The Health Care Marketplace

Problems and Solutions (maybe!)

Arno Vosk, M.D.

Let’s consider the health care marketplace….

A free market for health care?

Can we have one?

“We need real competition in a free health-care market.” Cato Institute

A fair market transaction,per the U.S. Supreme Court:

“ (A transaction) between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”

Is he a willing buyer…not under any compulsion?

Is the hospital a willing seller, without any compulsion?

(This is the federal EMTALA Law)

Reasonable knowledge?What is all this stuff?

One thing we know for sure: it’s very

expensive.

Reasonable knowledge?What treatment will she need?

An antacid, or coronary bypass surgery?

A fair market transaction?

Ü Have you ever tried to learn the actual cost to you of a hospital procedure, in advance?

Ü Does a hospital ever know, in advance, how much it will cost to treat an emergency patient?

Ü When you buy health insurance, do you know what it will actually pay for: all the things the company considers “medically necessary” and all the things it doesn’t?

Does this look like a competitive market?

Ü “Charges for a non-complicated vaginal delivery in California ranged from $3,296 to $37,277, and $8,312 to $70,908 for a non-complicated cesarean section…Institutional and market factors could only explain 35 percent to 36 percent of the variation in charges.” Bloomberg News, 1/16/14.

Ü The cost of a colonoscopy in Denver, CO “ranges from $2,800 down to about $400.”Kaiser Health News 2/19/14

Our health care marketplace

What are Americans paying for health care?

Per capita health expenditure, 2008(In 2013, U.S. = $8,508)

Future Projection

Pennsylvania’s Health Care Expenditures

Share of gross state product

The personal dimension

Ü 20% of American adults under 65 are having difficulty paying medical bills.

Ü 15 million Americans will use up all of their savings to pay medical bills.

Ü 17 million Americans will receive lower credit ratings because of medical bills.

Ü 60% of personal bankruptcies are due to medical bills

Ü 70% of those filing for bankruptcy had medical insurance

Ü The majority of medical debtors were well-educated and middle class.

NerdWalletHealth.com, 2013; Harvard Bankruptcy Study 2007

An efficient, competitive system?Ü “Administrative costs consume 31 percent of US health

spending, most of it unnecessary. “ New England Journal of Medicine, 2003.

Ü U.S. office-based physicians spend an average of 3.4 hours per week dealing with insurance companies. Their nurses spend 13.1 hours, clerical staff 53.1 hours. The cost of this time is estimated to be $83,000 per year per physician. Health Affairs,

2011.

Ü 800+ companies market some 6,000 health insurance plans in the U.S.

OK, but Americans have the best health care in the world, right?

Life Expectancy

Infant Mortality

Maternal Mortality

American College of Emergency Physicians(my own professional organization) “National Report Card on Emergency Care, 2013”

Ü U.S. overall = D+Ü Pennsylvania = C+

Ü The U.S. has the most expensive health system in the world.

Ü Pennsylvania spends even more than the average share of gross state product.

Ü Our national level of health is significantly lower than that of other countries that spend much less.

Ü The health market is chaotic, non-competitive, and no one understands it. There is no plan to control costs. Costs are projected to increase.

Ü There is no comprehensive plan to remedy the quality problems of the U.S. health system.

Ü This includes the Affordable Care Act.

Speaking of the Affordable Care Act…

Let’s try to consider it aside from politics

Improvements under the Affordable Care Act (Obamacare)

Ü Insurance will be more equitable: exclusions for pre-existing conditions and lifetime coverage limits will be eliminated.

Ü The “donut hole” in Part D drug coverage will gradually be eliminated.

Ü More people should be able to afford medical insurance. Low income people will receive subsidies or tax relief. More will be eligible for Medicaid.

Ü Primary care will be expanded. Some preventive care will be covered by insurance.

Improvements under the Affordable Care Act - 2

Ü Insurance companies’ administrative expenses should be limited to 15% of revenues.

Ü Limited quality improvement measures will be implemented.

Ü Coverage under parents’ policies for young adults up to age 26

Ü Limited tax credits for small businesses to buy insurance

Many problems will remain, or worsen

Ü Affordable Care Act = 955 pages!

Ü Rules and Regulations = 20,000+ pages!

Ü No fundamental change in the medical marketplace.

Ü As many as 45 million Americans will be left uninsured, or underinsured.

Ü Low-end policies can still be expensive, and due to high deductibles and co-pays, will provide poor coverage.

Ü Doctors’ offices and emergency rooms will have to get most of their payments directly from patients due to same.

Other problems with ACA

• Endless (and costly) political arguments

• Insurance companies will become even more entrenched, but little will be done to remedy their inefficiency.

• Federal funds to safety net hospitals will be cut, and the primary care shortage won’t be solved.

• Does anyone really understand it?!

Cost problems will not be solved

Ü There are no major, overall cost containment provisions in ACA. Costs are projected to continue increasing, and may reach 20% of GDP by 2020, >25% by 2030.

Ü Many people who do not qualify for government subsidies will pay more for health insurance.

Ü Consumers’ out-of pocket costs, for insurance + deductibles + co-pays will still be high, even for the best plans.

Ü Insurance companies can get around the 15% limitation by re-classifying some administrative expenses as clinical care expenses.

Is there any solution?

HINT:

Ü 80% of Medicare beneficiaries rate services as good or very good.

Ü Medicare patients have fewer problems with access to care than privately insured patients, and fewer problems with claims processing.

Ü Medicare’s overhead is 1.5-2.0%. Private insurance companies’ is 15-30%.

Ü Medicare has built-in cost controls (though some are controversial).

Medicare’s costs are increasing, but much more slowly than private insurers'. This is especially significant, considering that Medicare insures the oldest, sickest and fastest-growing segment of our population.

Medicare is a single payer system

Ü All payments are made by a single government agency, using a publicly available pay scale.

Ü Hospitals, doctors and other providers remain independent and may choose whether or not to participate in Medicare.

Ü Medicare is widely accepted, and simple for patients to use at the point of service.

Ü A uniform, national billing system makes billing and collections straightforward.

But Medicare’s coverage isn’t comprehensive

Ü Part A is “bare bones,” Part B still only covers part of most people’s needs.

Ü For better coverage, most beneficiaries must buy “medigap” supplements from private insurers.

Ü Many services aren’t covered: dental care, eyeglasses, hearing aids.

Ü Many covered services aren’t reimbursed 100%.

Ü Part D (drugs) also offers only partial coverage, though that is scheduled to improve under ACA. Medicare is still prohibited from negotiating prices with drug suppliers.

Ü Medicare only covers people over 65!

Can we improve on Medicare?

The Pennsylvania Health Care PlanComprehensive Medicare-type

coverage for all residents of Pennsylvania

The Pennsylvania Health Care PlanHow is it financed?

Ü 3% income tax surcharge on all state taxpayers

Ü 10% payroll tax on all employers

Ü Federal funding sources: Medicare, Medicaid, special purpose grants

Ü Independent of state budget

What is coveredÜ Doctors

Ü Hospital services, inpatient and outpatient

Ü Emergency room services and ambulances

Ü Lab and X-rays

Ü Prescription drugs

Ü Dentists

Ü Mental health treatment

What is covered (2)

Ü Rehab services

Ü Long-term care

Ü Glasses and hearing aids

Ü Chiropractic treatment

Ü Preventive care

Ü Hospice care

A Single Payer PlanPublicly financed, privately delivered

Ü No exclusions for pre-existing conditions

Ü No deductibles or co-pays

Ü All legal residents of Pennsylvania are covered

Ü Note: This is NOT “socialized medicine.” Veterans Administration (VA) is socialized medicine.

(Current length of the bill: 32 pages!)

The Pennsylvania Health Care Plan

Ü Administered by a board appointed by the Governor with approval of legislative leaders

Ü Governing board has representatives from health professions, business, consumers

Ü Financing is independent of state budget

Ü Advisory boards have representatives from professions and businesses affected

Ü Plan may spend no more than 5% of revenue for administrative expenses

Advantages for business

Ü Immediate savings: 10% vs. 15% of gross payroll for health insurance (average for large employers)

Ü A level playing field for health care expenses for all businesses

Ü Savings on Workers’ Compensation: All medical costs are covered under state plan

Ü Savings on liability and vehicle insurance

Ü Healthier employees, since they can access preventive care and early care for illnesses without financial barriers

Ü Ensures maximum rehabilitation for injured workers

Advantages for business - 2

Ü Health care is no longer an issue in employee contracts, union/management negotiations, or employee pensions.

Ü PA manufacturers can compete more effectively against foreign manufacturers in countries with government-sponsored medical insurance

Ü Can compete more effectively against manufacturers in other states with higher health costs.

Ü Encourages entrepreneurism: startup businesses and their employees don’t risk losing health coverage

Ü Eliminate uncompensated care for providers

Total annual state government savings: $2,293,652,053 = Tax Savings

?

Economic Impact Study, done in 2013

Object: determine whether the Pennsylvania Health Care Plan is financially feasible.

The bottom line

Arguments against Single Payer

Ü “Government is always less efficient than private insurers.”

Ü Medicare’s overhead = 1.5-2.0%

Ü Private insurance companies’ overhead = 15-30%.

Arguments against Single Payer- 2

Ü “Eliminating deductibles and co-pays encourages people to over-use medical care.”

Ü Recent study showed employees switched to a high-deductible plan reduced ER visits for high-severity conditions (conditions for which an ER visit was necessary) by 34%.

Ü Hospitalizations in year 1 decreased, but in year 2 hospitalizations increased by 30%. (Medical Care, 8/2013)

Ü Other studies have had similar findings.

Arguments against Single Payer - 3

Ü “A fee-for-service system with guaranteed payment encourages overcharging and fraud.”

Ü Dealing with multiple payors encourages providers to set “sticker prices” as high as possible.

Ü Single-payer system can combat fraud and abuse more efficiently than multiple payors.

Is there a perfect health care system?Anywhere?

Total spending on health in U.S. in 2011 = $2,486,300,000,000

What we pay for What we get

What we’re getting

Are we better off with this kind of marketplace?

These are pretty much our choices.

Ü Information on Pennsylvania single payer legislation: healthcare4allpa.org

Ü National site with information on single payer: Physicians for a National Health Program – pnhp.org

Ü Information on Affordable Care Act – Kaiser Permanente Foundation: healthreform.kaiserpermanente.org

Ü Arno Vosk, M.D. – avosk@ovalinternet.net

Ü Thanks to Walter Tsou, M.D., MPH and Stephen B. Kemble, M.D. for some of the material used in these slides.