Presented by: Aisha Price HicklenMANA 5334

October 31, 2007

The CureThe Cure

• Dr. David Gratzer, Canadian-born physicianDr. David Gratzer, Canadian-born physician– Senior fellow at the Manhattan Institute for Senior fellow at the Manhattan Institute for

Policy ResearchPolicy Research– Blames America’s current health care “crisis” Blames America’s current health care “crisis”

on its reliance on outdated economic factorson its reliance on outdated economic factors– IRS tax ruling 1943- “biggest event to shape IRS tax ruling 1943- “biggest event to shape

American health insurance”American health insurance”• Tax exemption gave rise to 3Tax exemption gave rise to 3rdrd party payers & party payers &

employer-based health coverageemployer-based health coverage

America the BeautifulAmerica the Beautiful

• Rapid progression of modern medicine began Rapid progression of modern medicine began in 1941 with penicillinin 1941 with penicillin

• Now the leader in medical technology, Now the leader in medical technology, surgery, drug interventions and diagnostic surgery, drug interventions and diagnostic measuresmeasures

• Live longer healthier lives, but at what cost???Live longer healthier lives, but at what cost???

The CureThe Cure

• Dick Cheney’s HeartDick Cheney’s Heart– 4 heart attacks (the first at age 37)4 heart attacks (the first at age 37)– Quadruple bypass in 1988Quadruple bypass in 1988– Angioplasty in 2000Angioplasty in 2000– Pacemaker implanted 2001Pacemaker implanted 2001

• Cost between $20-$25,000Cost between $20-$25,000• 50 times the average cost of health care in 50 times the average cost of health care in

19501950• Example of the extreme rise of costs in Example of the extreme rise of costs in

AmericaAmerica

Employer-based Employer-based CoverageCoverage

• Over-insured AmericansOver-insured Americans– Accustomed to paying little to no out-of-pocket Accustomed to paying little to no out-of-pocket

expenses for basic medical careexpenses for basic medical care– No incentive to make educated, cost-cutting No incentive to make educated, cost-cutting

choices which further drives up costschoices which further drives up costs– Health care in America = “shopping with Health care in America = “shopping with

someone else’s credit card”someone else’s credit card”

Health Savings Accounts Health Savings Accounts (HSAs)(HSAs)

• Consumer-driven; give patients choiceConsumer-driven; give patients choice• Low-cost, high deductible coverage for Low-cost, high deductible coverage for

“catastrophic” events“catastrophic” events• Tax-free savings account to cover basic Tax-free savings account to cover basic

out-of-pocket medical expensesout-of-pocket medical expenses– Roll over funds each yearRoll over funds each year– Create financial incentive to be more Create financial incentive to be more

responsible and cut costsresponsible and cut costs• Example: John Mackey, founder/CEO of Whole FoodsExample: John Mackey, founder/CEO of Whole Foods

– Deposit $300-$1800/year into employee accountsDeposit $300-$1800/year into employee accounts

Health Savings Accounts Health Savings Accounts (HSAs)(HSAs)

• Gratzer’s Steps Towards Building a Gratzer’s Steps Towards Building a Healthcare MarketHealthcare Market– Make HSAs popular to create more choiceMake HSAs popular to create more choice

• Use politicians to promote consumer-driven health care Use politicians to promote consumer-driven health care & local governments to provide option to employees& local governments to provide option to employees

– Free HSAsFree HSAs• Raise annual contribution amountRaise annual contribution amount• Allow flexibility in deductibles within plans & among Allow flexibility in deductibles within plans & among

consumersconsumers

– Government deregulation to provide more Government deregulation to provide more choice and promote competitionchoice and promote competition• > 100,000 pages of Medicare regulations; state > 100,000 pages of Medicare regulations; state

regulations; malpractice law; insurance regulations; regulations; malpractice law; insurance regulations; certificates of need; public health reporting certificates of need; public health reporting requirements; etc.requirements; etc.

The Uninsured in The Uninsured in AmericaAmerica• Myth of the 46 million Myth of the 46 million

• Many Americans uninsured by choiceMany Americans uninsured by choice– 16% earn >$75,000 annually 16% earn >$75,000 annually – 1/3 earn at least $50,000 annually1/3 earn at least $50,000 annually– 1 in 4 lack coverage because of high costs associated 1 in 4 lack coverage because of high costs associated

with state regulationswith state regulations

• Health care costs about $1,587/year compared Health care costs about $1,587/year compared to $2,484/year expense of the insuredto $2,484/year expense of the insured– Bottom Line: Medical attention is readily available Bottom Line: Medical attention is readily available

for those who need it.for those who need it.

The Uninsured in AmericaThe Uninsured in AmericaAlternatives to HealthcareAlternatives to Healthcare

• Make Health Make Health Insurance AffordableInsurance Affordable– HSAsHSAs– Increase annual Increase annual

contributioncontribution• Tool for long-term Tool for long-term

savingssavings

• Interstate Insurance Interstate Insurance OptionOption– Freedom to choose low-Freedom to choose low-

regulation state to regulation state to purchase coveragepurchase coverage

– ↑ ↑ choice=↑ competition choice=↑ competition among carriersamong carriers

• Tax ReformTax Reform– Necessary to reduce Necessary to reduce

premiums by 30%premiums by 30%

• Block Funding to Block Funding to States by Federal States by Federal GovernmentGovernment– States given freedom to States given freedom to

design own coverage design own coverage options for uninsuredoptions for uninsured

Medicaid ConcernsMedicaid Concerns• Loosened Eligibility RequirementsLoosened Eligibility Requirements

– Fraud & abuseFraud & abuse• TennCare ( covers 1.3 million of state’s 5.8 million TennCare ( covers 1.3 million of state’s 5.8 million

population)population)

– ↑ ↑ prescription costsprescription costs

• Slow Reform efforts due to aggressive Slow Reform efforts due to aggressive litigationlitigation

• Cut Physician Reimbursement to Control CostsCut Physician Reimbursement to Control Costs• States use of “creative accounting” States use of “creative accounting”

Medicaid ReformMedicaid Reform

• Make private insurance more Make private insurance more attractiveattractive– Reserve Medicaid for the needyReserve Medicaid for the needy– Provide HSAs & interstate insurance options Provide HSAs & interstate insurance options

• Block Grant Funding to States by Block Grant Funding to States by Federal GovernmentFederal Government– Leave Medicaid regulations to the stateLeave Medicaid regulations to the state– Inspires accountability and innovationInspires accountability and innovation

• Provide Financial Incentives for Provide Financial Incentives for Recipients to Cut CostsRecipients to Cut Costs– Example: Gov. Mark Sanford of S. Carolina Example: Gov. Mark Sanford of S. Carolina

proposes “health dollars” proposes “health dollars”

Medicare ConcernsMedicare Concerns

• InadequateInadequate– Elderly potentially pay large out of pocket Elderly potentially pay large out of pocket

expensesexpenses• InefficientInefficient

– Many over insured for the services covered (but Many over insured for the services covered (but not necessarily services needed)not necessarily services needed)

• InequitableInequitable– Geographic variations in spending Geographic variations in spending

• InsolventInsolvent– #1 problem; will consume 25% of federal #1 problem; will consume 25% of federal

income tax revenues by 2030income tax revenues by 2030– Unfunded liability over next 75 years is $68.3 Unfunded liability over next 75 years is $68.3

trilliontrillion

Medicare ReformMedicare Reform

• Choice, Choice, Competition & Competition & Light (Federal) Light (Federal) RegulationRegulation– Federal Employee Federal Employee

Health Benefits Health Benefits Program (FEHBP)Program (FEHBP)• Measuring stick for Measuring stick for

reformreform• Choice of over 240 Choice of over 240

plans (HMOs, PPOs, plans (HMOs, PPOs, HSAs, fee-for-service)HSAs, fee-for-service)

• Federal government’s Federal government’s role limited to paying role limited to paying the billthe bill

– Benefits of an Benefits of an FEHBP-like FEHBP-like programprogram• Contain costs Contain costs

without controlling without controlling priceprice

• Combine a Combine a fragmented system fragmented system (Part A, B, C, D)(Part A, B, C, D)

• Modest increases in Modest increases in retirement age (over retirement age (over the years) the years)

• Flexible Premiums Flexible Premiums

Prescription Drug Prescription Drug ConcernsConcerns

• High costs associated with High costs associated with consumers not directly paying for consumers not directly paying for drugsdrugs

• Overregulated FDAOverregulated FDA• Limited follow up process on drugs Limited follow up process on drugs

post approvalpost approval

Prescription Drug Prescription Drug ReformReform

• Reform FDA approval processReform FDA approval process– 1. Create an independent office designed to 1. Create an independent office designed to

monitor negligent employee actionsmonitor negligent employee actions– 2. Outsource non-government analyzers2. Outsource non-government analyzers

• Free up FDA time & moneyFree up FDA time & money• Create a competitive market for non-government Create a competitive market for non-government

analyzersanalyzers

– 3. Implement “post-approval surveillance” to 3. Implement “post-approval surveillance” to improve drug safetyimprove drug safety• Gather information from physicians at point of care and Gather information from physicians at point of care and

from real world settings (drug companies, insurance from real world settings (drug companies, insurance agencies, etc.)agencies, etc.)

• Win-win-win for patients, drug companies & the FDAWin-win-win for patients, drug companies & the FDA

National Health CareNational Health Care

• Canadian-style health careCanadian-style health care– Complete government fundedComplete government funded– No co-paymentsNo co-payments– No deductiblesNo deductibles– No insurance forms to completeNo insurance forms to complete– Hospitals and physicians government fundedHospitals and physicians government funded– Low administrative costs Low administrative costs – Most medical visits, diagnostic tests, & Most medical visits, diagnostic tests, &

surgical procedures are covered if deemed surgical procedures are covered if deemed “medically necessary”“medically necessary”

• So What’s the Problem????So What’s the Problem????

““O Canada”O Canada”• The ProblemThe Problem

– Extremely long waits for Extremely long waits for carecare

– Overcrowded hospitals Overcrowded hospitals and ERsand ERs

– Increasing demand Increasing demand • As result of no fees for As result of no fees for

servicesservices– Many cost cutting Many cost cutting

measuresmeasures• Intentional shortages of Intentional shortages of

clinics, physicians, clinics, physicians, restricted access to restricted access to specialists; capped specialists; capped physician income; physician income; hospital bed closures; hospital bed closures; denial of critical servicesdenial of critical services

• ““The Cure”The Cure”– Trend towards private Trend towards private

health care clinics & health care clinics & diagnostic facilitiesdiagnostic facilities

– Travel abroad (to Travel abroad (to America) for medical America) for medical carecare

• Americans are leaders Americans are leaders in medical innovation in medical innovation and technologyand technology

The Cure~ CapitalismThe Cure~ Capitalism

• Decentralize decision makingDecentralize decision making• Price control by increasing choicePrice control by increasing choice• Increase competitionIncrease competition

– Among insurance agencies, physicians, & Among insurance agencies, physicians, & prescription drug analyzersprescription drug analyzers

• Budget capsBudget caps– ““block grants” for Medicaid and Medicareblock grants” for Medicaid and Medicare