Is the American
Health Care System
Too Sick to Save?
NAHU’s Healthy Access Plan—Our Vision for Affordable and
Responsible Health Reform
National Association of Health Underwriters
2000 N. 14th Street, Suite 450
Arlington, VA 22201
(703) 276-0220
(703) 841-7797 FAX
www.nahu.org
U.S. Medical Costs Are Rising Drastically
What solutions address this cost increase?
2.5
Medical Inflation
Rose 112.5%
2.0
1.5
1.0
General Inflation
Rose 28.8%
0.5
'98
'99
'00
'01
'02
'03
'04
Year
Kaiser Family Foundation, “Health Care Costs – A Primer,” August 2007; OECD Stats, 2007
'05
'06
Medical Costs Are Rising Drastically
• How can we constrain medical costs?
• How will we get access for all?
• How about financing access?
Constraining
Medical
Costs
Constraining Medical Costs
How Much Can Private Insurance Costs
Be Affected?
1/3 Taxes
Administration
14%
Claims Cost
86%
Centers for Medicare & Medicaid Services, 2004
Constraining Medical Costs
How Much Can Private Insurance Costs
Be Affected?
Administration
14%
Other Claims
Cost
70.9%
Behavior
15%
Aon Consulting, Research Brief “The Impact of Consumer-Directed Health Plans with Integrated Health
Improvement Services on Health Care Consumers,” October 2006
Constraining Medical Costs
Determinants of Health Status
Lifestyle
Choices
50%
Access
to
Care
10%
Genetics
20%
Environment
20%
Mercer Management Journal 18, “The Case for Consumerism in Health Care”
Constraining Medical Costs
Behavior & Lifestyle: The Cost of Smoking
Dollars (Billions)
180
160
$75 B.
Direct
Medical
Costs
140
120
100
80
60
40
20
0
$88.8 B.
Product
Taxes &
Revenue
Tobacco Revenue
$92 B.
Lost
Productivity
Cost to Country
Centers For Disease Control & Prevention, Tobacco Use Fact Sheet (July 2007)
Constraining Medical Costs
Behavior & Lifestyle: Weight Gain ’86-’06
No Country Can
Fund All the
Consequences:
Hypertension
Type 2 Diabetes
Osteoarthritis
Stroke
Coronary Heart
Gallbladder
Sleep Apnea
Respiratory
Issues
Some Cancers
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
Obesity Trends Among U.S. Adults (BMI>30%)
No Data
<10%
10%–14%
15%–19%
20%–24%
25%–29%
≥30%
Centers for Disease Control & Prevention, 2006 Behavioral Risk Factors Surveillance System
Constraining Medical Costs
Behavior and Lifestyle: Solutions
• Incorporate wellness and disease-management
into all government employee programs
–
–
–
–
–
–
Federal employees
State employees
Medicaid
Medicare
SCHIP
Veteran Health System
• Encourage employer wellness programs
– Legal protection
– Tax incentives
– Premium incentives
Constraining Medical Costs
How Much Can Private Insurance Costs
Be Affected?
Administration
14%
Other Claims
Cost
67.6%
Behavior
15%
Inefficiencies
3.3%
National Institute of Medicine, Report on Medical Errors, November 1999
Constraining Medical Costs
System Inefficiencies: Solutions
• Improve system inefficiencies in doctor and
medical facilities
– Pay for performance
– Best practice guidelines
– Evidence-based medicine
• Federal standards for interoperable
electronic medical records
– Unify the system
– Reduce errors
– Improve patient satisfaction of the entire
system
Constraining Medical Costs
How Much Can Private Insurance Costs
Be Affected?
Administration
14%
Other Claims
Cost
62.6%
Behavior
15%
Inefficiencies
3.3%
Malpractice
5%
Towers Perrin, “U.S. Tort Costs: 2005 Update,” March 2006
PricewaterhouseCoopers, “The Factors Fueling Rising Healthcare Costs 2006,” February 2006
Constraining Medical Costs
Medical Malpractice: Solutions
• Malpractice reform limits
– Limit non-economic damages
– Increase effectiveness of disciplining
incompetent doctors
Constraining Medical Costs
How Much Can Private Insurance Costs
Be Affected?
Administration
14%
Other Claims
Cost
45.1%
Behavior
15%
Inefficiencies
3.3%
Government
Cost Shift
Uninsured
9.5%
Cost Shift
8%
•Margaretann Cross, “Confronting the
Medicare Cost Shift,” Managed Care, Dec. 2006
•2003 Health Affairs, “Kaiser Commission Report on Medicaid & the Uninsured”
Malpractice
5%
Constraining Medical Costs
Government Cost-Shifting to Hospitals
$14,000
$12,000
$10,000
Average
33%
Less
$8,000
$6,000
$4,000
Medicare/Medi-Cal
Blood
Poisoning
Kidney
Infections
Esophagitis
Gastrointestinal
Hemorrhage
Heart Failure
Pneumonia
Chronic
Pulmonary
$0
Intracranial
Hemorrhage
$2,000
Commercial
Managed Care Magazine, December 2006: Confronting The Medicare Cost Shift
Constraining Medical Costs
Government Cost-Shifting to Hospitals
20.0%
14.3%
15.0%
Profit Margin
10.0%
Commercial Margin
5.0%
0.0%
Medicare Margin
Breakeven
Medicaid Margin
-5.0%
-10.0%
Hospital Breakeven
Point
-15.0%
-20.0%
-18.2%
-18.5%
-25.0%
Premera Blue Cross, May 2006: Payment Level Comparison Between Public Programs
and Commercial Health Plans for Washington State Hospitals and Physicians
Constraining Medical Costs
Who Is Supporting the Health Care System?
200
$5,477 Per Person
Billions of Dollars
$1,000
$12,913 Per Person
180
160
140
$800
120
$600
100
80
$400
60
$200
40
20
$0
$1,739 Per Person
Commercial
Uninsured
Medicare/Medicaid
Annual Expenditure
$953
$80
$891
Number of Americans
174
46
69
0
2006 Chapterhouse, LLC: Census Bureau, “Current Population Survey,” CMS, Kaiser Family Foundation, EBRI, U.S. GAO, CBO
Millions of People
$1,200
Constraining Medical Costs
Cost-Shifting: Solutions
• Require Medicare, Medicaid & SCHIP to reimburse
doctors and hospitals at same level as the Federal
Employees Health Benefit Plan.
• Provide incentives for states to streamline the
application process for government programs.
Constraining Medical Costs
How Much Can Private Insurance Costs
Be Affected?
Administration
14%
Other Claims
Cost
45.1%
Behavior
15%
Inefficiencies
3.3%
Government
Cost-Shift
Uninsured
9.5%
Cost-Shift
8%
Malpractice
5%
Constraining Medical Costs
Decreasing Utilization: Solutions
• Expand consumerism
– Health Savings Accounts (HSAs)
– Health Reimbursement Arrangements (HRAs)
– Flexible Savings Accounts (FSAs)
• Increase health care cost transparency
Constraining Medical Costs
How Much Can Private Insurance Costs
Be Affected?
Administration
14%
Other Claims
Cost
45.1%
Behavior
15%
Inefficiencies
3.3%
Government
Cost Shift
Uninsured
9.5%
Cost Shift
8%
Malpractice
5%
Access
for
All
Access For All
Most Uninsured Not A Crisis
46 Million Considered Uninsured:
Eligible for
Government
Program
(but not signed up)
34%
80%
$50,000+
Annual Income
32%
Temporarily
Uninsured
14%
Long-Term
Uninsured
20%
February 2005 Blue Cross Blue Shield Association analysis of Census Bureau’s “Income, Poverty and Insurance Coverage” report
Access For All
Most States Have Guaranteed Access
to Individual Coverage
Guaranteed-Issue Market
High-Risk Pool
No Mechanism
Other
Insurer of Last Resort
Access for All
Recommendations for Guaranteed Access to
Health Insurance in Every State
• In a number of states there are individuals with serious
medical conditions and no access to employer-sponsored
health insurance – they cannot buy health insurance at any
price. Most states (but not all) have at least one guaranteed
option, with the most common being a high-risk health
insurance pool. The federal government should require that
all states have at least one private guaranteed purchasing
option for all individual health insurance market consumers.
• The federal government should provide seed grants to states
creating high-risk pools and states that provide risk-pool
premium subsidies to low-income citizens and older
beneficiaries to help ensure continued coverage for early
retirees.
Access for All
Important to Understand Claims Utilization
Total Claims Incurred
Insured Population
5%
50%
45%
45%
50%
5%
Under the plans currently being offered by most employers, the majority of
employees are not filing claims or using their benefits. However, we are
paying premiums as if they do.
Access for All
Reinsurance
• Making it easier and more affordable for carriers
to reinsure expenses related to extraordinary
claims could prove to be an effective way of
lowering premiums.
• In considering reinsurance as part of an overall
reform package, Congress should conduct a study
to thoroughly analyze the efficacy of reinsurance
programs.
Access for All
Smart State Reforms Make a Difference
Varying regulatory climates can have a profound impact on insurance affordability.
Consider the differences in individual rates for two 30-year-old males living in a
Philadelphia suburb located across the bridge from each other – in different states.
PA
September 2007
Lowest and Highest
Rates for PPO
Indemnity Plans:
NJ
$1000 Deductible
80/20% Coinsurance
$70 - $260
Wayne, PA
19087
In Neighboring
Philadelphia
Suburbs
$599 - $6,009
Haddonfield, NJ
08033
Access for All
Affordable Access Grants to States
• In some states, over-regulation of the health insurance market has
decreased competition and increased premium costs.
• NAHU believes states should be encouraged to create regulatory
climates that ensure the availability of many affordable coverage
options, as well as offer premium subsidies to targeted populations.
• The federal government should make block grants available to states
to encourage and reward state health insurance innovations that
utilize the strengths of the existing private health insurance
marketplace like:
– Broadly funded high-risk pools
– Allowing for the assessment of insurable risk in the individual and smallgroup health insurance markets
– Statewide medical liability reforms
– Limits on state mandated benefit requirements
– Low-income subsidies and tax incentives for the purchase of private
coverage
– Premium assistance in Medicaid and SCHIP
Access for All
Tax Equity
• The vast majority of privately insured Americans are happy with
their employer-sponsored coverage. The preservation of the
federal employer tax deduction and employee exclusion is
critical.
• But the employer-sponsored health insurance system does not
work for everyone.
• We should provide the same tax deductions to individuals and
the self-employed that corporations have for providing health
insurance coverage for their employees.
– Remove the 7.5% of adjusted gross limit of medical expenses on tax filers’
itemized deduction Schedule A form
– Allow the deduction of individual insurance premiums as a medical expense
– Equalize the self-employed health insurance deduction to the level
corporations deduct
– Clarify federal requirements regarding individual policies sold on a list-bill
basis regarding the establishment of Section 125 plans, HIPAA group
insurance protections, and the applicability of state-based individual health
insurance laws and regulations.
Access For All
Public/Private Producer Community
Education Partnership
• All health insurance consumers, both
private and public, should have access to
quality information and assistance
regarding their health care coverage.
• NAHU will assume responsibility for training
insurance agents in all coverage options,
both public and private, through the
creation of a designation program—the
Certified Health Care Access Advisor.
Financing
Access
Financing Access
• Raise public funds to prevent cost-shifting to
private sector.
• Raise them from activities that drive up health
costs
–
–
–
–
Cigarettes and tobacco products
Alcohol
Unhealthy food
Handguns and ammunition
Solutions Exist to Fix Health Care
• Work to constrain medical costs
• Continue increasing access to coverage
• Decide how “access” will be financed
NAHU
Our Current Health Care System
Is Not Dead.
Healthy Access Can Fix It!