International Financial Reporting Standards

US Health Care Reform:Review and Assessment

Ronald S. Hikel

2Main topics

• The system now in place

• The process by which the legislation was drafted, debated and adopted

• A summary of the legislation

• Analysis of the strengths, weaknesses and mysteries of the bill

• Conclusions and predictions

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3Current insurance coverage

• Seven major public plans– Medicare, Medicaid, Tri-Care, Veterans’ Administration.

State Child Health Insurance Plan, Federal Employees Health Benefits Plan, Indian Health Service

– 130 million+ users

• Private insurance– Costs covered by employers (⅔) and employees (⅓)

Fewer big and small employers are offering coverage Health benefits are tax free to employees

– Covers 160 million people

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4Current insurance coverage

• Total national health care cost is $2.5 trillion– Equals 18% of gross domestic product

– Compares to 10% or less in other countries

• System leaves over 80 million people (1 in 3 under 65) with:

– No care

– Inadequate care

– Insecure care

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5Major reform objectives

1. Bring national cost of care under control

2. Make quality care available to all American citizens and legal residents

3. Make cost of care affordable to individuals and families

4. Assure high quality care

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6Legislative process dominated by

1. Five committees of jurisdiction in Congress– 3 in House + 2 in Senate = 5 bills

2. Loss of Senators Kennedy and Daschle

3. Election of Republican in Kennedy’s old seat

4. Intense anti-government public sentiment

5. White House refuses to table draft bill– President shows limited leadership until late in the day

6. Desire for Republican support led to concessions

7. Bill complex, lengthy and impossible to understand

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7Process influence on content

1. House passed early more liberal bill

2. Senate made House bill more conservative

3. Weakened bill sent back to House

4. Weaker Senate bill passed by House as referendum on Obama’s presidency

8Five major provisions in the Bill

1. Most Americans must have health insurance or pay a tax fine

2. Financial assistance for those with modest incomes

3. Lower-income individuals/families eligible for Medicaid – 16 million enrolled by 2019

4. States to set up American Health Benefit Exchanges– Uninsured can buy coverage – 24 million by 2019

5. Regulation of insurance industry bans practices that prevent sicker people from getting coverage

Most major provisions in effect in 2014

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9Early provisions implemented in 2010

1. ‘High risk pool’ for those with pre-existing medical conditions and no coverage

2. Children can remain on parents’ coverage until they turn 26

3. Existing coverage cannot be cancelled for any reason except fraud

4. Coverage cannot be denied children with pre-existing conditions

5. Some restrictions on annual and lifetime maximum limits companies can set on costs per client

10Weaknesses new plan will not fix

1. No national Public Option to compete with private insurance

2. No steps taken to either– Reduce total health care costs or waste

– Hold premium increases to affordable level

3. No obligatory steps to significantly improve delivery system efficiency or effectiveness

4. System reliance on for-profit coverage substantially increased

11Weaknesses new plan will not fix (cont’d)

5. Competition and cost/risk off-loading between public and private sectors continues

6. Consolidation of private insurance firms will increase

7. Regulation of private insurance industry left largely in state hands

In 2019, 23 million people will still be uncovered

12Conclusions and predictions

1. Conflict between public and private health care will grow

2. Private insurance premiums will continue to rise sharply

3. Insurance companies will:– drop more expensive providers from their

approved vendor lists, narrowing choice

– reduce or drop less profitable plans

– ‘encourage’ sicker people to move onto public plans

– leave high cost states completely

13Conclusions and predictions (cont’d)

4. More subtle forms of insurance industry risk rating will emerge

5. Public sector plans will increasingly deal with sicker people and costs will rise significantly

6. Funding of public programs, especially Medicare and Medicaid, will be cut

7. Outcome of private/public conflict will determine shape of legislative changes to come and results of Obama reform

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Questions/comments?