New Health Incsurance

Understanding New Health Insurance

Week of August 26, 2013

Visit USA.gov's Health Insurance webpage to learn about the new Health Insurance Marketplace and other types of health coverage. Starting October 1, 2013, you can fill out an application for health insurance through the Health Insurance Marketplace. You will be able to compare your options side-by-side and enroll in a plan that fits your budget and meets your needs. Coverage takes effect as early as January 1, 2014.

BAsic Health Insurance terms

Half of Americans can't define basic health insurance terms

By Kathryn Mayer

August 29, 2013 • Reprints

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What’s a premium again?
Forgot about the PPACA. Americans have a lot of questions about the basics of health insurance.
A new survey of 1,008 U.S. adults conducted for the American Institute of CPAs by Harris Interactive found that more than half (51 percent) could not accurately identify at least one of three common health insurance terms: premium, deductible and copay.
A third (34 percent) thought a premium was an expense at the time of receiving medical service or a prescription; more than a quarter (27 percent) thought a copay was the cost of obtaining insurance; and 12 percent did not know a deductible is the money one pays before an insurance company makes payments.
“Half of Americans would fail health insurance 101,” said Ernie Almonte, chair of the AICPA’s National CPA Financial Literacy Commission. “That’s critical insight as consumers prepare to make important decisions with implications for both their physical and fiscal well-being. Americans need to take time in the coming weeks to familiarize themselves with key terms and assess their needs so they make the best decisions for their health and financial situations.”
Not surprisingly, just as consumers struggled with basic health insurance information, the majority of Americans were unaware of the Patient Protection and Affordable Care Act and its implications.

Forty-one percent said they are not at all knowledgeable about the law and another 48 percent said they were only somewhat knowledgeable. Young people were the least knowledgeable, with nearly half, 48 percent, of adults aged 18 to 34 saying they had no knowledge.
For 11 percent of U.S. adults, the upcoming requirement to buy health insurance is their biggest financial concern. For half of the small minority who don’t have health insurance —14 percent, according to the survey — figuring out how to pay for it is their biggest concern about the mandate.

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Health Care understanding

Health Care: A Brief Glossary

Benefit package – The list of services and products that a health plan covers. Typically, the more expansive the benefit package is, the more expensive the health insurance coverage is.

Capitation – A system of paying doctors and health providers a set amount per patient per year regardless of how much health care that person uses. In theory, this creates incentives to keep people healthy and avoid using expensive services.

Cherry-picking – A process where an insurer tries to cover only the healthiest people with the lowest risk of using health services.

Community rating – This rule would require insurance companies to set premium rates based only on geography and not health status. Sometimes gender and age also are considered in rate setting.

Guaranteed issue – This rule would require insurance companies to offer health coverage to any one willing and able to pay regardless of health status or pre-existing conditions.

Comparative effectiveness research – Research that compares two or more drugs, treatments or medical interventions to see which is most effective for which type of patient. In theory, insurance providers, whether it is the government or a private company, would use this research to guide decisions on which medical treatments to cover.

Employer mandate – A requirement that businesses offer their employees health insurance. It may only pertain to businesses of a certain size. Massachusetts, for example, requires businesses with 10 or more employees to provide coverage or to pay a set amount on their behalf to purchase coverage.

Fee-for-service – The traditional and most widespread method of paying doctors and health care providers for each service provided.

Health insurance cooperative – A nonprofit health plan owned and operated by a collection of small businesses or individuals that group together to purchase health insurance so they have greater negotiating power.

Health insurance exchange – A marketplace where people can buy insurance. An exchange could be set up in many ways at the state, regional or national level. The government could regulate what plans are offered, how much insurers charge and set other rules insurers must follow. Sometimes called a “connector,” it often is compared to a menu of insurance options people can choose among similar to what is available to federal government employees. Its primary users likely would be small businesses and people buying individual insurance.

High-risk pool – Some states have insurance pools for people who insurance companies will not cover due to pre-existing conditions or poor health status.

Individual mandate – A requirement that all individuals purchase health insurance coverage. Proponents say an individual mandate is necessary to achieve universal coverage and to avoid a system where only the elderly and unhealthy purchase insurance. Opponents say it infringes on personal freedoms and is unenforceable.

Medicaid – The government health insurance program for the poor. The $333-billion program is paid for through a combination of federal and state funding, but administered by states. In 2007, about one in five people in the U.S. were enrolled in Medicaid.

Medicare – The government health insurance program for people who are 65 and older, blind or permanently disabled. In 2008, the $460-billion program provided health coverage to about 45 million people.

Medicare Advantage – This program allows Medicare beneficiaries to enroll in a private HMO or other health plan to receive their benefits.

Medical underwriting – An insurance process of evaluating an individual’s health status to decide if they should be offered insurance and how much they should pay in premiums. Underwriting is not used in the employer-sponsored insurance market only the individual market.

Pay for performance – A system that would pay doctors, hospitals and health care providers based on how well they take care of patients and not just on how much care they provide to patients.

Pre-existing condition – A prior health condition that may make people ineligible for health insurance coverage in the individual market.

Premium – The amount an insurance company charges to provide coverage. In 2008, the average annual premium for a family was $12,680 – more than twice the cost in 1999.

Public plan – The government could offer a public plan similar to Medicare as one of choice in the health insurance exchange to compete with private insurers. Republicans strongly oppose creating a public plan.

Purchasing pool – Health insurers lump the premiums people pay together to pay for health care services. In this pool, people who use few health services subsidize the costs of people who use many. This ability to “spread risk” gives large employers an advantage over small employers when buying health insurance.

SCHIP – The State Children’s Health Insurance Program was created in 1997 to provide health coverage to children not poor enough to qualify for Medicaid. The program is funded by the federal and state governments, but each state operates its program differently. In 2008, the $10-billion program provided health coverage to about 4.5 million children.

Single-payer system – A health care system in which all the funding comes from one source, usually the government. Private insurance, however, can and does exist in countries with a single-payer system, such as Canada and the United Kingdom.

Socialized medicine – A health system in which the government provides the health insurance coverage, owns the hospitals, and employs the doctors. The Veterans’ Administration health system is an example of socialized health care.

Uncompensated care – Care that doctors and hospitals provide to patients for which they never receive payment.

Underinsured – A term describing people who have insurance but are still considered financially vulnerable to high health expenses because of the limitations or cost-sharing of their plans.

Puchasing own Health Insuarance

A new report estimates that U.S. consumers who purchase their own health insurance saved $2.1 billion last year due to tougher rules in the federal healthcare law.

Thursday's report by the nonpartisan Kaiser Family Foundation estimates that individual premiums would have been $1.9 billion higher in 2012 without the requirements in the federal Affordable Care Act. In addition, the nonprofit group said individual policyholders nationwide should receive $241 million in rebates this summer.
Insurers must issue rebates to individuals and small businesses if they don't spend at least 80% of their annual premiums on medical care

Thanks to the Affordable Care Act:

• Millions of uninsured Americans will gain access to quality,
•  affordable health coverage;
• No American will be denied health coverage simply
•  because they have a "pre-existing" condition;
• Insurers will no longer be able to drop an American
• from health coverage, simply because he or she got sick;
• Insurers will no longer have free rein to raise premiums without limits and accountability;
• Every insurance plan must be described in clear, factual, and transparent terms so consumers can understand
•  what they are getting for their premium dollars;
• Families can rest easy knowing young adults can stay on their family plan until age 26;
• All Americans will have no-cost access to vital preventive
• check-ups and care;
• Seniors stuck in the "doughnut hole" will get much-needed help affording their prescription drugs;
• Small businesses will get tax credits to help extend coverage to their employees; and
• Community health centers will be able to expand the number of patients they serve in states across the country.

These vital protections will make a difference for millions of American families. Don't take away our health care!

MASS HEATH CARE INSURANCE

The poll results show that residents with incomes below $30,000 — the bracket that would probably make them eligible for state-subsidized care — were the most likely to say the law is helping to control the cost of their care.


The law expanded eligibility for subsidized coverage to thousands more residents, and state figures a year after the law went into effect showed that more than 200,000 residents were added to state-run coverage.


The poll results also showed that the highest income group, those whose income exceeds $75,000, were more likely than the lowest income group to say the law is hurting their health costs.


Kay Lazar can be reached at klazar@globe.com.

uninsured coverage Mass Free Medical Care

Gov. Deval Patrick yesterday shrugged off a scathing inspector general’s report that found costly loopholes in the state’s $414 million free health-care pool — as Republicans pushed to put the brakes on the program.

“The depth of the issues is not as great as first read,” Patrick said of the report during the “Ask the Governor” segment on “Jim and Margery” on WTKK-FM (96.9).

The Herald this week reported that according to the IG probe, the state’s free medical care program — designed to help low-income uninsured Massachusetts residents — spent $7 million on hospital and doctors’ bills for out-of-staters and foreigners, and $6 million on duplicate claims.



“I venture to say that some of these issues might be a little exaggerated. That doesn’t mean to say an isolated incident isn’t significant,” Patrick said.

The IG’s office responded in a statement saying that because the administration had “failed to implement a claims adjudication system for outpatient claims . . . the Office commissioned its own claims editing adjudication.”

The office hired “an experienced health-care provider claims adjudication company,” Senior Assistant Inspector General Jack McCarthy said. “This vendor followed all Massachusetts laws and regulations.”

The report was hand-delivered to Health and Human Services Secretary JudyAnn Bigby on March 3, McCarthy said.

Meanwhile, Senate Minority Leader Bruce Tarr (R-Gloucester) and state Sens. Robert Hedlund (R-Weymouth), Michael Knapik (R-Westfield) and Richard Ross (R-Wrentham) called for better verification of applicants’ Medicaid eligibility, improved safeguards to prevent duplicate payments or payments for medically unnecessary procedures, and an audit of the state’s Medicaid program by the inspector general.

“We find it extremely troubling to learn there are such lax procedures in place that have allowed so many people to take advantage of the system,” Tarr said. “When health-care costs continue to grow at an unsustainable rate, we simply cannot allow such waste and abuse to continue.”

Tarr yesterday filed three amendments to the state’s 2011 supplemental budget to crack down on flaws in the system. The amendments failed last night.

“It’s deeply troubling that, in face of overwhelming evidence that health-care dollars are being spent appropriately, we failed to take action,” said Tarr, who scoffed at the majority party’s suggestion that safeguards are already in place. “If that’s the case, why was this report released?”

Hillary Chabot and Laura Crimaldi contributed to this report.

free care under healh care reform

We share the inspector general’s commitment to finding ways to enhance and improve the integrity of the claims adjudication systems at the Health Safety Net,” said Paulette Song, a spokeswoman for JudyAnn Bigby, secretary of the state’s Executive Office and Health and Human Services, “and are reviewing the 2011 report thoroughly to find opportunities to help increase efficiencies.”

Perhaps the report’s most troubling finding is that the state relies on the honor system when determining who is eligible for free care — and does not review an applicant’s assets, or even require a Social Security number to verify income, citizenship or address, Sullivan said.

This week marks the one-year anniversary of the Affordable Care Act.

Millions of Americans are already benefitting from our new health reform law. In the months ahead, even more of us will benefit if it improves care coordination, provides more preventive services, and makes coverage more affordable and secure. It only gets better from here.

That is, if we give reform time to work — and work together to make sure it gets implemented effectively.

Together, we’re working to build better care — care that is better coordinated, more centered on meeting the needs of patients, and more affordable. That's why I'm asking you to encourage the Senate to stand strong against efforts to repeal or defund health reform.

It’s time to move forward and fix our health care system.

We simply can’t afford to let anyone undermine our efforts to make America’s health care system work better for all of us — and especially for older adults, patients with multiple chronic conditions and their family caregivers.

Just ask Leslie Schlienger, a nurse from south Florida, who is working on the front lines.


Since graduating from nursing school in 1980, Leslie has been a head nurse in Veterans Administration and community hospitals, earned her certification in rehabilitation nursing and her master’s degree in nursing administration. For the last dozen years she’s been a home health nurse, and a critical part of her work is coordinating clients’ care with family, friends and medical professionals.

"The fragmentation of how care is delivered is a big issue," Leslie says. "Because of all the specialties, a single patient often has two or three physicians, and I’ve seen some with as many as seven or eight. Patients are overwhelmed by that. They’re lost in that system." (Read the rest of Leslie's story here.)


Now more than ever, we need better care coordination, improved communication among providers, medical records at our fingertips, and a system that doesn’t leave vulnerable patients and their family caregivers to fend for themselves.

To mark the one-year anniversary of the Affordable Care Act and honor the millions of Americans working every day for better care, urge your Senators to focus on fixing our health care system and reject any attempts to repeal or defund health reform.

I’ve already sent my message to Congress. Please send yours now!

Sincerely,

Medicare Advantage

Improvements to Medicare Advantage • Today, Medicare pays Medicare Advantage insurance companies over $1,000 more per person on average than Original Medicare. These additional payments are paid for in part by increased premiums by all Medicare beneficiaries—including the 77% of seniors not enrolled in a Medicare Advantage plan. • The new law levels the playing field by gradually eliminating Medicare Advantage overpayments to insurance companies. • If you are in a Medicare Advantage plan, you will still receive guaranteed Medicare benefits. • Beginning in 2014, the new law protects Medicare Advantage members by taking strong steps to ensure that at least 85% of every dollar these plans receive is spent on health care, rather than administrative costs and insurance company profits.

MUNICIPAL HEALTH COSTS

A group of Massachusetts mayors, fed up with what they say is legislative inaction on skyrocketing municipal health care costs, has launched a ballot initiative for 2012 aimed at giving cities and towns more flexibility in reducing expensive benefits for employees, retirees and elected officials. Health costs in Massachusetts have added more than $1 billion to municipal budgets from 2001 to 2008, and some cities now devote close to 20 percent of their budgets to health care.

The Effect of Repealing Health Reform on the State of Massachusetts:

CMMENTS FROM SEN. KERRY

•Repeal would take away $2 billion in additional federal assistance for MassHealth, which provides health coverage to more than one million Massachusetts children, families, seniors, and people with disabilities.


•Repeal would eradicate $860 million in federal funding of the Children’s Health Insurance Program (CHIP), which helps to ensure that virtually every child in Massachusetts has health care coverage.


•Repeal would make health coverage more expensive by taking away $4 billion in federal subsidies to purchase health insurance to over 254,000 Massachusetts residents.


•Repeal would prevent 75,000 people in Massachusetts with incomes between 300% of poverty to 400% of poverty—most of whom are older Americans under the age of 65—from receiving subsidies to purchase health coverage.


•Repeal would increase Medicare prescription drug costs for nearly 51,837 seniors in Massachusetts.


•Repeal would cut Medicare’s annual wellness visit and free preventive services for 1 million seniors in Massachusetts.


•Repeal would eliminate financial relief to 162 employers in Massachusetts who offer retiree health benefits.


•Repeal would make it more expensive for over 102,000 small businesses in Massachusetts to offer health coverage to their employees.


•Repeal would eliminate tens of millions of dollars in funding for community health centers in Massachusetts that provide high quality health care to about 800,000 state residents.


•Repeal would abolish $128 million in grants and tax credits to 312 small biotech companies in Massachusetts who are working to develop new therapies that prevent, diagnose and treat acute and chronic diseases.


•· Repeal would increase health insurance premiums in the nongroup market by 14 to 20%, costing Massachusetts families $1,950 to $2,790 more in premiums each year.


•Repeal would eliminate payment bonuses to about 11,500 physicians in Massachusetts who practice primary care.


•Repeal would reinstate a discriminatory Medicare reimbursement provision that penalizes Massachusetts hospitals by hundreds of millions of dollars each year.


•Repeal would expose nearly 4.5 million Massachusetts residents with private insurance coverage to having lifetime limits placed on how much insurance companies will spend on their health care.
# # #

Health Care Reform Update

It's been three months since health care passed and insurance companies still aren't out of the doghouse.

President Obama issued a stern warning Tuesday that the providers shouldn't use the new law "as an opportunity to enact unjustifiable rate increases," Reuters reports. He added that states and the federal government would monitor industry activity to ensure that won't happen.

The meeting between the president and insurers was the first of its kind since the law passed.

The White House has had to toe a careful line with insurance companies, which the Wall Street Journal notes will determine how seamless the transition to the new law will be. At the same time, officials have continued to point to industry problems as proof that the pricey overhaul was necessary.

Obama followed up the meeting by unveiling a "patients' bill of rights" that highlights aspects of the bill that are being implemented soon, including expanding coverage to children with chronic illnesses and eliminating limits on lifetime or annual insurance coverage, AP reports.

The White House also unveiled a $250-million fund to boost primary care.

The U.S. has long faced a shortage of primary-care doctors as medical students opt for specialized fields that pay more. But primary care is the sector of medicine that can help bring about some of the biggest cost savings -- by focusing on preventative care long before chronic conditions surface.

The funds being spent to train primary-care doctors and subsidize nursing school would create about 1,700 new doctors and nurses to address the gap. But it'll take a lot more than that to solve the problem.

The Association of American Medical Colleges estimates that there will be a shortage of 47,000 primary-care doctors by 2025, according to the Washington Post .

The health care law included $1.5 billion to boost the sector, and this money represents a part of that fund. There is another $410 million set aside to help poor Americans get health training, the Los Angeles Times adds.

Insurance companies have started making changes ahead of new regulations in the law.

One unexpected outcome is that the companies are spending more money on customer service. As government officials prepare to create an open marketplace with health products by 2014, insurers are trying to boost their image to be competitive in that market.

That includes opening up retail storefronts to answer questions, offering wellness classes, improving customer service calls, and making insurance information more understandable.

"We see the stakes in terms of customer service going higher and higher," a Cigna rep told the Los Angeles Times .

Insurers add that the added customer service will limit confusion about how the new health law affects them.

Companies are also putting emphasis on preventative care to prevent costlier and more serious health conditions in the future, the New York Times reports.

Geisinger Health System in Pennsylvania pays the salaries of nurses in doctor's offices to ensure that patients with chronic conditions take care of themselves and avoid visits to the emergency room.

Meanwhile, lawmakers put off what to do about Medicare cuts for another six months.

Their last-minute fix to avoid a 21 percent cut in what doctors get paid for treating Medicare patients came barely in time.

Thousands of physicians will receive the reduced amounts of reimbursement as checks were mailed before lawmakers ended the debate. While the doctors can file paperwork to get paid in full, the situation highlights the funding problems Medicare faces, Forbes writes.

"Chances are seniors soon will be staring at higher premiums, and slimmer benefits, for Medicare Advantage," CQ reports. That program allows private health care plans in Medicare.

Millions of seniors could be affected if the program is eliminated, as industry analysts expect it eventually will be. They would have to find other insurance or switch back to regular Medicare with its higher premiums.

The Seattle Times highlights the frustration seniors feel over the confusing debate. But the article adds that seniors stand to have better care under the new health care overhaul.

The media may be to blame for some of the public's confusion on health care.

A Pew review of how journalists covered the health care debate found that Americans found it difficult to understand and got more confused, not less, over time.

While acknowledging that health care is a complex topic, the study concludes that "the debate centered more on politics than the workings of the health care system."

Health care opponents did a better job of getting their message out than those who supported it, partly because of the time conservative talk show hosts devoted to that perspective, Pew adds.

The report has prompted a flurry of comments on blogs like the Huffington Post , which highlighted a graph that shows how much time was devoted to descriptions of the plan versus the politics and strategy of the debate. The latter got double the attention.

The Washington Post's Ezra Klein blamed public confusion about health care on the media's bias towards timely news rather than explaining the nuts and bolts of what has already happened.

"The media cover those points of controversy, and people tune in, but they missed the beginning, and now everyone is talking about the bill's third CBO score, not about how the thing actually works," he wrote.

Indian outsourcers haven't had trouble seeing that the health care law presents new opportunities for them.

As the U.S. health care industry looks to trim costs and make health care more affordable, many administrative services could be outsourced to countries with cheaper labor costs.

"The new law is a potential gold mine for Indian outsourcers and medical service providers," Medical Tourism Magazine writes.

Ambreen Ali writes for Congress.org.

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Moratorium Against Medicare Cuts Extended to Nov 30, 2010
by Uniformed Services Disabled Retirees on June 25

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Medicare Savings over time Health Care Reform

The new health reform law wrings $390 billion in savings from Medicare over the next decade to help pay for health care reforms—but spending on the program will continue to rise.

How can the new legislation reduce Medicare costs and still spend millions more dollars on improvements like closing the gap in drug coverage and offering free preventive care? Here’s a quick lesson in Medicare math.

These are cuts in future increases, not cuts in services, experts explain.

Medicare spending has grown about 8 percent annually over 20 years, according to the Congressional Budget Office, an independent arm of Congress. The law could slow down the annual increase in spending to about 6 percent over the next 20 years, the CBO has reported.

For example, of the projected $390 billion in savings—the latest estimate from Congressional Research Service—$196 billion comes from smaller increases in payments to hospitals, nursing homes, home health workers and other medical providers. But physicians who work in primary care will be rewarded with a 10 percent bonus. Hospitals that prevent readmissions or hospital-acquired infections will be paid more than those that do not. The American Hospital Association and the American Medical Association were among the many health care organizations that backed the legislation, along with advocacy groups.

Medicare Advantage Another piece of the $390 billion savings, about $136 billion, comes from reductions in subsidies paid to private health insurance plans, called Medicare Advantage, that provide medical and drug coverage to about one of four people in Medicare. Currently, Medicare pays the private plans an average of 14 percent more to care for a member than it would cost if that person remained in traditional Medicare.

In 2012, the government will start lowering these overpayments to Medicare Advantage plans. Insurers contend they will be forced to cut benefits. But the law prohibits plans from reducing or eliminating essential guaranteed Medicare benefits. It also protects plan members by requiring that at least 85 cents of every dollar insurers receive is spent on benefits.

Guarantees The law also requires Medicare to spend more wisely. For example, a new independent Medicare advisory board is expected to save the program $16 billion over 10 years. Cracking down on fraud and waste will save an estimated $7 billion. Even bonus payments and innovations aimed at improving patient care are intended to produce a long-term payoff: People who get more effective treatment can recover more quickly from medical setbacks, and that saves Medicare money, too.

Finally, the law comes with a Medicare warranty in Section 3601: Nothing in the law can cut current Medicare benefits, and the Medicare savings it achieves “shall extend the solvency of the Medicare trust funds, reduce Medicare premiums and other cost-sharing for beneficiaries, and improve or expand guaranteed Medicare benefits and protect access to Medicare providers.”


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Other Insurance Situations

Health Coverage Legislation Small Business

Health Coverage Legislation Small Business
Health coverage legislation enacted this year includes a Small Business Health Care Tax Credit to help small businesses and small tax-exempt organizations afford the cost of covering their workers.
Eligibility Rules
Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
Average annual wage. A qualifying employer must pay average annual wages below $50,000.
Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Three Simple Steps for Employers to Qualify
Posted by Malden Senior at 4:16 PM
Labels: AARP. MASS SENIOR ACTION, cost Heath care, healthcare.medicare.msac, heath Care Reform, Helath Care Reform. MSAC
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Health Coverage Legislation Small Business

Health coverage legislation enacted this year includes a Small Business Health Care Tax Credit to help small businesses and small tax-exempt organizations afford the cost of covering their workers.
Eligibility Rules
Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
Average annual wage. A qualifying employer must pay average annual wages below $50,000.
Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Three Simple Steps for Employers to Qualify

The Commonwealth Fund Blog

The Costs of Failure: Economic Consequences of Failure to Enact Nixon, Carter, and Clinton Health Reforms
December 21, 2009
Authors: Karen Davis, Ph.D., Kristof Stremikis, M.P.P.
Tags: health reform legislation , health reform , health spending
View Citation
CitationK. Davis and K. Stremikis, The Costs of Failure: Economic Consequences of Failure to Enact Nixon, Carter, and Clinton Health Reforms, The Commonwealth Fund Blog, December 2009.
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By Karen Davis and Kristof Stremikis

The U.S. Congress is on the threshold of historic change that will usher in a new era in American health care. In the last 50 years, three presidents—Nixon, Carter, and Clinton—have made a serious effort to enact reform and failed. The nation simply can not afford to fail again—too much is at stake for those Americans who fail to get the life-saving care they need and for those who pay the bills of ever-rising cost of health care. History makes clear that failing to act on health reform has serious and far-reaching economic ramifications. An examination of trends in health spending over the past 50 years shows that if health reform measures proposed by previous presidents had been enacted and slowed the growth in spending by as little as 1.0 or 1.5 percentage points annually, spending trends in the U.S. would have been closer to those seen in other major industrialized countries and fewer adverse health consequences and economic burdens would have been borne by American families, businesses, and government.


Learning from Past Efforts
Over the last half-century, the nation has made several serious attempts to ensure health insurance coverage and control health care spending, either as part of comprehensive legislation or through companion measures.

President Richard Nixon imposed wage and price controls on the entire economy in 1971 in the wake of inflation triggered by the Vietnam War, with special mechanisms developed for controlling health care costs. He then proposed a Comprehensive Health Insurance Plan that received serious legislative consideration in 1974. The central features of the plan were employer-mandated private insurance coverage for workers and their families in firms with 25 or more employees, a plan for low-income families that would replace and improve Medicaid, and a federal health insurance plan that would replace and improve Medicare.1 Reform efforts died when Nixon was removed from office, as proponents hoped to enact stronger legislation in the political aftermath of his impeachment. The Nixon health care cost controls were lifted in 1975 when the industry pledged to control costs voluntarily.2

President Jimmy Carter proposed hospital cost containment legislation in 1977. In 1979, he introduced a national health plan that included minimum standards on benefits and required employer contributions, as well as a new federal HealthCare program to replace Medicaid and Medicare and cover all low-income individuals, in addition to the elderly and disabled. The Carter hospital cost containment legislation, a response to the explosion in health care costs following the lifting of Nixon's health cost controls, was defeated when the industry mounted an alternative "Voluntary Effort." Unfortunately, this voluntary approach to cost control also quickly dissipated once the threat of legislation was removed.3 Inflation in health care spending and a deteriorating economy contributed to the demise of the Carter national health plan in 1980.

President Bill Clinton introduced legislation in 1993 with cost containment measures built into health reform. In particular, his proposal called for controls on the rate of increase in health insurance premiums. The Health Security Act included an employer mandate that required employers to pay 80 percent of the premium (up to a maximum of 7.9% of payroll), with the family share of premiums not to exceed 3.9 percent of income.4 The plan was to be financed by substantial Medicare and Medicaid savings, an increase in tobacco taxes, and cross-subsidies among employers within risk pools. President Clinton's health reform ran into major opposition from small businesses and insurers, and the legislation stalled out in Congress.

U.S. Health Spending Trends and Projections
The federal government's repeated failure to enact health reform has had serious consequences for American government, families, and businesses. The U.S. spent 5 percent of gross domestic product (GDP) on health care in 1960; health care now consumes 17 percent of the nation's economy and will reach 21 percent by 2020, if trends continue. While investment in health care has contributed to improved health and productivity, other countries have devoted a far lower share of GDP to health care and achieved comparable or better health outcomes.

Ever-higher health spending has directly contributed to stagnating incomes and rising health insurance premiums for middle-class families and workers. Commonwealth Fund analysis has shown that premiums have risen from 11 percent of family income in 1999 to 18 percent in 2009. If current trends continue, average family premiums will reach 24 percent of median income by 2020.

Rising health care costs–and the subsequent rise in health insurance premiums–have fueled an increase in the number of Americans without insurance over the past three decades. Nearly 50 million Americans are expected to be uninsured in 2010. Cost growth also has placed enormous pressure on employers' ability to provide comprehensive benefits, leading many to shift to less generous policies or drop coverage altogether. Employees of small businesses, which are much less likely to offer coverage, are at particularly high risk.

It is difficult to estimate with precision what would have happened had proposed reforms been enacted. Still, it is instructive to consider where we would be today if those efforts had succeeded. Each included provisions designed to provide health insurance coverage for all.5 Each set out regulatory restraints on the growth in provider payment or insurance premiums, or both. All had significant mechanisms to control costs, including changing provider payment, increasing competition in the insurance market, and controlling the growth in private insurance premiums.

Exhibit 1 shows the growth in national health expenditures as a percentage of GDP and what we would have spent as a nation if effective measures to slow the growth in health expenditures by 1.5 percentage points a year had been adopted in 1975, 1980, and 1995. In 1960, we spent 5.2 percent of GDP on health care, compared with the 3.8 percent of GDP median rate in all major industrialized nations. Today, we spend 17.7 percent—nearly twice the rate of 9 percent that is devoted to health care in other industrialized countries.



If President Nixon's health reform plans had been enacted in 1975 and slowed the annual rate of spending by 1.5 percentage points a year, today we would be spending 10.7 percent of GDP on health care. In dollar terms, we would spend only $1.6 trillion on health care in 2010, instead of projected health spending of $2.6 trillion. This savings of $1 trillion in 2010 alone would remove much of the financial burden on families, businesses, and government. Even if Nixon reforms had slowed spending growth by "only" 1 percentage point a year, health spending as a percent of GDP would have been $1.9 trillion in 2010, or 12.7 percent of GDP—a savings of 5 percent of GDP.

If cost containment measures slowing spending by 1.5 percentage points a year had been enacted in 1980 under President Carter, the trends would be similar, with spending rising to $1.7 trillion in 2010, or 11.5 percent of GDP. Even if we had acted as late as 1995 under President Clinton, health spending in 2010 would be $2.1 trillion, or 14.2 percent of GDP.

The federal government would have been a major beneficiary of comprehensive health reform under Presidents Nixon, Carter, or Clinton. Instead of consuming 6.2 percent of GDP in 2010, federal health outlays would have been 3.7 percent in 2010 under Nixon reforms that slowed spending growth by 1.5 percentage points, 4.0 percent under Carter, and 5.0 percent under Clinton.

Bending the Health Care Cost Curve Today
In the current round of health reform, the primary strategy for controlling costs has been legislative changes to Medicare and a public health insurance plan that encourages private insurers to control costs. While enrollment in the public health insurance plan in the House bill has been narrowly targeted on the uninsured and small businesses, the proposal faces an uncertain future in the legislative process.

The House of Representatives has added provisions to negotiate pharmaceutical drug prices, review insurance premium increases, and set standards on the share of premiums devoted to health care. Both the House and Senate have provisions for rapid testing of new methods of provider payment in Medicare. The Senate bill calls for an independent Medicare advisory board to facilitate rapid consideration of recommendations to limit the rate of increase in Medicare outlays.

Several commentators have questioned whether the cost containment provisions in the health reform bills passed by the House and under consideration in the Senate are sufficient. Neither bill includes the aggressive system-wide cost control measures that were part of the Nixon, Carter, and Clinton proposals. But the House and Senate bills would begin to bend the curve in total health spending and encourage the development of mechanisms for extending cost control measures more broadly once experience is gained. A recent analysis by the Council of Economic Advisers estimates that private and governmental spending would be slowed by 1.0 percentage points a year.

History shows that even modest cost-cutting has a significant impact over time and that inaction has a cost. The longer we wait to address the underlying problems in the U.S. health care system, the more health spending will continue on its rapid rise and the more drastic the measures that will be required to right our economy and our federal budget. Congress is right to move ahead. After 50 years of spiraling health care costs and the resulting price paid by American families, business, and government, we can no longer afford to postpone health reform.



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1 K. Davis, National Health Insurance: Benefits, Costs, and Consequences (Washington, D.C.: The Brookings Institution, 1975).
2 K. Davis, G. Anderson, D. Rowland, and E. Steinberg, Health Care Cost Containment (Baltimore: The Johns Hopkins University Press, 1990).
3 K. Davis, "Recent Tends in Hospital Costs: Failure of the Voluntary Effort," Testimony before the House Committee on Energy and Commerce, December 15, 1981.
4 Congressional Research Service, Health Care Reform: President Clinton's Health Security Act, (Washington, D.C.: Congressional Research Service, 1993).
5 K. Davis, "Universal Coverage in the United States: Lessons from Experience of the 20th Century," Journal of Urban Health: Bulletin of the New York Academy of Medicine, March 2001 78(1).

Read or Post Comments
Edward Gamache, of Deckerville Community Hospital, say(s):
December 21, 2009

There was a time when the healthcare cost curve started to flatten; it was at the height of the impact of HMO implementation. It is important to remember this historic period. Your article fails to identify this period and the backlash HMO controls had on the general public. HMOs became associated with a loss of choice in healthcare and as a result was pushed back by the very institution that supported its development, the U.S. Congress.

I suspect that whatever elements of cost control are included in the current national health reform bill that creates similar impacts will face the same fate. I’m confident that the first legislative proposal to change the current bill will be introduced that day after the President signs it.

Medicare and the elderly

President Obama hopes to finance a health care overhaul in part by squeezing hundreds of billions of dollars in savings from Medicare through a crackdown on fraud and waste. An oft-cited example: Medicare Advantage, run by private insurers reimbursed by Medicare, costs the government 14 percent more per enrollee than traditional Medicare.

Republicans claim that Democrats will ultimately be forced to reduce Medicare benefits to seniors in order to finance health care for more citizens. Are the elderly being asked to shoulder the burden for universal coverage? Should Medicare, or something like it, be available to an even greater number of Americans?

Health Care Reform

President Barack Obama is putting forward a nearly $1 trillion, 10-year health care plan that would allow the government to deny or roll back egregious insurance premium increases that infuriated consumers.

Posted Monday morning on the White House Web site, the plan would provide coverage to more than 31 million Americans now uninsured without adding to the federal deficit.

It conspicuously omits a government insurance plan sought by liberals.

But it's uncertain that such an ambitions plan can pass, since Republicans are virtually all opposed and some Democrats who last year supported sweeping health care changes are having second thoughts. After a year in pursuit of his top domestic priority, Obama may have to settle for a modest fallback.

Kerry on Health Care

Health Care not only the great unfinished business of half a century bat a metter of fundamental moral values.
The Goal of health coverage by 2012
Could be financed by repealing the Bush Administration tax cuts for people earning more the 200,000 dollars a year.
What is his plan for enforcing the proposal to have all americans insured if his plan is not implemented by 2012?