Title: ReThinking National Health Care Reform: Universal Healthcare Vouchers
1Re-Thinking National Health Care Reform
Universal Healthcare Vouchers
- Ezekiel J. Emanuel, M.D., Ph.D.
- Department of Clinical Bioethics
- Warren G. Magnuson Clinical Center
- National Institutes of Health
2Problems with the US Health Care System
- 15 uninsured
- High and escalating costs
- Inconsistent quality
- Frequent medical errors
- Substantial racial, geographic and other
disparities - High administrative costs
- Under investment in information technology
- Absence of systematic technology assessment
before dissemination - Personnel shortages
3Victor R. Fuchs, PhD
4Another Perspective
- On July 30, 1965, Lyndon Johnson signed the
Medicare and Medicaid acts in Independence,
Missouri which put in place the framework for our
current health care financing system. - It rests on on 3 pillars
- Employment-based insuranceworkers and their
families - Medicareelderly
- Medicaidpoor and unemployed
5DISCLAIMER
- The views expressed in this presentation do not
represent the views of the NIH, DHHS, or any
other government agency or official. These are
not their views.
6DISCLAIMER
-
- These views merely represent
- The Truth.
7Another Perspective
- Each is of the 3 components of the system is
-
- Inequitable
- Inefficient
- Increasingly unaffordable
8Employment-Based Coverage
- Inequitable
- Rich receive more substantial tax subsidies than
the poor. - Workers at larger firms receive better health
care coverage than workers at smaller firms. - Workers receive better coverage than non-workers
or part time workers or the unemployed.
9Health Insurance Tax Breaks
10Employment-Based Coverage
- Inefficient
- Distorts labor marketsreduces hiring and creates
job-lock even wed-lock. - Source of labor-management conflict.
- High administrative costs--120 billion.
- Leads to discontinuities in coverage as employers
change coverage or workers change jobs.
11Employment-Based Coverage
- Increasingly Unaffordable
- Costs about 2-5 per hour per worker for
coverage. - Declining proportion of insured. Now just 63 of
workforce has employment based coverage with less
than half of private, non-governmental workers. - Decline of 5 million jobs with health insurance
between 2001-2004.
12Real Health Costs and Real GDP
Percent
13Erosion of Employment-Based Coverage
- Increasingly competitive economy
- Anti-trust actions
- Deregulation
- More foreign competition
- Decline of unions
- Globalization
- Outsourcing of jobs to foreign countries
- Foreign production
14Erosion of Employment-Based Coverage
- Rise in health care costs
- Real per capita expenditures for health care are
6 times higher than in 1965. - Real average weekly earnings of production
workers are lower than in 1965. - All increases in productivity have gone to health
care. - Changes in health care insurance market
- End of cross-subsidization between firms.
- End of cross-subsidization within firms.
15Erosion of Employment-Based Coverage
- In 1960s the largest firm ATT
- 1 million workers all with health insurance.
- Regulated industry with guaranteed profit.
- Health insurance costs passed onto consumers an
implicit tax. - In 2000s the largest firm Wal-Mart
- 1 million workers, only 38 have any health
coverage, no workers get coverage in first 2
years of employment. Many get Medicaid. - Price is king, cheaper even if foreign produced
is not better.
16Medicaid
- Inequitable
- Some are eligible, but many poor
Americansespecially working poorare ineligible.
- Benefits and eligibility criteria differ
substantially between states. - Some states give children at 300 FPL coverage
while othersWyomingat 133. Disparity even
worse for adults.
17Medicaid
- Inequitable
- Widely viewed as second class medicine compared
to employment-based or Medicare coverage. - In Massachusetts Medicaid covers just 21 days of
hospitalization in a year. - In Tennessee Medicaid covers just 5 days of
hospitalization in a year.
18Medicaid
- Inefficient
- High administrative costs if eligibility is
closely monitored. It costs the equivalent of 2
months of insurance to screen and enroll a child
in SCHIP. Even more for adults. - High tax on increases in income.
- Encourages evasion or avoidance of reported
income.
19Medicaid
- Inefficient
- Leads to discontinuities in coverage.
- Many who are eligible do not apply because of
hassle, embarrassment, or belief that their
prospects will improve.
20Medicaid
- Increasingly Unaffordable
- About 20 of state budgets go to Medicaid other
means tested programs and health care for state
employees. - Problem is rate of increase. Over the last 4
years health expensesMedicaid and health
coverage for state employees have gone up 8-10
per year.
21Medicaid
- Increasingly Unaffordable
- With flat revenues, this requires cuts in other
state services or tax increases. - In Georgia, since 2001 state universities lost
211 million while admitting 30,000 more
students. This year, 42 million in cuts with
15,000 more students anticipated.
22Medicaid
- States are facing a perfect storm
deteriorating tax bases, an explosion in health
care costs, and a virtual collapse of capital
gains and corporate profit tax revenues. - National Governors Association, 2003
23Medicare
- Inequitable
- Old get guaranteed coverage which the young do
not. Not done in any other country. - Young subsidize old.
24Medicare
- Inefficient
- Administrative costs are very low.
- High levels of fraud.
25Medicare
- Medicares controls against fraud have not kept
pace with todays health care environment in
which the number of claims processedand those
submitted electronicallyhave risen dramatically
While electronic claims processing is critical
for efficiency, when the volume rises to this
degree, it also increases the need for more
innovative controls to curtail fraud. - GAO
26Medicare
- Inefficient
- No assessment of quality or cost per benefit.
- Covers Erbitux Treats metastatic colorectal
cancer. Does not cure patients, but prolongs
life on average 1.7 months. Cost about 60,000
per patient. - Covers Lung volume reduction surgery--300,000
per QALY.
27Medicare
- Increasingly Unaffordable
- In 2004, 17 increase in Part B premiums.
- In 2004 Medicare consumed 2.6 of GNP--309
billion. - In 2006, with the drug benefit Medicare will be
3.4 of GNP438 billionand by 2020 over 5 of
GNP. - By 2020, Medicare will exhaust the hospital trust
fund.
28Medicare
- Increasingly Unaffordable
- In 75 years, if unchanged Medicare will consume
all federal tax revenues from all sources.
29Medicare
- Medicare could be brought into actuarial
balance over the next 75 years by an immediate
108 increase in program income or an immediate
48 reduction in program outlays. - Medicare Trustees Report, 2004
30Medicare
- Even in fantasy, no one has yet come up with a
way to pay for Medicare. - New York Times, May 23, 2004
31The Problem
- The American health care system is inherently
and irreparably broken.
32Implications for You
- Hostile regulatory environment.
- The perception of excessively high drug costs
brings with it increased scrutiny of the industry
by Washington. - Cuts in reimbursement.
- Reduced coverage of drugs by Medicaid.
- Harder negotiation by PBMs and MCOs.
33Implications for You
- Likely regulation of prices in Medicare drug
benefit. - Uncertainty about coverage in the future and
level of payment which makes investment and
business decisions much harder and risky.
34What Should be Done?
35Reform Proposals
- Incrementalism
- Comprehensive mandates with subsidies
- Single payer
36Incremental Reform
- Subsidies to individuals or firms.
- Tax exemptions, deductions, or credits.
- Mandates on individuals, firms, or insurance
companies. - Higher income eligibility for means tested
programs300 of poverty level. - Lower age levels for Medicare eligibility55-64
eligible.
37Incremental Reform
- Main appeal of incremental reform is not the
quality or adequacy of the reform but its
political feasibility. - Comprehensive reform is not possible. It was
the scope and reach of the Clinton proposal that
proved to be its downfall. - Ken Thorpe, NEJM 2004
38Incremental Reform
- Incremental reform fails as policy and as
politics. - As policy, incremental reform
- Builds on a broken system.
- Fails to realize any savings by efficiency.
- Makes us lose ground as we wait.
- Only postpones real reform.
39Incremental Reform
- As politics, incremental reform is
- Costly. At 60 billion per year for partial
coverage and without cost control measures making
it is not politically viable. - Uninspiring. Who can even recall what Kerrys
plan was? A few hard core policy wonks. Even
casual wonks do not remember it. - Misdiagnoses the problem with the Clinton health
care reform. The problem was not over-reaching,
but lack of a good plan.
40Incremental Reform
- We often think of public policy as changing
slowly or incrementally, but policy agendas often
change dramatically. Issue hit suddenly.
There is a tremendous burst of activity, and
government policy changes in major ways all at
onceNeither scholars nor practitioners, even
with the best of knowledge and the best theory,
can predict with great certainty what will happen
and often find themselves surprised. - John Kingdon, Univ. of Michigan, 2002
41Incremental Reform
- Key Republicans now reject incremental reform
opting for comprehensive reform. - The crisis we face in health care cannot be
resolved by our present strategies or with
patchwork efforts of the past. Neither can it be
resolve by dealing with only one or several
problems we face. Resolution will require
comprehensive health system reform.
42Mandates with Subsidies
- The Clinton Health Security Act.
- Pay or Play.
- Maines state program.
- Center for American Progress.
- AMA, Heritage Foundation, and other mainstream
groups endorse this approach. - It is the responsible and prudent approach.
43Mandates with Subsidies
- Fails for both policy and political reasons.
- As policy
- A summary of Maines proposal in the New England
Journal was confusing and complex which creates
opportunities for gaming the system. - Builds on the failed current system foregoing
efficiencies.
44Mandates with Subsidies
- As politics
- Uninspiring. No grand vision.
- Costly. Using inefficiencies of the current
system requires adding 100 billion to get
universal coverage. - Offends a key interest group. Business strongly
opposes mandates. They want out of health care
not to be locked in.
45Single Payer
- Medicare for All
- Canadian-style single payer.
- Physicians Working Group for Single-Payer
National Health Insurance. - Arnold Relman.
46Single Payer
- A single public plan covering all Americans for
all medically necessary services, including
long-term care, mental health and dental
services, and prescription drugs and supplies. - No private insurance except for services excluded
by national insurance. - No deductibles or co-payments.
47Single Payer
- Lump sum payments to hospitals for operations.
No billing for services. - Negotiated payment for capital improvementsconstr
uction, equipment, etc. - Physicians paid by 1) fee-for-service
- 2) salary in an institution
- 3) salary in an HMO
48Single Payer
- Cover disabled care for all Americans including
home and nursing home care. - Cover all medically necessary prescription drugs
and supplies. Establish formulary with
negotiated prices. - Financed by unspecified taxes.
49Single Payer
- Fails for policy and political reasons.
- As policy
- Institutionalizes fee-for-service delivery system
which makes cost control and quality improvement
efforts difficult. - Almost always end up with queuing to save money
which is deeply resented. - Both Medicare and Canadian system are going
bankruptnot persuasive models for cost control.
50Single Payer
- The past decade in Canadian health care has
been difficult for patients, providers, and
governments alikeRecent changes appear
unlikely to achieve a sustainable transformation
in the organization, delivery, and financing of
Canadian Medicare. We foresee continued
turbulenceas a growing proportion of Canadians
lose patience with health care systems that they
perceive as no longer delivering reasonable
access to core services.
51Single Payer
- As politics
- Does not cohere with American valuesAmerican
equality is not everyone getting the same thing.
- Americans value freedom to upgrade if they want
to spend the money. - May appeal Boston doctors who dont want to be
accountable, but lacks national appeal.
52Universal Healthcare Vouchers
- Every American receives a voucher to purchase a
universal benefits package through a health plan. - Free choice of a qualified plan.
- Vouchers are funded by an ear-marked value added
tax. - Freedom to purchase more than universal benefits
with after-tax dollars. - Private sector organizes and delivers care.
53Universal Healthcare Vouchers
- Elimination of tax exemption for employment-based
insurance. - Elimination of Medicaid and other means tested
programs. - Phase out of Medicare while protecting current
beneficiaries. - Administration and oversight by National and
Regional Health Boards modeled on the Federal
Reserve System.
54Universal Healthcare Vouchers
- An Institute for Technology and Outcomes
Assessment.
553 Key Feasibility Questions
- Ethical
- Economic
- Political
56Ethical Feasibility
- Universal coverage for all Americans.
- With VAT the financial burden is fairly
distributed according to ability to pay.
57Ethical Feasibility
- Tiering is ethical as long as universal benefit
package is good enough. - Practicalitythe rich can always buy out.
- Autonomypeople should be able to buy more if
they want amenities and reduce risks. We do not
level down. - Justicesociety cannot guarantee everything, must
make choices, too much health compromises other
important goods, e.g. education, environment, etc.
58Economic Feasibility
- Costs of the current systemwithout Medicare or
nursing home coverage -
- Employment-based coverage 600 billion
- Medicaid 200 billion
- Out of pocket expenses 212 billion
- Economic feasibility means the voucher should
cost about 800 billion.
59Economic Feasibility
- Two ways to calculate economic feasibility.
- Begin with the current system.
- Covering the 15 uninsured will increase their
utilization of health care services approximately
33. - Overall, increase in utilization 5.
60Economic Feasibility
- Underinsuredcompared to voucherwill also
increase utilization somewhat. - Overinsured will decrease utilization somewhat.
- Overall utilization will increase approximately
5 or 40 billion.
61Economic Feasibility
- Voucher system should save administrative costs.
- Less cost for Medicaid and means testing.
- Less cost for sales and marketing of employment
based insurance which now costs about 120
billion per year.
62Economic Feasibility
- How much would it cost to purchase
employment-based insurance at 2004 rates?
63Economic Feasibility
- How much would it cost to purchase
employment-based insurance at 2004 rates?
64Economic Feasibility
- But, the uninsured and Medicaid recipients are
sicker and will use more health care services
than Americans with employment-based coverage. - How much more? 26 more.
65Economic Feasibility
- The uninsured and Medicaid recipients constitute
25 of all Americans under 65 and will use 26
more health care, raising overall costs 6.5. - The total cost of the voucher then would be
- 759 billion or 837 billion
66Economic Feasibility
- Long term cost control
- Rheostat based on the earmarking of
VATincrease in benefits requires willingness to
increase taxes. - Lower demand by requiring additional services to
be paid for by after tax dollars. - Systematic technology and outcomes assessment,
changing delivery and research by drug and device
companies.
67Political Feasibility
- The voucher system is not politically feasible
today. - The goal is to outline a plan that can be adopted
when forces for change coalesce. - Forces may come from
- Depression Public health emergency
- Civil unrest Health system melt down
68Political Feasibility
- Who will support the voucher proposal?
- Big business
- Small business
- State governments
- Some unions
- Some health care professionals
- Uninsured
- Vulnerable insured
69Political Feasibility
- Who will oppose the voucher proposal?
- Some of the 1300 health insurers
- Health benefits consultants and suppliers
- Some health care professionals
-
70Political Feasibility
- Ironically, most extreme opposition may come from
liberals. - Will not give up Medicaid and Medicare
- Oppose VAT as regressive
- Hate anything associated with vouchers
71Advantages of Universal Healthcare Vouchers
- Universalityall American are covered without
means testing. - Fairnessfinancial burden is fairly distributed.
- Cost controllinkage between benefit levels and
willingness to pay through ear marked VAT. - Continuity of coverage and care.
72Advantages of Universal Healthcare Vouchers
- Administratively efficient system.
- Data for assessing quality of care and costs
relative to benefits.
73Advantages of Universal Healthcare Vouchers
- More efficient labor markets.
- Eliminate incentive for out-sourcing.
- Eliminate source of labor-management conflict.
- Relieves states of financial and administrative
burden so they can focus on education, etc.
74Advantages of Universal Healthcare Vouchers
- Bigger market with 15 uninsured included.
- Much less uncertainty regarding what drugs and
devices will be paid for. - Shift in research priority to computer
modelgetting more for less rather than
discovering whatever is possible.
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76Pay for Performance
- We should pay physicians and hospitals for
delivering quality medical care that is
explicitly measured. - Sounds great, but is much harder and less
effective than appears at first blush.
77Pay for Performance
- Assessing quality is very, very difficult
especially for multi-dimensional care. - Cannot assess just cancer surgeries. Some places
do very well on breast surgery but poorly on
colorectal surgery and neither correlates with
mammography rates. - Little data on long term outcomes.
- Skew what physicians and hospitals focus on to
what is measured.
78Pay for Performance
- British NHS has rated hospitals based on their
adherence to established process measures for
quality. - Guess what? Very little correlation between NHS
ratings of hospitals and actual patient outcomes.
79Medical Savings Accounts
- Create catastrophic health insurance with
consumers paying for routine care from their own
funds using large deductible. - By making consumers have skin in the game it
will make them - More cost conscious about health care.
- Induce a change to healthier lifestyles.
80Medical Savings Accounts
- MSAs are a fantasy world based on ideology not
data or reasonable assumptions of economic
behavior. - High out-of-pocket expenditures for routine care
does lead to lower use of health services, but
they decrease both appropriate and inappropriate
care. - Why? Patients are not doctors.
81Medical Savings Accounts
- Likely to lead to less use of preventive services
and greater use of high technology interventions
for the very sickbecause they are covered by
catastrophic insurance. - This will further bias RD toward expensive,
end-of-life interventions and increase future
health costs.
82Medical Savings Accounts
- A small proportion of people account for a large
proportion of health care costs. These patients
will all have good catastrophic coveragenot
lowering costs. - Those who are close to the deductible limit or
cost where catastrophic coverage kicks in will
have an incentive to use more services. Each
additional service becomes free. This is also
true with services that are elective regarding
the timing of the service.
83Medical Savings Accounts
- If the deductibleor place where catastrophic
insurance kicks inis income adjusted, this
will significantly increase administrative costs.