The Obama Health Care Reform Proposal - PowerPoint PPT Presentation

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The Obama Health Care Reform Proposal


Some parts adopted in stimulus plan ... 'And this is your plan, John,' he said at one debate. ... Savings alluded to in plan based on RAND estimates ... – PowerPoint PPT presentation

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Title: The Obama Health Care Reform Proposal

The Obama Health Care ReformProposal
  • Bill Evans
  • Department of Economics and Econometrics

Three topics in this topic
  • What issues must comprehensive health care reform
  • Outline the Obama proposal
  • Suggest some likely consequences

Confusing at the moment
  • Campaign proposal but no legislation yet
  • Some parts adopted in stimulus plan
  • HealthCare Dialogue Coalition (18 groups) will
    release their recommendations Monday
  • But, everything is up in the air as a result of
    the economy

Kaiser FF Tracking Survey
What two issues you would most like to hear the presidential candidates talk about? What two issues you would most like to hear the presidential candidates talk about? What two issues you would most like to hear the presidential candidates talk about? What two issues you would most like to hear the presidential candidates talk about?
Issue June 07 March 08 Oct 08
Iraq 43 32 13
Health care 21 28 12
Immigration 18 7 2
Economy 12 45 62
Gas Prices 12 lt1 5
Terrorism 7 6 7
What issues must health care reform address?
  • Access
  • Cost (both the level and rate of change)
  • Medicare
  • Tax equity

  • Uninsurance is a persistent issue
  • Dimensions of the problem (2007)
  • 45.7 million people
  • 9 million children
  • Fraction uninsured increasing
  • 12.6 in 1987
  • 15.3 in 2007

What issues must health care reform address?
  • Access
  • Cost (both the level and rate of inflation)
  • Medicare
  • Tax equity

Expenditures on Medical Care
  • Data for 2007
  • 2.2 trillion on HC
  • 7,400 per capita
  • 16.2 of GDP
  • Projected, 2018
  • 4.4 billion
  • 13,100 per capita
  • 20.3 of GDP

90 more than Canada
145 more than the UK
Average Annual PremiumsCovered Workers, 2008
  • Individual plan
  • 4,704 total
  • Family plan
  • 12,690

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Are high expenditures a bad thing?
  • A key driver of health care costs is technology
  • MRIs/CT scans, angioplasty, anti-psychotropic
    drugs, hip/knee replacements, neo-natal intensive
    care, treatments for AIDS, statin drugs (Lipitor)
  • All not available 20-30 years ago. Now,

If you want to cut costs, where do you look?
  • Administrative/overhead
  • 3 in Canada (single payer)
  • 1.5 in Medicare
  • 30 in US system in total
  • Chronic conditions
  • Unnecessary care

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Per Capita Medicare Spending by Hospital Referral
Region, 2006
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What issues must health care reform address?
  • Access
  • Cost (both the level and rate of inflation)
  • Medicare
  • Tax equity

  • 2007
  • 44.1 million recipients
  • 432 bill. exp.
  • 3.2 of GDP
  • 16 of fed. budget
  • 2040
  • 86 million recipients
  • 7.6 of GDP
  • 30 of fed. budget

Future problems
  • Funding
  • Medicare trust fund
  • General revenues (75)
  • Medicare Trustees predict
  • Costs gt revenues by 2011
  • Trust fund exhausted by 2019
  • Declining ratio of workers/enrollees means taxes
    must be raised

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What issues must health care reform address?
  • Access
  • Cost (both the level and rate of inflation)
  • Medicare
  • Tax equity

Tax System Equity
  • EPHI health insurance is a tax-free fringe
  • Greatly reduces the cost to consumers of
    purchasing insurance
  • Has encouraged the growth of EPHI
  • Most people w/ private insurance get is through
    their employers
  • 170 million have EPHI

  • Tax break only available to people who receive
    insurance from their firm
  • Higher income families have higher tax rates so
    the tax benefit to them is greater
  • Costs Fed. Govt. over 243 billion/year
  • Regressive tax

Tax Benefit of EPHI
  • A family w/ 70,000 in income
  • 36.4 marginal tax rate
  • 25 federal
  • 3.4 state (Indiana)
  • 8 Social Security and Medicare
  • Want to purchase 12,000 policy in AFTER TAX

Without tax advantage
  • Receive 18,897 in income
  • Pay 36.4 or 6,897 in taxes
  • 12,000 left over for health insurance
  • Net benefit of tax deduction is 6,897

Obama/Biden Plan for a Healthy America
  • Plan builds out from existing EPHI
  • Tries to fill in the gaps in coverage
  • Heavy emphasis on trying to reduce costs to make
    health care more affordable
  • Plan has not been formally proposed so some
    details sketchy

  • Expansion of SCHIP/Medicaid
  • Must provide HI for children
  • No enforcement specified
  • Tax credits for small businesses that provide
  • Pay or play for businesses
  • Must spend minimum fraction of labor costs on HC
    or pay that amount as a tax (5 or 6)

Access (continued)
  • National Health Insurance Exchange
  • Similar to MA connector
  • Policies similar to those offered to congress and
    federal employees
  • Available to individuals, small businesses,
  • National Plan
  • Offered by the Federal government
  • Designed to provide competition to pvt. ins.

Controlling Cost
  • 50 billion in IT for health care sector
  • Expand use of preventive services and disease
  • Increase competition in insurance industry
  • Allow Medicare to bargain Part D prices
  • Catastrophic reinsurance through the Federal

  • Reduce expenditures for Medicare Advantage
  • Prevention/Disease Management
  • Greater bargaining over health care costs

Tax equity
  • Subsidies for small business who offer EPHI
  • Some talk on Capital Hill of eliminating
    tax-preferred status of EPHI
  • Obama railed against McCain for proposing
  • White House has signaled they will support but
    cannot propose

  • "And this is your plan, John," he said at one
    debate. "For the first time in history, you will
    be taxing people's health-care benefits." Mr.
    Obama added that the McCain proposal was
    "radical," "the biggest middle-class tax increase
    in history," "out of line with our basic values"
    and that "the choice you'll have is having your
    employer no longer provide you health care."

What has been adopted?
  • 19B to encourage health IT investment
  • Additional 10B over next 2 years for NIH
  • 1.1B for effectiveness research (AHRQ)
  • 85B for states to help finance Medicaid

  • 25B -- 65 of COBRA for unemployed
  • 9 months
  • Laid-off between 9/1/2008 and 12/31/2009
  • Had insurance
  • Worked for company gt20 employees
  • Income lt 145,000/adult

Incentives/Fines for EMR Investment
Proposed 2010 Budget Downpayment on Reform
  • 630 billion over time years
  • Cost savings
  • Reduce payments for Medicare Advantage
  • Increase rebate from pharma. to Medicaid
  • Higher taxes
  • Reduce tax rate on itemized deductions for
    families w/ taxable income gt250,000

Is it enough?
  • Cost estimates
  • Vary from 1.2 - 1.7 trillion over 10 years
  • Big unknowns
  • Take up rates on new programs
  • Subsidy for government insurance
  • Health care costs

Estimated impacts Access(Lewin Group, 2008)
  • Cut number uninsured by 26.6 million
  • Primarily from expansion of Medicaid/SCHIP
  • Shift 28.7 million onto federal insurance
  • Companies drop coverage
  • Those on federal rolls will increase by 48.3
    million roughly 50 increase

Does Preventive Medicine save ?
  • Intuitively appealing detect disease before it
    becomes expensive
  • Problem with low incidence rates, screening is
    costly and low of cases detected
  • Cohen et al., NEJM, February 14, 2008
  • Reviewed 599 published articles on
    cost-effectiveness of preventive care

  • Our findings suggest that the broad
    generalizations made by many presidential
    candidates can be misleading. These statements
    convey the message that substantial resources can
    be saved through prevention. Although some
    preventive measures do save money, the vast
    majority reviewed in the health economics
    literature do not.

Disease Management?
  • Again intuitively appealing
  • Reduce discretion in use, standardize care,
    eliminate unnecessary treatment
  • Lots of experience with DM in managed care
  • Has DM reduced costs?

  • American Journal of Medical Care (2007)
  • reviewed 317 studies about DM
  • there was no conclusive evidence that disease
    management leads to a net reduction of direct
    medical costs.

Health IT/EMR?
  • Great promise
  • Reduce paper work/time/medical errors/unnecessary
    diagnostic tests
  • Savings alluded to in plan based on RAND
  • RAND estimates that IT has the potential to
    reduce costs by 80 billion/year
  • Only considered studies that showed cost savings
  • Best case scenario if it does what is promised

CBO (2008)
  • In general, investment in EMR is generally not
    sufficient to produce significant cost savings
  • Significant cost savings have tended to be
    connected to relatively integrated health care
    systems which the US health care system is not

  • Will reduce uninsurance but
  • Will do so by shifting a lot more onto public
  • Cost savings are greatly exaggerated
  • Investing heavily in proposals that to date have
    not demonstrated much savings
  • Tax equity has been suggested nothing concrete
  • So far, the administration is punting on Medicare

My opinion
  • Must control costs first
  • Benefits never decline, they only increase
  • Enacting universal coverage or a massive
    expansion will generate cost that will never be
    controlled or cut
  • To control cost must deal with Medicare first

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MA Reform Romney (2006)
  • Most ambitious state reform to date
  • Many features but..
  • Most striking component Individual mandate
  • Required by law to carry insurance

MA Reform
  • If you require insurance, you need to make it
  • State subsidizes purchases for poor
  • Firms must establish Section 125 plans
  • Established the Connector

  • Merge of individual and small group market
  • Market maker in insurance
  • Community rating
  • Requirements on what plans must have

  • Cheapest individual plans cost about 200/month
  • 40-60 lower than average plan
  • Was achieved primarily by higher cost sharing

Results from MA -- Access
  • with insurance increased by 430K
  • 60 went to public plan
  • Uninsurance rate now only 2.6
  • MA far and away had the lowest uninsurance rate
    going 2006
  • State underestimated
  • Number uninsured
  • Uninsured eligible for subsidized care
  • No one opted for the cheap low cost/high cost
    sharing option

  • States contribution is rising much faster than
  • Minor cost control options
  • Costs are rising very fast
  • MA now spend 33 more per capita than national
  • State has 4b deficit
  • State costs on health care have increased 42
    since 2006

  • To make it happen, Democratic lawmakers and Gov.
    Mitt Romney, a Republican, made an expedient
    choice, deferring until another day any serious
    effort to control the states runaway health
    costs. The day of reckoning has arrived.
    .government and industry officials agree that
    the plan will not be sustainable over the next 5
    to 10 years if they do not take significant steps
    to arrest the growth of health spending.

  • "exclude coverage of services of low priority/low
  • "limit coverage to services that produce the
    highest value when considering both clinical
    effectiveness and cost."
  • "a limitation on the total amount of money
    available for health care services," i.e., an
    overall spending cap.

Exporting MA Plan?
  • Plan is being studied extensively by
  • Other states
  • Presidential candidates
  • MA is very unique so it might not travel
  • Lower uninsurance rate (9)
  • Unique fiscal situation that was used to finance
    the law
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