How Americans Pay for Health Care: A Brief Overview

October 12, 2010Merton D. Finkler, Ph.D.

John R. Kimberly Distinguished Professor in the American Economic System

Lawrence University

Agenda

• Spending Patterns Overall• Payment Patterns Overall• Payment Structure• Patient Protection and Affordable Care Act –

2010• Primary Sources– California HealthCare Foundation – Health Care Costs

101– Kaiser/ HRET Surveys of Employer-Sponsored Benefits– 2010 Milliman Medical Index

National HC Spending/ GDP

Cumulative Impact

Spending Distribution by Sector

Spending Distribution by Payor

Health Plan Enrollment Distribution History

Spending Distribution, Private Insurance vs. Out-of-Pocket

Worker Identified Premium Payment Trend

The 80- 20 Rule Provides Guidance

Health Reform Effects on Payment

• Near Term – New coverage requirements– Expanded dependent coverage up to age 26– Remove of lifetime and annual limits– Elimination of cost-sharing for preventive care– Prohibition of pre-existing conditions clauses

• Since new requirements for coverage neither require healthy young adults to enroll nor extra Federal support, premiums are likely to rise

Health Reforms continued

• Medium Term (2013 – 2014)– Creation of exchanges with a variety of provisions– Tax changes include increase in Part A payroll tax rate for

high income taxpayers– Required coverage for individuals and firms with 50 or

more employees

• Longer Term (2015 or later)– Multistate compacts for sale of insurance– Excise tax on employer plans with individual premium of

$10,200 or family premium of $27,500 (2018)

Comments

• Three Legs of Health Care Policy (Cost, Quality, and Access) Require Coherent Attention

• Health Care Reform Addresses the Insurance Leg (and partly the access leg)

• Despite the assigned burden, the cost of employer organized health care mostly falls on the employee

• Demographics and intensive practice styles make our policy choices increasingly severe

• There are no free lunches.