The Uninsured and the Health Care Safety Net Grace-Marie Turner, Ph.D. President Galen Institute, Inc. Alexandria, VA

The Uninsured and the The Uninsured and the Health Care Safety NetHealth Care Safety Net

Grace-Marie Turner, Ph.D. Grace-Marie Turner, Ph.D. PresidentPresidentGalen Institute, Inc.Galen Institute, Inc.Alexandria, VA Alexandria, VA

Turner # Turner # 22

The U.S. health care system The U.S. health care system is in troubleis in trouble

Rising insurance costs threaten coverage Rising insurance costs threaten coverage for many for many

Millions are uninsuredMillions are uninsured

A plethora of rules, regulations, fines, A plethora of rules, regulations, fines, penalties govern the system penalties govern the system


2004 U.S. health expenditures 2004 U.S. health expenditures (estimated)(estimated)

Total Total $1.8 trillion$1.8 trillion 15% of GDP15% of GDP

Private:Private: $984 billion$984 billion 55% of total55% of total

Public:Public: $810 billion$810 billion 45% of total45% of total

see see http://www.cms.hhs.gov/statistics/nhe/projections-2003/t3.asp


Cost concerns drive debateCost concerns drive debate

2.7%

7.5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

General Inflation Index Employer HealthInsurance Cost

“2004 Mercer U.S. National Employer-Sponsored Health Plans Survey,” Mercer Human Resources, November 22, 2004. http://www.mercerhr.com/knowledgecenter/reportsummary.jhtml?idContent=1051300

U.S. Department of Labor, Bureau of Labor Statistics. Consumer Price Index. January 19, 2005. ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt


Does the U.S. spend too much or Does the U.S. spend too much or too little on health care? too little on health care?

0

10

20

30

40

50

60

70

80

Too LittleAbout RightToo Much

Robert Blendon and John Benson. “Americans’ Views on Health Policy” Health Affairs. March/April 2001.


Consumers pay 15% of costsConsumers pay 15% of costs

0

10

20

30

40

50

60

1960 1980 2000

Out-of-PocketPublic PayersPrivate Insurance

Office of the Actuary, Centers for Medicare and Medicaid Services


Kaiser benefits studyKaiser benefits study

Premiums now average $3,383 for single Premiums now average $3,383 for single coverage and $9,068 for familiescoverage and $9,068 for families

Worker contributions were stable for Worker contributions were stable for singles (at $508) and rising 13% for singles (at $508) and rising 13% for families (to $2,412)families (to $2,412)

Kaiser 2003 Employer Health Benefit Survey


Cost drivers for health insuranceCost drivers for health insurance

18%18% General health care inflationGeneral health care inflation

22%22% New medical advances, drugsNew medical advances, drugs

18%18% Rising provider expensesRising provider expenses

15%15% Government mandates and regulation Government mandates and regulation

15%15% Increased consumer demandIncreased consumer demand

7%7% Litigation and defensive medicineLitigation and defensive medicine

5%5% Fraud and abuse, etc.Fraud and abuse, etc.

PriceWaterhouseCoopers 2002


Research questionResearch question

Can State health insurance regulations Can State health insurance regulations

reduce costs and increase access reduce costs and increase access

to health insurance? to health insurance?


Insurance regulationsInsurance regulations

Guaranteed issue Guaranteed issue

Guaranteed renewalGuaranteed renewal

Community ratingCommunity rating

Mandated benefits Mandated benefits

Pre-existing condition exclusionsPre-existing condition exclusions


The GAO identified 16 States that passed The GAO identified 16 States that passed these insurance regulations in the early- and these insurance regulations in the early- and mid-1990s.mid-1990s.

What happened?What happened?


Annual growth rate in number of Annual growth rate in number of uninsureduninsured

4.6%3.9%

4.1%

1990 1996

8.1%

1.0%

2.7%

16 34 50 16 34 50

“Uninsured Rates Rise Dramatically in States with Strictest Health Insurance Regulations,” Arnett GM, Schriver ML. The Heritage Foundation 1998. http://www.galen.org/statehealth.asp?docID=179

# of States

% g

row

th r

ate

in

nu

mb

er o

f u

nin

sure

d


Expanding access to the Expanding access to the uninsureduninsured

Why is it so hard for the States to Why is it so hard for the States to solve this problem?solve this problem?


The tax treatment of health The tax treatment of health insuranceinsurance

A huge Federal subsidy that discriminates A huge Federal subsidy that discriminates against lower-income, working Americans against lower-income, working Americans who are most likely to be uninsuredwho are most likely to be uninsured


Low income families hard to reach with job-based coverage

Less than$25,000

Over$75,000

23%

82%

Persons with job-based health insurance, by income

U.S. Census Bureau, Current Population Survey, 2004 Annual Social and Economic Supplement. Table HI01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2003 (All Races)


Population under age 65 with health coverage

$0 $75,000Income

42 MillionUninsured

Conceptual depiction based upon the logo of the Galen Institute.

The Galen GapThe Galen Gap


Getting to the root of the Getting to the root of the problemproblem

Price controls Price controls in World War IIin World War II


1943:1943:Health insurance to boost payHealth insurance to boost pay

Workers are scarceWorkers are scarceWage and price Wage and price controls cap paycontrols cap payHealth insurance Health insurance offered insteadoffered insteadHealth insurance Health insurance becomes job-basedbecomes job-based


Sixty years and $1 trillion Sixty years and $1 trillion later...later...

A $189 billion annual tax subsidy that A $189 billion annual tax subsidy that is: is: – InefficientInefficient

– RegressiveRegressive

– DiscriminatoryDiscriminatory


ProblemsProblems

Leads people to think health insurance is a Leads people to think health insurance is a gift from employers, not part of their pay, gift from employers, not part of their pay, as it isas it isConsumers of health care drive up costs Consumers of health care drive up costs by demanding more expensive coverage by demanding more expensive coverage without seeing the pricewithout seeing the priceHigher costs drive more and more people Higher costs drive more and more people out of the market for health insurance, out of the market for health insurance, especially low-income workers/familiesespecially low-income workers/families


$0 $75,000Income

Pressure for Government Pressure for Government to fill the gapto fill the gap


A fresh idea: A fresh idea: Create new, fairer subsidies for Create new, fairer subsidies for

health insurancehealth insuranceTax credits for the uninsured to purchase Tax credits for the uninsured to purchase health insurancehealth insurance

Credits are “refundable” and Credits are “refundable” and “advanceable”“advanceable”

Provide new help for those shut out of the Provide new help for those shut out of the systemsystem

A new fairness in subsidizing insurance A new fairness in subsidizing insurance “Empowering Health Care Consumers through Tax Reform,” Grace-Marie Arnett, Ed. University of Michigan Press, Ann Arbor. September 1999. http://www.galen.org/book.asp Mark Pauly and Bradley Herring. “Expanding Coverage Via Tax Credits: Trade-Offs and Outcomes,” Health Affairs, January/February 2001.


The uninsured will need new The uninsured will need new places to purchase coverageplaces to purchase coverage

Individuals with new subsidies will need Individuals with new subsidies will need new places to buy health insurance, new places to buy health insurance, outside the workplace, to get group ratesoutside the workplace, to get group rates

Labor unions, professional organizations, Labor unions, professional organizations, churches, and other affinity groups could churches, and other affinity groups could offer insurance as a member benefitoffer insurance as a member benefit

This insurance would be portable from job This insurance would be portable from job to job and provide more continuity in to job and provide more continuity in coveragecoverage


Bipartisan agreementBipartisan agreement

Tax credits for the uninsuredTax credits for the uninsured

New purchasing pool New purchasing pool arrangementsarrangements

Enrolling those eligible for Enrolling those eligible for Medicaid and SCHIPMedicaid and SCHIP

Gaining efficiencies through Gaining efficiencies through health information health information technologiestechnologies

My assessment of general agreement based upon joint publications and position papers by political leaders, including President Bush, Senator Kerry, Senator Frist, Senator Clinton, etc.


Public sector innovationsPublic sector innovationsSecretary Leavitt will support greater use of 115 waivers Secretary Leavitt will support greater use of 115 waivers for Medicaid to expand optionsfor Medicaid to expand optionsGovernor Jeb Bush of Florida wants to bring competition Governor Jeb Bush of Florida wants to bring competition and choice into Medicaidand choice into MedicaidSouth Carolina offers Medicaid Health Savings Account South Carolina offers Medicaid Health Savings Account (HSA) option(HSA) optionNew York State’s reinsurance programNew York State’s reinsurance programMaine’s DirigoChoice for small businessesMaine’s DirigoChoice for small businesses


A new conversationA new conversation

PreventionPrevention

Disease managementDisease management

Value in medical careValue in medical care

Greater access to Greater access to informationinformation

More consumer input More consumer input into care choicesinto care choices


Care management programs have Care management programs have demonstrated successdemonstrated success

Florida’s Cash and Counseling programs Florida’s Cash and Counseling programs give the disabled more choice and controlgive the disabled more choice and control

Pitney-Bowes’ positive experience in direct Pitney-Bowes’ positive experience in direct care management care management

The Asheville Project provides care for The Asheville Project provides care for chronic conditions like diabetes, asthma, chronic conditions like diabetes, asthma, and heart diseaseand heart disease


Some options for the StatesSome options for the States

About one-third of new purchasers of About one-third of new purchasers of HSAs were previously uninsured HSAs were previously uninsured

Encouraging HSAs can help some citizens Encouraging HSAs can help some citizens to get coverageto get coverage

“Health Savings Accounts: The First Year in Review,” eHealthInsurance, February 15, 2005.

Teresa Chovan and Hannah Yoo. “Health Savings Accounts Off to a Fast Start in the Individual Market,” America’s Health Insurance Plans, January 12, 2005.


HSA overviewHSA overview

HSAs allow individuals, employers, or HSAs allow individuals, employers, or employees to deposit tax-free money into employees to deposit tax-free money into a special account to pay for current and a special account to pay for current and future medical expenses future medical expenses

Savings roll over from year to yearSavings roll over from year to year

Individuals must have a “high-Individuals must have a “high-deductible health plan” to open a HSAdeductible health plan” to open a HSA


One example of an HSAOne example of an HSA

$1,000 deposit

Employer, employee, Employer, employee, or individual makes or individual makes deposit to HSA. deposit to HSA. Unspent funds roll Unspent funds roll over to next year.over to next year.

Funds routine health spending. Preventive care exempt.

Catastrophic coverage + preventive care

High deductible insurance

$500 deductible


HSA options for the StatesHSA options for the States

Enhancing the HSA optionEnhancing the HSA option– Allow a State tax deduction for deposits to Allow a State tax deduction for deposits to

HSAsHSAs– Allow State tax deductibility for conforming Allow State tax deductibility for conforming

health insurancehealth insurance– Allow cross-State purchase of health Allow cross-State purchase of health

insuranceinsurance

A new benefit option for State employees A new benefit option for State employees to save State funds on health coststo save State funds on health costs


Other State responsesOther State responses

Avoid new State mandates and regulations that Avoid new State mandates and regulations that drive up costs and reduce choicedrive up costs and reduce choice

Extend Medicaid and SCHIP $$: Extend Medicaid and SCHIP $$: – Focus on better managing chronic care patientsFocus on better managing chronic care patients– Focus on value, not just cutting costsFocus on value, not just cutting costs– Provide incentives for patients to stretch dollarsProvide incentives for patients to stretch dollars

Develop private-public partnerships to Develop private-public partnerships to strengthen the safety netstrengthen the safety net

Expand community health centersExpand community health centers


What is the new world about?What is the new world about?

Patient controlPatient control: Consumers will have : Consumers will have more choices in health insurance more choices in health insurance arrangementsarrangements

Cost visibilityCost visibility: They will be more price : They will be more price conscious in shopping for insurance and conscious in shopping for insurance and some medical servicessome medical services

Savings incentivesSavings incentives: Consumers have : Consumers have more incentive to get the best product, more incentive to get the best product, service, and value for their moneyservice, and value for their money


The next big thing…The next big thing…

Consumer choice in Consumer choice in health care and health care and coveragecoverage


The goalThe goal

Engaging consumers as partners rather Engaging consumers as partners rather than adversaries in managing health than adversaries in managing health costs and getting the best value for costs and getting the best value for health care dollarshealth care dollars


For more informationFor more information

Contact:Contact:

Grace-Marie TurnerGrace-Marie Turner

Galen InstituteGalen Institute

www.galen.orgwww.galen.org

(703) 299-8900(703) 299-8900

[email protected]@galen.org

Documents

The Uninsured and the Health Care Safety Net Grace-Marie Turner, Ph.D. President Galen Institute, Inc. Alexandria, VA