Moving beyond PPACA to a better health care system

1. Moving beyond PPACA to a better health care system Paul Pentel, MDDepartment of Medicine, U. Minn. Division of Clinical Pharmacology, HCMC No financial conflicts of interest Member of Physicians for a National Health Program

2. Attributes of good health care system • Universal and continuous • Coverage for everyone, at all times • High quality • Measured outcomes • Reasonable cost • Minimal administrative overhead • Choice of providers • Not linked to employment or insurance plan • Policy capacity • Ability to implement system-wide innovations

3. Evolution of private, employment-based insurance in the U.S. • 1930 Veteran’s Administration • Blue Cross (hospital services) 1933, Blue Shield (physician services) 1939. Marketed to employers. • 1940s For-profit life insurance companies offer health insurance • IRS ruled that employer contributions are tax deductible • Post WWII, with competitive labor market, health insurance offered as an employment benefit • 1965 Medicare and Medicaid • 1973 Health Maintenance Organization Act

4. Establishment of government guaranteed universal health insuranceHealth care as a human right and a public good 1945 – Belgium 1947 – Sweden 1948 – United Kingdom 1961 – Japan 1966 – Canada 1973 – Denmark 1978 – Italy 1986 – Spain 1996 – South Africa 2002 – Taiwan

5. Health care system models • Free market private insurance • United States • Government regulated private insurance • France, Germany, Switzerland • Single payer • Canada, United Kingdom, Taiwan

6. Issues that remain regardless of the type of health care system • Increasing health care costs • Being experienced by all countries • Need for spending limits (rationing) • We know how to do more than we can afford to do • Proposed use of cost-cutting measures • Pay for performance • Electronic medical record • Eliminating unnecessary care • Medical homes • Accountable care organizations We can’t reject a new system because it’s not perfect

7. Why Health Care Is On the Agenda Average Annual Premiums for Single and Family Coverage, 1999-2011 * Estimate is statistically different from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011.

8. 1999-2008 Trends in the U.S. Health insurance premiums Workers’ earnings Overall inflation Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2008. Bureau of Labor Statistics, Consumer Price Index

9. Health Care Spending per Person OECD, 2009

10. U.S. Health Care System(s) • Free market private insurance 60% • Employer based or individually purchased • Largely unregulated: who to accept, who to drop, cost, coverage • Single payer - Medicare, Medicaid • Government funded, privately delivered • Uniform benefits, regulated costs 25% • Single payer - Veterans Administration • Government funded, government delivered • Uniform benefits, regulated costs • Uninsured 15% • Unemployed, small company, don’t quality for Medicare or Medicaid • Can buy insurance but can’t afford to

11. 46.3 Million uninsured in the U.S. 15% of the population 45 40 35 MILLIONS 30 25 45,000 excess deaths yearly 20 1976 1980 2007 YEAR Wilper et al. Am J Pub Health 2009;99:2289

12. Under-insuranceMassachusetts: Required Coverage 56 y/o male with income > $32,000 • Premium: $5,600 • Co-pays for routine care • $2,000 deductible • 20% co-insurance once deductible reached

13. Under-insurance • 62% of personal bankruptcies in the U.S. are due to medical expenses (2007) • 78% of people with medical bankruptcies had medical insurance when they got sick Himmelstein et al, American Journal of Medicine, June 4, 2009

14. Patients with high deductibles forego needed care Percent delaying or avoiding care due to cost Low Deductible High Deductible 40% 20% 0% Total Chronic Disease Income > $50,000 Commonwealth Fund/EBRI Survey 3/08

15. Structural problems with the U.S. health care system • 15% of the population uninsured • With PPACA, projected to fall only to 8% • Most who are covered are under-insured • Unable to pay for larger medical expenses • Mis-alignment of incentives patients v. insurance companies • Individuals want medical care and preventive services • Insurance companies are rewarded for denying care to reduce expenses, and for charging high fees to enhance their income • Physicians caught in the middle • The free market system is working very well, but for insurance companies rather than patients.

16. US ranked 37th in quality of health care by WHO

17. U.S. worst on preventable deaths Age adjusted deaths/100,000 from potentially preventable causes 1997/98 2006/07 Health Affairs 2008;27:58

18. OECD, 2009

19. OECD, 2009

20. Why is health care is the U.S. so much more expensive than elsewhere?

21. Administrative Overhead $ per capita 516 500 400 300 220 198 191 200 140 86 100 0 U.S Australia Canada Germany Netherlands Switzerland Organization for Economic Cooperation and Development (OECD) 2009

22. U.S. Overhead Spending International Journal of Health Services 2005; 35(1): 64-90

23. Growth of physicians and administrators 1970-2010 Physicians Administrators 1970 1990 2008 Bureau of Labor Statistics; NCHS and Himmelstein/Woolhandler analysis of CPS

24. Ratios of Insured:Employee Sullivan K, The Health Care Mess, 2006 AuthorHouse press. Data from 1999-2001

25. Our health care “System” Purchase services Reimburse services Taxes Out-of-pocket Health care delivery

26. Administrative overhead for Insurance companies 12-20% • Advertising/marketing • Creating networks of providers and hospitals • Underwriting • Enrolling/disenrolling • Reviewing and making payments or denying claims. appeals • Lobbying ($1.2 billion in 2009) • Salaries (CEO pay at top 10 insurers in 2009 = $228 million) • Profit (Top 5 insurers reported $11.7 billion in 2010)

27. Administrative overhead for Providers 11-19% • Determining if patients are covered • Services • Medications • Prior authorizations • Finding alternative when coverage is lacking or inadequate • Billing >1000 insurance companies • Rules • Forms • Follow-up to confirm payment • Disputes, appeals

28. Total overhead 30% (8-15% in other countries) Purchase services Reimburse services Taxes Out-of-pocket Health care delivery

29. What are we paying for? • An incredibly complex system • Thousands of plans • Armies of people to • Determine eligibility • Collect payments • Deny care • No evidence of value added by this complexity

30. Regulated Insurance CompaniesGermany, France, Switzerland • Universal • Required, assigned if not elected • Payment • Taxes; employers, individuals, government subsidies for those who need it • Overall progressive structure • Insurance companies • Nonprofit • Highly regulated: Uniform minimum benefits package with uniform set cost • Compete on service, extras, bundling with other insurance • Combined bargaining unit to negotiate • Provider fees • Drug prices

31. Single PayerPremise is that there is no need for insurance companies • Canada • Federal program, supported by federal taxes • Administered by the provinces • Universal, no need to opt in • Privately delivered (similar to U.S.) with negotiated rates • Bargaining with vendors, policy implementation capabilities • United Kingdom • Federal program, supported by federal taxes • Administered by the federal government • Universal • Publicly delivered, providers are government employees • Bargaining with vendors, policy implementation capabilities

32. PPACA • Successes • Expanded coverage, reduce uninsured by 50% • Prohibitions on refusing or dropping coverage • No lifetime limit on coverage • Health quality research • Insurance exchanges for some individuals • Failures and omissions • 20 million uninsured after full implementation • Leaves complexity and administrative costs intact • No defined benefits package or regulation of cost • Insurance can’t be refused or cancelled but its cost can be increased • No more choice of plan or provider than at present • Negotiating with vendors is prohibited • Leaves the basic system intact

33. Our health care “System” Purchase services Reimburse services Taxes Out-of-pocket Health care delivery

34. Medicare for all Purchase services Reimburse services Taxes Out-of-pocket Health care delivery

35. Minnesota Health PlanExpanded and improved Medicare for all • Automatic enrollment • Comprehensive benefits • Free choice of doctor and hospital • Doctors and hospitals remain independent • Financed through progressive taxes • Costs contained through low overhead, negotiated provider and vendor rates, capital planning, budgeting, quality reviews, primary care Author: Sen. John Marty

36. Lewin Group Report Cost of single payer v. ACA in Minnesota • Features of the modeled plan • Universal, portable coverage not tied to employment. • Uniform, comprehensive benefits package (mental health, dental, drugs) • No deductibles or co-insurance, minimum co-pays • No provider choice limitation • Uniform pricing, payment rules, payment method • Single buyer for drugs and devices • Naturally appreciating funding based on wages or income • Reimbursement rates equal to current average (all payers) • Findings • Single payer would reduce costs by 8% ($46  42 billion yearly) • Businesses already providing coverage save $1,200 per employee • Average family saves $1,240 per person • Consistent with other analyses • California, Vermont, New York, Maine, Missouri, Kansas, Colorado

37. Covering EVERYONE with no additional spending Additional costs Covering the uninsured +6.4% Eliminating deductibles and co-pays +5.1% Savings Reduced insurance administrative costs -5.3% Reduced hospital billing costs -1.9% Reduced physician office costs -3.6% Bulk purchasing of drugs & equipment -2.8% Primary care emphasis -2.2% Total Costs +11.5% Total Savings -15.8% Net Savings - 4.3% Health Care for All Californians Plan, Lewin Group, January 2005

38. Public Support – Single Payer • 49% favor coverage from a single govt. plan1 • 59% prefer a system like Medicare for all2 • 59% say government should provide national health insurance3 Polls from 2009 1 April, Kaiser Family Foundation 2 January, Grove Insight Opinion Research 3January, New York Times/CBS News

39. “ In principle, do you support or oppose government legislation to establish national health insurance? ”59% Yes Carroll AE et al. Ann Int Med 2008;148:156

40. “You can’t cross a chasm in small steps”-David Lloyd George

41. More informationBackground literature Physicians for a National Health Plan - Minnesota www.pnhpminnesota.org Sullivan K., The Health Care Mess. AuthorHouse press, 2006