Health Reform in the US

1. Health Reform in the US

2. Current ProblemsUninsured • Uninsured and Underinsured • 45.7 million people uninsured in 2007 (15.3 percent of population) – source current population survey • An increase of 7.8 million from 2000 • Decrease from 2006 where it was 47 million • Decrease came from an increase in government coverage • The percent of people covered by private health insurance decrease slightly from 67.9 to 67.5 between 2006 and 2007 • Percent of people covered by employer insurance also decreased slightly from 59.7 to 59.2 • Majority are employed in small firms (<100). • So any reform needs to address this group. • 16 million non-elderly adults (20% of non-elderly adults) were underinsured • High out-of-pocket health costs to income ratio.

3. Figure 1. 47 Million Uninsured in 2006;Increase of 7.8 Million Since 2000 Number of uninsured, in millions Source: U.S. Census Bureau, March Current Population Survey, 2001–2007.

4. Figure 2. 16 Million Adults Under Age 65Were Underinsured in 2005 Uninsured during the year 47.8 million (28%) Insured, not underinsured 108.6 million (63%) Underinsured 16.1 million (9%) Adults Ages 19–64 Note: Underinsured defined as having any of three conditions: 1) annual out-of-pocket medical expenses are10% or more of income; 2) among low-income adults, out-of-pocket medical expenses are 5% or more of income; 3) health plan deductibles are 5% or more of income. Source: Analysis of the Commonwealth Fund Biennial Health Insurance Survey (2005).

5. Figure 3. The Majority of Uninsured AdultsAre in Working Families Adults ages 19–64 with any time uninsured Adult work status Family work status No worker in family 21% At leastonefull-time worker 67% Not currently employed 36% Full-time 49% Onlypart-time worker(s) 11% Part-time 15% Note: Percentages may not sum to 100% because of rounding. Source: The Commonwealth Fund Biennial Health Insurance Survey (2005).

6. Figure 4. More than Three of Five Working Adultswith Any Time Uninsured Are Employed inFirms with Less than 100 Employees Percent of employed adults with any time uninsured, ages 19–64 Don’t know/refused 4% Self-employed/1 employee 10% 500+ employees 21% 2–19 employees 31% 100–499 employees 11% 20–99 employees 22% Note: Percentages may not sum to 100% because of rounding. Source: The Commonwealth Fund Biennial Health Insurance Survey (2005).

7. Figure 5. Prevalence of High Family Out-of-PocketCost Burdens by Poverty Status Among theNonelderly Population, 1996 and 2003 Percent of nonelderly adults who spend >10% of disposable household income on out-of-pocket premiums and expenditures on health care services Source: J. S. Banthin and D. M. Bernard, “Changes in Financial Burdens for Health Care: National Estimates for the Population Younger Than 65 Years, 1996 to 2003,” Journal of the American Medical Association, Dec. 13, 2006 296(22):2712–19.

8. Current ProblemsCost of the Uninsured • Cost on the Individual • Receive less preventative care • Uninsured adults 3-4 times more likely than insured to go without preventative care services. (e.g screening for hypertension or breast cancer) • Late detection leads to worse health outcomes and higher health costs. • Less likely to be able to manage chronic conditions which leads to greater morbidity/mortality for this population • Can’t afford care: Uninsured adults with chronic conditions are 4.5 times more likely than insured to report an unmet need for medical or prescription drugs • More likely to need ER or hospital care due to mismanagement • Pay high out-of-pocket expenditures • Problems paying their medical care bills. Source: Families USA Foundation.

9. Figure 6. Receipt of Recommended Screening and Preventive Care for Adults, by Family Income and Insurance Status, 2002 Percent of adults (ages 18+) who received all recommended screening and preventive care within a specific time frame given their age and sex* * Recommended care includes seven key screening and preventive services: blood pressure, cholesterol, Pap, mammogram, fecal occult blood test or sigmoidoscopy/colonoscopy, and flu shot. Data: B. Mahato, Columbia University analysis of 2002 Medical Expenditure Panel Survey. Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2006.

10. Figure 7. Adults Without Insurance Are Less Likelyto Be Able to Manage Chronic Conditions Percent of adults ages 19–64 with at least one chronic condition* * Hypertension, high blood pressure, or stroke; heart attack or heart disease; diabetes; asthma, emphysema, or lung disease. Source: S. R. Collins, K. Davis, M. M. Doty, J. L. Kriss, and A. L. Holmgren, Gaps in Health Insurance: An All-American Problem, Findings from the Commonwealth Fund Biennial Health Insurance Survey (New York: The Commonwealth Fund, Apr. 2006).

11. Figure 8. Many Americans Have ProblemsPaying Medical Bills or Are Paying Off Medical Debt Percent of adults ages 19–64 who had the following problems in past year: * Includes only those who had a bill sent to a collection agency when they were unable to pay it. Source: S. R. Collins, K. Davis, M. M. Doty, J. L. Kriss, and A. L. Holmgren, Gaps in Health Insurance: An All-American Problem, Findings from the Commonwealth Fund Biennial Health Insurance Survey (New York: The Commonwealth Fund, Apr. 2006).

12. Current ProblemsCost of the Uninsured • Cost on the System and Insured • Cost of health care provided to uninsured but not paid for by uninsured in 2005 is over $43 billion. • 2 percent of total health care expenditures • Premium are higher for the insured • Health insurance premiums for families with insurance were through private employers was $922 higher in 2005 • Was $341 for individuals.

13. Current ProblemsHigh cost of health system • High cost of health system • Approximately double the per capita expenditures of rich countries • Increased cost in health premiums compared to wages since 1980s

14. Figure 9. International Comparison of Spending on Health, 1980–2005 Average spending on healthper capita ($US PPP) Total expenditures on healthas percent of GDP Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2006.Updated data from OECD Health Data 2007.

15. Figure 10. Increases in Health Insurance PremiumsCompared with Other Indicators, 1988–2007 Percent * Estimate is statistically different from the previous year shown at p<0.05. ^ Estimate is statistically different from the previous year shown at p<0.1. Note: Data on premium increases reflect the cost of health insurance premiums for a family of four. Historical estimates of workers’ earnings have been updated to reflect new industry classifications (NAICS). Source: G. Claxton, J. Gabel et al., "Health Benefits in 2007: Premium Increases Fall to an Eight-Year Low, While Offer Rates and Enrollment Remain Stable," Health Affairs, Sept./Oct. 2007 26(5):1407–16. Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2007, and Commonwealth Fund analysis of National Health Expenditures data.

16. Current ProblemsHigh cost of health system • Expenditures by category: 4 highest • Hospital care (30.4%) • Physician and clinical services (21.3%) • Drugs and prescriptions (10%) • Administrative Costs and Net Cost of Private Health Insurance (7.3) – higher than in other OECD countries • Cost per enrollee of private health insurance expenses not related to direct care costs (e.g admin costs and profit) • Expenditure Growth by Category (3 highest) • Administrative costs (12 %) • Drugs (10.7%) • Hospital care (8%)

17. Figure 11. Percentage of National Health ExpendituresSpent on Health Administration and Insurance, 2003 Net costs of health administration and health insuranceas percent of national health expenditures a b c * a2002 b1999 c2001 *Includes claims administration, underwriting, marketing, profits, and other administrative costs;based on premiums minus claims expenses for private insurance. Data: OECD Health Data 2005. Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2006.

18. Figure 12. Health Expenditure Growth 2000–2005for Selected Categories of Expenditures Average annual percent growth in health expenditures, 2000–2005 Source: A. Catlin, C. Cowan, S. Heffler et al., “National Health Spending in 2005: The Slowdown Continues,”Health Affairs, Jan./Feb. 2007 26(1):142–53.

19. Current ProblemsHigh Cost of Health System: Chronic Diseases • Need to deal with chronic disease to reduce costs. • More than 90 million Americans have a chronic disease. • Medical care costs of people with chronic disease account for more than 75% of total expenditures. • Unhealthy diet and physical inactivity can cause or aggravate chronic conditions including diabetes, hypertension, heart disease, stroke, and some cancers Source: CDC

21. Figure 13. Health Care Costs Concentrated in Sick Few—Sickest 10 Percent Account for 64 Percent of Expenses Distribution of health expenditures for the U.S. population,by magnitude of expenditure, 2003 Expenditure threshold (2003 dollars) 1% 5% 10% $36,280 24% $12,046 49% 50% 64% $6,992 97% $715 Source: S. H. Zuvekas and J. W. Cohen, “Prescription Drugs and the Changing Concentration of Health Care Expenditures,” Health Affairs, Jan./Feb. 2007 26(1):249–57.

22. Current ProblemsHigh Cost of Health System: Chronic Diseases

23. Current ProblemsGrowing levels of obesity in US • An adult who has a BMI between 25 and 29.9 is considered overweight. • An adult who has a BMI of 30 or higher is considered obese.

24. Current ProblemsGrowing levels of obesity in US • Health consequences: Overweight and obese individuals are at increased risk for many diseases and health conditions, including the following: • Hypertension (high blood pressure) • Associated with strokes, heart attack, heart failure, damage to the retina swelling of the brain. • Osteoarthritis (a degeneration of cartilage and its underlying bone within a joint) • Dyslipidemia (for example, high total cholesterol or high levels of triglycerides) • Type 2 diabetes • Coronary heart disease • Stroke • Gallbladder disease • Sleep apnea and respiratory problems • Some cancers (endometrial, breast, and colon)

25. Current ProblemsGrowing levels of obesity in US • Economic consequences (Finkelstein, Fiebelkorn, and Wang, 2003) • In 1998, approximately 9.1 % of total US medical expenditures were attributed to both overweight and obesity (approximately 92.6 billion 1992 dollars) • Approximately half these costs were paid by Medicare and Medicaid. • Costs likely to be much higher now as obesity rates have risen since 1998

26. Obesity Trends* Among U.S. Adults1990, 1998, 2007 (*BMI 30, or about 30 lbs. overweight for 5’4” person) 1998 1990 2007 No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30% Source: CDC presentation on US Obesity Trends 1985-2007

27. Criteria Used to Evaluate Reform The Common Wealth Fund • Universal Coverage: Should participation be voluntary? • Provision of benefits that cover essential services • Affordable premiums, deductibles, and out-of-pocket costs relative to family income. • Ease of enrollment • Choice in plans • Health risks broadly pooled • Simple to administer with coverage that is automatic and continuous • Portability (minimize dislocations)

28. Criteria Used to Evaluate Reform Other criteria to think about: • Cost Containment: How does the plan contain the growth of medical care expenditures over time? • Employment: To what extent does the plan influence overall employment opportunities? • Others? Does it reduce long-term costs of the system, will the system have ramifications for other sectors than health? (e.g. if get rid of employer-based care may be better for business)

29. Health Care Proposals 2008 • Difference between democratic and republican proposals. Not much within party difference • Republicans: Tax incentives to have individual purchase insurance on the individual market. Less regulation of insurance companies. • Democrats: Mixed private-public insurance with shared responsibility for financing. • Review of Plans

30. Health Care Proposals 2008Insurance market -- McCain Main Problems: uninsured and cost Key Features: • Rely on individual insurance market • Has not said will protect individuals from adverse selection (i.e no coverage for pre-existing conditions etc). • Sick, aged, women of child bearing age will pay substantially more • May not be able to get coverage for pre-existing conditions or deliveries. • Little or no risk pooling – increases the cost of care once sick • If don’t have the foresight to buy good insurance when healthy will not be insurance and may not be able to get sufficient insurance when sick.

31. Health Care Proposals 2008Insurance market -- McCain • Can buy insurance in any state. • Different states have different regulations for rating by age, health status sex, mandates on what insurance companies have to offer etc. • Argued that this is a move to deregulate. States won’t have the power to regulate and this power will be held at the federal level. McCain want to get rid of many of the regulations there are. Argues it is to make policies cheaper – what do you think?

32. Health Care Proposals 2008Insurance market -- McCain • Employer health benefits to be taxable income. • Could lead employers to stop providing health benefits. • Takes away monetary incentive for employers to provide health insurance • Could lead to low skilled workers or healthy not buying health insurance through employer • Health insurance coverage is usually more comprehensive through employers so may be more expensive than catastrophic care coverage on individual market • Adverse selection may mean low skilled or healthy will underinsure on the private market or not insure. This can lead to an unraveling of the more comprehensive health insurance market

33. Health Care Proposals 2008Insurance market -- McCain • Problematic because the alterative is to buy on the individual market • Little or no risk pooling • Administrative costs are much higher • For same benefits policies are much more expensive • Careful of the quotes you hear – these are for policies to healthy people and doesn’t disclose all the out-of-pocket expenditures • Unhealthy people on this market often can’t get coverage • Net effect is that people will have much less generous policies than they have today • More out of pocket costs, high costs if actually get sick.

34. Health Care Proposals 2008Insurance market -- McCain • Tax credit: 2,500 individual or 5,000 family • When the average premium is 12,000 for full coverage, this will not make comprehensive insurance unaffordable for the poor. • Poor or middle class will be forced into the individual market and will likely be underinsured. (same problems as before) • If premiums continue to rise, people will be paying more since the tax credit is not tied to the raising with cost of health care • If spend less on health insurance, credit goes into a health savings account • Incentive to buy cheap health insurance which increases financial risk

35. Health Care Proposals 2008Insurance market -- McCain Bring down the cost of health care by: • Drugs: allowing re-importation • Not allowing negotiation – but buying drugs from countries that do negotiate (i.e. letting Canadians do it for the US). • Funding avenues to bring in cheaper generics. • They are already cheap and available so needs to find ways to bring the into mainstream use in the medical system. • Pay-for-Performance: • Pay for a bundle of care (not each service) or coordinated care. • This will avoid payments for services that were a result of preventable medical errors or mismanagement • This is like a capitation system in some ways. • Greater use of technology for administrative purposes and to keep medical records. • People will purchase cheaper policies which give less coverage so it hoped they will use less care • What about the long-run?

36. Health Care Proposals 2008Prevention -- McCain • Put more responsibilities in the hands of individual • Hmm has this worked so far? • Public health initiatives to encourage individuals to prevent chronic diseases, receive appropriate tests for early detection. • Parents responsible for teaching children about health nutrition and exercise. • Promote care alternatives such as walk-in clinics in retail outlets.

37. Health Care Proposals 2008Insurance Market -- Obama • Main problems • Too many uninsured or under insured • Cost of health care is too high, which is leading to people being uninsured • Growth of health care costs is too high • Lack of preventive care and management of chronic illnesses • Providers not adequately reimbursed

38. Health Care Proposals 2008Insurance Market -- Obama • Main difference between Clinton and Obama is that Clinton will mandate that everyone have health care and Obama is not. • Obama may do that if not enough people sign up for health insurance. • Not having a mandate is tricky if you are not going if pre-existing conditions aren’t included. Will just wait until you are sick – but this type of system which is based on risk pooling needs both the sick and non-sick to enroll. You will get free-riders. • Obama doesn’t want to mandate insurance for everyone until he is sure it is affordable • What does affordable mean? • You can read his health advisor’s response to criticism • http://sentineleffect.wordpress.com/2007/12/01/health-mandates-a-talk-with-obama-health-advisor-david-cutler/

39. Health Care Proposals 2008Insurance Market -- Obama Key features: • Keep insurance you have or buy insurance through a National Health Insurance Exchange • Includes a public plan that will provide the same benefits that members of congress have. • Private plans would also be available. They have to provide the same benefits as the public plan. • These plans are portable because not based on a job. • Everyone guaranteed access to health care, no rating based on pre-existing conditions • The Exchange would evaluate the services and cost of the various plans and make these differences transparent. • To provide insurance in The Menu, plans will have to adopt quality and efficiency practices. • These include: preventive care practices and using computerized administrative and record keeping systems.

40. Health Care Proposals 2008Insurance Market -- Obama • Will expand Medicaid and SCHIP to serve low-income population. • SCHIP: state children’s health insurance program. • Did not define what low-income population will be so not clear how much this will cost. • Sliding-scale premium subsidies • Not clear how this will work • No change in the income tax exclusion benefit employer base health care • Could put a cap on tax benefit • Those who buy very expensive care receive a greater subsidy

41. Health Care Proposals 2008Prevention -- Obama • Require insurers to • cover preventative services which are known to be effective. • Promote chronic care management programs • Promote chronic care coordination (important for those with multiple conditions). • Coordinate public spending on prevention.

42. Health Care Proposals 2008Financing--Obama • Repeal tax cuts if income >$250,000 • Employer contributions • Savings: • Health IT investment • Reduce unnecessary spending from preventable errors and paper billing system. • Improve prevention and management of chronic illnesses • Reduce hospital costs • Increase insurance industry competition, reduce underwriting costs, and profits • Provide reinsurance for catastrophic coverage • Have universal insurance to reduce spending on uncompensated care of the uninsured • Buy drugs from other countries and negotiate drug prices for Medicare

43. Health Care Proposals 2008Republican Critiques--Obama • General republican critiques: • Too much regulation of the insurance industry • No economic basis to the argument • Might cost too much – some admit there is not enough knowledge to base this statement on. • Argue that it will be too expensive because the benefits are too generous. • See article on Health Affairs Journal website • Article is more an opinion piece. • Lack or articulation of the economic arguments and lack of use of other articles to back arguments. • Says Obama plan is not addressing the core reasons why health care is increasing – but fails to say what those are!

44. Features of Leading Candidates’ Approachesto Health Care Reform Source: Authors’ analysis of presidential candidates’ health reform proposals. Common Wealth Fund

45. Where Leading Candidates Standon Health Care Reform Features Source: Authors’ analysis of presidential candidates’ health reform proposals. Common Wealth Fund

46. How Well Do Different StrategiesMeet Principles for Health Insurance Reform? 0 = Minimal or no change from current system; – = Worse than current system;+ = Better than current system; ++ = Much better than current system

47. Candidates position pieces • Website with general information Obama: http://www.barackobama.com/issues/healthcare/ • Plan: Written document on plan • http://www.barackobama.com/pdf/issues/HealthCareFullPlan.pdf • Website with general information McCain • http://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm • There is no written document on the plan, just bullet points

48. Health affair article “Cost and coverage implications of the McCain plan to restructure health insurance” • 3 key features • Withdrawing the tax exclusions health premiums paid by employers • Individual tax credit • Deregulating non-group insurance by allowing people to purchase across state lines

49. Health affair article • Implications of the key features • Make calculation based on economic studies to show: • Not allow many more Americans to obtain health insurance • Certainly not reach universal coverage • Over time if the tax credit is not changed, un-insurance rates will increase • More people will be underinsured due to reliance on the individual insurance market which is more expensive way to provide health insurance. • Cost implication • Difficult to sort out because not enough details • Great burden on the individual in terms of out-of-poket costs • Those with acute illnesses or chronic illness will almost certain pay much more than they do now

50. Clinton Health Reform 1993 Clinton proposed “National Health Security Act of 1993” • Public concern about rising health care costs, uninsured population contributed to Clinton’s election in 1992 • Perceived job lock (don’t change jobs because don’t want to lose health insurance). • Similar to the present Obama plan. Sometimes called managed competition • Plan failed