The U.S. Healthcare SystemThe U.S. Healthcare SystemPrepared byNorma Perry
Reform Occurs When and WhereReform Occurs When and WhereProblem, Policy, and Politics MeetProblem, Policy, and Politics Meet• Kingdon’s Model of Agenda Setting says:PoliticalStream PolicyStreamProblemStreamWindow ofOpportunity
Reform Occurs When and WhereReform Occurs When and WhereProblem, Policy, and Politics MeetProblem, Policy, and Politics Meet• Kingdon’s Model of Agenda Setting says:PoliticalStream PolicyStreamProblemStreamWindow ofOpportunityGrassrootsmobilizationCost Crisis, Economy,Rising Unemployment
The Health Care System is Broken:The Health Care System is Broken:There is a Cost to Doing NothingThere is a Cost to Doing NothingCosts are out-of-control:• $2.4 trillion spent on health care in 2008– Represents 16.6% of Gross Domestic Product– By 2015, it is projected be 20% of GDPHealth Insurance Coverage is in Crisis:• 47 million people are uninsured (15.5%)– 52 million people are considered medically disenfranchised (i.e.they do not have a usual source of care, even if they areinsured)– 13.2 million (28%) of the uninsured are aged 19-29The Delivery System is Strained:• Disparities in quality and access– Medical errors, birth weight outcomes, hospital readmit rates,and waiting times for ER visits and specialty care indicate thatwe do not have the best health care system in the world.
Health Care Costs in the U.S.Health Care Costs in the U.S.
Source: The Commonwealth Fund, calculated from OECD Health Data 2006.Health Care Spending per Capita,1980-2004- adjusted for cost of living differences -U.S.: $12,357per person,20% of GDPby 2015
Health Spending in the U.S. Compared toHealth Spending in the U.S. Compared toOther Industrialized Countries, 2003Other Industrialized Countries, 2003Source: Organisation for Economic Cooperation and Development Health Data (OECD), 20061,5511,0531,1141,0562,473843670666675709509467581454766- 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500U.S.JapanGermanyFranceCanadaPer Capita Health Spending (in U.S. Dollars)Inpatient Outpatient AncillaryHome Health Pharmacy Nursing Home
Source: Yu & Ezzati-Rice, Medical Expenditure Panel Survey Statistical Brief #81, AHRQ, May 2005.22%49%64%97%0%10%20%30%40%50%60%70%80%90%100%Top 1% Top 5% Top 10% Top 50%Percentage of Population Ranked by SpendingPercentageofExpendituresHalf of the Population Uses Very Little Health Care:Half of the Population Uses Very Little Health Care:97% of all health spending is concentrated in half of the population!
Health Care CoverageHealth Care Coveragein the U.S.in the U.S.
Do We Even Have a “System”:Do We Even Have a “System”:Filling in the GapsFilling in the Gaps• Financing and Structure of the System are Intertwined• Different Components of the Health Care System arefinanced and regulated in different ways– Public Health Activities– Care for the Uninsured– Government Programs– Hospitals– Community Health Centers– Free Clinics– Private Physician Offices– Medical Groups– TriCare/CHAMPUS/Military– Employer-based Insurance– Individually-PurchasedInsurance– Indian Health Services– HIV/AIDS-related care– Insurance Companies– Veterans’ Affairs (VA)Health Care– Workers’ Compensation– Children’s Health Care
The Challenges of Basing a SystemThe Challenges of Basing a Systemon Employer Provided Insuranceon Employer Provided Insurance• As health care costs increase, employers are faced withdifficult choices:– Reducing benefits or not offering– Reducing choice of potential plans– Offering high deductible, catastrophic plans– Establishing different requirements for health benefitparticipation• Minimum hours, waiting periods, workers must higherpercentage of employer-negotiated premium• Employers negotiate directly with insurers for benefitsand premiums– Smaller employers have less leverage due to smaller risk pool– Can represent a significant cost when workforce and retireesage, get sicker, and ultimately use more health care
Sources of Commercial InsuranceSources of Commercial Insurance• Group (Employer-Based)– In the past, commercial insurance was knownas “Major Medical” – Benefits similar toMedicare Part A– Currently, employer-based insurance benefitsare more comprehensive• Individually Purchased (Non-Group Market)– Premium and Benefits based on risk profile ofthe individual policyholder– Tends to be more expensive for the individual– Limitations due to pre-existing conditions
Insurance Status in the U.S., 2007Insurance Status in the U.S., 2007Type of Coverage Number (millions) PercentPrivate 201.7 67.9%Employment Based 177.2 59.7%Individual 27.1 9.1%Government 80.3 27.0%Medicare 40.4 13.6%Medicaid/SCHIP 38.3 12.9%Uninsured 47.0 15.8%Note: Percentages exceed 100% because type of coverage is not mutually exclusive;individuals can have more than one category of coverage.Source: U.S. Census Bureau Analysis of March 2007 Current Population Survey
Main Governmental Sources ofMain Governmental Sources ofHealthHealth InsuranceInsurance CoverageCoverage• Two programs were voted into law in June of1965 and implemented in July of 1966.– Title XVIII (Medicare) and XIX (Medicaid) of the SocialSecurity Act– Medicare is “social insurance”• Designed for people with disabilities or the elderly who meetspecific requirements, lifetime benefit– Medicaid is a “welfare program”• Designed for needy people who are categorically eligible (nota guaranteed benefit)• State Children’s Health Insurance Program(SCHIP)– Created in 1997 as part of the Balanced Budget Act
The Uninsured: At Serious RiskThe Uninsured: At Serious Risk• The uninsured in the U.S. face huge obstacles whenattempting to access health care:– Many private providers will not accept them• The burden is placed on community health centers, publichospitals, and emergency rooms– Difficult to find medical home– Some are considered uninsurable due to pre-existingconditions, but cannot qualify for Medicaid– Cannot afford full cost of visits• This can lead to medical bankruptcies and foreclosures• There is some evidence that cost-shifting has resulted in theuninsured being billed for full charge, even higher thancommercially insured patients
Source: Kaiser Family Foundation, 2006Note: All respondents are under age 65
Health Care DeliveryHealth Care Delivery
U.S. Life Expectancy in 2003 LowerU.S. Life Expectancy in 2003 Lowerthan Countries that spend far lessthan Countries that spend far lessOrganisation for Economic Cooperation and Development Health Data (OECD), 200674.878.6 78.4 76.772.768.675.2126.96.36.1992.7 83.877.6 76.979.9830102030405060708090U.S. Japan Sweden France Mexico Hungary Denmark AustraliaLifeExpectancyinYearsMale Female
The U.S. also faces problemsThe U.S. also faces problemsrelated to:related to:• Health Care Disparities– Racial/Ethnic, Language, and Gender differences in outcomesand access– These differences persist even with insurance coverage• Medical Errors– 44,000 to 98,000 preventable deaths• Emergency Room overcrowding– Waiting Times– Throughput, Discharge Planning, Staffed Bed Supply• Some areas do not have appropriate numbers ofprimary care and specialty physicians (i.e. physicianmaldistribution)• Hospital Re-Admission Rates
The Intersection of Costs,The Intersection of Costs,Coverage, and DeliveryCoverage, and Deliveryof Health Careof Health Care
The Flow of the Dollar• Costs, Payment, Delivery, and Insurance Coverage are completelyintertwined in our system!InsuranceCompanyIndividuallyInsuredGovernmentInsuredEmployeesUninsuredPhysiciansEmployerPubliclyInsuredPayment made to this entityService provided by this entity to individualsSource: Roby DH. 2009 (forthcoming). Impacts of Being Uninsured in Handbook of Health Psychology (edited bySuls, Kaplan, Davidson), Guilford Publications: New York, NY.
Controlling CostsControlling Costs• Government has been a major proponent of costcontrols– Prospective Payment• Use of Diagnosis Related Groups– Managed Care• Capitation (HMO and POS)• Discounted Fee-for-Service (PPO and POS)• How do differential cost controls impacthospitals, clinics, and physician providers?– Lower payments for Medicaid and Medicare– Insurance companies have increased leverage tonegotiate prices due to managed care contracting– Cost Shifting impacts delivery and coverage
Impacts of Medicare ProspectiveImpacts of Medicare ProspectivePayment System (PPS): 1985-2006Payment System (PPS): 1985-2006Cost ShiftingHospital Payment Per Dollar of CareMedicare Medicaid Private1985 $1.020 $0.943 $1.1711990 $0.895 $0.801 $1.2781998 $1.019 $0.966 $1.1582004 $0.919 $0.899 $1.289Source: American Hospital Association/The Lewin Group, Trends Affecting Hospitalsand Health Systems, TrendWatch Chartbook, April 2006.
Government Spending Outpaces PrivateGovernment Spending Outpaces PrivateCompany Spending in our SystemCompany Spending in our SystemSource: National Health Expenditures, Centers for Medicare and Medicaid Services, 20070500,0001,000,0001,500,0002,000,0002,500,0001993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Spending(inthousands)Total Spending Out-of-Pocket Spending Commercial Health Insurance Public Funds
Billions spent to close the ‘gaps’ inBillions spent to close the ‘gaps’ inMedicaid/Medicare payment andMedicaid/Medicare payment andUncompensated CareUncompensated Care• Disproportionate Share Hospital (DSH) Payments– Medicaid and Medicare DSH– Based on percentage of caseload from uninsured, Medicaid, andMedicare– “Safety Net Financing”– Medicaid DSH administered by states and subject to federalmatch (FMAP)– Often public/county, teaching facilities, large trauma centers• Community Health Centers (Section 330) Funding– Comprehensive Primary Care (FQHC) clinics receive grantsubsidy based on uninsured and Medicaid– Sliding fee scale– Administered by the Bureau of Primary Health Care– 40% of patients are uninsured
Source: Stan Dorn, Bowen Garrett, John Holahan, and Aimee Williams,Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses, prepared for the KaiserImpact of Unemployment Growth on Medicaidand SCHIP and the Number Uninsured1%Increase inNationalUnemploymentRate=1.0 1.1Increase inMedicaidand SCHIPEnrollment(million)Increase inUninsured(million)&$2.0$1.4$3.4Increase inMedicaid andSCHIPSpending(billion)StateFederal
Why Does the U.S. Spend SoWhy Does the U.S. Spend SoMuch More on Health Care?Much More on Health Care?• Compared to other Industrialized countries, the U.S. has:– Fewer physician office visits per capita– Fewer hospital inpatient admissions per capita– Lower Average Length of Stay (ALOS) per admission– Fewer hospital inpatient days per capita– Higher (but not the highest) use per capita of selected high-tech procedures (MRI, CT, angioplasty, dialysis)• If expenditures = prices x quantity, and quantities are not higher inthe U.S., then prices must be higher!
Profits for Health InsurersProfits for Health Insurers• Profits for health insurance companies and pharmaceuticalcompanies continue to increase– In 2006, the top 18 health insurers made $15 billion in profits– In 2006, pharmaceutical industry profits were 19.6%• 2ndmost profitable industry, behind the oil industry• Insurers profit from privatized government programs– The Medicare Advantage (Part C) program results in $18 billionin overpayment to insurance companies when compared totraditional Medicare Fee-for-Service (FFS)• Outcomes are not better for Medicare HMO enrollees• Rates paid to private insurers are much higher than cost ofMedicare FFS claims
What are we doing wrong?What are we doing wrong?• We are the only major industrial nation that does notprovide comprehensive health benefits to all its citizens• We have the largest private market for health care financingof any nation• We spend more per capita than any other nation, but allowgreater disparity in spending for different portions of ourpopulation• Our political system favors incremental changes, based onmarket-oriented solutions, rather than fundamental reform– From the inception of Medicare/Medicaid, to SCHIP, to present, weare often working within the existing framework and accomplishingsmaller, incremental changes
Opportunities and theOpportunities and theNeed for ReformNeed for Reform
Possible Reforms andPossible Reforms andFuture FinancingFuture Financing• Restructure our Current System– Indirect Subsidies and Consolidation could be used to insureUninsured– There is enough money in the system to care for everyone, but itis not being used efficiently and effectively! (Obama and Baucus)• Market-Based Approach– Consumer Choice – high deductible plans, health savingsaccounts, provider fee transparency (McCain)• Complete Dismantling of Current System– Can universal health care survive in a for-profit system?(Conyers)• Is Universal Insurance required, or Universal Access?– President G.W. Bush’s health care reform efforts were basedupon expanding the safety net (Community Health Centers),rather than insuring the uninsured.
Current Reform ModelsCurrent Reform Models• Policy Choices are numerous, if there is politicalwill and priority given to health care:– Individual Mandate– Employer Mandate– Pay-or-Play Provision– Tax Credits for Health Insurance– Expansion of Safety Net Providers– Health IT (EMR) and Comparative Effectiveness• Designed to create efficiencies and save money on services,avoid duplication– Introduction of Public Health Insurance Plans• Benchmark Plan• Based on community rating, risk adjustment/reinsurance• Will insure those who cannot get other coverage– Pre-Existing Conditions
Where is Reform Occurring?Where is Reform Occurring?• Since Clinton’s failed attempt at universal health care in1994, most efforts have been at the state-level– Massachusetts’ recently passed a universal health care reform• Individual Mandate – requires all residents to have insurancecoverage, while providing subsidies to those who cannotafford to buy on the private market• Health Insurance Connector• Expansion of state Medicaid and SCHIP eligibility plans• Other states have tried and failed– California was close to a compromise to allow for an individualmandate, similar to Massachusetts– Budget problems derailed the reform effort– Hawaii was able to enact an employer mandate in 1974– States are considered “laboratories of democracy”
Problems with State-Level ReformProblems with State-Level Reform• Complications due to:– State Budgets• Current economic situation can derail efforts– ERISA• Employee Retirement and Income Security Act• Federal Law that preempts state laws mandating employerprovision of specific benefits– Centers for Medicare and Medicaid Services (CMS)• Changes to Medicaid or SCHIP state plan require approval ofwaiver or change in federal regulations• G.W. Bush was not supportive of changes in eligibilityrequirements• Obama administration is supportive and actively pursuingexpansions
Obstacles to ReformObstacles to Reform• Frequently, universal reform efforts have been led byelites– Clinton’s health care plan was written in a “vacuum”, rather thanseeking consensus from political figures• Even proponents of universal health care opposed Clinton’s plan• Interest groups, especially business, are powerful• Campaign financing is loosely regulated• Political Parties are weak and de-centralized• Pharmaceutical companies, the American MedicalAssociation, and other special interest groups have interestin maintaining status quo Health Care = $$$$• Major Stakeholders and Politicians cannot agree on thebest solution– Universal coverage can have many different forms– Grassroots mobilization could turn the tide• This economic downturn, with its rising unemployment, could createclass of uninsured and underserved that is vocal, motivated, and inserious need of reform
Senator Baucus’ ProposalSenator Baucus’ Proposal• Individual Mandate: All Americans will be required to purchasecoverage if it is available to them• Creation of purchasing pool or “health insurance exchange”• Requirement that carriers accept all applicants regardless of pre-existing health problems.– By bringing everyone into the system, Senator Baucus believes theaverage cost of insuring each American will be reduced.• Allows those between the ages of 55-and-64 to purchase Medicareif they lack access to public insurance programs or a group healthplan.• Expansion of the State Children’s Health Insurance Program toinclude children in families at or below 250 percent of the federalpoverty level ($44,000 for a family of three)• Lift the ban preventing legal immigrants to enroll in SCHIP untilthey’ve been in the country for five years.• Like President Obama, Senator Baucus supports tax credits forsmall businesses that provide health insurance coverage and forindividuals and families, below 400 percent of the federal povertylevel, who purchase their own coverage.
President Obama’s ProposalPresident Obama’s Proposal• Employer Mandate – Large employers would be required to payportion of payroll tax into fund (Pay-or-Play) – 5% or more– Lower costs for businesses by covering a portion of the catastrophichealth costs they pay in return for lower premiums for employees.• Require insurance companies to cover pre-existing conditions so allAmericans regardless of their health status or history can getcomprehensive benefits at fair and stable premiums.• Create a new Small Business Health Tax Credit• Establish a National Health Insurance Exchange to allow individualsand small businesses to buy affordable health coverage.• Subsidy through personal tax credits based on income• Additional steps to create efficiencies and reduce costs:– Health Information Technology (HIT) investment– Disease Management for chronic illness– Limits on overhead; greater transparency– Allow safe pharmaceuticals from other countries– Prevent insurers from overcharging doctors for their malpracticeinsurance– Reduce preventable medical errors.
Reform Occurs When and WhereReform Occurs When and WhereProblem, Policy, and Politics MeetProblem, Policy, and Politics Meet• Kingdon’s Model of Agenda Settting says:PoliticalStream PolicyStreamProblemStreamWindow ofOpportunity
Reform Occurs When and WhereReform Occurs When and WhereProblem, Policy, and Politics MeetProblem, Policy, and Politics Meet• Kingdon’s Model of Agenda Settting says:PoliticalStream PolicyStreamProblemStreamWindow ofOpportunityGrassrootsmobilizationCost Crisis, Economy,Rising Unemployment
Are we there yet?Are we there yet?• It appears that the window of opportunity may be open– Economy is in crisis– Unemployment and loss of insurance are big problems– Reformers need to take advantage of these opportunities• Obama has made health care reform a priority in hisfederal budget plan• Various Interest Groups are getting involved– Coalitions are being developed around different proposals– Broad Based Coalition and Grassroots support will be vital– Those impacted by the health care system (i.e. nurses,physicians, the underinsured and uninsured) need to beinvolved, empowered and given a voice.• Obama has expressed interest in signing health carereform that comes out of the legislative process– Different from President Clinton’s approach