Utah Health Policy Project: Issues in Health Reform

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UtahOwl
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Utah Health Policy Project: Issues in Health Reform

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The following is from John Holahan's report Feb 3, 2009 for the Utah Health Policy Project:
Health Reform: Why Now
•The number of uninsured is large and growing
•Health care cost (and premium) growth is faster than growth in GDP, wages and prices and is unsustainable
•Health care costs adversely affect economic competitiveness
•The evidence in the value of health insurance is overwhelming
•Massachusetts has provided a centrist approach that is working

The Uninsured
•45 million in 2007, up from 39.6 million in 2000
•36 million adults, 9 million children
•Highest uninsured rates among the low income, among young adults, Hispanics, non-citizens
•Most uninsured are in households with at least one full time worker
•Highest uninsured rates are in south and west
Growth in the Uninsured
•The number of uninsured has grown from 39.6 million in 2000 to 45.0 million in 2007
•The number of uninsured has grown because of declining rates of employer coverage
•The growth in the uninsured has been greater among adults than children; would have been greater if not for Medicaid/SCHIP growth
•Declines in employer coverage have increased because health care costs and thus premiums have grown faster than wages
•The number of uninsured has also risen because of demographic and employment shifts

Growth Rates of Healthcare Spending, Wages, and Prices
..the graphic basically shows nearly flat lines for growth rates of Wages & Consumer Price Index from 2000 to 2008 - fluctuating between 2.5%-3.5% growth, while Private Healthcare Spending growth has fallen from about 8% down to 5%...
The Implications of Doing Nothing
•Employer coverage will continue to decline because health care costs will continue to grow faster than wages; will decline further because of the recession and slow economic growth
•Declining real incomes will mean dramatic increases in the numbers eligible for Medicaid and SCHIP
•The erosion of employer coverage will exacerbate the number of eligibles who enroll in Medicaid
•State costs of financing Medicaid could increase substantially
•The uninsured would increase dramatically, by as much as a 25% increase by 2014; The costs to states, localities and providers for uncompensated care will increase commensurately

Economic Impacts of Health Reform
1.Stimulus package contains FMAP increases
–Will prevent reductions in coverage and increase in state taxes both of which would exacerbate the downturn
2.Expanding coverage has offsetting economic effects but are generally positive
–Spending for coverage expansion (+)
–Tax increases or premium contributions (-)
3.Cost containment efforts also generally positive to the extent they reduce cost growth and improve efficiency

The Obama/Congressional Plan:
1.A single payer plan
2.The Clinton plan
3.A pure market driven plan

The Obama/Congressional Plan:
•Medicaid/SCHIP expansion
•Income related subsidies
•Connector/exchange
•Insurance regulation
•Employer assessment
•Individual mandate for some/all

The Obama/Congressional Plan:
•Increasing market efficiency
•Establishing a public plan
•Other initiatives
1. Medicare Advantage Plans, Medicare Drug Pricing
2. HIT, Prevention, Chronic Care Management, Malpractice Reform

Building on Medicaid and SCHIP
•Is Medicaid a good base to build on with it’s extensive variation among states in eligibility, benefits, provider payment rates
•Should Medicaid remain separate or be integrated into rest of reformed system?
•Should Medicaid be preserved for special populations?
•Is SCHIP too small to be retained as a separate program?

Income Related Subsidies
•Low income people would receive premium subsidies
•Premiums would vary with income to reflect judgments on affordability
•How much is affordable–who decides?
•How are out of pocket costs factored in?
•These questions are very difficult and can have serious budget consequences

Insurance Market Regulation
•Why regulate pricing of insurance?
•Broad risk spreading benefits those with greater needs but at higher cost to healthy
•Risk segmentation, or limited risk sharing, increases costs to sick, benefits the healthy
•Insurance regulation, largely province of states, sets desired level of risk sharing
•Lots of variation across states

Connectors/Exchanges
•Goal is to improve access for individuals and small business; organize market to increase competition over price and service
•Could be responsible for enrollment and subsidy administration
•Could negotiate with health plans over rates
•Should it be an option for all people, not just individuals and small firms?
•How strong a role in negotiating with plans, with providers?

Employer Mandate
•Should business be required to “play or pay”?
•If so, how much should they pay as a percent of payroll; should payments vary by workers wages?
•Should there be exemptions, e.g., small firms, part time workers?
•Most businesses will provide coverage without a mandate
Individual Mandates
•Is it fairness, or an infringement on freedom?
•Without a mandate, about half the uninsured will remain uncovered; will still have free riders, will still need to finance safety net
•What benefits, deductibles, stop loss should be mandated?
•Need to make it easy to enroll
•Best to enforce through tax system

Cost Containment
•Need for a public plan option
•Would be offered as a choice on equal terms--with same income related premium subsidies--as for private plans
•A public plan choice is needed in most markets because of lack of effective competition; to provide countervailing power in response to provider consolidation

Cost Containment –The Evidence on Other Options
•Payments to Medicare Advantage Plans
•Medicare Drug Pricing
•Accelerate Adoption of Health Information Technology
•Expand Prevention Efforts
•Invest in Chronic Care Management; Medical Homes
•Malpractice Reform

Cost Estimates (Ballpark)
•Government: $115 -$125 billion
–Net cost is lower because current payments for the uninsured could be reduced
•Employers: $10 -$15 billion
–Mostly borne by employers not currently offering; others could save
•Individuals and Families: $20 -$25 billion
–Low income families would spend less; middle and higher income families without coverage would spend more
SOURCE: Garrett, 2009

Financing
•Savings from delivery system reform
•Cap exclusion of employer contributions
•Employer assessments
•Reduce direct payments to safety net providers
•Sin taxes
•Taxes on wealthy
Obstacles to Reform
•Providers
•Insurers
•Business
•Consumer advocates
•Free market and anti-tax advocates
•Single payer advocates

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