Whole Washington Better healthcare for less Gerald Friedman Professor of Economics University of Massachusetts at Amherst March 2, 2018 Follow me at @gfriedma gfriedma@econs.umass.edu

Where we are going America’s health care: too expensive for too little How we got into this mess: the market turn in health policy A better way: Whole Washington How we will win: people power over money power

America’s health care: too expensive for too little Note: healthcare spending associated with longer life expectancy. Except, for US Life expectancy short 6 years. Or spending $7000 per person too much compared with Chile (with about equal life expectancy).

Getting worse since 1970 We spent more than other countries in 1971 but nearly four-times as much now. Between 1971 and 2008, we gained less life expectancy, at over three times the cost! Other countries became more efficient, we became less.

Cost of health care is a problem for Washington Cost of health care is a problem for Washington. And it is expected to get worse CMS projected spending 2017-29

Washington’s workers pay for the rising price of healthcare Average cost per employee in Washington of healthcare costs rising beyond CPI

Problem is the prices. We do not use too much health care.

The market turn in health policy Reduced access, but without financial savings

Soaring deductibles

Exhibit 6 Adults Who Cited Cost as a Reason for Skipping Prescriptions or Doses, 2016 Percent Data: 2016 Commonwealth Fund International Health Policy Survey of Adults in 11 Countries.

We ration care. And people die. The rich longer, and the gap is growing! For men, the gain from being rich has grown from 6.4 years to 10.7 (+4.3 years); for women, from 4.2 to 9.5 (+5.3 years). Life expectancy is declining for the poorest 40% of women! Bosworth and Burke, “Retirement Benefits in the Health and Retirement Study” at http://www.brookings.edu/research/papers/2014/04/differential-mortality-retirement-benefits-bosworth. Average for OECD from OECD http://www.oecd.org/els/health-systems/oecdhealthdata2013-frequentlyrequesteddata.htm November 2013 update.

Americans die because they can’t afford health care

People in Washington die because they can’t afford to see a doctor Each dot represents a county in Washington. The more people can’t afford to see a doctor, the higher the mortality rate

Especially the poor Each dot represents a county in Washington. The higher the poverty rate, the higher the mortality rate

Rationing by income fails to control costs Rationing by income fails to control costs! Costs rise because of monopoly power and administrative waste http://www.commonwealthfund.org/usr_doc/Davis_slowinggrowthUShltcareexpenditureswhatareoptions_989.pdf These are quality controlled price indices from the Bureau of Labor Statistics http://www.commonwealthfund.org/usr_doc/Davis_slowinggrowthUShltcareexpenditureswhatareoptions_989.pdf These are quality controlled price indices from the Bureau of Labor Statistics.

US vs. Netherlands

A government healthcare system would be a bureaucratic nightmare! Administrative Bloat Is No Accident Insurers profit by driving away claims and people who file! Are you crazy? A government healthcare system would be a bureaucratic nightmare!

Selection policies feed bureaucratic bloat Private insurance is the problem Inherently wasteful because insurers profit from waste 66:10 rule –66% of costs go to 10% Shoe companies want to sell more shoes. Insurers profit by selling less. Find the 10%; drive them out! Copays, deductibles, paperwork, hassles to drive away sick Private insurers who practice adverse selection prosper: Others face insurance death spiral Selection policies feed bureaucratic bloat Lemon dropping because 50% of spending for 5% Cherry picking because only 3% of spending for 50% of people

A better way: Whole Washington saves money and provides better access

Whole Washington would allow quality improvements

We will spend money on health care, not administration and monopoly prices

Some benefit more than others

Other benefits Avoid 6,121- 7,324 bankruptcies per year Over 40 years, 9-11% chance Washington adult will go bankrupt because of medical bills. Net increase in employment of 101,879 Lower premature mortality by as much as 12%, saving 7,500 lives Economic value of $75 billion, annually.

Estimating spending Personal health expenditures $ 72,766 $ 72,766 Insurance and government administration $ 6,592 Employer administration $ 622 Total spending $ 79,980 Savings Provider administration $ 5,527 Market Power (Pharmaceuticals and Hospitals) $ 3,536 Insurance Administration $ 5,282 Fraud reduction $ 1,455 Total Savings $ 16,423 Program improvements Universal coverage $ 1,336 Utilization (removal of copays and deductibles) $ 3,249 Medicaid rate $ 680 Assumption of Medicare premiums $ 1,878 Public administration of program improvements $ 91.7 Transition costs for UI and retraining $ 91.9 Cost of program improvements $ 7,327 Net spending, single payer, 2019 $ 70,885

Revenue sources Net spending, single payer, 2019 $ 70,885 $ 13,793 $ 70,885 Medicare $ 13,793 Medicaid $ 14,205 SCHIP $ 140 VA $ 1,609 Fed share of Medicaid rate adjustment $ 420 New Federal Medicaid for utilization $ 219 Other third party (TRICARE, IHS, charity, etc.) $ 8,825 Remaining out-of-pocket (actuarial value of 96%) $ 2,835 Current state spending (other than public health) $ 120 ACA subsidies $ 494 Available revenue $ 42,660 Needed revenue $ 28,225 8.5% payroll premium on wages, salaries, business net income with $15,000 exempt on sliding scale $ 18,019 8.5% payroll premium on partnership income, with $15,000 exempt on sliding scale $ 1,102 8.5% premium on capital income, with $15000 exempt on sliding scale $ 2,915 1% income tax with $15,000 exemption $ 2,839 Premiums with low income exemption and sliding scale for lower-middle income $ 4,375 Total new revenue: $ 29,250 Surplus (shortfall) $ 1,025

Sustainable and savings grow over time

Sustainable

How we will win: people power over money power FDR to Sidney Hillman (leader of the CIO): “I agree with you, I want to do it, now make me do it.” Politicians will not take the lead; they are too cautious about antagonizing the insurance industry, big pharma, big hospitals. We must lead so they can follow.

All Of Us Have the Right to Health Care. We Can Make It Happen.