The US Health Care System:
Reformed at Last!
Summer Enrichment Program Orientation
June, 2010
Richard Lichtenstein PhD, MPH
Department of Health Management and Policy
School of Public Health
University of Michigan
The Patient Protection and Affordable
Care Act
(March 23,2010)
This is historic legislation that ranks with
Social Security, Medicare and the Civil Rights
Act in terms of creating social change
People have been advocating for a national
health insurance plan in the US since at least
1913. They have been thwarted many, many
times, but this time they were successful!
The law is certainly not “perfect,” but it moves
us substantially.
Why We Need Health Insurance
Reform (and more)
The Traditional Health Care
System in the US Has Had
Several Structural Flaws
• System of Financing Care
(Fee-for-service system; fragmented payments)
• Organization of Services
“A Paradox of Excess and Deprivation”*
• Insurance Coverage of the Population
Health coverage has been connected with employment
Health coverage is not a right in America
*Enthoven and Kronick, NEJM 320:29-37. 1989
PROBLEMS WE FACE AS A
RESULT:
• COSTS
• ACCESS TO COVERAGE AND CARE
• QUALITY AND ACCOUNTABILITY
• RACIAL AND ECONOMIC
DISPARITIES in HEALTH AND CARE
Health Care Costs: Magnitude of Growth
Both total and per capita spending on health keep skyrocketing.
U.S. Total and Per Capita Expenditures on
20081
Health Care, 1965-
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$-
$2,000
$1,500
$1,000
$500
$172
$0
$35 Billion
5 975 985 994 996 998 000 002 004 006 008
6
9
1
1
1
1
1
1
2
2
2
2
2
Total (billions)
Per Capita
Source: “Health Spending Growth at a Historic Low in 2008,” Health Affairs. January, 2010.
Per Capita
Expenditures (Billions)
$2,500
$7,681
$2.33Trillion
$9,000
Estimates for
2009: NHE=$2.5
Trillion;
Per capita=
6
$8,046
The US Spends the Highest Fraction of National
Income on Health
Total expenditure on health (% of GDP)
16%
14%
12%
10%
8%
6%
4%
2%
0%
OECD Health Data 2008. Latest year of data available is 2006
For US,
% of GDP
was
16.2% in
2008. The
estimate
for 2009
is 17.3%
Access to Care
The number of uninsured people in
the US is unacceptably high and is
rising quickly in this recession
• In 2008 there were about 46 million
uninsured and over 70 million
underinsured people in the US
• The number of uninsured would have risen
to about 55 million by the end of 2019
• Being Uninsured is very bad for your
health!
Specialist and Generalist Physician
Trends
(Counting Primary Care Subspecialists as Specialists)
% Generalists
Specialists
Generalists
100%
500
75%
400
300
50%
200
25%
0%
Source: AMA, Physician Characteristics and Distribution in the U.S., 2010.
100
0
Projection of RN’s Supply vs. Demand
Quality
“Serious and widespread quality problems
exist throughout American medicine. These
problems…occur in small and large
communities alike, in all parts of the
country... Very large numbers of Americans
are harmed as a result.”*
* Quoted in: Berwick, D.M. (2002). "A User’s Manual for the IOM’s 'Quality Chasm'
Report." Health Affairs 21(3):80-90.
International Comparison of Quality, 2007
US
AUS
CAN
GER
NET
NZ
UK
Patients confident to
receive high-quality care
35%
2*
34%
28%
24%
59%
30%
28%
Patients with no doctors
visit when sick
25%
7
13%
4%
12%
1%
19%
2%
Patients with out-of-pocket
expenses >$1,000
30%
7
19%
12%
10%
5%
10%
4%
Patients with 2 or more ER
visits
17%
6
15%
20%
4%
6%
10%
13%
Patients with medical,
medication or lab error
20%
6/7
20%
17%
12%
14%
16%
13%
Rx drug included as core
health insurance benefit
No
6/7
Yes
No
Yes
Yes
Yes
Yes
Primary care physicians
using electronic medical
records
28%
6
79%
23%
42%
98%
92%
89%
* Rank out of
7 countries
Source: Schoen et al (2007): Toward higher-performance health systems: Adults’ health care experience in seven countries,
2007, Health Affairs Web Exclusive: w717-w734.
Racial and Economic Disparities
40
All races
White
Black
30
20
10
0
1970
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Deaths per 1,000 Live Births
Infant Mortality Rates by Race*
United States, 1970-2005
Source: Health, United States, 2008, Table 21
*Race of mother
Years of Potential Life Lost
due to Diabetes Mellitus,
by race and Hispanic Origin, 2005
White
Am. Indian or Alaskan
Hispanic
Black
Asian/Pacific Islander
Years lost*
400
300
200
100
0
Source: Health, United States, 2008, Table 29
* Age-adjusted years lost before age
75 per 100,000 population under 75
years of age.
Current Distribution of Health
Insurance Coverage in the US
Types of US Financing
and Number of People Covered, by Category
U.S. Population
304 million
Government
Social Insurance
Welfare
Medicare
44.8 million
Social Insurance
Medicaid
58.7 million
Welfare
47% of total spending
Private
Insurance
173.8 million
Employer
Sponsored
159.3 million
Uninsured
45.6 million
Other
Private
14.5 million
53% of total
Note: Numbers do not add to total population because some persons fall in more than one category.
Medicare data is as of July 2008 (Source: Kaiser Family Foundation – based on Mathematica Policy
Research analysis of CMS State/County Market Penetration Files, July 2008). Latest Medicaid data is for
fiscal year 2006 (Source: The Urban Institute and Kaiser Commission on Medicaid and the Uninsured –
based on data from Medicaid Statistical Information System (MSIS) reports from the Centers for Medicare
and Medicaid Services (CMS), 2009).
Remaining data is for 2007 (Source: Kaiser Family Foundation – based on the Census Bureau's March
2007 and 2008 Current Population Survey).
Major Problems We Face in
Financing Health Care in 2010
Health Care Costs: Magnitude of Growth
Both total and per capita spending on health keep skyrocketing.
U.S. Total and Per Capita Expenditures on
1
$7,681
Health Care, 1965-2008
$2.33Trillion
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$-
$2,000
$1,500
$1,000
$500
$172
$0
$35 Billion
Per Capita
Expenditures (Billions)
$2,500
5 975 985 994 996 998 000 002 004 006 008
6
9
1
1
1
1
1
1
2
2
2
2
2
Total (billions)
Per Capita
Source: “Health Spending Growth at a Historic Low in 2008,” Health Affairs. January, 2010.
20
Employer Sponsored Insurance
Cumulative Changes in Health Insurance
Premiums and Workers’ Earnings, 2001-2008
Health Insurance Premiums
Workers' Earnings
119%
120%
100%
80%
60%
34%
40%
20%
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2001-2008; Bureau of Labor Statistics, Seasonally Adjusted Data from the
Current Employment Statistics Survey, 2000-2008 (April to April).
2008
Annual Growth in Cost of Health
Insurance is Crippling Employers
• The “Detroit Three” Auto Companies
• About 5% of large employers said that they have
considered the elimination of health coverage for
employees
• 22% of small employers said they may eliminate
coverage
• Leaves employees either paying most of annual
increases or losing coverage
• Many companies are eliminating or severely
cutting health benefits for retirees
Source: www.CHCF.org
Medicare
Medicare
• 1965 amendment to the Social Security Act of
1935 (Title XVIII)
• Social Insurance for the elderly and disabled.
Nationwide eligibility and benefits.
• A Defined Benefit Plan with no limit to annual
spending
• Covers 45 million people: over-65, disabled,
people with ESRD, ALS
• In 2009, Medicare spending was (approx) $507
billion (13 % of the federal budget)
Medicare
• Part A covers hospital, post-hospital
nursing home and other program costs
– This is paid-up, compulsory, social insurance - no current premiums.
– Employers and employees each contribute
1.45% of wages
– Provides defined benefits with deductibles and
co-payments.
– 2010 Part A hospital deductible is $1,100*
* The Henry J. Kaiser Family Foundation, 2010 Medicare Benefit Table, available online at:
http://www.kff.org/medicare/med2010benefitstable.cfm
Medicare
• Part B covers physician costs, home health benefits, and some
other expenses.
– This is subsidized, voluntary insurance.
– Current (2010) premium of $110.50 is 25% of actual cost.
(Lower income beneficiaries will still pay$96.40.)*
– Starting 2007 – enrollees with incomes > $85k per year
($170k for couple) will pay higher income-related
premiums (up to $353.60 per month for people with
incomes over $213K ($426K for couple).
– As of 1998, annual premium increases related to CPI
growth. (No increase in SS payments this year.)
– Includes deductible and co-pays. Current deductible is
$155/year*. Co-pay is 20% of approved amount.
– Need “Medigap” or Medicare Advantage to cover co-pays
The Medicare Prescription Drug Improvement
and Modernization Act of 2003 (Part D)
• Created Voluntary Rx Drug Benefit Available to
ALL Medicare Beneficiaries
• Choice of at least 2 plans (now over 50 plans in
Michigan and most other states)
• Quality Improvements
– electronic prescribing to reduce medical errors
– pharmacy therapy to manage chronic conditions
• Prohibits price negotiation on Rx drug costs
between Medicare and Pharma companies
• Average Premium is $30.36/Mo.
Average (weighted) premium for Part D is $38.94/month
Estimated Medicare Shortfall Amount –
2007-2081
• PV* of difference between projected
expenditures and revenues for just the HI
component of Medicare (Part A) :
$11.6 trillion
• PV* of difference between projected
expenditures and revenues for Medicare
(Part A plus SMI –Part B and D)
$24.8 trillion
We need to fix this to lower the deficit!!
*PV=Present Value
Medicaid
Major Features of Medicaid
Structure
1. Federal-State Matching Program
• Feds set Standards, States define program and
manage it
2. Only certain low-income people are
eligible
3. States Select Benefit Package (within Fed.
Guidelines)
4. There are 56 different Medicaid Programs
5. In 2009, Medicaid spent approx. $378.3
Billion
Medicaid Eligible Population
Income Level
Aged
Blind
Disabled
Federal Poverty Level
Medically Needy
Social Security Assistance
AFDC/ Other Pregnant
TANF Kids Women
Everyone else
Medicaid Eligible Population
Income Level
Aged
Blind
Disabled
AFDC/ Other Pregnant
TANF Kids Women
300% FPL
300% FPL
200% FPL
200% FPL
SCHIP
150% FPL
150% FPL
133% FPL
133% FPL
Federal Poverty Level
Medically Needy
Medicaid
133% FPL
Everyone else
Health Reform
Medicaid Eligible Population
Income Level
Aged
Blind
Disabled
AFDC/ Other Pregnant
TANF Kids Women
133% FPL
Federal Poverty Level
Medically Needy
Medicaid
Everyone else
Medicaid Eligible Population
Income Level
Aged
Blind
Disabled
AFDC/ Other Pregnant
TANF Kids Women
150% FPL
133% FPL
Federal Poverty Level
Medically Needy
Medicaid
Everyone else
Medicaid Eligible Population
Aged
Blind
Disabled
AFDC/ Other Pregnant
TANF Kids Women
200% FPL
Income Level
SCHIP
150% FPL
133% FPL
Federal Poverty Level
Medically Needy
Medicaid
Everyone else
Medicaid Eligible Population
Aged
Blind
Disabled
AFDC/ Other Pregnant
TANF Kids Women
Income Level
300% FPL
200% FPL
150% FPL
133% FPL
Federal Poverty Level
Medically Needy
Medicaid
Everyone else
Medicaid Eligible Population
Aged
Blind
Disabled
AFDC/ Other Pregnant
TANF Kids Women
Everyone else
Income Level
300% FPL
200% FPL
150% FPL
133% FPL
Federal Poverty Level
Medically Needy
Medicaid
Health Reform
What Services Does Medicaid
Cover?
State Medicaid programs must cover certain “mandatory services” enumerated in federal law in order
to receive federal matching funds. Most Medicaid beneficiaries are entitled to receive the following
services if they are determined to be medically necessary by the state Medicaid program or a managed
care organization with which the state contracts:
•
•
•
•
•
Physician services
Hospital services (inpatient and
outpatient)
Laboratory and x-ray services
Early and periodic screening,
diagnostic, and treatment (EPSDT)
services for individuals under 21
Medical and surgical dental services
•
•
•
•
•
•
Rural and federally-qualified health
center services
Family planning
Pediatric and family nurse
practitioner services
Nurse midwife services
Nursing facility services for
individuals 21 and older
Home health care for persons eligible
for nursing facility services
What Services Does Medicaid
Cover?
States can choose to cover certain additional services and are entitled to receive federal
matching funds for these “optional” services. Commonly offered optional services include:
•
•
•
•
•
•
•
•
Prescription drugs
Clinic services
Dental and vision services and
supplies
Prosthetic devices
Physical therapy and rehab services
TB-related services
Primary care case management
Nursing facility services for
individuals under 21
•
•
•
•
•
Intermediate care facilities for
individuals with mental retardation
(ICF/MR)services
Home-and community-based care
services
Respiratory care services for
ventilator-dependent individuals
Personal care services
Hospice
Medicaid Has Many Problems, Yet
Plays a Major Role in Health
Reform Proposals
• Major part of state budgets, leading to
cutbacks across the country
•Dropping recipient groups and benefits
•Low reimbursement rates—Low physician
participation
•Unequal across states
•Reform relies heavily on Medicaid to cover
the low-income uninsured. Governors are
worried.
The Uninsured
The Uninsured as
Compared to the Insured:
•
•
•
•
•
•
•
•
•
Have poorer health status overall.
Use fewer health care services overall.
Less likely to have a medical home/ receive preventive care.
More likely to delay seeking care.
More likely to enter treatment at a more serious stage of
illness.
Less likely to control chronic diseases adequately.
Less likely to receive costly, high tech interventions for
illnesses.
More likely to die in hospital and outside of hospital.
Pay 2.5 times more for health care than the insured
Hadley, J. “Sicker and Poorer—The Consequences of Being Uninsured: A Review of the Research on the Relationship
between Health Insurance, Medical Care Use, Health, Work, and Income.” Med Care Res Rev 2003; 60; 3
Major Features of The Patient
Protection and Affordable Care Act
of 2010
1. Individual Mandate: Everyone must have
insurance, or face a penalty if they don’t
purchase a plan (penalty is $95 in
2014increasing to $695 in 2016, or 2.5%
of income by 2016).
a. Subsides to households below 250% of
FPL
The Patient Protection and
Affordable Care Act
2. Employer Contribution: Penalizes
companies with over 50 workers who don’t
provide insurance ($2,000 per worker), but
exempts paying penalty for first 30 workers.
a. Tax credits for small employers (<25
workers, average wage < $50K)to pay for
insurance
The Patient Protection and
Affordable Care Act
3. Insurance Reform: Covers dependents up
to 26 years old; guaranteed issue -companies cannot exclude pre-existing
conditions; no recission; no annual or
lifetime caps, etc. Feds can regulate
insurance company rate increases and
unfair practices. Starts in 2014 (Changes
for children already starting.)
The Patient Protection and
Affordable Care Act
3a. Creates (Interim) High Risk Pools for
those with pre-existing conditions and no
HI for six months (run either by states or the
federal government). Scheduled to start
September 1, 2010. Many states are
refusing to take this on due to costs.
The Patient Protection and Affordable
Care Act
4.
Insurance Exchanges: Individuals and employees of small
employers can purchase insurance through State Level
exchanges. These will all be private plans, there is no “Public
Option.” Different levels of coverage: Bronze, Silver, Gold,
Platinum and Catastrophic. Starts in 2014
5.
Medicaid Expansion: Medicaid will cover everyone under
133% of FPL, including childless adults. Feds cover 100% of
costs for newly eligible (2014-7), then 95% (2018-9), then 90%
of costs after 2020. Starts in 2014.
a. Reauthorizes CHIP until 2019
b. Raises Medicaid Rates to Medicare Rates for Primary Care
Providers
The Patient Protection and
Affordable Care Act
6. Medicare Changes: No Part D doughnut
hole by 2020. Reimbursed $250 this year if
you reach the doughnut hole.
a. Increases Medicare Payroll Tax to 2.35%
from 1.45% for the affluent (over $200K/year
per individual ($250k couple). Additional
3.8% tax on unearned income over $200k/year
per individual ($250k couple).
The Patient Protection and
Affordable Care Act
7.
Financing: Medicare increases. Also,
starting in 2018, excise tax on high coverage
plans (>$27,500 for family). At individual
and small group level--Subsidies and tax
credits. Individual and employer penalties for
not purchasing insurance. Elimination of
“excess payments” to Medicare Advantage
Programs.
The Patient Protection and
Affordable Care Act
8. Prevention and Public Health. Creates
National Prevention, Health Promotion and
Public Health Council to coordinate
federal wellness programming.
Disseminate evidence-based preventive
services and community preventive
services. $7 Billion allocation from 20102015 plus $2 Billion per year after 2015.
The Patient Protection and
Affordable Care Act
9. Long-term Care. “Community Living
Assistance Services and Supports” (CLASS).
Voluntary payroll deductions for long-term care
assistance. After 5-year vesting period, all participants
would be eligible for average of $50/day for non-medical
support services for people with functional disabilities.
Increase Medicaid support for home and communitybased services programs. Nursing homes required to
disclose more information to the public.
The Patient Protection and
Affordable Care Act of 2010
10. Workforce. Increased funding for Primary Care
residencies and for primary care practitioners. Addresses
nursing shortage by increasing capacity for education
programs, supporting training programs, etc. Funding for
training that employs medical home and disease
management models.
11. Community Health Centers. $11 billion
additional funding over 5 years. School-based
health centers, nurse clinics, etc. encouraged.
The Patient Protection and
Affordable Care Act
12. Abortion: No federal financing for
abortion
13. Illegal immigrants cannot purchase HI
from an exchange.
The Patient Protection and
Affordable Care Act
14. Waste, Fraud and Abuse efforts are expanded.
15. Malpractice Reform: Grants to states to
experiment with new approaches to malpractice
reform.