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Health System Reform:
Why Now?
Why Colorado? Who’s Next?
Len M. Nichols, Ph.D.
Director, Health Policy Program
New America Foundation
Hot Issues in Health Care Legislative Conference
Colorado Springs, Colorado
November 17, 2006
Overview
•
•
•
•
•
Introduction to Health Markets
Sources of extreme stress
Why the national debate is stuck (for now)
Competing Visions
States as
– Laboratories
– Catalysts
• How Colorado could inspire the nation
2
Are Health Markets “Different?”
• Information asymmetries
– Clinician-patient
– Consumer-insurer
• Third-party payment
– Moral hazard
• Voluntary insurance purchase
– Adverse selection
• Expenditure distribution skewed
– Risk pooling necessary
– Competing definitions of “fair” risk pool
3
Linked Problems
• Low Value for Dollar
• Uneven quality
• Inequitable access to care
4
Compared to Other Countries
• #1 in spending, share of GDP, per capita
• #37 (by WHO) on overall system
performance, next to Slovenia and Costa
Rica
– Life expectancy, child survival, fairness,
responsiveness, health outcomes
5
Medicare Quality and Spending Correlation
6
Source: Baiker and Chadra, Health Affairs we, April 7, 2004
US Overuses interventionist technological procedures
7
Institute for Healthcare Improvement’s
Ventilator Associated Pneumonia
program
• Known how to eradicate VAP since ’99
• 14 hospitals have
• 6 more have made great progress
• Why hasn’t every hospital nationwide done
this?
8
Percent of median family income
required to buy family health insurance
20
18
16
14
12
10
8
6
4
2
0
19
7.7
1987
2005
Source: Author’s calculations, using KFF and AHRQ premium data,
CPS income data.
9
Family health insurance premium
as percent of wages
50
45
40
35
30
25
20
15
10
5
0
47.8
33.2
33
Mean
Median
25th percenti
22.4
26.4
17.9
1998
2004
Source: author’s analysis of KFF premium data, BLS wage data
10
Labor Market Realities
Occupation
Physician
Family premium/Median wage
7.9%
History professor
14.8%
Secretary
30.9%
Carpenter
25.6%
Cook
50.0%
Source: KFF premium and BLS wage data, 2004.
11
Premium Payments v. GDP
Growth Rate
14%
12%
10%
8%
esi
gdp
6%
4%
2%
0%
1999
2000
2001
Source: NIPA, BEA/Commerce Dept.
2002
2003
12
Employer Health Insurance
Payments / Corporate Profits
esi/pre-tax
esi/post-tax
100%
80%
60%
40%
20%
0%
1998
1999
2000
2001
2002
2003
13
Some Coverage Trends
(percent of under-65 population)
Employer
Medicaid+SCHIP
Uninsured
1987
1993
2004
70.1%
64.3%
62.4%
8.7%
12.9%
13.4%
13.7%
16.0%
17.8%
Source: EBRI, December 2005.
14
Result of our incremental
approaches
• Health insurance as we know it is out
of reach of a growing share of our
workforce
• We tolerate a stunning amount of
mediocre performance
15
Linkages Among Problems
Access
Cost
Quality
16
Political Gridlock and Fear
• R’s don’t want real reform discussions
– universal coverage threatens tax cuts (#1)
– Serious cost-growth containment requires enhanced
government role
• D’s don’t know what they want
– Some want to use UC to get power
– Others fear and want to avoid it to get power
– Others fear any solutions which unions don’t like
17
Visions of Problems
• Right:
– High costs caused by moral hazard (too much insurance
coverage)
– Coverage expansion will require unimaginable taxes
• Left
– High costs caused by market forces, market power/high
profits, adverse selection
• Center
– Problems LINKED, must be addressed simultaneously,
for technical and political reasons
18
Competing Policy Visions
• New Wild West, with tax breaks
– Individual consumers will drive efficiency
• Musty Cocoon of Single Payer
– Elite control will drive efficiency
• Brave New World
– Mandates, smart regulation, combined buying power
will drive efficiency
19
President’s Proposals
• Encourage non-group purchase of HSAeligible insurance
– Premium + OOP from HSAs deductible
– Payroll tax credit for HSA contribution
• Support passage of AHPs + federal override
of state regulation of insurance markets
• Malpractice reform
• HIT and transparency exhortations
20
21
What Do We Need?
• Political Space to Begin the Conversation
– Moral case
• Proof we are all in the same community
– Economic case
• Delivery system “culture of value”
• Credible policy design
– 3 dimensions of credibility
• Stakeholders, politicians, people
22
Health System Culture of Value
• Information infrastructure to support quality improvement
• Malpractice safe harbors and value-enhancing incentives (for
all)
• Comparative technology assessment as countervailing power
between medical technology and coverage/use decisions
– Raise the bar at the FDA
– Raise the bar for procedural interventions as well
• Create Health Home, pay Host to guide us through system,
teach/learn evidence base with us
23
Credible Policy Design
• Individual and Shared Responsibility
– Individual purchase requirement
– Purchasing pool
• Risk pooling/market rules
• Administrative economies of scale
– Subsidies for lower income
– Financing sources
• Culture of Value
– Evidence-based limits on collectively financed benefits
• Preservation of liberty and choice
24
Pew Typology: Support for government guarantee of
health insurance, even if taxes must be raised
90
80
70
60
50
40
30
20
10
0
ENTR
SC
PG Cons
UP
Disaff
Cons D
Disadv D Liberals
25
Pew Center for Research on People & the Press: 2005
States as Laboratories
• No inpatient coverage
– Utah, West Virginia
• Limited inpatient coverage
– Arkansas, New Mexico, Tennessee
• Piggyback on state’s purchasing power
– West Virginia, Oklahoma
• Encourage offers within purchasing pools
– Montana
• Adding Adults
– Wyoming, Pennsylvania
26
States as Catalysts
• Maine
– Build it, capture savings, hope they’ll come
• Illinois
– Cover all kids, cover all citizens?
• Vermont
– Bipartisan, insurance home and subsidies for uninsured
• Massachusetts
– Bipartisan, individual mandate, subsidize lower
income in smaller firms, hard budget constraint
27
Why Colorado Should Do This
• Ich Bien Ein Coloradan
• It would confound the cynics
• It would inspire the Just
• It would concentrate minds in Washington
28
What Can Colorado Do Alone?
• Agree to work across party lines
• Create sustainable structures
–
–
–
–
Efficient markets
Transparent information systems
Subsidies and benefits for target population
Build in budget safeguards
• Agitate for Federal partnership
29