A Perfect Storm A Practical Solution ? Paying for Health Care 2005 EPIC FORUM Faculty House, Madison...
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Transcript of A Perfect Storm A Practical Solution ? Paying for Health Care 2005 EPIC FORUM Faculty House, Madison...
A Perfect StormA Practical Solution?
Paying for Health Care 2005
EPIC FORUMFaculty House, Madison Room
November 29, 2005
Richard N. Pierson Jr.
The Perfect Storm:• Escalating numbers of Uninsured
• Escalating costs of Medical Care
• The Insurance Industry faces:• increased costs,• restricted coverage, lead to,
• The Insurance Death Spiral
• System Failures, Economic results:• Personal bankruptcies, medical basis• Closure of factories (GM, Ford)• Medicaid reductions: (MS, TN, PA, MA)
Getting the attention of….• Welfare agencies?• Justice activists?
• AARP?• Medical Societies? Hospital Associations?• Community Chests?
• Business owners?• The general Public!• Lobbyists?• Legislators?
Get Care
Bills not paid
Fixed costs of healthcare services not met
Deficit!
Cost shift
Higher premiums
More uninsured More underinsured
COST SHIFTING: NO END IN SIGHTThe “Insurance Death Spiral”
Number of Uninsured Americans
1980 1985 1990 1995 2000
45
40
35
30
25
20Source: U.S. Census Bureau
(Millions)
Who are the Uninsured?
• 80% are in working families, BUT: Insurance is not offered (Walmart ...), or Employee refuses, or Preexisting conditions, or…..
Resulting in• Delay in services Uninsured suffer more, die younger
• Patient Pays 35% OOP, 65% from “Charity”(!)• Total Cost: (estimated) $65 to 135 billion annually
SOLUTIONS require that (Institute of Medicine 2004)
1. Health Care must be Universal
2. “ “ “ “ Continuous
3. Affordable, to individuals and families
4. Sustainable for Society
Must control HealthCare Inflation
Encourage effective services, Public Health
5. Enhance Societal Health and Well-Being
How We Got Here ?A Short History
• For Profit : The American Way ! • The Great Conversion: 1990-2005 Let many flowers bloom!
– 520+ Insurers compete, by denying care – Incentives to providers: increase care!
– Return on Investment! Profits increase
• Health Care was Not-for-Profit • Blue Cross 1935
• Kaiser Permanente, WW II
• Military Medicine: DOD, VA, Fed. Employees
• MediCare / MediCaid 1965
The Costs of Health Care
• Utilization: Over? Under? Mis? Who decides?
• Incentives for prevention? • Public Health vs Profit Health?
• Or, The Common Good. – Schools, roads, fire, Police…
• The few sick are very expensive• End-of-life care
• Radically Improving, Expensive, Technology
• Overheads and Profits increase– Hospitals 40% - Physicians 14%
– Pharmaceuticals 17% - Insurance 31%
You’re not paying for Joe Smith’s care.
You’re paying for a nurse, plus ….
• Neonatal intensive care unit
• Trauma unit
• Emergency department
• Surgical unit
• Primary care
• Specialty care
These are Fixed and shared services
Implications of Fixed costs
• It is much more cost effective to invest in only what we need.
• Trying to save money by keeping patients out of the hospital is like trying to save money on schools by keeping kids home for the day
• Once a facility or service is up and running, we pay for it - whether it is used or not (Your Hospital Expansion)
Health care services: How much does our population
need?
• 7% have diabetes
• 25% have high blood pressure
• 5% have heart disease
Certain amount ofDisease in any population
Services available are determined bygroup needs over time
Source: Agency for Healthcare Research and Quality MEPS, 1999
Healthy
Who uses it?
Health care at any one time
SickestSick
Healthy
Sick
Sickest
Who supports it?
12%
12%
76%73%13%
14%
HealthySickestSick
Healthy
Sick
Sickest
All of Us will likely Be Among The Sickest At One
Or Many Points in Our Lives
User Supporter
Source: Agency for Healthcare Research and Quality. MEPS, 1999
CostPer year
When you’re really sick, health care is very expensive
Sickest Sick
$38,000
$1,000
$6,900
Healthy
0
6,000
5,267
US
Canad
a
Fran
ce
Austra
lia
UK
Ger
man
ySource: OECD, 2004
Dollars per Capita
Note: Figures adjusted for purchasing power. Data for Australia, Japan -2001
Health Care Spending - 2002
Japa
n
2,736
2,931
2,504
2,160
2,160
2,077
0
40
34
US Canad
a
Fran
ce
Austra
liaUK
Swed
en
Source: OECD, 2004. Data for 2001, 2002
38 35 31 29 35
Renal Transplants
No. per million population
0
100
12.8USCan
ada
Fran
ce
Ger
man
yDen
mar
k
Japa
n
Source: OECD, 2004. Data for 2002
9.7 9.7 13.3
13.8
92.8
No. per million population
CT Scanners
0
20
5.8US Can
ada
Fran
ce
Austra
lia
UKGer
man
ySource: OECD, 2002. Data for 2000 or most recent year
Per Capita Japa
n
6.5 6.4 6.4 6.5 5.4
16
Physician Visits
How do
we finance health care ?
Health Care Financing Today
• Fragmented - No health policy guaranteeing coverage to all.
• Complicated - needing a massive, expensive, bureaucracy to manage.
Deficit: What to do
• Close down
• Cut staff
• Shift the deficit to the private insured !!!!
0
27
3.1%M
edic
are
Non-p
rofit
Blues Com
mer
cial
Carrie
rsSource: Schramm. Blue Cross Conversion. Abel Foundation. CMS.
Inve
stor
-
owne
d Blu
es
16.3% 19
.9% 26.5%
Private Insurer’s High Overhead
0
400
Insurance Overhead - 2002
364
52 73 73 116 155
US
Canad
a
Fran
ce
Austra
lia
Nethe
rland
s
Ger
man
y
Source: OECD, 2004
Dollars per Capita
Note: Figures adjusted for purchasing power. Data for Australia-2001
GROWTH SINCE 1970
HC Administrative Costs
69%
31%Clinical Care
Administrative Costs
New England Journal of Medicine 8/03
Who’s paying the Health Care bill?
Source: NEJM 1999; 340:109; Health Affairs 2000; 19(3):150
60%20%
20%taxpayers
Private employers
Individuals
We all payBut we don’t all have coverage
{Medicare, Medicaid.Public employees,tax subsidies}
Summary so far
• We all pay the bill: higher premiums • higher taxes
• Most of the health care dollar is spent on services that we pay for, used or not
• Financing is piecemeal and unpredictable
• We have no effective way to control costs
• If we don’t act this will only get worse
Whatto
Do?
Continue what we have now?
• Payment for care is based on the individual in the here and now
• Piecemeal financing, from many sources
• No guaranteed coverage for everyone
• No mechanism for containing overall costs
Should health care be regarded as a consumable?
“The American Way”
HEALTHCARE
A PUBLIC GOOD?
Something we all need
But cannot provide for ourselves(E.g. : roads, schools, police and fire
protection)
Public Good
NHP: an Investment Model
• Assumes healthcare is a public good. Invests in the needed services for the whole population
• Pays for people who are sick now
• Pools money, pays for health care
directly
Single Payer Healthcare systemsthere are several models
• Sweden, Norway, Denmark, Canada ,Finland, Iceland, Australia, Taiwan, and …. have single payer financing
• Single publicly financed risk pool that pays for health care directly
• Everyone has access to privately delivered, publicly financed health care services
• Public can buy extra health insurance for services not covered by public plan.
Fundamental Features of Universal Systems
• Everyone Included
• Public Financing
• Public Stewardship
• Global Budget
• Public Accountability
• Public agency processes and pays bills
What would a national health program look like?
• Everyone receives a health care card
• Doctors and hospitals remain independent, non- profit. Negotiate fees and budgets with NHP
• Free choice of doctor and hospital
• Local regional agencies allocate expensive technology (Certificate of Need)
• Progressive taxes go to Health Care Trust Fund
• Treats health care as a commodity by making a goal selling more heart bypasses, drugs, etc.
• Puts money into treatment, not prevention (flu vaccine, immunizations, diabesity, hypertension)
• Provides insurance incentives to avoid covering the sick (risk selection), delayed care
The Market doesn’t always work
“Market” and quality health care are often at odds.
Questions we need to ask:
• How are we going to pay for it?
• How much health care services does our population need?
• How much will it cost?
• How much do we already have?
• How can we get more for our money?
Change in Spending in a Single Payer Program
Change in Spending in a Single Payer Program
-6 -4 -2 0 2 4 6
Elimination of Cost Sharing (5.1%)
Home Health (0.8%)
Increased Utilization by the Poorly-Insured (2.4%)
Increased Utilization by the Uninsured (3.2%)
Percent ChangeSource: Health Care for All Californians Act: Cost and Economic Impacts Analysis, Lewin Group, January 19, 2005
Emphasis on Primary Care (-1.8%)
Reduced Fraud (-0.4%)
Bulk Purchase of Drugs and Equipment (-2.8%)
Hospital Administrative Savings (-1.9%)
Physician Office Savings (-3.6%)
Insurer Administrative Savings (-5.3%)
NET SAVINGS (-4.3%)
Additions
Savings
FOUR Reform Strategies Which one to Choose? IOM 2004 (in order of increasing costs)
1. Major Public Program Expansion New tax credit, Medicare from 55
2. Employer and Individual Mandate
3. Individual Mandate + Tax Credit (“Moral Hazard”; individual responsibility)
4. Single Payer
WHY IS NATIONAL HEALTH INSURANCE POSSIBLE IN THE U.S.?
• Market forces do not address fundamental problems of cost, choice, access and quality.
• Everyone will be affected: the uninsured,
the underinsured, and the rest of us, (we are
already paying the bill!)
• Employers want to be relieved of the burden of rising health care costs.
The Institute of Medicine says:
• Between the heath care we have and could have, lies not just a gap but a chasm
• The American health care delivery system is in need of a fundamental change
• The challenge is the enormity of the change required
• We’ve tried and failed with incremental reforms for 100 years (Common Sense: “You cannot cross a chasm in two jumps”)
• The time has come for single-payer National Health Insurance - an improved Medicare-for-All.
Physicians for a national health program (PNHP) say:
SOME RELATED ISSUESMalpractice Insurance
• Is not directly addressed; however accounts for
<3% of healthcare costs
• BUT, Matters intensely to hospitals and physicians
• NHI removes costs of subsequent care and defensive medicine, leaving “pain and suffering”
Medical Errors• A separate costly, painful fact of complex care.
• Must be addressed through professional organizations
Single-Payer WILL fix
• Overhead costs of approvals-paperwork (large administrative staffs)
• Profits by competing “ROI” industries
Specialty hospitals, Insurance companies
• PHARMA budgets• Direct-to-consumer advertising(Canadian prices identify large profit-margins)
Single-Payer WILL NOT fix
• Unregulated competition: hospitals, doctors,
healthcare companies
• Fraudulent billing
• Unregulated facility growth: specialty hospitals
• (Certificate of Need is required.)
• National Recessions (Canada, UK, Japan)
WHO WILL be in CONTROL?
• National Commissions, Regional offices
• *States (Provinces): different needs, resources
• IOM, AMA, specialty societies, JCAHO, Nurses, Social Workers, Pharmacists, IHI, NBME, FSMB, elected governments.
• Citizen involvement: the Oregon experiment
PATHWAY 1 to a better system
• Recover non-profit model, institutional providers
• Recruit leaders:
• Public: Church, Service, Chambers….
• Professional: Societies and organizations
• Business: Many
• Academic: Economists, Sociologists, Medical
• Foundations: Many
PATHWAY 2
Change the laws for insuring Healthcare
• Federal Legislation - A contested scene
• State Legislation - ME, VT, NJ, OR, MA,
(23 states have considered legislation)
Enter the Political Process!
PATHWAY 3
Identify The OppositionThe “Medical-Industrial Complex” is a powerful force
• Health Insurance Industries are for-profit
• Managed care companies are for profit
• Pharmaceutical Industries are most profitable
• Some Medical Professional SocietiesCon: AMA, Surgical societiesPro: APHA, AAFP, APedA, APsychA,
ACP
I NEED TO HEAR FROM YOU
• What do YOUR constituents need to hear?
• Whom have we offended?• Necessarily• Unnecessarily
• Where will we find allies?
THANK YOU
Right Wing Think Tanks 2003 budgets, million dollars
• Heritage Foundation 31.5• American Enterprise Institute 17.5 • Cato Institute 15.6• Manhattan Institute 10.7 • Hudson Institute 9.3 • Fraser Institute 6.1• National Center for Policy Analysis 4.5• Discovery Institute 4.2• Pacific Research Institute 4.1 • Association of American Physicians 0.25