Why Did Health Care Reform Come so Hard: How Much More is There to Do?

Steven A. Schroeder, MD Health Services Research Seminar, UC Davis May 27, 2010

Speaker’s Disclosure Statement

 Neither I nor my wife have ever had a personal financial relationship with any manufacturer of any of the products discussed in this seminar  Support for Dr. Schroeder and the Smoking Cessation Leadership Center come from the Robert Wood Johnson and American Legacy Foundations, as well as the Centers for Disease Control

Educational Objectives

 To describe health care reform actions taken before passage of the Patient Protection and Affordable Care Act of 2010  To identify the context for the recent health care reform debate  To understand aspects of the U.S. health care system—specifically costs—that still need attention

Quick Poll

     How many think the recent health care reform legislation was a good thing?

How many think U.S. has best medical system?

How many have parents happy with their own medical care?

How many of you want your parents to die in an ICU? In a hospital?

How many of you will consider at some time undertaking a leadership role in health reform?

Central Challenges of Health Care Reform

 Expand coverage for health insurance  Pay for this expansion  How much to try to change health care delivery at the same time?

 How much else to attempt?

2009 American Recovery and Reinvestment Act (Stimulus Package)

  Comparative effectiveness research--$1.1 billion Continue HI coverage for newly unemployed- $24.7 billion   HRSA--$2.5 billion --$1.5 billion for construction and IT at community health centers --$500 million for services --$300 million for National Health Services Corps --$200 million for other health prof. training

2009 Stimulus Package (2)

 Medicare--$338 million for teaching hospitals, hospice, and long-term care  NIH--$10 billion (80% new grants, 20% intramural and construction)  FDA tobacco regulation  Prevention and wellness--$1 billion  Medicaid and other state programs --$87 billion for new grants --$3.2 billion for extra state health $ relief

Other Obama Health Changes

 Enlargement of CHIP--$33 billion  62 cent/pack tax increase on cigarettes  Greater FDA emphasis on food safety  Removed barriers on stem cell research  Uncoupled foreign aid from “abstinence only”  Strong subcabinet appointments

Health Care Reform, 2009-2010

 Background of fierce partisan politics  24 hour news coverage sensationalizes the issues (“death panels”)  Health care reform as “third rail” of politics  Lessons of Clinton attempt in 1993-1994: Republican control of Congress, and weakening of President

Willingness of Healthier and Wealthier to Subsidize Care for Sicker and Poorer is Weakening Harris Survey question: Do you agree or disagree?

The higher someone’s income is, the more he or she should expect to pay in taxes to cover the cost of people who are less well off and are heavy users of medical services.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 66% 51% 1991 2003

http://www.harrisinteractive.com/news/allnewsbydate.asp?NewsID=1076

39% 2006

Health Care Reform (2)

 Obama campaigned on the issue  Obama instinct for consensus and bipartisanship as former community organizer accounts for long negotiations  Kristol 1993 memo advocating Republican resistance still pertains  Democrats fractured: single payer, community option, anti-insurance companies, blue dogs

Health Care Reform (3)

 Massive bail out of financial sector raised fears of government intrusion on the right, and resentment of helping the fat cats by both left and populist right  Stimulus package may have been good for the economy, but unemployment still high and fears of governmental intrusion very real  Rising federal debt a smoldering issue

    

Political Barriers to Health Care Reform (Costs and Coverage)*

Crowded agenda (2 wars, recession, energy policies) Slim Democratic majority in Congress No consensus of shape of HI reform Stakeholders resist changing status quo (insurance companies, pharma, device industry, health professionals, hospitals, academia) How pay for expanded coverage ($100b/y) esp with huge budget deficit?

* Oberlander. Great Expectations—the Obama administration and health care reform. NEJM 2009; Jan 22, 2009

Political Process Dominated

 Attempt at bipartisan bill fails in Senate and House --Daschle resigns as HHS designate --Kennedy ill and then dies  --Brown victory on MA meant filibuster possible in Senate Process dragged on, and support declined. “Death by a thousand cuts”

Unlikely Supporters of Reform

 Organized medicine, though not vigorously (concern re Medicare $ cuts)  Big Pharma (in exchange for some $ protection)  Business less antagonistic than in 1993, although small business still opposed  Insurance less opposed than 1993  Catholic church split re abortion/coverage issue

And a Bill Did Pass

 Surprised a lot of people, including me  Democrats in general pleased, most Republicans irate  Still hugely controversial  Bill very complicated and poorly understood  Looks a lot like MA plan, and old Republican proposals  Unclear how it will play politically

What Does the Bill Do?

  Expands coverage to about 33 million people by 2014 (50% private, 50% public support); 95% eligible Americans would be covered: 83% now Does this by a combination of expanding Medicaid coverage, mandating that all individuals be covered (with certain exemptions), and mandating that private businesses cover workers for firms with >200 employees (WalMart issue)

What Does the Bill Do? (2)

 Estimated costs of $965 billion/10 years  Pays for expansion by combination of increased revenues and cost containment  Lets states create insurance exchanges to broaden and cheapen insurance options for those not covered  Extensive and income-adjusted subsidies for low income families

What Does the Bill Do? (3)

 Penalizes employers that don’t provide coverage  Expands Medicaid coverage to all under 65 population with incomes <133% of Federal Poverty Level  Require states to maintain CHIP thru 2015  Increases taxes on high income persons, beginning 2011

The Bill (4)

   Cracks down on Medical Savings Accounts, “Cadillac insurance plans” and Medicare Advantage Plans (to get new coverage $) Some charges to health insurance plans and pharma Health insurance reform --Eliminates preexisting conditions --Jawbones insurance plans re “loss ratio” (>85%) --Kids can stay on parents’ plans until age 26 --Eliminates lifetime expenditure caps --Covers prevention services --Gradually closes the doughnut hole for Medicare Part D

Cost Containment/Revenue Generation Features of the Bill

 Estimated 10 year $1.1 trillion savings (vs. $965 billion costs)  50% through spending cuts: Medicare advantage, limiting Medicare payment growth, cutting payments to Medicare Advantage; reduced payments to DSH hospitals like SFGH; other  50% through new revenue—taxes and fees

Other Features—Many as Demonstrations

 Reduce waste, fraud and abuse  Comparative effectiveness research  Medical malpractice reform  Increased payments for primary care  New payments for prevention, wellness; cover preventive services  Increase residency positions in primary care and general surgery

Important Political Omissions

 The public option  Abortion coverage  Coverage for non-citizens and illegal immigrants  How will states pay for their expanded Medicaid obligations?

Uncertainties in Health Reform

       Tricky implementation details, state and federal Can the proposed Medicare cuts survive politically?

Extent of political backlash (see catastrophic insurance, 1988)? Will Republicans try to repeal or just amend?

What about those still lacking coverage?

Translating cost effectiveness research into action (see mammography debate)?

Care at the end of life and palliative care?

Can we truly bend the cost curve?

Performance of the U.S. Health Care System, pre Reform

   Health (outcomes) Costs Access

Health Status of the United States

 Ranks 19-25 in usual indicators

Health Status: United States vs. 29 Other OECD Countries Health Status Measure U.S.A.

U.S. Rank in OECD (30) Best Rank of OECD Life Expectancy from birth (y)

All Women White women All men White men

Life expectancy from age 65/-2004*

All women, years White women, years All men, years White men, years * Data missing for six (6) countries 80.1

80.5

74.8

75.3

19.8

19.8

16.8

16.9

22 19 22 19 10 10 9 9 Japan (85.3) Sweden (78.4) Japan (23) Iceland (18.1)

Some Good News

  US does much better for life expectancy after age 65 2005 life expectancy data at all time high years at birth — 77.6 – Women: 80.1, men: 74.8

– White women>black women>white men>>>black men – Almost all the recent gains were in upper SES groups – Much of those gains are from tobacco use declines

Tobacco Tipping Point?

       California 13% adult smoking prevalence National rates down to modern low of 19.8% in 2007, up to 20.6% in 2008, ? in 2009.

Northern California Kaiser Permanente down to 9% Physician smoking rates around 1% Proliferation of smoke-free areas National 62cent/pack federal tax increase, 2009 Increased stigmatization of smoking

Health Status—Summary

       Doing better But at bottom of developed world Major declines in heart disease (multiple reasons) Major opportunities for improvement in tobacco and obesity Can’t improve without more attention to the poor Social causes very important Hard to improve through medical care alone

Costs of Medical Care: We’re Number One!

 Now up to 17% of GDP  Poor health value for the dollar  Reluctance to take on the involved sectors (pharma, device and insurance industries, hospitals, doctors, unions)

Actual and Projected National Health Expenditures, Selected Years Source: Sean Keehan and others (2008). “Health Spending Projections Through 2017: The Baby-Boom Generation is Coming to Medicare.” Health Affairs Web Exclusive, Feb. 26, pp w146. (www.healthaffairs.org)

The U.S. Healthcare Value Shortfall

Source: Havard Business Review, p. 70, April 2010

Years - Estimated Average Life Expectancy

Number of MRI Units per Million Persons 2006

30 25 20

26.5

15 10 5

14.0

7.7

7.7

6.6

6.2

5.6

5.3

4.9

0 United States Switzerland Germany OECD Median Netherlands Canada United Kingdom France Australia

Data are from the organization for Economic Cooperation and Development (OECD) Health Data 2008. The value for the Netherlands is for 2005. NEJM 360:10 3/5/2009, p. 1032

Where the Health Care Dollar Comes From

Source: Hartman, M.; Martin, A.; McDonnell, P., et al. (2009). “National Health Spending in 2007; Slower Drug Spending Contributes to Lowest Rate of Overall Growth Since 1998.” Health Affairs, Jan/Feb., p. 254. ( www.healthaffairs.org

).

Where the Health Care Dollar Goes

Source: Hartman, M.; Martin, A.; McDonnell, P., et al. (2009). “National Health Spending in 2007; Slower Drug Spending Contributes to Lowest Rate of Overall Growth Since 1998.” Health Affairs, Jan/Feb., p. 247. ( www.healthaffairs.org

).

Why Is U.S. Medical Care So Costly?

      Physician supply? No (but specialty % very high) Fee for service payment valuations? Yes Health worker incomes? Yes Hospital supply/length of stay? No Proportion intensive care beds? Yes Rate of expensive procedures, and technology in general? Yes, in spades!

Why Is U.S. Medical Care So Costly (Part 2)?

       Practice style variations? Yes Administrative costs? Yes Malpractice, including defensive medicine? Yes Aging population? Not really Patient demand? Yes Lack of cost competition? Yes Low investment in IT? Maybe

Why Not Let Costs Keep Rising?

     Opportunity costs – Schools – – – The environment Jobs and overseas competition (see General Motors) Other worthy causes Business resistance – Operational costs – – Retiree costs Source of labor disputes Pressure on public programs (Medicare, Medicaid, County Hospitals) Increases the number of uninsured Biggest cause of personal bankruptcies

Medicare Cost Crisis May Force Cost Control

 Medicare to reach deficit in about 2017  Congressional choices at that time: --raise taxes --cut benefits --reduce costs  Which is the most politically palatable?

Access to Health Care

   Insurance coverage the major barrier Geography, language, literacy, racial barriers also important Different salience for the two political parties; issue of role of government

The Uninsured in 2007

Source: Kaiser Commission on Medicaid and the Uninsured (2007). “The Uninsured: A Primer.” (http://www.kff.org/uinsured/7451.cfm)

Other Major Issues

     Quality/safety of care Coordination of chronic illness care Long term care End of life care The work force --medical student debt corrodes values and influences career choices (the “ROADE”) --erosion of primary care --future of nursing

Concluding Thoughts

 Health reform will be a continuing issue for the rest of your lives. Tension between demand for coverage and inability to pay for it.  Huge uncertainties regarding politics and implementation of health reform  U.S. poor health status not correctable by better health care alone  No easy solution to cost inflation and tendency to fix on technical solutions (IT)

Concluding Thoughts (2)

   Primary care’s status uncertain Cost control threatens many, because health care is 17% of the GDP Great opportunity for health professional influence in the years to come