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A Perfect Storm A Practical Solution ?

Paying for Health Care 2005. A Perfect Storm A Practical Solution ?. EPIC FORUM Faculty 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,

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A Perfect Storm A Practical Solution ?

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  1. Paying for Health Care 2005 A Perfect StormA Practical Solution? EPIC FORUMFaculty House, Madison RoomNovember 29, 2005Richard N. Pierson Jr.

  2. 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)

  3. Getting the attention of…. • Welfare agencies? • Justice activists? • AARP? • Medical Societies? Hospital Associations? • Community Chests? • Business owners? • The general Public! • Lobbyists? • Legislators?

  4. COST SHIFTING: NO END IN SIGHTThe “Insurance Death Spiral” Get Care More uninsured More underinsured Bills not paid Higher premiums Fixed costs of healthcare services not met Cost shift Deficit!

  5. Number of Uninsured Americans (Millions) 45 40 35 30 25 Source: U.S. Census Bureau 20 1980 1985 1990 1995 2000

  6. 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

  7. SOLUTIONS require that(Institute of Medicine 2004) • 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

  8. How We Got Here ?A Short History • Health Care wasNot-for-Profit • Blue Cross 1935 • Kaiser Permanente, WW II • Military Medicine: DOD, VA, Fed. Employees • MediCare / MediCaid 1965 • 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

  9. The Costs of Health Care • 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% • Utilization: Over? Under? Mis? Who decides? • Incentives for prevention? • Public Health vs Profit Health? • Or, The Common Good. • Schools, roads, fire, Police…

  10. 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

  11. 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)

  12. Health care services: How much does our population need?

  13. Certain amount of Disease in any population • 7% have diabetes • 25% have high blood pressure • 5% have heart disease Services available are determined by group needs over time

  14. Health care at any one time Who uses it? Who supports it? Sick Sick 12% Healthy 14% Sickest Healthy 76% Sickest 73% 13% 12% Source: Agency for Healthcare Research and Quality MEPS, 1999

  15. All of Us will likely Be Among The Sickest At One Or Many Points in Our Lives Sick Sick Sickest Healthy Sickest Healthy Supporter User

  16. When you’re really sick, health care is very expensive Cost Per year Healthy $1,000 Sickest Sick $6,900 $38,000 Source: Agency for Healthcare Research and Quality. MEPS, 1999

  17. Health Care Spending - 2002 US Dollars per Capita Canada Germany 5,267 France Australia Japan UK 2,160 2,077 2,504 2,736 2,160 2,931 Source: OECD, 2004 Note: Figures adjusted for purchasing power. Data for Australia, Japan -2001

  18. Renal Transplants No. per million population France Canada Sweden US Australia UK 34 38 35 29 31 35 Source: OECD, 2004. Data for 2001, 2002

  19. CT Scanners Japan No. per million population 92.8 Denmark Germany US Canada France 13.3 13.8 9.7 9.7 12.8 Source: OECD, 2004. Data for 2002

  20. Physician Visits Japan Per Capita Australia Germany 16 France Canada US UK 6.4 5.8 6.5 6.4 6.5 5.4 Source: OECD, 2002. Data for 2000 or most recent year

  21. How do we finance health care ?

  22. Health Care Financing Today • Fragmented - No health policy guaranteeing coverage to all. • Complicated - needing a massive, expensive, bureaucracy to manage.

  23. Deficit: What to do • Close down • Cut staff • Shift the deficit to the private insured !!!!

  24. Private Insurer’s High Overhead Investor-owned Blues Commercial Carriers Non-profit Blues Medicare 26.5% 19.9% 16.3% 3.1% Source: Schramm. Blue Cross Conversion. Abel Foundation. CMS.

  25. Insurance Overhead - 2002 US Dollars per Capita Germany 364 Australia Netherlands Canada France 155 116 73 73 52 Source: OECD, 2004 Note: Figures adjusted for purchasing power. Data for Australia-2001

  26. GROWTH SINCE 1970

  27. HC Administrative Costs Administrative Costs 31% Clinical Care 69% New England Journal of Medicine 8/03

  28. Who’s paying the Health Care bill? Individuals 20% taxpayers 60% {Medicare, Medicaid. Public employees, tax subsidies} 20% Private employers We all pay But we don’t all have coverage Source: NEJM 1999; 340:109; Health Affairs 2000; 19(3):150

  29. Summary so far • Most of the health care dollar is spent on services that we pay for, used or not • We all pay the bill: higher premiums • higher taxes • Financing is piecemeal and unpredictable • We have no effective way to control costs • If we don’t act this will only get worse

  30. Whatto Do?

  31. 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

  32. Should health care be regarded as a consumable? “The American Way”

  33. HEALTHCARE A PUBLIC GOOD?

  34. Something we all need But cannot provide for ourselves(E.g. : roads, schools, police and fire protection) Public Good

  35. 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

  36. 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.

  37. Fundamental Features of Universal Systems • Everyone Included • Public Financing • Public Stewardship • Global Budget • Public Accountability

  38. What would a national health program look like? • Everyonereceives a health care card • Free choice of doctor and hospital • Public agency processes and pays bills • Doctors and hospitals remain independent, non- profit. Negotiate fees and budgets with NHP • Local regional agencies allocate expensive technology (Certificate of Need) • Progressive taxes go to Health Care Trust Fund

  39. The Market doesn’t always work • 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 incentivesto avoid covering the sick (risk selection), delayed care “Market” and quality health care are often at odds.

  40. Questions we need to ask: • How much health care services does our population need? • How are we going to pay for it? • How much do we already have? • How much will it cost? • How can we get more for our money?

  41. Change in Spending in a Single Payer Program

  42. FOUR Reform StrategiesWhich one to Choose?IOM 2004(in order of increasing costs) • Major Public Program Expansion New tax credit, Medicare from 55 • Employer andIndividual Mandate • Individual Mandate + Tax Credit (“Moral Hazard”; individual responsibility) 4. Single Payer

  43. WHY IS NATIONAL HEALTH INSURANCE POSSIBLE IN THE U.S.? • Market forces do not address fundamentalproblems 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.

  44. 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

  45. Physicians for a national health program (PNHP) say: • 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.

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