher life expectancies than the United States. This is a clear indication of the inefficiency of the American health care system and justifies the use for a single-payer health care system. France and England both have successfully eliminated financial barriers to health care access. South Korea is an excellent example of a complete health care system transformation. Following the first-, second-, and third-order change model, South Korea has completely restructured a multiple-scheme insurance system into a unified health insurance system. Through incremental changes, South Korea successfully mobilized resources for health care, expanded public coverage through public and private pooling, and contained health care expenditures.
Conclusion
The US health care system faces a serious problem that is two-fold: eliminating health disparities and refinancing health care to enhance efficiency and equality in health care provisions. Diminishing quality of health care and disparities across populations is negatively impacting our current health care system. Heath policies need to guide improvements to the delivery and access to health care and reduce disparities. Health policy formulators should pay careful consideration to enhancing data information systems to accurately account for the challenges they are facing. Resources should be directed towards enhancing cultural competency, capacity, and empowerment. And most importantly, health care restructuring should develop within social and policy networks. Power is in the numbers. Building connections between the multitudes of stakeholders coordinates a holistic understanding of health disparities and helps to convey corresponding responses that offer a possibility of giving a holistic/comprehensive formulation to a total transformation in the health care policy arena.
Refinancing the American health care system will require incremental changes and will demand the joint efforts of federal, state, and local governments, and various stakeholders in the private sector. We desire a complete health care system change in the financing, provision, and regulation of health care services. Health care policy-makers should consider both vertical and horizontal equity principles to transform the present regressive multi-payer insurance system into a progressive single-payer insurance system. Benchmarking the success of other countries, such as France, England, and South Korea, has provided a platform for achieving our national goal, of mobilizing resources and containing health expenditures.
Reaching a goal takes a lifetime .... [W] e need to hold onto our goals to eliminate inequity and disparities, even if we won't succeed in our lifetimes. The point of an ideal may not be to reach it but to let it guide our paths. When we decide what our vision is, all we can do is keep hacking away at it.
About the Author: . Schnequa N. Diggs holds a Master's degree in Public Administration from Old Dominion University. She is currently a full-time PhD student in Public Administration at Florida Atlantic University
