The "New Deal" for healthcare: reforms, risks, choices and outcomes

Citation

Mukherjee, A. (2009), "The "New Deal" for healthcare: reforms, risks, choices and outcomes", International Journal of Pharmaceutical and Healthcare Marketing, Vol. 3 No. 3. https://doi.org/10.1108/ijphm.2009.32403caa.001

The "New Deal" for healthcare: reforms, risks, choices and outcomes

Article Type: Editorial From: International Journal of Pharmaceutical and Healthcare Marketing, Volume 3, Issue 3

Just as President Franklin Roosevelt called for “The New Deal” to get America out of the Great Depression, healthcare today needs a New Deal. Just past its 75th anniversary, the New Deal of President Roosevelt seems more relevant than ever for the healthcare system. There needs to be a paradigm shift in current thinking when it comes to healthcare policy and management. Reforms are necessary and imminent. Risks are paramount but unavoidable. Choices are plenty and filled with trade-offs. Outcomes will be difficult to forecast, assess, and measure.

Heuvel and Schlosser (2008) report that close to 50 million Americans now lack health insurance. This is about one in every six people in the USA. About 40 percent of the nation's adult population is facing medical debts, or having difficulty paying medical bills. According to Heuvel and Schlosser (2008), a universal healthcare system would help American families, while cutting the nation's long-term healthcare costs. On the other hand, the thought of “socialized medicine” triggers an alarm in the minds of most American consumers. However, the noted Princeton Health Economist Reinhardt (2009) clarifies that socialized medicine is frequently confused with social health insurance, where individuals transfer their financial risk of medical bills to a risk pool to which, as individuals, they contribute taxes or premiums based primarily on ability to pay, rather than on how healthy or sick they are. Reinhardt offers a taxonomy of US healthcare systems leading to 15 different types based on who produces and who finances healthcare.

According to President Roosevelt, the New Deal during the Great Depression had three fundamental aims: relief, reform, and reconstruction. The US Government has now stepped into offer relief, reform, and reconstruction to the healthcare sector. All three are the subject of attention in the current healthcare situation. President Barack Obama offered healthcare relief through the recent stimulus package. The final version of the massive American Recovery and Reinvestment Bill signed into law in February 2009 by President Barack Obama included $59 billion for healthcare. Reforms are likely to follow soon. On Saturday, June 6, 2009, in his weekly address, the US President Barack Obama stated:

With skyrocketing costs threatening fiscal collapse, real reform that provides quality, affordable health care for every American is a necessity that cannot wait. To do this, reform must be built on lowering costs, improving quality, and protecting consumer choice so people who are happy with their coverage can keep it (The White House, 2009).

While relief and reform will be offered from the government, reconstruction will largely be a collaborative endeavor between all stakeholders in the healthcare sector.

There are huge business and public policy opportunities in the unjustifiable variation in cost and quality across the healthcare spectrum. These give rise to a plethora of research opportunities. The papers in this issue deal with different stakeholders of the healthcare system: physicians, pharma companies, health insurance, health technology, and retail pharmacies. They all provide ideas for relief, reform, and reconstruction. The papers in this issue are intended to stretch the horizons of conventional thinking about healthcare and provide ideas for the New Deal.

Whether managed care can effectively control healthcare costs has been a subject of debate for quite some time. The first paper in this issue by Jennifer L. Rice, titled “Are HMO physicians more price sensitive in prescribing brand-name drugs?” contributes to this debate by investigating the impact of Health Maintenance Organizations (HMOs) on physician prescribing behavior. The purpose of this paper is to estimate whether HMO physicians are more price sensitive than non-HMO physicians in their prescribing behavior of brand-name substitute. The results based on logit model and ordinary least square regression show that HMO physicians are more price sensitive in prescribing brand-name substitutes than non-HMO physicians. In addition, this paper also provides insight into the effectiveness of HMOs in altering physician prescribing behavior and price sensitivity of pharmaceutical prices and suggests how HMOs can improve the cost-effectiveness of physician prescribing behavior.

Next, Thani Jambulingam, Rajneesh Sharma and WaQar Ghani, in their paper “Wealth effects of the pharmaceutical industry-physician interaction compliance guidelines on large pharmaceutical companies,” investigate the role of government oversight on corporate performance in the pharmaceutical industry. They explore the wealth effects of the issuance of guidelines by the Office of Inspector General (OIG) to encourage pharmaceutical manufacturers to use internal controls or self-regulation “to efficiently monitor adherence to applicable statutes, regulations and program requirements” in their marketing to physicians. A standard event-study methodology is used to examine the impact on shareholders of 12 large pharmaceutical firms around four events leading up to the final guidance issued by the OIG. The results indicate a net wealth loss for the sample firms. They also provide credence to the argument that the hybrid systems, ones that combine industry rule making with government oversight, provide the greatest potential for overall benefits to the society.

The third paper deals with proposed reforms in the US healthcare system. In a rare thought-provoking piece, Kimball P. Marshall, Michaeline Skiba and David P. Paul III discuss implementation challenges in proposed consumer-driven health care (CDHC) solutions in their paper “The need for a social marketing perspective of consumer driven health care.” This paper reviews the US health care system, insurance plans, and CDHC plan elements and assumptions regarding patients, service providers, and insurers, in order to identify research on social marketing needs of CDHC. The effectiveness of CDHC plans could be seriously constrained by the lack of adequate consumer education, consumer information, and objective quality measures in healthcare. The paper proposes that social marketing programs can contribute to preparing consumers and practitioners for CDHC. However, the degree to which CDHC can reduce health care costs is uncertain. Insights gained from this study can contribute to social marketing program designs needed for practitioner and consumer acceptance and effective use of CDHC.

The fourth paper by Michel Rod, Nicholas Ashill and Sarena Saunders is titled “Considering implementing major strategic change? Lessons from joint venture in the UK health technology sector” This paper identifies and illustrates factors that influence successful implementation of major strategic change drawing on the example of a joint venture between two small firms – a hospital and a consultancy organization in the health technology sector. The results of subjective personal introspection as a methodological approach lead to a taxonomic framework of seven issues and eight propositions, thus providing an illustration of the sorts of factors that influence major strategic change implementation in the health technology sector: strategic vision/mission/objective; sense of purpose; motivational enthusiasm necessary for coordination, consensus, cohesion, cooperation, commitment and change receptivity; commitment to organizational objectives; consensus among employees on need for strategic change; collective responsibility; credibility of senior management; continuous organizational learning; effective two-way communications; detailed audit or analysis of the corporate culture and organizational climate, etc. The authors outline specific managerial action points to help guide the development and management of major strategic change.

Retail pharmacies are a critical component of the healthcare delivery system. The applicability of traditional industrial organization approaches to entry barriers and entry deterrence in the Australian retail pharmacy industry is the subject of exploration in Christopher Clark and Lesley White's paper “Entry barriers in retail pharmacy – a novel model.” Entry barriers and entry deterrence are investigated by examining the perceptions of incumbent retail pharmacists using in-depth interviews and surveys, regarding the strength of potential barriers to entry into the industry, and their likely response to entry. The results suggest that this industry is relying on barriers which while arguably effective, are outside the industry's control, and do not justify the apparent complacency among retail pharmacists.

We conclude with a review by Mark J. Kay of the book Our Daily Meds authored by Melody Peterson.

In conclusion, these studies are a piece of ammunition in the armamentarium in the war on fixing healthcare. They should encourage future researchers to study the interventions needed by different stakeholders in the healthcare sector and their major outcomes, such as proper utilization of health care resources and optimization of healthcare cost, quality, and access. For healthcare practitioners, these studies are a call to arms, so that if a change in the environment forces them to re-design their strategies and tactics, they will know that the change is as big as The New Deal and that addressing it head-on will greatly benefit the sector.

Avinandan Mukherjee