Coalition For Sensible Health Care Solutions

1. Coalition For Sensible Health Care Solutions Choosing Private Market Solutions over Government Reform 1

2. Health Care Cost Crisis Source:” Health Affairs. February 7, 2003. & U.S. Department of Commerce Bureau of Economic Analysis. July 30, 2004. Growth in National Health Expenditure, as a Percentage of the Gross National Product Percentage 2 Source: Centers For Disease Control

3. America is at a crossroad Health care costs are rising . . . Employer-based health insurance premiums, overall inflation, worker earnings Source: EMPLOYER HEALTH BENEFITS 2003 ANNUAL SURVEY. The Kaiser Family Foundation and Health Research and Educational Trust. 3

4. The Problem • Health Care Costs “Healthcare costs are not expensive because of health insurance - health insurance is expensive because of healthcare costs” 4

5. Getting to the Core Problem: Medical Care Expenses Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. New England Journal of Medicine, Costs of Health Care Administration in US & Canada 5

6. The Reason • Components Certainly Include: • Reimbursement Rates from Medicaid/Medicare • Tort Reform • Aging Population • Advanced Technologies • Cost Shifting from the Uninsured • Shift in Bargaining Power to Providers • Government Interference (Mandates) • Market Consolidation of Providers & Payers • But, these are not the Core Reasons 6

7. Cato Policy Analysis “The major culprit…..the removal of the patient as a major participant in the financial and medical choices that are currently being made by others in the name of the patient.” Professor Stan Liebowitz Professor of Managerial Economics in the Management School of the University of Texas at Dallas 7

8. Cato Policy Analysis • As the percentage of the patient’s share of medical bills goes down, the cost of that care increases dramatically because patients no longer care what the total cost is. • Because patients no longer care about the cost, it’s human nature for the providers of that care to no longer care about the cost. 8

9. Micro Example • Prescription Drug Costs • From 1965 to 1990, one of the most stable components of health care • GNP rose 194% • Rx Drugs rose relatively close at 250% • By Contrast, Hospital Expense rose nearly 500%

11. Why the Increase in Rx Drug Costs? • Consumer Behavior • Prior to 1990’s, consumers paid full cost of the drug and then filled out claim form • In 1993 the advent of the drug co-pay • Now, any drug at any cost for only $2 • Is there any wonder drug companies started to advertise to consumers?

12. A Brief History of Health Care &Health Insurance • Prior to the 1980s: • Healthcare Delivery • Independent Hospitals & Physicians • Community-based or Religious-based Non-profit Hospitals • Health Insurance Plan • Comprehensive Major Medical Insurance • $500 Deductible • 80%/ 20% Coinsurance • No Drug Card Copays • No Doctor’s Office Visit Copays 12

13. A Brief History of Health Care &Health Insurance • The 1980s and 1990s: • Healthcare Delivery • Integrated Healthcare Systems– Non Profit Corporate Structures: • Aurora Healthcare • Marshfield • Theda / Bellin • Luther/ Midlefort • New Full Service Health Insurance Plans • 1973 Federal HMO Act • No Patient Financial Responsibility • Drug Card Copays • Doctors Office Visit Copays • Maintenance Plans 13

14. A Comparison of Historical Insurance Costs Adjusting for trend (7% annually), a comparable plan in 2000 would have a $551 deductible, $3,310 out-of-pocket maximum. An actual average healthcare plan in 2002 has a $276 deductible and a $1000 (or less) out-of-pocket maximum. A typical health care plan in 1985 had a $200 deductible and a $1,200 out-of-pocket maximum.

15. Results of the Full Service Plan Experience: • Eliminated the consumer in the health care system. • Changed the concept of insurance from “financial protection against large, unexpected medical expenses” to “maintenance coverage for all health care needs, with little or no financial responsibilityon the part of the policyholder.” • Some consumers today think that the cost of a doctor visit or a prescription drug is a $25 copay. 15

16. Today’s Health Care Environment • Today: • Healthcare Delivery • Integrated Healthcare Systems – Non Profit Corporate Structures: • Aurora • Gunderson/Lutheran • St. Josephs / Marshfield • Non-Typical Competition for Patients • Patient Demand • Duplication of Services • Cardiac Centers & Heart Hospitals • MRI’s 16

17. Wisconsin Premium Comparison By Location

18. Urban v Rural Health Care • Urban Health Care • Two or More Competing Corporate Structured Health Care Systems • Stronger Penetration of 1st Dollar Coverage (HMO) Plans • More Public Sector Employees • More Union Bargained Plans

19. Urban v Rural Health Care • Rural Health Care • Single Community Based Hospital • More Traditional Health Plans (Cost Sharing) • Higher Deductibles and/or CDHC Plans • Less Public Sector Employees • Less Union Influence

20. Insurance Reform v. Health Care Reform • Government solutions have focused on how we finance health care, rather than focusing on health care costs 20

21. Why Insurance Reform? • It has been the Only Politically Viable Option for Politicians • Government Has Only Two Options in Reforming Health Care Costs • Control Over Providers • Allowing the Market to Work 21

22. The Solution is the Second Option • The Only Comprehensive Health Care Reform Plan is the Sensible Health Care Solutions. • Decreases the influence of third party payments • Give consumers control over their health care decisions and the cost of their health care • Give providers a reason to be concerned with the cost of the care they deliver • Begins to create competition in health care • Incentivizes Employees to take better care of themselves 22

23. Basis for SHCS • Recognize & Identify the Real Problem – Health Care Costs • Stop Trying to Reform Insurance Just Because it is Politically Attractive & Safe • Listen to the Experts Why Costs Are High 23

24. Sensible Solutions Include: • Returning to Fundamental Principal of Insurance • Reform Medicaid & BadgerCare • Expand Wellness Programs • Health Information Technology • Health Care Transparency • Expand Long Term Care Coverage • Insurance/Market Reforms 24

25. Returning to Fundamental Principal of Insurance • Introduce Comprehensive Major Medical Insurance Plans into the Public Sector • HSA Tax Deductibility • Health Insurance Premium Tax Deductibility • Expand the Reach of Section 125 25

26. Evidence of Consumerism • Consumer-driven health care consumers were more value conscious: • They were 50% more likely to ask about costs, and; • Three times more likely to have chosen a less expensive treatment option, and; • They also were much more likely to visit an urgent care center than a hospital emergency room “CONSUMERISM IN HEALTH CARE: EARLY EVIDENCE IS POSITIVE”. The Galen Institute, August 11, 2005. 26

27. Reform Medicaid & BadgerCare • Covering the Uninsured – Moving Beyond Medicaid • Create Health Coverage Accounts • Private Market Coverage versus Government Plans • Public/Private Partnership 27

28. Expand Wellness Programs • Remove Barriers to Offering Financial Incentives • Encourage Wellness Plan for Private Sector Employers • Implement Wellness Plans for All Public Sector Employees • Implement Wellness Plans for Medicaid Recipients 28

29. National Healthcare Costs • In 1980, the nation’s healthcare costs totaled $245 billion1 • In 2001, the nation’s healthcare costs totaled $1.5 trillion1 • Preventable lifestyle-related illness accounts for 70% of the $1.5 trillion in medical care costs2 1 Department of Health and Human Services, 2003, The Power of Prevention. 2 Beyond Health Promotion, Health Affairs, 1998. Reducing need and demand for medical care. 29

30. Prevention 70% of healthcare expenditures are preventable!* • Due to lifestyle or behavioral choices. • You only have one body– take care of it! *Health Affairs, 1998**JAMA, August 2003

31. Health Information Technology • Encourage Private Market Advancements of Information Technology • Tax Incentives • Implement IT Requirements for State Programs (Medicaid, State Employees) 31

32. Health Care Transparency • Require Full Disclosure of Health Care Costs • Patient Right To Know. Consumers should be given the estimated cost of the service at the time the provider recommends the service. • Move Private Market Where Necessary • Hospitals have shown effort, but we need physician & other provider data 32

33. A Need for Health Care Consumerism? Some plan members’ perception is that the real cost of an office visit or prescription drugs is a $30 copay… “Consumers can guess the price of a Honda Accord within $300, a roundtrip ticket within $37 but they’re off by $8,100 for a four day hospital stay.” Source: “Consumer Attitudes Toward Health Care”, Harris Interactive survey of 2,000 individuals, February 2005 33

34. Expand Long Term Care Coverage • Implement Long Term Care Partnership Program 34

35. Insurance/Market Reforms • List Bill • Open options for coverage • Reduce costs to consumers through IRS code • Claims Data Disclosure • Make insurance shopping easier & more competitive 35

36. What Simple Things Can Consumers Do? • See your doctor each year for preventative care services • Routine physical • Make exercise and proper nutrition part of your everyday life: • Stairs versus the elevator • Hold the mayo • Get out and play (listen to your mother) • Eat fruits and vegetables. • An apple a day can still keep the doctor away!

37. What Simple Things Can Employers Do? • Implement a Consumer Driven Health Care Plan • Short of that, remove co-pays and apply all charges to large deductible and co-insurance with maximums • Change your drug plan. Remove co-pays and apply co-insurance for full cost of drug.

38. What Simple Things Can Citizens Do? • Get Active – Locally & State. • Call your School Board and insist they implement CDHC • Call your County Board and insist they implement CDHC • Call your Legislators and insist they implement CDHC • Get active with your local hospital. Find out who serves on their board of directors and get vocal with them about costs.

39. QUESTIONS Dan Schwartzer Wisconsin Association of Health Underwriters 4600 American Parkway, Suite 208 Madison, WI 53718 608-268-0200 www.eWAHU.org