Why Is HealthcareWhy Is HealthcareReform So Difficult?Reform So Difficult?

David DavenportDavid Davenport

Crystal SerenityCrystal Serenity

February, 2011February, 2011

Washington, D.C.Washington, D.C.

The DifficultyThe Difficulty

Heated Rhetoric, Complex Heated Rhetoric, Complex IssuesIssues

51 Million Uninsured?51 Million Uninsured?– About 11 million are noncitizensAbout 11 million are noncitizens– About 16 million adults eligible but not About 16 million adults eligible but not

insuredinsured– About 7 million kids eligible but not insuredAbout 7 million kids eligible but not insured– Another 9 million have incomes over $66kAnother 9 million have incomes over $66k

So real number closer to 16 millionSo real number closer to 16 million

Heated Rhetoric, Complex Heated Rhetoric, Complex IssuesIssues

WHO says US life expectancy #42 in WHO says US life expectancy #42 in world?world?

--Remove homicides--Remove homicides

--Remove traffic fatalities--Remove traffic fatalities

We’re Number OneWe’re Number One

The DifficultyThe Difficulty

The Science & Technology The Science & Technology Are Rapidly ChangingAre Rapidly Changing

Economics Are BecomingEconomics Are BecomingUnsustainableUnsustainable

Federal Budget Outlays: 1795-2065(as percentage of GDP)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1795 1820 1845 1870 1895 1920 1945 1970 1995 2020 2045

Year

Per

cen

tag

e o

f GD

P

Projected

War of 1812

Civil War

World War I

World War II

Medicare & Medicaid

Social Security

2008John F. CoganHoover Institution1/10/09

But Costs Difficult to But Costs Difficult to ManageManage

• #1 cost driver is technology and #1 cost driver is technology and improved healthcareimproved healthcare

• There is also waste, perhaps as high There is also waste, perhaps as high as 20-25% but difficult to squeeze outas 20-25% but difficult to squeeze out

Waste To Be EliminatedWaste To Be Eliminated

• 33rdrd party payor problems (moral hazard) party payor problems (moral hazard)– $5 of every $6 paid by “someone else”$5 of every $6 paid by “someone else”

• Regulatory costRegulatory cost

• Malpractice, lawsuitsMalpractice, lawsuits

• Tax policy drives employer plansTax policy drives employer plans

Different Political Different Political PhilosophiesPhilosophies

The Equality vs. Liberty The Equality vs. Liberty NarrativesNarratives

From the French Revolution: Liberte, From the French Revolution: Liberte, egalite et fraterniteegalite et fraternite

From the American Revolution: life, From the American Revolution: life, liberty and the pursuit of happinessliberty and the pursuit of happiness

The Liberty NarrativeThe Liberty Narrative

• Equality of opportunityEquality of opportunity

• Limited role of governmentLimited role of government

• Individual freedom and choiceIndividual freedom and choice

The Equality NarrativeThe Equality Narrative

• Equality of outcomesEquality of outcomes

• Government oversightGovernment oversight

• Limits on free markets and individual Limits on free markets and individual freedom to institutionalize equalityfreedom to institutionalize equality

Healthcare Reform in the Healthcare Reform in the 60’s60’s

Healthcare Reform in the Healthcare Reform in the 90’s90’s

Health Care Reform in 2010Health Care Reform in 2010

What Would Happen In What Would Happen In “Ordinary” Times?“Ordinary” Times?

• American people don’t generally American people don’t generally support major overhaulssupport major overhauls

• With 15% uninsured and 80% + happy With 15% uninsured and 80% + happy with their healthcare, felt need for with their healthcare, felt need for overhaul isn’t widespreadoverhaul isn’t widespread

• So work on individual pieces of problemSo work on individual pieces of problem

But These Were Not “Ordinary” But These Were Not “Ordinary” TimesTimes

• President Obama wanted to spend President Obama wanted to spend his political capital on thishis political capital on this

• Both Congress and Senate were in Both Congress and Senate were in his partyhis party

• Tough economic times create greater Tough economic times create greater support for more safety net support for more safety net

Obamacare: Will It Survive?Obamacare: Will It Survive?

• Repeal highly unlikelyRepeal highly unlikely

• But Congress may alter it in other waysBut Congress may alter it in other ways

• Constitutional challenges are realConstitutional challenges are real

• Public is ambivalentPublic is ambivalent

Repeal and ReplaceRepeal and Replace

For individualsFor individuals

• National market, National market, portabilityportability

• Preexisting conditionsPreexisting conditions

• Tax relief and subsidies Tax relief and subsidies for uninsuredfor uninsured

Individual Fixes for SystemIndividual Fixes for System

• National market National market

• Information/accountability for choicesInformation/accountability for choices

• Change tax incentivesChange tax incentives

• Reform medical malpractice lawsReform medical malpractice laws

Why Is Healthcare Reform So Why Is Healthcare Reform So Difficult?Difficult?