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The U.S. Healthcare System, Health Policy, and Potential for Reform


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Title: The U.S. Healthcare System, Health Policy, and Potential for Reform

The U.S. Healthcare System, Health Policy, and
Potential for Reform
  • Prepared by
  • Dylan H. Roby, Ph.D.
  • Adjunct Assistant Professor
  • UCLA School of Public Health
  • Service Employees International Union (SEIU)
    Nurse Alliance
  • Change That Works A Prescription for Quality
    Affordable Healthcare
  • Jackson Memorial Hospital, Miami, FL
  • March 12th to 13th, 2009

Reform Occurs When and Where Problem, Policy, and
Politics Meet
  • Kingdons Model of Agenda Setting says

Problem Stream
Political Stream
Policy Stream
Window of Opportunity
Reform Occurs When and Where Problem, Policy, and
Politics Meet
  • Kingdons Model of Agenda Setting says

Problem Stream
Cost Crisis, Economy, Rising Unemployment
Political Stream
Policy Stream
Grassroots mobilization
Window of Opportunity
The Health Care System is Broken There is a
Cost to Doing Nothing
  • Costs are out-of-control
  • 2.4 trillion spent on health care in 2008
  • Represents 16.6 of Gross Domestic Product
  • By 2015, it is projected be 20 of GDP
  • Health Insurance Coverage is in Crisis
  • 47 million people are uninsured (15.5)
  • 52 million people are considered medically
    disenfranchised (i.e. they do not have a usual
    source of care, even if they are insured)
  • 13.2 million (28) of the uninsured are aged
  • The Delivery System is Strained
  • Disparities in quality and access
  • Medical errors, birth weight outcomes, hospital
    readmit rates, and waiting times for ER visits
    and specialty care indicate that we do not have
    the best health care system in the world.

  • Health Care Costs in the U.S.

Health Care Spending per Capita,1980-2004 -
adjusted for cost of living differences -
U.S. 12,357 per person, 20 of GDP by 2015
Source The Commonwealth Fund, calculated from
OECD Health Data 2006.
Health Spending in the U.S. Compared to Other
Industrialized Countries, 2003
Half of the Population Uses Very Little Health
Care 97 of all health spending is concentrated
in half of the population!
(No Transcript)
  • Health Care Coverage
  • in the U.S.

Do We Even Have a System Filling in the Gaps
  • Financing and Structure of the System are
  • Different Components of the Health Care System
    are financed and regulated in different ways
  • Public Health Activities
  • Care for the Uninsured
  • Government Programs
  • Hospitals
  • Community Health Centers
  • Free Clinics
  • Private Physician Offices
  • Medical Groups
  • TriCare/CHAMPUS/Military
  • Employer-based Insurance
  • Individually-Purchased Insurance
  • Indian Health Services
  • HIV/AIDS-related care
  • Insurance Companies
  • Veterans Affairs (VA) Health Care
  • Workers Compensation
  • Childrens Health Care

The Challenges of Basing a System on Employer
Provided Insurance
  • As health care costs increase, employers are
    faced with difficult choices
  • Reducing benefits or not offering
  • Reducing choice of potential plans
  • Offering high deductible, catastrophic plans
  • Establishing different requirements for health
    benefit participation
  • Minimum hours, waiting periods, workers must
    higher percentage of employer-negotiated premium
  • Employers negotiate directly with insurers for
    benefits and premiums
  • Smaller employers have less leverage due to
    smaller risk pool
  • Can represent a significant cost when workforce
    and retirees age, get sicker, and ultimately use
    more health care

Sources of Commercial Insurance
  • Group (Employer-Based)
  • In the past, commercial insurance was known as
    Major Medical Benefits similar to Medicare
    Part A
  • Currently, employer-based insurance benefits are
    more comprehensive
  • Individually Purchased (Non-Group Market)
  • Premium and Benefits based on risk profile of the
    individual policyholder
  • Tends to be more expensive for the individual
  • Limitations due to pre-existing conditions

(No Transcript)
Insurance Status in the U.S., 2007
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 2007 Current Population Survey
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Main Governmental Sources of Health Insurance
  • Two programs were voted into law in June of 1965
    and implemented in July of 1966.
  • Title XVIII (Medicare) and XIX (Medicaid) of the
    Social Security Act
  • Medicare is social insurance
  • Designed for people with disabilities or the
    elderly who meet specific requirements, lifetime
  • Medicaid is a welfare program
  • Designed for needy people who are categorically
    eligible (not a guaranteed benefit)
  • State Childrens Health Insurance Program (SCHIP)
  • Created in 1997 as part of the Balanced Budget

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The Uninsured At Serious Risk
  • The uninsured in the U.S. face huge obstacles
    when attempting to access health care
  • Many private providers will not accept them
  • The burden is placed on community health centers,
    public hospitals, and emergency rooms
  • Difficult to find medical home
  • Some are considered uninsurable due to
    pre-existing conditions, but cannot qualify for
  • Cannot afford full cost of visits
  • This can lead to medical bankruptcies and
  • There is some evidence that cost-shifting has
    resulted in the uninsured being billed for full
    charge, even higher than commercially insured

Source Kaiser Family Foundation, 2006 Note All
respondents are under age 65
  • Health Care Delivery

(No Transcript)
U.S. Life Expectancy in 2003 Lower than Countries
that spend far less
The U.S. also faces problems related to
  • Health Care Disparities
  • Racial/Ethnic, Language, and Gender differences
    in outcomes and access
  • These differences persist even with insurance
  • Medical Errors
  • 44,000 to 98,000 preventable deaths
  • Emergency Room overcrowding
  • Waiting Times
  • Throughput, Discharge Planning, Staffed Bed
  • Some areas do not have appropriate numbers of
    primary care and specialty physicians (i.e.
    physician maldistribution)
  • Hospital Re-Admission Rates

The Intersection of Costs, Coverage, and Delivery
of Health Care
The Flow of the Dollar
  • Costs, Payment, Delivery, and Insurance Coverage
    are completely intertwined in our system!

Source Roby DH. 2009 (forthcoming). Impacts of
Being Uninsured in Handbook of Health Psychology
(edited by Suls, Kaplan, Davidson), Guilford
Publications New York, NY.
Controlling Costs
  • Government has been a major proponent of cost
  • Prospective Payment
  • Use of Diagnosis Related Groups
  • Managed Care
  • Capitation (HMO and POS)
  • Discounted Fee-for-Service (PPO and POS)
  • How do differential cost controls impact
    hospitals, clinics, and physician providers?
  • Lower payments for Medicaid and Medicare
  • Insurance companies have increased leverage to
    negotiate prices due to managed care contracting
  • Cost Shifting impacts delivery and coverage

Impacts of Medicare Prospective Payment System
(PPS) 1985-2006
  • Cost Shifting
  • Hospital Payment Per Dollar of Care
  • Medicare Medicaid Private
  • 1985 1.020 0.943 1.171
  • 1990 0.895 0.801 1.278
  • 1998 1.019 0.966 1.158
  • 2004 0.919 0.899 1.289

Source American Hospital Association/The Lewin
Group, Trends Affecting Hospitals and Health
Systems, TrendWatch Chartbook, April 2006.
(No Transcript)
Government Spending Outpaces Private Company
Spending in our System
Billions spent to close the gaps in
Medicaid/Medicare payment and Uncompensated Care
  • Disproportionate Share Hospital (DSH) Payments
  • Medicaid and Medicare DSH
  • Based on percentage of caseload from uninsured,
    Medicaid, and Medicare
  • Safety Net Financing
  • Medicaid DSH administered by states and subject
    to federal match (FMAP)
  • Often public/county, teaching facilities, large
    trauma centers
  • Community Health Centers (Section 330) Funding
  • Comprehensive Primary Care (FQHC) clinics receive
    grant subsidy based on uninsured and Medicaid
  • Sliding fee scale
  • Administered by the Bureau of Primary Health Care
  • 40 of patients are uninsured

Impact of Unemployment Growth on Medicaid and
SCHIP and the Number Uninsured


Increase in National Unemployment Rate
Increase in Medicaid and SCHIP Enrollment (million
Increase in Uninsured (million)
Increase in Medicaid and SCHIP Spending (billion)
Source Stan Dorn, Bowen Garrett, John Holahan,
and Aimee Williams, Medicaid, SCHIP and Economic
Downturn Policy Challenges and Policy Responses,
prepared for the Kaiser Commission on Medicaid
and the Uninsured, April 2008
Why Does the U.S. Spend So Much More on Health
  • Compared to other Industrialized countries, the
    U.S. has
  • Fewer physician office visits per capita
  • Fewer hospital inpatient admissions per capita
  • Lower Average Length of Stay (ALOS) per admission
  • Fewer hospital inpatient days per capita
  • Higher (but not the highest) use per capita of
    selected high-tech procedures (MRI, CT,
    angioplasty, dialysis)
  • If expenditures prices x quantity, and
    quantities are not higher in the U.S., then
    prices must be higher!

Profits for Health Insurers
  • Profits for health insurance companies and
    pharmaceutical companies continue to increase
  • In 2006, the top 18 health insurers made 15
    billion in profits
  • In 2006, pharmaceutical industry profits were
  • 2nd most profitable industry, behind the oil
  • Insurers profit from privatized government
  • The Medicare Advantage (Part C) program results
    in 18 billion in overpayment to insurance
    companies when compared to traditional Medicare
    Fee-for-Service (FFS)
  • Outcomes are not better for Medicare HMO
  • Rates paid to private insurers are much higher
    than cost of Medicare FFS claims

What are we doing wrong?
  • We are the only major industrial nation that does
    not provide comprehensive health benefits to all
    its citizens
  • We have the largest private market for health
    care financing of any nation
  • We spend more per capita than any other nation,
    but allow greater disparity in spending for
    different portions of our population
  • Our political system favors incremental changes,
    based on market-oriented solutions, rather than
    fundamental reform
  • From the inception of Medicare/Medicaid, to
    SCHIP, to present, we are often working within
    the existing framework and accomplishing smaller,
    incremental changes

Opportunities and the Need for Reform
Possible Reforms and Future Financing
  • Restructure our Current System
  • Indirect Subsidies and Consolidation could be
    used to insure Uninsured
  • There is enough money in the system to care for
    everyone, but it is not being used efficiently
    and effectively! (Obama and Baucus)
  • Market-Based Approach
  • Consumer Choice high deductible plans, health
    savings accounts, provider fee transparency
  • Complete Dismantling of Current System
  • Can universal health care survive in a for-profit
    system? (Conyers)
  • Is Universal Insurance required, or Universal
  • President G.W. Bushs health care reform efforts
    were based upon expanding the safety net
    (Community Health Centers), rather than insuring
    the uninsured.

Current Reform Models
  • Policy Choices are numerous, if there is
    political will and priority given to health care
  • Individual Mandate
  • Employer Mandate
  • Pay-or-Play Provision
  • Tax Credits for Health Insurance
  • Expansion of Safety Net Providers
  • Health IT (EMR) and Comparative Effectiveness
  • Designed to create efficiencies and save money on
    services, avoid duplication
  • Introduction of Public Health Insurance Plans
  • Benchmark Plan
  • Based on community rating, risk
  • Will insure those who cannot get other coverage
  • Pre-Existing Conditions

Where is Reform Occurring?
  • Since Clintons failed attempt at universal
    health care in 1994, most efforts have been at
    the state-level
  • Massachusetts recently passed a universal health
    care reform
  • Individual Mandate requires all residents to
    have insurance coverage, while providing
    subsidies to those who cannot afford to buy on
    the private market
  • Health Insurance Connector
  • Expansion of state Medicaid and SCHIP eligibility
  • Other states have tried and failed
  • California was close to a compromise to allow for
    an individual mandate, similar to Massachusetts
  • Budget problems derailed the reform effort
  • Hawaii was able to enact an employer mandate in
  • States are considered laboratories of democracy

Problems with State-Level Reform
  • Complications due to
  • State Budgets
  • Current economic situation can derail efforts
  • Employee Retirement and Income Security Act
  • Federal Law that preempts state laws mandating
    employer provision of specific benefits
  • Centers for Medicare and Medicaid Services (CMS)
  • Changes to Medicaid or SCHIP state plan require
    approval of waiver or change in federal
  • G.W. Bush was not supportive of changes in
    eligibility requirements
  • Obama administration is supportive and actively
    pursuing expansions

Obstacles to Reform
  • Frequently, universal reform efforts have been
    led by elites
  • Clintons health care plan was written in a
    vacuum, rather than seeking consensus from
    political figures
  • Even proponents of universal health care opposed
    Clintons plan
  • Interest groups, especially business, are
  • Campaign financing is loosely regulated
  • Political Parties are weak and de-centralized
  • Pharmaceutical companies, the American Medical
    Association, and other special interest groups
    have interest in maintaining status quo ? Health
  • Major Stakeholders and Politicians cannot agree
    on the best solution
  • Universal coverage can have many different forms
  • Grassroots mobilization could turn the tide
  • This economic downturn, with its rising
    unemployment, could create class of uninsured and
    underserved that is vocal, motivated, and in
    serious need of reform

Senator Baucus Proposal
  • Individual Mandate All Americans will be
    required to purchase coverage if it is available
    to them
  • Creation of purchasing pool or health insurance
  • Requirement that carriers accept all applicants
    regardless of pre-existing health problems.
  • By bringing everyone into the system, Senator
    Baucus believes the average cost of insuring each
    American will be reduced.
  • Allows those between the ages of 55-and-64 to
    purchase Medicare if they lack access to public
    insurance programs or a group health plan.
  • Expansion of the State Childrens Health
    Insurance Program to include children in families
    at or below 250 percent of the federal poverty
    level (44,000 for a family of three)
  • Lift the ban preventing legal immigrants to
    enroll in SCHIP until theyve been in the country
    for five years.
  • Like President Obama, Senator Baucus supports tax
    credits for small businesses that provide health
    insurance coverage and for individuals and
    families, below 400 percent of the federal
    poverty level, who purchase their own coverage.

President Obamas Proposal
  • Employer Mandate Large employers would be
    required to pay portion of payroll tax into fund
    (Pay-or-Play) 5 or more
  • Lower costs for businesses by covering a portion
    of the catastrophic health costs they pay in
    return for lower premiums for employees.
  • Require insurance companies to cover pre-existing
    conditions so all Americans regardless of their
    health status or history can get comprehensive
    benefits at fair and stable premiums.
  • Create a new Small Business Health Tax Credit
  • Establish a National Health Insurance Exchange to
    allow individuals and small businesses to buy
    affordable health coverage.
  • Subsidy through personal tax credits based on
  • Additional steps to create efficiencies and
    reduce costs
  • Health Information Technology (HIT) investment
  • Disease Management for chronic illness
  • Limits on overhead greater transparency
  • Allow safe pharmaceuticals from other countries
  • Prevent insurers from overcharging doctors for
    their malpractice insurance
  • Reduce preventable medical errors.

Reform Occurs When and Where Problem, Policy, and
Politics Meet
  • Kingdons Model of Agenda Settting says

Problem Stream
Political Stream
Policy Stream
Window of Opportunity
Reform Occurs When and Where Problem, Policy, and
Politics Meet
  • Kingdons Model of Agenda Settting says

Problem Stream
Cost Crisis, Economy, Rising Unemployment
Political Stream
Policy Stream
Grassroots mobilization
Window of Opportunity
Are we there yet?
  • It appears that the window of opportunity may be
  • Economy is in crisis
  • Unemployment and loss of insurance are big
  • Reformers need to take advantage of these
  • Obama has made health care reform a priority in
    his federal budget plan
  • Various Interest Groups are getting involved
  • Coalitions are being developed around different
  • Broad Based Coalition and Grassroots support will
    be vital
  • Those impacted by the health care system (i.e.
    nurses, physicians, the underinsured and
    uninsured) need to be involved, empowered and
    given a voice.
  • Obama has expressed interest in signing health
    care reform that comes out of the legislative
  • Different from President Clintons approach