State Health Care Reform: Key Questions and Answers
Table of Contents
- Executive Summary
- Introduction
- Do We Need Individual Mandates?
- Should Government Decide How Medicine Should Be Practiced?
- Does Universal Coverage Lower Health Care Costs?
- What Is the Best Use of Government’s Health Care Dollars?
- Should We Encourage Consumer-Directed Health Reforms?
- Are Electronic Medical Records The Answer?
- Are Guaranteed Issue and Community Rating the Answer?
- Is a Massachusetts-Style Connector Part of the Answer?
- Does Modeling by the Lewin Group Bias State Choices?
- Notes
- Appendix A
- Appendix B
- Appendix C
- About the Authors
Executive Summary
Popular Claims versus Scholarly Evidence
Claim: People without health insurance have no access to care.
Evidence : Among those with comparable incomes, the uninsured get about the same amount of health care as those with insurance once they seek care.
Claim: Insuring people will eliminate uncompensated care.
Evidence :
The largest amounts of uncompensated care are generated by Medicare and Medicaid patients. This occurs because Medicaid and Medicare pay providers less than cost. Eliminating the uninsured by putting them on Medicaid may actually increase the amount of uncompensated care by eliminating the payments the uninsured make for their own care, increasing utilization and increasing administrative overhead. In the 1990s, Tennessee insured everyone in the state under the TennCare program. The program was supposed to eliminate uncompensated care, but by the late 1990s uncompensated care had increased.1
Claim: Health insurance is unaffordable for individuals.
Evidence :
In Colorado, a 40-year-old woman can choose from a number of comprehensive health insurance policies that cost less than $100 a month. Adding two children costs about $50 to $100 a month more. The most this woman would have to pay for health insurance, regardless of health status, would be $425 a month under Cover Colorado, the state’s risk pool, or insurance plan, for the uninsurable.
Claim: Medicare has lower administrative costs than private insurance plans; private insurers have administrative costs of 30 percent.
Evidence :
Recent papers suggest that Medicare administrative costs are similar to those in the private sector — even ignoring the fact that Medicare is not solvent.2 Overhead is not necessarily bad. It includes case management for patients with chronic conditions, health education expenses, fraud detection and customer service, areas in which Medicare is notoriously weak.3 In 2002, the Washington State Office of the Insurance Commissioner determined that administrative expenses for companies filing annual statements with the state averaged 12.6 percent of overall revenues.
Claim: Mandating electronic health records will lower costs and improve quality.
Evidence :
Evidence from existing systems suggests that results are mixed and that there are significant concerns with record availability, accuracy and security.
Claim: Mandating evidence-based medicine will lower costs and improve quality.
Evidence : Where evidence-based medical decision-making processes have been implemented, there are indications they are used to control costs by denying access to effective therapies.
Claim: Care coordination and case management will lower costs.
Evidence :
Experiments with disease management have lowered costs in some cases but not in others. Case management for expensive events like trauma is already routine for private insurers. Ongoing experiments concentrate on managing some chronic conditions known to generate avoidable costs.
Claim: Because the United States has the highest per capita health care spending, it “spends too much on health care.”
Evidence : Not all higher spending is waste. Wealthier people spend more on health in order to function better, just as they spend more on housing, transportation and entertainment. Countries with lower levels of health care spending have worse health outcomes than the United States along a variety of measures. Within the United States, vacationers admitted to emergency rooms in high-spending areas have lower mortality rates than similar visitors in lower spending areas.4
Claim: The U.S. health system spends more money and has poorer outcomes than health systems in other countries.
Evidence :
The medical literature shows the opposite. Disparities between health care access for the rich and poor are lower in the United State than in other countries. A few examples of comparative outcomes include: lower U.S. infant mortality rates, higher cancer survival rates, better population blood pressure control, lower mortality and morbidity from cardiac disease, better diabetes treatment, more preventive care, and better health and quality of life for spinal cord injury patients. Compared to the British National Health Service, U.S. medical care provides more services for roughly the same expenditures.5
Claim: More spending on the indigent will improve health outcomes.
Evidence :
Spending on the indigent has risen significantly and there is little evidence of positive effects. It may be time to study how money is spent rather than simply spending more.
Claim: Integrated health care systems will lower costs.
Evidence :
Integrated health care systems have raised costs in states such as Wisconsin, where hospital networks use primary care practices to provide patients for their higher margin hospital services and as barriers to competition. Colorado has determined that Medicaid managed care costs more than its current fee-for-service system, possibly due to higher overhead costs.6
Claim: People are better off if their health insurance policies have lower deductibles and pay for routine care.
Evidence :
Buying insurance for expected expenses is the most expensive way to purchase medical care. Lower deductibles come with higher premiums. Someone spending $10,000 on health insurance with a $500 deductible might be able to buy a policy with a $5,000 deductible for $5,000 a year and save the remaining $5,000 in a tax-free health savings account. The higher deductible makes this person better off if his health expenses for the year are less than $5,000.
Claim: The uninsured get their care at the emergency room, driving up costs for everyone.
Evidence :
A recent look at a census of all frequent users of Massachusetts emergency rooms suggests that ER use by the uninsured is roughly the same as for the privately insured. The Urban Institute has concluded that the uninsured do not use emergency rooms at a higher rate than the insured.7
Claim: Centralizing administration will lower costs.
Evidence :
If this were true, the Soviet Union would have had the lowest costs in the world. In fact, smaller systems tend to have lower administrative costs. Counter-evidence for the superiority of competitive systems includes a comparison of the Northern California Kaiser Health Plan with the British National Health Service. Researchers found that costs were comparable but that Kaiser provided more for the money.8
Claim: Insurance company profits increase the cost of care.
Evidence :
There is a great deal of evidence showing that for-profit entities minimize costs better than nonprofit entities. Competitive markets generally make price increases difficult. When that happens, the only certain way to generate profits is to cut costs. In some cases, the efficiencies created by the drive to minimize costs allow for-profit firms to provide services that are better and less expensive than their nonprofit competitors, even though the for-profit entities must pay higher taxes and shareholder dividends. There is no evidence that health insurers are making abnormal profits.
Claim: More preventive care for individuals will save money.
Evidence :
With the exception of things like childhood immunizations, the evidence suggests that many preventive care initiatives increase expenditures.9 This is because most preventive care consists of screening for early detection of diseases that are less expensive to treat if caught early. While screening lowers individual risk, it increases overall expenditures because the savings from the relatively small number of early cases detected are smaller than the total costs of screening the population. This is why there is more preventive care screening in the United States than in government-run health care systems. Individuals are more likely to pay more to lower their own risks; government accountants are more likely to be concerned with total expenditures.
- Data from the RAND Health Insurance Experiment suggest that “with no insurance at all, people would have spent about half the cost of free care.” Emmett B. Keeler, “Effects of Cost Sharing on Use of Medical Services and Health,” Medical Practice Management, summer 1992, page 318. Available at http://www.rand.org/pubs/reprints/2005/RP1114.pdf. Access verified December 10, 2007.
- See Merrill Matthews, “Medicare’s Hidden Administrative Costs: A Comparison of Medicare and the Private Sector,” Council for Affordable Health Insurance, January 10, 2006. Available at http://www.cahi.org/cahi_contents/resources/pdf/CAHI_Medicare_Admin_Final_Publication.pdf. Access verified February 19, 2008; and Benjamin Zycher, “Comparing Public and Private Health Insurance: Would A Single-Payer System Save Enough to Cover the Uninsured,” Manhattan Institute, Medical Progress Report No. 5, October 2007. Available at http://www.manhattan-institute.org/pdf/mpr_05.pdf. Access verified February 19, 2008.
- J. P. Wieske, “How High Loss Ratios Undermine Affordable Health Insurance,” Council for Affordable Health Insurance, May 2007. Available at http://www.cahi.org/cahi_contents/resources/pdf/n141lossratio.pdf. Access verified February 19, 2008.
- Joseph H. Doyle, Jr., “Returns to Local-Area Health Care Spending: Using Health Shocks to Patients Far From Home,” National Bureau of Economic Research, Working Paper No. 13301, August 2007.
- Richard G. A. Feachem, Neelam K. Sekhri and Karen I. White, “Getting more for their dollar: a comparison of the NHS with California’s Kaiser Permanente,” British Journal of Medicine, No. 324, January 19, 2002, pages 135-143.
- In its December 2006 Joint Budget Committee hearings, the Colorado Department of Health Care Policy and Financing wrote, “Although managed care organizations should experience savings over fee-for-service due to their improved ability to reduce unnecessary hospitalizations, emergency room visits, and other overutilization, there are also extensive administrative costs for care management, utilization management, providing networking to ensure access, and other processes such as bill paying and risk management.” See “FY 07-08 Joint Budget Committee Hearing,” Colorado Department of Health Care Policy and Financing, December 19-20, 2006, page 55. Available at http://www.chcpf.state.co.us/HCPF/Budget/jbc%2007-08%20hearing/FY%2007-08%20HCPF%20Hearing%20Agenda%20and%20Response_new.pdf. Access verified October 16, 2007.
- Stephen Zuckerman and Yu-Shu Shen, “Characteristics of Occasional and Frequent Emergency Department Users: Do Insurance Coverage and Access to Care Matter?” Medical Care, Vol. 42, No. 2, February 2004, pages 176-182.
- Feachem, Sekhri and White, “Getting more for their dollar: a comparison of the NHS with California’s Kaiser Permanente.”
- Tammy O. Tengs, “Dying Too Soon: How Cost-Effectiveness Analysis Can Save Lives,” National Center for Policy Analysis, Policy Report No. 204, May 1997. Available at http://www.ncpathinktank.org/pub/st204/. John D. Graham, “Comparing Opportunities To Reduce Health Risks: Toxin Control, Medicine and Injury Prevention,” National Center for Policy Analysis, Policy Report No. 192, June 1995. Available at http://www.ncpathinktank.org/pub/st192/.
