Obamacare: Achievement, Disaster, or Diversion?

Leonard Rodberg, PhD Urban Studies Dept., Queens College/CUNY

and NY Metro Chapter, Physicians for a National

Health Program

QC Monday Social Science Lunch February 2014

www.pnhpnymetro.org

DISCLOSURES Leonard Rodberg has no relevant financial relationships with commercial interests

Dr. Rodberg is Research Director of the NYMetro Chapter and co-founder of Physicians for a National Health Program (PNHP), a non-profit educational organization that advocates for single-payer national health insurance. He receives no financial compensation from PNHP.

Outline 1.  Current status of health care finance 2.  The Affordable Care Act (ACA or

Obamacare): What it does and doesn’t do

3.  Why the ACA won’t achieve its goals of containing costs while covering everyone

$5,791$2,196

$15,073*

$13,770*

$13,375*

$12,680*

$12,106*

$11,480*

$10,880*

$9,950*

$9,068*

$8,003*

$7,061*

$6,438*

$5,429*

$5,049*

$4,824

$4,704*

$4,479*

$4,242*

$4,024*

$3,695*

$3,383*

$3,083*

$2,689*

$2,471*

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999 Single Coverage

Family Coverage

$5,615*

* Estimate is statistically different from estimate for the previous year shown (p<.05).

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012.

$15,745*

Why Health Care Was On the Agenda: Escalating Cost

Shrinking Private Insurance

Rise in Medicaid Enrollment Rising Medicaid Enrollment, 1987-2010

Uninsured Trends

Source: U.S. Census Bureau, Current Population Survey, 1988-2012 Annual Social and Economic Supplements

And the Number of Uninsured Keeps Rising

(Though the Rate is Steady)

Most People Get Their Coverage from the Private Sector…

Medicare

Medicaid

Military

Uninsured

Individual Private

Insurance

Employer-based Private

Insurance

Source: Income, Poverty, and Health Insurance Coverage in the United States: 2009, Census Bureau, 2010

(169.7 million)

(43.4 million)

(47.7 million)

(50.7 million)

(27.2 million)

(12.4 million)

State and Local Govt (existing Medicaid, other)

13%Other private funds (charity, etc.)7%

Federal tax subsidy9%

Private Insurance25% Federal Government

(existing Medicare, Medicaid, other)

34%

Out-of-pocket12%

But Most of the Money Comes from the Public Sector

Out of pocket 12% Other private funds

(charity, etc.) 7%

State and Local Government (existing Medicaid, other) 13%

Federal Government (existing Medicare, Medicaid, other) 34%

Source: Health Affairs, Feb. 2010; data for 2009

Private Insurance 34%

(Federal tax subsidy)

State and Local Govt (existing Medicaid, other)

12%

Other private funds (charity, etc.)7%

Federal tax subsidy9%

Private Insurance19%

Federal Government (Medicare, Medicaid,

subsidies)41%

Out-of-pocket12%

Even More Money Will Come from the Public Sector after Reform

Federal Government ( Medicare, Medicaid, other) 40%

State and Local Government (Medicaid, other) 12%

Other private funds (charity, etc.) 7%

Out of pocket 12%

Private Insurance 29%

Source: CBO and Lewin projections

(Federal tax subsidy)

2. The Affordable Care Act (Obamacare):

What it does and doesn’t do

Why did this thing have to be so complicated in the first place?... Imagine, now, a much simpler system in which the government just pays your major medical expenses…It’s called Medicare.

Kludge (From Wikipedia, the free encyclopedia): A kludge (or kluge) is a workaround, a quick-and-dirty solution, a clumsy, inelegant, difficult to extend, hard to maintain, quick solution to a problem, and a rough synonym to the term "jury-rig“. Alt: An ill-assorted collection of poorly-matching parts, forming a distressing whole; a machine, system, or program that has been improvised or 'bodged' together; a hastily improvised and poorly thought-out solution.

It’s not even a good kludge, since it won’t really work!

In Deciding on a Plan, The President Made a Fateful Choice •  He could have chosen to -- build on the public sector, which now spends more than half the money, or -- expand the private sector. •  He chose to build his program by -- enlarging Medicaid for the poor -- expanding private insurance for the rest

The Great Dealmaker The Obama Administration made a series of deals to pass the ACA:

•  The insurance industry: Everyone required to buy their product -- and no public option, even though it had been promised

•  The drug industry: No negotiation on prices •  The AMA: No cut in physician fees •  Hospitals: No cut in reimbursements, only slower

growth in payments •  Employers: Continued control of health benefits •  Nervous members of the public: “You can keep what

you have” – which was not actually the case

The New Reform Plan: Affordable Care Act (ACA)

•  Continued reliance on private insurance •  Employment-based insurance unchanged •  Market competition determines

premiums, co-pays, and deductibles •  Experimental pilot programs to reduce

costs

Result: Most people will see little change.

•  Citizens and legal immigrants required to be insured. Penalties up to 2.5% of income.

•  Insurers required to take everyone. •  Insurance “exchanges” or “marketplaces” for

individuals and small employers •  Premium subsidy up to 400% Federal poverty

level, so premium is less than 9.5% of income •  “Hardship waiver” if premium too expensive !

+Can remain uninsured! •  Medicaid for all below 138% poverty level

The Mandate and the Exchange

Under the ACA, Millions Will Remain Uninsured

Millions

Note: The uninsured include about 5 million undocumented immigrants. Source: Congressional Budget Office.

51 51 51 52 53 53 5451

2323232328

35

50 50

0

20

40

60

80

2012 2013 2014 2015 2016 2017 2018 2019

Current law

PPACA

…while Underinsurance becomes the Norm

What’s Covered

Why so much cost-sharing -- it doesn’t reduce spending.

 

Source: Patryk Perkowski and Leonard Rodberg, to be published

Costs Will Keep On Rising

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

ACA (CMS Actuary)Current projectionACA (Commonwealth Fund)

National Health Expenditures (trillions)

Notes: * Modified current projection estimates national health spending when corrected to reflect underutilization of services by previously uninsured. Source: D. M. Cutler, K. Davis, and K. Stremikis, Why Health Reform Will Bend the Cost Curve, Center for American Progress and The Commonwealth Fund, December 2009. Estimated Financial Effects of PPACA as Amended, Richard Foster, CMS Actuary, April 2010

$4.67 $4.5

6.4% annual growth

6.6% annual growth

6.0% annual growth

$4.7

National Health Expenditures as Percent of GDP 17.8 17.9 18.0 18.2 18.8 19.3 19.8 20.2 20.5 21.0

Principal Consequences

•  Little change for most people

•  Those using the Exchanges will face costly premiums, deductibles and copays and limited choice of doctors and hospitals

•  Millions will remain uninsured

•  Costs will continue to rise

3. Why the ACA won’t achieve its goals of containing costs while

covering everyone

0

10

20

30

40

50

60

70

80

90

100

United S

tate

s

Austra

lia

Austri

a

Belgi

um

Canada

Czech

Rep

ublic

Denm

ark

Finl

and

Franc

e

Germany

Greece

Hungar

y

Icel

and

Irela

ndIta

ly

Japa

n

Korea

Luxe

mbou

rg

Mexi

co

Nether

land

s

New Z

eala

nd

Norway

Portu

gal

Slova

k Rep

ublic

Spain

Swede

n

Switz

erla

nd

Turke

y

United K

ingd

om

Percent

Population Covered by Public System

Other Countries Cover Everyone with a Variety of Public Systems

Source: F. Colombo and N. Tapay, Private Health Insurance in OECD Countries, OECD 2004

0

2

4

6

8

10

12

14

161980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

USFRSWIZGERCANNETHNZDENSWEUKNORAUS

Total health expenditures as percent of GDP

Source: OECD Health Data 2010 (Oct. 2010).

With Universal Coverage, Costs Can be Contained

Why Does the US Spend So Much More than Anyone Else?

1. Mainstream economics answers •  Technology •  Too many doctors •  Insurance (“moral hazard”) •  Unions •  Prices

Why Does the US Spend So Much More than Anyone Else?

2. Single payer advocate’s answer: Reliance on unregulated private insurance

0

5

10

15

20

25

30

35

40

Uni

ted

State

s

Austral

ia

Austria

Belgi

um

Canad

a

Czech

Rep

ublic

Denm

ark

Finl

and

Fran

ce

Ger

man

y

Gre

ece

Hun

gary

Icel

and

Irel

and

Ital

y

Japa

n

Kor

ea

Luxe

mbo

urg

Mex

ico

Net

herlan

ds

New

Zea

land

Nor

way

Portu

gal

Slova

k Rep

ublic

Spain

Swed

en

Switz

erla

nd

Turke

y

Uni

ted

Kin

gdom

Percent

Private Health Insurance Percent of Total Cost

While Private Insurance Dominates

Source: F. Colombo and N. Tapay, Private Health Insurance in OECD Countries, OECD 2004

Medical Care Administration

9%

Insurer Billing8%

Other Insurer Costs and Profit

11%

Hospital Billing4%

Medical Care64%

Physician Billing 5%

Source: James G. Kahn et al, The Cost of Health Insurance Administration in California: Estimates for Insurers, Physicians, and Hospitals, Health Affairs, 2005

Allocation of Spending for Hospital and Physician Care Paid through Private Insurers

Billing and insurance overhead account for nearly 30 cents of every dollar

28%

Spending through private insurers

Why Does the US Spend So Much More than Anyone Else?

3. More fundamental answer: •  No other country allows providers of

medical care to set their own prices. •  Government regulates physician fees,

hospital spending, and drug prices.

Bottom line: Health care is not a market phenomenon, needs regulation.

And Here’s the United States, with our Own Medicare Program

Private insurance

Composite

Medicare

Fox News on Obama’s Real Plan!

•  See Video at http://www.youtube.com/watch?v=AS_eKBjW5QM

Vermont passed Reform Legislation, is using its Exchange to

move to a Single Payer System

Green Mountain Care Medicaid

Today

Vermont Health Connect (ACA) 2014

Green Mountain Care – unified system

After ACA waiver is

available

Single PayerReform in New York State: Gottfried-Perkins

New York Health Bill •  Universal comprehensive coverage: Everybody in, nobody out! •  No co-pays or deductibles •  Coordination of care by a care manager •  All payments from a single state fund •  Graduated payroll tax and Federal funds •  Covering everyone yet spending less than now

Will Health Care Premiums take All Our Income before we get Serious about

Health Care Reform?

Source: American Family Physician, November 15, 2005