carolyn tuohy: the institutional entrepeneur – a new force in health policy
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The Institutional Entrepreneur – a New Force
in Health Policy?
Carolyn Hughes Tuohy, PhD, FRSC
Nuffield Trust, September 19, 2012
1
Entrepreneurs in Private and Public Sectors
entrepreneurs identify opportunities to recombine existing resources to create new value for some set of consumers.
business entrepreneurs: combine capital, labour, technology in private sector; seek financial profit
public/political/policy entrepreneurs: link problem definitions, policy remedies, political support to produce innovations in policy design; seek to augment political capital
The Concept of the Institutional Entrepreneur
Institutional entrepreneurs combine resources and power bases across the public and private sectors.
In health care, the principal bases of power are state authority, private capital and professional expertise
Institutional entrepreneurs combine authority (public mandates) with private capital and/or professional expertise
May operate from a principal base in any one of the three bases
Policy entrepreneurs vs institutional entrepreneurs
Policy entrepreneurs link problems with “solutions” in politically saleable ways to make changes in policy frameworks (the rules of the game)
Institutional entrepreneurs (IEs) link public mandates with private-sector resources to create hybrid public-private arrangements
Policy entrepreneurs and IEs may (or may not) act in complementary ways
The activity of IEs can drive reforms in unanticipated directions
Institutional entrepreneurs vs business entrepreneurs
Institutional entrepreneurs (IEs) act in lieu of the state in some matters – i.e. are “ordained” with public mandates
Business entrepreneurs may contract with government for certain deliverables, but they do not exercise state authority
A British example: the road from GP fund-holding to CCGs
Fundholding introduced as relatively minor aspect of 1990s internal market reforms – at initiative of “policy entrepreneurs” (Maynard, Clarke)
Combined public mandate (purchasing) with professional expertise
Seized upon by entrepreneurial GPs; became popular beyond expectations (>50% by 1997)
Multiple models of GP commissioning – multifunds, TPP, etc.
Political ramifications
Fundholding galvanized opposition to “two-tier” medicine among non-FH GPs who pursued “locality commissioning” relationship with HAs
Both groups established political associations (now NHS Alliance and NAPC) and links with politicians
Milburn and universalization of locality commissioning through PCT/PEC model
Return to “fundholding” with PBC
Lansley and GP consortia
Political ramifications
Clinical Commissioning Coalition supports Health and Social Care legislation
IEs took GP commissioning from margins to centre of policy framework
But, perhaps ironically, not involved in detail of design or broader architecture
Institutional entrepreneurs in health care reform: other nations
The Dutch Case
20-year reform process moved from bifurcation of social insurers and private insurers to “universal managed competition”
Sparked by Lubbers government, influenced by Enthoven’s ideas
First wave “liberated” social insurers from regional monopolies to compete nationally
The Dutch Case
Entrepreneurs took advantage of unique mixes of public resources (including publicly-mandated social insurance contributions) and private capital
distinction between sickness funds and private insurers blurred
some not-for-profit sickness funds drawn into broader holding companies with private insurers and other for-profit entities
private insurers established sickness funds as divisions
complex corporate structures
The Dutch Case – Unanticipated Consequences (1)
As risk-adjustment mechanisms were being developed, insurers were buffered against loss by government subsidies
But opportunities for profit also very limited by regulation.
Entrepreneurial activity aimed at increasing market share – led to increased market concentration
Number of sickness funds: 53 in 1985, 26 by 1993, 22 by 2003; Four large corporate umbrellas accounted for almost 90 percent of the market by 2009
increased market power of insurers vis-à-vis providers: especially re price in deregulated segment
The Dutch Case – Unanticipated Consequences (2)
Investments in information technology by insurers created an enhanced potential for risk selection on the basis of morbidity.
But also allowed regulators to respond by incorporating measures of morbidity into their risk adjustment formulae
These developments “softened up” the ground for final round of reform in 2006
Erosion of social/private distinction
market actors (including consumers) became accustomed to the new landscape.
The US case
An early example: HMOs in the 1970s:
Legislation mandated demand
But business entrepreneurs successfully lobbied for progressive dilution of HMO advantage
Current example: health insurance exchanges:
at the heart of the failed Clinton reform initiative of 1993: regional health alliances, with employer “play or pay” mandates
Other models developed at state level; taken up as
centrepiece of the Affordable Care Act of 2010
Health insurance exchanges: market players grounded in public authority
1990s: Attempts in numerous states to develop pooled purchasing arrangements for the small-group market e.g. California – began as state agency, later privatized,
closed.
All failed to achieve critical mass without employer or individual mandates
2000s: Massachusetts and Utah “bookends:”
MA: individual mandate, public subsidy
UT: employer-based defined contribution model; employees then select among competing plans, bearing any cost above the employer contribution
Massachusetts Health Connector
Market player whose power derives from mandated demand plus public subsidy
quasi-public agency: start-up public funding, then entirely
financed from premium surcharges
First executive director recruited from HMO (past connection to BCBS), second executive director moved from Governor’s office
operates two exchanges: for subsidized and non-subsidized clients)
focused on simplifying and streamlining choices; includes products from all major health plans in state
Massachusetts Health Connector - impact
Product: innovative web portal
98% MA residents now insured.
Needs to attract non-subsidized clients (individuals and small businesses) to validate model
Utah Health Exchange
public agency within a branch of the Governor’s Office
limited authority: reliant on insurer cooperation
Four of five major insurers participated, cooperated on risk-adjustment mechanism
Launched as a pilot project with innovative web portal in 2009
rolled out under somewhat strengthened rules in 2011
Utah Health Exchange - impact
Product: innovative portal and risk selection process
Little impact on uninsurance:
300,000 individuals without insurance prior to establishment
Exchange involved 300 employers with about 6500 covered lives by June 2012
US Health Reform at the Federal Level
Massachusetts as model for Affordable Care Act 2010:
Increased regulation of employer-based insurance
State-level health insurance exchanges
Medicaid expansion
Key actors from Massachusetts closely involved
Utah became Republican foil
US Health Reform at the Federal Level
By July 2012, 11 additional states had enacted legislation to establish exchanges.
10 under solid Democratic control of the legislature and governorship
In two more states, Democratic or Independent governors issued Executive Orders to establish exchanges after legislation failed.
Wide variation anticipated across states
Federal government will operate exchanges in some states by default
Institutional entrepreneurs in health care reform:
an explanatory framework
Institutional entrepreneurs thrive in heterogeneous contexts
resources are “loosely coupled” enough to be recombined in more productive uses.- cf Ostrom’s “polycentricity.”
policy frameworks vary in the extent to which they provide structural sites in which resources are loosely coupled enough to allow for recombination.
“market-oriented” reforms provide fertile ground
Those sites in turn differ in the power bases from which they make it possible for entrepreneurs to emerge:
state authority, private capital, professional expertise, etc.
Content of Policy Reform and Sites of Institutional
Entrepreneurialism
Britain Netherlands US
Content of reform
Purchaser-provider split replacing
hierarchy
Managed competition/universal
mandate replacing social/private
insurance
Managed competition/universal mandate grafted onto
mixed system
Site of entrepreneur-ialism
Fundholding Insurer competition Health insurance
exchanges
Institutional entrepreneurs
GPs Sickness funds State actors
Functional role of IE
Purchaser Underwriter, purchaser Broker, regulator
Base of IE power Clinical expertise Authority: State
mandate Authority: State position
Scope of IE power
State mandate Private revenue/capital Private revenue
Institutional entrepreneurs exploit uncertainty
Entrepreneurs make bets on an uncertain future: profit (or lose) from the difference between the value of the resources they invest at time T and the value of the product of those resources at time T+n.
i.e. they gamble that their predictions are more accurate than those of competitors.
Institutional entrepreneurs need to bet on conditions in both private and public sectors - i.e. political uncertainty is added to the mix
Institutional entrepreneurs exploit uncertainty
Uncertainty is heightened in episodes of major reform: timing and nature of uncertainty depends on political strategy of reform:
scale and pace attempted:
Big-bangs: large scale, fast pace
Blueprints: large scale, slow pace
Mosaics: small scale, fast pace
Increments: small scale, slow pace
Strategy of Policy Reform and Opportunities for Institutional
Entrepreneurialism
Britain Netherlands US
Strategy of reform
big-bang -> cycling -> mosaic blueprint mosaic
Duration of uncertainty
Big-bang: tight window for large-scale change
Cycling: extended window for small-scale change
Mosaic: Tight window for multiple deals; longer for implementation
Extended period for enactment of reform
in phases
Tight window for multiple deals; longer for
implementation
Type of uncertainty
Big-bang: Policy design, duration of political support
Cycling: political receptivity
Mosaic: Degree of political support, policy design
Policy design Degree of political
support, policy design
Britain – Big bang internal market reforms
political leadership solidified quickly among early-mover entrepreneurs; stayed stable through a period of policy cycling until the next episode of major change.
most apparent in the case of GP fundholding: early movers who “believed in a market” for fundholders rapidly adopted and adapted the model
different sub-set of GPs who objected to fundholding on
ideological grounds moved quickly to develop and promote a competing model. .
Britain – Cycling under Labour
Incremental change through centralist and decentralist cycles
For a time, GP entrepreneurs seemed to lose their bets on the future: GP commissioning eclipsed by Primary Care Trusts during centralist policy cycle after 1997.
But when the cycle turned again to attention to the need for clinical expertise in the making of purchasing decisions, entrepreneurial GPs found another foothold in PBC.
Britain: the Coalition Mosaic
Coalition reforms built on some Labour reforms, discarded others – rebranding, consolidation and acceleration
GP commissioning as centrepiece, but politically contested
NHS Alliance and NAPC not involved in drafting - – product of coalition “mosaic” of multiple compromises under time pressure
Clinical Commissioning Coalition mobilized in support
Britain: the Coalition Mosaic Implementation
Compromise required extended implementation timeframe
PBC provided nuclei for “pathfinder” commissioning groups created in anticipation of the passage of 2012 legislation.
The Dutch Blueprint
measured pace of “blueprint” strategy allowed for development of entrepreneurial talent among social insurers, gradually phasing in the transfer of risk
stalling of reforms in early stages created political uncertainty re whether social and private insurance would ultimately be merged
principal institutional entrepreneurs were the largest social insurers, who worked from the base of their public mandates to act increasingly as businesspeople pursuing market share.
Created technological infrastructure to support reforms
US (Massachusetts) Mosaic
MA: incrementalism accelerated under shadow of threatened loss of federal Medicaid funding
Multiple compromises in bipartisan environment
Key roles for policy entrepreneurs
Multiple uncertainties re market responses
Institutional entrepreneurs took the concept to market
US (federal) Mosaic
Historically: “bifurcated” welfare state confined entrepreneurialism to the private sector; state actors played classic regulatory and program management roles
2009: Like Coalition government in the UK, Democratic reformers adopted a “mosaic” strategy: multiple adjustments to the established system – including MA experiment.
compromises included delays in implementation of a number of key features of the reform, including the state-level exchanges
US (federal) Mosaic
Despite enactment of ACA in 2010, continued political uncertainty First state actors to respond had highest stakes in success
of exchange model – the political leaders of states in Democratic control.
ACA allows for a range of interpretation in implementation
considerable variety among states: different models of corporate structure, composition of the governing boards, etc.
Significant new political and economis actors
Institutional Entrepreneurialism: Implications
Shift in instruments:
England and NL:↑ use of exchange-type, market instruments: puts professional resources and private finance at risk
US: ↑ use of state authority, but as market player
Shift in balance of power – to private finance; or increased state regulation??
Summary
Institutional entrepreneurs (IEs) combine public mandates with a power base in the private sector.
Facilitated by certain policy designs and strategies of reform
bases from which institutional entrepreneurs emerge depends on policy design
IEs then affect the course of policy change
The impact of IEs depends on political strategy of reform: the scale and pace of change attempted
The growing importance of IEs raises new challenges of accountability
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