Yale economist Irving Fisher, December 1916. Fisher predicted that universal health coverage was just around the corner. “Within another six months, it

will be a burning question”

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“At present the United States has the unenviable distinction of being the only great industrial nation without compulsory health insurance”

The U.S. Healthcare “System”

Richard L. Elliott MD, PhD, FAPAProfessor and Director

Medical Ethics and ProfessionalismMercer University School of Medicine

Adjunct ProfessorMercer University School of Law

Outline of Presentation

• What we have now• A brief summary of the U.S. healthcare

“system”

• How we got here• A brief history of healthcare in the U.S.

• Where we are going• A brief look at the Affordable Care Act

Goals

• Describe key events in the evolution of U.S. Healthcare

• State why reforming U.S. Health care has been so hard?

• Distinguish universal health care from socialized medicine

• Describe the breakdown of expenditures in each of the major components in the U.S. healthcare system

• Describe the major goals of the Affordable Care Act

• The role of the individual mandate in the ACA

• Describe Medicare, Medicaid, and SCHIP

Where are we now?

• How are health care dollars spent?

• How is care paid for?

• What do Americans get for their money?

14%

17%

18%

23%

14%

8%6%

Chart Title

Healthcare spending is 17.9 % of GDPTotal Federal Spending in 2013: $3.5 Trillion

MEDICARE

Medicaid

Net interest

Social Security

Defense

Nondefense discretionary

Other

NOTE: All amounts are for federal fiscal year 2013. 1Consists of Medicare spending minus income from premiums and other offsetting receipts. 2Other category includes spending on other mandatory outlays minus income from offsetting receipts.SOURCE: Congressional Budget Office, Updated Budget Projections: 2014 to 2024 (April 2014).

Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

Hospital and physician services represent half of total health spending

Hospitals34%

Physicians/Clinics 21%

Prescriptions 10%

Nursing Homes, 6%

Other PersonalHealth16%

Other Health10%

Relative contributions to total national health expenditures, 2013Home Health Care,

3%

Slovenia smackdown!!

How do we pay for healthcare?

• Employers

• Privately purchased (5%)

• Government• Medicare• Medicaid, SCHIP• Military, VA, IHS

• Uninsured

Is US Healthcare socialized?

Employer-sponsored insurance

• Offered by employers as part of benefits package

• Administered by private insurance companies (for-profit and non-profit)

• Employer pays bulk of premium; employee pays remainder

• Tax benefits to employer and employee

Employer-Based and Individual

• Tax policy favors employee-based benefit– Companies that spend money in employee health

benefits have incentive.– They do not pay tax on the “profit” of the money

spent on health care benefits. – Employees are not taxed on benefits

• “Adverse selection” and individual Insurance– People who know they are sick are more likely to

buy health insurance. – Leads individually-purchased health care to be

MUCH more expensive than what an individual would pay for a “group rating” employer based health care.

Governmental insurance

What is Medicare?

• A federally-funded program for:• Ages 65 and older• ESRD, ALS, other disabilities

• Part A Hospital, some Skilled Nursing Facility costs

• Part B Physician, RN, equipment, tests, other

• Part C Medicare Advantage Plans

• Part D Prescription Drug Plan

• Beneficiaries can enroll in regular fee-for-service program OR in a Medicare Advantage (MA) plan

• MA include HMOs, PPOs and other private health plans

• Some plans offer extra benefits and have lower cost-sharing requirements than traditional Medicare

• Access to doctors and other health care providers is typically limited to those in the plans network

• Plans are paid a fixed amount per enrollee

• On average, 14 percent more than it would pay under traditional Medicare

• This extra payment will increase overall costs to Medicare by about~$150 b over 10 years

Medicare Advantage (Part C)

Medicare Advantage Enrollment (in millions)

25% of beneficiaries are enrolled in Medicare Advantage plans in 2009

Medicare offers important coverage, but with high cost-sharing and benefit

gaps• Does not cover all medical benefits

• Very limited long-term care coverage• No dental, hearing aids or eyeglasses

• Has relatively high cost-sharing requirements• Deductibles for Part A, Part B, and Part D• Coinsurance/copayments • Part D coverage gap (doughnut hole)

• No limit on out-of-pocket spending• Unlike typical plans offered by large

employer • Pays about half of beneficiaries total health

and long-term care spending

Median out-of-pocket health spending as a percent of income for Medicare beneficiaries is on the rise – especially

for those with modest incomes

NOTES: In 2005, federal poverty level: $9,570/individual and $12,830/couple. SOURCE: Kaiser Family Foundation. “Skin-in-the-Game,” November 2008.

24%

25%

12%

11%

8%

6%

14%

Nearly one-fourth of Medicare spending is for hospital inpatient servicesTotal Medicare Benefit Payments in 2013: $583 billion

Hospital inpatient

Medicare Advantage

Other services

Hospital outpatient

Post-acute care

Outpatient prescription

drugs

Physician payments

NOTE: Other services consists of Medicare benefit spending on hospice, durable medical equipment, Part B drugs, outpatient dialysis, ambulance, lab services, and other Part B services; also includes the effect of sequestration on spending for Medicare benefits and amounts paid to providers and recovered.SOURCE: Congressional Budget Office, 2014 Medicare Baseline (April 2014).

SOURCE: Intermediate projections from 2005-2014 Annual Reports of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

The outlook for the Medicare hospital trust fund has improved, but it is projected to have insufficient funds to pay all hospital bills beginning in 2030

Year of Projection

2008 2010 2012 2014

2019

2029

2024

2030

“Medicare at a Glance,” (#1066-08), The Henry J. Kaiser Family Foundation, Sept 2005

Increasing elderly, decreasing numbers of workers to support them.

Looking to the Future…

Medicare remains critical source of health coverage and economic security for many

Addressing fiscal pressures without shifting more costs to beneficiaries

Setting fair payment rates to providers and plans

Monitoring and improving Part D drug benefit

Assessing role of Medicare Advantage plans

Improving care to meet needs of those with coverage and chronic illnesses and disabilities

Ensuring affordability for lower-income beneficiaries

Strengthening coverage for long-term care services

Medicaid – “Poor”

• 52 million recipients - $266 Billion in 2003• Federal-State Partnership• Eligibility – varies by State. Generally poor +

children, parents of dependent children, pregnant women, disabled– “Dual eligible” with Medicare – chronically ill, long-

term care

• Covers most clinical services + Rx“The Medicaid Program at a Glance,” (#7235), The Henry J. Kaiser Family Foundation, Jan 2005

Medicaid – “Poor”

• May contract as “Medicaid HMO” with non-government entity

• Future – more cost limiting. • Possibilities:

– Prescription drug limits – Utilization review: evaluate services for medical

necessity– Prior review and authorization for referrals

“The Medicaid Program at a Glance,” (#7235), The Henry J. Kaiser Family Foundation, Jan 2005

State Children’s Health Insurance Program (S-CHIP)

• Supplements Medicaid by covering low-income children who are ineligible for Medicaid

• PeachCare for Kids in Georgia

• Administered and financed similarly to Medicaid

• Similar problems to Medicaid: • Low reimbursement rates → some providers refuse to

accept S-CHIP• Under-enrollment• Eligibility varies by specific populations and states

Other public insurance programs

• Tricare• Uniformed service members, families,

retirees

• Veterans Health Administration• Health benefits plan available to all veterans • Services delivered through VA health care

facilities (“socialized medicine”)• Financed by the federal government

• Indian Health Service

Profile of the uninsured

• 47 -> 37 million Americans uninsured after ACA

• 52-59% from low-income families (200% FPL)

• 80% are adults

• 50% are ethnic minorities

• 79% are American citizensSource: Kaiser Commission on Medicaid and the Uninsured

Source: US Census Bureau

How did we get here?

How did we here?

• 1800s – 1910 Scientific medicine• Anesthesia, antisepsis, asepsis, microbiology• X-rays, magic bullets

• 1910-1920 Hospitals and education• 1910 Flexner report• 1919 ACS “Minimum Standard”

• 1929-2010 Healthcare financing• 1929 Baylor plan and Blue Cross

• 1912 -2009 Reforming healthcare

Yale economist Irving Fisher, December 1916. Fisher predicted that universal health coverage was just around the corner. “Within another six months, it

will be a burning question”

Drag picture to placeholder or click icon to add

“At present the United States has the unenviable distinction of being the only great industrial nation without compulsory health insurance”

Where are we going?

• America’s largest industry

• Almost a fifth of economy

• America’s largest lobby – four times larger than #2 lobby, military-industrial

• My back surgery- June 2014 – 3 days in hospital - $96,000

Problems with US healthcare 2009

Cost of healthcare is high, outcomes poor

Too many underinsured (47 million)

45,000-48,000 unnecessary deaths each year

Leading cause of bankruptcies (over 50%)

Increased costs of US goods

Emphasis on costly technologies

Lack of access to preventative care

Why is reforming U.S. healthcare hard?

• Piecemeal approach to healthcare reform• Medicare, Medicaid, children, medications• Too many stakeholders in current system

• Medical industry is so large – 17.9% of GDP• Too many have too much to lose• Political campaigns are expensive

• Too few underinsured• Piecemeal approach to reform • Underinsured do not impact campaign finances

Goals for 2009 healthcare reform

• Reduce number of underinsured

• Improve coverage for insured• Reduce or eliminate exclusions/rescissions

• Improve access to and quality of care• Preventative care• Comparative efficacy

• ? Control rising costs ?

Promoting Health Coverage

Medicaid Coverage

(up to 133% FPL)

Employer-Sponsored Coverage

Exchanges(subsidies 133-

400% FPL)

IndividualMandate

Health Insurance

Market Reforms

Universal Coverage

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Expanding Health Insurance CoverageEarly Actions

• Create temporary Pre-existing Condition Insurance Plan for people with medical conditions who are uninsured

• To qualify, individuals must be uninsured for six months

• Federally funded

• Available in each state until 2014 when new exchanges provide coverage

• Allow adult children to remain on their parents’ health insurance policy until age 26

• Children do not have to live with parents, nor be students

• May be married, but spouses and children not eligibleReturn to KaiserEDU

Tutorials

• Expand Medicaid to all individuals under age 65 with incomes up to 133% of the poverty level ($14,400/individual or $29,300/family of 4) but many states did not participate

• Create new Health Insurance Exchanges where individuals and small employers can purchase coverage

• Provide premium subsidies to eligible individuals and families with incomes up to 400% of the poverty level ($43,300/individual or $88,200/family of 4) through the Exchanges

Expanding Health Insurance Coverage—in 2014

Expanding Health Insurance CoverageEarly Actions

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Estimated Health Insurance Coverage in 2019

SOURCE: Congressional Budget Office, March 20, 2010

Total Nonelderly Population = 282 Million

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Improving Health Insurance

• Reform the health insurance market– Prohibit insurers from denying coverage or charging

people more because they are sick

– Prohibit insurers from rescinding coverage or placing annual or lifetime limits on coverage

• Improve benefits for those with insurance– Ensure coverage of preventive services with no cost-

sharing

– Establish minimum benefit standards

– Limit out-of-pocket spending for consumers

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Employer Requirements and Incentives

• Larger employers that don’t offer affordable coverage will face penalties of up to $2,000 per full-time worker per year beginning in 2014

• Small employers with up to 50 employees will be exempt from penalties

• Tax credits available for some small businesses that offer health benefits

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Individual Mandate

• Individuals will be required to have health coverage that meets minimum standards in 2014

• Individual mandate spreads costs among whole population

• Mandate enforced through the tax system

• Penalty for not having insurance after 2015: greater of $695 (up to $2085 for family) or 2.5% of family income

• Exemptions for certain groups and if people cannot find affordable health insurance

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Some Uninsured Will Remain

• Congressional Budget Office (CBO) estimated 23 million uninsured in 2019

• Who are they?• Immigrants who are not legal residents• Eligible for Medicaid but not enrolled• Exempt from the mandate (most because can’t find

affordable coverage)• Choose to pay penalty in lieu of getting coverage

• Many remaining uninsured will be low-income

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Health Reform and Delivery System Changes

• Promoting primary care and prevention

• Improving provider supply

• Developing new models for coordinating and delivering care

• Making use of information technology

• Reforming provider payments to promote quality

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Promoting Primary and Preventive Care

• Increased Medicare and Medicaid payments for primary care providers

• Incentives for new doctors and other health professionals to practice primary care

• No cost-sharing in Medicare and new private plans for certain preventive services and incentives for states to do same in Medicaid

• Funding for population-based prevention activities

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Containing Health Care Costs

• Greater oversight of health insurance premiums and insurer practices

• Increased competition and price transparency through Exchanges

• Provider payment reforms in Medicare

• Testing of new, more efficient delivery system models in Medicare and Medicaid

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Financing Health Reform, 2010-2019

Total Cost = $938 BillionSavings to Federal Deficit = $124 Billion

Source: Congressional Budget Office, 2010

Federal savings

New revenues

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Health Reform Implementation Timeline

2010

• Some insurance market changes—no cost-sharing for preventive services, dependent coverage to age 26, no lifetime caps

• Pre-existing condition insurance plan

• Small business tax credits

• Premium review

2011-2013

• No cost-sharing for preventive services in Medicare and Medicaid

• Increased payments for primary care

• Reduced payments for Medicare providers and health plans

• New delivery system models in Medicare and Medicaid

• Tax changes and new health industry fees

2014

• Medicaid expansion

• Health Insurance Exchanges

• Premium subsidies

• Insurance market rules—prohibition on denying coverage or charging more to those who are sick, standardized benefits

• Individual mandate

• Employer requirements

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Future of Health Reform: Legislation Is Just the Beginning

• Implementation will be challenging• Guidance and federal oversight needed

• Resources for infrastructure and capacity building

• Policy and political challenges

• Health reform provides opportunities to improve our health care system• Reduce the number of people who are uninsured

• Make the health insurance system work better for all consumers

• Transform delivery and payment systems to get better value

• Reorient health care to focus on prevention and primary care

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21“Deadline”Extension

s• Canceled policies Oct. 1, 2014->Oct. 17, 2016Delayed termination of insurance plans that didn’t meet ACA minimum standards.

• 2015 open enrollment Nov. 15, 2014->Feb. 15, 2015 Open enrollment for 2015 extended for a month.

• Employer mandate Jan. 1, 2015->Jan. 1, 2016 The employer mandate, first delayed in July, was pushed back again — and modified. Now businesses with 50-99 employees have until 2016 to provide their employees with health insurance. For companies with more than 100 employees, they still must offer insurance in 2015 — but only to 70 percent of their full-time employees.

Winners/losers under ACA

• Winners• Uninsured, preexisting conditions, those needing

preventative care, catastrophic care, mental health• Drug makers – more insured• Insurers

• Losers• Public hospitals, device manufacturers, more

affluent, tanning salons, home health care providers, those with cheap individual insurance

Is the ACA constitutional?

• US Supreme Court June 2012• Individual mandate constitutional• Cannot require states to expand Medicaid

• ACA and abortion• “Hobby Lobby” Should owners of private for-

profit companies be exempt from requirement to cover contraception if owners object? Yes

• ACA and subsidies• King v Burwell - Can recipients of insurance through

Federal exchanges receive subsidies?

Myths about the ACA• No Republicans involved

• Death panels

• Lots of people lose insurance coverage (probably 3%)

• Forces individuals to pay for abortion

• Will cost 2.5 million jobs

• Socialized medicine

• Unpopular - A rose by any other name?• Obamacare is unpopular, not ACA or its provisions

Will the ACA lower costs?

• For some, yes.• Subsidies for the poor• Those with preexisting conditions won’t

have to buy the most expensive insurance

• For some, no• Taxes on “Cadillac” plans• Cost shifting to those who are healthier,

more affluent• Those who have plans that are inadequate

Alternatives to ACA• Single payor (e.g., Medicare)

• Republican proposal 2015• Tax health benefits over $12K(ind)/30K

(fam)• Repeal individual and employer

mandates• Loosen essential benefits (no

requirement for maternity care, states determine)

• Eliminate Federal exchanges• Eliminate taxes and fees paying for ACA• No tort reform• Plan has not been analyzed by CBO

Everybody’s in favor of change!

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Everybody’s in favor of change!

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(as long as they don’t have to do anything different)

Resources

• Kaiser Family Foundation: http://healthreform.kff.org/

• New DHHS consumer website: http://healthcare.gov/

• Alliance for Health Reform: http://www.allhealth.org/

• National Association of Insurance Commissioners: http://www.naic.org

• National Governors Association: http://www.nga.org

Additional KaiserEDU tutorials:

• Health Care Reform: A Retrospective:http://www.kaiseredu.org/tutorials/retrospective-health-reform/player.html

• Health Reform: How Will Medicaid Change?:http://www.kaiseredu.org/tutorials/medicaid-and-health-reform/player.html

• Health Reform and Medicare:http://www.kaiseredu.org/tutorials/Medicare-and-health-reform/player.html

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