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Nicholas Pandelidis, M.D. Orthopaedic and Spine Specialists York, PA The Health-Care Debate is Not Over Sensible Health-care Reform:

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Presentation on theme: "Nicholas Pandelidis, M.D. Orthopaedic and Spine Specialists York, PA The Health-Care Debate is Not Over Sensible Health-care Reform:"— Presentation transcript:

1 Nicholas Pandelidis, M.D. Orthopaedic and Spine Specialists York, PA The Health-Care Debate is Not Over Sensible Health-care Reform: A Framework for True and Viable Reform

2 Framing the debate Underlying motivators for reform oUninsured and pre-existing medical conditions oClear need to control escalating costs Reform in current state expands access without first controlling costs The fundamental issue of unsustainable growth in the cost of health-care must be addressed first Result? More affordable health-care for all

3 The Uninsured CDC estimated 47 million uninsured (16% of U.S. population) oFound 24% of uninsured attributable to employment change AHRQ study looked at statistics of uninsured from 1996 to In 2007, 39.9M uninsured < 65 years; included o5.9M children who qualified for government subsidy or parents could afford health-care, and o12M illegal aliens Uninsured, age 18-24: 55% uninsured for ≥ 1 month, only 18% for a 2 year period

4 The Uninsured Baruch College study o43% considered “voluntary uninsured” o57% considered “involuntary uninsured” oThe ENTIRE uninsured population still has significant access to health-care services, but approximately 40% of services utilized by those with insurance oCancer screening rates 40% of those with insurance but similar to that for individuals in Canada’s single-payer system

5 Unsustainable growth in cost of health-care 2008 CBO report for period oCosts have increased by factor of 9 in inflation- adjusted dollars, oHealth-care expenditure rose from 5% to 15% GDP Federal outlays for Medicare and Medicaid rose 5 fold as percentage of GDP 2009 Medicare Trustees Reports estimates projected unfunded liability to $89 trillion. oCut benefits or raise taxes Currently, 13% of Fed Tax revenues cover Medicare and S.S. deficits; 27% by 2020, and 49% by 2030 What about defense, education, infrastructure maintenance, etc?

6 Unsustainable growth in the private sector Costs have grown faster in private sector Kaiser health benefits survey found employer- sponsored costs increased 119% from 1999 to Consequences: oFor workers, lower wages translates into less spending in the economy and decreased savings oFor businesses, less capital to invest in business RAND Corporation study– among corporations that provide employee health- care benefits, increased health-care costs led to: oGreater unemployment oLower industrial output

7 Value-added drivers of health-care costs Value-added costs of American health- care system, include: oMost responsive health-care system in the world oUnprecedented medical care and technological advances Reform must control unsustainable cost growth, but should not: oRation nor decrease access to health-care, oNor discourage progress and innovation in health-care

8 Key drivers of health-care costs 3 rd party payer system Injudicious government health-insurance company regulation oDirectly increasing premium cost oRestraining healthy free market competitive forces Federal tax policy Medical malpractice issues

9 The third party payer system Disconnects the consumer from the cost of that care o5 out of every 6 health-care dollars spent is paid by a 3 rd party payer oLittle or no incentive for consumer to use health-care dollars wisely– whether private or government-funded

10 The third party payer system Creates unlimited demand for health-care spending by nearly eliminating beneficial free market incentives o“Certificate of need” laws to control costs oMore capacity for health-care services  more services are utilized  greater expenditure Encourages increase expenditure for services and discourages competitive pricing Engenders little consumer demand for transparency or accountability regarding cost, quality, or appropriateness of service

11 Injudicious government insurance company regulation Mandates – State legislated coverage Including for example: drug/alcohol rehab services, infertility, massage, etc Including for example: coverage extension to domestic partners, dependent family members Number of such mandates differs from state to state, ranging from 20 to 60 These mandates estimated to increase premium cost from 20 to 50% in each state Many uninsured could afford simpler and more limited coverage

12 Injudicious government insurance company regulation Mandates – Guaranteed Issue Requires insurers to issue policies regardless of person’s health status Increase expected medical care benefit costs for particular insurance pool and therefore overall premium cost of insurance for that same pool

13 Injudicious government insurance company regulation Mandates – Community rating Prevent insurance company from setting premium cost for an individual to reflect the risk that individual contributes to the overall pool Requires insurers to blend the utilization of services risk of a particular person with the risks of a broader group

14 Injudicious government insurance company regulation WellPoint Study effect of “guarantee issue” and “community rating”– premium cost for a healthy 25 year old will increase by 150% End result? oYoung, healthy individuals will choose to opt out,… oLeaving less healthy individuals in the pool… oWhich will further increase the cost of insurance oThose who leave, now counted among the uninsured

15 Injudicious government insurance company regulation Individuals and businesses must purchase health-care insurance within state boundaries. Mandates and regulations vary from state to state, variably complicating the business environment for insurance companies. In any state, few providers large enough to operate profitably in the varied regulatory environment Fewer providers competing to sell policies – premium prices are higher and customer service is inferior.

16 Injudicious government insurance company regulation Current insurance regulations also make it difficult for individuals or groups of individuals to band together to form “association health plans” that would result in increased purchasing power and resultant lower premium costs

17 Federal tax policy Tax advantage of employer provided health-care insurance has unintentionally and indirectly exacerbated health-care costs crisis oAs insurance benefit cost have climbed actual take- home wages have fallen oEncourages maximal consumption of health-care services Tax advantage of employer provided health-care insurance has tied health insurance coverage to employment and exacerbated uninsured problem oLoss of employment = Loss of health-care insurance

18 Medical malpractice issues New England Journal study reviewed 1,254 random medical malpractice litigation cases; found: o40% involved no injury or medical errors oFor claims awarded, 54% went to administrative costs CBO (2009) estimate direct medical malpractice expenses only 2% ($35 B) of all health-care expenditure, however Cost of practicing “defensive medicine” between $190 to $239 billion annually Package of tort reform with cap on non-economic damages would decrease Federal health-care outlays by $54 billion over next 10 years

19 Ramifications of malpractice litigation expenses– A case example As a result of tort lawyer-friendly state laws, Texas had lost all but 4 insurers who wrote medical malpractice policies, and premiums for these policies had doubled From , 99 of 254 counties had lost ≤ 1 high risk specialists– including o26 counties lost obstetricians, o6 counties lost ALL obstetricians, o5 counties lost ALL thoracic surgeons

20 Results of tort reform in Texas In 2003 Texas enacted tort reform including $750,000 cap on non-economic damages and increased standards for “expert” witnesses. Results dramatic: Malpractice premiums fell by 27% From , physicians including specialists flowed back into the state 125 counties added high risk specialists 52 counties added obstetricians – 10 that had none before the malpractice reform

21 The Passed Health-Care Bill– Why It Can’t Work Since we know: Medicare has an $89 trillion unfunded liability Medicaid costs continue to skyrocket – significant contributor to state deficits Medicare/Medicaid fraud estimated $ billion annually Government now pays nearly 60% of all health-care expenditure How could turning over the other 40% to the government possibly be the solution?

22 The Passed Health-Care Bill– Why It Can’t Work Does not address the prime driver of HC costs – the 3 rd party payer system! Instead, the new bill adds an estimated 32 million more people e.g. uninsured and those with pre-existing conditions, into the same faulty 3rd party payer system

23 The Passed Health-Care Bill– Why It Can’t Work Does not address other cost drivers Adds additional insurance regulations and mandates Has no provisions for substantive tort reform Does not change the Federal tax policy that promotes employer-provided insurance over individually purchased insurance

24 The Passed Health-Care Bill – Will Worsen the Federal Deficit CBO estimated that the passed bill will result in $181 billion reduction over the first 10 years Sounds good but that estimate is based on outright unreasonable assumptions

25 The Passed Health-Care Bill – Will Worsen the Federal Deficit CBO assumptions: Budgeting for 6 years of new health-care spending with 10 years new taxes collection $52 billion projected revenues already assigned to Social Security and $78 billion of premiums for the CLASS long term care program also counted toward this new entitlement Assume shifting $500 billion of Medicare savings into new entitlement

26 The Passed Health-Care Bill – Will Worsen the Federal Deficit Recalculating estimate based on reasonable assumptions – the bill expands the deficit by $460 billion over 1st 10 years and by $1.4 trillion the 2 nd ten years

27 The Passed Health-Care Bill – Will Worsen the Federal Deficit Government notoriously inaccurate in predicting HC entitlement costs: oDuring its first year, 1987, Medicaid was expected to cost $238 million but wound up costing over $ 1 billion. oIn 1965, the CBO estimated that Medicare costs would be $12 billion in Turns out the “reality” number was $90 billion, off by more than a factor of 7.

28 Components for True Health-Care Reform There is an alternative, a better way While not an all encompassing solution to our health-care system’s shortcomings and not without some difficulties that would need to be worked out, the following framework for reform would bring us a long way to more affordable and responsive health-care for all.

29 Components for actual health-care reform Restructure health-care insurance payment system from 3 rd party payer to a more patient- centered system Encourage insurance company competition Allow insurance companies to fairly price risk of utilization of health-care services into their premiums Tax reform to eliminate dependence of health- care coverage on employment status Implement tort reform for medical malpractice For chronically uninsured, institute a simple Federal voucher program, for those who qualify, to purchase private health-care insurance

30 Patient-centered health-care insurance payment system Does not simply mean being financially responsible for utilized health-care services, but rather financially in control of health-care service expenditure.

31 Patient-centered health-care insurance payment system Employing a combination of tax credits and tax deductions along with eliminating the Federal bias for employer-provided insurance would return the funds currently being transferred to the 3rd party payers – private thru wage reduction for health-care benefit and governmental thru taxes – to the individual consumer to fund high deductible policies and associated health savings accounts (HSAs).

32 Patient-centered health-care insurance payment system Financial control will stimulate patients to be better informed in their utilization and choosing of health-care services. Patient demand for more information will bring significant competitive forces to bear on providers of those services. Competetive forces will lead to increased transparency with regard to indications for health-care services; and with regard to cost, quality, and customer satisfaction.

33 Patient-centered health-care insurance payment system The various medical societies would be motivated to formulate guidelines outlining indications and expected outcome measures for diagnostic tests, and medical and surgical interventions. Such information would significantly inform consumer utilization of health-care services but would still depend on the expertise, ethics, and professionalism of a person’s physicians

34 Patient-centered health-care insurance payment system In such a system, individuals, just like for their automobiles and homes, would be primarily financially responsible for routine medical care. For non-maintenance health-care issues, high deductable policies in conjunction with HSAs would similarly help contain costs, improve service, and discourage waste.

35 Consumer-centered health- care insurance payment system For more extraordinary conditions and expenses, medical services payment should be structures so that 3rd party payers progressively assume more and more of the cost, but ideally never all of the cost. Always maintaining some consumer responsibility will maintain disincentive for excessive health-care utilization.

36 Patient-centered health-care utilization In contrast to a person demanding an MRI in the 3 rd party system, in consumer-centered system, when MRI is recommended: Person would want assurance from MD the MRI necessary for treating their condition Would choose physician recommended to them or based on information from an internet physician rating site Would select an MRI provider on the basis of available transparent costs and quality measures MRI provider competing with other providers (the more, the better) for their business

37 Tort reform Tort reform - including capping of non- economic damages oDecrease private and governmental expenditure oDecrease health-care insurance premium costs oDecrease medical malpractice premium costs Improved access to physicians particularly specialists

38 Increased Insurance Company Competition Encourage competition oDecrease the number of mandated covered services oOpen insurance sales across state lines oSimplifying regulation resulting in more companies entering the market – to improve service and decrease premium oAllow individuals and groups to pool together to negotiate premium price

39 Allow insurance companies to fairly price risk Lifestyle choices e.g. smoking, obesity, sedentary lifestyle, etc lead to disproportionate amount of health-care expenditure oShould be reflected in price of premium oWould encourage reassessment of those choices Fair pricing would allow many more young families and individuals to afford health-care insurance

40 Pre-existing or significant medical conditions For those with pre-existing conditions or elderly oFairly priced premiums for all risk pools would encourage more insurance providers to enter market, encourage competition, and result in best pricing for all risk pools oFederal subsidy program for state-based or national high risk pools

41 Tax Reform Equalize tax treatment for individual- purchased (owned) health-care insurance with employer provided benefit oChange in employment will no longer = loss of health-care insurance Health-savings accounts with generous tax- free contributions oEncourage savings for health-care expenditures

42 Tax Reform – Stimulating the economy Promoting individual-owned health- care insurance not only would decrease the numbers of the uninsured but would also significantly decrease costs for small and large businesses, making them more competitive and giving them more resources to invest in the business

43 For the chronically uninsured Institute simple Federal voucher program, for those who qualify, to purchase private insurance Government agency to help consumers navigate more consumer-involved system Far better than current Medicaid system that provides poor care and causes massive state and Federal budget overruns

44 Return to traditional American free market principles True reform utilizing traditional American free market principles and personal freedoms would: oTruly bend the health-care costs curve down oReverse historic deficits by controlling state and Federal entitlement spending oWould help restore a vibrant economy and the individual’s unalienable human dignity and right to work and support themselves and their families, and to make their own decisions Thank you.

45 The Health-Care Debate is Not Over Please visit Nick Pandelidis – Dr Right at If you would like a copy of this presentation or the underlying document please contact me at If you think this presentation would be appropriate for another group you know, I would be pleased to present.


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