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HEALTH CARE AND THE
PRESIDENTIAL ELECTION
September 2004
Jeanne M. Lambrew, PhD
Associate Professor, Dept. of Health Policy
George Washington University
Senior Fellow, Center for American Progress
IS THIS THE YEAR FOR A
NATIONAL DEBATE?
High Health Care Cost Growth
Real National Health Expenditure Growth
8.1%
6.3%
4.6%
3.2%
1993 1997 2000 2002
2
Source: Levit et al., Health Spending Rebound Continues in 2002, Health Affairs (January/February 2003).
Health Insurance Premiums
Are Increasing Rapidly
Annual Rate Increases
12.9%
11.2%
8.5% 8.2%
5.3%
0.8%
1993 1996 1999 2000 2002 2004
3
Source: Kaiser/HRET Health Benefit Survey 2004
Job-Based Coverage Is
Declining
Percent of Non-Elderly With Employer-Sponsored
Insurance
67.7%
64.4% 64.8% 63.4%
1993 1996 2000 2003
4
Source: U.S. Census Bureau historical tables
Uninsured Problem Is Growing
• Uninsured rose by 5.2 Rate of Uninsured Americans
million between 2000-03
16.1% 15.6%
15.3%
• Problem expanding 14.2%
– Affecting workers in large firms,
people with higher income, education
• States are cutting back on
public coverage
– Medicaid enrollment increased by 6
million
– Yet, 1 to 2 million low-income people
may lose Medicaid due to continued 1993 1997 2000 2003
state budget stress
5
Source: Census Bureau. Note: methodology changed over
The period so that rates are not necessarily comparable.
Persistent Concerns about
Value of Health Care
• 45 percent of care may not be appropriate
• International ranking in health care is low
– 28th on infant mortality
– 21st for women, 24th for men in life expectancy at birth
• Up to 25 percent of all health spending is on
administrative costs
• High prices largely explain why the U.S. has the
highest health care costs in the world
6
Sources: McGlynn et al., NEJM, 2003; Health United States 2003; Woolhandler et al., NEJM, 2003;
Anderson et al., Health Affairs, 2003
Public Support Is Strong
Candidates' Views on Health Care Reform Will
Be An Important Factor in Election Decisions
Very Important Somewhat Important
93%
87% 86% 88%
24%
30% 32%
41%
69%
57% 56%
45%
ALL Democrat Republican Independent
7
Source: The Commonwealth Fund Biennial Health Insurance Survey (2003).
But Will It Be A Central Issue?
• National Security vs. Health Security?
– "How much [the issue of health care] plays out in 2004
depends on how much the cloud blows over on Iraq and
terrorism, but in 2006, these issues are likely to be much
larger." Republican pollster Bill McInturff (Kemper, Los
Angeles Times, 5/13).
• Deficit vs. Health Reform?
– “But in the heat of the policy debate, deficit reduction
appears to be taking a back seat to what is easily Mr.
Kerry's most significant economic proposal: an expensive
expansion of government-financed health insurance.” NYT
7-4-04
• Will Jobs Concern Raise Health as Issue?
– Unemployment rate major predictor of uninsured rate 8
PRESIDENT BUSH’S PLAN
• Major Themes:
– Encourage high-deductible insurance with accounts
– Shift from employer to individual insurance market
– Reduce costs through medical malpractice reform,
information technology
– Implement the Medicare law
• Expanding coverage
– Individual Market and Health Savings Accounts
– Association Health Plans
– Community Health Centers and CHIP
• Addressing Value and Cost
• Other Priorities
– Medicare, Bioterrorism, Global HIV/AIDS 9
Expanding Coverage
Individual Market Tax Credit
• Tax credit design:
– 90% up to $1,000 per year for individuals with income < $15,000
• Phased out at $30,000
– 90% up to $3,000 per year for families with income < $25,000
• Phased out at $60,000
– Indexed to general inflation
• But not indexed since first proposed; $1,000 has declined by over
35% in real terms compared to private premium growth
• Where they can be used:
– Individual market
• Few states guarantee offers, regulate rates
– State-created groups 10
Expanding Health Savings
Accounts (HSAs)
• HSAs created by Medicare Law
– For individuals purchasing high-deductible plan (at least $1,000
for individuals, $2,000 families)
– Creates accounts for health, long-term care costs
– More tax preferred than any other savings vehicle
– Employers, individuals can contribute up to the maximum
deductible
• Budget and campaign proposals would:
– Allow individuals to deduct premium payments for high-
deductible plans purchased in the individual market
– Give small businesses a tax credit for contributions to HSAs
($200 / worker, $500 / family)
– Modifies individual tax credit to all part of it to be used for HSAs
($300 / individual, $1,000 per family) 11
Association Health
Plans (AHPs)
• Allows small firms to buy insurance
through purchasing pools
• These pools differ from others by:
– Denying entry to all small firms (selective
enrollment)
– Exempting insurance sold through the pools
from state regulation
12
Where The Uninsured Would
Get Coverage
2 -11 of 45 Million
Uninsured
Individual Medicare
Insurance 12% of
5% of Americans
Association Medicaid/
Americans
Health Plans CHIP
Employer- 12% of Americans
Sponsored
Insurance
56% of Americans
13
Sources: 11 million from Bush campaign; 1.3 million from Kaiser Family Foundation, Coverage and Cost Impacts of the President’s
Health Insurance Tax Credit and Tax Deduction Proposals, March 2004. Note: American Enterprise Institute assumes 6.7 million
Other Access Policies
• Expanding Community Health Centers
– Proposes doubling by 2006, ensuring one in every
poor county
• 57% increase in Federal funding since 2001
• Reforming Medicaid and Covering Children
– Health Insurance Flexibility & Accountability Waivers
• Claims 2.6 million* people covered by state plan amendments
and fully-implemented waivers
– Optional Medicaid Block Grant
• Increase Federal funding in early years, decrease it later
• Reduces state contribution and Federal rules
– “Cover the Kids”: 2 year, 2 billion outreach effort
14
* Note: A Kaiser Family Foundation study estimated that the number of newly covered people is closer to 100,000.
Addressing Value & Costs
• Medical Malpractice Reform
– $250,000 cap on non-economic, “pain and suffering”
damages, cap on punitive damages
• Investment in Information Technology
– $100 million in 2005
• Reduce Medicaid Costs
– “Fraud” savings: Only Federal savings in budget
• Promote Consumer-Driven Health Care
15
Other Priorities
• Implementing Medicare Drug
Benefit, Private Plan Expansion
• Addressing Global HIV/AIDS
• Increasing Bioterrorism Preparedness
• Reducing Mental Health Stigma and
Obesity
16
President’s Accomplishments
and Agenda
New
Accomplishments 2004 Agenda From
2000?
• Medicare Drug Law • $1,000 Tax Credit x
• Start on CHC doubling • Association Health Plans x
• Expanded Bioterrorism • Health Savings Accounts* x
x
• Signed Policies: • CHCs
– Trade Act, high-risk pools
– Completed doubling of NIH • Medical Malpractice x
• Information Technology a
17
* HSAs created in Medicare law; new proposals would increase tax incentives to encourage them
SENATOR KERRY’S PLAN
• Themes:
– Drive down costs through premium rebate, other policies
– Build on existing group health insurance options
– Provide assistance to those with lowest income, highest cost
– Overhaul Medicare law
• Expanding coverage
– Medicaid / Children’s Health Insurance Program Expansion
– New Congressional Health Plan
– Premium Rebate
• Addressing Value and Cost
– Reducing Administrative Costs, Promote Information Technology
– Drug Cost Containment
• Other Priorities
– General Public Health, Domestic as Well as Global HIV/AIDS
18
Expanding Coverage
Filling Gaps in Public Programs
• Medicaid / CHIP “Deal”
– Federalize Medicaid coverage of children (in
mandatory, medically needy groups )
In Return For:
– Extending eligibility at enhanced match to:
• Children up to 300% of poverty
• Parents up to 200% of poverty
• Childless adults up to 100% of poverty by 2009
• Additional Changes:
– Fiscal relief in first two year
– Bonuses for enrolling eligible children
– Options to cover higher-income children with 19
disabilities, legal immigrants
Congressional Health Plan
• Modeled on Federal Employees Health Benefits
Plan
– Multiple, competing private insurers
• Allows individuals and employers to buy private
insurance through new pool
• Tax credits make pool premiums affordable
– Limits premiums to 6-12% of income
– Up to 50% credit for small business for low-wage workers
– 25% premium credit for people ages 55-64
– 75% premium credit for unemployed individuals 20
Premium Rebate / Reinsurance
Targets 10% Premium Reduction
Linked to Firms That Cover All Workers, Use Disease
Management and Pass Along Savings to Employees
Private Insurance Claims & Spending
Federal
} Gov’t
Individuals’ Pays
Annual
Spending
75%
Above
Threshold
Below
Threshold
21
Claims Spending
Where The Uninsured Would
Get Coverage
27* of 45
Million
Uninsured
Individual Medicare
Insurance
New Group Medicaid/
Health Option CHIP
Employer-Sponsored
Insurance 22
*Source for estimate: K. Thorpe, Emory University. Note: American Enterprise Analysis estimates the same (27 million covered)
Addressing Value & Costs
• Creates premium rebate to lessen risk in insurance and
encourages chronic disease management
• Promotes value and reduces administrative costs
– Federal funding for electronic medical records, patient registries,
reminder systems, and electronic prescriptions
– “Pay for quality” initiatives
• Contains prescription drug cost growth
– Greater transparency
– Government negotiation for Medicare, others
– Reimportation
• Supports medical malpractice reform (no caps)
– Limit unwarranted suits though screening for reasonable claim
– Penalize meritless and excessive claims
– Ensure state-based non-binding mediation prior to trial
– Limit punative damage awards
23
Other Priorities
• Fixing the Medicare law
• Improves public health infrastructure
• Addresses domestic and global
HIV/AIDS
• Promotes mental health parity, patients’
bill of rights
24
COMMON GROUND
• Improving Quality:
– Create, use performance standards
– Evaluate what works
• Reducing Costs:
– Invest in information technology in health care
– Reduce administrative costs
– Implement chronic disease management
• Addressing Basic Public Health Challenges:
– Global threats
– Emerging chronic disease epidemic, especially
obesity
25
DIFFERENCES
Size and Scope
$2.5 10-Year Federal Costs
trillion
$990
billion $653
billion
$79
billion
Gephardt Plan Tax Cut Kerry Plan Bush Plan
Extenders
Sources: Gephardt, Kerry from K. Thorpe; Tax Cut Extenders, President’s plan from Budget. 26
Note that the candidates’ own plan estimates are used here.
Effect on the Uninsured
Estimated Number Covered
45 million
27 million
2 – 11 million
Baseline Uninsured Uninsured Covered Uninsured Covered
by Kerry Plan by Bush Plan 27
27 million from K. Thorpe, 11 million from Bush campaign
1.3 million from Kaiser Family Foundation analysis; note: AEI estimated 27 million for Kerry Plan and 6.7 million for Bush Plan
Approach
Individual versus Employer/Group Coverage
Private Only versus Private-Public Insurance Mix
Bush Kerry
Individual Medicare
Insurance
New Group Medicaid/
Health Option CHIP
Employer-Sponsored 28
Insurance
Vision for the Future
President Bush Senator Kerry
• Change to scaled-back • Strengthen existing group
benefits in the individual coverage options
market
• Cost control through
• Cost control through cost information, management
sharing
• Reinsurance to keep sick in
• Separate high-risk pools existing pools
• Individual responsibility • Shared responsibility
29
Views on the Past
The New Medicare Law
President Bush Senator Kerry
• Historic Legislation • Missed Opportunity
• “Same Medicare, Just • Undermines
Better” Traditional Medicare
• Emphasizes Choices • Promotes Confusion
• Better for Seniors • Better for Drug
Industry, HMOs
30
Views on Each Other’s Plan
Bush on Kerry Kerry on Bush
• Too expensive • Record of inaction
• Government take- • Ideas could worsen
over of health system coverage
• Flip-flop on Medicare • Favors special interests
31
