County of Santa Cruz

Transcription

1 County of Santa Cruz 0059 HEALTH SERVICES AGENCY HEALTH SERVICES AGENCY ADMINISTRATION P.O. BOX 962, 1080 EMELINE AVENUE SANTA CRUZ, CA (831) FAX: (831) July 30, 2003 Agenda: August 12,2003 BOARD OF SUPERVISORS County of Santa Cruz 701 Ocean Street Santa Cruz, CA RE: Report Back on Single Payer Health Reform Options Dear Members of the Board: Backqround: Because of a variety of health reform bills introduced in the legislature, your Board requested a report on "single payer" health plans. Attached you will find a report which discusses this model of health care delivery and reviews major advantages and disadvantages. At this point, the bills in the legislature are not very complete and in light of the State budget crisis, it is not likely these bills will proceed. However, there are important merits to single payer models which are important for the Board and community members to understand. Summarv: The current health care system is fatally flawed with a growing crisis in costs, premiums, and numbers of persons who are uninsured and underinsured. Administrative complexity of the patchwork of current public and private insurance drives up costs and creates barriers to access. Radical change is needed, but significant political will and resources will be needed to move forward into meaningful reform. Movement to a single payer health system similar to Canada, Denmark, and Norway does hold promise for providing more equitable and accessible health care for all. It also takes wasteful administrative and stockholder profits out of the current system. Nonetheless, many voters and powerful interest groups oppose government directed health care insurance systems. Nonetheless, it may be possible to take intermediate steps towards improving coverage and quality and cost reductions particularly on a regional basis. At this point, these incremental efforts are more practical for the County to support and pursue. 1 26

2 It is, therefore, RECOMMENDED that your Board: 1. Accept and file the report on single payer health plans and direct HSA to continue to monitor legislation and regulatory efforts in this area and report back to the Board with further recommendations if appropriate. Respectfully submitted,.balsa, Ph.D. Health Services Agency Director RECOMMENDED: Susan A. Mauriello County Administrative Officer cc: County Administrative Office County Counsel Auditor-Controller Health Services Administration Safety Net Clinic Coalition Health Improvement Partnership Council Public Health Commission Mental Health Advisory Board Alcohol and Drug Advisory Board Emergency Medical Care Commission 26 2

3 0077 Single Payer Health Insurance OVERVIEW Introduction to Single Payer: A single payer health insurance model utilizes one entity, usually a government entity, to pay for all health services in a geographic area. While health insurance in a single payer system is managed by the public sector, medical care continues to be provided by private practice physicians at clinics, private offices and in private and public hospitals. A single payer system transforms the financing and administration of payment for health care from a multiplicity of public and private payers to a single public insurance plan that covers all individuals in one risk pool. Canada, Denmark and Norway utilize a single payer model for financing health care. The term single payer is not strictly and uniformly defined. There are many ways a single payer system might be structured and there is legitimate debate about which variations would be the most effective. Single Payer in California: In 1994 a single payer system was brought to the California voters as Proposition 186 but was voted down. In 1999 the Legislature directed that HHS study health care reform options that would extend care to all Californians. The California Health Care Options Project study was published in 2002 and examined nine options ranging from extending existing public programs to creating a single payer system. The full study, which can be found at was not designed to develop a consensus, so no particular option was recommended. The single payer options and fimding analysis developed in the study are the basis of SB 921, the single payer bill introduced by Senator Sheila Kuhl. SB 92 1, or the Health Care for All Californians Act, would create a single payer system for California. The new tax increases required to finance such a system were removed from the bill so that it now expresses the intent of the Legislature to create a single payer California Health Care System. Additional legislation would be required to finance and implement a single payer system. The bill passed the Senate 23 to 14 in early June 2003 and is now in the Assembly. SB 92 1 would cover all California residents with a single insurance plan offered by the State of California. The insurance plan would negotiate rates and pay existing private and public health practitioners and institutions for providing a broad array of benefits including physical and mental health, oral health, vision, rehabilitation, pharmacy, hospital and diagnostic services. Long term skilled nursing home care would not be covered. Existing state health care agencies would be consolidated to create a new State Health Agency that would administer the plan. The head of the Agency would be the Commissioner of Health, who would initially be appointed by the Governor and then elected to four year terms of office. The Commissioner would chair a new and powerful 23 member Health Policy Board. The California Health Care System would be financed with taxes on unearned income, tobacco and alcohol, a payroll tax on employers and an income tax on employees. These new tax funds would be deposited in the Health Care Fund. The Health Commissioner would do everything possible to secure the federal fimds now being spent on Medicare, Medical, Healthy Families and other federal programs and integrate them into the new California Health Care System. Similarly state and county expenditures for health care (including payments for employee and retiree health insurance) would be consolidated into the Health Care Fund and the California Health Care System would assume the responsibilities previously carried out by those jurisdictions. SB 92 1 calls for the Health Policy Board to adopt guidelines for the approval of capital expenditures by health care providers. It also creates a Board of Medical Practice Standards to determine what constitutes optimal medical practice including evaluation of pharmaceuticals and medical and surgical treatment. The standards established by this Board would help to direct the policy and payments of the California Health Care System. 1 86

4 0072 During a transition period, the Health Care Fund would pay for health care for everyone but collect reimbursement from other sources obligated to pay for those benefits. Eventually private health insurance, workers compensation insurance and other types of private coverage would play no role in financing health care in California. It is possible that private insurers would help to administer the Health Care System, but they would do so under contract to the State rather than as private vendors. SB 92 1 supporters believe that California can finance coverage for the uninsured and underinsured by creating efficiencies and savings via the single payer system. Theoretically the cost of the new system will be equal to current spending on health insurance. Additional people will be covered with the savings on lower administrative costs, savings from provider rate negotiations and savings from competitive bidding for the purchase of pharmaceuticals and durable medical goods. Clearly SB 921 is a dramatic and sweeping reform proposal. It does not build on the current system of employer-purchased insurance but rather consolidates and restructures the entire payment system. Such dramatic changes to a large complex system would entail significant risks. Why would we not stay with our current system of insurance and financing? THE CURRENT SYSTEM Financing Health Care: According to many observers our current system of financing health care is mortally ill; it s on life support and can t last. The costs of taking no action may be higher than the costs of taking bold action. It s probably inaccurate to describe our current health care financing patchwork as a system. In fact, the United States has a non-system that is becoming ever more fragmented and stressed. Broadly speaking, the system has problems with access, cost, and quality, leading to dissatisfaction by consumers, health care providers and payers alike. Information about the current system and its shortcomings is presented below: Access/ Universal Coverage: 0 Over 22% of California s non-elderly population lacks health insurance. This means 6.2 million children and adults are uninsured at some point during a year. California has one of the higher rates of uninsurance in the nation. The 2000 census found that nationwide 16% of the non-elderly population did not have health insurance equating to 40 million people who are uninsured at any one time and 60 million who lack insurance during a 12 month period. These numbers have worsened during the current recession. During a three year period up to one in three Americans ( and presumably Californians) will experience a gap in health insurance coverage. Many studies have documented that the uninsured lack access to care and their health is worse as a result. For example, 40% of uninsured adults and 25% of uninsured children lack a regular source of care. 20% of the uninsured postponed seeking health care due to concerns about cost. When they do receive care they are more ill and receive fewer, less optimal services. The uninsured experience worse health outcomes including earlier deaths. 0 Employer sponsored health care has been the norm. In California, 2/3 s of those with insurance get that coverage through employer based insurance (either directly or as a dependent). Employerbased insurance has always had limitations: making health care coverage dependent on employment is not logical. Those who need coverage the most (the seriously ill and disabled) may not be able to work. During periods of high unemployment, many people lose their employerbased coverage. Employers are not required to offer coverage and many are restructuring their work forces in part to reduce benefit costs. Employers cannot afford to absorb the substantial uncontrolled increases in health care costs and are shifting costs to employees Up to 80% of the uninsured live in a family where one or more adults are employed but either their employer does not offer insurance or the cost to the employee is too great. costs: 0 After a period of relatively low health care inflation in the 1990s we have entered a time of increasingly intense cost increases. Insurance premiums rose an average of 8.3% in 2000, 11% in 2

5 , 12.7% in 2002 and are projected to increase to 15% in During this same period, inflation was 3.3% and wage gains for non-supervisory workers were 4.4 % If the current rate of inflation continues, the average cost of health insurance will be $14,545 per employee in 2006,'(double the amount of the average premium in 2001). As the cost of health insurance increases, businesses that choose to pay for coverage are at a competitive disadvantage with those that do not. Moreover, when the uninsured receive health care the costs of that care are shifted onto costs charged to private insurance thus forcing those who provide insurance to subsidize those who do not. With an increasingly global economy, the United States is at a disadvantage compared to counties that contain health care costs. Health care costs now constitute 15% of our Gross National Product (GNP) or 1.4 trillion dollars a year. Most other western democracies spend between 7% and 10% of their GNF' on health care (and they have universal coverage.) Our fragmented system makes it impossible to make and implement policy decisions about which new health care costs are worthwhile and which costs should be contained. Operating separately, neither employers, consumers nor government are able to effectively shape and direct the health care system. Our duplicative payment system is wasteful: administrative costs for a private insurance eat up 25-32% of every health care dollar. Whereas large consolidated public systems such as Medicare spend 2% of each dollar on administration. Employers spend money to administer health insurance programs and government has numerous duplicative programs with additional staff and overhead costs. Quality: Quality is intrinsically related to financing. In a market-based system the purchasers determine what quality they are willing to pay for. Do the payers for health care, either the government or private employers, provide any incentive to deliver quality care? Do they reimburse adequately to cover the cost of quality care or do they actively impede quality by not covering necessary services? A recent RAND Institute study of adults in 12 metropolitan areas found that approximately half of them received the clinically recommended treatment approach for preventive care, for acute conditions and for chronic conditions. The Harvard Medical Practice Study in the State of New York produced data that suggest that over a million patients are injured in hospitals every year, and approximately 180,000 people die each year as a result of medically induced injury or negligence. The Harvard team concluded that medical injury and malpractice constitute the nation's "hidden epidemic." ADVANTAGES AND DISADVANTAGES OF THE SINGLE PAYER SYSTEM Single Payer System Solves Current Problems: A single payer system would cut through many of the problems created by an employer-based insurance system. Most individuals would be covered whether they worked for a small employer or a large employer, whether they worked part-time or full-time, whether they were unemployed, too ill to work or had retired early. Employers could focus on their core business and not have the burden of trying to manage health costs without adequate leverage. A single payer system would reduce the administrative costs of having multiple competing pro-profit insurance private plans. The Health Care Options Project study estimated that Californians could save $ 7.6 billion dollars a year in administrative costs by going to a single payer system. Providers would spend less trying to collect for the services they rendered. Hospital and provider reimbursement would be more predictable and would not be dependent on patient mix e.g. providers would be paid the same for serving a low-income patient as they would for serving a wealthy patient. Providers serving low-income patients would not have to worry about whether patients could afford to buy medications and whether any specialist would accept a referral. A single payer system would also reduce the confusing, duplicative nature of different government programs aimed at different segments of the population. Currently Medical has over 100 eligibility

6 0074 categories. Medical interfaces with Medicare, Healthy Families, CCS and CHDP in complex ways that frustrate providers and patients alike. A single payer system would simplify the financing of care. A single payer system would bring issues of cost and expenditures for health care into the public domain where there would be more accountability. The budget for health care in the state would be decided by public entities including the State Legislature, the State Health Commissioner and the Health Policy Board, not the executives of private health insurance companies. The Health Commissioner would stand for elections every four years and would make annual reports to the people of the state on the goals, accomplishments and problems of the health system. The California Health Agency, with access to all the data and control of all the health funding, would be able to decide where additional investments in health should be made. Do we need to finance more diabetes education or do more to reduce HIV transmission? Should we invest more in rural facilities or build centers of excellence in specific urban areas? Should we finance school based health centers and nurses for Senior Centers or focus on increasing access for newborns? All of these issues would now have a forum and could be decided as a matter of public policy. Disadvantages of a Single Payer System: While having a single payer system would solve many problems, undoubtedly it would also generate new problems. The problems that can be anticipated with a state based single payer system such as SB 921 include the following: 0 Budgetary estimates for the new system are just estimates. No one really knows how the transfer and consolidation of all existing funds would mesh with the number of enrollees and the negotiated expenditures. Cost containment will be possible but will undoubtedly be contentious and politicized. [One person s politicization is another person s accountability. ] 0 The cost of financing health care will be redistributed from myriads of private streams to fewer tax streams. The new taxes will be controversial and the savings will be unevenly distributed. For example, businesses that now pay for health insurance as an expense will shift to paying a new payroll tax but may have net savings. Businesses that do not provide coverage will experience the new payroll tax as a net increase in expense. Some families buying insurance out-of-pocket will incur savings, some will have new taxes and no savings. 0 Redistribution of resources within the health system will occur and could have unintended consequences. For example, when LA County transfers its general funds for the county health care system to the new Health Care Fund will its County hospitals survive on billing for services provided? Will the patients, who now suddenly have insurance, continue to seek care in the public system? If the public system disappears, who will train our health care professionals, perform research and operate the trauma and bum centers? Will LA be willing to transfer its considerable general funds to the state, while counties with small indigent care budgets contribute proportionately less to the State fund? 0 The federal government may not cooperate with consolidating federal programs and funds into California s single payer model. California could need federal waivers from ERISA requirements in order to integrate existing employer covered beneficiaries. A patchwork system could continue to exist. 0 The private health insurance industry employs many people who would be laid off. Eliminating waste and duplication may entail eliminating jobs. SUMMARY Our current system of financing health care is fatally flawed. Businesses will not continue to bear growing, uncontainable health care costs that hamper their competitiveness. The patchwork system of public and private financing is wasteful and does not support the delivery of quality services. Radical change is needed. The single payer model will have problems, but is intrinsically a more equitable and rational approach than many other proposed reforms to the current system. Nonetheless, many voters and powerful interests would not support state government in taking on the responsibility of managing a new system of health care payment and planning. Intermediate steps to improving coverage and quality while containing costs are also available and could be undertaken in the short term with less resistance. 26 4