Growing Unaffordability of Health Care: Incremental vs. Real Health Care Reform
John P. Geyman, MD

Major Problems of Health Care System
o Increased Costs
o Decreased Access
o Variable Quality
o Increased Fragmentation
o Increased Administrative Burden
o Technological Imperative
o Medico-legal Liability
o System Out of Control

Health Care Costs in U.S.
o 16.5% of GDP
o $2.1 trillion per year
o Increased cost-shifting to individuals/families
o Incremental "reforms" ineffective

Escalating Costs of Care
o Double digit increases in health insurance premiums
o Average family premium now over $10,000 per year
o 31% of total health costs are administrative
o HMO rates up by 11.7% in 2007 vs CPI increase of 2-3%

Growing Unaffordability of Health Care
o "Medical divide" at about $50,000 annual income
o Median household debt over $100,000
o Median family income $41,000 a year
o Health insurance premiums to consume one-third of average household income by 2010
Access Problems for Middle Class Families (see graph)

Medical Bankruptcy
o About half of personal bankruptcies
o Between 1.85 and 2.23 million Americans affected annually (debtors + dependents)
o 76% HAD coverage at the onset of bankrupting illness

Underinsurance a Growing Problem
o Average deductible of CDHC/HDHI plans $4,000 a year
o Blue Cross PPO plan in Massachusetts up to $12,000 deductible
o Annual caps of limited benefit plans as low as $10,000 (Aetna, Cigna)
o Profitable industry with little value of coverage

Private Health Insurance Industry in U.S.
o 1,300 companies fragment risk pools
o Medical underwriting, favorable risk selection
o $300 billion a year industry
o Minimal regulation, mostly at state level
o Average of 80% medical-loss ratios
Private Insurers' High Overhead -- Investor-owned Plans Are Worst (see graph)

Three Alternatives for Health Care Reform
1. Employer mandate
2. Individual mandate (Consumer-driven health care)
3. Single-payer system

Consumer Choice ("Individual Mandate") [Option 2]
o Increasingly popular pro-market "solution"
o Shifts responsibility for coverage from employers to consumers
o Assumes a free market in health care
o Assumes adequate information and options for consumers
o Current examples:
- premium support for defined benefits
- privatizing of Medicare
- medical savings accounts

Problems with Option 2
o Less service for more cost
o Serves for-profit insurance industry
o Coverage by risk selection
o Limited choice for consumers
o "Bad plans can drive out the good ones"
o Is still the most politically popular and likely

Why Incremental "Reforms" Keep Failing
1. Favorable risk selection by insurers
2. High administrative costs and profiteering
3. No mechanisms to contain costs
4. Fragmentation of risk pools
5. Decreasing access to necessary care
6. Lack of accountability for value and quality
Cumulative Changes in Health Insurance Premiums, Overall Inflation, and
Workers' Earnings, 2000-2006 (see graph)
Annual Health Insurance Premiums and Household Income, 1996 - 2025 (see graph)

Option 3: Single-Payer System
o Socialized insurance, not socialized medicine
o Universal coverage through National Health Program
o Eliminates private health insurance industry
o Hospitals and nursing homes with global budgets
o Physicians reimbursed by fee-for-service
o Blend of federal and state government roles

Fundamental Features of Universal Healthcare System
o Everyone included
o Public financing
o Public stewardship
o Global budget
o Public accountability
o Private delivery system

What Would a NHP Look Like?
o Everyone receives a health care card assuring payment for all necessary care
o Free choice of physician and hospital
o Physicians and hospitals remain independent and non-profit, negotiate fees and budgets with NHP
o Local planning boards allocate expensive technology
o Progressive taxes go to Health Care Trust Fund
o Public agency processes and pays bills

Advantages of National Health Program
o Assured access for all Americans
o Cost savings ($200 billion/year)
o Administrative simplicity
o Decreased overhead (Medicare 3% vs. private insurance 15%-26%)
o Distributes risk and responsibility to finance care
o Improves access, costs, and quality of care
Medicare Coverage Is Better Than Private (see graph)
"Would you prefer the current health insurance system… or a universal coverage program like Medicare that is government-run and financed
by taxpayers?" (see graph)
Health Care Coverage For All vs. Taxes (see graph)

Problems with Option 3
o Political acceptance
o Lobbying by special interest stakeholders
o Disinformation by media coverage
o Philosophic concerns about "big government"
o Denial of ineffectiveness of market-based system