health system reform: why now? why colorado? who’s next? len m. nichols, ph.d. director, health...
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Health System Reform: Why Now?
Why Colorado? Who’s Next?
Len M. Nichols, Ph.D.Director, Health Policy Program
New America Foundation
Hot Issues in Health Care Legislative Conference Colorado Springs, Colorado
November 17, 2006
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Overview
• Introduction to Health Markets• Sources of extreme stress • Why the national debate is stuck (for now)• Competing Visions• States as
– Laboratories– Catalysts
• How Colorado could inspire the nation
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Are Health Markets “Different?”
• Information asymmetries– Clinician-patient– Consumer-insurer
• Third-party payment– Moral hazard
• Voluntary insurance purchase– Adverse selection
• Expenditure distribution skewed – Risk pooling necessary– Competing definitions of “fair” risk pool
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Linked Problems
• Low Value for Dollar
• Uneven quality
• Inequitable access to care
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Compared to Other Countries
• #1 in spending, share of GDP, per capita
• #37 (by WHO) on overall system performance, next to Slovenia and Costa Rica– Life expectancy, child survival, fairness,
responsiveness, health outcomes
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Medicare Quality and Spending Correlation
Source: Baiker and Chadra, Health Affairs we, April 7, 2004
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US Overuses interventionist technological procedures
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Institute for Healthcare Improvement’s Ventilator Associated Pneumonia
program
• Known how to eradicate VAP since ’99• 14 hospitals have• 6 more have made great progress
• Why hasn’t every hospital nationwide done this?
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Percent of median family income required to buy family health insurance
7.7
19
02468
101214161820
1987 2005
Source: Author’s calculations, using KFF and AHRQ premium data, CPS income data.
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Family health insurance premium as percent of wages
17.9
22.4
33.2
26.4
33
47.8
0
5
1015
20
25
3035
40
45
50
1998 2004
MeanMedian25th percentile
Source: author’s analysis of KFF premium data, BLS wage data
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Labor Market Realities
Occupation Family premium/Median wage
Physician 7.9%
History professor 14.8%
Secretary 30.9%
Carpenter 25.6%
Cook 50.0%
Source: KFF premium and BLS wage data, 2004.
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Premium Payments v. GDP Growth Rate
0%
2%
4%
6%
8%
10%
12%
14%
1999 2000 2001 2002 2003
esigdp
Source: NIPA, BEA/Commerce Dept.
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Employer Health Insurance Payments / Corporate Profits
0%
20%
40%
60%
80%
100%
1998 1999 2000 2001 2002 2003
esi/pre-tax esi/post-tax
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Some Coverage Trends (percent of under-65 population)
1987 1993 2004
Employer 70.1% 64.3% 62.4%
Medicaid+SCHIP 8.7% 12.9% 13.4%
Uninsured 13.7% 16.0% 17.8%
Source: EBRI, December 2005.
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Result of our incremental approaches
• Health insurance as we know it is out of reach of a growing share of our workforce
• We tolerate a stunning amount of mediocre performance
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Linkages Among Problems
Cost
Quality
Access
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Political Gridlock and Fear
• R’s don’t want real reform discussions – universal coverage threatens tax cuts (#1)– Serious cost-growth containment requires enhanced
government role
• D’s don’t know what they want– Some want to use UC to get power– Others fear and want to avoid it to get power– Others fear any solutions which unions don’t like
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Visions of Problems
• Right:– High costs caused by moral hazard (too much insurance
coverage)– Coverage expansion will require unimaginable taxes
• Left– High costs caused by market forces, market power/high
profits, adverse selection • Center
– Problems LINKED, must be addressed simultaneously, for technical and political reasons
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Competing Policy Visions
• New Wild West, with tax breaks – Individual consumers will drive efficiency
• Musty Cocoon of Single Payer– Elite control will drive efficiency
• Brave New World– Mandates, smart regulation, combined buying power
will drive efficiency
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President’s Proposals
• Encourage non-group purchase of HSA-eligible insurance – Premium + OOP from HSAs deductible – Payroll tax credit for HSA contribution
• Support passage of AHPs + federal override of state regulation of insurance markets
• Malpractice reform• HIT and transparency exhortations
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What Do We Need?
• Political Space to Begin the Conversation– Moral case
• Proof we are all in the same community– Economic case
• Delivery system “culture of value”
• Credible policy design– 3 dimensions of credibility
• Stakeholders, politicians, people
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Health System Culture of Value • Information infrastructure to support quality improvement
• Malpractice safe harbors and value-enhancing incentives (for all)
• Comparative technology assessment as countervailing power between medical technology and coverage/use decisions– Raise the bar at the FDA– Raise the bar for procedural interventions as well
• Create Health Home, pay Host to guide us through system, teach/learn evidence base with us
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Credible Policy Design• Individual and Shared Responsibility
– Individual purchase requirement – Purchasing pool
• Risk pooling/market rules• Administrative economies of scale
– Subsidies for lower income– Financing sources
• Culture of Value– Evidence-based limits on collectively financed benefits
• Preservation of liberty and choice
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0
10
20
30
40
50
60
70
80
90
ENTR SC PG Cons UP Disaff Cons D Disadv D Liberals
Pew Typology: Support for government guarantee of health insurance, even if taxes must be raised
Pew Center for Research on People & the Press: 2005
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States as Laboratories
• No inpatient coverage– Utah, West Virginia
• Limited inpatient coverage– Arkansas, New Mexico, Tennessee
• Piggyback on state’s purchasing power– West Virginia, Oklahoma
• Encourage offers within purchasing pools– Montana
• Adding Adults– Wyoming, Pennsylvania
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States as Catalysts
• Maine– Build it, capture savings, hope they’ll come
• Illinois– Cover all kids, cover all citizens?
• Vermont– Bipartisan, insurance home and subsidies for uninsured
• Massachusetts – Bipartisan, individual mandate, subsidize lower
income in smaller firms, hard budget constraint
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Why Colorado Should Do This
• Ich Bien Ein Coloradan
• It would confound the cynics
• It would inspire the Just
• It would concentrate minds in Washington
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What Can Colorado Do Alone?
• Agree to work across party lines• Create sustainable structures
– Efficient markets– Transparent information systems– Subsidies and benefits for target population– Build in budget safeguards
• Agitate for Federal partnership