Transcript OFFICE OF THE ACTUARY National Health Care Reform: Promises

OFFICE OF THE ACTUARY
National Health Care Reform:
Promises, Prospects, & Pitfalls
Presentation for the Middle Atlantic Actuarial Club
May 14, 2009
Richard S. Foster, FSA
Chief Actuary
Nature of the Problem
• Uninsured
– 45.7 million in 2007; more since recession began
• Cost Growth
– Since 1975, per capita NHE has grown 1.9% faster
per year than per capita GDP
• Affordability
– Employer health insurance premiums more than doubled
between 1999 - 2008; wages increased 34%
– High U.S. health costs hinder competitiveness of
companies
– Many workers can’t afford employee share of premiums
• Federal, State budget implications
– Medicare: Part A Trust Fund exhausted in 2017
– Medicaid: 41 states and DC facing FY2009 and FY2010
budget shortfalls
Past and Projected National Health
Expenditures, as a Percentage of GDP
50%
45%
40%
Share of GDP (%)
35%
30%
25%
20%
15%
10%
5%
0%
1970
1980
1990
2000
2010
2020
2030
Calendar Year
2040
2050
2060
2070
2080
Nature of the Problem, continued
• Inefficiency
– Medical care is fragmented
– Payment mechanisms reward more services, not
quality of care
– Treatment practices & costs vary widely by region
– Significant incidence of medical errors, unnecessary
services
• Potential for catastrophic costs
– 700,000 personal bankruptcies annually related to
health care costs (and most have insurance)
Why Do Health Costs Grow Faster?
12%
Average Annual Growth
10%
8%
Health care use
& intensity
2.6%
Age-gender
effect
0.4%
6%
Excess
medical
inflation
1.7%
4%
Economy-wide
inflation
4.2%
Population
1.0%
Real GDP
per worker
1.3%
Economy-wide
inflation
4.2%
Employment
1.9%
2%
0%
Personal Health Care
Source: Office of the Actuary, National Health Statistics Group.
GDP
US vs. Rest of World
Growth in Health Expenditures per Capita,
2001-2006
OECD Average – 6.8 percent
Health Expenditures per capita and
Life Expectancy at Birth, 2005
Health Expenditures per Capita, US PPP
Life Expectancy at Birth, in Years
Source: OECD Health Data.
Who are the
players?
Congress
Administration
(White House,
HHS, OMB,
Treasury)
(Senate: SFC,
HELP, Aging
Businesses
(large/small)
House:
W&M, E&C)
Health
Reform
Advocates
States
(Massachusetts,
California)
Health Care
Providers
(AMA, AHA,
AHIP, PhRMA,
AdvaMed)
(AARP,
Families USA,
unions)
Types of Reform Proposals
• Changes to tax treatment of health
– Limit or eliminate exclusion of employer health
insurance costs from employee compensation
– Create standard deduction for health insurance
– Limit deductibility of health care costs
Types of Reform Proposals, cont.
• Mandated coverage
– Children only? Everyone?
– Penalties and incentives for employers
• “Pay or play”
• Subsidies for small employers
– Penalties and incentives for individuals
• Penalties up to full low-cost option premium
• Subsidies for low-income individuals (< 400% FPL)
Types of Reform Proposals, cont.
• Rules on non-group private health insurance
– No exclusion of pre-existing conditions
– Guaranteed issue & renewal
– No underwriting, except age rating
• Health insurance “exchange” or “connector”
– Increased pooling
– Facilitated enrollment
– Private plans, public plan option??
– Standardized policy options?
Types of Reform Proposals, cont.
• Changes to Existing Public Programs
– Expand Medicaid to 100% of FPL or higher
– Expand SCHIP
– Open Medicare to voluntary enrollees aged 55-64
• Who is Eligible?
– Citizens only?
– Legal residents only?
– Everyone?
Efforts to “Bend the Curve,” Pt. 1
• How to reduce health care cost growth to sustainable
level?
• The key to addressing affordability, coverage, and
other health care problems
• Many ideas considered—most can change level but
probably not slope
• Mark McClellan: “How to avoid ‘triumph of hope
over experience’?”
Efforts to “Bend the Curve,” Pt. 2
• Why do health costs increase faster than GDP?
– Normal “market” doesn’t exist for health care
• Insurance insulates people from true cost
• Extreme value placed on health
• Complexity of “product”
– “Guaranteed market” for new medical innovations
• Demand for best possible treatments
• Medical research, development, implementation
companies have little incentive to focus on costreducing technology
• Most innovation to date has been cost-increasing
Efforts to “Bend the Curve,” Pt. 3
• Comparative effectiveness with (substantive) costeffectiveness
• Federal Health Board
• More substantive cost-sharing
• [Sector-wide price or budget controls… ]
• [Vouchers (w/ amount updates < health cost increases)… ]
•
•
•
•
•
•
•
Health information technology / electronic health records
Value-based purchasing / Pay for performance
Preventative services
Competition (with or without public plan)
Provider efficiency incentives
Malpractice reform
Payment bundling; “medical home,” Accountable Care
Organizations
Why Health Reform Might Pass in 2009:
• Democratic President and Democratic majorities
in House, Senate
• Public concerns over health costs
• Business non-competitiveness due to health costs
• Condition of economy
• Use of “reconciliation” rules in Congress
• Willingness of those that defeated prior
initiatives to work together (AHIP, Republicans,
advocates)
• Industry commitment to voluntarily slow rate of
cost growth
Why Health Reform Might Fail in 2009?
• Costs of proposals >> savings from Medicare,
tax changes, etc.
• Current Federal budget situation
• Public plan option
• Use of “reconciliation” rules in Congress
• Concern over use of comparative effectiveness
and cost effectiveness by government
• “Blue Dog” Democrats concern over costs,
budget deficits
Parting Observations
• Can 30% of current costs really be eliminated?
– Where did this # come from?
– Difficulty in determining unnecessary/harmful services after the
fact
– Extraordinary difficulty in determining unnecessary/harmful
services before the fact
– Barriers: Provider desire to protect revenues
Little incentive for patients to change behavior
• Similar reform occurred in Massachusetts; what have we
learned?
– Increased coverage, though not to 100%, and mostly through
public plans
– Costs have been much greater than expected and rate of growth
has not slowed
Who Are the Estimators?
•
•
•
•
•
•
CBO
CMS Office of the Actuary (OACT)
Treasury
Jon Gruber, MIT
HHS: ASPE (w/ Urban) and AHRQ
Private organizations: Lewin, RAND, Urban
Requirements:
– Objective estimates of financial impacts
– Guard against “wishful thinking” regarding proposals on
cost growth
OACT Health Reform Model (OHRM)
Controlled to NHE 2010
Employer Model
Household Model
Source: Kaiser/HRET
2008 Employer
Survey
Source: 2003-5
MEPS-household
component
Linked by workers by
industry by firm size
(consistent with BLS
data)
Coverage
Proposals
Benefit
Proposals
Impacts on NHE 2010
Employer Model
Household Model
Assumptions applied
to reflect impact of
coverage change
Assumptions applied
to reflect impact of
spending change
Trend
Proposals
New NHE Projections
2010-2018