OVERVIEW OF HEALTH REFORM

1. OVERVIEW OFHEALTH REFORM Oliver Fein, M.D. Professor of Clinical Medicine and Public Health Associate Dean Office of Affiliations Office of Global Health Education Weill Cornell Medical College Medicine Housestaff Conference Weill Cornell Medical Center September 17, 2010

2. 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.

3. PRESENTATION OUTLINE • History of U.S. Health Reform • Macroeconomics of health care • Challenges facing U.S. Health Care System • Policy options: P-PACA and Single Payer

4. 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

5. 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

6. 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

7. 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

8. 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

9. CONCLUSION #1 Government sponsored Health Insurance is rather young

11. NATIONAL HEALTH CARE EXPENDITURESBillions of dollars (% total for year) * Data for 2008 from Health Affairs: January 5, 2010

12. PERSONAL HEALTH CARE EXPENDITURESBillions of dollars (% total for year) * Data for 2007 from Health Affairs: January 5, 2010

13. WHO PAYS FOR HEALTH CARE?1 *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

14. CONCLUSION #2 We are more than half way to a government financed health care system!

16. CHALLENGES FACING HEALTH CARE REFORM • Declining access • Escalating costs • Defining of benefits • Restricted choice • Uneven Quality • Lack of primary care • How to pay for reform

17. 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) or 2) to build on the private sector • He chose to try to reach universal coverage by expanding private insurance

18. Progress(?) of US Health Reform Employer mandate Medicare 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) Public option** ** “you can choose to enroll in the new public plan”

19. 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 thepopulation) • Negotiated rates, self sustaining The Senate Plan • No public option

20. 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 Affordability Reconciliation Act (HCEARA) March 25, 2010 House: For = 220 Against = 211 (No Repubs; 38 Dems) Senate: For = 56 Against = 43 (No Repubs; 3 Dems)

21. CHALLENGE #1 DECLINING ACCESS

23. The Epidemic of Underinsurance Number of people spending more than 10% of income on health care (Millions) Source:Too Great a Burden, Families USA, December 2007

24. ImprovedMEDICARE FOR ALL • Automatic enrollment • Federal guarantee • All residents of the United States • “Everybody in, nobody out”

25. 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: Guaranteed issue; no rescissions; no annual/life limits

26. 26 Trend in the Number of Uninsured Nonelderly, 2012–2019Under Current Law and House and Senate Bills Millions 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.

27. CHALLENGE #2 ESCALATING COSTS

28. Insurance Premiums • Workers’ Earnings • Inflation 1999-2008 Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2008. Bureau of Labor Statistics, Consumer Price Index

29. 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

30. RISE IN PERSONAL BANKRUPTCIES 62% of personal bankruptcies are due to medical expensesand over 75% had health insurance at the outset of their bankrupting illness.* * Himmelstein, et.al. Am J Med, August, 2009

31. 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 uninsured and to expand coverage for the underinsured * NEJM 2003:349;768-775 – updated to 2010

32. Covering Everyone and Saving Money through Medicare for All $ B 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% 134 107 241 Total Costs +11.5% -111 -21 -76 -59 -46-313 Total Savings -15.8% Net Savings - 4.3% - 73 Source: Health Care for All Californians Plan, Lewin Group, January 2005

34. Private insurers’ High Overhead

35. 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

36. 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

37. 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

38. HEALTH INSURANCE REFORM (P-PACA) Offers unproven tools to contain costs • Health Information Technology (HIT) • Chronic Disease Management • Payment reforms (e.g., medical homes)

39. Total National Health Expenditures (NHE), 2009–2019Current Projection and Alternative Scenarios NHE in trillions 6.6% annual growth $4.8 $4.7 $4.5 6.4% annual growth 6.0% annual growth $2.5 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.

40. CHALLENGE #3DEFINING BENEFITS • Service Coverage: Doctors, NPs, Hospitals, Rxes; Dental, Mental Health, Home care/nursing home • Financial Coverage: Copays and deductibles

41. 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?

42. ImprovedMEDICARE FOR ALL Eliminates Co-Pays or Deductibles • Reduce use of needed and unneeded services 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

43. 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

44. 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

45. 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

46. 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

47. 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

48. 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)

49. 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

50. 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)