National Health Expenditures: Act of Have Unaffordable Care

Health Affairs (http://content.healthaffairs.org/content/early/2012/06/11/hlthaff.2012.0...)
June 2012
National Health Expenditure Projections: Modest Annual Growth Until Coverage Expands And Economic Growth Accelerates
By Sean P. Keehan, Gigi A. Cuckler, Andrea M. Sisko, Andrew J. Madison, Sheila D. Smith, Joseph M. Lizonitz, John A. Poisal and Christian J. Wolfe

2012

$2,809.0 billion - NHE (National Health Expenditures)

$8,952.8 - NHE per capita

17.9% - NHE as percent of GDP

$37.5 billion - Government administration (Note d)

$162.6 billion - Net cost of health insurance (Note e)

d Includes all administrative costs (federal, state, and local employees’ salaries; contracted employees, including fiscal intermediaries; rent and building costs; computer systems and programs; other materials and supplies; and other miscellaneous expenses) associated with insuring individuals enrolled in the following public health insurance programs: Medicare, Medicaid, Children’s Health Insurance Program, Department of Defense, Department of Veterans Affairs, Indian Health Service, workers’ compensation, maternal and child health, vocational rehabilitation, Substance Abuse and Mental Health Services Administration, and other federal programs.

e Net cost of health insurance is calculated as the difference between calendar year premiums earned and benefits paid for private health insurance. This includes administrative costs and, in some cases, additions to reserves; rate credits and dividends; premium taxes; and plan profits or losses. Also included in this category is the difference between premiums earned and benefits paid for the private health insurance companies that insure the enrollees of the following public programs: Medicare, Medicaid, Children’s Health Insurance Program, and workers’ compensation (health portion only).

Conclusion

For 2011 through 2013, the lingering effects of the economic recession and modest recovery, mostly in the form of limited growth in incomes, are expected to continue to constrain health spending growth. In 2014 the coverage expansions laid out in the Affordable Care Act for Medicaid and for private health insurance are expected to increase the growth rate for health spending to 7.4 percent, with notable increases expected in spending on physician services and prescription drugs for newly insured patients. By the end of the projection period, higher income growth and the continuing shift of baby boomers into Medicare are expected to cause health spending to grow roughly two percentage points faster than overall economic growth, which is about the same differential experienced over the past thirty years.

Dr. Don McCanne's comment:

This is the annual report that is used most often as a resource for our health care spending.

The numbers to remember for 2012:

National Health Expenditures: about $2.8 trillion
Health spending per capita: about $9000
Spending as a percent of GDP: about 18%

After the transitions of the next decade, health care spending is expected to continue to grow two percentage points faster than overall economic growth - the same differential experienced over the past thirty years. It makes you wonder when Herbert Stein's principle will kick in (essentially, if it can't go on, it won't).

Since we are seeing an increase in the political rhetoric divided over whether the government or markets should be the dominant force in health care financing, it is worthwhile looking at the total administrative costs of these two approaches to financing health care. Although government spending accounts for about half of all health care spending, we are paying private insurers more than four times as much in administrative costs and profits as we are spending on government administration of health insurance programs.

It is true that the net cost of private health insurance includes the administrative costs of private Medicare Advantage plans and private Medicaid and CHIP managed care plans, but this does not begin to account for the four fold differences in total administrative costs between public and private insurance.

Keep this in mind during the national debate over the Affordable Care Act this political season, which will continue to take place regardless of the Supreme Court decision. One side will argue that we need to encourage free markets of private plans plus private options for Medicare. The other side will argue that we need exchanges to provide choices of private plans, while continuing to offer private Medicare Advantage plans. The one side will talk about private markets while condemning the government, whereas the other side simply will avoid rhetoric referencing the government while touting the virtues of nominal ACA reforms of the private insurers. Both sides are wrong!

We need to get rid of the private insurers. . .

And. . .My comment:

Switch to state based single payer programs with federal minimum standards. Here is how I described it in a recent Salt Lake City Weekly article:

We, at UHI, propose radical reforms uniquely suited to Utah, which take advantage of the best aspects of health care delivery already present in the Beehive State. We have the nation’s lowest per capita health care cost, in part because we have some of the nation’s highest quality hospitals and associated clinics (IHC and University Hospital). We also have one of the nation’s most efficient private payers for health care services--Public Employees Health Plan (PEHP). PEHP has an overhead cost consistently less than 4%, substantially below the Utah industry average of 15%. PEHP is a private, non-profit trust fund operated for the benefit of Utah’s public employees and their dependents. UHI proposes to convert PEHP to the sole payer for health care services for all Utahns and re-name it the Utah Health Cooperative. Immediately upon passage of the ballot initiative enabling this transformation, the Utah Health Cooperative would begin offering a health benefit program to all residents of Utah while beginning the process of merging with all public health care programs (Medicaid, CHIP, etc.) Private health insurers would have two years to phase out their Utah operations. The Utah Health Cooperative would negotiate to become the fiscal agent for Medicare in Utah, anticipating the time when Medicare beneficiaries living in the Beehive State could be phased into full participation in the program. The most important function of the Utah Health Cooperative, aside from receiving and managing all funds intended to support health services in Utah, would be to use its monopsony clout to improve health system function, including better use of primary care, improved distribution of public health, optimizing behavioral health services, negotiating better prices for pharmaceuticals and medical devices, and supporting continuous quality improvement system wide.

UHI also proposes the creation of a new government regulatory/adjudicatory agency, which we call the Utah Health System Commission. The Utah Health System Commission will have two principal tasks: 1. Define the clinically proven set of health benefits for every citizen in Utah; and 2) adjudicate claims against any part of the health system efficiently. The commission will be given two years after passage of the enabling statute to determine what diagnostic and therapeutic interventions have been proven effective by clinical science while being the least expensive alternative. These interventions will constitute the initial Uniform Benefit for all Utah residents. The commission will have the task of continuously reviewing clinical science as it evolves to keep the Uniform Benefit updated. The commission will also organize an administrative law system, similar to the system that handles claims about workplace injuries and illnesses, for the purpose of adjudicating claims against any part of the health-care system, such as malpractice. The principal features of this administrative law system will be that no punitive damages will be allowed and no jury trials will be conducted.

For a more comprehensive review of the UHI health system reform proposal, please visit our website (http://www.utahhealthcareinitiative.com/solutions).

The bottom line is simple. The Affordable Care Act is probably unconstitutional. In any event, it was never affordable, because it never attacked the real problem with American health care: high cost due to inefficiency and poor quality. Whether or not the US Supreme Court strikes down the individual mandate, Obama-care will fail, good intentions or no. As that happens, the Utah Healthcare Initiative is prepared to lead the heavy political lifting needed towards health system reform done by Utah voters for Utah patients, through the ballot initiative process.

Join the Utah Healthcare Initiative by becoming a fan on Facebook, following our daily blog updates through Twitter (@UtahHealthcare), and donating through PayPal on our website (www.utahhealthcareinitiative.com).

Dr. Joe Jarvis