Proceedings of the 4th National Conference on Primary Health Care Access: April 2, 1993 – First Plenary Panel – Reweaving the Safety Net, Part 1 (Midtling, Grumbach)

Last Updated on April 16, 2022 by Lee Burnett, DO, FAAFP

The archiving and publishing of the introductory remarks and the proceedings of the first plenary session of the Fourth National Conference  on Primary Health Care Access (April 2-4, 1993) was made possible, in part, through the generous support of the Michigan State University/Sparrow Hospital Family Medicine Residency Program, Lansing.


The Fourth National Conference on Primary Health Care Access

April 2, 1993: Hyatt Regency; Monterey, California

First Plenary Panel: Reweaving the Safety Net: National Trends and Policy Considerations


Moderator: John E. Midtling, M.D., M.S., Chair, Department of Family Medicine, Medical College of Wisconsin; Senior Fellow, Coastal Research Group.

John Midtling, MD, MS; Chair, Department of Family Medicine, Medical College of Wisconsin

I would like to welcome you to the “Fourth National Conference on Primary Care Access.”  It’s great for me to be back in California, especially back in Monterey County.

As I think many of you know, I was a residency director here and then I was the Medical Director of the Monterey County Hospital.  So for me it is a great homecoming.  It has been a great time to see the old places and it is also good to see so many friends back from previous conferences.

One of the things that has been so unique about this conference is the fact that it provides continuity over time to address the access to care issue.  This problem is, I think, the problem which is the heart of the health care problem in America.

This problem, along with the cost of care problem, are probably two of the most difficult problems our country is facing in the decade of the 90’s.

It has been a pleasure to co-sponsor this conference with Charles R. Drew University.  Conference management has been provide by the Coastal Research Group.  I have to thank Bill and Nancy Burnett for their work in putting this conference together.

The Coastal Research Group began – somebody sas asking me about this last night – as a group of medical educators from California and then health policy and then spread to Oregon and Washington.  Now it has made it’s way to the coast of Lake Michigan.  Again, this year Coastal Research is doing the conference management and I would like to thank Bill and Nancy for their efforts.

This year’s focus will focus on health care reform.  It is interesting to me that four years ago when we had the first conference back in Kohler, Wisconsin, health care reform was a somewhat “radical” idea espoused by only a few.  We were really voices out of the mainstream.  I think Dr Gayle Stephens even commented on this during his address in Beaver Creek, Colorado.

We spent a lot of time at that conference talking about how we might develop coalitions of support to move the health care reform debate along.  Now for the first time in my professional life I really feel that health care reform is going to happen if for no other reason  than the fact that American business has now joined the litany of voices crying for reform and the numbers of under-insured and uninsured Americans are now reaching far into the middle class.

The first session this morning is going to focus on “National Trends and Policy Considerations.”  It is interesting that as the health care reform debate evolved during the election, Clinton began to embrace managed competition as a solution.  I think, as many of you know, this is a concept that was espoused by Alan Einthoven, Stanford economist, several years ago.

But declaring managed competition as a presidential strategy is somewhat akin to identifying a national megatrend and then claiming that this will become one’s policy.  I think this is a tactic that many great leaders have used.  I always wondered if Gorbachev provided the leadership to change the Soviet Union or whether he, in fact,  was able to identify changes that were happening in the world and identify those changes and announce those changes before they happened.  I think it was probably some of both.

I think the real challenge, though, for the Clinton administration is going to be in how to enfranchise the under-insured and the uninsured in this new system of managed competition and vertically integrated health care delivery systems.

I am especially interested in the impact that this will have on the traditional safety nets, such as the public hospitals and especially the federally funded clinics which have been somewhat isolated and, to-date, have in general not been part of large vertically integrated health care delivery systems.  So I am looking forward to some dialog about what the reform effect will be on the traditional safety nets.

I am also interested in the emphasis that will be places on a physician supply strategy in the administration’s health care reform effort.  That is something that David Satcher is going to comment on in the second session this morning.

The first session is entitled, “Weaving the Safety Net: National Trends and Policy Considerations.”  I would like to ask each of our plenary speakers who are at the table here with me this morning to take 15-20 minutes of prepared comments followed by 15 minutes of response from David Satcher and Martha Evans.  Then I would like to open the discussion to the conference participants for the remainder of the time.

The first speaker this morning is Kevin Grumbach.  I have known Kevin since he was a medical student at UCSF.  He was the winner of the Gold Headed Cane Award which is the award that goes to the top medical student at UCSF.  I know that Marc Babitz, who is in the audience, was also a winner of that award.  I am pleased that so many winners of the Gold Headed Cane have actually gone into family medicine.  I think that is a tribute to the department’s effort at UCSF.

Kevin was also a resident in the residency program at San Francisco General and did a Pew Foundation fellowship with Dr Philip Lee in the Health Policy Institute there.  He currently has a faculty appointment both in the Department of Family and Community Medicine and the Health Policy Institute at UCSF.

Phil Lee has acted as a mentor for many of us who have known him.  I know he has certainly been a mentor for Kevin.  I was very pleased to see that Phil will be going  back to Washington to take the Assistant Secretary of Health position, a position that he previously held during the Johnson Administration.  This is an exciting time and a great window of opportunity for us in primary care.  I know that Phil will be a very powerful advocate for primary care as the health care reform debate unfolds.

Kevin is going to speak this morning on hat he sees as likely actions the administration will take in the health care reform effort.


Kevin Grumbach, MD, MPH; University of California San Francisco

Dr Grumbach: Thanks, John.  We’ll have to bring our canes next year so we can rap anybody that disagrees with us.  It is a pleasure to be here.  I think my task is to try to give an overview of maybe what is going to come out next month with the Clinton/Rodham health care reform task force.

So I will try to pull out my crystal ball and see where things are going.  Of course, you know I can’t refrain from making some editorial comments along the way.

I have a dual hat of health policy and family medicine.  Every time I see people in the hall they say, “Gee, have you gotten the call yet?”  So getting the call – the task force.  I kept waiting and waiting and finally I got the call.  It was Bill Burnett asking me why I had not sent in my registration fee yet.  I haven’t gotten the call but I will share with you what my ear is telling me is happening.

I think Bill and John framed the question for this session, “Will there be a ‘sea’ change in health care reform?”  I think that is a fitting question for being in Monterey.

I don’t know.  It is difficult to say whether there will truly be a sea change.  What I can say for sure is there has been a “C” change of this nature.  Whether the “C” is for Clinton, and I think that certainly is a different administration than we have had in the recent 12 years; whether the “C” stands for a Canadian system or it is the sea of managed competition, I think those questions we will get to in a little bit more detail.

When I thought about reform and the sea change idea, I thought I would use some aquatic metaphors to go through the possibilities here.

The first one is what I call the tsunami sea change which would be moving to something like a single payer Canadian system.  Single payer is one option that has been talked about.

The other one clearly, as John alluded to, is the managed competition model. My image here is a passenger ship with many different tiers of passengers, but at least potentially everybody might be afloat in the health care system.

But then I think we also need some sober reflection on whether we will simply get another shallow current of incremental reform that leaves many Americans, and particularly the ones we are most interested in caring for, stranded high and dry as the river runs by them.

The Clinton Task Force: No Single Payer System

First Lady Hillary Clinton at a rally supporting the Clinton Health Care Plan

The first thing I think I can say with a fair amount of certainly about the Clinton task force is its policy on single payer – not!  Basically, there is no question at this point that single payer is not on the agenda for the Clinton task force.

Apparently there is some domestic disagreement about this among the Clinton family but Bill does remain President and he has said that he is firmly opposed to a Canadian style of tax-financed, government-administered, single-payer program.

So I think for those of us who have been advocates approach, this is certainly a disappointment.  There really has been no inroads from the consumer groups, the labor groups, the senior groups pushing for this type of reform.  They, I think,  really have received no warm signals from the task force that this is an option.

So, I think the option that has been most identified with the Clinton task force is that of managed competition.  That was certainly the rhetoric.  I have a slide here that asks, “Are there several doctors in the house so we can have a little managed competition?”  That is what was most clearly identified with Clinton during his campaign.

One of the things I want to do today is to try to say exactly what is managed competition. It is a bit of a vague term. It certainly sounds more appealing that “mismanaged competition” or “ruthless competition.”

I think there is often a lack of clarity about what is managed competition. I don’t know! If anybody came up to you at the aquarium last night and said, “Gee, can you give me a one sentence description – what is this managed competition I have been hearing about?” I think most of us tend to fumble around and say something about HMOs and competition. But it is not always clear exactly what is involved. One of my goals is to just at least help you with the vocabulary and a little better understanding of this.

The basic gist of managed competition as proposed by its architects like Alan Einthoven are the following: In these policy analysts’ minds, these are the two main problems affecting health insurance in the United States today.

The first is that there is an open-ended employer subsidy for health insurance which makes employees relatively insensitive to price when selecting health insurance plans. We have little incentive to shop around for a low-cost plan because our employer, if we are employed and getting insurance that way, our employer is paying most of the cost of our insurance.

Often, if we pick a more expensive plan, traditionally the employer has been willing to contribute a higher share of the premium for that. There is really not the proper market dynamic affecting us when we go out and make this choice to induce us to really exert more of a consumer-driven, cost-sensitive insurance system.

The second point here is that the health insurance market is not sufficiently organized to allow well-informed consumer choice. That is, even if consumers had an incentive to shop around for lower cost plans, the market is not well organized to provide the proper context for doing that.

For example, when comparing Plan A and Plan B, A may offer certain benefits that Plan B does not.  It may have different co-payments and deductibles. You are not sure what you are really getting for the difference price for Plan A versus Plan B. Is Plan A more expensive because it has mental health benefits? Or because it has a lower co-payment and things like that? There really is not a good structure to allow well-informed consumer choice.

Alain Enthoven; Stanford University

Now, the response of Einthoven and the managed competition advocates are the following: The first is the very basic premise, and I think these are the two center points of managed competition that you should take home.

The first point is that you have to limit the amount of employer subsidy so that now the employee, himself or herself, bears a greater share of the cost for selecting higher cost plans. If that is necessary to induce the competitive dynamic into health insurance purchasing by making employees really consider cost much more up front when they pick an insurance plan.

I think these people believe it may not be the case where somebody arriving in agony with an appendicitis on the gurney at that point can flip through Consumer Reporrs and go to the lowest cost, best quality surgeon. But at least when one is kind of soberly evaluating insurance plans in advance of being ill that one could, in fact, make a better informed purchase.

The second is that we need to manage the competition through government oversight and market reforms. I think these people believe that it is not just laissez faire, free market policies, per se, but it is a setting of competition under some government management.

There the management consists of things like making all insurance plans come in with the same standard benefit package so that consumers can shop between them – the same deductibles, organizing larger purchasing cooperatives so that you don’t leave a small business of five employees trying to go shop around and being at the mercy of large insurance plans.

So that is the suggested answer. The vision under this plan, if you ask these folks to say what they see as the future of health care, would be that there would be the invisible hand of the market forcing controlling cost by means of consumers preferentially enrolling in truly efficient plans that provide high quality but lower cost care, presumably large HMOs.

I think the presumption is the only plans that could really effectively compete on these terms and offer genuinely more cost-effective product rather than just skimming the market would be large vertically integrated HMOs. Although realize that in managed competition there is nothing that says we will only allow HMOs.

Managed competition is not inherently managed care. If Blue Cross can come in with a competitive price and if people want to opt to pay more for Blue Cross, that’s fine. I think it is implicit, though, that the market forces will tend to favor the larger HMOs.

You may notice that there is really nothing in what I have said so far about increased access. Increased access is not an inherent part of managed competition.

One picture often speaks a thousand words. Here is an image of a tough guy who says, “Hillary Clinton’s Potent Brain Trust on Health Reform.” [Note: the phrase is the title of a February 28, 1993 New York Times article by Robin Toner.]

This is a Jackson Hole group that has become famous as really promoting this. What is wrong with this picture? From left to right – let me tell you who the members of the Jackson Hole group are in this picture. This is Paul Elwood, who is one of the founders.

We then have William Link from Prudential; Lawrence English from Cigna Insurance Company; James Todd, American Medical Association; Paul Freeman, Pharmaceutical Manufacturer’s Association; Robert Hansberger, Voluntary Hospitals of America; James MacClain, Aetna.

Now, John Midtling, I think, was there and they just didn’t catch him in this picture. I think he was talking to Ralph Nader in the hall at the time and they didn’t catch him.

It really has not been a proposal that has been at the forefront of those people who are most concerned about access. Again, I think you can see that this group is tended to be dominated now by insurance companies and various other health care provider-supplier groups. They have, I think, their vision of how their role will be under this kind of health care reform.

Paul Ellwood at Jackson Hole, Wyoming

Managed competition, let me reiterate, is primarily a cost containment strategy. It has even been redrafted in a form by the conservative democrats in Congress under the lead of Congressman Cooper as a way to simply address cost containment with virtually no increased insurance coverage.

Under the Cooper bill all employers would have to follow the rules of managed competition but still under a voluntary employer-based insurance system that does not force any increased coverage. Einthoven, to be fair to the Einthoven plan, does call for broadened coverage and we will get into that. But I think you have to realize that that is really not the essence of managed competition.

Will managed competition result in cost containment?

Briefly, what are the prospects for managed competition achieving its most ostensible goal which is mainly cost containment? There has been some sober re?ection in the task force now that maybe managed competition isn’t quite all it was touted to be and I think there are really some second thoughts about relying on it completely.

They have observed things like there has been steadily increasing enrollment in HMOs for the past decade. Even though HMO enrollment has more than doubled in the past decade, health care costs have not slowed down their rate of inflation.

The data are interesting that show the share of premium or the percent of employees and their dependents who have to pay a share of the premium for health insurance when it is covered by the employer. From 1980 to 1991 the number of employees whose employers pay for the full share of benefits has steadily declined. It is now at the point where less than one-half of all employees have the employer paying for the full share of the benefits.

If you graph the percent of employees with insurance benefits for whom the employer pays the full share, you can see there has been a steady trend for employers covering less of the complete premium for employees. It is even more pronounced for the dependents.

So the idea that health care inflation will be restrained if we make employees bear a bigger burden of the cost of buying insurance at the work place can be questioned. I think some sobering data show that it actually has been happening for the last decade – that employees are now actually paying much more out-of-pocket at the time they purchase insurance.  At this point, it really isn’t dampening the rate of health care in?ation.

Perhaps the present conditions are not right to allow this to play out in a more managed format. But it is not giving one a lot of optimism.

Stratification of the health care insurance market

The other problem that has surfaced is when this has been tried in things like the Federal Health Care Benefit System for federal employees what it started to do was stratify the market. The employees who can afford to pay more tend to pick the more expensive health plan.

The value of the health plan is closely associated with the annual income of the federal worker. The higher the  income strata of the workers, the more they are willing to pay the extra premiums to to buy private insurance to supplement what the federal government is contributing as the employer.

There is, I think, a real concern that rather than just really dampening or controlling costs, it may just stratify the market so that people with more money will be willing to pay extra and those without will go with a less expensive plan.

Robert Reichauer, the director of the congressional budget office, testified before the Ways and Means Committee last month and said, “No significant savings in national health expenditures for at least five years under managed competition in savings and after that are unclear.”

To make managed competition work, the essential ingredient is to limit the amount of employer paid health insurance. The mechanism to do that is to tax workers on benefits paid by the employer above a certain fixed amount. The government may say that you can get tax-free $150 per month in insurance benefits. If your employer pays anything more than that for you, we count that just like taxable income.

Then you can either take that as wages or you can pay for more health insurance, but that now is going to be taxed. It reduces some of the tax incentives to put it into health insurance.

That is a cornerstone of Einthoven’s plan. The task force is pretty clear that they are going to reject that approach for obvious political reasons. When you win elections promising no middle class tax increase, it is a little difficult to go back to middle class workers and say, “We are now going to tax you on the benefits you have been getting above a certain basic level.”

So, we are seeing that for political reasons primarily, that even if the task force wanted to fully do tax health care benefits, that they are now shying away from some of the critical policy decisions that would make that possible.

So what about managed competition! Here is a slide that says, “Corporate leaders gather in a field outside Darien, Connecticut where one of them claims to have seen the invisible hand in the market place.”

I think there is still a lot of interest in creating a system that would not be government run by means of a heavy handed, bureaucratic control of costs in health insurance.  That  we could somehow foster the right conditions, so that we could get the best of the free market where it would really foster efficiency and restrain costs, but without all the odious elements of a totally unregulated kind of ruthless competition system.

That would be the goal. In fairness to people like Einthoven, I think that their vision is really for a more efficient and a reasonably equitable system, but I think there is a lot of question about whether you think that the market really can achieve that.

As the task force is moving away from the pure managed competition model, I think they are actually moving more towards a regulatory framework for controlling health care costs. They have recently announced, I don’t know when Vice President Gore presided over the last meeting of the task force – the public one, that they really are going to start probably with a regulatory approach to fee controls and price regulation and this will probably include regulation of private health insurance premium increases.

It is interesting that only in the 1990’s that a Nixon era policy be considered progress, I guess. This was what Nixon did in 1970. There was a wage and price freeze in the health care sector. I think essentially that is what we are hearing that the Clinton administration is moving towards.

Policies Affecting Physician Supply 

One key element that I think will be really important – one that John Midtling alluded to – are policies affecting physician supply. I know this is a particular interest of Doctor Phil Lee. I think one of the bright spots of the reform proposals will be a really strong policy to limit the total number of the physician supply, which continues to escalate much faster than the rate of population growth.

More importantly, policies should be adopted to redistribute physicians from specialities to primary care and to reorganize the way graduate medical education is paid for through Medicare, so as to pull in all third-party payers into some sort of medical education pool fund that will pay for graduate medical education and will be under a carefully planned policy of what programs to support or not.

I think we will also see some of the elements of managed competition. The Clinton administration will support the idea of large risk pools and purchasing cooperatives so that small businesses can band together under some quasi-public agency which will act as a purchasing agent for those small businesses. This would give them the benefit of larger purchasing power, and less adverse selection. I think they will try to encourage HMOs in a very general way.

 Primary Health Care Access

Now what about access! Let me close by talking about access to care. After all, this is the National Conference on Primary Health Care Access, not on cost containment.

This is the key issue. There are a few ways to go about it. The bottom line is this: how are you going to pay for covering more Americans? There was a report in the San Francisco Chronicle a few days ago from the Clinton hearings. that said, “Judging from the questions posed by various administration officials, the task force apparently is not yet settled on some of the basic elements of the reform agenda, including how to finance coverage for the 37,000,000 uninsured Americans – a fairly basic question.

I think Clinton has all along leaned more towards cost containment as the centerpiece of his program and access to care has followed behind.

You need more money if you are going to cover the uninsured. There are three basic ways that under a non-single payer system that this could be done. One is what Einthoven proposes. If you start taxing middle class workers on their benefits above a certain level, you actually generate a lot of money.

You can then use that to subsidize insurance coverage for people – for the uninsured and people who do not have adequate benefits. As I said, that’s really been rejected.

The other option is the traditional payer-play model which the U. S.  Senate Democrats came up with in the last session of Congress, which is you give business a choice – either they have to give insurance benefits or they have the option of paying a payroll tax into a public fund that would then be subsidized by additional revenues that would be used to purchase insurance.

The Clinton administration has ruled that out. It has said it is not for payer-play. What they say they are for is a strict employer mandate. That is a plan that apparently will say that all businesses must pay for insurance coverage for their workers and pay 75% of the basic premium costs for all workers.

I must say politically that is a bold maneuver based on the results, for example, of Proposition 166 in California which was an employer mandate put on the ballot by the California Medical Association. In November it lost by almost a 2:1 margin.

Polling done by the Harris and Kaiser Family Foundation found that two-thirds of people who voted against it said they voted against it because they were afraid of its impact on business, that it would lead to increased unemployment, drive businesses out of the state, etc. Those are valid concerns.

Business is not providing benefits because they are prohibitively expensive. Expecting small businesses to go out and buy into private health insurance at current rates is a problem. That seems to be where they are heading, though.

It will, at least, potentially cover some employed people. For many of the people we care for, let us say in the county systems who are either unemployed or often on-jobs and out-of-jobs, I don’t think it is going to give us a great sense at all that our patients are receiving continuous comprehensive coverage as they move in and out of the work force.

 Medicaid Reform

Medicaid reform is the other issue on the agenda. They have been talking about whether they will put Medicaid into a kind of managed competition system where instead of having an autonomous federally-state operated Medicaid system.

In a managed competition system, Medicaid recipients would be allowed to participate in these purchasing cooperatives and essentially their care would be contracted out to HMOs which is already essentially happening in California, New York, and other states.

I think we will see an acceleration of that trend. Again, I think that has real implications for people working in public health care systems or federally financed clinics where you will be required to essentially compete like an HMO if you want Medicaid contracts. I think it is not going to be “business as usual” for Medicaid.

In conclusion, I guess I will just say that I think we are – this is what the county hospitals may look like in the future. (Slide) Suddenly it occurred to Barney that although he was healthy, at these prices he couldn’t afford not to have this operation– the gates of our clinic.

The theme will definitely be market reforms, I think, and that approach. I don’t know! “C” change – I think the “C” is further along than the “B” when it comes to the administration that was there before.

Whether it is talking about HIV policies or reproductive rights, there is no question. This has been a dramatic change from past administrations. I am a little dubious that it is really going to be a “C” change of a complete fundamental change of the health care system.

I think we will see pushing some trends along a little bit further and sticking with an employment based private insurance system with some regulation and some attempt to do market reforms. I think for many of us this is truncated at the top, but it will be a long walk and a bit of a long gestation before we can be sure that all of our patients have the health security that will cover them from womb to tomb in a very different health care system than we have now. Thank you.

Midtling: Thanks, Kevin. It is true that Ralph Nader and I were there at Jackson Hole but we were out in the hall talking about airbags because we believe that managed competition is just a bag of hot air.

In a way I agree with what Kevin said. I think we are looking at incremental reform and I think that what we will see is a process that is just beginning and it will probably taken several years to move through this process of change.

It will be interesting to see what’s floated out by the administration in a couple of weeks in early May. But I think it is going to take a while to implement things and I think Congress is going to go very slowly.

One of the things that I think will happen, and this leads me to our next speaker, is that there will be demonstration projects at the state level and maybe even at the local level before we move to radical change at the federal level.

Here in California one of my good friends, Dr Molly Coye, who worked with me on a number of pesticide research projects in the early 80’s, I understand is going to be floating out a Medicaid HMO concept in the next week or so for the entire state.

I know that in Wisconsin for a number of years now we have had mandated Title 19 HMOs in two counties – Dane County where the state capital of Madison is located, and then Milwaukee County. We have had an interesting experience with that.



people found this article helpful. What about you?