The Case for A Better Health Care System

2

The United States spends more per capita on health care than any other country.

$4,887

$3,322

$2,808 $2,792$2,561

$2,131 $1,992

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Unite

d St

ates

Switz

erlan

d

Germ

any

Cana

da

Fran

ce

J apa

n

Unite

d Kin

gdom

Per Capita Health Care Spending(US$PPP)

2001

Source: Organization for Economic Cooperation and Development, OECD Health Data 2002

3

Costs are rising rapidly…

National Health Expenditures(in billions)1980-2003

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Inflation-adjusted (1)

Source: Centers for Medicare & Medicaid Services, Office of the Actuary(1) Expressed in 1980 dollars; adjusted using the overall Consumer Price Index for Urban Consumers

4

…and are projected to consume an ever greater share of GDP.

10.9%

13.4% 13.2%

14.9% 15.4% 16.0%

18.7%

13.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1988 1993 1996 1998 2002 2004* 2006* 2014*

*ProjectedSource: Heffler et al., “Health Spending Projections for 2004–2014,” Health Affairs (February23, 2005).

National Health Care Expenditures as a Percent of GDP1988-2014 Projected

5

Despite this level of spending, 45 million Americans are uninsured—and the number is again growing.

Number of Uninsured Individuals1985 - 2003

0

5

10

15

20

25

30

35

40

45

50

Source: US Census Bureau

Nu

mb

er

of

Un

insu

red

in

Mill

ion

s

6

Uninsured people are less likely to get needed medical care…

11%

18%21%

24%

32%

41%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

No Mammogram in Past 2 Years* No Cholesterol Check in Past 5 Years**

Insured Uninsured Less Than 1 Year Uninsured More Than 1 Year

Percent of Individuals Not Receiving Selected Recommended Preventive Care Services

*Among women 50–64. **Among adults 45–64.Source: J. Ayanian, et al. “Unmet Health Needs of Uninsured Adults in the United States,” JAMA 284 no 16 (2000): pp 2061–2069.

7

…and more likely to experience financial barriers to getting care.

37%40%

44%

18%

12%16%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Did not fill prescription Skipped medical test,treatment, or follow-up

Not able to pay medical bill

Uninsured Full Year Continuously Insured

Source: The Commonwealth Fund 2003 Biennial Health Insurance Survey

Financial Barriers to Care Insured vs. Uninsured Population

8

Rapid premium growth for employers raises fears more will lose coverage.

Annual Percent Change in Health Insurance Premiums1988 - 2004

12.0%

8.5%

0.8%

3.7%

5.3%

8.2%

10.9%

12.9%13.9%

11.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1988 1993 1996 1998 1999 2000 2001 2002 2003 2004

Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 2000, 2001, 2002, 2003, 2004 Annual Surveys; KPMG Survey of Employer -Sponsored Health Benefits: 1988, 1993, 1996

9

Even so, needed change is about more than costs and coverage—the system is broken and must be fixed.

• Uneven coverage; unequal access

• No evidence base to address variations in practice patterns and spending levels

• Paperwork at the expense of patient care

• A tort system in need of reform

• Medical errors

• Payment systems that don’t make sense; misaligned incentives

• A looming breaking point as need begins to surpass our capacity to provide care

The rich

Health insurance coverage is a confusing patchwork.

The poor

The near poor

The broad middle class

The Young

Working-age people

People age 65 and over

The 40 million or so

uninsured tend to be near poor

The federal-state Medicaid

program for certain of the

poor, the blind and the disabled

The employed and their families who are typically covered through their jobs, although many small employers do not provide coverage.

For the rich, “Disneyland” the sky-is-the limit policies without rationing of any sort (Boutique medicine)

Near poor children may be temporarily covered by Medicaid and S-Chip, although 7-10 million are still uninsured.

Persons over age 65, who are covered by the federal Medicare program, but not for drugs or long-term care. Often the elderly have private supplemental MediGap insurance

The very poor elderly are also covered by Medicaid

Source: Professor Uwe Reinhardt, Princeton University

11

Even those with “coverage” often lack access to certain services.

• Many with private insurance lack coverage for basic services like mental health, substance abuse, and dental care

• Medicare fails to cover long-term care

• Coverage doesn’t guarantee access: 30 percent of physicians aren’t accepting new Medicaid patients Managed care practices restrict choice and access Increasing cost sharing requirements can provide barriers to care

even for the insured

12

Racial and ethnic disparities exist in care for people with similar access to care.

72%

34%

68%

31%

57%

37%

52%

39%

21%

63%

0%

20%

40%

60%

80%

100%

Breast Cancer(Mammography)

Colon and Rectum Cancer(Fecal Occult Blood Test)

White, Non-Latino

Latino

African American, Non-Latino

Asian/Pacific Islander

American Indian/Alaska Native

Percentage of Individuals receiving recommended Cancer Screening within the past 2 years, by Race/Ethnicity

2000

Source: American Cancer Society, Cancer Prevention & Early Detection: Facts & Figures 2003.

Data: National Center for Health Statistics, National Health Interview Survey, 2000.

13

Use of services varies significantly for patients with the same outcome.

Source: Medicare claims data, 1999-2000

23.0

29.6

32.3

15.114.9

12.3

8.58.9

10.1

5

10

15

20

25

30

35

Cancer COPD CHF

Patient Days(Highest Rate)

Patient Days(Median)

Patient Days(Lowest Rate)

Variation in Inpatient Days per DecedentSelected Conditions Across Different Hospitals

14

Health care organizations face a regulatory morass…

March 13, 2001

WHO REGULATES HOSPITALS

IRS EPA FTC FCC

FBI

HHS/HRSA HHS/NIOSH JCAHO NRC DOL

SEC

OPO’s

FAA

DEA

Regional Home Health Intermediaries

DME Regional Contractors

Treasury

DOJ

OSHA

DOT

FDA

Regional Offices

Intermediaries Carriers PRO’s

PRRB

Medicare Integrity Program Contractors

Congress

Federal Circuit Courts Supreme Court

Departmental Appeals

OIG

State

Survey & Certification

Courts

Attorneys General

Medicaid

Health Boards

Medical Boards

Local Governments

Licensure

Hospitals

Centers for Medicare and Medicaid

Services

15

…that takes time away from patient care and adds to cost.

16

Our tort system has spun out of control.

2004 Malpractice Premiums by Specialty in Dade County, FL

$344,162

$239,002 $239,002$227,242 $227,242

$215,101

$131,451

Neurosurgery ThoracicSurgery

CardiovascularSurgery

GeneralSurgery

OB/GYN Orthropaedics Plastic Surgery

Source: Florida Physicians Insurance Company (Dade County, FL)

17

At the same time, we know medical errors occur.

Institute of Medicine report on medical errors: To Err is Human, November, 1999

• Faulty systems, processes, and conditions that lead to mistakes

• Loss of trust in the health care system

• Culture that impedes open discussion of errors and steps to prevent them

18

Private payers subsidize the costs of care for the publicly insured…

70%

95%

120%

145%

80 8182 83 8485 8687 88 8990 9192 9394 95 9697 98 99 00 01 02 03

Aggregate Hospital Payment-to-cost Ratiosfor Private Payers, Medicare and Medicaid

1980 - 2003

Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 - 2003 for community hospitals

Private Payer

Medicare

Medicaid

Payment equal to cost

19

…and cross subsidies also exist across types and levels of care.

1.3%

-11.5%-6.6%

-87.0%

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Medicare Hospital Margins by Service Type2003

Source: *MedPAC, December 2004 public meeting, ** Clark and Lowry estimates of Medicare Cost Reports

Inpatient Care* HospitalOutpatient*

Home Health**

Hospital-BasedSkilled Nursing*

20SOURCE: The Lewin Group analysis of American Hospital Association state survey data, 2004; state hospital associations; American Health Planning Association, National Directory of Health Planning, Policy and Regulatory Agencies, Fifteenth Edition: February 2004

*Weighted range is based on the number of medical services subject to CON review and their importance; facilities in development reported by state hospital associations, data may be incomplete

Number of Limited-service Hospitals, by State, 2004

LA - 5

Open Limited Service Hospitals

Limited Service Hospitals in Development

Number of Limited Service Hospitals

0-9.9

10.0-19.9

20.0-44.0

No CON

CON RegulationBy State

Weighted Range of Services Reviewed*

Distorted payment systems create incentives for cherry-picking patients and payers.

21

These problems will reach crisis proportions as the population continues to grow and age…

Source: US Census Bureau

US Population Trends and Projections by Age1980 - 2050

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1980 1990 2000 2010 2020 2030 2040 2050

Tho

usan

ds

20 - 64

65 - 84

0 - 19

85 and over

22

…placing increasing demands on our health care system.

Hospital Days per 1000 by Age Group2002

Hos

pita

l Day

s

267.0 313.4

573.0

1,270.4

2,283.5

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Under 18 yrs 18 - 44 yrs 45 - 64 yrs 65 - 74 yrs 75 yrs and over

Source: National Center for Health Statistics, Health United States, 2002

23

More than half of Americans surveyed rate the health care system as fair to poor.

4%10%

24%

30%

1%

30%

Rating of Health Care System in America Today2004

Source: Employee Benefit Research Institute and Matthew Greenwald & Associates, Inc., 2004 Health Confidence Survey.

Poor

Don’t Know/Refused Excellent

Very Good

Good

Fair

24

Nearly one in four Americans see health care as the most critical issue in America today…

22%21%

17%16%

13%

4%3%

4%

0%

5%

10%

15%

20%

25%H

ea

lth

Ca

re

Te

rro

ris

m a

nd

Na

tio

na

lS

ec

uri

ty

Th

e E

co

no

my

Wa

r

Ed

uc

ati

on

Th

e B

ud

ge

tD

efi

cit

Ta

xe

s

Do

n't

Kn

ow

/Re

fus

ed

Most Critical Issue in America TodayPercent of Respondents

2004

Source: Employee Benefits Research Institute, 2004 Health Confidence Survey

25

A majority of Americans are ready for change.

To improve our health care system Americans* would…

10.0%

47.0%

1.0%

41.0%

Give up a future wage increase

Have a larger amount deducted for health insurance

Don’t know

Refused

Source: Kaiser Family Foundation, Health Insurance Survey, October 2004

*Based on those who have health insurance through their or their spouse’s employer.

26

Creating the outline for a better health care system will require broad input.

• We as a nation have a clear policy, a “social contract” for education—all children receive a free education through grade 12. What is the policy or “social contract” for health care?

• The public must engage in a discussion of the values and principles that should guide debate.

• The voice of the public and other stakeholders needs to be heard more clearly in the political debate.

27

Questions for Discussion

• What social contract for health care exists today? What should it be?

• Recognizing that our system is based on public/private collaboration, what are the attributes of a well-functioning system?

• What are the principles and values that should guide health care policy?