Health Care Reform in Obama’s First 100 Days

Leonard Rodberg, PhDUrban Studies Dept., Queens College/CUNY

and NY Metro Chapter, Physicians for a National

Health Program

April 21, 2009www.pnhpnymetro.org

Assumptions for this Talk (from last year’s talk)

• We support single payer

• We understand that a system based on private insurance will not lead to universal coverage or control costs

• We understand that only single payer can reduce spending while covering everyone

• We understand that only single payer can control costs going into the future

1. Conyers: Expanded and Improved Medicare for All

“single payer national health care” HR 676

1. Automatic enrollment

2. Comprehensive benefits

3. Free choice of doctor and hospital

4. Doctors and hospitals remain independent

5. Public agency processes and pays bills

6. Financed through progressive taxes

7. Costs contained through capital planning, budgeting, primary care emphasis

New – Sanders (& McDermott): American Health Security Act S 703 (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

2. Mandates Won’t Lead to Universal Coverage

Source: Sherry Glied et al, “Consider It Done? The Likely Efficacy of Mandates for Health Insurance,”, Health Affairs, 26(6), Nov/Dec 2007; Insurance Research Council, June 2006

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CurrentlyInsured

Hawaii'sEmployerMandate

Auto Insurance Child Support ChildhoodImmunizations

IndividualIncome Tax

Minimum WageLaws

Mandate

Co

mp

lia

nce

below 65 yrs

3. Covering Everyone with No Additional Spending

Additional costs

Covering the uninsured and poorly-insured +6.4%

Elimination of cost-sharing and co-pays +5.1%

Savings

Reduced hospital administrative costs -1.9%

Reduced physician office costs -3.6%

Reduced insurance administrative costs -5.3%

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

134107

241

-21

-76

-111

-59

-46 -313

$ B

Total Costs +11.5%

Total Savings -15.8% Net Savings - 4.3% - 73

4. Single payer offers real tools to contain costs

• Budgeting, especially for hospitals• Capital investment planning• Emphasis on primary care, coordination of

care, and alternative ways of paying for services

• Bulk purchasing

We understand that only single payer national health

insurance will:• Cover everyone for comprehensive services.

• Cost no more than we are now spending.

• Provide mechanisms for containing the growth in cost.

But the President, and the Congressional leadership have ruled

it “off the table”

Why Health Care Is On the Agenda: Escalating Cost

$2,196

$12,680

$12,106

$11,480

$10,880

$9,950

$9,068

$8,003

$7,061

$6,438

$5,791$2,471

$2,689

$3,083

$3,383

$3,695

$4,024

$4,242

$4,479

$4,704

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999 Single Coverage

Family Coverage

Average Annual Premiums for Single and Family Coverage, 1999-2008

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2008.

Underinsurance is Growing

0

10

20

30

40

50

60

70

2000 2007

Insured Uninsured

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

Number of people in families spending more than 10% of pre-tax income on health care (millions)

High Cost Leads to Less Care…

…and medical costs create serious financial problems for millions of us

Source: Health Tracking Poll, Kaiser Family Foundation, April 2008

0

10

20

30

40

50

60

70

80

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Population by Decile in Health Care Costs

This Year’s Underinsured

Source: Medical Expenditure Panel Survey, US Agency for Healthcare Research and Quality, 1999

Percentof Health CareCosts

Health Care Costs Are Concentrated Among a Few People in Any One Year

While millions are underinsured, millions more don’t think there’s a problem!

The Progress of US Health Care 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”

Déjà vu All Over Again?1993:• President describes plan: Managed competition• Turns details over to wife, who runs (quasi-) secret

task force

2009:• President describes plan: Mandated purchase of

affordable insurance• Turns details over to Congress, which runs (very)

secret legislative drafting process

What’s new since 1993:• The public plan option

Cost Control This Year is the President’s Goal

“…the key to dealing with our deficit and debt is to get a handle on out-of-control health care costs.”

 “I firmly believe we need to get health care reform done this year.”

   -- President Barack Obama, Georgetown

University, April 14, 2009

The President’s Principles for Health Care Reform

• Protect Families’ Financial Health…reduce growing premiums and other costs…protect from bankruptcy due to catastrophic illness.

• Make Health Coverage Affordable... reduce high administrative costs, waste, inefficiencies.

• Aim for Universality… put the United States on a clear path to cover all Americans.

• Provide Portability of Coverage… not locked into their job just to secure health coverage.

• Guarantee Choice… provide a choice of health plans and physicians… have the option of keeping their employer-based health plan.

-- “A New Era of Responsibility,” President’s Budget, Feb. 26, 2009

The Stakeholders Meet• Insurance companies• Pharmaceutical manufacturers• Hospitals• Physicians• Other health care providers• AARP• Business associations• AFL-CIO

Who’s interested in reducing spending?Only the unions speak for the people!

Recipients of funds

Source of funds

The Baucus Mandate ModelFinancing – • Require everyone to have insurance (individual & employer mandate)• Create a nationwide insurance pool (“Health Insurance Exchange”)• Guaranteed issue, with no restriction on pre-existing conditions• New public plan option, similar to Medicare, offering the same

benefits and setting premiums the same way as private insurance • Subsidies for families < 400% poverty and small businesses• Medicare buy-in for persons 55-64, Medicaid for all below poverty

Delivery system – • “Strengthened primary care and chronic disease management”• “Align payment incentives toward improving the quality of care”• “Refocus health care system toward prevention and wellness”

Source: Call to Action: Health Reform 2009, US Senator Max Baucus (D,MT), Chairman, Senate Finance Committee

Policy vs. PoliticsReading Baucus White Paper (and others):

• No analysis of alternatives• No explanation of how “affordability” would be achieved• No discussion of how to reshape or regulate private

insurance to reduce underinsurance• No estimates of what the subsidies would cost or what

savings would be achieve (in fact, no numbers at all!)Conclusions: 1. Policy is based on politics, not analysis 2. No evidence presented that policy would “work”

Fundamental point: The US Congress is a bastion of private-enterprise ideology and influence.

Why a Public Option?• Provide features that private plans do not: stability, wide

pooling of risks, transparency, affordability, broad provider access, source of data

• Competitive benchmark to force private plans to reduce prices and improve coverage (and “behavior”)

• Lead in restraining costs and improving quality• Without it, there’s no “reform”

Source: Jacob Hacker, Healthy Competition, Berkeley Law and Institute for America’s Future, April 2009, Health Care for America Now (HCAN) , Howard Dean

Why Not a Public Option?From single payer supporters –• Not a level playing field (“private insurers will game the

system”)• Private insurers will receive extra subsidies, selectively

market to the healthy (“adverse selection”)• Retains private insurance and doesn’t get all savingsFrom supporters of private insurance –• Not a level playing field (“unfair competition”)• Public plan would undermine private insurance, use

inherent powers of government to limit competition, underpay doctors and hospitals

• Will eventually lead to “government-run” system

What Kind of Public Plan? • A “Medicare-like” insurance plan• A government plan that acts exactly like

private insurance• Federal Employees Health Benefit Program

(private insurers vetted by government)• Self-insured plan operated for the government

by a private insurer

One Possible Public Option: Guaranteed Health Plan (GHP)

The Eric Massa (D, NY) Bill• Anyone without insurance would automatically be

enrolled in the GHP• The public plan would provide comprehensive benefits

with no cost-sharing• Employers (and the self-employed) not providing

insurance would pay taxes to support the public plan• Achieves universal coverage without need for mandate • Eliminates underinsurance• Leaves the option of purchasing private insurance

Cost of Covering the Uninsured:

$122.6 billion (2008 dollars) Source: J. Hadley et al (Urban Institute), “Covering the Uninsured

in 2008: Current Costs, Sources of Payment, and Incremental Costs,” Health Affairs, 27:5, p. w199, August 25, 2008

• How will Congress raise this money?• Who will be subsidized? By what means?• Will the plan address the problem of

underinsurance, which will cost additional tens of billions of dollars?

The Massachusetts Plan: Insurance Still Costly and Unaffordable

Family Characteristics

Annual Income

Annual Cost

Deductible*

30-year old individual

$31,212 or more

$2,459 $2,000

30-yr old couple w/2 children

$63,612 or more

$8,900 $3,500

55-year old couple

$42,012 or more

$10,476 $4,000

* Also physician & hospital co-paysSource: www.mahealthconnector.org (Boston Area, Jan 2009)

What Will Control Costs under the Baucus Mandate Model?

• Emphasis on prevention• Computerization• Chronic disease management• Payment reforms (e.g., pay for performance,

“bundling”)• Comparative effectiveness research• Competition through the “Exchange”

These will neither cut costs significantly nor limit the rise in cost.

CBO: Mandate Plans Will Not Lead to Universal Health Care or Cut Costs• “…national compliance rates [with mandates] range

from 63 percent to 86 percent.” (p. 49)• “The adoption of more health IT offers many benefits, but

it is generally not sufficient to produce substantial cost savings.” (p.147)

• “The evidence was insufficient to conclude that disease management programs generally reduce health care spending.”(p. 142)

• “Although new research into comparative effectiveness might lead to net cost savings over a long period of time, its effects during the conventional 10-year horizon for budgetary estimates would be limited.” (p.146)

Source: Key Issues in Analyzing Major Health Insurance Proposals, Congressional Budget Office, December 2008.

What is Needed to Control Costs?

“International experience [shows that] effective cost control requires strong government leadership to set targets and caps for spending” -- T. Marmor, J. Oberlander, J. White, “The Obama Administration’s Options for Health Care Cost Control: Hope vs. Reality”, Annals of Internal Medicine, 150:7, April 7, 2009

There has been no hint from Washington that anyone is considering such a government role!

Will the Mandate Plan Pass?

• Will Congress be willing to appropriate the hundreds of billions of dollars they will cost?

• Will business accept the mandate to provide coverage?

• Will private insurance companies accept guaranteed issue and community rating?

• Will conservatives oppose the mandated purchase of insurance?

• Will business and its allies support the public option?• Will the general public support a plan without one?

The Bottom LineThe Mandate model would• Make the world’s most expensive system even

costlier.• Not achieve universal coverage• Not improve insurance coverage for the

average person.• Not make affordable insurance available.• Not contain the continuing growth in cost.• Not achieve President Obama’s goals.

In other words, it won’t work!

Conclusions

1. If if a plan is passed, the problems of the health care system will not go away..

2. Real health care reform will continue to be essential.

3. It will not take another 16 years to put health care reform on the agenda!

Will We Get Real Health Care Reform Before the Premium Takes All our Income?

Source: American Family Physician, November 14, 2005

Today