Health Care Reform? P-PACA vs Single Payer

1. Health Care Reform?P-PACA vs Single Payer 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 Internal Medicine Residency Program Columbia University Medical Center NewYork-Presbyterian Hospital February 3, 2012

2. PRESENTATION OUTLINE • History of recent U.S. Health Reform • Challenges facing U.S. Health Care System • Comparison of Single Payer and 2010 Health Reform (P-PACA)

3. DISCLOSURES Dr. Oliver Fein has no relevant financial relationships with commercial interests Dr. Oliver Fein is immediate past President of Physicians for a National Health Program (PNHP), a non-profit educational and advocacy organization. He receives no financial compensation from PNHP.

4. Disclosure Information A) Relationship with companies who manufacture products used in the treatment of the subjects under discussion Yes____ No __X__ If "Yes," list company(ies) with the relationship(s) below. RelationshipManufacturer(s) Research Support ________________________________ Speaker's Bureau ________________________________ Consultant ________________________________ Share Holder ________________________________ Other Financial Support ________________________________ Large Gift(s) ________________________________ B) Relationships with any of the commercial supporters of this CME activity: C) Discussion of unlabeled uses: Yes _____ No___X__

5. 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 • Which did he choose?

6. 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”

7. WHAT HAPPENED TO THEPUBLIC OPTION? The original “robust” Plan – March 2009 • Open enrollment: “Medicare for everyone who wants it” • Medicare rates, backed by the government • 119 million members (Lewin)

8. The greatest lobbying effort in history June 29, 2009

9. $1.2 Billion Spent on Health Care Lobbying! Center for Public Integrity, March 26, 2010

10. WHAT HAPPENED TO THEPUBLIC OPTION? The House Plan – November 2009 • Restricted enrollment (only the uninsured) • 6 million members (<2% of thepopulation) • Negotiated rates, self sustaining The Senate Plan – December 2009 • No public option

11. THE PATIENT PROTECTION AND AFFORDABLE CARE ACT(P-PACA) March 23, 2010

12. P-PACA(a MANDATE MODEL) Everyone is required to have health insurance or pay a penalty. Individual mandate: penalty =$695 for singles; $2,085 for families Employer mandate (50 or more employees): penalty =$2,000/employee Necessary for the survival of private HI. Private HI lost 3.2% (6.3 million) enrollees in 2009 and more than 15 million in the last decade.

13. Improved MEDICARE FOR ALL(a Single Payer Model) Build on the original Medicare • Improve Coverage: preventive services, oral surgery, long term care • Reduce or eliminate deductibles and co-payments • Expand drug coverage: eliminate the “donut hole” • Re-design physician reimbursement

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

15. CHALLENGE #1 DECLINING ACCESS

17. 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

18. 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

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

20. 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: Coverage up to age 26; no pre-existing condition exclusions; no annual/lifetime limits

21. Millions Will Remain Uninsured (and Millions More Poorly Insured) Millions Note: The uninsured include about 5 million undocumented immigrants. Source: Congressional Budget Office.

22. CHALLENGE #2 ESCALATING COSTS

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

24. High Cost of Health Insurance Premiums: It’s Even Too Expensive for the Middle Class Today National Average for Employer-provided Insurance Single Coverage $ 5,503 per year Family Coverage $15,073 per year Note: 31% high-deductible ($1,000-2,000) policies Source: Kaiser Family Foundation/HRET Survey of Employee Benefits, 9/27/2011

25. 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

26. 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% - 72 Source: Health Care for All Californians Plan, Lewin Group, January 2005

28. Private insurers’ High Overhead

29. SINGLE PAYER OFFERS TOOLS TO BEND THE COST-CURVE • Global budgeting of hospitals • Capital investment planning • Emphasis on primary care; coordination of care; alternative ways of paying for care • Bulk purchasing of pharmaceuticals

30. HEALTH INSURANCE REFORM(P-PACA) Market Theory: Mandate the young, healthy uninsured buy private health insurance (they usually don’t get sick and don’t get health insurance = low risks) Then, the premiums for everyone will go down.

31. WILL MARKET THEORY WORK? Premiums* Single Coverage $5,503 per year Family Coverage $15,073 per year *national average for employer-provided insurance Penalties under P-PACA Individuals $695 per year Families $2,085 per year Employers $2,000 per employee

32. HEALTH INSURANCE REFORM (P-PACA) Offers unproven tools to contain costs • Health Information Technology (HIT) • Chronic Disease Management • Payment reforms (e.g., ACOs, bundled payments, value-based purchasing)

33. …and Costs Will Keep On Rising National Health Expenditures (trillions) $4.7 6.6% annual growth $4.67 $4.5 6.4% annual growth 6.0% annual growth National Health Expenditures as Percent of GDP 17.8 17.9 18.0 18.2 18.8 19.3 19.8 20.2 20.5 21.0 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. Estimated Financial Effects of PPACA as Amended, Richard Foster, CMS Actuary, April 2010

34. CHALLENGE #3THE DEFINITION OF ESSENTIAL HEALTH BENEFITS • Service Coverage: Doctors, NPs, Hospitals, Drugs; Dental, Mental Health, Home care/nursing home • Financial Coverage: Copays and deductibles

35. ImprovedMEDICARE FOR ALL Comprehensive coverage - Preventive services - Hospital care • Physician services • Nurse practitioner services - Dental services - Mental health services - Medication expenses - Reproductive health services -Home Care/nursing home care “All medically necessary services” Any exclusions? How decided?

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

37. HEALTH INSURANCE REFORM (P-PACA) • No Standard Benefit Package mandated • Eliminates co-pays and deductibles, but only on preventive services • No regulation of the magnitude of premiums, deductibles and co-pays – just the stipulation that benefits have an actuarial value of 60% or higher • Stipulation that health insurers have medical lost ratios (MLR) of 80-85%

38. HHS DEFINES “ESSENTIAL HEALTH BENEFITS”(January 2012) • States choose a benchmark plan that reflects the scope of services offered by a “typical employer plan” • Four benchmark options: • One of the three largest small group plans in the state by enrollment; • One of the three largest state employee health plans by enrollment; • One of the three largest federal employee health plan options by enrollment; • The largest HMO plan offered in the state’s commercial market by enrollment. • If states choose not to select a benchmark, HHS intends to propose that the default benchmark will be the small group plan with the largest enrollment in the state. • Consequence: 50 Different Benefit Packages

39. 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

40. 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

41. HEALTH INSURANCE REFORM (P-PACA) Creation of HI Exchanges Expands Choice for Some • Limited to the individual and small group market • Market-place of private HI plans • No public option • State-based with federal backup • No state single payer until 2017

42. VERMONT’S PATHWAY TO SINGLE PAYER Elected Peter Shumlin governor: 11/6/2010 William Hsiao, Ph.D., Harvard economist, reports 3 options: 2/2011 - Option 3: Public-private hybrid single payer Standard benefit package Uniform prices Administered by a public benefitcorporation Pathway legislation passed: 5/25/11

43. HEALTH INSURANCE REFORM (P-PACA) Restricts Choice: The case of abortion • 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

44. 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 (2011)

45. 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

46. HEALTH INSURANCE REFORM (P-PACA) • Comparative Effectiveness Research • Innovation Center in CMS to test new payment and service delivery models – PCMH + ACOs (2011) • Value based purchasing – hospital payments based on quality reporting measures (2013) • Readmission penalties (2013) • Reduce hospital payments for hospital-acquired conditions (2015)

47. CHALLENGE #6:LACK OF PRIMARY CARE • Average medical school debt = $160,000 • Primary care is under-reimbursed • Medical school graduates going into specialties

48. ImprovedMEDICARE FOR ALL • Debt forgiveness for primary care • Malpractice payment for primary care providers (MDs, NPs and PAs) • Patient-Centered Medical Homes (team based care, open access, coordination of care; phone/internet medicine)

49. HEALTH INSURANCE REFORM (P-PACA) • 10% Primary Care Bonus Payments (2011-2017) – estimate = $4,000/provider/year • Increase Medicaid payment to Medicare rates for primary care (2013) • Independent Payment Advisory Board – I-PAB (2014)

50. CHALLENGE #7 HOW TO PAY FOR REFORM