The Hybridized Nature of America’s Health Care System: Medicare as a Case of both Market and Public Failure

The Hybridized Nature of America’s Health Care System: Medicare as a Case of both Market and Public Failure

Monica Gaughan
DOI: 10.4018/978-1-4666-3982-9.ch012
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The theoretical perspective of Bozeman’s publicness work is used to frame a two-part case study of the health insurance system in the United States. It begins with a historical overview of the incremental changes to the system over the past 70 years, illustrating how competing economic and political authorities have combined to create a uniquely expensive and poorly performing system. The empirical lens then focuses on one component of the US system, the Medicare program for the elderly and disabled. It shows how a fully public system has become increasingly privatized through a series of policy reforms starting in the 1990s. This analysis is timely in light of the recent Affordable Care Act of 2010 and the continuing efforts of the US Congress to limit the growth of entitlements such as Medicare.
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To listen to political discourse about health care policy and financing in the developed world, it is easy to conclude that there really is a titanic struggle between neoliberal ideals of private sector provision, and socialist ideals of public sector provision. Distinctions between the United States and other developed countries often rely on language that portrays the US system as private and relying on the free market, while other systems rely on government control and regulation. Similarly, political arguments within the United States tend to characterize approaches led by liberals and most Democrats as “socialist” and approaches led by conservatives and most Republicans as “free market.” In point of fact, there is no purely private health care system in the developed world, just as there is no purely public one. Rather, these ideal types form the axes between which actual health care system policy and financing occur. In this analysis, I use theoretic al work on publicness and public value (Bozeman, 1987, 2007) to analyze the specific country case of the United States, and the very specific public insurance case of Medicare. Although this analysis constitutes a case (one insurance system) within another case (the United States), I will demonstrate that framing the analysis analytically as I do may have potentially broad applications in evaluating health system governance and finance.

Theoretical Background

In seminal work of the 1980s, Bozeman problematized the simple sectoral difference of public and private sector (Bozeman, 1987). He argued that sector blurring, hybrid organizations, and private contracting resulted in much more complex organizational domains than could be characterized by reference to public or private legal status. His conceptualization relied on two dimensions of what he terms the organizational authority mix, the proportion of economic and political authority that influences an organization. The dimension of publicness represents the degree to which an organization is affected by political authority, and the dimension of privateness represents the degree to which an organization is affected by economic concerns. Such a conceptualization is particularly useful in the United States, which relies heavily on sector mixing to achieve quasi-public goals such as public health.

With respect to hospitals in particular, the dominant sectoral type is neither public nor private, but the private not-for-profit hospital. This organizational type represents over two-thirds of hospital organizations in the United States and accounts for the majority of acute care delivered to the nation’s populace. In Figure 1, I adapt Bozeman’s (1987) authority grid to show that hospitals in the United States are arrayed on the diagonal, whereby private hospitals are governed relatively more by economic concerns (e.g., profit motives), public hospitals by political concerns (e.g., population care), and nonprofit hospitals—constituting the majority of such institutions occupying the middle of the grid (General Accountability Office, 2005). The key point is that health care in the United States cannot be categorized simply in terms of private or public ownership and delivery; because of the differing mixes of public and private authorities present in all health care organizations, much of the rhetorical basis about privatization is simply not supported empirically.

Figure 1.

Adaptation of publicness authority grid to organizational authority in the US


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