Health System Reform: Why Now Why Colorado Whos Next Len M. Nichols, Ph.D. Director, Health Policy P

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Health System Reform Why Now? Why Colorado?
Whos Next? Len M. Nichols, Ph.D.Director,
Health Policy ProgramNew America FoundationHot
Issues in Health Care Legislative Conference
Colorado Springs, ColoradoNovember 17, 2006
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Overview

• Introduction to Health Markets
• Sources of extreme stress
• Why the national debate is stuck (for now)
• Competing Visions
• States as
• Laboratories
• Catalysts
• How Colorado could inspire the nation

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Are Health Markets Different?

• Information asymmetries
• Clinician-patient
• Consumer-insurer
• Third-party payment
• Moral hazard
• Voluntary insurance purchase
• Adverse selection
• Expenditure distribution skewed
• Risk pooling necessary
• Competing definitions of fair risk pool

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Linked Problems

• Low Value for Dollar
• Uneven quality
• Inequitable access to care

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Compared to Other Countries

• 1 in spending, share of GDP, per capita
• 37 (by WHO) on overall system performance, next
  to Slovenia and Costa Rica
• Life expectancy, child survival, fairness,
  responsiveness, health outcomes

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Medicare Quality and Spending Correlation
Source Baiker and Chadra, Health Affairs we,
April 7, 2004
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US Overuses interventionist technological
procedures
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Institute for Healthcare Improvements
Ventilator Associated Pneumonia program

• Known how to eradicate VAP since 99
• 14 hospitals have
• 6 more have made great progress
• Why hasnt every hospital nationwide done this?

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Percent of median family income required to buy
family health insurance
Source Authors calculations, using KFF and AHRQ
premium data, CPS income data.
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Family health insurance premium as percent of
wages
Source authors analysis of KFF premium data,
BLS wage data
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Labor Market Realities
Occupation Family premium/Median wage Physician
7.9 History professor 14.8 Secretary
30.9 Carpenter 25.6 Cook 50.0 Source KFF
premium and BLS wage data, 2004.
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Premium Payments v. GDP Growth Rate
Source NIPA, BEA/Commerce Dept.
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Employer Health Insurance Payments / Corporate
Profits
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Some Coverage Trends (percent of under-65
population)
1987 1993 2004 Employer 70.1 64.3 62
.4 MedicaidSCHIP 8.7 12.9 13.4 Unins
ured 13.7 16.0 17.8
Source EBRI, December 2005.
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Result of our incremental approaches

• Health insurance as we know it is out of reach of
  a growing share of our workforce
• We tolerate a stunning amount of mediocre
  performance

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Linkages Among Problems
Access
Cost
Quality
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Political Gridlock and Fear

• Rs dont want real reform discussions
• universal coverage threatens tax cuts (1)
• Serious cost-growth containment requires enhanced
  government role
• Ds dont know what they want
• Some want to use UC to get power
• Others fear and want to avoid it to get power
• Others fear any solutions which unions dont like

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Visions of Problems

• Right
• High costs caused by moral hazard (too much
  insurance coverage)
• Coverage expansion will require unimaginable
  taxes
• Left
• High costs caused by market forces, market
  power/high profits, adverse selection
• Center
• Problems LINKED, must be addressed
  simultaneously, for technical and political
  reasons

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Competing Policy Visions

• New Wild West, with tax breaks
• Individual consumers will drive efficiency
• Musty Cocoon of Single Payer
• Elite control will drive efficiency
• Brave New World
• Mandates, smart regulation, combined buying power
  will drive efficiency

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Presidents Proposals

• Encourage non-group purchase of HSA-eligible
  insurance
• Premium OOP from HSAs deductible
• Payroll tax credit for HSA contribution
• Support passage of AHPs federal override of
  state regulation of insurance markets
• Malpractice reform
• HIT and transparency exhortations

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What Do We Need?

• Political Space to Begin the Conversation
• Moral case
• Proof we are all in the same community
• Economic case
• Delivery system culture of value
• Credible policy design
• 3 dimensions of credibility
• Stakeholders, politicians, people

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Health System Culture of Value

• Information infrastructure to support quality
  improvement
• Malpractice safe harbors and value-enhancing
  incentives (for all)
• Comparative technology assessment as
  countervailing power between medical technology
  and coverage/use decisions
• Raise the bar at the FDA
• Raise the bar for procedural interventions as
  well
• Create Health Home, pay Host to guide us through
  system, teach/learn evidence base with us

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Credible Policy Design

• Individual and Shared Responsibility
• Individual purchase requirement
• Purchasing pool
• Risk pooling/market rules
• Administrative economies of scale
• Subsidies for lower income
• Financing sources
• Culture of Value
• Evidence-based limits on collectively financed
  benefits
• Preservation of liberty and choice

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Pew Typology Support for government guarantee of
health insurance, even if taxes must be raised
Pew Center for Research on People the Press
2005
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States as Laboratories

• No inpatient coverage
• Utah, West Virginia
• Limited inpatient coverage
• Arkansas, New Mexico, Tennessee
• Piggyback on states purchasing power
• West Virginia, Oklahoma
• Encourage offers within purchasing pools
• Montana
• Adding Adults
• Wyoming, Pennsylvania

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States as Catalysts

• Maine
• Build it, capture savings, hope theyll come
• Illinois
• Cover all kids, cover all citizens?
• Vermont
• Bipartisan, insurance home and subsidies for
  uninsured
• Massachusetts
• Bipartisan, individual mandate, subsidize lower
  income in smaller firms, hard budget constraint

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Why Colorado Should Do This

• Ich Bien Ein Coloradan
• It would confound the cynics
• It would inspire the Just
• It would concentrate minds in Washington

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What Can Colorado Do Alone?

• Agree to work across party lines
• Create sustainable structures
• Efficient markets
• Transparent information systems
• Subsidies and benefits for target population
• Build in budget safeguards
• Agitate for Federal partnership