Health Care Policy Paper.

PMAP 3311: CRITICAL POLICY ISSUES Fall 2014

Lecture 8

Prof. Reynold V. Galope Department of Public Management and Policy

Andrew Young School of Policy Studies Georgia State University

Health Care Policy October 20 & 22, 2014

TOPIC

2. Issue Paper #2

1. U.S. Health Care Policy - laws - major health care programs - reducing health care cost - preventive health care

1. U.S. HEALTH CARE SYSTEM

Rising Cost of Health Care

1. U.S. HEALTH CARE SYSTEM

- but achieve less for it (poor health outcomes despite huge health expenditure)

U.S. health expenditure per capita twice as much as any other developed/industrialized country

- “We are not getting what we pay for.” – a Mayo Clinic chief executive

- “The health care system is fraught with waste.”

75% spent on the treatment of preventable diseases (e.g. diabetes, heart disease)

- need to shift to preventive health care and wellness activities? - how?

1. U.S. HEALTH CARE SYSTEM

1. quality

2010 Commonwealth Fund Report ranked the U.S. (among 6 developed nations) last in health care performance:

2. efficiency

3. access to care 4. equity

5. individual’s ability to lead long, healthy, and productive lives

1. U.S. HEALTH CARE SYSTEM

1. about 75 million lack health insurance or are underinsured

Reasons for the poor health outcomes of the US:

2. quality of health care received and payments (e.g. deductibles, co-payments) depend on:

- leads to limited access to health care services - underlying cause?

- high cost of health insurance premiums (as high as $15,073 for a family of four in 2011)

- where you live, personal characteristics such as race, income, education

*** Q. Does the 2010 Affordable Care Act solve the problems above?

1. U.S. HEALTH CARE SYSTEM

The Perils of Being Uninsured

the uninsured are more likely to receive too little medical care, to receive it too late, to be sicker, and to die sooner

- more likely to go without screening tests (e.g. mammograms, Pap tests, colorectal screenings), suffer from delayed diagnosis and treatment

- tend not to receive the care recommended for chronic diseases (e.g. diabetes, HIV infection, end-stage renal disease, high blood pressure)

25 percentage points more likely to die that those with health insurance

1. U.S. HEALTH CARE SYSTEM

Healthcare Scorecard by State: - link http://www.longtermscorecard.org/ - copy of the report here:

http://www.longtermscorecard.org/~/media/Microsite/Files/2014/R einhard_LTSS_Scorecard_web_619v2.pdf

 State scores based on five dimensions: (1) affordability and access, (2) choice of setting and provider, (3) quality of life and quality of care, (4) support for family caregivers, and (5) effective transitions

1. U.S. HEALTH CARE SYSTEM

Healthcare Scorecard by State: - link http://www.longtermscorecard.org/ - copy of the report here:

http://www.longtermscorecard.org/~/media/Microsite/Files/2014/R einhard_LTSS_Scorecard_web_619v2.pdf

 Highest ranked states: Minnesota, Washington, Oregon, Colorado, Alaska, Hawaii, Vermont, and Wisconsin

 States with poor health outcomes: Kentucky, Alabama, Tennessee, Indiana, West Virginia, and Oklahoma

 Georgia – ranked # 36; lower bottom half

1. U.S. HEALTH CARE SYSTEM

1. quality of health care

Public policy in health care: it influences the following:

2. access to urgent, primary, and specialty care

3. pace of the development of new drugs and medical technologies

4. basic and applied research that could lead to new life-saving treatments

1. U.S. HEALTH CARE SYSTEM

What is health care policy? - includes all of the actions that governments take to influence the

provision of health care and the various government activities that affect or attempt to affect public health and well-being

- Narrow Definition: design and implementation of federal and state programs (e.g. Medicare, Medicaid) that affect the provision of health care services

- Broader Definition: also includes government activities that influence both public and health care decision-making

1. U.S. HEALTH CARE SYSTEM

What is health care policy? - Broader Definition: also includes government activities that

influence both public and health care decision-making

1. operation and/or funding of health science (medical) research and public health departments and agencies (e.g. CDC, NIH)

2. subsidy to medical education and hospital construction 3. regulation of food, drugs, and medical devices (FDA) 4. regulation of health-damaging environmental pollution 5. tax deductions for health care expenditures (making them

more affordable)

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

health care policy developed only after the 1930s, with the idea of health insurance

- health insurance would defray the cost of health care should an injury develop or an injury occur

most are employer-sponsored health insurance - became popular in the 1950s because it was ruled a tax-deductible

business expense

- Economics of insurance? Health insurance? - we want to prevent a potentially huge loss in the future (the benefit) by

agreeing to pay “small” amounts today (the cost); thus, you buy an insurance only if you estimate that the benefit outweighs its cost

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

1960s – push for federal health insurance policies for the poor and the elderly (segment of the population that would not benefit from employer-sponsored insurance) - federal Medicare and Medicaid created in 1965

U.S. health care system still different from those of developed countries (e.g. Canada, Great Britain, Switzerland), even with Medicare and Medicaid - no national health insurance for all citizens; not a single-payer (the

government) system

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

Clinton Administration (1990s): proposed the National Health Security Bill (result of the convening of a presidential health care task force headed by then First Lady Hillary Clinton) - would have guaranteed health insurance for every American (about 34

million uninisured at that time)

- individuals: pay about $1,800 a year for coverage - families: about $4,200 a year

- businesses: required to cover all employees - small businesses: would be subsidized by the government so they can also

cover their own employees - not approved by Congress

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

2010 Patient and Affordable Care Act - a.k.a. Affordable Care Act (ACA) or “Obamacare”

- signed into law by President Obama on March 23, 2010

- approved by Congress strictly along party lines (i.e. no Republican voted for it)

 H.O.R: 220-215  Senate: 60-39

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

Main Purpose of the Affordable Care Act - Increase Health Insurance Coverage and Access to Health Care Services

by:

1. Expanding Medicaid and the Children’s Health Insurance program (CHIP) and making eligibility requirements uniform across states

2. Mandating a minimal level of health insurance for individuals who are not covered through their employers or by public programs

- to be offered through state insurance exchanges that must offer standard packages

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

Main Purpose of the Affordable Care Act - Increase Health Insurance Coverage and Access to Health Care Services

by:

3. Subsidizing the cost of insurance for low- to moderate-income families

4. Offering tax credits to encourage small businesses to provide health insurance to their employees and instituting a penalty for larger employers (with 50+ employees) who do not cover their employees

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

Main Purpose of the Affordable Care Act - Increase Health Insurance Coverage and Access to Health Care Services

by:

5. Creating new regulation for health insurers to deal with long- standing concerns:

- exclusion of children and all individuals with pre-existing conditions - setting annual and lifetime limits on coverage - coverage of family members (such as college students) up to age 26

1. U.S. HEALTH CARE SYSTEM

Evolution of Health Care Policy

Cost of the Affordable Care Act - is expected to be offset by new revenues, including:

1. 0.9 percentage point increase in Medicare payroll tax for high- income earners ($250,000/year)

2. new 3.8 percent tax on dividends and capital gains (e.g. sale of stocks) [Status of this new tax?]

1. U.S. HEALTH CARE SYSTEM

1. degree of government involvement in health care

health care policy issues

2. how to ensure sufficient access to health care

3. how to deal with escalating costs

4. how to improve the quality of health care while containing costs

1. U.S. HEALTH CARE SYSTEM

1. Medicare

Major health care programs:

2. Medicaid

3. Veterans’ health care

2. HEALTH CARE PROGRAMS

Medicare began in 1965 designed to help 65 year old and older citizens to meet basic health care needs

- “national health insurance” for the elderly?

also covers: - <65 with permanent disabilities and those with diabetes and end-stage

renal disease (patients who need dialysis or a kidney transplant)

2011: 48 million beneficiaries

2. HEALTH CARE PROGRAMS

Medicare started with 2 main parts: standard and optional

- Medicare Part A: the core (standard) plan  partially pays for hospital charges, with individuals responsible for

deductible and co-payments

 also covers 100 days in a nursing care facility (following release from a hospital)

 paid for by Medicare trust funds

2. HEALTH CARE PROGRAMS

Medicare started with 2 main parts: standard and optional

- Medicare Part B: optional  supplemental insurance for health care expenses other than hospital stays

- doctor’s fees, diagnostic tests, hospital outpatient services

 cost is shouldered by (1) individuals who enroll and (2) the government – which covers about 75%.

1997: Medicare + Choice (Part C) 2003: Medicare Advantage (Part D)

2. HEALTH CARE PROGRAMS

Medicare Pros:

1. pays for the 1st 90 days of hospital stay and (limited) nursing home care

2. a bargain for the elderly, who would have to pay much higher fees for a full private insurance policy

2. HEALTH CARE PROGRAMS

Medicare Cons:

1. covers only about 2/3 of the health care cost of the elderly

2. some physicians choose not to participate in Medicare

 does not cover prescription drugs outside of the hospital, dental care, eyeglasses

 individuals must pay for the rest of the costs or purchase supplementary private insurance policies (e.g. AARP health insurance)

2. HEALTH CARE PROGRAMS

Medicare Fraud and Abuse

- health care providers may charge the government:  for services not performed and/or

 order tests and procedures that may not be necessary

- other forms of fraud: 1. unqualified health care providers 2. patients who are not eligible 3. inappropriate charges

2. HEALTH CARE PROGRAMS

Medicare Fraud and Abuse

- $1 of every $3 is wasted on inappropriate and/or unnecessary care  Medicare pays for procedures that provide little or no clear benefit to

patients

Potential Solutions? 1. strengthen monitoring/oversight of health care providers 2. criminal and civil action against these providers

2. HEALTH CARE PROGRAMS

Medicare How to reform it?

- little agreement on how to alter benefits (raising the age requirement of beneficiaries from 65 to 67) or improve its effectiveness and sustainability

- Lecture 7: reforming entitlement programs politically volatile, requires change in the law, “reneging on Americas promise to take care of its elderly, sick, unemployed, etc.”; “harming senior citizens”

- “a sacred cow”: Medicare can only be expanded?

2. HEALTH CARE PROGRAMS

Medicaid

second major health program

also established in 1965 as Title XIX of the Social Security Act designed to assist the poor and the disabled through a federal-state program of health insurance

- covers over 55 million people (in 2011)

- about half of Medicaid beneficiaries are children in low- income families

2. HEALTH CARE PROGRAMS

Medicaid

Who pays? - federal government – ½ - states – ½ (eligibility requirements differ across states)

Note: The 2010 Affordable Care Act (1) included adults under 65 in households with income up to 138% of the poverty level, and (2) eliminated state differences in eligibility

- Medicaid is one of the largest programs in most state budgets

2. HEALTH CARE PROGRAMS

Medicaid

one of the largest programs in most state budgets - education, other welfare programs, public infrastructure may

suffer as Medicaid costs continue to rise

also vulnerable to fraud and abuse by health care service providers (e.g. filing inaccurate claims for reimbursement)

- defense of service providers: they are victims of excessively complicated system of eligibility requirements and reimbursement procedures

2. HEALTH CARE PROGRAMS

Medicaid

Estimated Waste of the New York Medicaid program:

a. 10% spent on fraudulent claims

b. 20-30% on unnecessary procedures

- as much as 40% of New York’s Medicaid claims could be questioned; about $18 billion/year lost on fraud and abuse

Q: How can Medicaid be reformed to minimize fraud and abuse?

2. HEALTH CARE PROGRAMS

Veterans’ Health Care

“national health insurance” program for the veterans

provides primary and specialized medical care, and other medical and social services (e.g. rehabilitation) - medical needs attributable to service-related injuries and

disease (free of individual deductibles and co-payments) - for not service-related injuries and diseases: use a financial

means test to set co-payment charges

2. HEALTH CARE PROGRAMS

Veterans’ Health Care

Veterans Health Administration also operates veterans’ hospitals and clinics across the country

health care cost of the wars on Iraq and Afghanistan: - mental health care patients from 900,000 (in 2000) to 1.2

million (in 2010) - those who undergo therapy increased from 35,000 (in 2006)

to 139,000 (in 2010)

2. HEALTH CARE PROGRAMS

Veterans’ Health Care

(+) has been a model for a national health care system:

1. electronic medical records 2. strong focus on preventive care (e.g., for cancer, diabetes, and

heart disease) 3. high scores on health care quality indicators

Q: The government operates hospitals and clinics across the country for veterans. Should this system be expanded to provide health care to other Americans, not just veterans?

2. HEALTH CARE PROGRAMS

Veterans’ Health Care

In 2000, Congress approved the expansion of TriCare (the military’s health plan) to include retirees with at least 20 years of service once they become eligible for Medicare - pays for most of the costs for medical treatment that are not covered

by Medicare, except for $3,000 per year in out-of-pocket expenses - also includes generous prescription drug coverage - annual premium costs of only $520 per year for family coverage

Q: Is the TriCare program too generous? Should the government continue to subsidize health care insurance for retired veterans (about $52 billion per year) this way?

3. REDUCING HEALTH CARE COSTS

1. raising the policyholder’s share of the cost with higher deductibles and higher levels of co-payment – to inject “market discipline” into health care coverage

2. provide incentives for employers to set-up personal health accounts for their workers -- employers deposit money into an account that is used to pay for each employee’s health expenses that the regular insurance does not cover

Other Alternatives

3. disease management programs – e.g. HMOs/PPOs train patients to take better care of themselves by monitoring their diseases, watching their diets, and seeking appropriate and timely medical care. They have implemented programs for diseases such as diabetes, heart disease, end-stage renal disease, cancer, depression.

4. preventive health care

4. PREVENTIVE HEALTH CARE PROGRAMS

1. more routine physical examinations and diagnostic tests

2. education and training in diet, exercise, and stress management

Alternatives

3. smoking cessation programs

PREPARATION FOR NEXT WEEK

Read Chapter 9 (Welfare and Social Security Policy) Issue Paper # 2 at D2L (due October 29, 11:00 pm) 1. Choose a position: A strategy to reduce health care costs is to encourage

individuals to adopt healthier lifestyles (e.g. avoiding salty, sugary, and fatty foods). Are you in favor of imposing a higher sales tax on soda, hamburgers, and other unhealthy food to discourage their consumption?

2. Discuss effectiveness, efficiency, individual choice and economic freedom, and equity issues of adopting or not adopting this strategy. Cite also any political acceptability or administrative feasibility issues.

3. 1.5 to 2 single-spaced pages