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The BUSINESS CASE FOR single-payer Health care

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Presentation on theme: "The BUSINESS CASE FOR single-payer Health care"— Presentation transcript:

1 The BUSINESS CASE FOR single-payer Health care
Stephen B. Kemble, MD Clinical Assistant Professor of Medicine John A. Burns School of Medicine The Rotary Club March 11, 2014

2 Disclosure No financial conflicts of interest to disclose.
I receive no money whatsoever for any of my involvement in health care reform and health policy activities.

3 Definition SINGLE-PAYER: Public funding that pays for the health care of the entire population for a geographic/political entity. Private care delivery: Traditional Medicare, FFS Medicaid, Canada Public care delivery: VA, Military health system, Indian Health Service, Great Britain Eliminates private health insurance except for supplemental benefits not covered in single-payer program.

4 US Public Spending for Health Exceeds Total Spending in Other Nations
$8,950 2011 healthcare spending per capita Data are for 2011 Sources: OECD 2013; Health Affairs (4)88

5 Health Costs: USA vs Canada
19% 17% 15% 13% 11% 9% 7% 5% USA Health costs % of GDP “Uniquely American” Single Payer Implemented Canada 1960 1970 1980 1990 2000 2014 Source: Statistics Canada, Canadian Institute for Health Info, and NCHS/Commerce Dept.

6 Are we getting better health care?

7 Life Expectancy Years Note: Data are for 2011 or most recent year available Source: OECD, 2013

8 Decline in Preventable Deaths 1998-2002 Preventable deaths per 100,000 (males)
Nolte & McKee, Measuring The Health Of Nations, Health Affairs, Jan-Feb 2008

9 Infant Mortality Deaths in First Year of Life Per 1,000 Live Births
Note: Data are for 2011 or most recent year available Source: OECD, 2013

10 Maternal Mortality Deaths per 100,000 Live Births
Note: Data are for 2011 or most recent year available Source: OECD, 2013

11 How Many People Don’t Have Health Insurance?
USA with the ACA Canada 30 Million US Census Bureau, 2012

12 How Many People Go Without Some Medical Care Because of Cost?
USA Canada 115 Million Commonwealth Fund, Schoen 2007

13 How Many People Die Each Year From Not Having Insurance?
USA Canada 45,000 Wilper, et al “Health Insurance and Mortality in U.S. Adults,” American Journal of Public Health; Vol. 99, Issue 12, Dec 2009

14 How Many People Are Involved in Medical Bankruptcies Each Year?
USA Canada 2 Million 62% of Americans file cases 866,000 total cases affecting 2 million Americans Excludes those too poor to declare bankruptcy Source: Himmelstein et al. Am J Med: August, 2009

15 What costs us so much more? Are we utilizing too much care?

16 Hospital Inpatient Days per Capita
Note: Data are for 2011 or most recent year available Source: OECD, 2013

17 Physician Visits per Capita
There are definitely pockets of overutilization in the US, especially in those areas with high penetration of for-profit hospitals and health systems, but there are also vast areas of the country with inadequate health care providers and poor access to care, so on the whole we have lower utilization of health care services than any other industrialized country. Note: Data are for 2011 or most recent year available Source: OECD, 2013

18 Is it “moral hazard” because patients don’t have enough “skin in the game?”

19 Deductibles Are Rapidly Increasing
Percent of workers with deductibles >$1,000 Note that this trend started years before Obama was elected president, and long before the ACA was even conceived. Kaiser/HRET Survey of Employer-Sponsored Benefits, 2013

20 We Have the Most “Skin in the Game”
Out-of-pocket dollars per capita Canada’s relatively high out-of-pocket costs are largely due to the fact that prescription drugs are not included in their otherwise single-payer system. Note: Data are for 2011 or most recent year available Figures adjusted for Purchasing Power Parity Source: OECD, 2013

21 Financial Barriers Worsen Diabetes Care and Outcomes
The definition of “financial barrier” is that the patient reported that in the previous 12 months they needed to see a doctor but couldn’t because of the cost. JGIM On-Line, 9/27/2013. Note: Financial barrier = needed to see a doctor in last 12 months but couldn’t 21

22 Medicare HMO Copayments Drive Fewer Office Visits, More Hospitalizations
Difference between plans that did and didn’t raise copays A hospital day costs about times as much as an out-patient visit. Outpatient Visits Hospital Admissions Hospital Days Source: NEJM 2010;362:320 All figures are per 100 enrollees

23 Restricting Access Increases Costs
Restricting care requires bureaucracy that costs more than it saves We already rely heavily on incentives to deliver less care and pushing more costs onto patients. If these worked to control costs, we would not be spending twice as much as other advanced countries!

24 So, the reality is: We’re spending twice as much
We’re under-utilizing, not over-utilizing care Our health outcomes are worse

25 Then what is costing us so much more than other countries?

26 Growth of Physicians vs Administrators
3000% 2500% 2000% 1500% 1000% 500% Growth Since 1970 1970 1980 1990 2000 2010 Physicians Administrators Data updated through 2013 Source: Bureau of Labor Statistics; NCHS; Himmelstein/Woolhandler analysis of CPS

27 Hospital Billing and Administration
Dollars per capita, 2014 Source: Woolhandler/Himmelstein/Campbell NEJM 2003;349:769 (updated 2013)

28 Physicians’ Billing and Office Expenses
Dollars per capita, 2014 Source: Woolhandler/Himmelstein/Campbell NEJM 2003;349:769 (updated 2013)

29 Overall Administrative Costs
Dollars per capita, 2014 These figures are from 2003, and the gap between our administrative costs and Canada’s has definitely escalated further in the decade since then. Also, Canada’s administrative costs would be a lot less if they did not leave prescription drug coverage to the private insurance market. Source: Woolhandler/Himmelstein/Campbell NEJM 2003;349:769 (updated 2013)

30 Competitive Private Health Insurance
Administrative costs: 5-6 times that of public systems Incentive is to avoid risk (caring for sick people) “Race to the bottom” among plans Misguided and costly efforts to centrally manage health care providers Administrative costs include underwriting, insurance reserves, marketing, lobbying, highly paid executives, broker costs, and managed care costs. Insurance is a system to manage risk – works best for risks that are expensive but infrequent and unpredictable, in which case risk is managed with risk pooling. When a high percentage of the insured population has known health risks, as is the case in health care, then the primary financial incentive is to avoid risk, not to offer a better plan. If a plan offers better benefits and friendlier customer service and provider relations, then it will selectively attract sicker subscribers, so the best plan is punished with a worse risk pool. A plan does best if they are at least as bad as the competition. Health care is too complex to be easily or cost-effectively managed by policies imposed by a central bureaucracy, whether a private insurance plan or government.

31 Can the Affordable Care Act work?

32 ACA Fails for Sick People
Website rollout complications Low value plans (bronze, silver) Deter needed care For individual making only $25,000 (max subsidies), > $7,500/yr in premiums, deductibles, & co-pays !!! Access problems: MD shortage, narrow & ghost networks, dysfunctional Medicaid The ACA is focused on trying to keep premiums affordable. This is fine for the healthy, but but it means unaffordable out-of-pocket expenses for those with significant illnesses. Either those who need care will avoid getting it, leading to expensive complications, or doctors and hospitals will be stuck with unpaid bills. Narrow networks are an insurance strategy to limit provider networks to those from whom they can obtain concessions on fees, and of course if patients can’t find an accessible doctor, they don’t get care and the insurance plan doesn’t have to pay for their care. Ghost networks are the opposite of narrow networks. The plan claims to have doctors in their network who won’t actually accept their patients. This is very widespread for Medicaid managed care plans.

33 Ineffective ACA “Cost Controls”
Preserves private, competitive insurance model Leaves obstacles to access in place “Cost control” aimed at further restricting care Pushes more cost onto patients Shifts insurance risk to doctors and hospitals Increases administrative complexity and cost All counter to evidence for achieving “Triple Aims” - better quality, better health, lower cost! Incentives when insurance risk is shifted onto doctors and hospitals As you have seen from earlier slides, none of these have been shown to make health care more cost effective, and in fact the evidence is that all of them have been shown to have the opposite effect.

34 Can the Affordable Care Act work?
Doesn’t work for sick people Relies on strategies shown to increase costs

35 The Single-Payer Alternative – HR 676
Everyone covered, all medically necessary care Minimal or no deductibles & co-pays Access to care based on need, not means Insurance risk is managed by risk pooling alone, pooled across entire population – not shifted onto doctors, hospitals, and patients. Vastly simplified administration Minimizes centralized management of care & bureaucracy

36 Single-Payer Cost Control
Assure access to cost-effective care for all Simplify, streamline administration Use admin savings to reduce prices Hospitals - global budgeting Doctors – negotiated fees, simplified billing, support quality improvement Drugs and medical equipment - negotiated prices, bulk purchasing

37 Single-Payer Savings Hospitals (~7%): global operating budgets – no itemized billing Doctors (~5%): Reduced admin and malpractice cost, incentive-neutral pay – FFS based on time, or salary Patients (~5%): better access to cost-effective outpatient care reduced complications reduced ER and hospital use (Savings as % of total health spending) Sources include Price Waterhouse Coopers, Blanchfield et al, “Saving Billions of Dollars—and Physicians’ Time— by Streamlining Billing Practices,” Health Affairs, Apr. 29, 2010, Lewin Group and Friedman economic analyses for California, Maryland, Colorado The percentages are percent of total health spending. I have taken the percentage of the health care dollar that goes to each and multiplied it by the percent savings each would realize with a single-payer system, based on economic studies of single-payer proposals compared to existing US health care. Reduced administrative costs for doctors include large savings on medical malpractice premiums if injury related health care costs were covered by a universal system and removed from liability insurance, including medical malpractice. For patients, with a universal system there would be increased cost due to expansion of coverage, but economic analyses project even larger savings from improved access to cost-effective care in out-patient settings, with reduced complications leading to reduced ER and hospital care.

38 Single-Payer Savings Drugs and Medical Equipment (~6%):
bulk purchasing, negotiated prices, less fraud Business (~1%): no health insurance administration much lower worker’s comp, liability, and vehicle insurance No COBRA or retiree health benefits Every other country with a universal system allows government to negotiate prices with the pharmaceutical industry, and they pay about 40% less than we do for drugs. For businesses, with a universal system health care costs can be removed from all types of liability insurance, and based on the experience of other countries this would bring insurance costs down by about 2/3.

39 Single-Payer Savings Administration (~16%): focused on assuring care and payment, not avoiding “risk” For entire health care system: ~ 30-40% savings Insurance Administration Managed Care Administration No: Exorbitant exec salaries, marketing, lobbying, profit Underwriting, insurance reserves, broker fees, exchange fees Eligibility determination, narrow networks Care managed by doctors & hospitals, not health plans No complex financial incentives and risk adjustment Simplified data for QI No distortion of data due to “pay-for-documentation” Much less fraud and abuse The insurance administrative costs on the left would almost completely disappear with a single-payer system. There might be some public service advertising to inform the public about their benefits and how to access them, and there is some debate about whether a large-scale national system would still need insurance reserves. In any case, the larger the risk pool the more predictable costs become, so reserve requirements would be proportionally far smaller. Managed care costs are possible under a single-payer system, but without competing health plans trying to come up with justifications for their presence in health care, the incentive would be to minimize administrative costs so as to bring prices down. Centralized managed care has been shown repeatedly to cost more than it saves. Much of the administrative savings for a single-payer system would come from markedly limiting centralized managed care to outlier providers and those few drugs and services shown to be prone to over-use and misuse. With a universal system, especially one that pays physicians and hospitals in incentive-neutral ways, there would be far less opportunity for fraud and abuse, and they would also be far easier to detect.

40 HR 676 “Medicare for All” Covers Everyone and Spends Less
$ Billions $142 Increased utilization (especially home health and dental) $200 -$200 -$400 -$600 Covering the uninsured $110 Medicaid Rate Adjustment $74 Government administration ($23B) $153 Health insurance administration $178 Increased market power (pharma and devices) $215 Admin costs to providers New Costs Savings Friedman, G. Dollars & Sense. March/April 2012

41 HR 676 “Medicare for All” Covers Everyone and Spends Less
New Costs: $326 B Net savings: $243 Billion New Savings: $569 B Cover everyone with better benefits and spend less. Friedman, G. Dollars & Sense. March/April 2012

42 What Do You Spend on Health Care Benefits?
USA Employers Today Single Payer Model 7 - 12% of wages 3.3% tax on wages Single-payer health care taxes depend on how much of the cost is covered with individual income taxes and how much is a payroll tax on business. 3.3% is based on proposed financing under HR 676, the single-payer bill in the US House. A Tobin tax option (tax on financial transactions) would reduce payroll taxes further. Payroll tax could be on dollar amount of payroll, or based on employee FTE’s so that it would work more like the premiums we pay now and there would be no incentive to keep wages low to avoid health care payroll taxes. Bureau of Labor Statistics Business Health Coalition for Single Payer

43 8 Ways that Single Payer Strengthens American Businesses
Reductions in Direct Costs Cost of health care benefit Health care benefit management costs Worker Comp, auto and liability insurance Retiree health benefits Reduced Employer Risk More predictable future costs Eliminate risk of employees with high medical costs Eliminates contentious item in labor negotiations Another implication for business would be to disconnect health care from employment, eliminating “job lock” in order to keep health insurance. This might mean some employees would leave their jobs voluntarily, but it would be a boon for entrepreneurs and sole proprietors. Level the global playing field for business

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