Background Information: Money in Minnesota

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Revisiting Health Care Costs, Access and Trends
Citizens League Mind Opener Series August 31,
2005Lynn A. Blewett, Ph.D.Associate
ProfessorUniversity of Minnesota, School Public
Health Executive Director - SHADAC
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Overview

• Overview of Health Care Systems
• US Employer-based System
• Trends in costs and access
• Role of Safety Net
• Final Comments

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WHO Definition of Health Care System
All activities whose primary purpose is to
Promote, Restore, or Maintain Health

• Health Systems
• Improve the health of the population they serve
• Respond to peoples health care needs
• Provide financial protection against costs of
• ill health

(Source World Health Report 2000)
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Objectives of Health Care Delivery System
Deliver Access to HC Services

Deliver Cost-effective Services
Deliver Quality Services
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U.S. Employer-Based SystemSolid Foundation?
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Employers are key to coverage

• Employer-Based System as Foundation
• Private system with private providers
• Government Programs as Supplemental
• Medicare for the Elderly
• Medicaid for the Poor
• SCHIP for low-income Children
• VA for Veterans/HIS for Native Americans

Is this a solid foundation for a HC system?
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U.S. Employer-Based System

• Dependent on economy
• Economy slows, employers less likely to offer
  coverage
• Can an employer-based health care system survive
  in global economy?
• Out-sourcing of jobs
• Stiff competition forcing wages and benefits down
• Current trends indicate drop in
  employer-sponsored coverage
• What is appropriate role for employers in
  financing of health care?

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Non-elderly Health Insurance Coverage, 2002
Total population 250.8 million
SOURCE Kaiser Commission on Medicaid and the
Uninsured (KCMU) and Urban Institute analysis of
the March 2003 Current Population Survey.
9
Private health insurance coverage, 2002
Source Kaiser Family Foundation,
eHealthInsurance, Update on Individual Health
Insurance, 2004.
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Where do Minnesotansget their health insurance?
Private 66 Public 24
Public Programs 24 Medicare 13.3 Medical
Assistance 6.6 GAMC 0.7 MinnesotaCare 3.0 MCHA
0.5
Source MDH Health Economics Program. GAMC is
General Assistance Medical Care MCHA is
Minnesota Comprehensive Health Association.
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Minnesota Has More Employer-Based Coverage and
Fewer Uninsured
Source CPS, Non-elderly coverage 2002-2003
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Role of Employer-based Insurance in MN

• Uninsurance rate is lowest in US because MN
  employer-based insurance is so strong
• Economy
• Large Employers
• Historically Civic-Minded Employers
• First time in a decade employer-based coverage is
  down, uninsured up, public program coverage is up

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Trends in Employer-Sponsored Coverage

• Decrease in Employer-Sponsored Coverage
• First dip in over a decade
• Minnesota trends similar to US trends
• Increase in number of adult uninsured
• Shifting of Cost Increases to Employees
• Development of new insurance models
• MSAs, HSAs, Defined Contribution Plans
• Designed to shift costs to consumers
• Increase involvement of consumers in purchasing
  decisions

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Cost shifts to workers Increased premiums and
cost-sharing
Premiums increased more than a little.
Increased cost-sharing includes cuts in benefits
or higher deductibles or copayments.
Source Commonwealth Fund 2002 Workplace Health
Insurance Survey.
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Change in MN Employer-sponsored Coverage
100
0
Source MN Health Care Access Survey, 2001 and
2004
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Distribution of SpendingMix of Public/Private
Spending
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US health care spending, 2002

• Total Spending 1.5 Trillion
• Per Capita Spending 5,440
• Spending as of GDP 15
• SOURCE Centers for Medicare Medicaid Services,
  Office of the Actuary

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Public Program Coverage Low, Spending High


Public 25
Public 46
Private or Uninsured 75
Private or Uninsured 54
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Distribution of Public Private Spending (2002)
Total 1.5 Trillion (MN 22.8 Billion)
U.S. Public 46 (MN 41)
US Private 54 (MN 59)
SOURCE Centers for Medicare Medicaid Services,
Office of the Actuary
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Per Capita Health Care Spending
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Minnesota Health Care Spendingby Type of
Service, 2002
Total Spending 22.8 Billion
Source Health Economics Program
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Cost Trends
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Cost of health care coverageaverage annual
premiums by state

• Highest Premiums
• Connecticut 3,057
• Illinois 2,980
• New York 2,956
• New Jersey 2,911
• Wisconsin 2,826

• Lowest Premiums
• Idaho 1,973
• Hawaii 2,208
• Delaware 2,237
• N. Dakota 2,293
• Wyoming 2,327

Minnesota 2,712
Source Kaiser Family Foundation
www.statehealthfacts.kff.org
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Growth in national health expenditures
SOURCE Centers for Medicare Medicaid Services,
Office of the Actuary, National Health Statistics
Group.
26
National health expenditure growth
average annual growth
SOURCE Centers for Medicare Medicaid Services,
Office of the Actuary, National Health Statistics
Group.
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Access to CareInsurance Coverage only one
Component
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National trends in the number of uninsured
New verification question
Source U.S. Census Bureau, Current Population
Surveys (March), 1989-2004
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What is the Purpose of Health Insurance?

• Catastrophic coverage to protect against
  financial loss?
• Economic Perspective
• Comprehensive coverage to provide access to
  prevention and promotion?
• Public Health Perspective

Is the answer the same for public and private
insurance?
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Insurance Coverage does not Equal Access

• Underinsurance
• Financial, Benefits, Attitudinal Components
• Cost Barriers
• Increasing out-of-pocket costs for consumers
• Other Structural Barriers
• Transportation
• Availability of Providers
• Important and growing role of the safety net

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What is the safety net?
those providers that organize and deliver a
significant level of health care and other
related services to uninsured, Medicaid and other
vulnerable populations. Source Institute of
Medicine, 2000
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Core safety net providers

• Formal safety net hospitals
• Public hospitals
• Teaching hospitals, academic health centers
• Community Health Centers (CHCs)
• Federally Qualified Health Centers (FQHCs)
• Health Care for the Homeless programs
• Healthy Schools, Healthy Community programs
• Migrant health centers, and others
• Community hospital uncompensated care

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Hospitals provide the most free care
Distribution of Health Insurance Coverage
Uncompensated Care Costs by Provider Type
Source Health insurance coverage for non-elderly
using 2003 CPS. Distribution of UC costs from
Hadley and Holahan, 2003. UC includes health
services rendered but not paid for in full
(either by individuals or by an insurance payer).
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Community hospitals and uncompensated care

• Care that is provided, but not paid for
• Charity care and Bad debt
• U.S. hospitals 25 billion on uncompensated
  care in 2003
• 5.5 of operating expense on average
• MN hospitals 125 million
• 1.6 of operation expenses on average
• Research shows that as public program enrollment
  goes up, UC goes down (source Blewett et al.,
  Medical Care Research and Review, 2003)

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Who monitors safety net financing?

• No onebut
• Cutting public programs increases uninsured and
  need for safety net services
• State budget line items cut but a cost shift to
  safety net primarily supported by
• Local property taxes
• Federal income tax
• Higher premiums for insured

Difficult to assess safety net impact
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Who really pays for the uninsured?
Provider
Intermediate Payer
Tax Payer Incidence
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Concerns about resilience of safety net

• Growing number of uninsured with economic
  downturn
• Eroding subsidies
• Reduced Medicaid DSH payments
• Increased federal scrutiny of intergovernmental
  transfers
• Phase-out of cost-based payments to FQHCs
• Reductions in eligibility and payment rates in
  state health care programs
• Growth in Medicaid managed care
• Fewer subsidies and direct payments to safety net
  providers

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Summary Comments

• US Employer-based system under strain
• Almost equal mix of financing of public-private
  of US health care
• Solutions need public/private partnerships,
  discussions, and solutions
• We all pay for health care for those without
  coverage
• Directly and indirectly
• There must be a better way to spend 1.5
  trillion?

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Contact information
www.shadac.org 2221 University Avenue, Suite 345
Minneapolis Minnesota 55414
[phone]
Principal Investigator Lynn Blewett,
Ph.D. (blewe001_at_umn.edu) Co-Principal
Investigator Kathleen Call, Ph.D. (callx001_at_umn
.edu) Center Director Kelli Johnson,
M.B.A. (johns706_at_umn.edu) Research Director
Michael Davern, Ph.D. (daver004_at_umn.edu)
Supported by a grant from The Robert Wood Johnson
Foundation