The Health Care Landscape

1. The Health Care Landscape Bill Evans University of Notre Dame

2. Two Goals • Four issues every health care reform proposal should confront • Outline what the recently passed legislation does for each of these issues

3. What issues must health care reform address? • Access • Cost (both the level and rate of change) • Medicare • Tax equity

5. Uninsurance rates, 2007 • Overall 15.3% • By race • White, NH 10.4% • Black, NH 19.5% • Asian, NH 16.8% • Hispanic 32.1% • Nativity • Native 12.7% • Naturalized 17.6% • Not citizen 43.8% • Age • <18 11.0% • 18-24 28.1% • 25-34 25.7% • 35-44 18.3% • 45-64 14.0% • 65+ 1.9% • HH income • <$25K 24.5% • $25-$50K 21.1% • $50-$75K 14.5% • >$75K 7.8%

6. % Firms offering health insurance

7. Uninsured Non-Elderly Population by Work Status of Family Head, 2007

8. What issues must health care reform address? • Access • Cost (both the level and rate of inflation) • Medicare • Tax equity

9. Expenditures on Medical Care • Data for 2007 • $2.2 trillion on HC • $7,400 per capita • 16.2% of GDP • Projected, 2018 • $4.4 billion • $13,100 per capita • 20.3% of GDP

10. 90% more than Canada 145% more than the UK

11. Average Annual PremiumsCovered Workers, 2008 (KFF) • Individual plan • $4,704 total • Family plan • $12,690

14. Bang per buck?? • US ranks 25 of 29 countries in life expectancy • 4.3 years shorter than Japan (highest) • 2.4 years shorter than Canada • 24th worst of 28 countries in infant mortality • More than twice the rate of Japan (lowest) • 31% higher than Canada • 28% higher than UK

15. Are high expenditures a bad thing? • A key driver of health care costs is technology • MRIs/CT scans, angioplasty, anti-psychotropic drugs, hip/knee replacements, neo-natal intensive care, treatments for AIDS, statin drugs • All not available 20-30 years ago. Now, commonplace

16. HIV/AIDS Drugs • Early 1990s, 32% annual mortality rates for patients w/ AIDS • 1995:4, 1996:1, three new ARVs • Usage rates increase immediately • Mortality falls 70% in 18 months

18. ARVs are expensive, $12K/year in some cases • AIDS patients are expensive, $20K/year • ARVs ↑ lifespan after diagnosis by 8 years • Lifetime cost of treating an AIDS patient increases by about $256K

19. What is accurate picture of US? • Innovator to the world – tremendous gains to new advances • Wasteful spender of tremendous resources with little return

20. Fatality Rates 2000* * Deaths per 100,000 people

21. Life Expectancy

22. 5-year Cancer Survival Rates

23. Heart Attack TreatmentCanada vs. US (2004) • Category Canada US • Angioplasty 11.4% 30.5% • Bypass 4.0% 11.4% • 5-year mortality 21.4% 19.6%

25. If you want to cut costs, where do you look? • Administrative/overhead • 3% in Canada (single payer) • 1.5% in Medicare • 8-30% in US system • Chronic conditions • Unnecessary care

27. Per Capita Medicare Spending by Hospital Referral Region, 2006 $9,000 to 16,352 (57) 7,500 to < 8,000 (53) 5,310 to < 7,000 (75) 8,000 to < 9,000 (79) 7,000 to < 7,500 (42) Not Populated

28. What issues must health care reform address? • Access • Cost (both the level and rate of inflation) • Medicare • Tax equity

29. Medicare • 2007 • 44.1 million recipients • $432 bill. exp. • 3.2% of GDP • 16% of fed. budget • 2040 • 87 million recipients • 7.6% of GDP • 30% of fed. budget

30. Future problems • Rising number eligibles • People are living longer • Older people spend a lot more on health care • Rising costs • Falling fraction of people to tax

33. Per Capita Health Care Spending by Age (2004)

35. Medicare Sources as % of GDP

36. What issues must health care reform address? • Access • Cost (both the level and rate of inflation) • Medicare • Tax equity

37. Tax System Equity • EPHI a tax-free fringe benefit • WW II era program • Greatly reduces costs of HI to consumer • Encourages more generous insurance • Helps solve problem of adverse selection • Has encouraged the growth of EPHI • 170 million have insurance through employers

38. Tax Benefit of EPHI • A family w/ $70,000 in income • 36.4% marginal tax rate • 25% federal • 3.4% state (Indiana) • ~8% Social Security and Medicare • Want to purchase $12,000 policy in AFTER TAX DOLLARS

39. Without tax advantage: • Receive $18,897 in income • Pay 36.4% or $6,897 in taxes • $12,000 left over for health insurance • Net benefit of tax deduction is $6,897

40. Inequalities • Costs Fed. Govt. over $243 billion/year • Tax break only available to people who receive insurance from their firm • High income more likely to have insurance • Higher income families have higher tax rates • Regressive tax • Benefits much higher in upper income groups

41. Overview of Senate Bill • Plan builds out from existing system • Tries to fill in the gaps in coverage • Large scale insurance industry reform • Community rating • Eliminate pre-existing conditions • Aggressive effort to reduce growth of Medicare fees • Biggest unknown: controlling costs

42. Coverage Expansions • Individual mandate (tax of 2.5% of AGI) • Pay or play: employer mandates • Expand Medicaid to 133% of FPL • Provide tax credits for the low income in individual market • Establish health insurance exchange where people can purchase insurance

43. Why is coverage mandatory? • Insurance industry reform • Community rating • eliminate pre-existing condition clauses • If adopted under current system • Costs for young would rise – exit system • Would not buy insurance until they needed it • Forces low cost users into the system, drives down average cost

44. Impact on Uninsured • Reduce uninsured by 32 mil. in 2019 • 60% reduction in the uninsured • Leaves another 22 mil. uninsured • Uninsured will overwhelmingly be Hispanics • Where coverage will come from

45. Pay or play • Firms w/ >50 employees must offer qualified health insurance and pay $2000 tax/employee • Tax incentives/credits for small firms to provide insurance • Language is that firms must pay “fair share” • Economists believe workers pay for insurance in the form of lower wages • Will firms pay or play?

46. CBO Estimates • Fines will generate $20 bill per year • @ $2000/head, 10 million not receiving health care from their firm • There are roughly 16 million uninsured workers

47. Financing • New taxes: on insurance companies, drug makers, medical devices • Increase Medicare tax on high income, tax unearned income for this group • Revenues from firms paying and not playing • Tax on people without insurance • 40% tax on high-cost insurance • Reductions in Medicare reimbursements

48. CLASS Act –long term care insurance program • Automatic enrollment • Starts in 2011. No benefits paid for 5 years

49. Balance Sheet – CBO 2010-2019(Billions of dollars) • Expenditures • Expand private $ 466 • Expand public $ 434 • Small firm TC $ 40 • Total $ 940 • Revenues • Higher taxes $ 551 • Reduced • Spending $ 507 • Total $1058 • Diff is $118 billion reduction in deficit

50. Revenues, 2010-2019(billions of $) • Tax on high cost health care plans $ 32 • Firm/individual taxes, no ins. $ 69 • Expand taxes on Medicare $ 210 • Reduce Medicare reimbursements $ 437 • CLASS premiums $ 70 • Tax on Rx/Med device/Ins. $ 107 • Other taxes $ 133 • Total $1,058