the u.s. national health care system ph 150 ninez a. ponce, mpp, phd assistant professor department...

The U.S. National Health The U.S. National Health Care System Care System

PH 150PH 150

Ninez A. Ponce, MPP, PhDNinez A. Ponce, MPP, PhDAssistant ProfessorAssistant Professor

Department of Health Services, Department of Health Services, UCLA School of Public HealthUCLA School of Public Health

23 October 200623 October 2006

Outline Outline

(1)(1) Overview of U.S. system compared Overview of U.S. system compared to to other developed countriesother developed countries

(2)(2) Private insurancePrivate insurance

(3)(3) Public coverage & the Safety NetPublic coverage & the Safety Net

(4)(4) Massachusetts and Medicare Part DMassachusetts and Medicare Part D

(5)(5) Current policy issuesCurrent policy issues

How does the US “national How does the US “national system” compare to system” compare to others?others?

Stylized OverviewStylized Overview

Characteristics of U.S. System:Characteristics of U.S. System:– Big Big

$1.9 trillion in 2004 or $6280 per person$1.9 trillion in 2004 or $6280 per person 16% of GDP16% of GDP

– Relies on marketplaceRelies on marketplace Competition and cost containment Competition and cost containment

– Patchwork of insurance coveragePatchwork of insurance coverage– ““Safety net” to cover the patchesSafety net” to cover the patches

Patchwork of CoveragePatchwork of Coverage

Employer-sponsored private insurance Employer-sponsored private insurance – (if offered, if you are eligible, & if you buy it)(if offered, if you are eligible, & if you buy it)

Individual private insuranceIndividual private insurance

Medicare: over 65 or disabledMedicare: over 65 or disabled Medicaid: some (about ½) of poorMedicaid: some (about ½) of poor Military or veterans coverageMilitary or veterans coverage Indian Health ServicesIndian Health Services Uninsured (safety net providers) Uninsured (safety net providers)

% of Population Covered% of Population Covered

Australia 100

Canada 100

France 99.5

Germany 92.2

Japan 100

74.2

100

100

100

45.0

Coverage fromPublic Programs

Switzerland

Sweden

Per Capita Per Capita Expenditures in U.S. Expenditures in U.S.

DollarsDollars

Ratio of Expenditures Ratio of Expenditures to the United States’ to the United States’

LevelLevel

Percentage of Gross Percentage of Gross Domestic Product Domestic Product Spent on HealthSpent on Health

Australia $2350 2.08 8.9%

Canada 2,792 1.91 9.7

France 2,561 2.04 9.5

Germany 2,808 1.74 10.7

Japan 1,984 2.46 7.6

Netherlands 2,626 1.86 8.9

Sweden 2,270 2.15 8.7

Switzerland 3,248 1.50 10.9

United Kingdom 1,992 2.45 7.6

United States 4,887 1.00 13.9

Total Health Care Expenditures, 2001

Acute Care Bed Days per

Capita*

Physician Visits per Capita**

Coronary Artery Bypass Operations per

100,000+

Coronary Angioplasty

Operations per 100,000++

Australia 1.0 6.4 83 103

Canada 1.0 6.4 65 81

France 1.1 6.5 35 73

Germany 1.9 6.5 38 166

Japan NA 16.0 NA NA

Netherlands 0.8 5.9 60 NA

Sweden 0.8 2.8 54 NA

Switzerland 1.3 11.0 60 65

United Kingdom 0.9 5.4 41 51

United States 0.7 5.8 203 388

Utilization of Select Services

AustraliaAustralia CanadaCanada United United KingdomKingdom

United United StatesStates

Waiting times for non-emergency surgery for themselves or a family member: None 5 16 7 10

Less than one month 46 28 23 60

1-3.9 months 32 43 36 28

4 months or more 17 12 33 1

Source: Donelan, K., et al. 1999. “The Cost of Health System Change: Public Discontent in Five Nations.” Health Affairs 18(3): 206-216.

Self-Reporting Waiting Times, 1998

Life Expectancy at Birth Life Expectancy at Birth (years)(years)

Infant Deaths per Infant Deaths per 1,000 Live Births1,000 Live Births

Australia 78.7 5.0

CanadaCanada 78.6 5.5

FranceFrance 78.4 4.6

GermanyGermany 77.5 4.7

JapanJapan 80.6 3.6

NetherlandsNetherlands 78.0 5.2

SwedenSweden 79.4 3.5

SwitzerlandSwitzerland 79.5 4.6

United KingdomUnited Kingdom 77.3 5.8

United StatesUnited States 76.7 7.2

Life Expectancy and Infant Mortality Rates, 1998*

* Data for Canada are for 1997.

RELATIONSHIP BETWEEN NATIONAL WEALTH AND HEALTH EXPENDITURES

Source: Huber, M. 1999. “Health Expenditure Trends in OECD Countries, 1970-1997.” Health Care Financing Review 21(2): 99-117.

Overview of the US health Overview of the US health care systemcare system

8

10

12

14

16

1980 1984 1988 1992 1996 2000

Source: CMS, Office of the Actuary, National Health Statistics Group.

Calendar Years

Per

cen

t o

f G

DP

Period of accelerated growth

Period of stabilization

Rapid growth in the health spending share of GDP stabilized beginning in 1993.

National Health Expenditures as a Share National Health Expenditures as a Share of of

Gross Domestic Product (GDP)Gross Domestic Product (GDP)

8

10

12

14

16

18

20

1980 1985 1990 1995 2000 2005 2010


Calendar Years

Per

cen

t o

f G

DP

Actual Projected

Between 2001 and 2011, health spending is projected to grow 2.5 percent per year faster than GDP, so that by 2011 it will constitute 17 percent of GDP.

National Health Expenditures as a Share National Health Expenditures as a Share of of

Gross Domestic Product (GDP)Gross Domestic Product (GDP)

Other Spending24%

Nursing HomeCare 7%

Prescription Drugs

9%

Program Administration

andNet Cost

6%

HospitalCare32%

Physician and Clinical Services

22%

Note: Other spending includes dentist services, other professional services, home health, durable medical products, over-the-counter medicines and sundries, public health, research and construction.


Hospital and physician spending accounts for more than half of all health spending.

Total Health Spending = $1.3 Trillion

The Nation’s Health Dollar, CY The Nation’s Health Dollar, CY 20002000

36.5

25.2

1.8

5.87.6

23.1

31.7

25

2.5

9.4

7.1

24.3

0

5

10

15

20

25

30

35

40

Hospital Phys. & OtherProfessionals

Home Health PrescriptionDrugs

Nursing HomeCare

All Other

1990 2000

Expenditures for Health Services, by All Expenditures for Health Services, by All PayersPayers

Per

cen

t S

har

e

Calendar Years

Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

In recent years, the hospital share of total spending has decreased while the prescription drug share has increased.

20001988

Public22%

Out-of-pocket32% Private Health

Insurance46%

Out-of-pocket60%

Public16%

Private Health Insurance

24%

Note: Data are Calendar Year.


The financing of prescription drug expenditures has rapidly shifted from consumer out-of-pocket spending to private health insurance.

Expenditures for Prescription Drugs, Expenditures for Prescription Drugs, by Source of Fundsby Source of Funds


Over the decade, out-of-pocket payments declined while private insurance payments increased.

35.343.0 47.7

30.5

30.633.2

19.1

34.126.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1990 2000

Calendar Years

Pe

rce

nt

Private Health Insurance Public Funds Out-of-Pocket and Other Private Funds

Share of Expenditures for Physician Share of Expenditures for Physician and Clinical Services, by Source of and Clinical Services, by Source of

FundsFunds

Private Insurance34%

Other Public1

12% Other Private2

6%Medicaid and

SCHIP15%

Out-of-pocket15%

Medicare17%

1 Other public includes programs such as workers’ compensation, public health activity, Department of Defense, Department of Veterans Affairs, Indian Health Service, and State and local hospital subsidies and school health.2 Other private includes industrial in-plant, privately funded construction, and non-patient revenues, including philanthropy.

Note: Numbers shown may not sum due to rounding.


CMSPrograms

33%

Medicare, Medicaid, and SCHIP account for one-third of national health spending.

Total National Health Spending = $1.3 Trillion

The Nation’s Health Dollar, CY The Nation’s Health Dollar, CY 20002000

Private InsurancePrivate Insurance

(1)(1) DevelopmentDevelopment

(2)(2) Current statisticsCurrent statistics

(3)(3) Employer-based coverageEmployer-based coverage

Development of Private Development of Private InsuranceInsurance

Story begins around 1930 in U.S., although Story begins around 1930 in U.S., although earlier in countries such as Germanyearlier in countries such as Germany

First example: 21-day hospital benefit for First example: 21-day hospital benefit for $6/year (Baylor University, Dallas, 1929)$6/year (Baylor University, Dallas, 1929)– Hospitals then banded together to give choice Hospitals then banded together to give choice

of facility; gave them $$ even if beds in Great of facility; gave them $$ even if beds in Great Depression even when beds were empty, Depression even when beds were empty, which led to the formation of “Blue Cross”which led to the formation of “Blue Cross”

Development (continued)Development (continued)

A.M.A. was worried that insurance could A.M.A. was worried that insurance could lead to “socialized medicine,” so “Blue lead to “socialized medicine,” so “Blue Shield” plans didn’t form till 1940sShield” plans didn’t form till 1940s– 10 tenets of coverage (MDs have complete 10 tenets of coverage (MDs have complete

control over care, free choice of MD, etc.)control over care, free choice of MD, etc.) WWII stimulated development; with WWII stimulated development; with

labor shortage and wage controls, labor shortage and wage controls, health insurance became attractive health insurance became attractive fringe benefit, and courts later ruled it fringe benefit, and courts later ruled it not taxable incomenot taxable income

Public coverage:Public coverage:Medicare & MedicaidMedicare & Medicaid

Medicare & Medicaid in mid-1960sMedicare & Medicaid in mid-1960s– Compromise between liberals who wanted social Compromise between liberals who wanted social

insurance, and providers who didn’t want excess insurance, and providers who didn’t want excess government interferencegovernment interference

Compromise: 3-pronged approach put together by Compromise: 3-pronged approach put together by Congressman Wilbur Mills:Congressman Wilbur Mills:– Part A of Medicare, hospital insurance, is like social Part A of Medicare, hospital insurance, is like social

insurance, financed from payroll taxesinsurance, financed from payroll taxes– Part B, physician coverage, voluntary and partly paid by Part B, physician coverage, voluntary and partly paid by

beneficiaries and partly from general revenues – but beneficiaries and partly from general revenues – but with generous reimbursement ruleswith generous reimbursement rules

– Medicaid was not made an entitlement program, but a Medicaid was not made an entitlement program, but a rather welfare-like program for poor people.rather welfare-like program for poor people.

Health Insurance Coverage, US and Health Insurance Coverage, US and CA, Ages 0-64, 2005CA, Ages 0-64, 2005

Source: KFF 2006

61%53%

16%18%

5%7%

18% 21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

United States California

Uninsured

PrivatelyPurchased

Medicaid/OtherPublic

Employer-Based

Statistics: The Uninsured Statistics: The Uninsured (CPS (CPS

2005)2005)

Percentage of population under age 65:Percentage of population under age 65:

-- total population:total population: 18% (46 million people) 18% (46 million people)

-- age 18-24:age 18-24: ~29%~29%

-- Black:Black: 15%15% (pop. share 13%) (pop. share 13%)

-- Latino:Latino: 30% (pop. share 14%)30% (pop. share 14%)

-- <200% FPG: 65%<200% FPG: 65%

(about $40k pretax income for family of 4)(about $40k pretax income for family of 4)(note that median family income in 2005 is $56K(note that median family income in 2005 is $56K

– Workers ~35 millionWorkers ~35 million

The “Safety net”The “Safety net”

Intact? Endangered? Imaginary?Intact? Endangered? Imaginary? IOM: Definition:IOM: Definition:

– ““Those providers that organize and deliver a Those providers that organize and deliver a significant level of health care and other significant level of health care and other health-related services to the uninsured, health-related services to the uninsured, Medicaid and other vulnerable populations.”Medicaid and other vulnerable populations.”

– ““core safety-net providers”-core safety-net providers”- Legal mandate of “open door” policyLegal mandate of “open door” policy Serves a substantial share of uninsured, Medicaid Serves a substantial share of uninsured, Medicaid

and other vulnerable populationsand other vulnerable populations– No set threshold, but deemed detrimental to No set threshold, but deemed detrimental to

community if these providers disappearcommunity if these providers disappear

$500 cash upfront for an $500 cash upfront for an appointment—patient’s appointment—patient’s

perspectiveperspective "I make minimum wage, Dude—no "I make minimum wage, Dude—no

way I have that kind of money lying way I have that kind of money lying around. What am I supposed to do?" around. What am I supposed to do?"

His low-income job offered no health His low-income job offered no health insurance but paid him just enough to insurance but paid him just enough to disqualify him for Medicaid coverage. disqualify him for Medicaid coverage.

JAMA.JAMA. 2006;296:1701-1702 2006;296:1701-1702

$500 cash upfront for an $500 cash upfront for an appointment-doctor’s appointment-doctor’s

perspectiveperspective At times, and especially early in my career, I At times, and especially early in my career, I

have been proud of carrying that burden, of have been proud of carrying that burden, of being part of a safety net for the neediest. being part of a safety net for the neediest. At other times, and more so lately, I wonder At other times, and more so lately, I wonder if my very participation in this system plays if my very participation in this system plays a darker role—a complicit role—of enabling a darker role—a complicit role—of enabling the disparity of care to persist, of helping to the disparity of care to persist, of helping to provide false reassurance that we actually provide false reassurance that we actually have a safety net that provides adequate have a safety net that provides adequate care to all in need. care to all in need.

JAMA.JAMA. 2006;296:1701-1702 2006;296:1701-1702

Recent “sweeping” reformsRecent “sweeping” reforms

The Massachusetts model: The Massachusetts model: An artful balanceAn artful balance

(Turnbull; Health Affairs 2006)(Turnbull; Health Affairs 2006)

BackgroundBackground– Massachusetts health reform legislationMassachusetts health reform legislation

Goal = provide coverage to nearly all Goal = provide coverage to nearly all residentsresidents

– 12% uninsured12% uninsured Employs both proven and innovative policy Employs both proven and innovative policy

strategiesstrategies– Medicaid expansionsMedicaid expansions– Subsidies for low-incomeSubsidies for low-income– Individual mandateIndividual mandate– State purchasing poolState purchasing pool– OthersOthers



DiscussionDiscussion– TriumphsTriumphs

Sweeping reform vs. incremental changeSweeping reform vs. incremental change Solution involving government, employers, Solution involving government, employers,

and individualsand individuals



Discussion, cont’dDiscussion, cont’d– ChallengesChallenges

Need for ongoing public support, especially in light of Need for ongoing public support, especially in light of changes still to come including the individual changes still to come including the individual mandate (July 2007)mandate (July 2007)

Individual affordabilityIndividual affordability State’s economic state over timeState’s economic state over time Addressing address for undocumented, 300%-500% Addressing address for undocumented, 300%-500%

FPGFPG Adequate funding of the safety-netAdequate funding of the safety-net Cost containmentCost containment

Medicare Part D: Market-Driven, Medicare Part D: Market-Driven, Plus OversightPlus Oversight

1.1. Voluntary enrollmentVoluntary enrollment

As of June 2006, Nearly 23 Million of 43 million Medicare As of June 2006, Nearly 23 Million of 43 million Medicare Beneficiaries Have Enrolled in Part DBeneficiaries Have Enrolled in Part D

2.2. Federal government does not set prices, premiums, or Federal government does not set prices, premiums, or formulariesformularies

3.3. Federal government and plans share financial riskFederal government and plans share financial risk

4.4. Plans compete for enrollees, within regions, based on Plans compete for enrollees, within regions, based on premiums, OOP, benefit design, reputationpremiums, OOP, benefit design, reputation

5.5. Beneficiary protectionsBeneficiary protections

Low-income subsidyLow-income subsidy

Formulary protectionsFormulary protections

25% coinsurance25% coinsurance

CatastrophicCoverage

No Coverage (“donut hole”)

Partial Coverage

Deductible

5% coinsurance5% coinsurance

100% cost-sharing100% cost-sharing

1Equivalent to $3,850 in out-of-pocket spending: $3,850 = $265 (deductible) + $534 (25% cost-sharing on $2,135) + $3,051 (100% cost-sharing in the “gap”).Source: Office of the Actuary, Centers for Medicare and Medicaid Services.

Beneficiary Cost-Share

Plan’s Coverage

Medicare Part D Standard Benefit Medicare Part D Standard Benefit DesignDesign

20062006 20072007

$5,100$5,100 $5,451$5,45111

$2,250$2,250 $2,400$2,400

$250$250 $265$265

Current Policy IssuesCurrent Policy Issues(1)(1) Access/equityAccess/equity

- About 46 million uninsuredAbout 46 million uninsured- Getting access to care in HMOsGetting access to care in HMOs- Disparities in access and treatmentDisparities in access and treatment

(2) Rising costs(2) Rising costs - Higher premiums, higher cost sharing- Higher premiums, higher cost sharing - Especially pharmaceuticals- Especially pharmaceuticals - Movement away from tightly managed care- Movement away from tightly managed care

(3) Quality(3) Quality - Does competition improve or deter quality?- Does competition improve or deter quality? - Do HMOs provide as good quality of care?- Do HMOs provide as good quality of care?

- - Consumer-driven health careConsumer-driven health care

the u.s. national health care system ph 150 ninez a. ponce, mpp, phd assistant professor department...

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