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, MDClinical Assistant Professor of MedicineJohn A. Burns School of MedicineThe Rotary ClubMarch 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 DefinitionSINGLE-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, CanadaPublic care delivery: VA, Military health system, Indian Health Service, Great BritainEliminates 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 $8,9502011 healthcare spending per capitaData are for 2011Sources: OECD 2013; Health Affairs (4)88
5 Health Costs: USA vs Canada 19%17%15%13%11%9%7%5%USAHealth costs % of GDP“Uniquely American”Single Payer ImplementedCanada196019701980199020002014Source: Statistics Canada, Canadian Institute for Health Info, and NCHS/Commerce Dept.
7 Life ExpectancyYearsNote: Data are for 2011 or most recent year availableSource: 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 availableSource: OECD, 2013
10 Maternal Mortality Deaths per 100,000 Live Births Note: Data are for 2011 or most recent year availableSource: OECD, 2013
11 How Many People Don’t Have Health Insurance? USA with the ACACanada30 MillionUS Census Bureau, 2012
12 How Many People Go Without Some Medical Care Because of Cost? USACanada115 MillionCommonwealth Fund, Schoen 2007
13 How Many People Die Each Year From Not Having Insurance? USACanada45,000Wilper, 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? USACanada2 Million62% of Americans file cases866,000 total casesaffecting 2 million AmericansExcludes those too poor to declare bankruptcySource: 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 availableSource: 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 availableSource: 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>$1,000Note 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 capitaCanada’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 availableFigures adjusted for Purchasing Power ParitySource: 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 doctorin last 12 months but couldn’t21
22 Medicare HMO Copayments Drive Fewer Office Visits, More Hospitalizations Difference between plans that did and didn’t raise copaysA hospital day costs about times as much as an out-patient visit.OutpatientVisitsHospital AdmissionsHospitalDaysSource: NEJM 2010;362:320All figures are per 100 enrollees
23 Restricting Access Increases Costs Restricting care requires bureaucracy that costs more than it savesWe 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 careOur 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 197019701980199020002010PhysiciansAdministratorsData updated through 2013Source: Bureau of Labor Statistics; NCHS; Himmelstein/Woolhandler analysis of CPS
27 Hospital Billing and Administration Dollars per capita, 2014Source: Woolhandler/Himmelstein/CampbellNEJM 2003;349:769 (updated 2013)
28 Physicians’ Billing and Office Expenses Dollars per capita, 2014Source: Woolhandler/Himmelstein/CampbellNEJM 2003;349:769 (updated 2013)
29 Overall Administrative Costs Dollars per capita, 2014These 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/CampbellNEJM 2003;349:769 (updated 2013)
30 Competitive Private Health Insurance Administrative costs: 5-6 times that of public systemsIncentive is to avoid risk (caring for sick people)“Race to the bottom” among plansMisguided and costly efforts to centrally manage health care providersAdministrative 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.
32 ACA Fails for Sick People Website rollout complicationsLow value plans (bronze, silver)Deter needed careFor individual making only $25,000 (max subsidies), > $7,500/yr in premiums, deductibles, & co-pays !!!Access problems:MD shortage, narrow & ghost networks, dysfunctional MedicaidThe 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 modelLeaves obstacles to access in place“Cost control” aimed at further restricting carePushes more cost onto patientsShifts insurance risk to doctors and hospitalsIncreases administrative complexity and costAll counter to evidence for achieving “Triple Aims” - better quality, better health, lower cost!Incentives when insurance risk is shifted onto doctors and hospitalsAs 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 peopleRelies on strategies shown to increase costs
35 The Single-Payer Alternative – HR 676 Everyone covered, all medically necessary careMinimal or no deductibles & co-paysAccess to care based on need, not meansInsurance risk is managed by risk pooling alone, pooled across entire population – not shifted onto doctors, hospitals, and patients.Vastly simplified administrationMinimizes centralized management of care & bureaucracy
36 Single-Payer Cost Control Assure access to cost-effective care for allSimplify, streamline administrationUse admin savings to reduce pricesHospitals - global budgetingDoctors – negotiated fees, simplified billing, support quality improvementDrugs and medical equipment - negotiated prices, bulk purchasing
37 Single-Payer SavingsHospitals (~7%): global operating budgets – no itemized billingDoctors (~5%): Reduced admin and malpractice cost, incentive-neutral pay – FFS based on time, or salaryPatients (~5%):better access to cost-effective outpatient carereduced complicationsreduced 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, ColoradoThe 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 fraudBusiness (~1%):no health insurance administrationmuch lower worker’s comp, liability, and vehicle insuranceNo COBRA or retiree health benefitsEvery 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 SavingsAdministration (~16%): focused on assuring care and payment, not avoiding “risk”For entire health care system: ~ 30-40% savingsInsurance AdministrationManaged Care AdministrationNo:Exorbitant exec salaries, marketing, lobbying, profitUnderwriting, insurance reserves, broker fees, exchange feesEligibility determination, narrow networksCare managed by doctors & hospitals, not health plansNo complex financial incentives and risk adjustmentSimplified data for QINo distortion of data due to “pay-for-documentation”Much less fraud and abuseThe 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$142Increased utilization (especially home health and dental)$200-$200-$400-$600Covering the uninsured$110Medicaid Rate Adjustment$74Government administration ($23B)$153Health insurance administration$178Increased market power (pharma and devices)$215Admin costs to providersNew CostsSavingsFriedman, G. Dollars & Sense. March/April 2012
41 HR 676 “Medicare for All” Covers Everyone and Spends Less New Costs:$326 BNet savings:$243 BillionNew Savings:$569 BCover everyonewith better benefits and spend less.Friedman, G. Dollars & Sense. March/April 2012
42 What Do You Spend on Health Care Benefits? USA Employers TodaySingle Payer Model7 - 12%of wages3.3% tax on wagesSingle-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 StatisticsBusiness Health Coalition for Single Payer
43 8 Ways that Single Payer Strengthens American Businesses Reductions inDirect CostsCost of health care benefitHealth care benefit management costsWorker Comp, auto and liability insuranceRetiree health benefitsReducedEmployer RiskMore predictable future costsEliminate risk of employees with high medical costsEliminates contentious item in labor negotiationsAnother 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 fieldfor business