The New Health Reform Law: What Does It Mean? Will It Work? Leonard Rodberg, PhD Urban Studies Dept., Queens College/CUNY and NY Metro Chapter, Physicians for a National Health Program Presented at Weill Cornell Medical Center

Why Health Care Was On the Agenda: Escalating Cost Worker and Employer Contributions to Family Coverage * Estimate is statistically different from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, $5,791 $6,438* $7,061* $8,003* $9,068* $9,950* $10,880* $11,480* $12,106* $12,680* $13,375* $13,770* Why Health Care Was On the Agenda: Escalating Cost

Number and Rate of Uninsured Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements But the New Reform Plan Seeks to Address this Problem Instead: The Rising Number of Uninsured (Though the Rate is Steady)

The New Health Reform Plan* Provides insurance coverage for some …but it does almost nothing about cost! * The formal name for the legislation is the Patient Protection and Affordable Care Act (PPACA). The Obama Administration refers to it as the Affordable Care Act (ACA).

International Comparison: Universal Coverage at Less Cost -- They Must Be Doing Something Right! Average spending on health per capita ($US PPP) Total expenditures on health as percent of GDP Source: OECD Health Data 2009.

The Outlier Nation: Our Public System Covers Fewer… Source: F. Colombo and N. Tapay, Private Health Insurance in OECD Countries, OECD 2004 United States

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

Most People Get Their Coverage from the Private Sector 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)

But Employer-sponsored Insurance is Declining… Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements

…And 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. 2008; data for 2006 Private Insurance 34% (Federal tax subsidy)

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)

The President’s Fateful Choice In creating a reform plan, the President could have chosen to -- build on the public sector, especially Medicare, or -- expand the private sector. He chose to build his program on private insurance: -- leave the basic structure unchanged -- attempt to achieve the goals of health reform by changing the behavior of private insurance companies through regulation.

The Problems Facing the Program Private insurance is -- too expensive for many people -- complex and deficient in many ways -- profitable for the insurers when they can avoid sick people and limit what they have to pay for. The reform program tries to solve these problems through -- subsidies for individuals and employers -- trying to tame the insurance companies through regulation

The Great Dealmaker The Obama Administration made a series of deals to pass PPACA: The insurance industry: Assured that everyone would be required to buy their product -- and there would be no public option 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”

Overall Consequences of PPACA Continued reliance on private insurance Employment-based insurance unchanged Market competition will determine what health care costs (insurance premiums, co-pays, deductibles) and how it works (payment and denial practices) Nothing but experimental pilot programs to try and reduce system costs, so there will be no likely reduction in costs or waste Result: The program will make very little difference in the lives of most people. Why? Because there’s no change in the way we will be paying for health care.

PPACA will be implemented over ten years. Beginning now: Insurance companies required to cover dependent children up to age 26 No lifetime limits on coverage Begin closing the Medicare drug benefit “donut hole”, finally closed in 2020 Government review of insurance premiums Experimental programs in Medicare to reduce costs (e.g. primary care medical home, accountable care organizations)

Citizens and legal immigrants required to be insured. Penalties up to 2.5% of income. Insurers required to take everyone. State-based insurance “exchanges” for individuals and small employers Subsidies up to 400% Federal poverty level so premium (only) is less than 9.5% of income “Hardship waiver” if premium greater than 8% of income  Can remain uninsured. Medicaid for all below 133% poverty level Starting in 2014: The Insurance Mandate

Still later: In 2017, allow state experimentation with alternative insurance arrangements In 2018, start taxing “Cadillac” insurance plans worth $10,200 individual/$27,500 family

What Happened to the Public Plan? The Original “robust” Plan Open enrollment Medicare-like, backed by the Federal Government 119 million members (Lewin) The Congressional Plan Restricted enrollment (only the uninsured) Self-sustaining, follow same rules as private insurers Perhaps 6 million members The 800-pound gorilla turned into a mouse – and then it was gone!

Millions Will Remain Uninsured (and Millions More Poorly Insured) Millions Note: The uninsured include about 5 million undocumented immigrants. Source: Congressional Budget Office.

…and Costs Will Keep On Rising 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 Estimated Financial Effects of PPACA as Amended, Richard Foster, CMS Actuary, April 2010 $4.67 $ % annual growth 6.6% annual growth 6.0% annual growth $4.7 National Health Expenditures as Percent of GDP

Annual Costs in 2016 at the 2 nd “Silver” Level in Exchange without Subsidy Average Average Total Premium Cost-Sharing Cost Individual: $ 5,200 $ 1,900 $7,100 Family: $ 14,100 $ 5,000 $19,100 Actuarial Value of Policy = 70% (“Bronze” level: 60%) Source: Congressional Budget Office, Nov. 30, 2009

Insurance Costs in the Exchange with Subsidy Income (%FPL) Income for family of 3 (Middle of range) Annual Premium Premium as % of income Total Potential Costs (% of Income) 150$22,000$1,0994.0%18.1% $32,000$2,3076.3%16.9% $46,000$5,2189.8%20.1% $64,000$6,9589.8%20.1% Source: Community Catalyst and PICO National Network

Change in Coverage under the Act (millions)

Many reasons for remaining uninsured (millions)

The Bottom Line The world’s most expensive system will become even more costly PPACA will not lead to universal coverage It will not make affordable insurance available to everyone It will leave millions uninsured and poorly insured It will not control the continuing growth in cost Why? Because it doesn’t change the way we pay for health care.

The Alternative Public Route to Real Health Care Reform: Conyers’ Expanded and Improved Medicare for All HR 676 Extend Medicare to cover everyone Comprehensive benefits Free choice of doctor and hospital Doctors and hospitals remain independent Public agency processes and pays bills Financed through progressive taxes Costs no more than we are now spending

Big Savings from Single Payer: Billing and Insurance Overhead Consume Nearly 30% of Spending 28% Spending through private insurers

Covering Everyone with No Additional Spending Additional costs Covering the uninsured and poorly-insured +6.4% Elimination of cost-sharing and co-pays +5.1% Savings Reduced hospital administrative costs -1.9% Reduced physician office costs -3.6% Reduced insurance administrative costs -5.3% Bulk purchasing of drugs & equipment -2.8% Primary care emphasis & reduce fraud -2.2% Source: Health Care for All Californians Plan, Lewin Group, January $ B Total Costs +11.5% Total Savings -15.8% Net Savings - 4.3% - 73

How Medicare for All Could Be Paid For: One Example from a Recent Study of a California Plan

Medicare for All offers real tools to contain costs Budgeting, especially for hospitals Capital investment planning Emphasis on primary care, coordination of care, and alternative ways of paying for services

Conclusion A reform plan based on private insurance will not lead to universal coverage and can’t control costs. An expanded Medicare for All program can provide comprehensive services, cost no more than we now spend, and provide tools to control costs going into the future. The problems of the health care system will not go away under PPACA. Real health care reform built on Medicare for All continues to be essential.

Can We Wait Another 16 Years? We Need Real Health Care Reform Before the Premium Takes All our Income! Source: American Family Physician, November 15, 2005 Today