The winds of deregulation blowing through Ronald Reagan's Washington may well, in the next two years, break up one of the country's most complex regulatory networks: the health planning program designed to ensure local health needs are met while the nation's $247 billion annual health care bill is kept as low as possible.
The health planning program, at its peak, employed 240 federal bureaucrats and encompassed 207 local health systems agencies (HSAs), 57 state health planning development agencies and three technical support agencies. This complexity, coupled with a low political profile, have made it a prime target for an administration that frowns on regulation in general.
Few people pay health care bills directly, so the program's main constituents--you and I--were largely oblivious to it. Figures on how much the program saved, the handiest measure of success, were questionable at best. And, while the 1974 law creating the system emphasized local and state control, the accompanying rules were amended so Washington increasingly told local agencies not only what to do but how to do it.
For all that, its demise did not seem likely until David A. Stockman, who once supported the program, became director of the Office of Management and Budget and proposed phasing out all federal support for health planning by 1984.
Total federal support for the program last year was $122 million, with $88 million going to local and regional agencies and $32 million to states. For fiscal 1983, the administration wants to keep state funding at the same level but slash the local agencies' share to $6 million.
House and Senate proposals vary, but both are more generous to local HSAs. The House would give them $50 million, the Senate, $40 million.
By far the program's most controversial aspect has been the certificate of need. Before hospitals could make major capital expenditures for new construction or new equipment like CAT scanners, the computerized X-ray device, they had to get the planning agencies to certify that the expenditure was necessary.
The process was designed to give the states some control over an industry insulated from normal competitive forces.
For practical purposes, the consumers of hospitals are doctors, who become affiliated with an institution then send patients there. Since doctors like to work with advanced equipment, the more facilities a hospital has, the better its chance of attracting good doctors.
Proliferation and duplication of expensive equipment pushes up costs, costs usually paid by health insurers and, eventually, policyholders and taxpayers.
While about half the states had certificate of need programs before the 1974 law, the legislation virtually forced them to have one in place. Without such a program, the states would get no federal money for health planning and, worse, they stood to lose 25 percent of their grants for such things as alcohol and drug treatment centers.
Every state joined up, following federal guidelines for both state health planning development agencies and local HSAs. The local agencies were supposed to write health plans for their areas, appoint consumers to their boards, screen all certificate of need requests and make recommendations to the state agencies that made the final decision.
To the extent that the system was supposed to hold down costs, the federal government itself was the biggest potential beneficiary: federal taxes pay about 40 percent of the nation's health care costs, mostly through the Medicare and Medicaid programs.
Maryland and Virginia already had certificate of need laws when Congress acted in 1974; the District enacted one in 1978. Since 1973, these laws have blocked 2,200 unnecessary hospital beds--including seven new hospitals--according to Barry Wilson of Group Hospitalization Inc., the local Blue Cross-Blue Shield program. His savings estimate: $180 million in construction costs and $96 million in annual maintenance.
The American Health Planning Association estimates the program savings "approach $1 billion annually."
Such figures, Wilson and supporters of the program say, show it has worked. But they concede the figures are iffy. In rebuttal, opponents say the inexorable increase in hospital and health care costs is evidence the program does not work.
(Other measures of the program's success, such as improvements in local health care delivery, are seldom taken.)
"Cost containment was the most visible, the most dramatic way of looking at this. Health planning is more low-keyed, not as appealing," said May Wong, acting director of Montgomery County's HSA.
The American Medical Association, which fought the 1974 law and now is trying to get it repealed, contends that health planning took place long before certificates of need came into being. Doctors and hospitals would continue to plan on a voluntary basis but should not be subject to the goad of a local group with quasiregulatory authority, one AMA official said.
If there is to be regulation, he said, let the states do it, without any input from Washington and with local planning groups serving as lobbyists, not regulators.
"The mission of these agencies was in the first instance not reasonable," said a high OMB official familiar with the issue. "It substitutes political controls for resources management" and the control of competition. He added that local HSAs "tended to have irrational phobias--one year it was CAT scanners, the next it was fetal monitors. And always it was new beds.
"If we thought this system on balance had the potential to save more than it chewed up in resources, we might rethink," he added.
Roland Peterson, top program development officer in the Health and Human Services Department's health planning bureau, has a different view. One reason the program was viewed as a failure, he said, was that too much was expected of it.
"The legislation talked about cutting costs, improving access to hospitals, improving the quality of services and improving the health of the nation's citizens. It's questionable whether any one program can do all that. It's certainly questionable when what's been handed out is a flyswatter."