There is no problem that 100 years of government reform can t create.

Transcription

1 HEALTH REFORM BASICS: There is no problem that 100 years of government reform can t create. Linda Gorman Director, Health Care Policy Center Independence Institute Denver, Colorado IndependenceInstitute.org Special thanks to: The Buckeye Institute for Public Policy Solutions Columbus, Ohio BuckeyeInstitute.org (614)

2 The Problem 1: Ohio Medicaid Growth Source: Brian Blase, December Crushing Weight: National Health Care Law Threatens to Make Medicaid an Unsustainable Burden for Ohioans. The Buckeye Institute for Public Policy Solutions.

3 The Problem 2: Ohio Spending and Revenues Ohio Revenues Ohio Revenues from Federal Gov Ohio Expenditures $35,000,000 $30,000,000 $25,000,000 $20,000,000 Ohio Revenues Ohio Spending $15,000,000 $10,000,000 $5,000,000 From Federal Government $

4 The Problem 3: Ohio Medicaid and People in Poverty 2,500,000 Medicaid enrollment Individuals in Poverty 2,000,000 1,500,000 1,000, ,000 0 Sources: US Census Bureau SAIPE, Statistical Abstract (Medicaid Enrollment), Ohio Department of Job and Family Services Medicaid enrollment reports, Ohio Poverty, 2011,

5 A different approach, New York, 1939.

6 Health Care at Beginning of the 1900s Cash is king. Fraternal societies provide sickness insurance. An estimated 1/3 of adult males belong. Charities help out. Progressive Party platform of 1912 includes national health insurance. Health care is expensive. Committee on the Costs of Medical Care, , recommends groups of practitioners, organized preferably around hospitals encouraging high standards placing payment on a group cost standard.

7 A Major Problem: Paying With Other People s Money % HH Budget Food Housing Transportation Clothing Health Care Out-of-Pocket Expenses as proportion of US National Health Spending: % %

8 Health Spending in 1929 and (millions) 2009 (billions) Total $3,649 $2,486 Consumers $2,973 (81%) $1,256 (51%) Public $495 (14%) $1,146 (46%) Charity $217 (6%) $84 (3%) Per Capita (2009 dollars) $371 $8,035

9 The Regulatory Project Begins Protect supplier incomes. Expand third party payment and expert control by limiting patient choice. Encourage central planning. Stifle operation of price system.

10 Regulatory Milestones 1 Protect Provider Incomes : AMA convinces legislatures to limit physician entry by passing licensure laws, delist medical schools using Flexner report criteria. AMA campaigns against licensure for lodge doctors. 1930s American Hospital Association organizes hospital owned Blue Cross to generate prepaid revenue during the Depression. Exempt from insurance premium taxes and reserves. Community rating and cost plus pricing for services AMA physicians copy hospitals with prepaid plan named Blue Shield.

11 Regulatory Milestones 2 The Growth of Third Party Payment percent of US population has private health insurance Stabilization Act. Congress imposes wage price controls Administrative tax ruling saying employers payments for employee health insurance not taxable as employee wages Liberty Mutual introduces major medical coverage New Internal Revenue Code allows deductibility of employee health plans.

12 Regulatory Milestones 3 Government Makes Health Care an Entitlement 1965 Medicare and Medicaid enacted. Copies the Blue Cross/Blue Shield pay-as-you go approach and billing structure. Medicare: Generous payment for small things coupled with unlimited liability. Medicaid: first dollar coverage. Federal government pays ½ of the costs generated by the states AMA develops CPT code for billing.

13 Regulatory Milestones 4 Public spending out of control. Government turns to price controls, unfunded mandates, central planning, to control expenditure. Costs increase HMO Act 1974 ERISA covers large employers Start of prospective payment system, DRG AMA CPT required for Medicare billing COBRA 1986 CPT required for Medicaid billing, EMTALA passes RBRVS adopted for physician payment schedule. Balance billing limited HIPAA. States required to provide insurance for uninsurable Sustainable Growth Rate

14 The Coverage Crisis is Used to Excuse Continual Government Program Expansions Percent of US Residents with Third-Party Health Coverage Percent of Population With Coverage Note: verification questions changed in Percent with Medicare or Medicaid Percent on Medicare 10 0 Percent on Medicaid Direct Purchase, percent

15 Other misrepresentations deployed to argue for still more government intervention in the health care market Myth of lower foreign spending, higher quality. Differences in national accounting systems, price controls, medical error rate, waiting lists? Advocacy from the Institute of Medicine deaths from lack of health insurance from unrepresentative sample To Err is Human estimates of deaths from medical errors repudiated by the authors of the study the IOM used. Notion that supply creates demand (Roemer s law) used to underpin demands for national health planning, CON, rate-setting, HMOs, and ACOs. Exaggeration of extent of uncompensated care, uninsured ED use. False information on Ability of people with medical conditions to get insurance Policy cancelation. Adverse selection. Risk pooling.

16 And, in 2010, a final regulatory milestone is reached... Congressional Democrats pass a new, straightforward, easy-to-understand, health care system that has been designed for American patients by academic experts

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18 Real Health Care Reform Basics RAND Health Insurance Experiment: When individuals pay for their own routine care expenditures fall by roughly 30%. CDHC policies: 4 to 15% cut first year, lower premiums, expenditure growth 3-5% below trend. Cash means less overhead, more freedom, lower costs. No evidence poor health effects. Medicaid Cash & Counseling: When the chronically ill control their Medicaid expenditures, quality of life improves, health improves, and expenditures fall. People get the care that they need. (Sometimes costs fall, too.)

19 The RAND Health Experiment: Annual ER visits per 10,000 persons Cost share Free Cost/free Surgical abdominal disease Head injury Chest pain/acute heart disease Acute eye injury Asthma Ear infection Abrasion/contusion Sprain Headache Joseph P. Newhouse Free for All? Harvard University Press, Table 5.3, p. 155.

20 How much do cash, provider freedom, deregulation, and consumer activism control costs? Procedure North American Standard US Surgery Price Insured Price By-pass $15,000 $100,000 Cardiac Ablation $12,500 $55,000 Gallbladder removal $6,500 $12,500 Hysterectomy $7,500 $20,000 Microdiscectomy $10,000 $25,000 Hip/knee replacement $15,000 $43,520

21 Total Cost Total Cost Savings From Having a High Deductible Health Insurance Plan Under Three Scenarios $250,000 $200,000 $150,000 Total premium savings: $223,951 Total savings: Excellent Health $154,637 $100,000 $50,000 $0 -$50, Age Total savings: Good Health $128,690 Total savings: Chronic Illness $3,811

22 Characteristics of Effective Reform 1. Concern for patients: only real choice creates accountability. 2. Increase cash payment by patients: reduce the use of other people s money, put patients back in control. 3. Reduce direct government control: leave people free to innovate, encourage market entry. 4. Free the doctors, hospitals, and patients: reduce excess regulation, free the price system.

23 Specific Reforms: Move Medicare to premium support. Dismantle price control structure and the mandatory use of the 87,000 ICD-10 in-patient procedure codes and its 68,000 diagnosis codes. Block grant Medicaid. Revert to helping those who are chronically or acutely ill and cannot take care of themselves. Reduce Excess Regulation and level the health playing field. Same tax treatment for all kinds of insurance, no preferential payment rates, stop taxing private care to expand public care. Same malpractice standards for public and private entities. Encourage the growth of cash payment via health savings accounts and decoupling employment from health insurance. Expand the Cash & Counseling model for those dependent on government support. Let people out of the Medicaid Ghetto.

24 Websites for more information: BuckeyeInstitute.org PatientPowerNow.org John Goodman s Health Policy Blog, (HealthBlog.NCPA.org) Linda Gorman Director, Health Care Policy Center Independence Institute 727 E. 16 th Avenue Denver, Colorado (303) IndependenceInstitute.org Greg R. Lawson The Buckeye Institute for Public Policy Solutions 88 East Broad Street, Suite 1120 Columbus, Ohio (614) BuckeyeInstitute.org