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Single Payer Health Care


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James G. Kahn, MD, MPH
Pharmacy Leadership Institute
Kaiser Permanente Development Program
Debate on Health Care Reform

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Single Payer Health Care

  1. 1. Single payer health care James G. Kahn, MD, MPH Pharmacy Leadership InstituteKaiser Permanente Development Program Debate on Health Care Reform 13 September 2012
  2. 2. The single payer argument When it comes to health care financing, there is a free lunch awaiting us – single payer is cheaper & better. The evidence base: From the OECD and beyond …universal coverage, with one comprehensive benefit package & truly streamlined administration, leads to higher access, greater utilization, better health outcomes, and lower costs.
  3. 3. Key features of US Health Care Financing  17.4% of GDP 2009 and rising, $2.5 T, 8,086 per capita  Public – 43% (27% federal, 16% state/local) • CMS (Center for Medicare and Medicaid Services)  Medicare – federal, aged & disabled ($502 B)  Medicaid – state/federal, poor & long term care ($374 B) • Veteran’s Admin, Military, Indian Health Svc, … • State and local safety net  Private – 34% • Employers – 21% • Families – premium contribution – 13%  Families – uninsured services & copays etc – 15%  Other private – 7%Martin Health Affairs 2011
  4. 4. U.S. vs Other OECD countries Spending per capita ~50% higher Generally fewer doctor visits and hospital days Difference in spending due to: • price (cost of doctor, procedure, drugs) • Use of high technology • Administrative costs (later) Health care outcomes same or worse
  5. 5. Number of Uninsured in the US Source: US Census Bureau, Current Population Surveys50 Millions of people45 15.8% of40 population35302520 1976 1980 1985 1990 2000 2006
  6. 6. US standing on health care outcomes Rank of 13 industrialized nations Low birth weight % (U.S. in Red) Infant mortalityYears of potential life lost Age adjusted mortality Life expectancy @ 1 yrLife expectancy @ 40 yrsLife expectancy @ 65 yrsLife expectancy @ 80 yrs Average for all indicators Poorest Best
  7. 7. Schoen 2005
  8. 8. Billing and Insurance-Related Administrative Costs
  9. 9. U.S. Health Care Financing Multi-payer health care financing Funds Payers Providers Public & Private Many "pools"Employer Multiple private payers Doctors & many benefit plans HospitalsPremium contrib. PPO vs capitated, Pharmacies many blends/variants Device vendorsIncome taxes Public: Medicare, Medi-Cal, Skilled Nursing Fac. S-CHiP, VA, Indian Health,. OtherOut-of-pocket ~ 60 safety net programs Admin costs of insurance 15% Admin costs overall 30%
  10. 10. $400 billion annually in billing andinsurance-related (BIR) administration = $1300 per person per year ~60% is at providers >$250 billion is “excess” - avoidable
  11. 11. Elements of Provider BIR - 1 Complexity of the insurance process: multiple steps, often detailed & demanding: Contracting, maintaining benefits database, patient insurance determination, collection of copayments, formulary and prior authorization procedures, procedure coding, submitting claims, receiving payments, paying subcontracted providers, appealing denials and underpayments, negotiating end- of-year resolution of unsettled claims, and collecting from patients, …
  12. 12. Allocation of spending for hospital andphysician care paid through private insurers Insurer cMLR 19.0% Hospital BIR 3.9% PhysicianMedical BIR 5% care 62.0% Medical care admin 10.1%
  13. 13. Major types of health reform Free market – empower individuals to buy health insurance / care, subsidize the poor. Often called “consumer driven”. Based on principles of moral hazard and “skin in the game” Improved mixed system – regulate private insurance, expand public insurance (PPACA). “Managed competition” Single payer / universal – use a public fund to pay for privately and publicly delivered care, with everyone covered with good benefit package. Common in OECD countries.
  14. 14. By What Criteria Should We Judge Reform Proposals? The IOM Report: 2004: Health care coverage should be universal. Health care coverage should be continuous. Health care coverage should be affordable to individuals and families. The health insurance strategy should be affordable and sustainable for society. Health insurance should enhance health and well-being by promoting access to high-quality care that is effective, efficient, safe, timely, patient-centered, and equitable.US health care meets NONE of these criteria
  15. 15. Single payer health care financing Funds Payers Providers Public & PrivateEmployer / Employee Doctors Single public pool, Hospitals one benefit package. PharmaciesIncome taxes FFS or capitated outpt Device vendors Facility budgets inpt Skilled Nursing Fac.Out-of-pocket (modest) Other Admin costs of insurance < 5% Admin costs overall 15-20%
  16. 16. Administrative Savings from Single Payer - Principles Universal coverage: no eligibility determination, marketing, underwriting. Single pipe for payment: fully standard benefit package & reimbursement rates; single billing process - transparent, simple, few errors; single fiscal agent per office. Single clinical practice rules: formularies, referrals, guidelines. Not-for-profit: public or private
  17. 17. Drastic Process Simplication The 3 Cs Culling (e.g., enrollment and eligibility determination) Consolidation (e.g., benefits, billing, formularies) Community orientation (i.e., not-for- profit payers)
  18. 18. Impact of single payer on administrative costs100%80% Medical care60% Other admin Physician BIR Hospital BIR40% Insurer BIR20% This shift = 12.3% 0% Current Single payer
  19. 19. Taiwan transformation to single payer  Taiwan established National Health Insurance (NHI) in 1995  NHI covers >98% of population, generally small co-pays.  Cost = 3.4% of GDP, satisfaction = 77.5%, admin cost =1.49%, equitable financial burden  Deaths from “amenable causes” fell faster with NHI, 5.83% per year 1996 - 1999.  Fewer deaths from circulatory disorders and, for men, infections; reversed trend in female cancer deaths.  Effect highest among the young and old, and lowest for working age, consistent with changes in coverage.  Little change in non-amenable causes (0.64% per year).Yue-Chune Lee BMC-HSR 2010