The US Health Care System: Reformed at Last! Summer Enrichment Program Orientation June, 2010

1. The US Health Care System:Reformed at Last!Summer Enrichment Program Orientation June, 2010 Richard Lichtenstein PhD, MPH Department of Health Management and Policy School of Public Health University of Michigan

2. The Patient Protection and Affordable Care Act (March 23,2010) • This is historic legislation that ranks with Social Security, Medicare and the Civil Rights Act in terms of creating social change • People have been advocating for a national health insurance plan in the US since at least 1913. They have been thwarted many, many times, but this time they were successful! • The law is certainly not “perfect,” but it moves us substantially.

3. Why We Need Health Insurance Reform (and more)

4. The Traditional Health Care System in the US Has Had Several Structural Flaws • System of Financing Care (Fee-for-service system; fragmented payments) • Organization of Services “A Paradox of Excess and Deprivation”* • Insurance Coverage of the Population Health coverage has been connected with employment Health coverage is not a right in America *Enthoven and Kronick, NEJM 320:29-37. 1989

5. PROBLEMS WE FACE AS A RESULT: • COSTS • ACCESS TO COVERAGE AND CARE • QUALITY AND ACCOUNTABILITY • RACIAL AND ECONOMIC DISPARITIES in HEALTH AND CARE

6. Health Care Costs: Magnitude of Growth Both total and per capita spending on health keep skyrocketing. $7,681 $2.33Trillion $172 $35 Billion Estimates for 2009: NHE=$2.5 Trillion; Per capita= $8,046 6 Source: “Health Spending Growth at a Historic Low in 2008,” Health Affairs. January, 2010.

7. The US Spends the Highest Fraction of National Income on Health For US, % of GDP was 16.2% in 2008. The estimate for 2009 is 17.3% OECD Health Data 2008. Latest year of data available is 2006

8. Access to Care

9. The number of uninsured people in the US is unacceptably high and is rising quickly in this recession In 2008 there were about 46 million uninsured and over 70 million underinsured people in the US The number of uninsured would have risen to about 55 million by the end of 2019 Being Uninsured is very bad for your health!

10. Specialist and Generalist Physician Trends(Counting Primary Care Subspecialists as Specialists) Source: AMA, Physician Characteristics and Distribution in the U.S., 2010.

11. Projection of RN’s Supply vs. Demand

12. Quality “Serious and widespread quality problems exist throughout American medicine. These problems…occur in small and large communities alike, in all parts of the country... Very large numbers of Americans are harmed as a result.”* * Quoted in: Berwick, D.M. (2002). "A User’s Manual for the IOM’s 'Quality Chasm' Report." Health Affairs 21(3):80-90.

13. International Comparison of Quality, 2007 * Rank out of 7 countries Source: Schoen et al (2007): Toward higher-performance health systems: Adults’ health care experience in seven countries, 2007, Health Affairs Web Exclusive: w717-w734.

14. Racial and Economic Disparities

15. Infant Mortality Rates by Race*United States, 1970-2005 Deaths per 1,000 Live Births *Race of mother Source: Health, United States, 2008, Table 21

16. Years of Potential Life Lostdue to Diabetes Mellitus, by race and Hispanic Origin, 2005 * Age-adjusted years lost before age 75 per 100,000 population under 75 years of age. Source: Health, United States, 2008, Table 29

17. Current Distribution of Health Insurance Coverage in the US

18. Types of US Financing and Number of People Covered, by Category 47% of total spending 53% of total • Note: Numbers do not add to total population because some persons fall in more than one category. • Medicare data is as of July 2008 (Source: Kaiser Family Foundation – based on Mathematica Policy Research analysis of CMS State/County Market Penetration Files, July 2008). Latest Medicaid data is for fiscal year 2006 (Source: The Urban Institute and Kaiser Commission on Medicaid and the Uninsured – based on data from Medicaid Statistical Information System (MSIS) reports from the Centers for Medicare and Medicaid Services (CMS), 2009). • Remaining data is for 2007 (Source: Kaiser Family Foundation – based on the Census Bureau's March 2007 and 2008 Current Population Survey).

19. Major Problems We Face in Financing Health Care in 2010

20. Health Care Costs: Magnitude of Growth Both total and per capita spending on health keep skyrocketing. $7,681 $2.33Trillion $172 $35 Billion 20 Source: “Health Spending Growth at a Historic Low in 2008,” Health Affairs. January, 2010.

21. Employer Sponsored Insurance

22. Cumulative Changes in Health Insurance Premiums and Workers’ Earnings, 2001-2008 119% 34% Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2001-2008; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2000-2008 (April to April).

23. Annual Growth in Cost of Health Insurance is Crippling Employers • The “Detroit Three” Auto Companies • About 5% of large employers said that they have considered the elimination of health coverage for employees • 22% of small employers said they may eliminate coverage • Leaves employees either paying most of annual increases or losing coverage • Many companies are eliminating or severely cutting health benefits for retirees Source: www.CHCF.org

24. Medicare

25. Medicare 1965 amendment to the Social Security Act of 1935 (Title XVIII) Social Insurance for the elderly and disabled. Nationwide eligibility and benefits. A Defined Benefit Plan with no limit to annual spending Covers 45 million people: over-65, disabled, people with ESRD, ALS In 2009, Medicare spending was (approx) $507 billion (13 % of the federal budget)

26. Medicare • Part A covers hospital, post-hospital nursing home and other program costs • This is paid-up, compulsory, social insurance -- no current premiums. • Employers and employees each contribute 1.45% of wages • Provides defined benefits with deductibles and co-payments. • 2010 Part A hospital deductible is $1,100* * The Henry J. Kaiser Family Foundation, 2010 Medicare Benefit Table, available online at: http://www.kff.org/medicare/med2010benefitstable.cfm

27. Medicare • Part B covers physician costs, home health benefits, and some other expenses. • This is subsidized, voluntary insurance. • Current (2010) premium of $110.50 is 25% of actual cost. (Lower income beneficiaries will still pay$96.40.)* • Starting 2007 – enrollees with incomes > $85k per year ($170k for couple) will pay higher income-related premiums (up to $353.60 per month for people with incomes over $213K ($426K for couple). • As of 1998, annual premium increases related to CPI growth. (No increase in SS payments this year.) • Includes deductible and co-pays. Current deductible is $155/year*. Co-pay is 20% of approved amount. • Need “Medigap” or Medicare Advantage to cover co-pays * The Henry J. Kaiser Family Foundation, 2010 Medicare Benefit Table,

28. The Medicare Prescription Drug Improvement and Modernization Act of 2003 (Part D) • Created Voluntary Rx Drug Benefit Available to ALL Medicare Beneficiaries • Choice of at least 2 plans (now over 50 plans in Michigan and most other states) • Quality Improvements • electronic prescribing to reduce medical errors • pharmacy therapy to manage chronic conditions • Prohibits price negotiation on Rx drug costs between Medicare and Pharma companies • Average Premium is $30.36/Mo.

29. Average (weighted) premium for Part D is $38.94/month

30. Estimated Medicare Shortfall Amount –2007-2081 • PV* of difference between projected expenditures and revenues for just the HI component of Medicare (Part A) : $11.6 trillion • PV* of difference between projected expenditures and revenues for Medicare (Part A plus SMI –Part B and D) $24.8 trillion We need to fix this to lower the deficit!! *PV=Present Value

31. Medicaid

32. Major Features of Medicaid Structure • Federal-State Matching Program • Feds set Standards, States define program and manage it • Only certain low-income people are eligible • States Select Benefit Package (within Fed. Guidelines) • There are 56 different Medicaid Programs • In 2009, Medicaid spent approx. $378.3 Billion

33. Medicaid Eligible Population Pregnant Women AFDC/TANF Other Kids Aged Blind Disabled Everyone else Income Level Federal Poverty Level Medically Needy Social Security Assistance

34. Medicaid Eligible Population Pregnant Women AFDC/TANF Other Kids Aged Blind Disabled Everyone else 300% FPL 300% FPL 200% FPL SCHIP 150% FPL 200% FPL 150% FPL 133% FPL Income Level 133% FPL 133% FPL Health Reform Federal Poverty Level Medically Needy Medicaid

35. Medicaid Eligible Population Pregnant Women AFDC/TANF Other Kids Aged Blind Disabled Everyone else Income Level 133% FPL Federal Poverty Level Medically Needy Medicaid

36. Medicaid Eligible Population Pregnant Women AFDC/TANF Other Kids Aged Blind Disabled Everyone else 150% FPL Income Level 133% FPL Federal Poverty Level Medically Needy Medicaid

37. Medicaid Eligible Population Pregnant Women AFDC/TANF Other Kids Aged Blind Disabled Everyone else 200% FPL SCHIP 150% FPL Income Level 133% FPL Federal Poverty Level Medically Needy Medicaid

38. Medicaid Eligible Population Pregnant Women AFDC/TANF Other Kids Aged Blind Disabled Everyone else 300% FPL 200% FPL 150% FPL Income Level 133% FPL Federal Poverty Level Medically Needy Medicaid

39. Medicaid Eligible Population Pregnant Women AFDC/TANF Other Kids Aged Blind Disabled Everyone else 300% FPL 200% FPL 150% FPL Income Level 133% FPL Health Reform Federal Poverty Level Medically Needy Medicaid

40. What Services Does Medicaid Cover? State Medicaid programs must cover certain “mandatory services” enumerated in federal law in order to receive federal matching funds. Most Medicaid beneficiaries are entitled to receive the following servicesif they are determined to be medically necessary by the state Medicaid program or a managed care organization with which the state contracts: Rural and federally-qualified health center services Family planning Pediatric and family nurse practitioner services Nurse midwife services Nursing facility services for individuals 21 and older Home health care for persons eligible for nursing facility services • Physician services • Hospital services (inpatient and outpatient) • Laboratory and x-ray services • Early and periodic screening, diagnostic, and treatment (EPSDT) services for individuals under 21 • Medical and surgical dental services

41. What Services Does Medicaid Cover? States can choose to cover certain additional services and are entitled to receive federal matching funds for these “optional” services. Commonly offered optional services include: Intermediate care facilities for individuals with mental retardation (ICF/MR)services Home-and community-based care services Respiratory care services for ventilator-dependent individuals Personal care services Hospice • Prescription drugs • Clinic services • Dental and vision services and supplies • Prosthetic devices • Physical therapy and rehab services • TB-related services • Primary care case management • Nursing facility services for individuals under 21

43. Medicaid Has Many Problems, Yet Plays a Major Role in Health Reform Proposals Major part of state budgets, leading to cutbacks across the country Dropping recipient groups and benefits Low reimbursement rates—Low physician participation Unequal across states Reform relies heavily on Medicaid to cover the low-income uninsured. Governors are worried.

44. The Uninsured

46. The Uninsured as Compared to the Insured: Hadley, J. “Sicker and Poorer—The Consequences of Being Uninsured: A Review of the Research on the Relationship between Health Insurance, Medical Care Use, Health, Work, and Income.” Med Care Res Rev 2003; 60; 3 Have poorer health status overall. Use fewer health care services overall. Less likely to have a medical home/ receive preventive care. More likely to delay seeking care. More likely to enter treatment at a more serious stage of illness. Less likely to control chronic diseases adequately. Less likely to receive costly, high tech interventions for illnesses. More likely to die in hospital and outside of hospital. Pay 2.5 times more for health care than the insured

47. Major Features of The Patient Protection and Affordable Care Act of 2010 • Individual Mandate: Everyone must have insurance, or face a penalty if they don’t purchase a plan (penalty is $95 in 2014increasing to $695 in 2016, or 2.5% of income by 2016). • Subsides to households below 250% of FPL

48. The Patient Protection and Affordable Care Act • Employer Contribution: Penalizes companies with over 50 workers who don’t provide insurance ($2,000 per worker), but exempts paying penalty for first 30 workers. • Tax credits for small employers (<25 workers, average wage < $50K)to pay for insurance

49. The Patient Protection and Affordable Care Act Insurance Reform: Covers dependents up to 26 years old; guaranteed issue -- companies cannot exclude pre-existing conditions; no recission; no annual or lifetime caps, etc. Feds can regulate insurance company rate increases and unfair practices. Starts in 2014 (Changes for children already starting.)

50. The Patient Protection and Affordable Care Act 3a. Creates (Interim) High Risk Pools for those with pre-existing conditions and no HI for six months (run either by states or the federal government). Scheduled to start September 1, 2010. Many states are refusing to take this on due to costs.