The Health Care Landscape
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Transcript of The Health Care Landscape
The Health Care Landscape
Bill EvansUniversity of Notre Dame
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Two Goals
• What are the issues?
• How the reform proposal deals with these issues?
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What issues must health care reform address?
• Access
• Cost (both the level and rate of change)
• Medicare
• Tax equity
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The Uninsured
• Percent uninsured– 1987: 12.9%– 2008: 15.4%
• Number uninsured– 1987: 31 million– 2008 46 million
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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
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Percent of Firms Offering Health Insurance
46%
72%
87%95% 98%
0%
20%
40%
60%
80%
100%
3-9 10-24 25-49 50-199 200+
% O
fferin
g In
sura
nce
Firm Size
Percent of Firms Offering Health Insurance
Uninsured Non-Elderly Population by Work Status of Family Head, 2007
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Full-year,full-time worker,
66.7%
Full-year,part-
time worker, 6.6%
Part-year, full-time worker, 11.5%
Part-year, part-time
worker, 4.1%
Non-worker, 11.0%
What issues must health care reform address?
• Access
• Cost (both the level and rate of inflation)
• Medicare
• Tax equity
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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
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10
$7,290
$0
$2,000
$4,000
$6,000
$8,000
US NOR SWZ CAN IRE UK SPN JPNCountry
Per Spending on Health Care, 2007
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$7,290
$4,763$4,417
$3,895$3,424
$2,992$2,581 $2,581
$0
$2,000
$4,000
$6,000
$8,000
US NOR SWZ CAN IRE UK SPN JPNCountry
Per Spending on Health Care, 2007
87% more than Canada
143% more than UK
Average Annual PremiumsCovered Workers, 2008 (KFF)
• Individual plan–$4,704 total
• Family plan–$12,690
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13
Price Changes, 1999 to 2008
29% 34%
119%
0%
40%
80%
120%
160%
Overall inflation Earnings Healthinsurancepremiums
Pric
e C
hang
es
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
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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
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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
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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
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1.4 0.9 0.6 1.2 0.70
5
10
15
20
25
30
Country
Homicide Rate, 2000(deaths per 100,000)
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1.4 0.9 0.6 1.2 0.73.2
26.1
7.3
0
5
10
15
20
25
30
Country
Homicide Rate, 2000(deaths per 100,000)
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9.3 10.18.3
4.96
0
5
10
15
20
Can. Ger. JPN Sweden UK USCountry
Traffic Fatality Rate, 2000(deaths per 100,000)
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9.3 10.18.3
4.96
15.3
0
5
10
15
20
Can. Ger. JPN Sweden UK USCountry
Traffic Fatality Rate, 2000(deaths per 100,000)
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74
75
76
77
78
79
80
SWZ NOR CAN GER JAP SWE UK USCountry
Life Expectancy, 2000
Real Standardized
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74
75
76
77
78
79
80
SWZ NOR CAN GER JAP SWE UK USCountry
Life Expectancy, 2000
Real Standardized
Where would you rather be treated for a disease: US or elsewhere?
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5-year Cancer Survival Rates Country Breast
(Female)Cervical
(Female)Colon
(Male)Lung
(Male)Prostate
(Male)Thyroid
(Female)
US 82.8 69.0 61.7 12.0 81.2 95.9UK 66.7 62.6 51.0 7.0 44.3 74.4Dnmk. 70.6 64.2 39.2 5.6 41.0 71.7France 80.3 64.1 49.6 8.7 67.6 77.0Swed. 80.6 68.0 51.8 8.8 64.7 83.7Switz. 79.6 67.2 52.3 10.3 71.4 78.0
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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%
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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
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Percent of Total Health Care Expenses by Different Percentiles of Population, 2002
22%
49%
64%
80%
97%
0%
20%
40%
60%
80%
100%
1% 5% 10% 20% 50%Percentiles of population
% o
f tot
al e
xpen
ditu
res
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Per Capita Medicare Spending by Hospital Referral Region, 2006
$9,000 to 16,352 (57)8,000 to < 9,000 (79)
7,500 to < 8,000 (53)7,000 to < 7,500 (42)
5,310 to < 7,000 (75)Not Populated
What issues must health care reform address?
• Access
• Cost (both the level and rate of inflation)
• Medicare
• Tax equity
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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
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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 tax33
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20.428.4
34.339.7
46.8
62.3
79.287.0
0
20
40
60
80
100
1970 1980 1990 2000 2010 2020 2030 2040
Mill
ions
of P
eopl
e
Year
Medicare Enrollment
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13.9 14.315.2
16.417.2
18.018.7
10.4 10.9 11.0 11.2 11.3 11.412.0
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8
10
12
14
16
18
20
1950 1960 1970 1980 1990 2000 2005
Rem
aini
ng Y
ears
Year
Remaining Life Years at Ages 65 and 75
At age 65
At age 75
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$2,650 $3,370 $5,210
$7,887
$10,778
$16,389
$25,691
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
0-18 19-44 45-54 55-65 64-75 75-84 85+Age group
Per Person Health Care Spending, 2004
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5.5
4.7 4.5 4.3 4.0
3.22.6 2.5
0
1
2
3
4
5
6
1970 1980 1990 2000 2010 2020 2030 2040
Ratio
Year
Ratio: 20-64 Population/Medicare
What issues must health care reform address?
• Access
• Cost (both the level and rate of inflation)
• Medicare
• Tax equity
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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
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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
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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
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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
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Patient Protection and Affordable Care Act
An outline and some likely outcomes
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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
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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
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Coverage expansions
• Individual mandate (tax of 2.5% of AGI)
• Pay or play: employer mandates
• Expand Medicaid to include higher income groups
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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
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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
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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
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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?
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Problem?
• Small firms not subject to pay/play mandate
• Face extremely high cost of providing HI
• Workers face much lower wages if they receive HI from firm
• Gov’t now provides high subsidy rate for uninsured
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Problem?
• Makes sense for small firms with low wage to drop coverage
• Who benefits:– Workers: after-tax wages would increase and cost
of HI declines– Firms: Don’t have to worry about HI anymore– Costs to the government will increase
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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
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Financing
• Tax on people without insurance
• 40% tax on high-cost insurance
• Reductions in Medicare reimbursements
• CLASS Act –long term care insurance program– Automatic enrollment– Starts in 2011. No benefits paid for 5 years
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Balance Sheet – CBO 2010-2019(Billions of dollars)
• Expenditures
• Expand private $ 466
• Expand public $ 434
• Small firm credit $ 40
• Total $ 940
• Revenues
• Higher taxes $ 551• Reduced • Spending $ 507 • Total $1058
• $118 billion ↓ deficit• CBO adjustment of + $115
billion
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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
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What is missing?
Cost controls
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• Add 32 million people to the market
• No effort to change supply (hospitals, physicians, etc.)
• Should increase price
• But with Medicare cuts, may discourage some providers from participating in program
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P
Q
D
S
P1
P2
D*
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0%
10%
20%
30%
40%
50%
60%
1990 1993 1996 1999 2002 2005 2008
Perc
ent
Year
Insurance rates, 1990-2009, Children 19 and Under< 200% of Federal Poverty Limit
Public
63
0%
10%
20%
30%
40%
50%
60%
1990 1993 1996 1999 2002 2005 2008
Perc
ent
Year
Insurance rates, 1990-2009, Children 19 and Under< 200% of Federal Poverty Limit
Uninsured
Public
64
0%
10%
20%
30%
40%
50%
60%
1990 1993 1996 1999 2002 2005 2008
Perc
ent
Year
Insurance rates, 1990-2009, Children 19 and Under< 200% of Federal Poverty Limit
Uninsured
Private
Public
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