Burke J. Balch, J.D. Robert Powell Center for Medical Ethics October 19, 2013 Understanding Obamacare– Will There Be Limits on Medical Treatment?
Jan 12, 2016
Burke J. Balch, J.D.
Robert Powell Center for Medical Ethics
October 19, 2013
Understanding Obamacare– Will There Be Limits on Medical Treatment?
Two Questions
1. Should the federal government limit what private citizens are allowed to spend on health care to save the lives of their family?
2. Should the federal government limit how much life-saving medical
treatment doctors are allowed to give their patients?
Fundamental Issue
Obamacare based on erroneous assumption: that in order to provide an adequate health care safety net, especially for previously uninsured
Government must enforce limits on all health care spending/ including what private citizens and their employers spend to save lives and foster health
This talk will
1. Describe 4 ways Obamacare limits what we’re allowed to spend to save the lives of our family members and what treatment doctors can provide
2. Argue that America can afford unrationed health care
3. Show how we can both provide an adequate health safety net and avoid government-imposed rationing
1. 40% Tax on “Excess Benefit” Health Insurance
If health insurance employers provide has a value of more than $8500 for an individual or $23,000 for a family, the “excess” value is taxed at 40%
The limits increase by general but not medical inflation
Understanding Inflation
CPI is an AVERAGE Price rise/decline of individual
categories of goods & services varies
Understanding Inflation
Compare classroom grades: if average is C+, some get A’s and some get D’s
Primarily because HC is labor-intensive, medical inflation consistently higher than average inflation across all sectors
Since 1990, on average, annual Medical Inflation 3.3% higher than CPI
Medical vs. Average Inflation
Compounding annually, gap grows wider and wider
Politico article(September 30, 2013 )
“[The level at which taxes kick in will] be linked to the increase in the consumer price index, but medical inflation pretty much always rises faster than that . . . . David Nather, “How Obamacare affects businesses—
large and small” (September 30, 2013), http://www.politico.com/story/2013/09/how-obamacare-affects-businesses-large-and-small-97460.html
Politico article(September 30, 2013 )
“Think of the Cadillac tax as the slow-moving car in the right lane, chugging along at 45 miles per hour. It may be pretty far in the distance, but if you’re . . . moving along at a reasonable clip in the same lane – say, 60 miles an hour—and you don’t slow down, you’re going to run smack into it.”
Politico article(September 30, 2013 )
Although the excess benefits tax does not apply until 2018, the Politico article reports, “Towers Watson found that more than six out of 10 employers said the fear of triggering [it] would influence their health care benefit strategies in 2014 and 2015. . . .
Politico article(September 30, 2013 )
“For one thing, the thresholds were set in 2010, and even though the law has a method for raising them if there’s a lot of growth in health care spending, employers are still concerned that they’ll get busted for offering fairly standard plans.”
2. Medicare Limits
$ 555 billion cut from Medicare over 10 years
But will the government allow senior citizens to make up the difference from their own funds?
2. Medicare Limits
BEFORE: Older Americans permitted to add their
own money, if they chose, on top of the governmental payment, in order to get insurance plans less likely to ration.
(Known as Medicare Advantage private-fee-for-service plans.)
2. Medicare Limits
UNDER NEW HEALTH LAW: HHS given standardless discretion to
reject any Medicare Advantage plan. HHS can limit or eliminate ability to add
own money to obtain health insurance less likely to ration seniors’ health care.
3. Exchange Limits on What People Can Pay for Insurance
New state-based insurance “exchanges”
At first, individuals & small business employees
Later, all employees
3. Exchange Limits on What People Can Pay for Insurance
Government officials will exclude health insurers
Whose plans inside or outside the exchange
Allow private citizens to spend whatever gov’t officials think is an “excessive or unjustified” amount on their own health insurance
4. Independent Payment Advisory Board
Present public focus is on impact on Medicare
4. Independent Payment Advisory Board
LITTLE ATTENTION TO MUCH MORE FAR-REACHING ROLE IN RATIONING:
4. Independent Payment Advisory Board
IPAB directed to make recommendations every 2 years, starting in 2015
“to slow the growth in national health expenditures” – i.e., nongovernmental spending
Below the rate of medical inflation
IPAB Must Limit HC Spending Growth to the LESSER OF:
Year Limit
2015 Halfway between medical and general inflation
2016 Same
2017 Same
Later Years
Nominal GDP per capita + 1% [President Obama has proposed lowering to Nominal GDP per capita + .5%]
Year % below projected spending
2015 .5 %
2016 1%
2017 1.25%
2018 1.5%
Later Years
1.5%
5. Independent Payment Advisory Board
The recommendations are to include those that federal Department of Health and Human Services “can implement administratively”
How will HHS enforce limits?
HHS empowered to impose “quality measures” on hospitals, doctors, & other health care providers
One uniform standard of care specifying under what circumstances treatment can – and cannot – be given
Enforcement
Physicians who give treatment not permitted by “quality” measures disqualified from contracting with “qualified” insurance plans
What if IPAB members not named?
Republican leaders have said will not name members they’re authorized to; may resist confirmation of Presidential appointees
BUT law provides that HHS given duty and authority to substitute if IPAB doesn’t
4. Independent Payment Advisory Board
IPAB Push private HC spending below med. inflation Recommendations every 2 years
HHS Imposes “quality” standards Doctors must comply or lose insurance contracts
Patients Can’t get HC exceeding standards
New Health Care Law’sRoutes to Rationing
1. 40% Tax on “Excess Benefits” 2. Medicare Limits 3. Exchange Limits on What People
Can Choose to Pay for Insurance 4. Independent Payment Advisory
Board & “quality and efficiency” standards
CAN America AFFORD Unrationed Health Care?
The Paradox
Appearance: HC spending eats up ability to pay
for other goods and services (ultimately unsustainable)
Reality: Rising productivity in other goods
and services is freeing up resources to use to save lives and preserve health
**The HC, food, clothing & shoes, housing, and combination charts are versions, derived from updated data, based on Figure 4.3 in Sherry Glied, Chronic Condition: Why Health Reform Fails (Cambridge MA & London: Harvard Univ. Press, 1997), p.103.Data Source: (CEA 1991, 2011.) Available at http://origin.www.gpoaccess.gov/eop/tables09.html
Food, Clothing & Shelter Combined as a % of the Family Budget
What the Family Spends on 1. Essentials and 2. Essentials & Healthcare Combined
American Health Expenditures and Per Capita Gross Domestic Product
19602009
2040
76 % Increase for Non-Health Expenditures
279 % Increase for Non-Health Expenditures
Health Expenditures
Non-Health Expenditures
94.7%82.4% 70%
30%17.6%
5.3%
Sources: available on request to [email protected]
Sherry Glied• Former Assistant Secretary for Planning and Evaluation• Department of Health and Human Services in Obama
Administration• Chronic Condition: Why Health Care Reform Fails (1997)
Glied Is Not Alone . . . • William J. Baumol, “Do Health Care Costs Matter?” The
New Republic, Nov. 22, 1993, Professor of Economics at New York and Princeton Universities
• David F. Bradford, Professor of Economics and Public Affairs, Princeton University Woodrow Wilson School of Public and International Affairs
• Edward Wolff, Professor of Economics, New York University
• Eli Ginzberg, A. Barton Hepburn Professor of Economics, Columbia University
• Joseph P. Newhouse, John D. MacArthur Professor of Health Policy and Management, Harvard University
Conclusions
NOT that American health care system is ideally efficient and can’t be improved
BUT if improvements are made in cost-effectiveness, we shouldn’t necessarily expect growth in health care spending to abate – we might just get more and better health care
Bottom Line:• As long as American productivity keeps increasing (in the
long term), America can afford to continue to increase the resources used to save lives and preserve health
• Real problem: providing safety net for those whose incomes are not average, and its implications for government budgets
The Real Problems • REAL: Distribution of income increases not equal
• Those with less-than-average income increases have genuine difficulty coping with health care cost increases
• Number of uninsured rises among low income• GOVERNMENT ACTS TO HELP: Medicaid, CHIP, now PPACA
But government does not benefit equally with private sector from productivity increases in areas other than health care – the productivity increases that reduce the resources needed and free up resources for health care
What the Family Spends on 1. Essentials and 2. Healthcare Combined
PRIVATE SECTOR SPENDING- GDP
17.6 % (spent on H.C) 2011
30% (spent on H.C) 2040
51% growth in economy by 2040
GOVT. SPENDING- FEDERAL BUDGET
H.C. Deficit – 7%
15.1% tax rate to fund the Federal Budget
23% (spent on H.C) 2011
30% (spent on H.C.) 2040
51% growth in government 2040
Understanding Private Sector Cost-Shifting• Faced with unsustainable health care cost increases,
government actors tend to avoid unpopular benefit cuts, and focus on limiting the reimbursement rate for health care providers
• Many health care providers assert they are then forced to charge higher rates to privately insured patients to make up for what they lose on governmentally insured patients (and on the uninsured EMTALA requires hospital emergency rooms to serve)
140
120
100
13130
80
90.1% 89.0%
60
40
20
0
0 10 20 30 40 50 60 70 80 90 100
Uncompensated Care 6.1%Percent of Hospital Costs
Source: American Hospital Association and Avalere Health, Avalere Health analysis of 2009 American Hospital Association Annual Survey data, for community hospitals, Trendwatch Chartbook 2011, Trends Affecting Hospitals and Health Systems, March 2011, Tables 4.5-4.6 at http://www.aha.org/research/reports/tw/chartbook/ch4.shtml
Cost=
Payments
Hospital Cost Shifting- The Hidden Tax (as of 2009)
134.1%
Private Payers 36.6%
Medicare39.4%
Medicaid 15.9%
140
120
100
13130
80
91.3% 85.8%
60
40
20
0
0 10 20 30 40 50 60 70 80 90 100
Uncompensated Care 6.1%Percent of Hospital Costs
Source: American Hospital Association and Avalere Health, Avalere Health analysis of 2009 American Hospital Association Annual Survey data, for community hospitals, Trendwatch Chartbook 2011, Trends Affecting Hospitals and Health Systems, March 2011, Tables 4.5-4.6 at http://www.aha.org/research/reports/tw/chartbook/ch4.shtml
Hospital Cost Shifting- The Hidden Tax (as of 2009)
130.3%
Private Payers 36.6%
Medicare39.4%
Medicaid 15.9%
Private Sector Cost-Shifting as a Solution
• Key advantage of private sector cost-shifting is that it can grow proportionately with the resources the private sector allocates to health care
• I.e., yields a % of what is actually spent on health care
Private Sector Cost-Shifting as a Solution
• Regardless of extent to which it presently occurs• Provides a basis for understanding feasibility of providing
for those with low incomes without governmentally imposed restraints on growing allocation of private resources to health care
PROPOSED SOLUTION: COST-SHIFTING AT THE LEVEL OF THE INSURER
To make easier to understand• Begin with abstract, but unrealistic, approach --- to make
the concept clear• Move to more complex, but practical, concrete plan
Problem with Cost-Shifting by Providers• Suburban hospital with low number of uninsured,
Medicaid patients• Inner city hospital with low number of privately insured,
high number of uninsured and Medicaid patients
• SOLUTION: cost-shifting among insurers instead of providers
Proposed Solution:Cost-Shifting at the Level of the Insurer• Analogy of high-risk pools for automobile insurance in
many states• Could require health insurers to offer (sliding scale)
discounted health insurance to those unable to afford in proportion to insurer’s market share
• Insurers pass along costs of subsidizing insurance in premiums for all -- private sector cost-shifting
PRIVATE SECTOR SPENDING- GDP
17.6 % (spent on H.C) 2011
30% (spent on H.C) 2040
51% growth in economy by 2040
GOVT. SPENDING- FEDERAL BUDGET
H.C. Deficit – 7%
15.1% tax rate to fund the Federal Budget
23% (spent on H.C) 2011
30% (spent on H.C.) 2040
51% growth in government 2040
15.1 % Taxes
Government Expenses
Amount for Health Care
Government Expenses
Amount for Health Care
15.1% Taxes
Private Sector Spending GDP
Private Sector Spending GDP
17.6 % (spent on H.C) 2011
30% (spent on H.C) 2040
15.1% tax rate to fund the Federal Budget
MORE REALISTIC APPROACH
Proposed Solution:Cost-Shifting at the Level of the Insurer• Require health insurers to offer (sliding-scale) discounted
health insurance to those unable to afford in proportion to share of market
• Provide sliding-scale vouchers based on existing levels of government funding for health care (e.g., Medicaid, CHIP)
• Insurers pass along additional costs in premiums for all
15.5% Taxes
Government Expenses
Total Amount for Health Care
Government Expenses
Total Amount for Health Care
X dollar Amount for HC
Same X dollar Amount for HC
Private Sector Spending GDP
Private Sector Spending GDP
15.5% Taxes
17.6 % (spent on H.C) 2011
30% (spent on H.C) 2040
How Employers Decide• Health insurance too costly – can go bankrupt• Health insurance too meager – can lose workers to
competitors• Balance costs and benefits
The Virtuous Use of the Free Market• When cost of insuring those who cannot afford it passed
on to those who can• Employers unconsiously factor in their share of
subsidizing those who can’t afford insurance in their cost/benefit balancing
ADVANTAGES
• Funding is tied to what people who can afford to do so themselves choose to pay for health insurance rather than being tied to government budgets. This:• Keeps health care costs to what people collectively,
through individual decisions, decide they can afford to pay
• Does not limit health care below what people, through such decisions, are willing and able to pay
Consequence• America wouldn’t spend more than it can afford on health
care• America WOULD spend AS MUCH as it COULD afford on
health care• Physicians would not be artificially constrained by
government limits on what treatment they, in their medical judgment, provide their patients
CONCLUSION
•We CAN afford health care without rationing!
•We CAN provide help for those who themselves cannot afford to pay for adequate health insurance without rationing care for all!
•There IS an alternative to Obamacare
For Documentation & Further Info:• FOR COPY OF SLIDES
• Send email with subject “NY Health Care PowerPoint”• To: [email protected]
• For documentation :• 1. www.nrlc.org• 2. Click on Issues• 3. On drop-down list:
• 4. Click on “Euthanasia/Assisting Suicide” for:• Healthcare rationing [Obamacare]• Involuntary euthanasia by providers
Conclusion• Soberly face reality of government limits on what
treatment you will be allowed, especially from about 2016 on
• Challenge for both those on the political left and political right
• On the right –• Emphasis is on using more competition to reduce HC spending• How does this square with allowing free market to allocate
resources where people choose to put them?
• On the left – • Emphasis is on government limits on what people spend on HC• How does this square with better HC for all, including those with
low income?
CAN HEALTH CARE SPENDING BE LIMITED WITHOUT RATIONING?
The Claim that Greater Efficiency Will Avert Rationing
“Dartmouth Atlas” – compares what different hospitals spend per patient on those in last months or years of life
Claim: some hospitals spend much less with same outcome (death), so we can limit payments to the level of the most efficient hospitals without harm
The Claim that Greater Efficiency Will Avert Rationing
“Dartmouth Atlas” – compares what different hospitals spend per patient on those in last months or years of life
Claim: some hospitals spend much less with same outcome (death), so we can limit payments to the level of the most efficient hospitals without harm
NY Times article 12/22/09
The Obama Administration’s former director of the Office of Management and Budget, Peter Orzag, attacked the fact that the Ronald Reagan University of California at Los Angelos [UCLA] Medical Center spends more than Rochester, Minnesota's Mayo Clinic.
NY Times article 12/22/09
Orzag: "One of them costs twice as much as the other, and I can tell you that we have no idea what we’re getting in exchange for the extra $25,000 a year at U.C.L.A. Medical. We can no longer afford an overall health care system in which the thought is more is always better, because it’s not."
NY Times article 12/22/09
BUT: “[T]he hospital that spent the most on heart failure patients had one-third fewer deaths after six months of an initial hospital stay.”
Difference between looking forward and looking back
ANOTHER N.Y. Times article 6/14/2010
“The atlas’s hospital rankings do not take into account care that prolongs or improves lives. If one hospital spends a lot on five patients and manages to keep four of them alive, while another spends less on each but all five die, the hospital that saved patients could rank lower because Dartmouth compares only costs before death.”
Life ExpectancyThe 2012 CDC report (relying on the latest data from 2010) says Americans
are living longer than ever now – 78.7 years.
Are We Getting More for Our Money?
62646668707274767880
1950 1960 1970 1980 1990 2000 2010
Ave. Life Expectancy
Are We Getting More for Our $?
Cancer Survival RatesAccording to the American Cancer Society in
a 2009 report the number of cancer deaths has steadily declined in the United States over the past 15 years, saving a possible 650,000 lives.
The cancer death rate (the #2 cause of death) fell by 19.2 percent for men and 11.4 percent for women between 1990 and 2005.