U.S. Health Care System: History, status, current reform

1. U.S. Health Care System:History, status, current reform James G. Kahn, MD, MPH 28 April 2012

2. Overview History Current system Profile Performance vs OECD Federal reform – the ACA

3. Major US Health Reform Efforts and Events & Medicaid Medical benefits to increase compensation during WWII salary freeze

5. Other Forces Affecting US Health Care • Weak cost controls • RBRVS (a scale for outpatient care) • DRGs (inpatient per diagnosis) • Rise of technology and specialty care • Rise of corporate form for insurers & providers

6. CORPORATE MEDICINE IS HERE TO STAY(and has been for a long time) Growth in HMO Enrollment and Plans, 1970-1997 1997 Source: InterStudy National HMO Census.

7. Key features of US Health Care Financing • 17.4% of GDP 2009 and rising, $2.5 T, 8,086 per capita • Public – 43% (27% federal, 16% state/local) • CMS (Center for Medicare and Medicaid Services) • Medicare – federal, aged & disabled ($502 B) • Medicaid – state/federal, poor & long term care ($374 B) • Veteran’s Admin, Military, Indian Health Svc, … • State and local safety net • Private – 34% • Employers – 21% • Families – premium contribution – 13% • Families – uninsured services & copays etc – 15% • Other private – 7% Martin, Health Affairs 2011

8. U.S. vs Other OECD countries • Spending per capita ~50% higher • Generally fewer doctor visits and hospital days • Difference in spending due to: • price (costs of doctor, procedure, drugs) • use of high technology • administrative costs (later) • Health care outcomes same or worse

10. Number of Uninsured in the US Source: US Census Bureau, Current Population Surveys Millions of people 15.8% of population

13. Schoen 2005

14. Rank of 13 industrialized nations Low birth weight % (U.S. in Red) Infant mortality Years of potential life lost Age adjusted mortality Life expectancy @ 1 yr Life expectancy @ 40 yrs Life expectancy @ 65 yrs Life expectancy @ 80 yrs Average for all indicators Poorest Best US standing on health care outcomes

15. Billing and Insurance-Related Administrative Costs

16. U.S. Health Care Financing

17. $400 billion annually in billing and insurance-related (BIR) administration= $1300 per person per year ~60% is at providers >$250 billion is “excess” - avoidable

18. Elements of Provider BIR - 1 • Complexity of the insurance process: multiple steps, often detailed & demanding: Contracting, maintaining benefits database, patient insurance determination,collection of copayments, formulary and prior authorization procedures, procedure coding, submitting claims, receiving payments, paying subcontracted providers, appealing denials and underpayments, negotiating end-of-year resolution of unsettled claims, and collecting from patients, …

19. Elements of Provider BIR - 2 • Friction: some BIR steps are (or seem) designed to slow and complicate the process, e.g., prior authorization, high rates of denials / errors / underpayment. • Variation: modest number of payers, but dozens to hundreds of plans, including negotiated variants. Providers need to track plan-specific benefits and pay rules.

21. ReformIncremental … Systemic

22. Major types of health reform • Free market – let individuals buy health insurance / care, subsidize the poor. Often called “consumer driven”. Based on principles of moral hazard. • Improved mixed system – regulate private insurance, expand public insurance (PPACA). “Managed competition” • Single payer / universal – use a public fund to pay for private and public providers, everyone covered with good benefit package. Common in OECD countries.

23. By What Criteria Should We Judge Reform Proposals? The IOM Report: 2004: • Health care coverage should be universal. • Health care coverage should be continuous. • Health care coverage should be affordable to individuals and families. • The health insurance strategy should be affordable and sustainable for society. • Health insurance should enhance health and well-being by promoting access to high-quality care that is effective, efficient, safe, timely, patient-centered, and equitable.

24. Patient Protection and Affordable Care Act - PPACA (March 2010)Key provisions • Private insurance regulation - fairer, less baroque • Insurance exchanges - individuals / small business • Public means-tested – expand (Medicaid, CHIP) • Medicare - close gaps, control costs • Individual mandate • Subsidies for poor / near-poor

25. Patient Protection and Affordable Care Act (PPACA)

30. PPACA waivers Used to further coddle insurers, edentulating the bill. Dozens granted, e.g., Child coverage: Insurers complained may have to exit market if forced to cover sick children on parents’ policies. The govt allowed brief open-enrollment periods and higher premiums. Insurers free to set their own premium rates, with limited states restraint. Medical loss ratios (MLRs) set at 80-85%. Concessions: counting expenses of quality assurance as medical costs, deduct taxes from premiums before calculating MLR, and the ability to appeal for lower MLR for up to 3 years in states where “there is a reasonable likelihood that market destabilization could harm consumers”. Four states so far. Exempted plans: Many insurance plans, including most large employers, exempt from PPACA - “grandfathered in” > 100 employers and other insurers can retain very low annual limits of coverage (eg. only $2,000 a year, hardly qualifying as insurance). E.g., McDonald’s, after warning regulators that it might have to drop coverage for 30,000 hourly workers, can keep “mini-med” policies. John Geyman, PNHP blog, Dec 2010