OVERVIEW

OF

HEALTH 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

The Warren Alpert Medical School

Brown University

October 22, 2012

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.

PRESENTATION OUTLINE

1. History of U.S. Health Insurance

2. Macroeconomics of health care

3. The Politics behind P-PACA

4. Challenges facing U.S. Health Care System

5. Policy options: P-PACA vs. Single Payer

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

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

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

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 – 2010

P-PACA (Mandate Model)

2010-present

• Individual Mandate to buy private

insurance

• June 2012 – Supreme Court upholds

mandate

• 2014 – Mandate goes into effect

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

CONCLUSION #1

Government sponsored Health

Insurance in the world

is rather young

NATIONAL HEALTH CARE EXPENDITURES

Billions of dollars (% total for year)

Category 1960 2010*

• Personal Health Care $ 23.3 (85%) $ 2,186.0 (84%)

• Public Health Activities $ 0.4 (1%) $ 82.5 (3%)

• Research and Construction $ 2.6 (6%) $ 149.0 (6%)

• Other $ 1.2 (4%) $ 176.1 (7%)

TOTAL NHE $ 27.5 (100%) $ 2,593.6 (100%)

Per Capita NHE $ 147 $ 8,402

NHE as percent of GDP 5.2% 17.9%

* Data for 2010 from Health Affairs: January, 2012;31:208-219

PERSONAL HEALTH CARE EXPENDITURES

Billions of dollars (% total for year)

Category 1960 2010*

• Hospital care $ 9.2 (39%) $ 814.0 (37%)

• Physician services $ 5.4 (23%) $ 515.5 (24%)

• Dental $ 2.0 (9%) $ 104.8 (5%)

• Other professional services $ 0.4 (2%) $ 68.4 (3%)

• Prescription drugs $ 2.7 (12%) $ 259.1 (12%)

• Other medical products $ 2.3 (9%) $ 82.5 (4%)

• Nursing home and home health $ 0.9 (4%) $ 341.8 (15%)

• Other $ 0.4 (2%) 0 (0%)

Total Personal Health Care $ 23.3 (100%) $ 2,186.0 (100%)

* Data for 2010 from Health Affairs: January, 2012;31:208-219

WHO PAYS FOR HEALTH CARE?1

Category Billions of Dollars % of Total

National Health Expenditures $ 2,593.6 (100%)

Private Funds $ 960.8 (37%)

Private health insurance $ 661.1 (26%)

Out of pocket payments $ 299.7 (12%)

Public Funds $ 1,632.8 (63%)

Medicare $ 524.6 (20%)

Medicaid $ 401.4 (15%)

Other Federal** $ 96.1 (4%)

Other State and Local*** $ 274.1 (10%)

Public Employee health benefits $ 151.6 (6%)

Tax Subsidies $ 185.0 (7%)

Tax-Financed ($ per capita) $ 5,289

*Data for 2010 from Health Affairs: January, 2010, using the methodology described in Health Affairs 2002;21:88-98

**Includes VA, DOD, SCHIP

*** Includes HIS, federal public health, Workmen’s Comp., SCHIP, etc.

1 Woolhandler S, Himmelstein, DU. Paying for National Health Insurance—and Not Getting It. Health Affairs. 2002:21;88-98

CONCLUSION #2

We are more than half way to a

government financed health care

system!

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?

Progress(?) of US Health Reform

Employer mandate

Public option**

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)

** “you can choose to enroll

in the new public plan”

Medicare

??

WHAT HAPPENED TO THE

PUBLIC 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)

$1.2 Billion Spent on Health Care

Lobbying!

Center for Public Integrity, March 26, 2010

WHAT HAPPENED TO THE

PUBLIC OPTION?

The House Plan – November 2009

• Restricted enrollment (only the uninsured)

• 6 million members (<2% of the population)

• Negotiated rates, self sustaining

The Senate Plan – December 2009

• No public option

THE PATIENT PROTECTION

AND

AFFORDABLE CARE ACT

(P-PACA)

March 23, 2010

P-PACA

(a MANDATE MODEL)

Everyone is required to have health

insurance or pay a penalty.

1. Individual mandate: penalty =$695 for

singles; $2,085 for families

2. Employer mandate (50 or more

employees): penalty =$2,000/employee

3. 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.

Improved

MEDICARE FOR ALL

(a Single Payer Model)

Build on the original Medicare

1. Expand Medicare to the entire population

2. Improve Coverage: preventive services,

dental care, long term care

3. Eliminate deductibles and co-payments

4. Expand drug coverage: no “donut hole”

5. Re-design physician reimbursement

CHALLENGES FACING

HEALTH CARE REFORM

1. Declining access

2. Escalating costs

3. Lack of comprehensive benefits

4. Restricted choice

5. Uneven Quality

6. Insufficient primary care

7. How to pay for reform

CHALLENGE #1

DECLINING ACCESS

The Epidemic of Underinsurance

0

10

20

30

40

50

60

70

2000 2007

Insured Uninsured

Source: Too Great a Burden, Families USA, December 2007

Number of people spending more than 10% of income on health care (Millions)

RISE IN PERSONAL

BANKRUPTCIES

62% of personal bankruptcies are due

to medical expenses and over 75% had

health insurance at the outset of their

bankrupting illness.*

* Himmelstein, et.al. Am J Med, August, 2009

Improved

MEDICARE FOR ALL

• Automatic enrollment

• Federal guarantee

• All residents of the United States

• “Everybody in, nobody out”

HEALTH INSURANCE REFORM

(P-PACA)

• Mandates purchase of private HI (2014)

• Expands Medicaid eligibility to 133% FPL (2014) - single $14,403; family $19,378, but not in every state (FL,TX,MS,LA,SC)

• 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

Millions Will Remain Uninsured (and

Millions More Poorly Insured) Millions

Note: The uninsured include about 5 million undocumented immigrants.

Source: Congressional Budget Office.

51 51 51 52 53 53 5451

2323232328

35

50 50

0

20

40

60

80

2012 2013 2014 2015 2016 2017 2018 2019

Current law

PPACA

CHALLENGE #2

ESCALATING COSTS

Cumulative Increases in Health Insurance Premiums, Workers’

Contributions to Premiums, Inflation, and Workers’ Earnings,

1999-2011

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2011; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2011 (April to April).

High Cost of Health Insurance

Premiums: It’s Even Too Expensive for

the Middle Class Today

National Average for Employer-provided Insurance

Single Coverage $ 5,615 per year

Family Coverage $15,745 per year

Note: employee contribution: Single (18%) = $1,011

Family (28%) = $4,409

Source: Kaiser Family Foundation/HRET Survey of Employee Benefits, 2012

Improved

MEDICARE 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

Covering Everyone and Saving Money

through Medicare for All

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%

Source: Health Care for All Californians Plan, Lewin Group, January 2005

134

107

241

-111

-21

-76

-59

-46

-313

$ B

Total Costs +11.5%

Total Savings -15.8%

Net Savings - 4.3% - 72

Private insurers’ High Overhead

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

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.

WILL MARKET THEORY WORK?

Premiums*

Single Coverage $5,615 per year

Family Coverage $15,745 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

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)

…and Costs Will Keep On Rising

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

PPACA (CMS Actuary)

Current projection

PPACA (Commonwealth Fund)

National Health Expenditures (trillions)

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

$4.67 $4.5

6.4% annual

growth

6.6% annual

growth

6.0% annual

growth

$4.7

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

CHALLENGE #3

LACK OF

COMPREHENSIVE BENEFITS

• Service Coverage: Doctors, NPs,

Hospitals, Drugs; Dental, Mental

Health, Home care/nursing home

• Financial Coverage: Copays and

deductibles

Improved

MEDICARE FOR ALL

Comprehensive coverage

- Preventive services

- Hospital care

- Physician services

- Nurse practitioner and Physician Assistants

- Dental services

- Mental health and substance abuse services

- Medication expenses

- Reproductive health services

-Home Care/nursing home care

“All medically necessary services”

Any exclusions? How decided?

Improved

MEDICARE 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

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%

CHALLENGE #4

RESTRICTED 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

Improved

MEDICARE FOR ALL

Expands Choice for Everyone

• No limit to a network of providers

• Free choice of doctor and hospital

• Delinks health insurance from employment

HEALTH INSURANCE REFORM

(P-PACA)

Creation of HI Exchanges Expands Choice

for Some

• Enrollment is limited to those in the individual and small group market

• Market-place of private HI plans

• No public option

• State-based, but no standard national plan

• No state single payer plan allowed until 2017

VERMONT’S PATHWAY TO

SINGLE PAYER

• Elected Peter Shumlin governor: 11/6/2010

• William Hsiao, Ph.D., Harvard economist, reported 3 options: 2/2011

- Option 3: Public-private hybrid single payer

• Standard benefit package

• Uniform prices

• Administered by a public benefit corporation

• Pathway legislation passed: 5/25/11

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)

Improved

MEDICARE 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

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)

CHALLENGE #6:

LACK OF PRIMARY CARE

• Average medical school debt =

$160,000

• Primary care is under-reimbursed

• Medical school graduates going

into specialties

Improved

MEDICARE 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)

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)

CHALLENGE #7

HOW TO PAY FOR REFORM

Improved

MEDICARE FOR ALL

• Public funding

- Graduated payroll tax

- Corporate taxes

- Income taxes

- Tax on unearned income (stocks, bonds, etc.)

• No premiums: regressive

• No increase in overall health care spending,

because of administrative savings

Improved

MEDICARE FOR ALL

Non-profit/private delivery system under local control

- This is not “socialized medicine”

- Doctors not salaried by government

- Hospitals not owned by government

A publicly funded-privately delivered partnership

HEALTH INSURANCE REFORM

(P-PACA)

1. Increased taxes

- Excise tax on “Cadillac” health insurance plans (2018)

- Medicare payroll tax increase from 1.45% to

2.35% if income greater than $200-250K

- 3.8% tax on investment income

2. Savings from Medicare

- Advantage: ($132 bill over 10 yrs)

- Cut DSH payments ($36 million)

- Cut Medicare payments to hospitals

($136 bill over 10 yrs)

- Cut payments for home care/nursing homes ($60 bill)

3. Revenue from cracking down on fraud and abuse

AFFORDABLE CARE ACT

1. Expanded coverage, but not universal

2. Cost control by market means

3. No definition of benefits

4. Risk of increasing under-insurance

5. Choice thru State-based exchanges,

but no public option

6. Primary care/ACO pilots

7. Funding: Excise tax on high cost (comprehensive coverage) private HI and Medicare cutbacks

Single Payer

MEDICARE FOR ALL THE PHYSICIANS’ PROPOSAL

(JAMA, August 13, 2003 p. 798-805)

1. Universal coverage/automatic enrollment

2. Low administrative costs=single payer

3. Comprehensive coverage without co-pays

and deductibles

4. Maximum choice of Doctor, NP, Hospital

5. Improved quality through nationwide HIT

6. Expanded primary care

7. Publicly-funded/privately delivered

MEDICARE 2.0

Conyers HR 676

Expanded and improved

MEDICARE-FOR-ALL

“Single Payer NH Care” (76 Co-sponsors in House of Rep)

• Automatic enrollment

• Comprehensive benefits

• Free choice of doctor and hospital

• Doctors and hospitals remain independent

• Financed through progressive taxes

• Costs contained through capital planning, budgeting, quality reviews, primary care emphasis

Sanders (& McDermott):

American Health Security Act

S 915 (HR 1200)

1.Automatic enrollment

2.Comprehensive benefits

3.Operated by States using Federal standards

4.Free choice of doctor and hospital

5.Doctors and hospitals remain independent

6.Public agency processes and pays bills

7.Financed through payroll taxes

April 14, 2010

Overall, do you think the benefits from government

programs such as Social Security and Medicare are worth

the costs of those programs for taxpayers, or are they not

worth the costs? (results in %)

Worth It Not Worth It DK/NA

National Sample 76 19 5

Tea Party Sample 62 33 6

Summary

• A system based on private insurance plans

-- will not lead to universal coverage

-- will not create affordable insurance

• A Medicare for All System

-- can lead to universal, comprehensive coverage without costing more

-- has the greatest potential to increase choice, improve quality and expand primary care

-- can be financed fairly

By 2037, under the ACA,

Total Healthcare Costs Will Equal Median Income

Young, R. Ann of Fam Med March/April

2012 vol 10 no. 2 156-162

$120,000

$90,000

$60,000

$30,000

2000 2005 2010 2015 2020 2025 2030 2035 2040

Household Income Optimistic ACA Assumptions

CONCLUSION #3

For the first time in U.S. history,

Congress through P-PACA,

has stated that every citizen should have

access to health care.

“The arc of history (the moral universe) is long, but it

bends towards universal access to health care”

CONTACTS AND REFERENCES

• PNHP National: www.pnhp.org

• PNHP-NY Metro: www.pnhpnymetro.org

• Bodenheimer TS, Grumbach K, Understanding Health Policy: A Clinical Approach. McGraw-Hill, 2005

• Fein O, Birn AE. (editors), Comparative Health Systems. Am Jour Public Health 2003; 93: 1-176

• O’Brien ME, Livingston M (editors), 10 Excellent Reasons

for National Health Care. New Press, 2008

• Potter W, Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans. Bloomsbury Press, 2010