Summary of Remarks
Robert I. Field, JD, MPH, PhD
Chair, Department of Health Policy and Public Health
Professor of Health Policy
“American Health Care Regulation as an Assortment of Public-Private Partnerships”
September 5, 2007

 
Regulation of the health care industry is pervasive and perceived by many as a barrier to innovation.  The conventional view falsely perceives health care regulations as a dichotomy that is a conflict between private market players and government overseers.  An alternative theory contradicts the conventional view and recognizes regulatory programs as public-private collaborations that nurture as well as restrict innovation.  Regulatory programs can be drivers of health care innovation.  They are not necessarily external intrusions into private markets but instead have created health care as it exists today by fostering continued growth and expansion. 

Regulation is defined as oversight of private activities.  This oversight is done by a variety of bodies both governmental and private whose functions are to provide the rules, settle disputes, provide administrative functions and funding for programs. The government is joined by private regulators such as professional organizations in the oversight process.   Regulatory actions provide the forum for policy implementation. 

There are three paradigms of regulation; state primacy with federal coordination, federal primacy and federal funding with strings.   State primacy is a collaborative effort among state, federal and private authorities.  It is often promoted by the industry itself, frequently by professional organizations in order to regulate entrance and behavior of the profession.  Examples of this paradigm include physician licensure, hospital licensure and insurance regulation.  All of these initiatives were promoted by professional organizations and supported by governmental agencies.   

Federal primacy is the most restrictive of the paradigms.  The federal government has responsibility for oversight but retains a major role for private players.  This can be demonstrated by several examples such as drug safety, Medicare, and human subjects protection.  In drug safety, the FDA sets the rules by which pharmaceutical companies must abide, but it is the drug company that decides which drugs to choose for research and trial, private payers who decide access, and specialty guidelines which determine the appropriate usage.  The Medicare program is funded and administered by the Federal Government which also sets the rules for coverage and participation, yet private insurance companies actually administer claims as carriers act as intermediaries, and private entities provide the care.  The National Institute of Health and the FDA have developed the rules for human subject trials and protection but they do not make the decision about the trials, but instead it is private Institutional Review Boards that approve individual research studies. 

The third paradigm is federal funding with strings.  This supports innovation by providing funding and guidance for programs but does not direct how the innovations will occur.  This strategy is uniquely an American form of partnership between the government and the industry.  Examples include tax subsidies which have shaped the insurance industry, the NIH which provides funding for research that leads to new drug development, and tax exemption for hospitals which encourages the building of hospitals and supports non-profit ownership. 

The government through regulatory programs has created health care as it is known today.  The Medicare program continues to outlay billions of dollars for care that would not be spent otherwise.  Tax breaks allow employers to provide health insurance to their employees while the government forgoes billions of dollars in taxes.  These outlays and insurance programs have resulted in increased payments to physicians which have increased the number of physicians along with their salaries.  They have also encouraged growth within the industry that has resulted in health care becoming a giant jobs program. 

The next frontier is how the government will create information based health care and impact the development of information technology.  There have already been steps in that direction with the implementation of privacy rules and the creation of the federal office of health care technology, but the United States is behind other countries in terms of the money invested in information technology. 

Susan Cusack
Doctoral Student, Health Policy
University of the Sciences in Philadelphia