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Defining Federal Health Reform


and why it matters

Marcia Nielsen, PhD, MPH  
Vice Chancellor for Public Policy & Planning
Office of Public Affairs 
April 6th, 2010
2

What objectives will we cover today?


• Does the US need “health 
reform”? 
▫ How does the US stack up 
against other countries in terms 
of cost, access, and outcomes?
• What does “federal health 
reform” mean?
▫ Given all the rhetoric, what is 
NOT in the law?
▫ What IS in the law?
▫ Who does it help, how, and 
when?
3

Q: Does the US need “health


reform”?

A: Data on US costs, access, and


outcomes would suggest we can
improve on the current system.
4

“The health system consists of multiple,


interdependent, institutional and organizational
parts whose functions and interaction comprise
health care. It is vast, it is complicated, and it is
not working all that well”.

-Harvey Fineberg, MD, PhD


President, Institute of Medicine
5

COST: Premiums Rising Faster Than Inflation and Wages


C umulative C hanges in Components of U.S. National H ealth
Expenditures and Workers’ Earnings, 2000–2009
125
Insurance premiums
108%
Workers' earnings
100
Consumer Price Index

Percent 75

50

32%

25 24%

0
2000 2001 2002 2003 2004 2005 2006 2007 2008* 2009*
* 2008 and 2009 NHE projections.
Data: Calculations based on M. Hartman et al., “National Health Spending in 2007,”  Health Affairs, Jan./Feb. 2009; and A. Sisko et al.,
“Health Spending Projections through 2018,”  Health Affairs, March/April 2009. Insurance premiums, workers’ earnings, and CPI from 
Henry J. Kaiser Family Foundation/Health Research and Educational Trust, E mployer Health Benefits Annual Surveys, 2000–2009.
Source: K. Davis, Why Health Reform Must Counter the Rising Costs of Health Insurance Premiums, (New York: The Commonwealth
Fund, Aug. 2009).
6

COST: National Health Expenditures per Capita


Average spending on health per capita ($US PPP)

8000
United States
7000 Canada
France
6000 Germany
Netherlands
5000 United Kingdom

4000

3000

2000

1000

0
1980 1984 1988 1992 1996 2000 2004

Data: Organisation for Economic Cooperation and Development (OECD) Health Data 2009 (June 2009).
7

COST: Pharmaceutical Spending per Capita

$210
NETH 1995
$422
2007
$228
AUS
$431

$317
GER
$542

$335
FR
$588 *
$319
CAN
$691

$385
US
$878

$0 $200 $400 $600 $800 $1,000

* 2006
Source: OECD Health Data 2009 (June 2009). Figures adjusted for cost of living..
8

COST: High U.S. Overhead & Administrative Costs


Spending on H ealth Insurance A dministration per
• Fragmented payers +  $600 C apita, 2007

complexity = high  $516

transaction costs and  $500

overhead costs
$400

▫ $90 billion per year*
$300
• Insurance and providers $247
$220
$198 $191
▫ Variation in benefits is  $200
$140
hard to understand $86
$100 $76
▫ Expensive for doctors, 
hospitals, and patients $0
US FR SWIZ NETH GER CAN AUS* OECD
Median

* 2006
Source: 2009 OECD Health Data (June 2009).

* McKinsey Global Institute, Accounting for the Costs of U.S. Health Care: A New Look at Why Americans Spend More
(New York: McKinsey, Nov. 2008).
ACCESS: ER Visit for Condition a Primary Care Doctor
Could Have Treated if Available, by Income
Percent
75 Below average income Above average income

50

19 21
25
12 14
9 11
6 5 6 6

0
United New Australia United Canada
Kingdom Zealand States

Source: 2004 Commonwealth Fund International Health Policy Survey of Adults’ Experiences
with Primary Care (Schoen et al. 2004; Huynh et al. 2006).
10

ACCESS: Physicians’ Perception of Patient Access


Patients Often Have Difficulty Patients Often Experience
Paying for Medications Long Waits for Diagnostic Tests
Percent Percent
75 75

57
51 51
50 50

27 28
26
24 23
25 25

15
13
8 9
7 6

0 0

AUS CAN GER NETH NZ UK US AUS CAN GER NETH NZ UK US

Source: 2006 Commonwealth Fund International Health Policy Survey of Primary Care Physicians.
11

ACCESS: Diagnosis of Late‐Stage Cancer


Uninsured vs. Privately Insured
Ratio of probability of diagnosis of late vs. 
3.0 early stage cancer, Uninsured/private  2.9
insurance
2.5 2.3 Equal likelihood 
2.0 2.2 between 
Uninsured and 
2.0 Insured

1.5

1.0

0.5

0.0
Colorectal Lung Cancer Melanoma Breast Cancer
Cancer
NOTE: Odds ratios were adjusted for age, sex, race/ethnicity, facility type, region, and income and education on basis 
of postal code.  They represent the odds of being diagnosed with stage III or state IV cancer vs. stage I cancer.
Analysis based on cases occurring between 1998­2004.
SOURCE: Kaiser Family Foundation, based on Halpern MT et al, Association of insurance status and ethnicity with 
cancer stage at diagnosis for 12 cancer sites: a retrospective analysis." The Lancet Oncology. March 2008.
12

ACCESS: Ability to See Doctor When Sick or Need Care


Base: A dults with any chronic condition
Percent
80
Same-day appointment 80
6+ days wait or never able
to get appointment
60
60 60
54
48
42 43
40 36 40
34
26 26 26
23
20 20
18 18
14
8
3
0 0
S
AU CA
N FR GER ETH NZ UK US S
AU CA
N FR GER ETH NZ UK US
N N

Data collection: Harris Interactive, Inc.


Source: 2008 Commonwealth Fund International Health Policy Survey of Sicker Adults.
OUTCOMES: Healthy Life Expectancy at Age 60
Developed by the World H ealth O rganization, healthy life expectancy is based on life
expectancy adjusted for time spent in poor health due to disease and/or injury
Years
30
Women Men

22
20 20 20 20
20 19 19 19 19 19 19 19 19
20 18 18 18 18 18 18
18 17 17 17 18 18 17 17
17 16 16 16 16 16 16 16 16 16 16 16 16 15 15
15 15
14

10

0
ia

C ria

G ium
A ly
ce

D an d
he nd

U ing e
d
Sw i n

Po tes
Fr d

N ny

Fi d

Re ar k
Ir e l
itz an

te dom
us n

B da

Ic y

Ze ds

ic
a
c
an

an
n

a
al
e

Ita

ug
a

bl
ee
an

a
t
S w Jap

ew lan
a
la

ed

a
Sp

a
us
tr

m
m
g

l
nl

al

pu
el
an

St
or

rt
er

te Gr
el

en
er

d
A

K
et

ch
d

ni
N

ze
ni

C
U

Data: T he World H ealth Report 2003 (W H O 2003, A nnex Table 4).


OUTCOMES: Mortality Amenable to Health Care
Mortality from causes considered amenable to health care is deaths before age 75 that are
potentially preventable with timely and appropriate medical care
Deaths per 100,000 population*
International State variation,
150
variation, 1998 129 130 132 2002 134

115 115 119


106 107 109 109 110
97 97 99 103
100 92
88 88 88 90
81 84 84
75

50

0
Ze ria
Ca l ia
Au ta ly

Po o m
y
No da
y

De an d
Sw in

rk
n

l
ce

es

ite Ire d
Ki and
en

s
G ece

ga
th wa

an
pa

an
nd

U.S. 10th 25th Med- 75th 90th


a

ite m a
ra

t
na
an

at
ed

us
Sp

d
rtu
I

al

nl
Ja

re

l
r
la
st

St

ng
avg ian
Fr

n
er

Fi
er

d
w

d
Ne

Percentiles
Ne

Un

Un

* Countries’ age-standardized death rates, ages 0–74; includes ischemic heart disease.


See Technical A ppendix for list of conditions considered amenable to health care in the analysis.
Data: International estimates—World H ealth O rganization, W H O mortality database (Nolte and Mc K ee 2003);
State estimates— K . H empstead, Rutgers University using Nolte and Mc K ee methodology.
15

OUTCOMES: Infant Mortality Rate


Infant deaths per 1,000 live births

International variation State variation


10
9.1

8.1

7.0 7.0 7.1

6.0
5.2 5.4 5.6
5.0 5.0 5.0 5.0 5.1 5.3
5 4.4 4.4 4.5 4.5
4.1 4.1 4.1 4.2 4.2
3.3 3.5
3.0 3.0
2.2

0
ay

nd

St *
ly

nd
De um
Sw d

No n

Au ds

es
Ire l
nd

Po lia
Re tria

m
Fr n

Be ny

a
ng e
Ge lic

k
Fi n

ce

ga

ite and
U.S. 10th 25th Med- 75th 90th
ai
an

ad
ar

ec
pa

Ita

do
rw

ra

at
Ne erla

la
n
an

a
ed

b
a

rtu
i
Sp

nm
ec Aus

lg

ite Gre
rm

Ne Can
nl

la
pu
el
Ja

st

Un eal
avg ian
er
Ic

itz

d
Ki

Z
th
Sw

w
h

Percentiles
Cz

Un

* 2001.
Data: International estimates—O E C D H ealth Data 2005;
State estimates—National Vital Statistics System, L inked Birth and Infant Death Data (A H R Q 2005a).
16

OUTCOMES: Infant Deaths per 1,000 Live Births


Infant mortality by race/ethnicity, Infant mortality trends, 1983–2002
and mother’s education, 2002
20 White Black
U.S. National 7.0 19.1 Hispanic Asian/PI
AI/AN

White 5.8 15.2


13.9
Black 13.9

Hispanic 5.6
10 9.5
Asian/PI 4.8 9.2
8.6
8.3
AI/AN 8.6
5.8
5.6
4.8

Less than high school* 7.9

At least some college 5.0 0


83

85

90

95

96

97

98

99

00

01

02
0 10 20
19

19

19

19

19

19

19

19

20

20

20
* For mothers age 20 and older.
PI = Pacific Islander; A I/A N = A merican Indian or A laskan Native.
Data: National Vital Statistics System—L inked Birth and Infant Death Data for infants up to one year (A H R Q 2005a; N C HS 2005).
17

Q: Given all the rhetoric, what is


NOT in health reform?

A: Unfortunately, misinformation
abounds.
18

How do you tell who is


telling the truth?

▫ a non­partisan, nonprofit website… with “aims to 
reduce the level of deception and confusion in U.S. 
politics” 
▫ A project of the Annenberg Center of Public Policy 
at the University of Pennsylvania
▫ Directed by Brooks Jackson, a former Cable News 
Network and Wall Street Journal reporter for 34 
years
19

Claim: Health reform will lead to government


rationing your health care.
False
• NONE of bills call for government run single 
payer system (or anything close to it) nor are 
there benefit cuts.  
▫ President Obama: “I don’t want 
bureaucracies making those decisions," and 
"we want doctors and medical experts to be 
making decisions” 6‐24‐09
▫ Rep. Eric Cantor: “I think intuitively that most 
Americans believe that more government in 
health care means more rationing and more 
forced discrimination…”9‐09‐09
20

Claim: Non‐US citizens, whether illegal or not, will


get free health care.
False
• Not true, even though some argued for stronger 
enforcement
▫ Current law PROHIBITS illegal immigrants 
from participating in government health 
care programs
▫ Specific amendment added:
 "Nothing in this subtitle shall allow 
Federal payments for affordability credits 
on behalf of individuals who are not 
lawfully present in the United States." 
21

Claim: Federal funding will be provided


for abortion services.
Misleading
• Under current law, federal dollars cannot be used to fund 
abortions except in certain limited circumstances
▫ Hyde amendment
• Federal health reform requires that health plans offering 
abortion coverage must segregate premium payments for 
that coverage from regular health coverage
▫ Keeps Hyde Amendment in place; President Obama also 
signed an Executive Order reinforcing this
• Health reform permits states to prohibit plans participating 
in the Exchange from providing abortion coverage
22

Claim: Individual mandate requiring everyone to


have health insurance is unconstitutional.
Unclear but unlikely
• Legal experts agree that requiring citizens to buy 
something is a novel concept that has not been tested 
in the courts, but most say reform will pass muster

Dispute hinges on differing 
interpretations of Commerce 
Clause of the Constitution, which 
gives Congress the power “to 
regulate commerce with foreign 
nations, and among the several 
states, and with the Indian tribes.” 
23

Claim: Health reform bills include “death panels”


and mandatory end of life counseling.
False
• House bill required Medicare to reimburse providers for some 
end‐of‐life planning counseling 
▫ Would not REQUIRE patients to receive counseling sessions, nor 
would it require a doctor to offer one  
▫ THIS PROVISION WAS REMOVED FROM FEDERAL HEALTH REFORM
• Former Governor Sarah Palin on Facebook, “The America I know 
and love is not one in which my parents or my baby with Down 
Syndrome will have to stand in front of Obama’s “death panel” so 
his bureaucrats can decide, based on a subjective judgment of 
their “level of productivity in society,” whether they are worthy of 
health care.”
24

“Top Whoppers of 2009”


Conservatives  Liberals

• Death panels • False finger pointing
▫ Paying for end­of­life  ▫ Illinois patient death not 
counseling caused by insurance company
• Socialized medicine • Double trouble
▫ Wasn’t even considered
▫ Bankruptcy every minute 
• Dictating to doctors
(not every 30 seconds)
▫ Comparative effectiveness 
research • Puffed­up premiums
• Breast cancer massacre ▫ Average family pays $200 for 
▫ TV spot comparing US to  uncompensated care shifted 
Great Britain onto insured, not $1000
• “26 lies” emails • Saving $2500
▫ Viral email chain purporting  ▫ Average family with group 
untrue claims insurance would save from 0 
to 3% on premiums 
Source: www.factcheck.org
25

Final “questions” of
health reform debate
• Do insurance premiums up or down?
• Will we have government run health care?
• Can you keep your current health plan?
• Does the bill cut Medicare by $500 billion?
• Is this the largest middle class tax cut for health 
care?
• Is medical malpractice biggest driver of health care 
costs?
• Was the “Cadillac plans tax” a sweetheart deal for 
unions?
Source: www.factcheck.org
26

Q. So what IS in federal health


reform?

A. Most significant changes to US


health policy in almost 50 years.
27

Two Major Goals of President


Obama’s 2009 Health Reform
• Cover the uninsured and 
improve access to care
• Decrease overall costs of 
health care or “bend the 
cost curve”
28

Summary of federal health


insurance reform
• Requires all citizens to have insurance
 And provides subsidies to help people buy it
• Creates new “insurance exchanges” where 
individuals and small businesses would go to buy 
insurance
 Offered through states or regional exchanges
• Bans insurers from discriminating against people 
with chronic conditions (pre­existing)
 Starts with children this year, expanded to adults in 2014
29

Q. Who does it help, how, and


when?

A. Health reform impacts many sectors,


some more than others, and the most
significant changes are phased in over the
next five years.
30

Health reform THIS year


• New “high risk pool” to help chronically ill
▫ Those who are uninsurable (due to medical condition) 
can enroll in new federally subsidized high risk pool 
insurance plan
• Tighter rules for health insurance industry
▫ Existing insurance plans will be barred from imposing 
lifetime caps and annual limited on coverage 
▫ Insurers can no longer cancel insurance retroactively for 
things other than outright fraud
• More government oversight for insurance
▫ Insurers must report how much they spend on medical 
care versus administrative costs, a step that later will be 
followed by tighter government review of premium 
increases
31

More major reforms THIS year


• Discounts and free preventive services in Medicare
▫ Medicare consumers in “doughnut hole” get $250 rebate
▫ Next year, cost of Rx in coverage gap will go down by 50%
▫ Preventive care, such as cancer screening, will be free to consumers
• Better coverage for kids  
▫ Parents allowed to keep children on their health plan until age 26
▫ Insurance plans cannot discriminate against children with pre­
existing medical conditions
 Insurers could still reject those children outright for coverage in 
the individual market until 2014
• Tax credits for small businesses
▫ Businesses with fewer than 25 employees and average wages of less 
than $50,000 could qualify for tax credit up to 35 percent of the 
cost of their premiums (phasing up to 50%)
Hospitals: Generally supported reform
Benefits Challenges

• Will treat fewer uninsured  • Agreed to give up at least $155 
patients billion in Medicare funding over 
• Millions more paying  next decade
customers • A new independent commission 
• Won guarantees to prevent  will have broad authority over 
Medicare spending, though 
uncompensated care subsidies 
doesn’t kick in until 2018
from drying up until the 
number of uninsured decreases • Sharply expands Medicaid, 
which reduces uninsured, but 
• Medicare to pay high quality  pays less than private insurers or 
hospitals more Medicare
• Several pilot programs to test  • Concerns about increasing 
new payment schemes,  patient census
including Accountable Care  • Medicare to pay less for hospitals 
Organizations with high re­admission rates
33

Physicians: Most national groups supported


reform
Benefits Challenges
• Will treat fewer uninsured  • Concerns about adding to primary 
patients care physician shortage
• Millions more paying patients • No significant medical liability 
changes, but $ for states to run 
• Primary­care doctors and  pilot programs
surgeons practicing in areas  • Medicaid expansion to those under 
with a shortage of physicians  133 percent of the federal poverty 
get a 10 percent bonus  level means more paying patients 
payment from Medicare from  but at lower Medicaid rates 
2011 to 2015 • Current Medicare physician 
• Medicaid will pay primary care  payment formula that each year 
doctors Medicare rates in 2013  threatens to slash doctor payments 
and 2014, to coincide with the  was left untouched
Medicaid expansion • Bans future physician­owned 
hospitals and crimps growth of 
this rising market niche
34

Academic Health Centers: Supported reform


Benefits Challenges
• Establishes multi­stakeholder  • No increase in number of 
Workforce Advisory Committee
• Requires health insurers to cover 
residency slots (though 
costs of routine care when patients  redistributes unused slots with 
enroll in a clinical trial (cancer or  priorities given to primary care 
life threatening disease) and general surgery and to 
• Establishes Teaching Health 
Centers & creates a number of new  states with lowest resident 
programs aimed at increasing  physician­to­population 
health professions workforce,  ratios)
especially primary care
• Creates the Cures Acceleration  • Workforce shortages are 
Network (CAN) to award grants  of  predicted to increase
up to $15 M through the National 
Institutes of Health (NIH) to 
biotech companies, universities, 
and patient advocacy groups
• Increases Pell grants and makes 
student loans more affordable
35

Other health care providers: Generally supported


reform
Benefits Challenges
• Much broader focus & support for  • Require skilled nursing facilities 
prevention and wellness to disclose information 
• Support for Community­based 
Collaborative Care Network  regarding ownership, 
Program to support better  accountability requirements and 
coordinated care among  expenditures; publish 
providers standardized information online
• $11 billion for community health 
centers • Require disclosure of financial 
• Establishes new programs to  relationships between health 
support school based health  entities, including physicians, 
centers and nurse managed  hospitals, pharmacists, other 
clinics providers, and manufacturers 
• Additional provisions aimed at  and distributors of covered 
nurse training programs and 
scholarships drugs, devices, biologicals, and 
• Support for reducing chronic  medical supplies (April 1, 2013)
disease and decreasing health 
disparities
36

Insurers: Opposed reform by the end of debate


Benefits Challenges
• Millions more new customers  • $132 billion in cuts to Medicare 
• Expansion of Medicaid will  Advantage private plans
provide new customers, many  • $70 billion in new taxes on 
will be covered by private  industry over 10 years
managed care plans  • New requirement to spend 85 
percent of insurance premiums 
on health care
• "Cadillac" tax on high­cost 
health plans is aimed at 
insurers, beginning 2018 
• Relatively low penalties for not 
buying insurance, which could 
encourage many healthy people 
to skip coverage 
37

Pharmaceutical companies: Big supporters of reform

Benefits Challenges
• Millions more paying  • Industry will pay out $84.8 
customers billion in new fees, rebates and 
• Expensive biologic drugs get  discounts over the next decade 
12 years of exclusivity 
protection from generics
• Prevented policies that make it 
easier for Americans to buy 
less expensive drugs from 
abroad
• Prevented policies that allow 
the government to negotiate 
lower drug prices for Medicare
38

Employers: Generally opposed


Benefits Challenges
• Creates health insurance exchange  • Requires companies with 50 or 
to provide more choices/richer 
benefits for small employers (up to  more full­time workers to pay 
100 employees) a penalty if company does not 
• New “community rating” rules will  offer health benefits AND any 
prohibit insurers from charging  of their employees obtain 
more to cover small businesses 
with sicker workers or raising rates  subsidized coverage through 
when someone gets sick the new health insurance 
• Provides tax credits for employers  exchanges
with 25 or fewer workers and 
average wages of $50,000 or less   • Require chain restaurants and 
• No employer mandates for  vending machine food 
employers with less than 50  operators to disclose 
employees  nutritional information
• Provides wellness grants to small 
businesses • Reforms paid for by taxing 
• Provisions to offer employees 30%  upper income Americans
discounts for coverage for 
participating in wellness activities
39

Consumers: Depends on how you ask!


Benefits Consumers
• Expands Medicaid for those  • Most Americans must carry 
with incomes less than 133  health insurance
percent of the poverty level
• In individual market, some 
• Provides subsidies to help  younger people will pay more, 
purchase insurance for those 
with incomes up to 400 percent  older people would pay less
of the federal poverty level 
• New voluntary insurance 
program providing $50 a day 
for home and community living 
assistance (CLASS program)
• Allow children to stay on their 
parents’ insurance plans 
through age 26 
• No cost­sharing for preventive 
services 
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States: Red state versus Blue state


Benefits Challenges

• Design and oversee insurance  • Enroll newly eligible beneficiaries 
Exchanges in Medicaid despite significant 
• States allowed to tailor their   budget cuts and limited 
Exchanges allowing flexibility  administrative resources (2014)
on abortion coverage • Coordinate Medicaid enrollment 
with Exchanges
• Assistance with high risk pools 
• Implement other Medicaid 
for uninsurable adults
specific changes
• Maintain current Medicaid and 
CHIP eligibility through 2019
• Implement new waste, fraud and 
abuse provisions
• Consider demonstration projects 
for tort reform
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Who gets coverage and who pays?


• By 2019, 32 million people will gain coverage through 
expanded Medicaid and newly created health 
insurance Exchanges
• Over ten years, costs $938 billion. Expected to reduce 
projected federal budget deficits by $124 billion.
• Financing over 10 years from:
▫ Medicare savings =$500 B ($136 B of that from Medicare 
Advantage plans)
▫ Excise tax on high cost insurance =$32 B
▫ Increase Medicare taxes for those earning more than 
$200,000 ($250,000 per couple) and impose $3.8% tax on 
unearned income =$210 B
▫ Penalty for those who don’t obtain insurance =$17 B
▫ New “fees” on health industry =$107 B
▫ Trim various health related tax breaks =$29B
▫ CLASS program reserves =$70 B
42

But what about YOU?!


• Health reform calculator asks: 
▫ 1.  Your health insurance status 
▫ 2. The number in your household
▫ 3.  Your adjusted gross family income
▫ 4.  Your marital status
• Summary tells you how the bill will impact you!
▫ http://www.washingtonpost.com/wp­
srv/special/politics/what­health­bill­means­for­
you/
▫ http://healthreform.kff.org/SubsidyCalculator.as
px (to see if you qualify for a subsidy)
43

Example: Average Kansas family of four


• “Insurance Coverage:  
▫ Beginning in 2014, if you pay more than 9.5% of your income in 
premiums you will have the option to receive tax credits to help afford 
insurance premiums in the new exchanges as well as assistance with 
deductibles and co­payments. 
▫ According to your income and family size, the tax credits will  ensure 
you do not spend more than $1760 to $2772 on. Your maximum out­
of­pocket costs for deductibles and co­payments would be capped at 
15% of the total cost.
▫ If you have children, you will be able to keep them on your insurance 
until they are 26. If you have adult children who don't have access to 
health insurance through an employer and are between the ages of 22 
and 26, you will be able to put them back on your plan beginning in 
late September.
• Additional Taxes:
▫ You will not pay any additional taxes.”
44

Bottom‐line:
• Federal health reform is not perfect – but real 
progress, made of multiple compromises
• Health reform focused more on insurance than 
health care – more on health care costs is 
needed
• Health reform phased in over several years – but 
some important provisions kick in this year
• Health reform included some provisions on the 
health professions workforce – but there are 
continued concerns about shortages 
45

Go to www.kumc.edu for more


information about federal reform and
regular updates