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					Financing Healthcare
The Uninsured
 Kiersten Adams
 Jay Singerman
 Jen Storch
 Ashley Thomas
 James Trinidad

   Overview of Financing
   Overview of The Uninsured
   Key Issues for Republicans
   Key Issues for Democrats
   Current Legislation
   Proposed Legislation
Overview of Financing
Overview- Medicare

   Medicare- started in 1965 with Title
    XVIII of the social security
   Medicare-
    – Part   A- Hospital Insurance
    – Part   B- Supplemental Medical Insurance
    – Part   C- Medicare Advantage
    – Part   D- Prescription Drug Coverage
Overview- Medicaid

   Medicaid- started in 1965 with Title
    XIX of the social security amendments
   States determine eligibility, receive
    portion of funding from Federal
Employer- Sponsored &
Blue Cross Blue Shield
   Employer-Sponsored Plans
    – 19th century Europe- to compensate for
      dangerous jobs
    – WWII wage controls
    – 1954- HI benefits tax deductible to employers
   Blue Cross Blue Shield
    – 1930‟s- community-based, voluntary, not for
    – Blue Cross- Hospitalization
    – Blue Shield- Physician Services
National Health
   In 2004, national health expenditures
    equaled $1.8 trillion
   Expected to increase approximately 8%
   17% of the GDP, increasing annually
   U.S. health care spending is expected to
    increase at similar levels for the next decade
    reaching $4 TRILLION in 2015, or 20
    percent of GDP
   Trends equate to higher premiums, higher
    out-of pocket spending and higher taxes
Self-Pay v. Third-Party
   Self-Pay= 12.6% of all healthcare
   Third-Party= 87.4%

   Percentage of third-party spending
    increased dramatically from the
    1950‟s-1990‟s and has since been
Public v. Private Spending

   Private= 54.9% of all healthcare
   Public= 45.1%

   Public spending has been increasing
   32% of Americans are covered by
    Medicare or Medicaid
Financing Trends

   Healthcare is unique because the
    person who pays is often not the
    person who receives health services
   Financing has shifted from individuals
    to employers and the government
Financing Trends

   Premiums are increasing faster than
    inflation and increases in wages
   Many employers are no longer offering
    health benefits
   Therefore, an increasing number of
    people can no longer afford health
   Those who can are facing increased
    premiums, deductibles, employee
    contributions and taxes
Overview of the
Number of Uninsured

   Number reached 46.1 million in 2005
   80% of these live in households below
    300% of the poverty level
   25% eligible for SCHIP or Medicaid
   56% not eligible, but need assistance
    in obtaining private insurance
Characteristics of Uninsured

       With Children         Without Children
   Predominantly US       Predominantly US
    Citizens                Citizens
   Majority have one      56% come from
    worker in family        families with no
   Mostly Hispanic         workers
   Live primarily in      Mostly White
    South                  Live primarily in the
                            West and Northeast
Health Status by
Race/Ethnicity and Income
Health Insurance Coverage
by Race/Ethnicity
Uninsured among those who
Uninsured Children

   8 million are uninsured
   74% are eligible for SCHIP
   60% of these children live in families
    with income at FPL
Characteristics of Uninsured
   Mostly teens
   25% under age 6
   40% Hispanic
   33% White
   18% Black
   85% US Citizens
   Live mostly in West and South
Characteristics of Uninsured
above 300% FPL
   Age 19-29 with income above 300%
    FPL more likely to be uninsured
   Hispanics with income above 300%
   More likely to have one worker in a
    small firm
   Less likely to report excellent or very
    good health
Illegal Aliens (AKA
Undocumented Non-US Citizens)
   Comprise 5 million of the uninsured
   NOT eligible for public assistance
   Numbers skew uninsured
Elderly Without Health
   Some have only Medicare Part A to fall back on
   17% (41 million) of those 65 and older have no other
Access and Outcomes for
   Study used Medical Expenditure Panel Surveys to
    assess people‟s SES, insurance coverage and access
    to care.
   Found:
     – Those uninsured who have an injury or new
       chronic condition have trouble accessing care
       and it takes longer for them to return to full
     – No difference in referral of additional services
       (PT, Home Health, etc)
     – More difficult to obtain health insurance in the
     – Those with chronic conditions less likely to
       receive treatment beyond initial consultation.
Why are so many uninsured?

   Lack of employer sponsored insurance
   Health costs are outpacing inflation
   Limited Medicaid coverage for low
    income adults
   Variations in state economies
Key Issues for
Republican Views

   Freedom to Choose Health Savings Accounts
   Individuals to Choose Their Own Health
    Insurance Benefits
   Providing More Affordable Health Care
    Choices by Expanding Competition
   Expanding Coverage Options for the
    Working Uninsured
Task Force on Health Care
Costs and the Uninsured
   2004
   Republican Senate Majority
   Senator Judd Gregg, chairman
Proposed Solutions
   Create incentives for young adults to purchase
    lifetime, portable insurance
   Improve enrollment in existing public programs
   Association Health Plans
   Encourage more doctor and provider participation
    in the safety net of care…
On National Health Care
BUSH: I‟m absolutely opposed to a national
  health care plan. I don‟t want the federal
  government making decisions for consumers
  or for providers. I remember what the
  administration tried to do in 1993. They
  tried to have a national health care plan,
  and fortunately it failed. I trust people; I
  don‟t trust the federal government. I don‟t
  want the federal government making
  decisions on behalf of everybody.
Reasons Why Not

   Inefficiency of federal government
   Decrease in patient flexibility
   Reduce doctor flexibility
   Healthy people to pay the burden
   No benefit to be a practicing physician
Defending John Q.

   an uninsured worker who forces
    doctors at gunpoint to treat his son
   a legitimate right doesn't impose
    obligations on anyone else

"Competition must be seen as a process
  in which people acquire and
  communicate knowledge“

    ~ Nobel laureate Friedrich Hayek

   Where real market competition can be
    found in health care, it drives quality
    upward and prices downward
   Laser eye surgery & cosmetic surgery
Competition- The
   we have disabled market competition
    throughout the health care sector
   too little competition, too little choice,
    and too little attention paid to costs
    and quality.
Health Savings Accounts

   Medical savings account
   accompanied by a health plan with a
    high deductible
Health Savings Accounts

   reduce medical spending by making
    consumers more sensitive to the costs
    of care
   together with high-deductible health
    plans should encourage consumers to
    make prudent treatment decisions
    because they are spending their own
Key Issues for
           Unimaginable Choices
               A severely disabled man‟s wife leaves her
                low-paying service sector job (which did
                provide health benefits) so she can care for
                her increasingly frail husband
               Although he qualifies for Medicare they
                cannot afford the $600 a month in
                prescriptions he requires
               In desperation she takes another service
                sector job, but it doesn‟t offer benefits and
                now she can‟t help her husband
NCMJ January/February 2002, Volume 63, Number 1

   The above stories represent just some
    of the causes for uninsured status
   Others include:
    - small business who cannot afford
    health coverage
    - low income populations not realizing
    their eligibility status

   These people will either delay
    treatment as long as possible, or they
    will simply not get care
   When they do get care, it often is in a
    free clinic, public hospital, or
    emergency room
   Now, their condition has become far
    more serious and expensive to treat
    because of the delay
What must happen next?

   Uninsured Americans have:
        - Limited access to medical care
        - Social/physiological environment
    that increases their vulnerability to
        - Differences in life-style that account
    for differences in health rates
   Uninsured Americans need programs that
    will help remedy their plight!
Democratic Views

   Democrats aim to pursue a legislative
    agenda that reflects the interests of
    middle- and working-class Americans
   Democrats want to extend health
    insurance to people who cannot afford
   The following will be major issues for
Three Major Issues

1. Expanding insurance to as many
   children of low-income families as
2. Empowering Medicare to negotiate
   prices of prescription drugs
3. Eliminate health insurance
   companies‟ discrimination on the
   basis of pre-existing conditions
          Boost S-CHIP

              Title XXI of Social Security Act: jointly
               financed by Federal & State governments
               and administered by the States
              Democrats must focus on expanding
               insurance to as many children of low-
               income families as possible
              SCHIP offers states federal funds for
               insurance coverage for children
NEJM, Volume 356:1-4, Jan. 4th, 2007
Centers for Medicare/Medicaid Services; DHHS
               Families that do not currently have health insurance
                may be eligible
               States have different eligibility rules, but in most,
                uninsured children under the age of 19, whose
                families earn up to $36,200 a year (for a family of
                four) are eligible.
               This insurance pays for:
                            - doctor visits
                            - prescription medicines
                            - immunizations
                            - hospitalizations
                            - emergency room visits
   We must provide more
    funding to local health
   In 2005, 8.3 million
    children w/o coverage
    Pelosi has said
    repeatedly that she will
    take up her gavel "on
    behalf of America's
           Prescription Drugs
               The current Medicare Rx drug law has failed to slow
                the rapid growth in drug prices – they are not
                containing drug price inflation
               Big drug companies report record profits and
                seniors pay higher drug prices

            One way to win discounts is to favor
             some drugs over others
            Beneficiaries could face a more limited
             choice of medications
            Lobbyists may influence which drugs are
            Pharmaceutical industry could discourage
             the development of new drugs
Washington Post; December 9, 2006; Article #AR2006120801578
         Mandatory Discounts on
             Dept of Veterans Affairs
              negotiates effectively to secure
              better prices for the 4.4 million
              veterans who use its drug
             "43 million people can have
              the purchasing power to
              perhaps encourage these drug
              houses to give the government
              and the American retirees a
              better price"
              - John Dingell, D-Mich.,
              Chairman of the House Energy
              and Commerce Committee

Piper Report;
       Comprehensive Health
               Provide health insurance coverage to
                Americans who would not have it due to a
                pre-existing condition
               Not a welfare or entitlement program
               You must pay premiums to participate in
                this plan
               Comprehensive major medical indemnity
                plan for persons not eligible for Medicare
Current Legislation
Current Reform Proposals

   Massachusetts
    – Requires everyone to purchase health insurance
    – “Connecter” links individuals with the insurance
      plan that is right for them
    – Employers with over 10 employees must offer a
      plan or possibly pay into a state    insurance
      pool (debate between gov. and leg.)
    – Government subsidizes those who are unable to
      afford coverage
    – Enforcement through income tax penalties
Current Reform Proposals
   California
     – Focus on preventative care
     – Everyone must purchase insurance, no employer
     – Low income individuals will be offered expanded
       state insurance and will be provided financial
       assistance to purchase insurance through a state
     – Insurers will be required to guarantee coverage
       and charge like prices for like populations.
     – State program reimbursement rates to providers
       will increase
     – Providers will take on responsibility for
      State of the Union and
      Financing Health Care
Proposed Legislation
Proposed Legislation:
Part 1
   Standard deduction
    – All health insurance becomes subject to
      income tax above the tax deductible
       Singles can deduct up to $7,500
       Families can deduct up to $15,000
       Standard deduction follows MPI

    – Eliminates tax-deductible health care
      expenditures incurred by employers
Rationale: Standard Deduction
   Higher wages and health expenditure visibility
    – Consumer choice between taxed wages and mostly
      non-taxed health insurance
          Increases visibility of health care costs
   Level playing-field
    – Non-employer-sponsored health insurance tax code
          Penalizes non-employer sponsored health insurance
          Penalizes less expensive employer-sponsored insurance
    – With standard deduction, all workers receive tax
Proposed Legislation:
Part 2
   Affordable Choices Initiatives (ACI)
    – Provide States financial incentives to make basic,
      affordable private health insurance policies
    – Shifts funds aimed at alleviating „bad debts‟
      expenditures of health care providers to insuring
      the uninsured
    – HHS and states work closely to find innovative
      ways to insure uninsured in each states‟ market
    Rationale: ACI
   Allocation of funds for more efficiency
    – Theoretically, fiscally-neutral
    – Publicly-funded health expenditures have risen
    – State reduction inefficient expenditures can be
      supported with reallocated federal funds (e.g., Medicaid)
   Competition & consumer-directed health care
    – Combined with the standard deduction, the market of
      health insurance will be more accessible to more
          Increases in competition among health insurance plans
          Affordability and responsibility brought to consumer
   Deregulation
Target Groups: Standard
   Winners
     – 80% of employees: receive tax benefits
       or choose higher wages
   Neutral
     – 20% of employees: generous health care
       policy owners will have to decide
       between higher taxed wages or better,
       but taxed health care coverage
   Losers
     – Employers: tax-deductible health
       expenditures will disappear
Target Groups: ACI
   Winners
     – Uninsured and hard-to-insure peoples: with more
       innovation in the individual markets, the number of
       privately-insured will rise
     – Tax-payers: with more privately-insured, the less
       government needs to pay for health care; thus, less
       tax-payer‟s dollars can be better allocated
     – Out-patients services: increases in number of
       insured increases utilization of out-patient services
   Neutral
     – Hospitals: with less uninsured patients, hospitals
       will receive less government subsidies, but they will
       also be able to allocate care to more deserving
       health needs
Mechanism: Standard Deduction
   Increasing the risk pools
    – Higher wages and a non-restrictive benefit plan
      offered by employers under standard deduction
      will allow employees to shop around
    – ACIs may allow uninsured to shop in same market
          E.g., „Commonwealth Health Insurance Connector”
   Increased visibility of health-care costs
    – A standard deductible will allow peoples to realize
      the actual cost of health insurance
    – Combined with „cafeteria‟ and other CDHC plans
      proposed via ACIs, both the uninsured and insured
      will purchase only what they need
Financing: Standard Deduction &
   Government intervention
     – Fiscally neutral solution
          It shifts tax-deductible health expenses from
           employer to employee
     – Successful ACIs may shift cost of uninsured unto
       insurance companies rather than tax-payers
     – ACIs: income-related subsidies/premium assistance
   Market forces
     – More consumers in non-employer sponsored
       market = more competition
          Aided by CDHC, e.g., HSA‟s
   Standard deduction limitations
     – Higher wages = misplaced priorities
     – More consumer choice will cause adverse (and favorable)
         The ability for consumers to jump in-and-out of risk pools
           due to favorable selection by insurance companies may
           cause adverse selection for sicker patients
         Can be remedied by subsidies and other interventions

     – Assumes that consumers can be responsible for their own
       health care
         Though employers can still be a source of a risk pool,
           other sources of risk pool may arise, from small pools
           made up of likeminded people to „connector‟ plans
           instituted by the gov‟t

   Considered fiscally „neutral‟
   Incremental, but bold
    – Increased consumer awareness (transparency)
      of health care costs drives…
    – Increases in private health insurance
      expenditures, which drives…
    – Bigger risk pools, which drives…
    – Lower premiums, which results in…
    – A greater number of insured
   Levit, Katharine, Cathy Cowen, “Business, Households and
    Governments: Helathcare Costs 1990- Healthcare Financing Trends,”
    Helathcare Financing Review.

   Smith, Cynthia, Cathy Cowan, Stephen Heffler, Aaron Catlin, and the
    National Health Accounts Team, “National Health Spending in 2004:
    Recent Slowdown Led by Prescription Drug Spending,” Health Affairs
    Vol. 25, No. 1 (January/February 2006): 186-196.

   Centers for Medicare/Medicaid Services;
   North Carolina Medical Journal; January/February 2002, Volume 63, Number 1
   AARP Public Policy Institute, August 2002
   The Health Insurance In The Private Sector (HIPS) Survey of Private Sector Firms September 2001;
   New England Journal of Medicine, Volume 356:1-4, Jan. 4th, 2007
   Illinois Green Party;
   U.S. Chamber of Commerce;
   Health Resources and Services Adminstration‟
   Washington Post; December 9, 2006; Article #AR2006120801578
   Piper Report;
   Illinois Legal Aid;
   Holahan, J., Cook, A. and Dubay, L. Characteristics of the Uninsured: Who Is
             Eligible for Public Coverage and Who Needs Help Affording Coverage?
    Kaiser            Commission on Medicaid and the Uninsured. Feb. 2007.
   QuickStats: Reasons for No Health Insurance Coverage* Among Uninsured
    Persons         Aged <65 Years. National Health Interview Survey, United
    States, 2004
          JAMA. 2007;297:1054.
   Hadley, J. Insurance Coverage, Medical Care Use, and Short-term Health
    Changes         Following an Unintentional Injury or the Onset of a Chronic
    Condition.      JAMA. 2007;297:1073-1084.
   Key Facts: Race, Ethnicity and Medical Care, 2007 Update. Kaiser Family
   The Uninsured and their access to health care. Kaiser Commission on Key
    Facts:         Medicaid and the Uninsured, October 2006.
   Massachusetts Health Care Reform Plan. Kaiser Commission on Key Facts:
         Medicaid and the Uninsured. April 2006
   Governor‟s Health Care Proposal
   D. K. Remler and S. A. Glied, How Much More Cost-Sharing Will Health Savings Accounts Bring?, Health
    Affairs, July/August 2006 25(4):1070–78
   Cannon, Michael F. Real Competition is the Cure for Health Care. September 26, 2005.
   Goodman, John C. and Musgrave, Gerald. Twenty Myths About National Health Insurance.
   Republican.Senate.Gov
   Eric Robinson, Chairman of the Sarasota County Republican Party
   Dunn, Wayne. Defending rights of John Q- dr. John Q. Capitalism Magazine. February 2002.
   Affordable, Accessible, and Flexible Health Coverage. Online
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   Wages and health expenditure visibility, from: Sherk, J. &
    Owcharenko, N. (2007). How Bush‟s Health Care Tax Plan Will
    Raise Wages. WebMemo #1345. Heritage Foundation. Accessed:
    March 18th, 2007
   Woolhander, S. & Himmelstein, D. U. (2002). Paying for national
    health insurance – And not getting it. Health Affairs, 21(4), 88-98
   Furrow, B. R., Greaney, T. L., Johnson, S. H., Jost, T. S., & Schwartz,
    R. L. (2004). Health Law: Cases, Materials, and Problems, 5th ed.
    West Pub., St. Paul, MN.
   Hadley, J. & Holahan, J. (2004). The Cost of Care for the Uninsured:
    What Do We Spend, Who Pays, and What Would Full Coverage Add
    to Medical Spending? KFF. Medicaid and the Uninsured: Issue
•   Hadley, J. (2007) Insurance Coverage, Medical Care Use, and Short-
    term Health Changes Following an Unintentional Injury or the Onset
    of a Chronic Condition. JAMA. 2007;297:1073-1084.
   Massachusetts Health Care Reform Plan. (2006). KFF. Medicaid
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   Butler, S. M. & Owcharenko, N. (2007). Making Health Care
    Affordable: Bush‟s Bold Health Tax Reform Plan. WebMemo #1316.
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    March 18th, 2007
   National Survey of Enrollees in Consumer Health Directed Health
    Plans. (2006). Online Summary. KFF. Accessed: March
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   Herzlinger, R., Ramin, P. (2004). Consumer-driven health care:
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