Financing Healthcare and The Uninsured Kiersten Adams Jay Singerman Jen Storch Ashley Thomas James Trinidad.

Financing Healthcare Financing Healthcare and and The UninsuredThe Uninsured

Kiersten AdamsKiersten AdamsJay SingermanJay SingermanJen StorchJen StorchAshley ThomasAshley ThomasJames TrinidadJames Trinidad

AgendaAgenda

Overview of FinancingOverview of Financing Overview of The UninsuredOverview of The Uninsured Key Issues for RepublicansKey Issues for Republicans Key Issues for DemocratsKey Issues for Democrats Current LegislationCurrent Legislation Proposed LegislationProposed Legislation

Overview of Overview of FinancingFinancing

Overview- MedicareOverview- Medicare

Medicare- started in 1965 with Medicare- started in 1965 with Title XVIII of the social security Title XVIII of the social security amendmentsamendments

Medicare- Medicare- – Part A- Hospital InsurancePart A- Hospital Insurance– Part B- Supplemental Medical Part B- Supplemental Medical

InsuranceInsurance– Part C- Medicare AdvantagePart C- Medicare Advantage– Part D- Prescription Drug CoveragePart D- Prescription Drug Coverage

Overview- MedicaidOverview- Medicaid

Medicaid- started in 1965 with Medicaid- started in 1965 with Title XIX of the social security Title XIX of the social security amendmentsamendments

States determine eligibility, States determine eligibility, receive portion of funding from receive portion of funding from Federal governmentFederal government

Employer- Sponsored Employer- Sponsored & Blue Cross Blue & Blue Cross Blue ShieldShield Employer-Sponsored PlansEmployer-Sponsored Plans

– 1919thth century Europe- to compensate for century Europe- to compensate for dangerous jobsdangerous jobs

– WWII wage controlsWWII wage controls– 1954- HI benefits tax deductible to 1954- HI benefits tax deductible to

employersemployers Blue Cross Blue ShieldBlue Cross Blue Shield

– 1930’s- community-based, voluntary, not for 1930’s- community-based, voluntary, not for profit profit

– Blue Cross- HospitalizationBlue Cross- Hospitalization– Blue Shield- Physician ServicesBlue Shield- Physician Services

National Health National Health ExpendituresExpenditures In 2004, national health expenditures In 2004, national health expenditures

equaled $1.8 trillion equaled $1.8 trillion Expected to increase approximately 8% Expected to increase approximately 8%

annuallyannually 17% of the GDP, increasing annually17% of the GDP, increasing annually U.S. health care spending is expected to U.S. health care spending is expected to

increase at similar levels for the next increase at similar levels for the next decade reaching $4 TRILLION in 2015, or decade reaching $4 TRILLION in 2015, or 20 percent of GDP20 percent of GDP

Trends equate to higher premiums, higher Trends equate to higher premiums, higher out-of pocket spending and higher taxesout-of pocket spending and higher taxes

Self-Pay v. Third-Party Self-Pay v. Third-Party SpendingSpending Self-Pay= 12.6% of all healthcare Self-Pay= 12.6% of all healthcare

expendituresexpenditures Third-Party= 87.4%Third-Party= 87.4%

Percentage of third-party spending Percentage of third-party spending increased dramatically from the increased dramatically from the 1950’s-1990’s and has since been 1950’s-1990’s and has since been stagnantstagnant

Public v. Private Public v. Private SpendingSpending Private= 54.9% of all healthcare Private= 54.9% of all healthcare

expendituresexpenditures Public= 45.1%Public= 45.1%

Public spending has been Public spending has been increasing dramaticallyincreasing dramatically

32% of Americans are covered by 32% of Americans are covered by Medicare or MedicaidMedicare or Medicaid

Financing TrendsFinancing Trends

Healthcare is unique because the Healthcare is unique because the person who pays is often not the person who pays is often not the person who receives health person who receives health servicesservices

Financing has shifted from Financing has shifted from individuals to employers and the individuals to employers and the governmentgovernment

Financing TrendsFinancing Trends

Premiums are increasing faster than Premiums are increasing faster than inflation and increases in wagesinflation and increases in wages

Many employers are no longer offering Many employers are no longer offering health benefitshealth benefits

Therefore, an increasing number of Therefore, an increasing number of people can no longer afford health people can no longer afford health insuranceinsurance

Those who can are facing increased Those who can are facing increased premiums, deductibles, employee premiums, deductibles, employee contributions and taxescontributions and taxes

Overview of the Overview of the UninsuredUninsured

Number of UninsuredNumber of Uninsured

Number reached 46.1 million in Number reached 46.1 million in 20052005

80% of these live in households 80% of these live in households below 300% of the poverty levelbelow 300% of the poverty level

25% eligible for SCHIP or Medicaid25% eligible for SCHIP or Medicaid 56% not eligible, but need 56% not eligible, but need

assistance in obtaining private assistance in obtaining private insurance insurance

Characteristics of Characteristics of UninsuredUninsured

With ChildrenWith Children Predominantly US Predominantly US

CitizensCitizens Majority have one Majority have one

worker in familyworker in family Mostly HispanicMostly Hispanic Live primarily in Live primarily in

SouthSouth

Without ChildrenWithout Children Predominantly US Predominantly US

CitizensCitizens 56% come from 56% come from

families with no families with no workersworkers

Mostly WhiteMostly White Live primarily in the Live primarily in the

West and NortheastWest and Northeast

Health Status by Health Status by Race/Ethnicity and Race/Ethnicity and IncomeIncome

Health Insurance Health Insurance Coverage by Coverage by Race/EthnicityRace/Ethnicity

Uninsured among those Uninsured among those who workwho work

Uninsured ChildrenUninsured Children

8 million are uninsured8 million are uninsured 74% are eligible for SCHIP74% are eligible for SCHIP 60% of these children live in 60% of these children live in

families with income at FPL families with income at FPL

Characteristics of Characteristics of Uninsured ChildrenUninsured Children Mostly teensMostly teens 25% under age 625% under age 6 40% Hispanic40% Hispanic 33% White33% White 18% Black18% Black 85% US Citizens85% US Citizens Live mostly in West and SouthLive mostly in West and South

Characteristics of Characteristics of Uninsured above 300% Uninsured above 300% FPLFPL Age 19-29 with income above 300% Age 19-29 with income above 300%

FPL more likely to be uninsuredFPL more likely to be uninsured Hispanics with income above 300% Hispanics with income above 300%

FPLFPL More likely to have one worker in a More likely to have one worker in a

small firmsmall firm Less likely to report excellent or Less likely to report excellent or

very good healthvery good health

Illegal Aliens (AKA Illegal Aliens (AKA Undocumented Non-US Undocumented Non-US Citizens)Citizens) Comprise 5 million of the Comprise 5 million of the

uninsureduninsured NOT eligible for public assistance NOT eligible for public assistance

programsprograms Numbers skew uninsured Numbers skew uninsured

characteristicscharacteristics

Elderly Without Health Elderly Without Health InsuranceInsurance Some have only Medicare Part A to fall back onSome have only Medicare Part A to fall back on 17% (41 million) of those 65 and older have no other 17% (41 million) of those 65 and older have no other

insuranceinsurance

Access and Outcomes for Access and Outcomes for UninsuredUninsured Study used Medical Expenditure Panel Surveys to Study used Medical Expenditure Panel Surveys to

assess people’s SES, insurance coverage and assess people’s SES, insurance coverage and access to care.access to care.

Found:Found:– Those uninsured who have an injury or new Those uninsured who have an injury or new

chronic condition have trouble accessing care chronic condition have trouble accessing care and it takes longer for them to return to full and it takes longer for them to return to full healthhealth

– No difference in referral of additional services No difference in referral of additional services (PT, Home Health, etc)(PT, Home Health, etc)

– More difficult to obtain health insurance in the More difficult to obtain health insurance in the futurefuture

– Those with chronic conditions less likely to Those with chronic conditions less likely to receive treatment beyond initial consultation.receive treatment beyond initial consultation.

Why are so many Why are so many uninsured?uninsured? Lack of employer sponsored Lack of employer sponsored

insuranceinsurance Health costs are outpacing Health costs are outpacing

inflation increasesinflation increases Limited Medicaid coverage for low Limited Medicaid coverage for low

income adultsincome adults Variations in state economiesVariations in state economies

Key Issues for Key Issues for RepublicansRepublicans

Republican ViewsRepublican Views

Freedom to Choose Health Savings Freedom to Choose Health Savings Accounts Accounts

Individuals to Choose Their Own Health Individuals to Choose Their Own Health Insurance Benefits Insurance Benefits

Providing More Affordable Health Care Providing More Affordable Health Care Choices by Expanding CompetitionChoices by Expanding Competition

Expanding Coverage Options for the Expanding Coverage Options for the Working UninsuredWorking Uninsured

Task Force on Health Task Force on Health Care Costs and the Care Costs and the UninsuredUninsured 20042004 Republican Senate MajorityRepublican Senate Majority Senator Judd Gregg, chairmanSenator Judd Gregg, chairman

Proposed SolutionsProposed Solutions

Create incentives for young adults to purchase lifetime, portable insurance

Improve enrollment in existing public programs

Association Health Plans Encourage more doctor and provider

participation in the safety net of care…

On National Health On National Health CareCareBUSH: I’m absolutely opposed to a national BUSH: I’m absolutely opposed to a national

health care plan. I don’t want the federal health care plan. I don’t want the federal government making decisions for government making decisions for consumers or for providers. I remember consumers or for providers. I remember what the administration tried to do in what the administration tried to do in 1993. They tried to have a national 1993. They tried to have a national health care plan, and fortunately it health care plan, and fortunately it failed. I trust people; I don’t trust the failed. I trust people; I don’t trust the federal government. I don’t want the federal government. I don’t want the federal government making decisions on federal government making decisions on behalf of everybody. behalf of everybody.

Reasons Why NotReasons Why Not

Inefficiency of federal Inefficiency of federal governmentgovernment

Decrease in patient flexibilityDecrease in patient flexibility Reduce doctor flexibilityReduce doctor flexibility Healthy people to pay the burdenHealthy people to pay the burden No benefit to be a practicing No benefit to be a practicing

physicianphysician

Defending John Q.Defending John Q.

an uninsured worker who forces an uninsured worker who forces doctors at gunpoint to treat his doctors at gunpoint to treat his son  son 

a legitimate right doesn't impose a legitimate right doesn't impose obligations on anyone else obligations on anyone else

CompetitionCompetition

"Competition must be seen as a "Competition must be seen as a process in which people acquire process in which people acquire and communicate knowledge“and communicate knowledge“

~ Nobel laureate Friedrich ~ Nobel laureate Friedrich HayekHayek

CompetitionCompetition

Where real market competition Where real market competition can be found in health care, it can be found in health care, it drives quality upward and prices drives quality upward and prices downwarddownward

Laser eye surgery & cosmetic Laser eye surgery & cosmetic surgerysurgery

Competition- The Competition- The ProblemsProblems we have disabled market we have disabled market

competition throughout the competition throughout the health care sectorhealth care sector

too little competition, too little too little competition, too little choice, and too little attention choice, and too little attention paid to costs and quality.paid to costs and quality.

Health Savings Health Savings AccountsAccounts Medical savings accountMedical savings account accompanied by a health plan accompanied by a health plan

with a high deductiblewith a high deductible

Health Savings Health Savings AccountsAccounts reduce medical spending by reduce medical spending by

making consumers more sensitive making consumers more sensitive to the costs of careto the costs of care

together with high-deductible together with high-deductible health plans should encourage health plans should encourage consumers to make prudent consumers to make prudent treatment decisions because they treatment decisions because they are spending their own moneyare spending their own money

Key Issues for Key Issues for DemocratsDemocrats

Unimaginable ChoicesUnimaginable Choices

A severely disabled man’s wife leaves A severely disabled man’s wife leaves her low-paying service sector job (which her low-paying service sector job (which did provide health benefits) so she can did provide health benefits) so she can care for her increasingly frail husbandcare for her increasingly frail husband

Although he qualifies for Medicare they Although he qualifies for Medicare they cannot afford the $600 a month in cannot afford the $600 a month in prescriptions he requiresprescriptions he requires

In desperation she takes another service In desperation she takes another service sector job, but it doesn’t offer benefits sector job, but it doesn’t offer benefits and now she can’t help her husbandand now she can’t help her husband

NCMJ January/February 2002, Volume 63, Number 1

UninsuredUninsured

The above stories represent just The above stories represent just some of the causes for uninsured some of the causes for uninsured statusstatus

Others include: Others include:

- small business who cannot afford - small business who cannot afford health coveragehealth coverage

- low income populations not - low income populations not realizing their eligibility statusrealizing their eligibility status

ResultsResults

These people will either delay These people will either delay treatment as long as possible, or they treatment as long as possible, or they will simply not get carewill simply not get care

When they do get care, it often is in a When they do get care, it often is in a free clinic, public hospital, or free clinic, public hospital, or emergency room emergency room

Now, their condition has become far Now, their condition has become far more serious and expensive to treat more serious and expensive to treat because of the delaybecause of the delay

What must happen What must happen next?next? Uninsured Americans have:Uninsured Americans have:

- Limited access to medical care- Limited access to medical care

- Social/physiological environment - Social/physiological environment that increases their vulnerability to that increases their vulnerability to disease disease

- Differences in life-style that - Differences in life-style that account for differences in health rates account for differences in health rates

Uninsured Americans need programs Uninsured Americans need programs that will help remedy their plight!that will help remedy their plight!

Democratic ViewsDemocratic Views

Democrats aim to pursue a legislative Democrats aim to pursue a legislative agenda that reflects the interests of agenda that reflects the interests of middle- and working-class Americansmiddle- and working-class Americans

Democrats want to extend health Democrats want to extend health insurance to people who cannot insurance to people who cannot afford coverageafford coverage

The following will be major issues for The following will be major issues for consideration:consideration:

Three Major IssuesThree Major Issues

1.1. Expanding insurance to as many Expanding insurance to as many children of low-income families as children of low-income families as possiblepossible

2.2. Empowering Medicare to negotiate Empowering Medicare to negotiate prices of prescription drugsprices of prescription drugs

3.3. Eliminate health insurance companies’ Eliminate health insurance companies’ discrimination on the basis of pre-discrimination on the basis of pre-existing conditionsexisting conditions

Boost S-CHIPBoost S-CHIP

Title XXI of Social Security Act: jointly Title XXI of Social Security Act: jointly financed by Federal & State financed by Federal & State governments and administered by governments and administered by the Statesthe States

Democrats must focus on expanding Democrats must focus on expanding insurance to as many children of low-insurance to as many children of low-income families as possible income families as possible

SCHIP offers states federal funds for SCHIP offers states federal funds for insurance coverage for childreninsurance coverage for children

NEJM, Volume 356:1-4, Jan. 4th, 2007Centers for Medicare/Medicaid Services; DHHS

S-CHIPS-CHIP

Families that do not currently have health Families that do not currently have health insurance may be eligibleinsurance may be eligible

States have different eligibility rules, but in States have different eligibility rules, but in most, uninsured children under the age of most, uninsured children under the age of 19, whose families earn up to $36,200 a year 19, whose families earn up to $36,200 a year (for a family of four) are eligible. (for a family of four) are eligible.

This insurance pays for: This insurance pays for: - doctor visits - doctor visits - prescription medicines- prescription medicines- immunizations - immunizations - hospitalizations - hospitalizations - emergency room visits- emergency room visits

http://www.insurekidsnow.gov/

S-CHIPS-CHIP

We must provide We must provide more funding to more funding to local health local health departmentsdepartments

In 2005, 8.3 million In 2005, 8.3 million children w/o children w/o coveragecoverage

Pelosi has said Pelosi has said repeatedly that she repeatedly that she will take up her will take up her gavel "on behalf of gavel "on behalf of America's children"America's children"

Prescription DrugsPrescription Drugs

The current Medicare Rx drug law has failed The current Medicare Rx drug law has failed to slow the rapid growth in drug prices – they to slow the rapid growth in drug prices – they are not containing drug price inflation are not containing drug price inflation

Big drug companies report record profits and Big drug companies report record profits and seniors pay higher drug prices seniors pay higher drug prices

http://www.house.gov/pelosi/

http://www.wvec.com/news/health/stories/wvec_medical_011207_medicare_drugs_house.32d0fd62.html

Tricky…Tricky…

One way to win discounts is to favor One way to win discounts is to favor some drugs over otherssome drugs over others

Beneficiaries could face a more limited Beneficiaries could face a more limited choice of medications choice of medications

Lobbyists may influence which drugs Lobbyists may influence which drugs are available are available

Pharmaceutical industry could Pharmaceutical industry could discourage the development of new discourage the development of new drugs drugs

Washington Post; December 9, 2006; Article #AR2006120801578

Mandatory Discounts Mandatory Discounts on Drugson Drugs Dept of Veterans Affairs Dept of Veterans Affairs

negotiates effectively to negotiates effectively to secure better prices for the secure better prices for the 4.4 million veterans who 4.4 million veterans who use its drug benefit use its drug benefit

"43 million people can "43 million people can have the purchasing power have the purchasing power to perhaps encourage to perhaps encourage these drug houses to give these drug houses to give the government and the the government and the American retirees a better American retirees a better price" price" - John Dingell, D-Mich., - John Dingell, D-Mich., Chairman of the House Chairman of the House Energy and Commerce Energy and Commerce Committee Committee

Piper Report; http://www.piperreport.com/archives/2007/01/medicare_drug_p.html

http://www.wvec.com/news/health/stories/wvec_medical_011207_medicare_drugs_house.32d0fd62.html

Comprehensive Health Comprehensive Health InsuranceInsurance Provide health insurance coverage to Provide health insurance coverage to

Americans who would not have it due Americans who would not have it due to a pre-existing conditionto a pre-existing condition

Not a welfare or entitlement program Not a welfare or entitlement program You must pay premiums to You must pay premiums to

participate in this planparticipate in this plan Comprehensive major medical Comprehensive major medical

indemnity plan for persons not indemnity plan for persons not eligible for Medicareeligible for Medicare

http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=256

Current LegislationCurrent Legislation

Current Reform ProposalsCurrent Reform Proposals

MassachusettsMassachusetts– Requires everyone to purchase health Requires everyone to purchase health

insuranceinsurance– ““Connecter” links individuals with the Connecter” links individuals with the

insurance plan that is right for theminsurance plan that is right for them– Employers with over 10 employees must offer Employers with over 10 employees must offer

a plan or possibly pay into a state a plan or possibly pay into a state insurance insurance pool (debate between gov. and leg.)pool (debate between gov. and leg.)

– Government subsidizes those who are unable Government subsidizes those who are unable to afford coverageto afford coverage

– Enforcement through income tax penaltiesEnforcement through income tax penalties

Current Reform ProposalsCurrent Reform Proposals

CaliforniaCalifornia– Focus on preventative careFocus on preventative care– Everyone must purchase insurance, no employer Everyone must purchase insurance, no employer

mandatemandate– Low income individuals will be offered expanded Low income individuals will be offered expanded

state insurance and will be provided financial state insurance and will be provided financial assistance to purchase insurance through a state assistance to purchase insurance through a state poolpool

– Insurers will be required to guarantee coverage Insurers will be required to guarantee coverage and charge like prices for like populations.and charge like prices for like populations.

– State program reimbursement rates to providers State program reimbursement rates to providers will increasewill increase

– Providers will take on responsibility for enrollmentProviders will take on responsibility for enrollment– Will uses tax penalties to enforce the mandateWill uses tax penalties to enforce the mandate

State of the Union and State of the Union and Financing Health CareFinancing Health Care

www.youtube.com/watch?v=ICEwfkNxhkA

Proposed LegislationProposed Legislation

Proposed Legislation: Proposed Legislation: Part 1Part 1 Standard deductionStandard deduction

– All health insurance becomes All health insurance becomes subject to income tax above the tax subject to income tax above the tax deductible amountdeductible amount Singles can deduct up to $7,500Singles can deduct up to $7,500 Families can deduct up to $15,000Families can deduct up to $15,000 Standard deduction follows MPIStandard deduction follows MPI

– Eliminates tax-deductible health Eliminates tax-deductible health care expenditures incurred by care expenditures incurred by employersemployers

Rationale: Standard Rationale: Standard DeductionDeduction Higher wages and health expenditure Higher wages and health expenditure

visibilityvisibility– Consumer choice between taxed wages and Consumer choice between taxed wages and

mostly non-taxed health insurancemostly non-taxed health insurance Increases visibility of health care costsIncreases visibility of health care costs

Level playing-fieldLevel playing-field– Non-employer-sponsored health insurance tax Non-employer-sponsored health insurance tax

code penalizationcode penalization Penalizes non-employer sponsored health insurancePenalizes non-employer sponsored health insurance Penalizes less expensive employer-sponsored Penalizes less expensive employer-sponsored

insuranceinsurance

– With standard deduction, all workers receive With standard deduction, all workers receive tax benefitstax benefits

Proposed Legislation: Proposed Legislation: Part 2Part 2 Affordable Choices Initiatives (ACI)Affordable Choices Initiatives (ACI)

– Provide States financial incentives to make Provide States financial incentives to make basic, affordable private health insurance basic, affordable private health insurance policies availablepolicies available

– Shifts funds aimed at alleviating ‘bad Shifts funds aimed at alleviating ‘bad debts’ expenditures of health care debts’ expenditures of health care providers to insuring the uninsuredproviders to insuring the uninsured

– HHS and states work closely to find HHS and states work closely to find innovative ways to insure uninsured in innovative ways to insure uninsured in each states’ marketeach states’ market

Rationale: ACIRationale: ACI Allocation of funds for more efficiencyAllocation of funds for more efficiency

– Theoretically, fiscally-neutralTheoretically, fiscally-neutral– Publicly-funded health expenditures have risenPublicly-funded health expenditures have risen– State reduction inefficient expenditures can be State reduction inefficient expenditures can be

supported with reallocated federal funds (e.g., supported with reallocated federal funds (e.g., Medicaid)Medicaid)

Competition & consumer-directed health Competition & consumer-directed health care (CDHC)care (CDHC)– Combined with the standard deduction, the Combined with the standard deduction, the

market of health insurance will be more market of health insurance will be more accessible to more consumersaccessible to more consumers

Increases in competition among health insurance plansIncreases in competition among health insurance plans Affordability and responsibility brought to consumerAffordability and responsibility brought to consumer

DeregulationDeregulation

Target Groups: Standard Target Groups: Standard DeductionDeduction WinnersWinners

– 80% of employees: receive tax 80% of employees: receive tax benefits or choose higher wagesbenefits or choose higher wages

NeutralNeutral– 20% of employees: generous health 20% of employees: generous health

care policy owners will have to care policy owners will have to decide between higher taxed wages decide between higher taxed wages or better, but taxed health care or better, but taxed health care coveragecoverage

LosersLosers– Employers: tax-deductible health Employers: tax-deductible health

expenditures will disappearexpenditures will disappear

Target Groups: ACITarget Groups: ACI WinnersWinners

– Uninsured and hard-to-insure peoples: with Uninsured and hard-to-insure peoples: with more innovation in the individual markets, the more innovation in the individual markets, the number of privately-insured will risenumber of privately-insured will rise

– Tax-payers: with more privately-insured, the Tax-payers: with more privately-insured, the less government needs to pay for health care; less government needs to pay for health care; thus, less tax-payer’s dollars can be better thus, less tax-payer’s dollars can be better allocatedallocated

– Out-patients services: increases in number of Out-patients services: increases in number of insured increases utilization of out-patient insured increases utilization of out-patient servicesservices

NeutralNeutral– Hospitals: with less uninsured patients, Hospitals: with less uninsured patients,

hospitals will receive less government hospitals will receive less government subsidies, but they will also be able to allocate subsidies, but they will also be able to allocate care to more deserving health needscare to more deserving health needs

Mechanism: Standard Mechanism: Standard Deduction & ACIDeduction & ACI

Increasing the risk poolsIncreasing the risk pools– Higher wages and a non-restrictive benefit Higher wages and a non-restrictive benefit

plan offered by employers under standard plan offered by employers under standard deduction will allow employees to shop arounddeduction will allow employees to shop around

– ACIs may allow uninsured to shop in same ACIs may allow uninsured to shop in same marketmarket

E.g., ‘Commonwealth Health Insurance Connector”E.g., ‘Commonwealth Health Insurance Connector”

Increased visibility of health-care costsIncreased visibility of health-care costs– A standard deductible will allow peoples to A standard deductible will allow peoples to

realize the actual cost of health insurancerealize the actual cost of health insurance– Combined with ‘cafeteria’ and other CDHC Combined with ‘cafeteria’ and other CDHC

plans proposed via ACIs, both the uninsured plans proposed via ACIs, both the uninsured and insured will purchase only what they needand insured will purchase only what they need

Financing: Standard Financing: Standard Deduction & ACIDeduction & ACI

Government interventionGovernment intervention– Fiscally neutral solutionFiscally neutral solution

It shifts tax-deductible health expenses from It shifts tax-deductible health expenses from employer to employeeemployer to employee

– Successful ACIs may shift cost of uninsured Successful ACIs may shift cost of uninsured unto insurance companies rather than tax-unto insurance companies rather than tax-payerspayers

– ACIs: income-related subsidies/premium ACIs: income-related subsidies/premium assistanceassistance

Market forcesMarket forces– More consumers in non-employer sponsored More consumers in non-employer sponsored

market = more competitionmarket = more competition Aided by CDHC, e.g., HSA’sAided by CDHC, e.g., HSA’s

LimitationsLimitations Standard deduction limitationsStandard deduction limitations

– Higher wages = misplaced priorities Higher wages = misplaced priorities – More consumer choice will cause adverse (and More consumer choice will cause adverse (and

favorable) selectionfavorable) selection The ability for consumers to jump in-and-out of The ability for consumers to jump in-and-out of

risk pools due to favorable selection by insurance risk pools due to favorable selection by insurance companies may cause adverse selection for sicker companies may cause adverse selection for sicker patientspatients

Can be remedied by subsidies and other Can be remedied by subsidies and other interventions interventions

– Assumes that consumers can be responsible for their Assumes that consumers can be responsible for their own health careown health care

Though employers can still be a source of a risk Though employers can still be a source of a risk pool, other sources of risk pool may arise, from pool, other sources of risk pool may arise, from small pools made up of likeminded people to small pools made up of likeminded people to ‘connector’ plans instituted by the gov’t‘connector’ plans instituted by the gov’t

StrengthsStrengths

Considered fiscally ‘neutral’Considered fiscally ‘neutral’ Incremental, but boldIncremental, but bold

– Increased consumer awareness Increased consumer awareness (transparency) of health care costs drives…(transparency) of health care costs drives…

– Increases in private health insurance Increases in private health insurance expenditures, which drives…expenditures, which drives…

– Bigger risk pools, which drives…Bigger risk pools, which drives…– Lower premiums, which results in…Lower premiums, which results in…– A greater number of insuredA greater number of insured

ReferencesReferences

Levit, Katharine, Cathy Cowen, “Business, Households and Levit, Katharine, Cathy Cowen, “Business, Households and Governments: Helathcare Costs 1990- Healthcare Financing Governments: Helathcare Costs 1990- Healthcare Financing Trends,” Trends,” Helathcare Financing ReviewHelathcare Financing Review. . http://findarticles.com/p/articles/mi_m0795/is_n2_v13/ai_121http://findarticles.com/p/articles/mi_m0795/is_n2_v13/ai_12160563. 60563.

Smith, Cynthia, Cathy Cowan, Stephen Heffler, Aaron Catlin, Smith, Cynthia, Cathy Cowan, Stephen Heffler, Aaron Catlin, and the National Health Accounts Team, “National Health and the National Health Accounts Team, “National Health Spending in 2004: Recent Slowdown Led by Prescription Spending in 2004: Recent Slowdown Led by Prescription Drug Spending,” Drug Spending,” Health AffairsHealth Affairs Vol. 25, No. 1 Vol. 25, No. 1 (January/February 2006): 186-196.(January/February 2006): 186-196.

ReferencesReferences

Centers for Medicare/Medicaid Services; Centers for Medicare/Medicaid Services; http://www.cms.hhs.gov/LowCostHealthInsFamChild/http://www.cms.hhs.gov/LowCostHealthInsFamChild/

North Carolina Medical Journal; North Carolina Medical Journal; January/February 2002, Volume 63, Number 1January/February 2002, Volume 63, Number 1

AARP Public Policy Institute, August 2002AARP Public Policy Institute, August 2002

The Health Insurance In The Private Sector (HIPS) Survey of Private Sector FirmsThe Health Insurance In The Private Sector (HIPS) Survey of Private Sector Firms September September 2001; 2001; http://www.moh.gov.jo/phr_studies/hips.htmhttp://www.moh.gov.jo/phr_studies/hips.htm

New England Journal of Medicine, Volume 356:1-4, Jan. 4th, 2007New England Journal of Medicine, Volume 356:1-4, Jan. 4th, 2007 Illinois Green Party; Illinois Green Party;

http://www.ilgp.org/new-groups/media/ilgp-press-coverage/can-state-s-uninsured-be-helped/vhttp://www.ilgp.org/new-groups/media/ilgp-press-coverage/can-state-s-uninsured-be-helped/viewiew

U.S. Chamber of Commerce; U.S. Chamber of Commerce; http://www.uschamber.com/issues/index/health/ahps.htmhttp://www.uschamber.com/issues/index/health/ahps.htm Health Resources and Services Adminstration’ Health Resources and Services Adminstration’ http://www.insurekidsnow.gov/http://www.insurekidsnow.gov/ http://www.house.gov/pelosi/http://www.house.gov/pelosi/ Washington Post; December 9, 2006; Article #AR2006120801578Washington Post; December 9, 2006; Article #AR2006120801578 Piper Report; http://www.piperreport.com/archives/2007/01/medicare_drug_p.htmlPiper Report; http://www.piperreport.com/archives/2007/01/medicare_drug_p.html http://www.wvec.com/news/health/stories/http://www.wvec.com/news/health/stories/

wvec_medical_011207_medicare_drugs_house.32d0fd62.htmlwvec_medical_011207_medicare_drugs_house.32d0fd62.html Illinois Legal Aid; http://www.illinoislegalaid.org/index.cfm?Illinois Legal Aid; http://www.illinoislegalaid.org/index.cfm?

fuseaction=home.dsp_content&contentID=256fuseaction=home.dsp_content&contentID=256

ReferencesReferences

Holahan, J., Cook, A. and Dubay, L. Holahan, J., Cook, A. and Dubay, L. Characteristics of the Uninsured: Who Characteristics of the Uninsured: Who Is Is Eligible for Public Coverage and Who Needs Help Affording Eligible for Public Coverage and Who Needs Help Affording Coverage? Coverage? Kaiser Kaiser Commission on Medicaid and the Uninsured. Commission on Medicaid and the Uninsured. Feb. 2007.Feb. 2007.

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