Why Did Health Care Reform
Come so Hard: How Much
More is There to Do?
Steven A. Schroeder, MD
Health Services Research Seminar, UC Davis
May 27, 2010
Speaker’s Disclosure Statement
Neither I nor my wife have ever had a
personal financial relationship with any
manufacturer of any of the products
discussed in this seminar
 Support for Dr. Schroeder and the
Smoking Cessation Leadership Center
come from the Robert Wood Johnson and
American Legacy Foundations, as well as
the Centers for Disease Control

Educational Objectives
To describe health care reform actions
taken before passage of the Patient
Protection and Affordable Care Act of 2010
 To identify the context for the recent
health care reform debate
 To understand aspects of the U.S. health
care system—specifically costs—that still
need attention

Quick Poll
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How many think the recent health care reform
legislation was a good thing?
How many think U.S. has best medical system?
How many have parents happy with their own
medical care?
How many of you want your parents to die in an
ICU? In a hospital?
How many of you will consider at some time
undertaking a leadership role in health reform?
Central Challenges of Health
Care Reform
Expand coverage for health insurance
 Pay for this expansion
 How much to try to change health care
delivery at the same time?
 How much else to attempt?

2009 American Recovery and
Reinvestment Act (Stimulus Package)
Comparative effectiveness research--$1.1 billion
 Continue HI coverage for newly unemployed-$24.7 billion
 Health Information Technology--$19.2
billion
—
 HRSA--$2.5 billion
--$1.5 billion for construction and IT at
community health centers
--$500 million for services
--$300 million for National Health Services Corps
--$200 million for other health prof. training

2009 Stimulus Package (2)
Medicare--$338 million for teaching
hospitals, hospice, and long-term care
 NIH--$10 billion (80% new grants, 20%
intramural and construction)
 FDA tobacco regulation
 Prevention and wellness--$1 billion
 Medicaid and other state programs
--$87 billion for new grants
--$3.2 billion for extra state health $ relief

Other Obama Health Changes
Enlargement of CHIP--$33 billion
 62 cent/pack tax increase on cigarettes
 Greater FDA emphasis on food safety
 Removed barriers on stem cell research
 Uncoupled foreign aid from “abstinence
only”
 Strong subcabinet appointments

Health Care Reform, 2009-2010
Background of fierce partisan politics
 24 hour news coverage sensationalizes the
issues (“death panels”)
 Health care reform as “third rail” of politics
 Lessons of Clinton attempt in 1993-1994:
Republican control of Congress, and
weakening of President

Willingness of Healthier and Wealthier to
Subsidize Care for Sicker and Poorer is Weakening
Harris Survey question: Do you agree or disagree?
The higher someone’s income is, the more he or she should expect to
pay in taxes to cover the cost of people who are less well off and are
heavy users of medical services.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
66%
51%
39%
1991
2003
http://www.harrisinteractive.com/news/allnewsbydate.asp?NewsID=1076
2006
Health Care Reform (2)
Obama campaigned on the issue
 Obama instinct for consensus and
bipartisanship as former community
organizer accounts for long negotiations
 Kristol 1993 memo advocating Republican
resistance still pertains
 Democrats fractured: single payer,
community option, anti-insurance
companies, blue dogs

Health Care Reform (3)
Massive bail out of financial sector raised
fears of government intrusion on the right,
and resentment of helping the fat cats by
both left and populist right
 Stimulus package may have been good for
the economy, but unemployment still high
and fears of governmental intrusion very
real
 Rising federal debt a smoldering issue

Political Barriers to Health Care
Reform (Costs and Coverage)*
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*
Crowded agenda (2 wars, recession, energy policies)
Slim Democratic majority in Congress
No consensus of shape of HI reform
Stakeholders resist changing status quo (insurance
companies, pharma, device industry, health
professionals, hospitals, academia)
How pay for expanded coverage ($100b/y) esp with
huge budget deficit?
Oberlander. Great Expectations—the Obama administration and health
care reform. NEJM 2009; Jan 22, 2009
Political Process Dominated
Attempt at bipartisan bill fails in Senate
and House
--Daschle resigns as HHS designate
--Kennedy ill and then dies
--Brown victory on MA meant filibuster
possible in Senate
 Process dragged on, and support declined.
“Death by a thousand cuts”

Unlikely Supporters of Reform
Organized medicine, though not
vigorously (concern re Medicare $ cuts)
 Big Pharma (in exchange for some $
protection)
 Business less antagonistic than in 1993,
although small business still opposed
 Insurance less opposed than 1993
 Catholic church split re abortion/coverage
issue

And a Bill Did Pass
Surprised a lot of people, including me
 Democrats in general pleased, most
Republicans irate
 Still hugely controversial
 Bill very complicated and poorly
understood
 Looks a lot like MA plan, and old
Republican proposals
 Unclear how it will play politically

What Does the Bill Do?
Expands coverage to about 33 million people by
2014 (50% private, 50% public support); 95%
eligible Americans would be covered: 83% now
 Does this by a combination of expanding
Medicaid coverage, mandating that all
individuals be covered (with certain
exemptions), and mandating that private
businesses cover workers for firms with >200
employees (WalMart issue)

What Does the Bill Do? (2)
Estimated costs of $965 billion/10 years
 Pays for expansion by combination of
increased revenues and cost containment
 Lets states create insurance exchanges to
broaden and cheapen insurance options
for those not covered
 Extensive and income-adjusted subsidies
for low income families

What Does the Bill Do? (3)
Penalizes employers that don’t provide
coverage
 Expands Medicaid coverage to all under 65
population with incomes <133% of
Federal Poverty Level
 Require states to maintain CHIP thru 2015
 Increases taxes on high income persons,
beginning 2011
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The Bill (4)
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Cracks down on Medical Savings Accounts, “Cadillac
insurance plans” and Medicare Advantage Plans (to get
new coverage $)
Some charges to health insurance plans and pharma
Health insurance reform
--Eliminates preexisting conditions
--Jawbones insurance plans re “loss ratio” (>85%)
--Kids can stay on parents’ plans until age 26
--Eliminates lifetime expenditure caps
--Covers prevention services
--Gradually closes the doughnut hole for Medicare Part D
Cost Containment/Revenue
Generation Features of the Bill
Estimated 10 year $1.1 trillion savings (vs.
$965 billion costs)
 50% through spending cuts: Medicare
advantage, limiting Medicare payment
growth, cutting payments to Medicare
Advantage; reduced payments to DSH
hospitals like SFGH; other
 50% through new revenue—taxes and
fees
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Other Features—Many as
Demonstrations
Reduce waste, fraud and abuse
 Comparative effectiveness research
 Medical malpractice reform
 Increased payments for primary care
 New payments for prevention, wellness;
cover preventive services
 Increase residency positions in primary
care and general surgery
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Important Political Omissions
The public option
 Abortion coverage
 Coverage for non-citizens and illegal
immigrants
 How will states pay for their expanded
Medicaid obligations?
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Uncertainties in Health Reform
Tricky implementation details, state and federal
 Can the proposed Medicare cuts survive politically?
 Extent of political backlash (see catastrophic insurance,
1988)? Will Republicans try to repeal or just amend?
 What about those still lacking coverage?
 Translating cost effectiveness research into action (see
mammography debate)?
 Care at the end of life and palliative care?
 Can we truly bend the cost curve?

Performance of the U.S. Health
Care System, pre Reform
Health (outcomes)
 Costs
 Access
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Health Status of the United States

Ranks 19-25 in usual indicators
Health Status: United States vs. 29 Other OECD Countries
Health Status Measure
U.S.A.
U.S. Rank in
OECD (30)
Best Rank of
OECD
All Women
80.1
22
Japan (85.3)
White women
80.5
19
All men
74.8
22
White men
75.3
19
All women, years
19.8
10
White women, years
19.8
10
All men, years
16.8
9
White men, years
16.9
9
Life Expectancy from
birth (y)
Sweden (78.4)
Life expectancy from
age 65/-2004*
* Data missing for six (6) countries
Japan (23)
Iceland (18.1)
Some Good News
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US does much better for life expectancy after
age 65
2005 life expectancy data at all time high—77.6
years at birth
– Women: 80.1, men: 74.8
– White women>black women>white men>>>black
men
– Almost all the recent gains were in upper SES groups
– Much of those gains are from tobacco use declines
Tobacco Tipping Point?
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California 13% adult smoking prevalence
National rates down to modern low of 19.8% in
2007, up to 20.6% in 2008, ? in 2009.
Northern California Kaiser Permanente down to
9%
Physician smoking rates around 1%
Proliferation of smoke-free areas
National 62cent/pack federal tax increase, 2009
Increased stigmatization of smoking
Health Status—Summary
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Doing better
But at bottom of developed world
Major declines in heart disease (multiple
reasons)
Major opportunities for improvement in tobacco
and obesity
Can’t improve without more attention to the
poor
Social causes very important
Hard to improve through medical care alone
Costs of Medical Care: We’re
Number One!
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Now up to 17% of GDP
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Poor health value for the dollar
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Reluctance to take on the involved sectors
(pharma, device and insurance industries,
hospitals, doctors, unions)
Actual and Projected National
Health Expenditures, Selected Years
Source: Sean Keehan and others (2008). “Health Spending Projections Through 2017: The Baby-Boom Generation is Coming to
Medicare.” Health Affairs Web Exclusive, Feb. 26, pp w146. (www.healthaffairs.org)
Health Care Spending- Per Capita In $US PPP*
The U.S. Healthcare Value Shortfall
Source: Havard Business Review, p. 70, April
2010
Years - Estimated Average Life
Expectancy
Number of MRI Units per Million
Persons 2006
30
26.5
No. of MRI Units/Million Persons
25
20
14.0
15
10
7.7
7.7
6.6
6.2
5.6
5.3
4.9
5
0
United
States
Switzerland
Germany OECD Netherlands Canada
Median
United
Kingdom
France
Australia
Data are from the organization for Economic Cooperation and Development (OECD) Health Data 2008. The value for the Netherlands is
for 2005. NEJM 360:10 3/5/2009, p. 1032
Where the Health Care Dollar
Comes From
Source: Hartman, M.; Martin, A.; McDonnell, P., et al. (2009). “National Health Spending in 2007; Slower Drug Spending Contributes to
Lowest Rate of Overall Growth Since 1998.” Health Affairs, Jan/Feb., p. 254. (www.healthaffairs.org).
Where the Health Care Dollar Goes
Source: Hartman, M.; Martin, A.; McDonnell, P., et al. (2009). “National Health Spending in 2007; Slower Drug Spending
Contributes to Lowest Rate of Overall Growth Since 1998.” Health Affairs, Jan/Feb., p. 247. (www.healthaffairs.org).
Why Is U.S. Medical Care So
Costly?
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Physician supply? No (but specialty % very high)
Fee for service payment valuations? Yes
Health worker incomes? Yes
Hospital supply/length of stay? No
Proportion intensive care beds? Yes
Rate of expensive procedures, and technology in
general? Yes, in spades!
Why Is U.S. Medical Care So
Costly (Part 2)?
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Practice style variations? Yes
Administrative costs? Yes
Malpractice, including defensive medicine? Yes
Aging population? Not really
Patient demand? Yes
Lack of cost competition? Yes
Low investment in IT? Maybe
Why Not Let Costs Keep Rising?
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Opportunity costs
–
–
–
–
Schools
The environment
Jobs and overseas competition (see General Motors)
Other worthy causes
 Business resistance
– Operational costs
– Retiree costs
– Source of labor disputes
 Pressure on public programs (Medicare, Medicaid,
County Hospitals)
 Increases the number of uninsured
 Biggest cause of personal bankruptcies
Medicare Cost Crisis May Force
Cost Control
Medicare to reach deficit in about 2017
 Congressional choices at that time:
--raise taxes
--cut benefits
--reduce costs
 Which is the most politically palatable?
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Access to Health Care
Insurance coverage the major barrier
 Geography, language, literacy, racial
barriers also important
 Different salience for the two political
parties; issue of role of government
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The Uninsured in 2007
Source: Kaiser Commission on Medicaid and the Uninsured (2007). “The Uninsured: A Primer.” (http://www.kff.org/uinsured/7451.cfm)
Other Major Issues
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Quality/safety of care
Coordination of chronic illness care
Long term care
End of life care
The work force
--medical student debt corrodes values and
influences career choices (the “ROADE”)
--erosion of primary care
--future of nursing
Concluding Thoughts
Health reform will be a continuing issue
for the rest of your lives. Tension
between demand for coverage and
inability to pay for it.
 Huge uncertainties regarding politics and
implementation of health reform
 U.S. poor health status not correctable by
better health care alone
 No easy solution to cost inflation and
tendency to fix on technical solutions (IT)
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Concluding Thoughts (2)
Primary care’s status uncertain
 Cost control threatens many, because health
care is 17% of the GDP
 Great opportunity for health professional
influence in the years to come
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