In This Issue

March 2005 | Bradford H. Gray

The first article in this issue of the Milbank Quarterly uses mortality statistics to shed light on two important topics: racial disparities in the United States and this country’s comparatively poor performance on various measures of mortality. These two themes are brought together in an unusual and rich analysis in “Mortality of White Americans, African Americans, and Canadians: The Causes and Consequences for Health of Welfare State Institutions and Policies,” by Stephen Kunitz (with Irena Pesis-Katz). Their article presents two arguments. The first concerns the interactions among race, public policy, and disparities in the health status of white and black Americans. Kunitz describes how the legacy of slavery affected welfare state policies in the United States. The lengthy disenfranchisement of African-American citizens in the post–Civil War South and the long-lasting influence of conservative, white Southern congressional committee chairmen led to social welfare legislation that disadvantaged African Americans. For example, in the original Social Security Act of 1935, agricultural laborers and domestic servants—the only two occupations in which African Americans predominated in the South—were excluded from the Old Age Insurance program.

In addition to influencing social welfare policy in the United States, race also affected the country’s vital statistics. Kunitz compares mortality and life expectancy in the United States and Canada and shows that since 1930, life expectancy for Canadians has exceeded that for residents of the United States. Until 1970, the difference between the two countries was largely due to African Americans’ higher mortality rate; the mortality rates of Canadians and white Americans were similar. Then, in the 1970s, Canadians’ life expectancy began to exceed that of white Americans, and the difference has widened in each subsequent decade.

Kunitz argues that this pattern can be explained by the two countries’ different social welfare policies, particularly Canada’s adoption of universal health insurance in 1972. He buttresses his argument with comparative data on deaths from causes amenable to intervention by the health care system. Kunitz’s analysis suggests that the Canadian advantage in life expectancy can be substantially attributed to its system of comprehensive care, a point that is supported by research evidence from the United States on the adverse health effects of a lack of health insurance (Hadley 2003; Institute of Medicine 2002).

The next article in this issue is “Making Medicaid a Block Grant Program: An Analysis of the Implications of Past Proposals,” by Jeanne Lambrew. From its inception, Medicaid, which is funded by both the federal government and the states, has provided comprehensive health benefits to people who meet disability and income standards set by federal and state law. The program’s cost depends on the number of people who are eligible, which can change from year to year depending on several factors, including the health of each state’s economy. Under block grant proposals, the amount that the states would receive from the federal government would be set by statute or regulation and would not vary with the number of people who might meet the eligibility criteria. The states would be allowed to control costs by changing the services that would be covered or the eligibility criteria for Medicaid. Block grants have been proposed several times (1981, 1995, and 2003) for the Medicaid program, and they remain on the policy agenda. What effects might they have?

Lambrew addresses this question by comparing the actual flow of federal funds to the states with the flows that would have occurred if the 1981 or 1995 block grant proposals had been enacted into law. From the federal government’s perspective, block grants have the advantage of making future Medicaid expenditures both predictable and controllable. Lambrew’s analysis highlights the cost of achieving these goals. The formulas for calculating the amount of the block grants would have moved as much as 30 percent more dollars or 30 percent fewer dollars to the states than actually occurred. In most years, the states would have received substantially less federal money under the block grant proposals than they actually received. The effects would have been felt in state budgets, the number of people covered, and their benefit packages. The impact would have been particularly dramatic during recessions.

Welfare state policies and block grants are also the subject of the next article. In “Welfare Reform and Substance Abuse,” Lisa Metsch and Harold Pollack examine important implications of the 1996 welfare reform legislation known as the Personal Responsibility and Work Opportunity Reconciliation Act. The act converted public aid from an entitlement to a block grant program and increased the states’ power to determine eligibility. The new program’s name, Temporary Assistance to Needy Families (TANF), conveys a new philosophy that welfare eligibility is to be transitional. Beneficiaries can ordinarily expect no more than five years of support. At the time the legislation was passed, some researchers and policymakers expressed concern about its potential adverse effects on low-income mothers with substance abuse disorders.

The evidence that Metsch and Pollack present suggests that the magnitude of substance abuse in the TANF population is much lower than seems to have been widely assumed, that the percentage of substance abusers in this group has remained relatively constant as the welfare population has shrunk, and that substance abuse is only one of several barriers to successful movement into the workforce. The second half of the article reviews what is known about the effectiveness of various programs in moving the welfare population into jobs. They conclude that the central challenge facing TANF is “to successfully execute interventions that are broadly supported in concept, but that are difficult to implement well.”

In addition to adding a prescription drug benefit to the Medicare program, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 included utilization management provisions designed to control expenditures and encourage the appropriate use of pharmaceuticals. In “Pharmacy Utilization and the Medicare Modernization Act,” Vittorio Maio and his colleagues discuss the implications of these provisions. Their article is based on a review of research on the effects of cost-sharing (copayments, coinsurance, deductibles, and benefit caps) and administrative mechanisms such as prior authorization and formularies. They contend that methods that reduce cost may also have negative clinical outcomes and that more research on the economic and clinical effects of pharmaceutical utilization management is needed to improve the design of drug benefit plans.

The article on pharmaceutical utilization management is followed by a commentary by Malcolm Maclure, who brings a Canadian perspective to the question of controlling pharmaceutical costs. He focuses on the reference-based pricing program that was introduced in British Columbia in 1995. This program gives patients economizing incentives for drugs in classes in which alternative drugs of different cost are available. Maclure describes the program and notes that several evaluations have shown that it has caused participants to switch to less expensive drugs, with no signs of adverse health events and no increase in patients’ discontinuing their drug use. Maclure also presents schematics describing the range of strategies available to influence the use of pharmaceuticals and to contain pharmaceutical costs.To guide drug insurance policies, he proposes that coverage should be for drugs that work and that benefits should go to patients with greater needs.

The final article in this issue is “Exporting the Buyers Health Care Action Group Purchasing Model: Lessons from Other Communities,” by Jon Christianson and Roger Feldman. The patient-choice purchasing model developed by the Buyers Health Care Action Group (BHCAG) of Minneapolis and St. Paul, Minnesota, has attracted wide attention from those who favor a managed competition strategy (Enthoven 1998). A coalition of 14 large, self-insured Twin Cities employers, BHCAG began in 1977 by offering employees a choice of “care systems” built around groups of primary care physicians and affiliated specialists and hospitals. After describing the key features of this strategy, Christianson and Feldman turn to the fate of efforts to export the BHCAG model to other cities. It did not work, and the reasons are instructive. They partly pertain to circumstances of the Twin Cities and of BHCAG itself that were not found in other markets and partly to the erosion of the expected support of employers in other cities when companies merged, downsized, or changed corporate headquarters. The story Christianson and Feldman tell suggests that in the current configuration of community health care systems, private-sector attempts to execute a model of competing health systems are unlikely to be successful as a path to reform.

Bradford H. Gray
Editor, Milbank Quarterly


Enthoven, A.C. 1988. Managed Competition: An Agenda for Action. Health Affairs 7(3):25–47.

Hadley, J. 2003. Sicker and Poorer: The Consequences of Being Uninsured. Medical Care Research and Review 60(2 suppl.):3S–75S.

Institute of Medicine. 2002. Care without Coverage: Too Little, Too Late. Washington, D.C.: National Academy Press.

Author(s): Bradford H. Gray

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Volume 83, Issue 1 (pages 1–4)
DOI: 10.1111/j.0887-378X.2005.00333.x
Published in 2005