Universal Coverage:Curb Your Enthusiasm

“State Coverage Initiatives”

Alliance for Health Reform briefing

Tom Miller

American Enterprise Institute

October 26, 2007

The Life Cycle of National Health Reform & Universal Coverage

Answer: Universal Coverage

Source: WHO: World Health Statistics 2007 based on OECD 2004 Health Data

Out of Pocket Share of Total Health Spending for Select Nations

7.5% 7.7%9.1%

12.6% 13.2% 13.3% 13.9% 14.4% 14.9% 15.7%17.2% 17.7%

20.0% 20.4% 21.0%23.6%

31.8%

0%

5%

10%

15%

20%

25%

30%

35%

State Rankings on Healthy Lives and Access Dimensions

AL

AK

AZ

AR

CA CO

DE

DC

FL

GA

HI

ID

ILIN

IA

KS

KYLA

ME

MD

MA

MI

MN

MS

MO

MT

NE

NV

NH

NJ

NM

NY

NC

ND

OH

OK

OR

PA

RI

SC

SD

TN

UT

VT

VA

WA

WV

WI

WY

CT

TX R2 = 0.0198

1

26

51

12651

State Ranking on Access

Sta

te R

anki

ng

on

Hea

lth

y L

ives

Source: Derived from Commonwealth Fund State Scorecard on Health System Performance, 2007

Source: Derived from Commonwealth Fund State Scorecard on Health System Performance, 2007Source: Derived from Commonwealth Fund State Scorecard on Health System Performance, 2007

State Rankings on Healthy Lives and Quality Dimensions

AL

AR

CO

DE

DC

FL

GA

HI

ID

ILIN

IA

KS

KYLA

MDMI

MN

MS

MT

NE

NV

NH

NJ

NM

NY

NC

ND

OH

OK

OR

PA

RI

SD

UT

VT

VA

WAWI

WY

CT

AK

AZ

CA

MEMA

MO SCTN

TX

WV

R2 = 0.0113

1

26

51

12651

State Ranking on Quality

Sta

te R

an

kin

g o

n H

ea

lth

y L

ives

Source: Derived from Commonwealth Fund State Scorecard on Health System Performance, 2007

Beyond Health Insurance

• Need stronger tools to improve health

• Avoidable deaths

• Upstream patient/consumer factors

• Downstream provider delivery value

• Limits of prevention

• Premiums reflect claims costs

Beyond Health Insurance

Discuss among yourselves:• “Making A Difference in Differences for the Health

Inequalities of Individuals,” Health Affairs, vol. 26, no. 5• “Measuring Distributive Injustice on a Different Scale,”

Law & Contemporary Problems, Autumn 2006• “Getting to Better Value in Health Care: The Role of

Physician Performance Measurement,” AEI, Nov. 5• “The Case for More Active Policy Attention to Health

Promotion,” McGinnis et al, Health Affairs, vol. 21, no. 2• “Health Policy Approaches to Population Health:

The Limits of Medicalization,” Lance et al, Health Affairs, vol. 26, no. 5

Administrative Costs as a Percent of Private Health Premiums

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Source: CMS National Health Accounts

Source: CMS National Health Accounts

Year to Year Premium and Admin Cost Growth

-20%

-10%

0%

10%

20%

30%

40%

50%Year to YearPercent Changein PrivatePremiums

Year to YearPercent Changein PrivateAdministrativeCosts

 

Annualized Growth Rate of Premiums 6 year periods

Annualized Growth Rate of Admin Costs 6 year Periods

Starting in 2000 8.81% 13.29%

1999 9.30% 15.09%

1998 9.42% 15.70%

1997 8.93% 11.96%

1996 7.78% 7.21%

1995 6.96% 6.22%

1994 6.27% 3.73%

1993 5.43% 1.34%

1992 5.51% 4.86%

1991 6.14% 6.68%

1990 6.83% 5.76%

1989 8.54% 8.53%

1988 10.99% 15.21%

1987 13.02% 17.35%

1986 13.37% 12.50%

1985 12.28% 8.59%

1984 11.52% 6.76%

1983 10.90% 6.88%

1982 9.71% 4.29%

1981 10.81% 11.95%Source: CMS National Health Accounts

What’s Gotten in to State Health Policy?

• Gap filling & incrementalism on steroids• “I got it one piece at a time

And it didn't cost me a dimeYou'll know it's me when I come through your townI'm gonna ride around in styleI'm gonna drive everybody wild'Cause I'll have the only one there is around.”

Johnny Cash 1976

Massachusetts:Miracle or Mirage?

• Starting off on third base

• Setting min. coverage, subsidies, affordability

• Punting on cost containment, sustainability

Pennsylvania Keystones:Costs, Capacity & Transparency

• Control costs first, ins. mandate later

• Expand supply (scope of practice)

• Actionable info, accountable transparency

• Fair share & higher taxes won’t fly

• Counter-productive small grp regulation

• Hospital mandates (mostly unfunded)

California:“Hide & Seek” Taxation

• Exaggerating “hidden” taxes

• Barriers to real ones

• Mandates: a heavy lift even for Arnold

What States Can Do

• The “bottoms up” road to “top down”

• Experiment w/o blowing up entire lab

• Build smaller consensus, lower transaction costs

• Internalize costs & consequences

What States Can’t Do (Well)

• Broaden their revenue base• Borrow (a lot)• Change the internal revenue code• Get around ERISA, lock all the exit doors• Ignore underlying drivers of health costs• Manage complex, personal health decisions

and tradeoffs• Export mistakes and burdens

Pooling in Shallow Water

• Not enough risk rating to negate substantial

risk pooling (limits, costs, imperfections)• Most state regulation – moderate harassment,

beside the point distraction• Cost averaging doesn’t reduce overall costs• Residual market vs. deeper one• Pooling of different scale and scope

Pooling in Shallow Water

Discuss among yourselves:• “Pooling Health Insurance Risks,” Pauly & Herring, AEI

1999• “Risk Pooling and Regulation,” Pauly & Herring, Health

Affairs, vol. 26, no. 3• “Consumer Decision Making in the Individual Health

Insurance Market,” Marquis et al, Health Affairs, May 2, 2006

• “Risk and Regulation: A New Look at the Individual Health Insurance Market,” AEI, May 11, 2007

Numbers to Remember

• 30 %

• 55%

• 49%

• 40%

• 10%

• $70 trillion or $38 trillion (who’s counting?)

• 2009

• 18% GDP

Potholes in the Road to Coverage Expansion

• Mission creep, overreaching

• Ceilings & floors

• Why need to mandate?

• Can’t make up your losses on volume

• Value = better outcomes at lower cost

Rx

• Healthier people

• Better-performing providers & delivery

• Education, early childhood, culture, behavior, time horizons, decision support, navigation, incentives, transparency, accountability, competition, decentralized choice, deregulation, targeted assistance, tax reform