Allen C. Goodman
Wayne State University
Presented to Adult Learning Institute
October 25, 2011 http://www.econ.wayne.edu/agoodman

• In 2009, the United States spent almost
$2.5 trillion dollars on health care.
• This accounted for 17.3% of GDP.
• Over 50 million U.S. residents were uninsured.

18.0
16.0
14.0
12.0
10.0
8.0
Canada
France
Germany
Italy
Japan
Netherlands
Spain
Sweden
Switzerland
United Kingdom
United States
Expenditures as % of GDP
6.0
4.0
2.0
0.0
1960 1965 1970 1975 1980 1985
Year
1990 1995 2000 2005 2010

Australia Canada Germany Israel Japan Korea
Life Exp at Birth, Females 2007
Life Exp at Birth, Males
2007
Deaths/1000 live births 2006
83.7
79.0
4.7
Mexico
83.0
78.3
5.0
82.7
77.4
3.8
82.4
78.7
4.0
Sweden Switzerla nd
Turkey
86.0
79.2
2.6
United
Kingdom
82.7
76.1
4.1
United
States
Life Exp at Birth, Females 2007
Life Exp at Birth, Males
2007
Deaths/1000 live births 2006
77.4
72.6
16.2
83.0
78.9
2.8
84.4
79.5
4.4
75.6
71.1
22.3
81.8
77.6
5.0
80.4
75.3
6.7

• We spend a lot
• By many measures, we’re not spending very effectively.
• Can we reform our health care system?
• What do we want, and what would it cost?

Four elements:
– A health “safety net” for all residents, irrespective of age, health status, or employment status
– Mechanisms that promote cost containment
– Choice for patients and providers
– Ease in administration

• Who do you cover?
• How do you provide access?
• How much does it cost?
• How do you pay for it?

• Everyone?
• Do you “not cover” illegal immigrants?
• Remember, at any moment of time in the
United States, there are millions of foreign students, visitors, and temporary workers.

• Employer mandate?
– Does employer pay it?
– Most feel that the workers pay for it in the form of lower wages.
• Individual mandate?
– Require individuals to buy insurance.
– They may buy it from employers.
– This is no more coercion than paying taxes.

• Uninsured does not mean “no care.”
– Uninsured currently get
– Hadley and colleagues (2008), estimated that uninsured Americans consumed $86 billion worth of health care in 2008.
• Full year coverage to all uninsured?
– Incremental cost of providing full-year coverage for all uninsured would amount to
$123 billion, so spending of those currently uninsured would rise from $86 to $209 billion.

• Full year coverage to all uninsured?
– We’re three years past the Hadley estimates, so let’s guess incremental cost at $164 billion, taking total cost to about $250 billion.
– If we divide $164 billion by 310 million people, you get about $529 per person.
– Can we pay it? Yes! There’s a difference between “can’t pay” and “won’t pay.”

Patient Protection and Affordable
Care Act of 2010 (PPACA)
• Require most U.S. citizens and legal residents to have health insurance, the individual mandate .
Families without coverage will face penalties up to $2,085 per year or 2.5% of household income.
• Penalize employers with 50 or more full-time employees that do not offer coverage a fee of
$2,000 per full-time employee. Small businesses that provide health insurance for their employees will be eligible for tax credits.
(Effective January 1, 2014).

Patient Protection and Affordable
Care Act of 2010 (PPACA)
• Expand Medicaid to all non-Medicare eligible individuals under age 65 (children, pregnant women, parents, and adults without dependent children) with incomes up to 133% of the federal poverty level FPL.
• Establish state-based health insurance exchanges, where individuals and small businesses can compare policies and buy coverage, administered by a governmental agency, or a non-profit entity.

Patient Protection and Affordable
Care Act of 2010 (PPACA)
• Eliminate underwriting policies that enable insurers to deny individuals insurance or charge them higher premiums based on pre-existing conditions.
• Establish a uniform set of benefits, called
Essential Health Benefits, with 10 major areas of coverage including prescription drugs and preventive services. All qualified health plans, except employer-sponsored plans and certain individual policies, will be required to offer at least the Essential Health Benefits. (Effective
January 1, 2014)
Eliminate cost-sharing for Medicare covered

Patient Protection and Affordable
Care Act of 2010 (PPACA)
• Eliminate cost-sharing for Medicare covered preventive services recommended by the U.S.
Preventive Services Task Force, and waive the
Medicare deductible for colorectal cancer screening tests. (Effective January 1, 2011)

• Creating a safety net – CBO estimates that approximately 32 million people would gain coverage by 2019, leaving about 23 million uncovered.
• Net changes would be increases of 16 million through Medicaid and CHIP, and 24 million through the exchanges, with small decreases of those in employer and nongroup insurance.
• This would leave about 23 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants).

Attaining goals. Cost containment?
More diffuse
– Reducing consumer demand through the socalled “Cadillac” insurance tax;
– Running pilot programs to test various approaches to revamping provider-payment incentives and organizational structure;
– Investing hundreds of millions of dollars in new comparative-effectiveness research; and
– Launching pilot programs to assess reorganizations of the medical malpractice process.

Attaining goals.
?
• In bypassing either single-payer programs or explicit mandated providers, PPACA will preserve both patient and provider choice.
• The insured would appear to have no less choice in insurance coverage, and payment provisions would seem to remain the same as previously.

Attaining goals.
?
• The largest increases in the numbers insured would come through Medicaid/CHIP (an additional 16 million) and the new insurance exchanges (24 million more).
• Medicaid/CHIP is a well-established program, with state-level relationships already in place.
• States have not yet established the exchanges, however, and some considerable administrative costs will most likely accompany their creation and operation.

• Other countries do.
• Resources are available.
• Costs are within reason … if we choose to pay them.