Health Care Reform? P-PACA vs Single Payer

Health Care Reform?P-PACA

vs Single Payer

Oliver Fein, M.D.Professor of Clinical Medicine and Public Health

Associate Dean Office of Affiliations

Office of Global Health EducationWeill Cornell Medical College

Internal Medicine Residency ProgramColumbia University Medical Center

NewYork-Presbyterian HospitalFebruary 3, 2012

PRESENTATION OUTLINE

1. History of recent U.S. Health Reform

2. Challenges facing U.S. Health Care System

3. Comparison of Single Payer and

2010 Health Reform (P-PACA)

DISCLOSURES

Dr. Oliver Fein has no relevant financial relationships with commercial interests

Dr. Oliver Fein is immediate past President of Physicians for a National Health Program (PNHP), a non-profit educational and advocacy organization. He receives no financial compensation from PNHP.

Disclosure InformationDisclosure Information

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HEALTH REFORM:OBAMA’S FATEFUL CHOICE

• He did not want to “start from scratch”

• He had two fundamental choices:

1) to build on the public sector (Medicare) or2) to build on the private sector

• Which did he choose?

Progress(?) of US Health Reform

Employer mandate

Public option**

Individual mandate*

* “each eligible individual must enroll in an applicable health plan for the individual and must pay any premium required with respect to such enrollment.” (S.1775)

** “you can choose to enroll in the new public plan”

Medicare

??

WHAT HAPPENED TO THEPUBLIC OPTION?

The original “robust” Plan – March 2009• Open enrollment: “Medicare for

everyone who wants it”• Medicare rates, backed by the

government• 119 million members (Lewin)

The greatest lobbying effort in history

June 29, 2009

$1.2 Billion Spent on Health Care Lobbying!

Center for Public Integrity, March 26, 2010

WHAT HAPPENED TO THEPUBLIC OPTION?

The House Plan – November 2009• Restricted enrollment (only the uninsured)• 6 million members (<2% of the population)• Negotiated rates, self sustaining

The Senate Plan – December 2009• No public option

THE PATIENT PROTECTION AND

AFFORDABLE CARE ACT(P-PACA)

March 23, 2010

P-PACA(a MANDATE MODEL)

Everyone is required to have health insurance or pay a penalty.

1. Individual mandate: penalty =$695 for singles; $2,085 for families

2. Employer mandate (50 or more employees): penalty =$2,000/employee

3. Necessary for the survival of private HI.Private HI lost 3.2% (6.3 million) enrollees in 2009 and more than 15 million in the last decade.

Improved MEDICARE FOR ALL (a Single Payer Model)

Build on the original Medicare

1. Improve Coverage: preventive services, oral surgery, long term care

2. Reduce or eliminate deductibles and co-payments

3. Expand drug coverage: eliminate the “donut hole”

4. Re-design physician reimbursement

CHALLENGES FACING

HEALTH CARE REFORM

1. Declining access

2. Escalating costs

3. Lack of comprehensive benefits

4. Restricted choice

5. Uneven Quality

6. Insufficient primary care

7. How to pay for reform

CHALLENGE #1

DECLINING ACCESS

The Epidemic of Underinsurance

0

10

20

30

40

50

60

70

2000 2007

Insured Uninsured

Source: Too Great a Burden, Families USA, December 2007

Number of people spending more than 10% of income on health care (Millions)

RISE IN PERSONAL BANKRUPTCIES

62% of personal bankruptcies are due to medical expenses and over 75% had health insurance at the outset of their

bankrupting illness.*

* Himmelstein, et.al. Am J Med, August, 2009

ImprovedMEDICARE FOR ALL

• Automatic enrollment

• Federal guarantee

• All residents of the United States

• “Everybody in, nobody out”

HEALTH INSURANCE REFORM (P-PACA)

• Mandates purchase of private HI (2014)

• Expands Medicaid eligibility to 133% FPL (2014) - single $14,403; family $19,378

• Subsidizes premiums up to 400% FPL(2014) - single $43,320; family $88,200

• Insurance market reforms: Coverage up to age 26; no pre-existing condition exclusions; no annual/lifetime limits

Millions Will Remain Uninsured (and Millions More Poorly Insured)

Millions

Note: The uninsured include about 5 million undocumented immigrants. Source: Congressional Budget Office.

51 51 51 52 53 53 5451

2323232328

35

50 50

0

20

40

60

80

2012 2013 2014 2015 2016 2017 2018 2019

Current law

PPACA

CHALLENGE #2

ESCALATING COSTS

Insurance Premiums • Workers’ Earnings • Inflation 1999-2008

Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2008. Bureau of Labor Statistics, Consumer Price Index

119%

34%

29%

0%

20%

40%

60%

80%

100%

120%

140%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Health Insurance Premiums

Workers' Earnings

Overall Inflation

High Cost of Health Insurance Premiums: It’s Even Too Expensive for

the Middle Class Today

National Average for Employer-provided Insurance

Single Coverage $ 5,503 per year Family Coverage $15,073 per year

Note: 31% high-deductible ($1,000-2,000) policies

Source: Kaiser Family Foundation/HRET Survey of Employee Benefits, 9/27/2011

ImprovedMEDICARE FOR ALL

Low Administrative Costs = Single Payer

• Administrative cost and profit

- Medicare: 2-3 %- Private insurance: 16-30%

• $400 billion* redirected to cover the uninsuredand to expand coverage for the underinsured

* NEJM 2003:349;768-775 updated to 2010

Covering Everyone and Saving Money through Medicare for All

Additional costs

Covering the uninsured and poorly-insured +6.4%

Elimination of cost-sharing and co-pays +5.1%

Savings

Reduced insurance administrative costs -5.3%

Reduced hospital administrative costs -1.9%

Reduced physician office costs -3.6%

Bulk purchasing of drugs & equipment -2.8%

Primary care emphasis & reduce fraud -2.2%

Source: Health Care for All Californians Plan, Lewin Group, January 2005

134107

241

-111

-21

-76

-59

-46 -313

$ B

Total Costs +11.5%

Total Savings -15.8% Net Savings - 4.3% - 72

Private insurers’ High Overhead

SINGLE PAYER OFFERS TOOLS TO BEND THE COST-CURVE

• Global budgeting of hospitals

• Capital investment planning

• Emphasis on primary care; coordination of care; alternative ways of paying for care

• Bulk purchasing of pharmaceuticals

HEALTH INSURANCE REFORM(P-PACA)

Market Theory:

Mandate the young, healthy uninsured buy private health insurance

(they usually don’t get sick and don’t get

health insurance = low risks)

Then, the premiums for everyone will

go down.

WILL MARKET THEORY WORK?Premiums*

Single Coverage $5,503 per year

Family Coverage $15,073 per year

*national average for employer-provided insurance

Penalties under P-PACA

Individuals $695 per year

Families $2,085 per year

Employers $2,000 per employee

HEALTH INSURANCE REFORM (P-PACA)

Offers unproven tools to contain costs

• Health Information Technology (HIT)

• Chronic Disease Management

• Payment reforms (e.g., ACOs, bundled payments, value-based purchasing)

…and Costs Will Keep On Rising

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

PPACA (CMS Actuary)

Current projection

PPACA (Commonwealth Fund)

National Health Expenditures (trillions)

Notes: * Modified current projection estimates national health spending when corrected to reflect underutilization of services by previously uninsured. Source: D. M. Cutler, K. Davis, and K. Stremikis, Why Health Reform Will Bend the Cost Curve, Center for American Progress and The Commonwealth Fund, December 2009. Estimated Financial Effects of PPACA as Amended, Richard Foster, CMS Actuary, April 2010

$4.67$4.5

6.4% annual growth

6.6% annual growth

6.0% annual growth

$4.7

National Health Expenditures as Percent of GDP 17.8 17.9 18.0 18.2 18.8 19.3 19.8 20.2 20.5 21.0

CHALLENGE #3THE DEFINITION OF ESSENTIAL

HEALTH BENEFITS

• Service Coverage: Doctors, NPs, Hospitals, Drugs; Dental, Mental Health, Home care/nursing home

• Financial Coverage: Copays and deductibles

ImprovedMEDICARE FOR ALL

Comprehensive coverage- Preventive services- Hospital care- Physician services- Nurse practitioner services- Dental services- Mental health services- Medication expenses- Reproductive health services-Home Care/nursing home care“All medically necessary services”Any exclusions? How decided?

ImprovedMEDICARE FOR ALL

Eliminates Co-Pays or Deductibles

• Reduce use of needed and unneededservices equally

• Result in under use of primary care services

• Not as effective in reducing over use of technology intensive services, as

- Eliminating self-referral to MD owned facilities- Reducing defensive medicine

HEALTH INSURANCE REFORM (P-PACA)

• No Standard Benefit Package mandated

• Eliminates co-pays and deductibles, but only on preventive services

• No regulation of the magnitude of premiums, deductibles and co-pays – just the stipulation that benefits have an actuarial value of 60% or higher

• Stipulation that health insurers have medical lost ratios (MLR) of 80-85%

HHS DEFINES “ESSENTIAL HEALTH BENEFITS”

(January 2012)

States choose a benchmark plan that reflects the scope of services offered by a “typical employer plan” Four benchmark options:

•One of the three largest small group plans in the state by enrollment;•One of the three largest state employee health plans by enrollment; •One of the three largest federal employee health plan options by enrollment;•The largest HMO plan offered in the state’s commercial market by enrollment.  

If states choose not to select a benchmark, HHS intends to propose that the default benchmark will be the small group plan with the largest enrollment in the state.

Consequence: 50 Different Benefit Packages 

CHALLENGE #4RESTRICTED CHOICE

• 42% of employees have no choice

• Private health insurance limits choice to

the network of doctors and hospitals with

whom they have negotiated contracts

• You pay more to go out of network

ImprovedMEDICARE FOR ALL

Expands Choice for Everyone

• No limit to a network of providers

• Free choice of doctor and hospital

• Delinks health insurance from employment

HEALTH INSURANCE REFORM (P-PACA)

Creation of HI Exchanges Expands Choice for Some

• Limited to the individual and small group market

• Market-place of private HI plans

• No public option

• State-based with federal backup

• No state single payer until 2017

VERMONT’S PATHWAY TO SINGLE PAYER

• Elected Peter Shumlin governor: 11/6/2010

• William Hsiao, Ph.D., Harvard economist, reports 3 options: 2/2011

- Option 3: Public-private hybrid single payer• Standard benefit package• Uniform prices• Administered by a public benefit corporation

• Pathway legislation passed: 5/25/11

HEALTH INSURANCE REFORM (P-PACA)

Restricts Choice: The case of abortion • Allows states to prohibit abortion coverage

in state-run exchanges

• If states allow abortion coverage, requires enrollees or employers to send two checks

• Insurers must keep abortion coverage moneyseparate from federal subsidies

CHALLENGE #5:UNEVEN QUALITY

• In 2008, U.S. was last among 19 industrialized nations in mortality amenable to health care.

• In 2006, we were 15th.

* Commonwealth Fund (2011)

ImprovedMEDICARE FOR ALL

• National data on health care quality vs. proprietary data held by private HI

• National standards and public reporting

• HIT for the nation with patient protections – every patient their own medical record on a “credit” card

HEALTH INSURANCE REFORM (P-PACA)

• Comparative Effectiveness Research

• Innovation Center in CMS to test new payment and service delivery models – PCMH + ACOs (2011)

• Value based purchasing – hospital payments based on quality reporting measures (2013)

• Readmission penalties (2013)

• Reduce hospital payments for hospital-acquired conditions (2015)

CHALLENGE #6:LACK OF PRIMARY CARE

• Average medical school debt = $160,000

• Primary care is under-reimbursed

• Medical school graduates going

into specialties

ImprovedMEDICARE FOR ALL

• Debt forgiveness for primary care

• Malpractice payment for primary careproviders (MDs, NPs and PAs)

• Patient-Centered Medical Homes (teambased care, open access, coordination ofcare; phone/internet medicine)

HEALTH INSURANCE REFORM (P-PACA)

• 10% Primary Care Bonus Payments (2011-2017) – estimate = $4,000/provider/year

• Increase Medicaid payment to Medicare rates for primary care (2013)

• Independent Payment Advisory Board –

I-PAB (2014)

CHALLENGE #7

HOW TO PAY FOR REFORM

ImprovedMEDICARE FOR ALL

• Public funding

- Payroll tax

- Corporate taxes

- Income taxes

- Tax on unearned income (stocks, bonds, etc.)

• No premiums: regressive

• No increase in overall health care spending, because of administrative savings

ImprovedMEDICARE FOR ALL

Non-profit/private delivery system under local control

- Doctors not salaried by government - Hospitals not owned by government- This is not “socialized medicine”

A publicly funded-privately delivered partnership

HEALTH INSURANCE REFORM (P-PACA)

1. Increased taxes - Excise tax on “Cadillac” health insurance plans (2018)

- Medicare payroll tax increase from 1.45% to 2.35% if income greater than $200-250K- 3.8% tax on investment income

2. Savings from Medicare- Advantage: ($132 bill over 10 yrs)- Cut DSH payments ($36 million)- Cut Medicare payments to hospitals

($136 bill over 10 yrs)- Cut payments for home care/nursing homes ($60 bill)

3. Revenue from cracking down on fraud and abuse

HEALTH REFORM (P-PACA)1. Expanded coverage, but not universal

2. Cost control by market means

3. No definition of benefits

4. Choice thru State-based exchanges,but no public option

5. Limits on abortion

6. Primary care/ACO pilots

7. Funding: Excise tax on high cost (comprehensive coverage) private HI and Medicare cutbacks

Single Payer MEDICARE FOR ALL

THE PHYSICIANS’ PROPOSAL(JAMA, August 13, 2003 p. 798-805)

1. Universal coverage/automatic enrollment2. Low administrative costs=single payer3. Comprehensive coverage without co-pays

and deductibles 4. Maximum choice of Doctor, NP, Hospital5. Improved quality through nationwide HIT6. Expanded primary care 7. Publicly-funded/privately delivered

MEDICARE 2.0

Conyers HR 676 Expanded and improved

MEDICARE-FOR-ALL “Single Payer NH Care”

(55 Co-sponsors in House of Rep)

• Automatic enrollment• Comprehensive benefits• Free choice of doctor and hospital• Doctors and hospitals remain independent• Financed through progressive taxes • Costs contained through capital planning, budgeting,

quality reviews, primary care emphasis

Sanders (& McDermott): American Health Security Act

S 915 (HR 1200)

1.Automatic enrollment

2.Comprehensive benefits

3.Operated by States using Federal standards

4.Free choice of doctor and hospital

5.Doctors and hospitals remain independent

6.Public agency processes and pays bills

7.Financed through payroll taxes

April 14, 2010

Overall, do you think the benefits from government programs such as Social Security and Medicare are worth the costs of those programs for taxpayers, or are they not worth the costs? (results in %)

Worth It Not Worth It DK/NANational Sample 76 19 5Tea Party Sample 62 33 6

Summary

• A system based on private insurance plans-- will not lead to universal coverage-- will not create affordable insurance

• A Medicare for All System-- can lead to universal, comprehensive coverage without costing more

-- has the greatest potential to increase choice, improve quality and expand primary care

-- can be financed fairly

Will We Get Real Health Care Reform Before the Premium Takes All our Income?

Source: American Family Physician, November 14, 2005

Today

CONTACTS AND REFERENCES• PNHP National: www.pnhp.org

• PNHP-NY Metro: www.pnhpnymetro.org

• Bodenheimer TS, Grumbach K, Understanding Health Policy: A Clinical Approach. McGraw-Hill, 2005

• Fein O, Birn AE. (editors), Comparative Health Systems. Am Jour Public Health 2003; 93: 1-176

• O’Brien ME, Livingston M (editors), 10 Excellent Reasons for National Health Care. New Press, 2008

• Potter W, Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans. Bloomsbury Press, 2010