Empire and the business of health insurance.

I examine the development of privately provided insurance since World War II, giving special attention to Empire Blue Cross, and argue that the competition between employers and unions for the loyalty of workers after the passage of the Taft-Hartley Act helped diffuse private health insurance benefits already favored by federal policies. For-profit insurers did not challenge the privileged status of Blue Cross plans because they recognized the political benefits that the plans offered and because they did not wish to offend the plans' sponsors. A relatively easy and profitable business, health insurance has been greatly disturbed by the system inflation accompanying the introduction of Medicare and Medicaid programs. Now self-insurance and various managed-care schemes are major threats. The future may bring consolidation and the strengthening of pools, just the opposite of today's system fragmentation.

The first DRG: lessons from the end stage renal disease program for the prospective payment system.

When Medicare implemented the diagnosis related group (DRG) method of reimbursement for hospitals in 1983, it already had a decade of experience using a prospective payment arrangement for its end stage renal disease (ESRD) program. We reviewed this experience to determine the lessons for Medicare's reimbursement of hospital services. The use of a fixed price for renal dialysis encouraged the introduction of cost-saving techniques. Failure to reduce the price for dialysis in keeping with the cost reductions, however, prevented the government from realizing the full benefits of prospective payment. In addition, there were important changes in medical practice that had independent effects on the program. Similar influences are likely to shape the impact of prospective payment on hospital behavior.

Economic incentives and organizational realities: managing hospitals under DRGs.

Diagnosis-related Groups (DRGs) offer hospitals financial incentives to improve efficiency. To be effective, DRGs require a realignment of management so that physicians' use of resources can be disciplined by administrators. The constituency for altering power relationships within hospitals, however, is, at best, a weak one: administrators see their primary task as the protection of physicians' clinical autonomy. Constraints imposed on hospitals by regulators can be accommodated by minor adjustments in behavior that ensure neither gains in efficiency nor changes in decision-making authority.

Prospective payment in perspective.

Prospective payment promises improvement for a health care system plagued by inefficiency and rising costs, but is likely to disappoint. Serious efforts to control costs threaten the system's access and quality objectives and will be resisted. Moreover, serious cost containment, whether the result of all-payer regulation or competition, requires a stronger civil service than America seems capable of providing. A comparison with the experience in defense demonstrates the important limitations in applying incentive-based models in policy areas with conflicting goals. The search for panaceas will go on, but there are none.

Cross-national differences in dialysis rates.

The dialysis treatment rate is more than 50 percent higher in the United States than it is in any West European nation. Relman and Rennie's analysis of this difference in rates raised the possibility that the extra care provided in the United States is unnecessary and is partially attributable to the existence of a private market for renal dialysis services. Their analysis ignores the effect of race on treatment needs in the United States. About 50 percent of the difference observed in rates between the American experience and the European maximum can be attributed to differences in the black/white composition of the populations. Most of the remaining difference in rates appears to be due to European policies that prohibit or severely limit access to dialysis by the elderly and those potential patients with significant medical complications.

The political obstacles to the control of cigarette smoking in the United States.

The opportunity to affect significantly the consumption of cigarettes in the United States through government action appears quite limited. Fifty million Americans smoke cigarettes. The United States is a leading producer of tobacco leaf and utilizes a price support system which is designed to protect tobacco growers. The industry is profitable and politicaly well connected. Several states are important producers of tobacco while others benefit from the excise tax imposed on cigarettes. The opposition to smoking is relatively weak and divided. Nevertheless, the tobacco industry worries about the future market for cigarettes.

Controlling post-transfusion hepatitis: a proposal to publicize hepatitis rates of transfusion facilities.

A federal requirement that donor blood be labelled as either "paid" or "volunteer" took effect on May 15, 1978. A major rationale for requiring such labelling is that physicians, now that they can distinguish between categories of blood, will fear liability for post-transfusion hepatitis resulting from the use of paid blood. Thus, supporters of the labelling requirement hope that it will deter the use of high-risk commercial blood. Some paid blood, however, is not commercial blood and in fact may be safer than volunteer blood. The labelling strategy for hepatitis control, therefore, has negative as well as positive attributes. This Article considers the efficacy of blood labelling as a hepatitis control measure and proposes an alternative strategy--the periodic publicizing of hepatitis rates of facilities that perform transfusions--that, if practiced responsibly, could significantly decrease hepatitis transmission rates.