The Health Care Landscape

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

2. Two Goals • What are the issues? • How the reform proposal deals with these issues?

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

4. The Uninsured • Percent uninsured • 1987: 12.9% • 2008: 15.4% • Number uninsured • 1987: 31 million • 2008 46 million

5. Uninsurance Rates: 2008 • By age: • 28.6% aged 18-24 • 26.5% aged 25-34 • By ethnicity • 30% for Hispanics • 19.1% for Blacks • Income • 24.5% for those < $25K family income

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 • $7,290 per capita • 16.2% of GDP • Projected, 2018 • $4.4 trillion • $13,100 per capita • 20.3% of GDP

11. 87% more than Canada 143% more than UK

12. 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 • Expensive items tend to be new technologies • Think of the technologies not available 30 years ago but are commonplace today • MRIs/CT scans, angioplasty, anti-psychotropic drugs, hip/knee replacements, neo-natal intensive care, treatments for AIDS, statin drugs

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

17. Problem? • Life expectancy is a coarse outcome • Some important causes of death are NOT impacted by health care • US has very high rates of those deaths • Murders • Motor vehicle fatalities

24. Where would you rather be treated for a disease: US or elsewhere?

25. 5-year Cancer Survival Rates

26. 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%

28. 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 • 5 conditions are responsible for 1/3 of costs • 15 conditions are responsible for 50% of growth in past 15 yrs • Unnecessary care

30. 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

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

32. 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

33. 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

38. Medicare Sources as % of GDP

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

40. 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

41. 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

42. 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

43. Inequalities • Costs Fed. Govt. $250 billion/year • Tax break only available to people who receive insurance from their firm • More likely high wage workers • Regressive tax • Benefits are much higher in upper income groups

44. Patient Protection and Affordable Care Act An outline and some likely outcomes

45. Overview • Primary goal was coverage expansion • Of the four areas outlined above, major changes in one, modest changes in the other • Increased coverage • Some efforts to ↓ growth of Medicare fees • Modest effort to reduce tax benefits of EPHI • No efforts to constrain costs

46. Overview • Builds out from existing system • Tries to fill in the gaps in coverage • Large scale insurance industry reform • Community rating • Eliminate pre-existing conditions

47. Coverage expansions • Individual mandate (tax of 2.5% of AGI) • Pay or play: employer mandates • Expand Medicaid to include higher income groups

48. Coverage expansions • Provide tax credits for the low income in individual market • Tax credits for small firms to provide HI • Establish health insurance exchange where people can purchase insurance

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

50. 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