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Health Care Reform

American citizens face many issues that have been brewing in the health care system relating to access, cost, and quality of care. These issues will affect every dimension of the health care system, including programs funded by the federal government, such as Medicare; programs funded jointly by the federal government and the states, such as Medicaid; care provided by the military health system or by the Department of Veterans Affairs; and care funded by the private sector. As work done at RAND has demonstrated, addressing these problems will require jointly tied clinical, economic and political solutions. It will require a strategic approach to demand greater efficiencies and increase the value of the money spent in the health care system.


efforts to expand health insurance coverage have focused on vulnerable populations: children, employees of small businesses, the mentally ill, and the near-elderly.

  • For employees of small businesses, which are less likely than large firms to offer health benefits, one proposal is to offer tax-deductible medical savings accounts (MSAs).

  • For the mentally ill, "parity" legislation by the federal government and most states in the recent years has required equal coverage for mental health and medical conditions, but much of the legislation is very limited and does not extend to the people who need it most. In fact, people with mental disorders say the quality of their insurance coverage and their access to care have both declined in the past two years, whereas those without mental disorders report stable insurance and improved benefits. Even if stronger legislation is enacted, however, parity "on paper" may not be enough in today's managed care environment.

  • Treatment for substance abuse has almost always been excluded from federal and state legislation expanding mental health coverage--largely because of cost concerns. However, unlimited coverage for substance abuse treatment that is currently offered by 25 managed care plans costs employers only $5 a year per employee. Limiting benefits for substance abuse treatment saves very little but costs a lot of patients very much. Patients who lose coverage are likely to end treatment prematurely or get dumped into the public sector.

  • For the near-elderly contemplating early retirement before they become eligible for Medicare at age 65, individual health insurance may be prohibitively costly. Recent proposals would allow some individuals to buy into Medicare prior to age 65. This would increase options for health insurance coverage among early retirees, who now must rely either on employer-provided retiree health benefits, COBRA continuation coverage purchased through a previous employer, or the private insurance market. Expanding access to Medicare coverage will reduce the number of near-elderly who are uninsured but, depending upon the cost of the coverage, might also increase the number who retire early, which may or may not be the intent.

Improve treatment for depression, using available and practical methods.

Depression is among the most common of chronic health problems. It exacts higher social costs than many other chronic diseases, particularly in terms of daily functioning and employment. Despite the existence of medical guidelines for treating depression, the quality of care varies widely, many patients receive no care at all, and the cost-effectiveness of care is usually low. A major part of the problem is that most patients with symptoms of depression are seen only in primary care settings, where general medical clinicians often lack the time, skills, training, or access to specialists necessary to diagnose and treat depression effectively. As a result, many seriously depressed patients receive care for a problem other than depression or receive the wrong treatment. For example, depressed patients are more likely to be prescribed tranquilizers, which are ineffective for depression, than antidepressants.


But there is hope. A recent clinical trial, called Partners in Care, shows that the quality of care for depression can be significantly improved with modest, practical methods. Partners in Care entails educating primary care clinicians to recognize the signs of depression and prescribe correct treatment, either medication or psychotherapy. No one tells the clinicians or patients what to do. Rather, the primary care practices are trained to improve themselves. The results have been startling. Twelve months into the clinical trial, five percent more of the patients in the improved practices remained in the workforce compared with their counterparts receiving customary care. Since depression reduces workforce participation by about five percent, the Partners in Care program negated the detrimental effect of depression on employment. Although employment is a crude measure of well-being, it is particularly relevant to health policy because most private health insurance comes through employment. No other quality-improvement program for any health condition in primary care has shown that kind of positive employment boost.


Spearhead a national strategy to improve the quality of health care for all.

The U.S. health care system is inefficient. It wastes money by providing care that is not needed, and it causes potential harm by failing to provide care that is needed. Most Americans receive high-quality care, but approximately 20 to 30 percent of the care given is unnecessary, while about a 25 percent of the needed care is not provided.


Many medical procedures are performed for inappropriate reasons, meaning the expected health risks outweigh the expected health benefits. The rates of inappropriate use range from 2 percent for cataract removal to 32 percent for carotid endarterectomy, a procedure that reduces the likelihood that a patient will have a stroke. Regarding underuse, many people receive either too little care or the wrong care because of misdiagnosis and mistreatment. There is little evidence that economic incentives alone will improve patterns of care. Cost-cutting strategies by U.S. managed care organizations and by national health care systems abroad have decreased necessary as well as unnecessary care. Fortunately, new methods for measuring the necessity and quality of care are available. RAND has developed more than 1,500 quality indicators for nearly 70 clinical areas that represent care for the leading causes of death, disability, and illness. This new quality system applies to children, adults, and the vulnerable elderly. Tools have been developed to evaluate care from claims data, medical records, and patient surveys. This system should be adopted for national, regional, and local monitoring of quality and could guide the development of improved information systems that will expand the capacity to monitor and improve quality. Routine and widespread implementation of more clinically sophisticated systems should be among the highest priorities of the public and private sectors.

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