Understanding the Demanders and Suppliers of Healthcare
Longest writes that “health policies . . . are made within the context of political markets, which in many ways operate like economic markets”, with some notable differences:
In economic markets, preferences of the buyers or demanders are exhibited by spending their own money. The benefits are derived at the time of purchase.
In political markets, the benefits of a policy may not be readily determined. For one thing, the link between who benefits from the policy and who pays for the policy may not be directly related. There may be an indirect link, for example, providing healthcare for the mentally ill may benefit society in terms of improving criminal statistics or providing a better image for a community. But in healthcare, the policies implemented today often affect future generations. The realization of benefit may not even be derived by those paying for it.
Legislators can and do implement policies that can give them immediate benefit. For example, in today’s political environment, legislative action if often delayed until just before reelection. We see this today from congressional action being taken on giving the president the power to invade Iraq. Congressional democrats don’t want to be viewed as being “weak” in dealing with terrorism so they cave into the presidential persuasion. At the same time, the economy continues to falter, and those issues that affect Americans on a daily basis may be ignored. Thus, the refusal to take action on political issues can also have an impact on future generations. So, legislators must way whether immediate benefits exceed immediate costs. Consequently, policies that provide immediate political benefits can result in burdensome future costs.
In private markets, demanders seek products and services that satisfy them. In political markets, demanders specifically seek public policies that satisfy their preferences.
The Demanders of Health Policies
These can include anyone who considers such policies relevant to the pursuit of health for themselves or others about whom they care, or who considers such policies to be a means to some other desired end.
Individuals have difficulty participating
in the political market effectively as a demander.
· First, they need to have policy relevant information. This requires time, and often, money.
· Second, they must also be willing to expend a significant amount of time and money in expressing their support of policies that affect them.
Therefore, organizations, with their pooled
resources, have advantages over individuals in the political marketplace.
· They have the resources to participate
· Their interests can be concentrated. For example, a change in Medicare policy that affects an individual’s pocketbook to the tune of $100 per year is likely to be unhappy, but not affected enough to put forth the effort to fight the policy. But a policy that affects an organization by millions of dollars is likely to make a significant statement on the policy.
Well-organized interest groups are the most effective demanders of policy. An interest group is “an organization of people (or other organizations) with similar policy goals who enter the political process to try to achieve those aims”. Because they can combine and concentrate their resources, they have a much greater impact in the political market than individuals or organizations.
Among the very powerful interest groups in the health care marketplace are:
The American Medical Association (AMA)
The American Association for Retired Persons (AARP)
The American Association of Health Plans (AAHP)
The Pharmaceutical Research and Manufacturers of American (PhRMA)
The American Hospital Association (AHA)
The American Nurses Association (ANA)
Even interest groups from other segments of the marketplace have a significant impact on healthcare decisions such as union organizations and veterans groups.
Interest groups are powerful because of their collective actions. The right to organize interest groups is protected by the U.S. Constitution (1st Amendment – the right to peaceably assemble, and to petition the Government for a redress of grievances”.
There is some disagreement as to whether interest groups make a positive or negative contribution. James Madison, the framer of the Constitution referred to them as “factions” and considered them inherently bad for the country because they could overwhelm the interests of the individual. However, he also stated that the “mischiefs of faction” could be and should be contained by setting the “ambition” of one faction against the selfish preferences and behaviors of other factions or groups. Today, we do have interest groups that represent the interests of all sides. But the interests of groups representing the private or individual interests, or the interests of the economically less powerful are at a severe disadvantage in terms of politicking. Especially where political financial contributions are concerned. Thus we have the Pluralist Perspective and the Elitist Perspective.
The Pluralist Perspective of Interest
Essentially this boils down to the belief that because there are so many interest groups operating that everyone’s interests can be represented by one or more of them. Pluralists generally think that interest groups are a good thing. The pluralist perspective can be referred to as the group theory of politics:
· Interest groups provide essential linkages between people and their government.
· Interest groups compete among themselves for outcomes of the policymaking process and counterbalance one another.
· No group is likely to become too dominant in the competition. As one group becomes more powerful, countervailing interest organize against their efforts.
· Competitions between interest groups is basically fair.
But the growth and influence of interest groups, even when taking the pluralist perspective has led to what Lowi refers to as “interest group liberalism” – an excessive dependence by government on the perspectives of the interest groups. Critics of the pluralist approach consider interest group liberalism as hyperpluralism.
· The presence of large numbers
of interest groups (there are more than 23,000 non-profit interest groups
in the U.S.) has made them too influential in policy making.
· And, because politicians seek to satisfy multiple and conflicting interest groups, policy making becomes confusing, contradictory, and even paralyzed.
The Elitist Perspective
This model is based on the idea that real political pwer in the United States is concentrated in the hands of the very small proportion of the population that controls the nation’s key institutions and organizations and much of its wealth. Big interest look out for themselves. They disproportionately influence the policymaking process. Interest groups are controlled by the power elite or establishment and most policies are made in the interests of these elite.
The tenets of the Elitist Theory view interest groups:
· Real political power resides in
a very small number of groups – a large number of interest groups is practically
meaningless because their power differentials are so diverse.
· The power elite share a consensus or near consensus on the basic values that should guide public policymaking.
· Members of the power elite have a strong preference for incremental changes in public policies. This permits social and economic adjustments without feeling threatened or with minimal impact.
· The elitists protect their power bases. Some minimal movement of non-elites into elite positions is permitted to maintain social stability, but only after they accept the elitist values.
Although neither the pluralist perspective nor the elitist perspective may fully explain the policymaking process, there is no question that interest groups influence decision making. There are certainly the anecdotal incidents that have impact on policymaking. Those individual events that are so outlandish that there must be something wrong with the system and therefore the system needs to be changed. This was common as individuals testified to Congress in an effort to obtain a patient’s bill of rights against HMOs, but even in this case, the prevailing interest groups seem to win out.
The Power and Influence of Interest
Whichever perspective one holds on the interest group model, some interest groups do have extraordinary power and are influential in the political marketplace. These demanders of public policy are often referred to as the iron triangle.
Iron Triangles and their Influence on
Whether it is healthcare or some other policy interest, each attracts a set of participants made up of individuals, organizations, and groups that have some stake in the policy affecting their domain. Some of these participants demand policies, others supply policies. These stakeholders form a policy community whose members share an interest in a common policy domain. Membership in these groups include legislative members or committees, the executive branch agency (also referred to administrative agency) responsible for implementing the policy or program, and the private-sector interest groups involved in the domain. The legislative and executive angles are the suppliers of the policies demanded by the third angle. This triad has been referred to as the iron triangle because of its stability and ability to withstand attempts to make undesired changes in the status quo.
However, the healthcare domain of policymaking is less controlled by iron triangle influences since the implementation of Medicare and Medicaid. The private sector interest groups that dominated the healthcare domain such as the AMA, the American College of Physicians, and the American College of Surgeons that once dominated healthcare began to have diverse interests. Other groups also played a larger role in the healthcare domain with the emergence of Medicare and Medicaid. Several of the groups even began to splinter. For example, today fewer than 50% of physicians are members of the AMA (in part because they have taken more active roles in the specialty groups). But today, the healthcare domain appears to be better described as a “heterogeneous and loosely structured” group with “shared attentiveness” on health care policy rather than “agreed upon attentiveness”. That is not to say that healthcare interest groups don’t continue to have major influence over the decision making process.
Interest Groups and Electioneering
Policymakers who are sympathetic to a group's interests are likely to be influenced in their policymaking by the group's policy preferences. Therefore, interest groups work with sympathetic policymakers to help get them reelected. Electioneering - using resources at the disposal of the interest groups to aid candidates for political office - has become one of the most common ways, and controversial ways, of influencing policy.
Through PAC (political action committees), interest groups contribute campaign contributions to help get their candidates elected. Nearly 50% of the costs of congressional elections in the United States come from PACs.
PACs are not the only methods that they use. Interest groups will also help drafting legislation. But other methods are found in the leadership of the interest groups. For example, the American Hospital Association has other resources besides financial power at its disposal. Because their members are important community leaders, they can influence at the local level. Moreover, they tend to have much more power over the political process at the state level on an individual basis.