OVERVIEW OF

HEALTH REFORM

Oliver Fein, M.D.Professor of Clinical Medicine and Public Health

Associate Dean Office of Affiliations

Office of Global Health EducationWeill Cornell Medical College

Medicine Housestaff ConferenceWeill Cornell Medical Center

September 17, 2010

DISCLOSURES

Dr. Oliver Fein has no relevant financial relationships with commercial interests

Dr. Oliver Fein is President of Physicians for a National Health Program (PNHP), a non-profit educational and advocacy organization. He receives no financial compensation from PNHP.

PRESENTATION OUTLINE

1. History of U.S. Health Reform

2. Macroeconomics of health care

3. Challenges facing U.S. Health Care System

4. Policy options: P-PACA and Single Payer

BEFORE HEALTH INSURANCE BEGAN…

• Health care 1% or less of GNP

• Out-of-pocket payment for physician care

• Charity and public hospital care

Before 1936

BEGINNINGS OF PRIVATE EMPLOYMENT-BASED HEALTH

INSURANCE

• BC is formed in 1936; BS in 1946

• WW II: health benefits linked to employment

• IRS rules employer contributions tax deductible

• Commercial life insurance companies begin selling health insurance to employers

1936 - 1965

LIMITED GOVERNMENT HEALTH INSURANCE

• Medicare for those over 65 years

• Medicaid for the poor

• U.S. remains the only industrialized nation without universal access to health care

1965 - 1997

FOR-PROFIT MARKET HEALTH INSURANCE

(privatization of Medicare)

• Medicare+Choice and Medicare Advantage

• Medicare Part D limited to private insurers

• Experience-rated premiums (the sick pay more) dominate the market

• Non-profit Blues convert to for-profit

• Passage of P-PACA: March 23, 2010

1997 – present

Government Guarantees Universal Health Insurance

• 1945 – Belgium• 1947 – Sweden• 1948 – United Kingdom• 1961 – Japan• 1966 – Canada• 1973 – Denmark• 1978 – Italy• 1986 – Spain• 1996 – South Africa• 2002 – Taiwan

CONCLUSION #1

Government sponsored Health Insurance is rather young

NATIONAL HEALTH CARE EXPENDITURES

Billions of dollars (% total for year)

Category 1960 2008*

• Personal Health Care $ 23.3 (85%) $ 1,952.3 (84%)

• Public Health Activities $ 0.4 (1%) $ 69.4 (3%)

• Research and Construction $ 2.6 (6%) $ 157.5 (6%)

• Other $ 1.2 (4%) $ 159.5 (7%)

TOTAL NHE $ 27.5 (100%) $ 2,338.7 (100%)

Per Capita NHE $ 147 $ 7, 693

NHE as percent of GDP 5.2% 16.2%

* Data for 2008 from Health Affairs: January 5, 2010

PERSONAL HEALTH CARE EXPENDITURES

Billions of dollars (% total for year)

Category 1960 2008*

• Hospital care $ 9.2 (39%) $ 718.4 (37%)

• Physician services $ 5.4 (23%) $ 496.2 (26%)

• Dental $ 2.0 (9%) $ 101.2 (5%)

• Other professional services $ 0.4 (2%) $ 65.7 (3%)

• Prescription drugs $ 2.7 (12%) $ 234.1 (12%)

• Other medical products $ 2.3 (9%) $ 65.5 (3%)

• Nursing home and home health $ 0.9 (4%) $ 203.1 (10%)

• Other $ 0.4 (2%) $ 68.1 (4%)

Total Personal Health Care $ 23.3 (100%) $ 1,952.3 (100%)

* Data for 2007 from Health Affairs: January 5, 2010

WHO PAYS FOR HEALTH CARE?1

Category Billions of Dollars % of Total

National Health Expenditures $ 2,338.7 (100%)

Private Funds $ 920.7 (39%)

Private health insurance $ 642.9 (27%)

Out of pocket payments $ 277.8 (12%)

Public Funds $ 1,418.0 (61%)

Medicare $ 469.2 (20%)

Medicaid $ 344.3 (15%)

Other Federal** $ 146.4 (6%)

Other State and Local*** $ 146.8 (6%)

Public Employee health benefits $ 140.3 (6%)

Tax Subsidies $ 171.0 (7%)

Tax-Financed ($ per capita) $ 4,665*Data for 2008 from Health Affairs: January 5, 2010, using the methodology described in Health Affairs 2002;21:88-98

**Includes VA, DOD, hospital subsidies, federal public health, SCHIP

*** Includes Workmen’s Comp., hospital subsidies, state public health, SCHIP

1 Woolhandler S, Himmelstein, DU. Paying for National Health Insurance—and Not Getting It. Health Affairs. 2002:21;88-98

CONCLUSION #2

We are more than half way to a government financed health care

system!

CHALLENGES FACING

HEALTH CARE REFORM

1. Declining access

2. Escalating costs

3. Defining of benefits

4. Restricted choice

5. Uneven Quality

6. Lack of primary care

7. How to pay for reform

HEALTH REFORM:OBAMA’S FATEFUL CHOICE

• He did not want to “start from scratch”

• He had two fundamental choices:

1) to build on the public sector (Medicare) or2) to build on the private sector

• He chose to try to reach universal coverage byexpanding private insurance

Progress(?) of US Health Reform

Employer mandate

Public option**

Individual mandate*

* “each eligible individual must enroll in an applicable health plan for the individual and must pay any premium required with respect to such enrollment.” (S.1775)

** “you can choose to enroll in the new public plan”

Medicare

??

WHAT HAPPENED TO THEPUBLIC OPTION?

The original “robust” Plan• Open enrollment: “Medicare for everyone who wants it”• Medicare rates, backed by the government• 119 million members (Lewin)

The House Plan• Restricted enrollment (only the uninsured)• 6 million members (<2% of the population)• Negotiated rates, self sustaining

The Senate Plan• No public option

HEALTH CARE vs INSURANCE REFORM

Patient Protection and Affordable Care Act (P-PACA)

March 23, 2010

House: For = 219 Against = 212 (No Repubs; 39 Dems)Senate: For = 60 Against = 39 (all Repubs)

Health Care & Education AffordabilityReconciliation Act

(HCEARA)March 25, 2010

House: For = 220 Against = 211 (No Repubs; 38 Dems)Senate: For = 56 Against = 43 (No Repubs; 3 Dems)

CHALLENGE #1

DECLINING ACCESS

The Epidemic of Underinsurance

0

10

20

30

40

50

60

70

2000 2007

Insured Uninsured

Source: Too Great a Burden, Families USA, December 2007

Number of people spending more than 10% of income on health care (Millions)

ImprovedMEDICARE FOR ALL

• Automatic enrollment

• Federal guarantee

• All residents of the United States

• “Everybody in, nobody out”

HEALTH INSURANCE REFORM (P-PACA)

• Mandates purchase of private HI (2014)

• Expands Medicaid eligibility to 133% FPL (2014) - single $14,403; family $19,378

• Subsidizes premiums up to 400% FPL(2014) - single $43,320; family $88,200

• Insurance market reforms: Guaranteedissue; no rescissions; no annual/life limits

Trend in the Number of Uninsured Nonelderly, 2012–2019

Under Current Law and House and Senate BillsMillions

Note: The uninsured includes unauthorized immigrants. With unauthorized immigrants excluded from the calculation, nearly 94% and 96% of legal nonelderly residents are projected to have insurance under the Senate and House proposals, respectively.Data: Estimates by The Congressional Budget Office.

26

51 51 51 52 53 53 5451

17 18181818

51

2623

2323232328

35

50 50

0

20

40

60

80

2012 2013 2014 2015 2016 2017 2018 2019

Current law

House

Senate

CHALLENGE #2

ESCALATING COSTS

Insurance Premiums • Workers’ Earnings • Inflation 1999-2008

Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2008. Bureau of Labor Statistics, Consumer Price Index

119%

34%

29%

0%

20%

40%

60%

80%

100%

120%

140%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Health Insurance Premiums

Workers' Earnings

Overall Inflation

High Cost of Health Insurance Premiums: It’s Even Too Expensive for

the Middle Class Today

National Average for Employer-provided Insurance

Single Coverage $5,049 per year Family Coverage $13,770 per year

Note: Annual income at minimum wage = $13,624 Annual income of average Wal-Mart worker = $17,114

Source: Kaiser Family Foundation/HRET Survey of Employee Benefits, 2010

RISE IN PERSONAL BANKRUPTCIES

62% of personal bankruptcies are due to medical expenses and over 75% had health insurance at the outset of their

bankrupting illness.*

* Himmelstein, et.al. Am J Med, August, 2009

ImprovedMEDICARE FOR ALL

Low Administrative Costs = Single Payer

• Administrative cost and profit

- Medicare: 2-3 %- Private insurance: 16-30%

• $400 billion* redirected to cover the uninsuredand to expand coverage for the underinsured

* NEJM 2003:349;768-775 – updated to 2010

Covering Everyone and Saving Money through Medicare for All

Additional costs

Covering the uninsured and poorly-insured +6.4%

Elimination of cost-sharing and co-pays +5.1%

Savings

Reduced insurance administrative costs -5.3%

Reduced hospital administrative costs -1.9%

Reduced physician office costs -3.6%

Bulk purchasing of drugs & equipment -2.8%

Primary care emphasis & reduce fraud -2.2%

Source: Health Care for All Californians Plan, Lewin Group, January 2005

134107

241

-111

-21

-76

-59

-46 -313

$ B

Total Costs +11.5%

Total Savings -15.8% Net Savings - 4.3% - 73

Private insurers’ High Overhead

SINGLE PAYER OFFERS REAL TOOLS TO CONTAIN COSTS

• Global budgeting of hospitals

• Capital investment planning

• Emphasis on primary care; coordination of care; alternative ways of paying for care

• Bulk purchasing of pharmaceuticals

HEALTH INSURANCE REFORM(P-PACA)

Saves costs by mandating penalties for Uninsurance (forcing low risks into risk pool)

1. Individual mandate (2014)• 2.5% of income or $695 (singles)

to $2,085 (family)-(2016)

2. Employer mandate (if 50 or more employees)• $2,000/employee

HEALTH INSURANCE REFORM(P-PACA)

Leaves many of the undesirable features of employment-based insurance unchanged

• Employers can change coverage and plans

• Insurers can change provider networks

• Employees must accept the employer plan

HEALTH INSURANCE REFORM (P-PACA)

Offers unproven tools to contain costs

• Health Information Technology (HIT)

• Chronic Disease Management

• Payment reforms (e.g., medical homes)

Total National Health Expenditures (NHE), 2009–2019Current Projection and Alternative Scenarios

$0

$1

$1

$2

$2

$3

$3

$4

$4

$5

$5

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Modified current projection*

Current projection

Senate

NHE in trillions

Notes: * Modified current projection estimates national health spending when corrected to reflect underutilization of services by previously uninsured. Source: D. M. Cutler, K. Davis, and K. Stremikis, Why Health Reform Will Bend the Cost Curve, Center for American Progress and The Commonwealth Fund, December 2009.

$2.5

$4.7$4.5

6.4% annual growth

6.6% annual growth

6.0% annual growth

$4.8

CHALLENGE #3DEFINING BENEFITS

• Service Coverage: Doctors, NPs, Hospitals, Rxes; Dental, Mental Health, Home care/nursing home

• Financial Coverage: Copays and deductibles

ImprovedMEDICARE FOR ALL

Comprehensive coverage- Preventive services- Hospital care- Physician services- Dental services- Mental health services- Medication expenses- Reproductive health services-Home Care/nursing home care“All medically necessary services”Any exclusions? How decided?

ImprovedMEDICARE FOR ALL

Eliminates Co-Pays or Deductibles

• Reduce use of needed and unneededservices equally

• Results in under use of primary care services

• Not as effective in reducing over use of technology intensive services, as

- Eliminating self-referral to MD owned facilities- Reducing defensive medicine

HEALTH INSURANCE REFORM (P-PACA)

• No Standard Benefit Package mandated

• Mandates coverage of check-ups and other preventive services

• Reduces or eliminates co-pays and deductibles, but only on preventive services

CHALLENGE #4RESTRICTED CHOICE

• 42% of employees have no choice

• Private health insurance limits choice to

the network of doctors and hospitals with

whom they have negotiated contracts

• You pay more to go out of network

ImprovedMEDICARE FOR ALL

Expands Choice for Everyone

• No limit to a network of providers

• Free choice of doctor and hospital

• Delinks health insurance from employment

HEALTH INSURANCE REFORM (P-PACA)

Creation of HI Exchanges Expands Choice for Some

• House: National Exchange with State option - Combines individual and small group markets into

one insurance pool and one Exchange - National public option

• Senate: State exchanges with federal back-up - Separate pools for individual and small groups - No public option

• No state single payer until 2017

HEALTH INSURANCE REFORM (P-PACA)

Restricts Choice when it comes to abortion

• House: Stupak Amendment

- Codifies Hyde Amendment- Bans abortion coverage in “public option” - Bans abortion coverage in any private plan that accepts public subside funds- Allows separate abortion “riders”

• Senate: Nelson Amendment

- Allows states to prohibit abortion coverage in state-run exchanges- If states allow abortion coverage, requires enrollees or employers to send two checks- Insurers must keep abortion coverage money separate from federal subsidies

CHALLENGE #5:UNEVEN QUALITY

• In 2008, U.S. was last among 19 industrialized nations in mortality amenable to health care.

• In 2006, we were 15th.

* Commonwealth Fund (2009)

ImprovedMEDICARE FOR ALL

• National data on health care quality vs. proprietary data held by private HI

• National standards and public reporting

• HIT for the nation with patient protections – every patient their own medical record on a “credit” card

HEALTH INSURANCE REFORM (P-PACA)

• Comparative Effectiveness Research

• Innovation Center in CMS to test new payment and service delivery models (2011)

• Value based purchasing – hospital payments based on quality reporting measures (2013)

• Readmission penalties (2013)

• Reduce hospital payments for hospital-acquired conditions (2015)

CHALLENGE #6:LACK OF PRIMARY CARE

• Average medical school debt = $160,000

• Primary care is under-reimbursed

• Medical school graduates going

into specialties

ImprovedMEDICARE FOR ALL

• Debt forgiveness for primary care

• Malpractice payment for primary careproviders (MDs, NPs and PAs)

• Patient-Centered Medical Homes (teambased care, open access, coordination ofcare; phone/internet medicine)

HEALTH INSURANCE REFORM (P-PACA)

• 10% Primary Care Bonus Payments (2011-2017)

• Increase Medicaid payment to Medicare rates for primary care (2013)

• Independent Payment Advisory Board (2014)

CHALLENGE #7

HOW TO PAY FOR REFORM

ImprovedMEDICARE FOR ALL

• Public funding

- Payroll tax

- Corporate taxes

- Income taxes

• No premiums: regressive

• No increase in overall health care spending, because of administrative savings

ImprovedMEDICARE FOR ALL

Non-profit/private delivery system under local control

- Doctors not salaried by government - Hospitals not owned by government- This is not “socialized medicine”

A publicly funded-privately delivered partnership

HEALTH INSURANCE REFORM (P-PACA)

1. Increased taxes - Excise tax on “Cadillac” health insurance plans (2018)

- Medicare payroll tax increase from 1.45% to 2.35% if income $200-250K- 3.8% tax on investment income

2. Savings from Medicare- Advantage: ($132 bill over 10 yrs)- Cut DSH payments ($36 million)- Cut Medicare payments to hospitals

($136 bill over 10 yrs)- Cut payments for home care/nursing homes ($60 bill)

3. Revenue from reduced fraud and abuse

HEALTH REFORM (P-PACA)1. Expanded coverage, but not universal

2. Cost control by market means

3. No definition of benefits

4. Choice thru State-based exchanges,but no public option

5. Limits on abortion

6. Primary care/quality pilots

7. Funding: Excise tax on “Cadillac” plans and Medicare cutbacks

Single Payer MEDICARE FOR ALL

THE PHYSICIANS’ PROPOSAL(JAMA, August 13, 2003 P. 798-805)

1. Universal coverage/automatic enrollment2. Low administrative costs=single payer3. Comprehensive coverage without co-pays

and deductibles 4. Maximum choice of Doctor, NP, Hospital5. Improved quality through nationwide HIT6. Expanded primary care 7. Publicly-funded/privately delivered

MEDICARE 2.0

Conyers HR 676 Expanded and improved

MEDICARE-FOR-ALL “Single Payer NH Care”

(86 Co-sponsors in House of Rep) • Automatic enrollment• Comprehensive benefits• Free choice of doctor and hospital• Doctors and hospitals remain independent• Financed through progressive taxes • Costs contained through capital planning, budgeting,

quality reviews, primary care emphasis

Sanders (& McDermott): American Health Security Act S 703 (HR 1200)

1.Automatic enrollment

2.Comprehensive benefits

3.Operated by States using Federal standards

4.Free choice of doctor and hospital

5.Doctors and hospitals remain independent

6.Public agency processes and pays bills

7.Financed through payroll taxes

CONCLUSION #3

• A system based on private insurance plans- will not lead to universal coverage- will not create affordable insurance

• A Medicare for All System- can lead to universal comprehensive coverage, without costing more- has the greatest potential to increase choice, improve quality and expand primary care- can be financed fairly

We Can’t Wait Another 16 Years! We Need Real Health Care Reform Before

the Premium Takes All our Income!

Source: American Family Physician, November 14, 2005

Today

CONTACTS AND REFERENCES• PNHP National: www.pnhp.org

• PNHP-NY Metro: www.pnhpnymetro.org

• Bodenheimer TS, Grumbach K, Understanding Health Policy: A Clinical Approach. McGraw-Hill, 2005

• Fein O, Birn AE. (editors), Comparative Health Systems. Am Jour Public Health 2003; 93: 1-176

• O’Brien ME, Livingston M (editors), 10 Excellent Reasons for National Health Care. New Press, 2008

• Geyman J, Do Not Resuscitate: Why the Health Insurance Industry is Dying and How We Must Replace It. Common Courage Press, 2008