The National View of Health Insurance

1
The National View of Health Insurance

• Cathy Schoen
• Senior Vice President, The Commonwealth Fund
• Alaska Work Shop Panel National Overview and
  State Strategies
• Anchorage, Alaska
• December 7, 2006

2
Overview Health Insurance, Costs and Health
System Performance

• Triple threats to health and economic security
• High rates uninsured, unstably insured and
  under-insured
• Rising health care costs outpacing incomes
• Low value for high investment inefficient
  insurance and care systems with wide variations
  in quality
• Consequences of inadequate and fragmented
  insurance coverage
• Health and financial risks for uninsured and
  under-insured
• Less healthy, productive workforce
• Inefficient health care system
• Barrier to achieving a high performance system
• National and state insurance reform strategies
  national proposals and recent state action
• Health insurance as critical element to improving
  overall care system performance

3
U.S. Healthcare System Falls Short - Need for
Policy Action

• Highest costs in the world
• Increasing much faster than wages or incomes
• Average family premium exceeds minimum wage
  worker annual income
• Rising numbers uninsured and underinsured
• Public programs employer base under stress
• Quality widely variable
• National scorecard score of 66 reflects wide gaps
  on access, quality and efficiency
• US evidence little relationship between quality
  and efficiency. Opportunity for net gains
• International evidence not getting value for
  money
• Lack of 21st Century Infrastructure

Commonwealth Fund Commission on a High
Performance Health System, Why Not the
Best? Results from a National Scorecard on U.S.
Health System Performance, Sept. 2006
4
Health Insurance and Cost Trends and Implications
5
47 Million Uninsured in 2005 Increasing Steadily
Since 2000
Millions uninsured
47
46
2013
Projected
19992005 reflect effect of verification
question and implementation of Census 2000-based
population controls. Note Projected estimates
for 20052013 are for non-elderly uninsured based
on T. Gilmer and R. Kronick, Its the Premiums,
Stupid Projections of the Uninsured Through
2013, Health Affairs Web Exclusive, April 5,
2005. Source U.S. Census Bureau, March CPS
Surveys 1988 to March 2006.
6
One in Five Adults Uninsured Up 7 Million in 5
YearsPopulation Under Age 65 Uninsured
Percent uninsured
Millions uninsured
46
45
45
43
41
40
39
Data Analysis of Current Population Survey,
March 20002006 supplements EBRI Sources of
Health Insurance and Characteristics of the
Uninsured, Current Population Survey March 2006.
Source Commonwealth Fund National Scorecard on
U.S. Health System Performance, 2006
6
7
Rising Rates of Adults Uninsured Across States
Percent of Adults Ages 1864 Uninsured
19992000
20042005
NH
NH
ME
WA
VT
NH
ME
WA
VT
ND
MT
ND
MT
MN
MN
OR
NY
MA
WI
OR
NY
MA
ID
SD
RI
WI
MI
ID
SD
RI
WY
MI
CT
PA
NJ
WY
CT
IA
PA
NJ
NE
OH
IA
DE
IN
NE
OH
NV
DE
IN
IL
MD
NV
WV
UT
VA
IL
MD
CO
DC
WV
UT
VA
KS
MO
CA
KY
CO
DC
KS
MO
CA
KY
NC
NC
TN
TN
OK
SC
AR
AZ
NM
OK
SC
AR
AZ
NM
GA
MS
AL
GA
MS
AL
TX
LA
TX
LA
FL
FL
AK
AK
23 or more
HI
HI
1922.9
1418.9
Less than 14
Data Two-year averages 19992000 and 20042005
from the Census Bureaus March 2000, 2001 and
2005, 2006 Current Population Surveys. Estimates
by the Employee Benefit Research Institute.
Source Commonwealth Fund National Scorecard on
U.S. Health System Performance, 2006
7
8
International Comparison of Spending on Health,
19802004
Average spending on healthper capita (US PPP)
Total expenditures on healthas percent of GDP
Data OECD Health Data 2005 and 2006.
Source Commonwealth Fund National Scorecard on
U.S. Health System Performance, 2006
8
9
U.S. National Health Expenditures as a Percent of
National Income (GDP) Total Projected to Double
from 2 trillion to 4 Trillion in 10 Years
Percent
Source Smith et al., National Health Spending
In 2004 Recent Slowdown Led By Prescription Drug
Spending, Health Affairs (January/February
2006) 186-196 Smith et al., Health Spending
Projections Through 2015 Changes On The
Horizon, Health Affairs Web Exclusive (February
22, 2006) W61-73.
10
Growth in National Health Expenditures Private,
Public, and Total Expenditures, 19802004
Average percent growth in health expenditures
Source Smith et al., National Health Spending
In 2004 Recent Slowdown Led By Prescription Drug
Spending, Health Affairs (January/February
2006) 186-196.
11
Health Expenditure Growth 19802004for Selected
Categories of Expenditures
Average annual percent growth in health
expenditures
Source Smith et al., National Health Spending
In 2004 Recent Slowdown Led By Prescription Drug
Spending, Health Affairs (January/February
2006) 186-196.
12
Percent of National Health Expenditureson Health
Insurance Administration, 2003
Net costs of health administration and health
insurance as percent of national health
expenditures
a
b
c

a 2002 b 1999 c 2001 Includes claims
administration, underwriting, marketing, profits,
and other administrative costs based on premiums
minus claims expenses for private
insurance. Data OECD Health Data 2005.
Source Commonwealth Fund National Scorecard on
U.S. Health System Performance, 2006
12
13
Increases in Health Insurance Premiums Compared
to Other Indicators, 1988-2005
Percent
Source KFF/HRET Survey of Employer-Sponsored
Health Benefits 2005. Note Data on premium
increases reflect the cost of health insurance
premiums for a family of four. Historical
estimates of workers earnings have been updated
to reflect new industry classifications .
14
Deductibles Rise Sharply, Especially in Small
Firms, Over 20002005
PPO in-network and out-of-network deductibles
In-network
Out-network
Out-network
In-network
Small Firms, 3-199 Employees
Large Firms, 200 Employees
Out-of-network deductibles are for 2000 and
2004. Source J. Gabel and J. Pickreign, Risky
Business When Mom and Pop Buy Health Insurance
for Their Employees (Commonwealth Fund, April
2004) KFF/HRET Employer Health Benefits 2005
Annual Survey.
15
Greater Out-of-Pocket Costs Not Associated with
Lower Spending in Cross-National Comparisons
National Health Expenditures per Capita, US
United States
Canada
Germany
Australia
Netherlands
France
OECD Median
Japana
New Zealand
a
Out-of-Pocket Health Care Spending per Capita, US
a2002
Note Adjusted for Differences in the Cost of
Living, 2003. Source B. Frogner and G. Anderson,
Multinational Comparisons of Health Systems
Data, 2005, The Commonwealth Fund, April 2006.
16
Insurance Dynamics Gaps in Coverage

• Annual uninsured estimates undercount the
  uninsured
• An estimated one third of total under 65
  population has had a time uninsured during past 2
  years 80 million people
• Change in family or job status can trigger
  part-year or longer loss of coverage
• Low wage families and seasonal workers at highest
  risk for moving in and out of private
• High rates of churning in public programs
• Negative consequences
• Undermines health access and financial security
• Inefficient and lower quality of care
• High insurance administrative overhead for
  programs and providers

17
Uninsured Rates Rising Among Adults with Low and
Moderate Incomes, 20012005
Percent of adults ages 1964
53
52
49
41
35
28
28
26
24
18
16
13
7
4
4
2001
2003
2005
2001
2003
2005
2001
2003
2005
2001
2003
2005
2001
2003
2005
Total
Low income
Moderate income
Middle income
High income
Note Income refers to annual income. In 2001 and
2003, low income is lt20,000, moderate income is
20,00034,999, middle income is
35,00059,999, and high income is 60,000 or
more. In 2005, low income is lt20,000, moderate
income is 20,00039,999, middle income is
40,00059,999, and high income is 60,000 or
more. Source S.R. Collins et al., Gaps in
Health Insurance Coverage An All-American
Problem, Findings from The Commonwealth Fund
Biennial Health Insurance Survey, The
Commonwealth Fund, April 2006.
18
Lacking Health Insurance for Any Period Threatens
Access to Care
Percent of adults ages 1964 reporting the
following problems in the past year because of
cost
Source The Commonwealth Fund Biennial Health
Insurance Survey (2005).
19
Adults Without Insurance Are Less Likely to Be
Able to Manage Chronic Conditions
Percent of adults 1964 with at least one chronic
condition
Hypertension, high blood pressure, or stroke
heart attack or heart disease diabetes asthma,
emphysema, or lung disease. Source The
Commonwealth Fund Biennial Health Insurance
Survey (2005).
20
Adults Without Insurance Are Less Likely to Get
Preventive Screening Tests
Percent of adults
Note Pap test in past year for females ages
19-29, past three years age 30 colon cancer
screening in past five years for adults age 50
and mammogram in past two years for females age
50. Source The Commonwealth Fund Biennial
Health Insurance Survey (2005).
21
Adults With Any Time Uninsured Receive Less
Efficient Care Duplicate tests and delays
Percent of adults ages 1964 reporting the
following problemsin past two years
Source S.R. Collins et al., Gaps in Health
Insurance Coverage An All-American Problem,
Findings from The Commonwealth Fund Biennial
Health Insurance Survey, The Commonwealth Fund,
April 2006.
22
Medical Bill Problems or Accrued Medical Debt for
Insured and Uninsured, 2005
Percent of adults (ages 1964) with any medical
bill problem or outstanding debt
By income and insurance status
By race/ethnicity and income
Problems paying or unable to pay medical bills,
contacted by a collection agency for inability to
pay medical bills ), had to change way of life to
pay bills, or has medical debt being paid off
over time. Data Analysis of 2005 Commonwealth
Fund Biennial Health Insurance Survey
Source Commonwealth Fund National Scorecard on
U.S. Health System Performance, 2006
22
23
Insurance Design Shift Market Trends and Policy
Increase Patient Cost Sharing

• Double digit premium increases triggering shift
  in insurance design
• Increased patient cost sharing benefit limits
• Move away from spreading costs through premiums
  to shift to sicker patients and their families
• Current federal tax policies for health savings
  accounts encourage high deductible plans
• Risk to basic goals of insurance
• facilitate timely access to medical care
• financial protection
• Deductibles and cost sharing limits rarely adjust
  for income
• Underinsured emerging concern

24
One-Third of All Adults Underinsured or
Uninsured 61 Million Adults, 2003
Uninsured During Year 26
Insured All Year, Not Underinsured 65
Underinsured 9
Source C. Schoen, et al., Insured But Not
Protected How Many Adults Are Underinsured?
Health Affairs Web Exclusive, June 14, 2005.
Underinsuredinsured all year but had out of
pocket costs of 10 of income or 5 if low income
or deductible equal to 5 of more of income.
25
Underinsured and Uninsured Adults At High Risk of
Access Problems and Financial Stress
Percent adults 19-64
Did not fill a prescription did not see a
specialist skipped recommended care or did not
see doctor when sick because of costs. Source C.
Schoen, et al., Insured But Not Protected How
Many Adults Are Underinsured? Health Affairs Web
Exclusive, June 14, 2005.
26
Privately Insured Adults with High Deductibles
Report Higher Rates of Medical Bill Problems
Percent of adults ages 1964 privately insured
all year
Source The Commonwealth Fund Biennial Health
Insurance Survey (2005).
27
Cost-Sharing Reduces Use of Both Essential and
Less Essential Drugs and Increases Risk of
Adverse Events
Percent reduction in drugs per day
Percent increase in incidence per 10,000
Source R. Tamblyn et al., Adverse Events
Associated With Prescription Drug Cost-Sharing
Among Poor and Elderly Person, JAMA 285, no. 4
(2001) 421429.
28
Tiered Prescription Drug Cost-SharingLeads to
People Not Filling Prescriptions
Percent of enrollees discontinuing use of all
drugs in class
Source H.A. Huskamp et al., The Effect of
Incentive-Based Formularies on Prescription-Drug
Utilization and Spending, New England Journal of
Medicine (December 4, 2003) 222432.
29
Health Care Costs Highly Concentrated Sickest
10 70 Total Expenditures
Distribution of Health Expenditures for the U.S.
Population, By Magnitude of Expenditure, 1997
Expenditure Threshold (1997
Dollars)
1
5
10
27,914
27
50
7,995
55
4,115
69
351
97
Source A.C. Monheit, Persistence in Health
Expenditures in the Short Run Prevalence and
Consequences, Medical Care 41, supplement 7
(2003) III53III64.
30
Summary of Trends and Implications

• Trends point to increase in under-insured as well
  as uninsured
• Affordability and access concerns make it harder
  to distinguish from uninsured
• Insurance design matters for access to effective
  care and financial protection
• Low and modest income and chronic ill at risk
• Need for attention to costs relative to income
  and benefit designs that encourage essential and
  effective care
• Design of insurance expansions need to target
  affordability and access for insured as well as
  uninsured

31
Public Support for Policy Action

• Broad and increasing public support for action on
  coverage and costs but no clear consensus
• Rising concern among middle income families
• Employers?
• Surveys of public indicate willingness to
  relinquish some tax cuts to finance coverage
  expansions
• Preferences for source of coverage varies by
  current source
• Public view financing of coverage as a shared
  responsibility of citizens, employers, government

32
National Legislative Proposals Focused on
Insurance Expansion
33
State Childrens Health Insurance Program
(SCHIP) 2007 Reauthorization

• SCHIP widely popular and generally viewed as a
  success. 10th Anniversary requires action to
  extend
• Critical component of national and state success
  in maintaining or improving childrens insurance
• Has lowered of low income uninsured
• Yet 8 million children remain uninsured
• Two-thirds of uninsured children income eligible
• Medicaid and SCHIP program rules barrier to
  enrolment or staying covered

34
Childrens Enrollment in Medicaid SCHIP
1997-2005
Of 6.1 Million in SCHIP in 2005 - 1.7 million
were in Medicaid - 4.4 million were in separate
programs
34.0
32.3
30.8
27.2
25.2
23.5
22.3
21.0
Source Jeanne Lambrew George Washington
University Presentation, 10-31-06. Adapted from
Georgetown Center for Children and Families and
CRS. Based on children ever-enrolled over the
course of a year.
35
Rate of Low-Income Uninsured Children, 1997-2005
22.3
14.9
Note Beginning in 2004, the NHIS changed its
methodology for counting the uninsured. This
results in the data for 2004 and later years not
being directly comparable to the data for 1997
2003. Source J. Lambrew based on Georgetown
Center for Children and Families, L. Dubay
analysis of data from the National Health
Interview Survey.
36
Change in Rate of Uninsured Children by State
Percentage Decline From 1997-98 to 2003-04
National Average Decline 20.5
Note No state experienced a statistically
significant increase in their rate of uninsured
children. Source Minnesota State Health Access
Data Assistance Center, The State of Kids
Coverage, August 9, 2006.
37
SCHIP Reauthorization 2007 Policy Issues

• Opportunity to reassess health coverage
  priorities and approaches
• Sustain with minimal change would require
  increase of 12 to 14 billion over 5 years to
  keep up reauthorization
• Revise or expand?
• Eligibility issues
• Maintain focus on core, currently eligible
  children
• Restrict or retarget funds on low income children
• Eliminate current crowd out provisions
• Extend to all income eligible legal
  immigrants, children of state employees, Medicaid
  eligible
• Expand eligibility
• Increase age to include young adults
• Raise income threshold to higher level, with
  buy-in option
• Extend to parents family care
• Benefits and financing
• State options to wrap-around employer coverage
• Sicker and special needs children benefits
• Align matching rates of Medicaid and SCHIP

38
109th Congress Health Insurance Expansion Bills
Federal Support for Expansion

• Public program expansions
• Medicare related
• Medicare for All with group insurance options
• Medicare buy-in older adults
• Eliminate 2 year waiting period for disabled in
  Medicare
• Universal coverage for kids
• Up to age 21. Public expansion to 300 tax
  credits and buy-in options for higher income
  families
• Medicaid expansions Various proposals
• Expand to young adults age 23
• Family Care expand to parents of low income
  children
• Federal-State Partnership Approaches to Support
  Innovation

39
109th Congress National Legislative Proposals to
Facilitate State Health Insurance Innovations

• Baldwin-Price Health Partnership through
  Creative Federalism
• State proposals for coverage, quality and
  efficiency and information technology. Statewide
  or multi-state
• Commission to review
• Voinovich-Bingaman Health Partnership Act
• State grants for innovation, priority to coverage
  and access
• Commission to establish performance measures and
  goals and review proposals
• Allen Small Business Health Plans Act
• Federal grants for states to establish small
  business health benefits program. Similar to
  federal employees benefit program
• Federal reinsurance for coverage new programs
• National program for employers in states without
  program

40
Health Insurance Expansion Bills 109th Congress
Private Market Focus

• Employer mandates
• Individual market and small group markets
• Tax credit and tax deductibility approaches
• Small group association plans override state
  regulations

41
What Are the Goals of More Universal
Coverage?Insurance as Foundation to Improve
System Performance

• Meaningful, affordable, and equitable access
• Broad risk pooling
• Eliminate insurance market incentives that reward
  avoidance of health risk or cost shifting
• Use insurance as foundation to facilitate
  system-wide -
• Timely, appropriate and effective care
• Enhanced primary, preventive and well-coordinated
  care
• More effective chronic care
• Lower insurance administrative costs by
  simplification and more efficient coverage
• Stable coverage with seamless transitions
• Reduce marketing, underwriting and overhead costs
• Simplification and coordination
• Use insurance expansions as a vehicle and
  foundation to achieve more integrated, high
  quality and efficient care

42
State Strategies to Expand Coverageto Provide a
Foundation to Improve Access, Quality and Cost
Performance

• Develop blueprints toward more universal coverage
• Coherent policies that maximize connection and
  minimize complexity
• Expand public programs and connect with private
  
• Provide financial assistance for affordability
  premium assistance buy-in provisions
• Assure benefit designs cover primary, preventive
  and essential care
• Pool risk and purchasing power, with multi-payer
  collaboration
• More efficient insurance arrangements and
  simplification
• Pool purchasing power
• Develop reinsurance or other financing strategies
  to make coverage more affordable, pool risk and
  stabilize group rates
• Shared responsibility mandate that employers
  offer and/or individuals purchase coverage

43
Acknowledgements
Karen Davis President
Sara Collins Assistant Vice President Future of
Health Insurance Program
Anne Gauthier Senior Policy Director, Commission
of a High Performance Health System
Sabrina How Research Associate
For Commonwealth Fund Publications Visit the Fund
at www.cmwf.org
44
Source Professor Uwe Reinhardt, Princeton
University
45
Making Coverage More AutomaticEmployer vs.
Public Insurance
Source Based on D. Remler, S. Glied What Can
the Take-Up of Other Programs Teach Us
Increasing Participation in Health Insurance
Programs, Am. J. of Public Health, January 2003.
46
Health Expenditures for Selected Type of
Services, 2000-2015
Source Smith et al., National Health Spending
In 2004 Recent Slowdown Led By Prescription Drug
Spending, Health Affairs (January/February
2006) 186-196 Smith et al., Health Spending
Projections Through 2015 Changes On The
Horizon, Health Affairs Web Exclusive (February
22, 2006) W61-73.
47
Growth in National Health Expenditures (NHE)
Under Various Scenarios
NHE, in trillions of dollars
Cumulative savings projections,
20072015 One-time savings 5 1.3
trillion Slowing trend 1 1.4 trillion
4.0 T
3.8 T
3.7 T
2.016 trillion in 2005
Source Based on Borger et al., Health Spending
Projections through 2015 Changes on the
Horizon, Health Affairs Web Exclusive, February
22, 2006.
47