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Pennsylvania single payer november 2013 131103
 

Pennsylvania single payer november 2013 131103

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The slides from Dr. Gerald Friedman's talk Nov. 19

The slides from Dr. Gerald Friedman's talk Nov. 19

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    Pennsylvania single payer november 2013 131103 Pennsylvania single payer november 2013 131103 Presentation Transcript

    • Sustainable Quality Health Care for Pennsylvania Single Payer is not an Answer, it is the Answer Gerald Friedman Professor of Economics University of Massachusetts at Amherst November 2013 gfriedma@econs.umass.edu
    • Two reasons why Economists are unpopular • If any good could be done, someone would have been done already. – George Stigler would not bend down to pick up a $20. If it were real, someone else would have picked it up already. • Markets perfectly balance desire and cost – They assume that health care is “overused” because it is free on the margin to those with insurance.
    • I am a different type of economist I will pick up money In US health care, there is a lot of money lying around. Billions upon billions upon billions!
    • Where we are going • Problems with US (and Pennsylvania) health care finance • Waste is no accident but built into private, forprofit health care • Our solution: the PHCP • Financing and distributional effects • Creating jobs
    • The Real Problem: Private, for-profit, health insurance With wasteful funding and fragmented delivery, system drowning in administrative expense and monopolistic pricing
    • Pennsylvania past, and future? 500% 450% 400% Excess Health Burden 350% 300% 250% 200% 150% 100% 50% 0% 1997 2002 2007 PC Health Spending 2012 2017 Per capita gross state product 2022
    • Nationally: rising health care burden on household budgets 4100% 3600% 3100% 2600% 2100% 1600% Growing burden of excess health care costs 1100% 600% 100% Index of per capita health care spending Index of SSA average wages Health care spending 6% of average wage in 1970, 20% in 2010, 24% in 2021
    • Burden of health care on the poor and middle class Share of income spent on health care and taxes to support health care 25% 20% Progressive federal taxes raise spending rate for higher income people. 15% 10% 5% 0% Bottom 20% 2nd 20% middle 20% 4th 20% Next 15% Income group Next 4% Top 1% Top 400
    • United States Norway Switzerland Netherlands ² Austria Canada Germany Denmark Luxembourg France Belgium ¹ Sweden Australia Ireland United Kingdom Finland Iceland Japan New Zealand ¹ Spain Italy Portugal Slovenia Greece Israel Korea Czech Republic Slovak Republic Hungary Chile Poland Estonia Mexico Turkey Per capita spending, around 2011, $US PPP We spend a lot on health care 9000 8000 7000 6000 5000 4000 3000 2000 1000 0
    • We are not getting our money’s worth Life Expectancy and Health Care Spending per Person, Nations and Average Value 84 Hong Kong y = 2.607ln(x) + 59.03 R² = 0.722 Switz Italy France 82 4 years less than we should have for our money Life Expectancy at Birth UK 80 Cuba Denmark 78 USA $6700 more than we should spend for our life expectancy 76 74 Turkey 72 $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 Health Care Spending Per Capita ($US at purchasing power parity) If we had the average OECD life expectancy, we’d have 4 more years of life. If we had the average OECD expenditures for our life expectancy, we’d be spending over $6700 less per person. Source: OECD $10,000
    • We die young because we lack access to care And it is getting worse! 45% 40% 35% 30% 25% 2001 20% 2005 15% 2010 10% 5% 0% Had a medical problem, did not visit doctor or clinic Did not fill a prescription Skipped recommended test, treatment or follow-up Did not get needed specialist care Any of the above access problems
    • US has most restrictive access to health care, for everyone Had cost related access problem 70% 60% 50% 40% Americans have most problems, even those with insurance! 30% 20% 10% 0% Source: Commonwealth Fund survey reported in Cathy Schoen, et al., "Access, Affordability, and Insurance Complexity" Health Affairs, Nov. 18, 2013
    • Access is a greater problem for those with lower incomes Income-gradient of unmet needs for the less affluent is greater in US Unmet care need* due to costs, by income group, 2007 Note that even above-average income Americans have unmet health needs! * Did not get medical care, missed medical test, treatment or follow-up, did not fill prescription or missed doses. Source: Commonwealth Fund (2008).
    • Cost drivers in health care Increase 1980-2005 2500% 2000% 1500% 1000% 500% 0% Hospital care Physicians services Nursing homes Prescription Administration and home drugs of private health care health insurance http://www.commonwealthfund.org/usr_doc/Davis_slowinggrowthUShltcareexpenditureswhatar eoptions_989.pdf CPI Wages Per-capita income These are quality controlled price indices from the Bureau of Labor Statistics.
    • Administrative bloat is overwhelming American health care • Administration of health insurers costs $200 billion • Employers spend $32 b interacting with insurers • US doctors spent 4x as much on billing and insurance as do Ontario doctors, $83,975 per doctor vs. $22,205 – Staff spend 21 hours interacting with health plans, 10x as much as in Canada.
    • More office workers than nurses More managers than doctors
    • Rising tide of administrators
    • Our health-care system is uniquely difficult Report difficulties with insurance 60% 50% 40% 30% 20% 10% 0% All Adults Primary-care physicians Source: Commonwealth Fund survey reported in Cathy Schoen, et al., "Access, Affordability, and Insurance Complexity" Health Affairs, Nov. 18, 2013
    • Those with market power exploit the rest of us Drug prices 60% higher in the US than elsewhere. – Prices fall by 80% when they go off patent
    • $850 Billion spent on Health Insurance Premiums in 2010 Medical Mutual: US Healthcare Costs, 2010
    • How much waste? Basis of estimate Waste share US excess spending compared with Canada 48.1% (2008) US excess spending compared with affluent 52.5% OECD (2008) US excess adjusted for life expectancy 75.2% Excess US spending growth since 1971 44.2% Excess US spending growth adjusted for slower growth of life expectancy 59.4%
    • State-level studies all find significant savings 30% Single-payer Savings as Share of State Health Spending 25% 20% 15% 10% 5% 0% Friedman Lewin Gruber-Hsiao Other
    • Administrative bloat is no accident Part of insurers’ strategy to drive away claims and people who file claims.
    • Private insurers raise costs because they profit from waste • 70:10 rule –70% of costs go to 10% of people. – Shoe companies try to sell more. Insurers profit by selling less. Find the 10%; drive them out! Cherry picking and lemon dropping
    • Failure to cheat risks insurance death spiral Rising premiums Rising coverage costs Good guys fail 10:56 Relatively healthy opt out Pool becomes more expensive
    • System works: for insurers and drug companies Profits for the ten largest insurance companies increased 250 percent between 2000-9. The five largest – WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in profits of $12.2 billion, up 56 percent in 2009 over 2008. This is enough to provide coverage for nearly 500,000 families http://www.thefiscaltimes.com/~/media/Fiscal-Times/Research-Center/Health-Care/GovernmentPapers/2010/02/18/Insurance%20Companies%20Prosper%20Families%20Suffer.ashx based on SEC 10-K filings.
    • They profit Without helping a single patient CEOs of the five largest insurers were paid $73 million in 2009. Michael McCallister, Humana, $3 million H. Edward, Hanway, Cigna, $29 million Angela Braly, WellPoint , $13 million Steven Hemsley, United Health Group, $9 million Ronald Williams, Aetna, $1 9 million.
    • Single payer is the solution • Limits administrative waste • Restricts monopolistic pricing of drugs and medical devices • Allows effective management of capital investments • Allocates burden of cost of health care according to ability to pay rather than burdening the sick and disabled
    • Savings estimated by comparison with single payer system • Administrative costs by activity of US vs. Canada, 2003 (Himmelstein et al. “Cost of Health Care Administration in the United States and Canada”) • Administrative costs Medicare vs. Medicaid, and Medicare vs. private insurance • Pharmaceutical costs in US vs. average of OECD, from McKinsey Global (http://www.mckinsey.com/mgi/rp/healthcare/accounting_cost_healthcare.asp)
    • National Savings from HR 676 Provider Administration $32 $26 Drug purchasing $221 Private Insurance Administration $197 Government Administration $116 Total savings: $592 billion, or 19% of spending Employer costs of administering private health insurance plans
    • Added costs for implementing HR 676 • CBO estimates of uninsured. Assume that uninsured would spend 80% as much on health care compared with 55% now – Adds 3.4% of personal health care spending • Utilization increase without copayments and deductibles – 3% for hospitalization, physicians, and pharmaceuticals, 22% for dental, 40% for home health care, 20% for nursing homes • Medicaid rate equalization – Medicaid/Medicare rates 66% now; equal under ACA for primary care • $25 billion for additional government administrative costs – Medicare rate for expanded system • $20 billion for purchase of private, for-profit health facilities • $31 billion for unemployment insurance and retraining of displaced workers.
    • Program Improvements with HR 676, 2014 $20 Increased utilization $31 $144 Cost of expanded coverage and additional government administration Cost of Medicaid rate adjustment $89 Transition cost of unemployment insurance and retraining for displaced workers $110 Transition cost of capital buy-out of private health care facilities
    • Until we get national single payer Pennsylvania Health Care Plan • All in, no one out • Single payer allows – administrative savings – Effective bargaining with monopolistic drug companies and medical device makers • Financing reduces penalty for being sick and disabled, and the burden on business
    • Pennsylvania single payer produces large savings $956 $1,464 $3,369 Employer administrative costs for health insurance $1,464 Administration in provider offices $12,815 $12,815 $7,983 Administration of private insurance system $6,167 Reduced drug prices $7,983 Fraud reduction $3,369 Administration of government programs $956 $6,167 Total savings of $32.8 billion!
    • Savings finance program improvements Cost of System Improvements with PHCP $1,398 $4,616 Net costs of health coverage for the uninsured Medicaid rates Increased utilization of health care services $9,807
    • Net savings: $17 billion in reduced spending in first year Spending under ACA including cost of administration of health insurance system, 2014 Total savings from ACA spending Net spending after savings, before coverage expansion $ 144,736 $ 32,754 $ 111,982 Added spending with PHCP Net costs of health coverage for the uninsured $ 1,398 Medicaid rates $ 9,807 Increased utilization of health care services $ 4,616 Total added spending $ 15,820 Spending under PHCP $ 127,802
    • Savings increase over time because single payer allows more efficiency • Savings from fraud reduction and duplicate billing • Coordinated investment allows savings on equipment and facilities • Coordinated electronic medical records • Eliminates excessive growth of administrative burden and drug and equipment prices
    • Single Payer makes health care sustainable by establishing universal coverage and eliminating private insurance and profit Health Care Spending of State Income 25% 24% Single payer savings grow over time 23% 22% 21% 20% 19% 2012 2013 2014 2015 2016 Without ACA 2017 2018 With ACA 2019 2020 Single Payer 2021 2022 2023 2024
    • Fairness • Insurance means the sick are not to be victimized by the payment system • Health care costs will be borne according to ability to pay, not by luck of good health.
    • Financing with existing revenues and payroll and income taxes replacing current health-insurance premiums Needed revenue Spending 2014 Existing spending sources Medicare Medicaid (Fed and State) Medicaid adjustments (Federal) VA State other than Medicaid Exchange subsidies Employer subsidies Workers' Compensation 20% of out-of-pocket spending 10% payroll 3% income tax Net surplus $ 127,802 $ $ $ $ $ $ $ $ $ 31,527 27,591 9,807 2,371 332 1,005 251 1,060 5,073 $ $ $ 30,813 19,075 1,102
    • Shift in funding: less spending but more Federal $70,000 Extra federal spending for additional coverage and higher Medicaid rates. Employers (including public sector) and households save. $60,000 Spending in $millions $50,000 $40,000 ACA $30,000 PHCP $20,000 $10,000 $- Federal State and local government Business Households
    • Single payer can shift cost of care from the unlucky sick to the relatively fortunate 16 14 Percentage change in net income 12 10 8 6 4 2 0 $15,136 $36,248 $57,058 $85,025 -2 -4 -6 Income $135,977 $222,366 $1,586,767
    • Single payer creates jobs • Lower cost of health care will allow more consumer spending on other things • Increased coverage brings federal money • Lower labor costs (3% of payroll) allows – Pennsylvania businesses to undersell competitors – investment to Pennsylvania – Use of more labor-intensive technology Over 200,000 new jobs lowers unemployment rate by over 3%
    • Single Payer lowers local taxes Total local government savings from PHCP, 2014, selected counties $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $0 Total savings of $3.3 billion for local governments in 2014 plus $581 billion for state.
    • Single Payer savings and improvements in health care from eliminating private insurance and profit Profit motive is inimical to efficient, quality care The best way to make profits is to drive away the sick and needy, adverse selection Coverage restrictions invite other insurance in, bringing billing waste and all the evils of the current regime
    • All of us have right to health care. You can make it happen.