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Introduction to State Health Policy: A Seminar for New State Legislators
Slide Presentation by Grace-Marie Turner, Ph.D.
On April 2, 2005, Grace-Marie Turner made a presentation in a seminar entitled Introduction to State Health Policy.
This is the text version of Ms. Turner's slide presentation. Select to access the PowerPoint® Slides (495 KB).
The Uninsured and the Health Care Safety Net
Grace-Marie Turner, Ph.D.
Galen Institute, Incorporated
The title slide has a picture of the speaker.
The U.S. health care system is in trouble
- Rising insurance costs threaten coverage for many.
- Millions are uninsured.
- A plethora of rules, regulations, fines, penalties govern the system.
2004 U.S. health expenditures, estimated
- Total: 1.8 trillion dollars, 15 percent of GDP.
- Private: 984 billion dollars, 55 percent of total.
- Public: 810 billion dollars, 45 percent of total.
Cost concerns drive debate
On a bar graph, General Inflation Index corresponds to 2.7 percent and Employer Health Insurance Cost corresponds to 7.5 percent.
Sources: 2004 Mercer U.S. National Employer-Sponsored Health Plans Survey, Mercer Human Resources, November 22, 2004. http://www.mercerhr.com/knowledgecenter/reportsummary.jhtml?idContent=1051300
U.S. Department of Labor, Bureau of Labor Statistics. Consumer Price Index. January 19, 2005. ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
Does the U.S. spend too much or too little on health care?
On a line graph, the x-axis represents unevenly spaced years and the y-axis presents the percent of respondents who answered Too Little, About Right, and Too Much. The labeled years are 1973, 1975, 1977, 1980, 1983, 1985, 1987, 1989, 1991, 1994, and 1998. The graph has three lines, marked Too Little, About Right, and Too Much.
- The Too Little line starts with about 61 percent, ranges between about 55 to 72 percent, and ends with about 67 percent.
- The About Right line starts with about 31 percent, ranges between about 17 to 34 percent, and ends with about 25 percent.
- The Too Much line starts with about 5 percent, ranges between about 3 to 9 percent, and ends with about 6 percent.
Source: Robert Blendon and John Benson. Americans' Views on Health Policy. Health Affairs March-April 2001.
Consumers pay 15 percent of costs
On a line graph, the x-axis represents years and the y-axis represents percentages of costs. The graph has three lines, marked Out-of-Pocket, Public Payers, and Private Insurance.
- Out-of-Pocket accounted for about 56 percent of costs in 1960, 28 percent in 1980, and 15 percent in 2000.
- Public Payers accounted for about 21 percent of costs in 1960, 40 percent in 1980, and 45 percent in 2000.
- Private Insurance accounted for about 23 percent of costs in 1960, 32 percent in 1980, and 40 percent in 2000.
Source: Office of the Actuary, Centers for Medicare and Medicaid Services
Kaiser benefits study
- Premiums now average 3,383 dollars for single coverage and 9,068 dollars for families.
- Worker contributions were stable for singles, at 508 dollars, and rising 13 percent for families, to 2,412 dollars.
Source: Kaiser 2003 Employer Health Benefit Survey
Cost drivers for health insurance
- 18 percent: General health care inflation.
- 22 percent: New medical advances, drugs.
- 18 percent: Rising provider expenses.
- 15 percent: Government mandates and regulation.
- 15 percent: Increased consumer demand.
- 7 percent: Litigation and defensive medicine.
- 5 percent: Fraud and abuse, et cetera.
Source: Price Waterhouse Coopers, 2002
Can State health insurance regulations reduce costs and increase access to health insurance?
- Guaranteed issue.
- Guaranteed renewal.
- Community rating.
- Mandated benefits.
- Pre-existing condition exclusions.
The GAO identified 16 States that passed these insurance regulations in the early and mid-1990s.
Annual growth rate in number of uninsured
On a bar graph, the x-axis represents years and the y-axis represents percent growth in the number of uninsured. For each year, there are three different bars: one for 16 States, one for 34 States, and one for 50 States.
- The 16 saw a 4.6 percent growth in 1990 and an 8.1 percent growth in 1996.
- The 34 saw a 3.9 percent growth in 1990 and a 1.0 percent growth in 1996.
- The 50 saw a 4.1 percent growth in 1990 and a 2.7 percent growth in 1996.
Source: Uninsured Rates Rise Dramatically in States with Strictest Health Insurance Regulations, Arnett GM, Schriver ML. The Heritage Foundation, 1998. http://www.galen.org/statehealth.asp?docID=179
Expanding access to the uninsured
Why is it so hard for the States to solve this problem?
The tax treatment of health insurance
A huge Federal subsidy that discriminates against lower-income, working Americans who are most likely to be uninsured.
Low-income families hard to reach with job-based coverage
On a bar graph with no x-axis or y-axis drawn is labeled Persons with job-based health insurance, by income. A bar labeled Less than 25,000 Dollars shows 23 percent and a bar labeled Over 75,000 Dollars shows 82 percent.
Source: U.S. Census Bureau, Current Population Survey, 2004 Annual Social and Economic Supplement. Table HI01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2003, All Races.
The Galen Gap
On a bell curve, the x-axis represents income and the y-axis represents the population under age 65 with health insurance. The curve is highest near 0 income and approaching the 75,000-dollar income, with the lowest point somewhere left of center.
Caption: Conceptual depiction based upon the logo of the Galen Institute.
Getting to the root of the problem
Price controls in World War 2
A U.S. flag is shown waving on a pole.
1943: Health insurance to boost pay
- Workers are scarce.
- Wage and price controls cap pay.
- Health insurance offered instead.
- Health insurance becomes job-based.
A man is shown at an assembly line with boxes.
Sixty years and 1 trillion dollars later
A 189 billion-dollar annual tax subsidy that is:
- Leads people to think health insurance is a gift from employers, not part of their pay, as it is.
- Consumers of health care drive up costs by demanding more expensive coverage without seeing the price.
- Higher costs drive more and more people out of the market for health insurance, especially low-income workers and families.
Pressure for Government to fill the gap
On a bell curve, the x-axis represents income. The curve is highest near 0 income and approaching the 75,000-dollar income, with the lowest point somewhere left of center. There is also a partial curve over the lower incomes, with arrows pointing to the right, to show the curve's valley partly filled.
A fresh idea: Create new, fairer subsidies for health insurance
- Tax credits for the uninsured to purchase health insurance.
- Credits are refundable and advanceable.
- Provide new help for those shut out of the system.
- A new fairness in subsidizing insurance.
Sources: Empowering Health Care Consumers through Tax Reform, Grace-Marie Arnett, Editor. University of Michigan Press, Ann Arbor. September 1999. http://www.galen.org/book.asp
Mark Pauly and Bradley Herring. Expand Coverage via Tax Credits: Trade-Offs and Outcomes. Health Affairs January-February 2001.
The uninsured will need new places to purchase coverage
- Individuals with new subsidies will need new places to buy health insurance, outside the workplace, to get group rates.
- Labor unions, professional organizations, churches, and other affinity groups could offer insurance as a member benefit.
- This insurance would be portable from job to job and provide more continuity in coverage.
- Tax credits for the uninsured.
- New purchasing pool arrangements.
- Enrolling those eligible for Medicaid and SCHIP.
- Gaining efficiencies through health information technologies.
A man is shown running with a briefcase in one hand and a giant lit light bulb in the other.
Source: My assessment of general agreement based upon joint publications and position papers by political leaders, including President Bush, Senator Kerry, Senator Frist, Senator Clinton, et. cetera.
Public sector innovations
- Secretary Leavitt will support greater use of 115 waivers for Medicaid to expand options.
- Governor Jeb Bush of Florida wants to bring competition and choice into Medicaid.
- South Carolina offers Medicaid Health Savings Account, Health Savings Account, option.
- New York State's reinsurance program.
- Maine's DirigoChoice for small businesses.
A sunset is shown over hills and water.
A new conversation
- Disease management.
- Value in medical care.
- Greater access to information.
- More consumer input into care choices.
An abstract drawing shows two people reaching into a computer monitor and shaking hands on the screen. One person has a briefcase in the other hand. Dollar symbols are scattered to the right of the monitor.
Care management programs have demonstrated success
- Florida's Cash and Counseling programs give the disabled more choice and control.
- Pitney-Bowes' positive experience in direct care management.
- The Asheville Project provides care for chronic conditions like diabetes, asthma, and heart disease.
Some options for the States
- About one-third of new purchasers of Health Savings Accounts were previously uninsured.
- Encouraging Health Savings Accounts can help some citizens to get coverage.
Sources: Health Savings Accounts: The First Year in Review, e-Health-Insurance, February 15, 2005.
Chovan T, Yoo H. Health Savings Accounts off to a fast start in the individual market, America's Health Insurance Plans, January 12, 2005.
Health Savings Accounts overview
- Health Savings Accounts allow individuals, employers, or employees to deposit tax-free money into a special account to pay for current and future medical expenses.
- Savings roll over from year to year.
- Individuals must have a high-deductible health plan to open a Health Savings Accounts.
One example of an Health Savings Account
One box is labeled High Deductible Insurance. Below it is a box labeled 1,000-Dollar Deposit. Between the boxes is written 500-Dollar Deductible. An arrow labeled Catastrophic Coverage plus Preventive care points to the High Deductible Insurance box. Two arrows point to the 1,000-Dollar Deposit box. One is labeled, Employer, employee, or individual makes deposit to Health Savings Account: unspent funds roll over to next year. The other arrow is labeled, Funds routine health spending; preventive care exempt.
Health Savings Account options for the States
- Enhancing the Health Savings Account option
- Allow a State tax deduction for deposits to Health Savings Accounts.
- Allow State tax deductibility for conforming health insurance.
- Allow cross-State purchase of health insurance.
- A new benefit option for State employees to save State funds on health costs.
Other State responses
- Avoid new State mandates and regulations that drive up costs and reduce choice.
- Extend Medicaid and SCHIP money:
- Focus on better managing chronic care patients.
- Focus on value, not just cutting costs.
- Provide incentives for patients to stretch dollars.
- Develop private-public partnerships to strengthen the safety net.
- Expand community health centers.
What is the new world about?
- Patient control: Consumers will have more choices in health insurance arrangements.
- Cost visibility: They will be more price conscious in shopping for insurance and some medical services.
- Savings incentives: Consumers have more incentive to get the best product, service, and value for their money.
The next big thing
Consumer choice in health care and coverage
A fireworks display is shown.
Engaging consumers as partners rather than adversaries in managing health costs and getting the best value for health care dollars
For more information
A sailboat is shown on rough water with seagulls nearby.
Current as of October 2005
The Uninsured and the Health Care Safety Net. Text version of a slide presentation at Introduction to State Health Policy: A Seminar for New State Legislators. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/ulp/statepolicy/turnertxt.htm
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