Transcript Outline - Trinity University

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Health Reform Basics
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Outline
• Setting the Stage
• Rational for Reform
• Access and Reform
• The Economics of Exchanges/Marketplaces
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Setting the Stage for Reform
• The Goals:
• Access
• Cost
• Quality
Value
• Economists have assumed that you can’t improve one area
without harming at least one of the others
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Access
• Nonelderly American’s Source of Health Insurance
Coverage, 2011
People
(millions)
Percentage of
Population
266.4
100%
163.8
62%
Employment-Based
148.7
56%
Individual Market
15.1
6%
Public
54.7
21%
Uninsured
47.9
18%
Total Population
Private
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Cost/Quality
• The average value of medical advance is very high
• The average 45-year-old will spend $30,000 more on
cardiovascular disease care than the equivalent person did in
1950
• He/she will live another 3 years because of this care
• We have spent a lot, but have gotten a lot more
• Most estimates suggest that 20 to 30 percent of medical
spending could be eliminated with no adverse effects on
patient outcomes
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Cost/Quality
• Beyond A is unambiguous waste
• Between C and A could be waste if benefits<costs
• Especially if it is somebody else’s care
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Cost/Quality
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Sources of Excess Cost (2009)
Category
Sources
Estimate
Unnecessary Services
Overuse/use of high cost services
$210 Billion
Inefficiently Delivered
Services
Mistakes, fragmentation, operational
inefficiencies
$130 Billion
Excess Administrative
Costs
Excess paperwork costs,
administrative inefficiencies
$190 Billion
Prices that are Too High
$105 Billion
Missed Prevention
Opportunities
$55 Billion
Fraud
$75 Billion
Total
$765 Billion
Source: IOM, 2010
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Reform
• Most of the ACA deals with the access issue and much
less directly with the value equation
• Easier problem to tackle
• We don’t really understand how to create value
• Less resistance from interest groups
• That $765 billion in waste is someone’s paycheck
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Reform
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Access
• Why Are They Uninsured?
• Too expensive
• Administrative costs
• Irregularities in insurance markets (small families subsidize large ones)
• Adverse selection in individual market
• Implicit Insurance through uncompensated care
• Over-insurance
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Reform
- Explanations
- Tax Subsidy
- Regulation
- Psychological motivation
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Access
• Why Do We Care About the Uninsured?
• Market failure of individual market
• Externalities
• Physical
• Financial ~$43 Billion or 2% of HC spending
• Labor market inefficiencies – “job lock”
• Paternalism
• Redistribution
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Access
• Two Types of Solutions
• Sweeping Universalism
• 163 million privately insured plus 46 million Medicare who are mostly
happy with current state
• 50 million uninsured not happy
• Incremental Universalism
• Tweak the current system to accommodate the 50 million
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3 Issues with Incremental Universalism
• Pooling
• If pools are too small or attract high risk, insurers will be reluctant
to offer coverage for fear of high cost exposure
• Large pools exist for Medicare/Medicaid/large employers
• Solving the problem of the uninsured/underinsured requires
developing effective pooling mechanisms
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3 Issues with Incremental Universalism
• Affordability
• Insurance is expensive
• Average cost of employer provided family coverage in 2012 was over
$15,000 per year
• A family of four at 200% of the poverty level earns about $47,000 per
year.
• This is about a third of their income
• Even if those with low incomes had access to large pooling
arrangements, they would still need subsidies.
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3 Issues with Incremental Universalism
• Mandates
• Full insurance requires a mandate
• Even large subsidies will not be sufficient
• Many of the currently uninsured qualify for public insures and still do not
take it up
• Mandates provide more effective risk pooling
• Transfer from those who are currently healthy to those who are currently
sick
• Without a way to compel individuals to participate the market will fail
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Three-Legged Stool
• Community Rating
• Giving individuals with pre-existing conditions access to health
care
• Requires the Mandate
• Otherwise adverse selection occurs
• Employer provided insurance has a hidden mandate
• Need a subsidy to make insurance affordable
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Bang for the Buck
• Targeting
• The extent to which new spending is directed to those who would
otherwise be uninsured
• As opposed to buying out the base or crowding out
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50 Million Tuna Swimming with 200 Million
Dolphins
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Insurance Exchanges
• Provides a large risk pool for the individual and small
employer to participate in
• Apples-to-apples: should lower price of coverage
• Designed to create competition in insurance markets
• Lower barriers to entry
• Transparency to the consumer
• Can see tradeoffs in price and generosity and network size
• Incentives for innovations
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Insurance Exchanges
• States have the ability to control the number and types of
plans, set quality or price standards
• States can also bar the sale of insurance to individuals
and small businesses outside of the exchanges – or
require they also be sold in the exchanges
• To prevent “cherry-picking”
• Vermont and DC are the only states to do this so far
• The ACA has many “experiments” for alternative methods
for paying for care and organizing providers.
• The exchanges will be in position to encourage or require the
adoption of those innovations that work.
Marketplace Basics
• Terminology: Health Insurance Marketplace (formerly
•
•
•
•
known as the Exchange) and SHOP for small employers
Compare private insurance plans based on price,
benefits, quality, and other features
Most people will get a break on costs
“No wrong door” with Medicaid and CHIP
Open enrollment starts October 1 and coverage is
effective beginning on January 1
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The Enrollment Opportunity
49 Million Total Nonelderly Uninsured
If All States
Expand
Medicaid
41%
37%
9%
Eligible for Medicaid Expansion
Eligible for Exchange with Subsidies
Eligible for Exchange without Subsidies
Not Eligible Due to Immigration Status
Source: Enroll America
13%
ACA Support Fitted to Your Income
Family Income
>$94,200 for a
family of four;
>400% of FPL
 Job-based coverage, or
 Full-cost coverage in the exchange
$70,650-$94,200;
300-400% of FPL
 Job-based coverage, or
 Subsidized exchange coverage: premiums capped
at 9.5% of income
$47,100-$70,650;
200-300% of FPL
 Job-based coverage, or
 Subsidized exchange coverage: premiums capped
at 6.3 – 9.5% of income
$31,322-$47,100;
133-200% of FPL
CHIP
<$31,322 for a
family of four;
< 133% FPL
Medicaid
•
•
Job-based coverage, or
Subsidized exchange
coverage: premiums capped
at 3% - 6.3% of income
Medicaid
Children
Adults
Family income based on 2013 federal poverty income levels for a family of(not eligible for Medicare or Medicaid today)
four
ACA Coverage and Coverage Gap
Family Income
>$94,200 for a
family of four;
>400% of FPL
 Job-based coverage, or
 Full-cost coverage in the exchange
$70,650-$94,200;
300-400% of FPL
 Job-based coverage, or
 Subsidized exchange coverage: premiums capped
at 9.5% of income
$47,100-$70,650;
200-300% of FPL
 Job-based coverage, or
 Subsidized exchange coverage: premiums capped
at 6.3 – 9.5% of income
$31,322-$47,100;
133-200% of FPL
CHIP
<$31,322 for a
family of four;
< 133% FPL
Medicaid
•
•
Job-based coverage, or
Subsidized exchange
coverage: premiums capped
at 2% - 6.3% of income
Coverage Gap below
poverty line
($23,550 for family of four)
Children
Adults
(not eligible for Medicare or Medicaid today)
Family income based on 2013 federal poverty income levels for a family of
four
Marketplace Administration
State-based
Partnership
Federally facilitated
Source: The Commonwealth Fund, www.commonwealthfund.org/Maps-and-Data/State-Exchange-Map.aspx
Coverage Level Options in the Marketplace
Essential Health Benefits
ambulatory services;
2. emergency services;
3. hospitalization;
4. maternity and newborn
care;
5. mental health and
substance use disorder
services;
6. prescription drugs;
7. rehabilitative and
habilitative services and
devices;
8. laboratory services;
9. preventive and wellness
services and chronic 0%
disease management
10. pediatric services dental
and vision care
% paid by
enrollee
1.
% covered by plan
90%
80%
70%
60%
20%
40%
60%
10%
20%
Platinum
Gold
Silver
30%
Bronze
40%
80%
100%
Catastrophic plan for people under 30 or if no other
coverage is affordable
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How much is it?
• http://kff.org/interactive/subsidy-calculator/
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It definitely wasn’t pretty!
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