The Case for Health Reform in the U.S.

Gerald F. Kominski, Ph.D.Professor, Department of Health Services

UCLA School of Public Health

Associate Director,

UCLA Center for Health Policy Research

October 7, 2009

The Growth of Private Insurance1929-1960

Source: Source Book of Health Insurance Data, 1965.

Where Do Most Americans Get Health Insurance Coverage?

From Their Employer Type of Coverage Number (millions) Percent

Private 202.0 67.5% Employment Based 177.4 59.3% Individual 26.7 8.9%Government 83.0 27.8% Medicare 41.4 13.8% Medicaid 39.6 13.2%Uninsured 45.7 15.3%

Note: Percentages exceed 100% because type of coverage is not mutually exclusive; individuals can have more than one category of coverage.Source: U.S. Census Bureau Analysis of March 2008 Current Population Survey

65% 68% 68% 66% 65% 63%59% 60% 59%

62%

99% 99% 99% 98% 98% 99% 98% 98% 99% 99%

56% 57% 58% 58% 55% 52%47% 48% 45%

49%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

All Small Firms (3-199 Workers)

All Large Firms (200 or More Workers)

3-9 Workers

Employers Who Offer Health InsuranceA Tale of Two Cities

*Tests found no statistical differences from estimate for the previous year shown (p<.05).

Note: Estimates presented in this exhibit are based on the sample of both firms that completed the entire survey and those that answered just one question about whether they offer health benefits. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2008.

How Much Financial Protection Does Health Insurance Currently Provide?

Not Much, If You Buy Insurance on Your Own, and Have a Low Income

Source: Jacobs K, Capozza K, Roby DH, Kominski GF, Brown ER. Health Coverage Expansion in California: What Can Consumers Afford to Spend? UCLA Center for Health Policy Research, September 2007.

Among those who buy insurance on their own, those in the highest quartile of expenses spend 14% or more of their pre-tax income on health care expenses

Among those who buy insurance on their own and have incomes from 101-200% FPL, those in the highest quartile of expenses spend 30.5% or more of their pre-tax income on health care expenses

The Probability of Being Uninsured Is Substantial Below 300% FPL

44%

71%

27%

11%35% 29%

18% 10%

92%

20%

83%

4%

45%

7%

5%

0%

25%

50%

75%

100%

<100% FPL 100-199%FPL

200-299%FPL

300-399%FPL

400%+ FPL

Uninsured

Medicaid/ Other Public

Employer/ Other Private

NOTE: The federal poverty level (FPL) was $21,203 for a family of four in 2007. Data may not total 100% due to rounding. Nonelderly defined as age 0-64. SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of March 2008 CPS.

Decrease in Employer Sponsored Insurance

(million)4.6%

National Unemployment Rate Increase

since 2007(from 4.9% in Dec-07 to 9.5% in June-

09)

=

4.6 5.0

Medicaid /CHIP

Enrollment Increase(million)

Uninsured Increase(million)

&

11.3

Note: Totals may not sum due to rounding and other coverage.Source: John Holahan and Bowen Garrett, Rising Unemployment, Medicaid, and the Uninsured, prepared for the Kaiser Commission on Medicaid and the Uninsured, January 2009.

Impact of the Rise in Unemployment on Health Coverage, 2007 to 2009

Sources of Financing, 2007Total Health Expenditures - $7,421 per Capita

16.2% of GDP

Out-of-Pocket

12%

Private Insurance

35%

Other Private

7%

Medicare19%

Medicaid15%

Other Public12%

Private54%

Public46%

Source: Hartman M, et al., National Health Spending in 2007: Slower Drug Spending Contributes to Lowest Rate of Overall Growth Since 1998, Health Affairs 2009;28(1):246-261.

Low-Income Subsidy Payments

Payments to Union/ Employer-Sponsored Plans

1%

Other Part B Benefits

Payments to Drug Plans

Hospital Outpatient

Hospital Inpatient

Skilled Nursing Facilities

Hospice3%

Medicare Advantage (Part C)

Physicians and Other Suppliers

Home Health

Total = $484 billionNOTE: Does not include administrative expenses such as spending for implementation of the Medicare drug benefit and the Medicare Advantage program. Total is net of $9.4 billion in recoveries for 2009 .SOURCE: Congressional Budget Office, Medicare Baseline, March 2009.

Medicare Benefit Payments, by Type of Service, 2009 Part A

Part B

Part D

Part A and B

19%

4%23%

5%

28%

4%6%

4%

5%

Average Payments to Medicare Advantage Plans Relative to Traditional Fee-for-Service Medicare, 2009

114%

113%

118%

112%

118%

116%

All MedicareAdvantage

Plans

Local HMOs Local PPOs RegionalPPOs

Private Fee-For-Service

Plans

SpecialNeeds Plans

SOURCE: Medicare Payment Advisory Commission, March 2009.

Medicare Advantage Plan Types

Traditional Fee-for-Service Medicare = 100%

Medicaid Expenditures by Service, 2007

Total = $319.7 billionNOTE: Total may not add to 100% due to rounding. Excludes administrative spending, adjustments and payments to the territories.SOURCE: Urban Institute estimates based on data from CMS (Form 64), prepared for the Kaiser Commission on Medicaid and the Uninsured.

Inpatient 15.0%

Physician/ Lab/ X-ray 3.7%

Outpatient/Clinic 7.4%

Drugs4.7%

Other Acute6.7%

Payments to MCOs 19.0%

Nursing Facilities

14.8%

ICF/MR3.9%

Mental Health1.5%

Home Health and Personal Care

15.0%

Payments to Medicare 3.5%

DSH Payments

5.0%

AcuteCare

59.9%

Long-TermCare

35.1%

23.4%

49.7%

64.6%

73.7%80.3%

96.8%

3.2%

0%

20%

40%

60%

80%

100%

Top 1%>$43,289

Top 5%>$14,098

Top 10%>$7,628

Top 15%>$5,274

Top 20%>$3,886

Top 50%>$775

Bottom50%

<$776Percent of Population, Ranked by Health Care Spending

Note: Population is the civilian noninstitutionalized population, including those with no spending. Health care spending is total payments from all sources, excluding health insurance premiums .

Source: Kaiser Family Foundation calculations using data from Medical Expenditure Panel Survey (MEPS), 2005.

5% of the Population Accounts for 50% of Spending20% Account for 80%

Perc

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Sp

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The U.S. Spends More Than Any Other Nation, Largely Because of Private Insurance

aa

Source: The Commonwealth Fund, calculated from OECD Health Data 2006.

Adjusted for Differences in Cost of Living

International Comparison of Spending on Health, 1980–2006

0

1000

2000

3000

4000

5000

6000

7000

1980 1984 1988 1992 1996 2000 2004

AustraliaCanadaDenmarkFranceGermanyNetherlandsNew ZealandSwedenSwitzerlandUnited KingdomUnited States

Average spending on healthper capita ($US PPP)

4

6

8

10

12

14

16

1980 1984 1988 1992 1996 2000 2004

AustraliaCanadaDenmarkFranceGermanyNetherlandsNew ZealandSwedenSwitzerlandUnited KingdomUnited States

Total expenditures on healthas percent of GDP

Data: OECD Health Data 2008, June 2008.

7681

88 8489 89

99 9788

97

109 106116 115 113

130134

128

115

65 71 71 74 74 77 80 82 82 84 84 90 93 96 101 103 103 104 110

0

50

100

150

Fran

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pan

Aus

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Italy

Can

ada

Nor

way

Net

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Swed

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reec

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ustr

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erm

any

Finl

and

New

Zea

land

Den

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Uni

ted

Kin

gdom

Irela

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tes

1997/98 2002/03

Deaths per 100,000 population*

* Countries’ age-standardized death rates before age 75; including ischemic heart disease, diabetes, stroke, and bacterial infections.See report Appendix B for list of all conditions considered amenable to health care in the analysis.Data: E. Nolte and C. M. McKee, London School of Hygiene and Tropical Medicine analysis of World Health Organization mortality files (Nolte and McKee 2008).

Mortality Amenable to Health Care

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2008

Patients Reporting Access Problems Because of Costs

4037

58

12

21

25 26

0

25

50

NETH UK CAN GER NZ AUS

* Did not get medical care because of cost of doctor’s visit, skipped medical test, treatment, or follow-up because of cost, or did not fill Rx or skipped doses because of cost.AUS=Australia; CAN=Canada; GER=Germany; NETH=Netherlands; NZ=New Zealand; UK=United Kingdom.Data: 2005 and 2007 Commonwealth Fund International Health Policy Survey.

2005 2007

United States

Percent of adults who had any of three access problems* in past year because of costs

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2008

Physicians’ Use of Electronic Medical Records

17

28

9892 89

79

42

23

0

25

50

75

100

NETH NZ UK AUS GER CAN

AUS=Australia; CAN=Canada; GER=Germany; NETH=Netherlands; NZ=New Zealand; UK=United Kingdom.Data: 2001 and 2006 Commonwealth Fund International Health Policy Survey of Physicians.

Percent of primary care physicians using electronic medical records

2001 2006

United States

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2008

Proposed Health ReformKey Elements of H.R. 3200: America’s Affordable Health

Choices Act of 2009

Require all individuals to have health insurance- Those without coverage pay a penalty of 2.5% of modified adjusted

gross income- Exceptions granted for dependents, religious objections, and

financial hardship

Require employers to provide coverage to employees or pay into a Health Insurance Exchange Trust Fund - Employers who do not offer insurance pay up to 8% of payroll- Exceptions for certain small employers, and credits for others to

offset the costs of coverage

Expand Medicaid to 133% of the Federal poverty level- Federal government pays full cost of expanded eligibility for first 5

years

Proposed Health ReformKey Elements of H.R. 3200: America’s Affordable Health

Choices Act of 2009

Create a Health Insurance Exchange for individuals and smaller employers to purchase health coverage- Premium and cost-sharing credits available to individuals/families

with incomes up to 400% of the federal poverty level - Out-of-pocket premium expenses limited based on the following

schedule:• 133-150% FPL: 1.5 - 3% of income• 150-200% FPL: 3 - 5.5% of income• 200-250% FPL: 5.5 - 8% of income• 250-300% FPL: 8 - 10% of income• 300-350% FPL: 10 - 11% of income• 350-400% FPL: 11 - 12% of income

Proposed Health ReformKey Elements of H.R. 3200: America’s Affordable Health

Choices Act of 2009

Impose new regulations on plans participating in the Exchange and in the small group insurance market- Guaranteed issue and renewal (no pre-existing condition

exclusions)- Limit premium variation to age, family status, and market area- Limit non-medical care expenses (medical loss ratios) - Prohibit rescissions, except in cases of clear fraud- Limit annual OOP liability to $5,000 per individual, $10,000 per

family- No lifetime limits on benefits- Create public option with payments based on Medicare

payment rates to foster competition

“Public” Concerns About Health Reform

1. I’m satisfied with my health coverage, so why is major reform necessary?

2. Will it control costs?

3. Is it socialized medicine?

4. Does it create unfair competition with private insurers?

5. Will it produce lower quality care and poorer general health? Will it ration care?