Health Policy Reform: Competition and Controls.

• Author: Chasin, Steven H.

Robert Helms, editor of Health Policy Reform Competition & Controls, wades into the health care reform debate with a long and distinguished background in government service and scholarly research. He was Assistant Secretary of Health for Planning and Evaluation in a Republican administration and now has resumed his position as the Director of American Enterprise's Health Policy Studies. The book is arranged into five main sections with a commentary after each one: The Evidence of Spending Controls, Will Global Budgeting Work, Managed Competition, Competition in a Changing Market, and Prospects for Health Policy Reform.

The best essays draw lessons from previous or present programs that mirror aspects under President Clinton's Health Security Act. For example, Smart Butler, Vice President of the conservative Heritage Foundation, examines price controls pitfalls because the early versions of the Health Security Act had them on "breakthrough" drugs and hospital procedures. Butler provides a lucid and understandable explanation of the historical reasons for and five effects of price controls. For instance, he argues that price controls lead to quality declines because suppliers focus on keeping their bottom lines rich instead of improving their products. Opponents of the Medicare Diagnostic Related Groups (DRG) have argued this point by stating hospitals improve their revenues by releasing patients "quicker and sicker." It would have been useful if Butler had addressed this specific issue since Louise Russell argues against this criticism in her 1989 book, Medicare's New Hospital Payment System.

President Clinton's Health Security Act is based on numerous assumptions about the health care system's behavior. First, is that health plan enrollees will act economically rational and switch to lower cost health plans. Roger Feldman and Bryan Dowd, University of Minnesota faculty members, confirmed this occurs in their study of Minnesota government employees. Their econometric model found that one program's enrollment "doubled from 1988 to 1993, a direct consequences of becoming the low-cost plan in 1989". My only reservation is that Minnesota residents may be more conscious of health care costs than the "average" citizen. It should be recalled that Minnesota is the home of Paul Ellwood, the father of the HMO movement, and the Jackson Hole Group, the cauldron of managed competition policy for President Clinton.

A second assumption underlining the...