Utah's Health System Reform
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Report Number 688, October 2008 Utah’s Health System Reform Key Issues to Resolve HIGHLIGHTS Utah voters ranked healthcare as the fourth most important g Rising healthcare costs create a negative feedback issue of concern on Utah Foundation’s 2008 Utah Priorities cycle within the market, making health insurance unaffordable. This increases the number of Project survey. Among the top concerns in this area were uninsured who then use public programs (increasing state healthcare costs) or go without the cost of healthcare and the quality of health insurance insurance and receive uncompensated care (increasing healthcare costs and private insurance benefits. Survey respondents also expressed significant premiums). g During this decade, the percentage of people concern about losing health insurance, covering the utilizing government-based insurance has increased for almost all age groups as the uninsured, and the quality of healthcare. The high ranking percentage of people with private insurance has declined. of healthcare in the top ten issues reflects Utah voters’ g Based on common themes from health system concerns with the current health system. This research stakeholder interviews, six issues that need to be addressed for real systemic reform include: report reviews some of the major problems underlying the 1) navigating the federal system; 2) re-aligning stakeholder incentives; 3) improving on the current system, summarizes Utah’s initial steps for reform, market system; 4) defining affordability; 5) dealing with tradeoffs between cost, quality, and access; and identifies six issues that need to be addressed for real and 6) improving the reform process. systemic reform to take place at the state level. g Federal laws that contain requirements pertaining to private health insurance can displace state THE PROBLEM statutes. One of the largest federal obstacles states frequently encounter challenges with is Health system reform has become an increasing important topic at both the state and ERISA’s “preemptive clause” which maintains that ERISA “supersedes any and all State laws insofar federal level. The trajectory of rising healthcare costs has significantly outpaced growth in as they relate to any employee benefit plan.” the cost of motor fuel, housing, food, and apparel (Figure 1). More and more employers have been unable to keep up with the rising cost, which has forced many businesses to lay The mission of Utah Foundation is to promote off employees or not provide insurance. This creates a negative feedback cycle within the a thriving economy, a well-prepared workforce, market; rising healthcare costs increase the number of people who don’t have access to and a high quality of life for Utahns by performing insurance and therefore must either utilize public programs (increasing the state’s healthcare thorough, well-supported research that helps policymakers, business and community leaders, costs) or go without insurance and receive uncompensated care through emergency room and citizens better understand complex services (increasing healthcare costs and premiums for those insured). issues and providing practical, well-reasoned recommendations for policy change. Uninsured Gregory P. Poulsen, Chairman There are several national and state surveys that attempt to estimate the number of uninsured. Douglas Matsumori, Vice Chairman A few of the major national surveys include the Current Population Survey (CPS), Medical Stephen J. Kroes, President Expenditure Panel Survey (MEPS), Survey of Income and Program Participation (SIPP), 10 West Broadway, Suite 307 and National Health Interview Survey (NHIS). At the state level, the Utah Department of Salt Lake City, UT 84101 (801) 355-1400 • www.utahfoundation.org Health (UDOH) uses the Utah Healthcare Access Survey to estimate the number of Utah residents who lack health insurance coverage each year. Although the estimates of each survey data provide useful national and state-level estimates, allowing one to Figure 1: Consumer Price Trends of Medical Care vs. Other Consumer Goods and Services compare Utah to national trends. The CPS data show the percentage Consumer Price Index of uninsured persons in Utah ranks 18th highest, just above the 6 350 national average. Texas has the largest uninsured rate; 24.4% of its population does not have insurance. Massachusetts ranks the lowest 300 Medical with only 8.3% of its population uninsured. The low uninsured rate in Care 250 Housing Massachusetts is reflective of its 2006 health reform initiative, which Motor included an individual mandate. This initiative increased access and Fuel 200 reduced the number of uninsured from 10.3% (2004-2005 average) Food 7 150 Apparel to 7.9% (2006-2007 average). 100 Even though the uninsured estimates from UDOH and CPS differ, both surveys confirm the rising number of uninsured persons over 50 the last decade. Being uninsured not only represents a risk to the 0 uninsured person, but it creates a negative externality for society 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 in terms of the receipt of uncompensated care.8 Because federal For consumer price indices, 1982-84 = 100. Medical care includes both commodities and services. Food does not include beverages. Housing is rent of primary law requires all people to have access to emergency care, even if resident or owner’s equivalent of rent. they do not have the means to pay for it; hospitals and physicians Source: 2007 Economic Report of the President. frequently receive no compensation for emergency care provided to the uninsured.9 vary due to sampling size, survey methodology, definitions of insured, Hospitals are especially affected by uncompensated care, as most and length of survey, they all provide useful estimates of uninsured physicians are now paid a predetermined stipend for on-call duty at individuals during a particular period or point in time.1 This report a hospital. Physicians receive this stipend regardless of their patients’ presents the uninsured estimates from CPS and UDOH. ability to pay, placing the burden of providing uncompensated care UDOH estimates there were 287,200 uninsured people living in on the hospitals. The uninsured also generally require more expensive Utah in 2007.2 This equals 10.6% of the population, representing procedures once in the emergency room due to their lack of preventive a 1.3 percentage point decrease from the 2006 uninsured rate and primary care visits. Data from UDOH show uninsured Utah (Figure 2). Although survey results indicate the uninsured rate residents are less likely to have had a usual source of medical care fell in 2007, historical data reveal a significant upward trend in (66.9% of uninsured vs. 93.3% of those with coverage) or a routine percentage of people without insurance in Utah. Between 2001 and medical visit in the last year (54.4% vs. 71.6%). Utah residents who 2007, Utah’s uninsured population grew at an average annual rate of lack health insurance are also more likely to seek primary care from 6.3%, compared with 2.7% for the state’s overall population growth an emergency department or urgent care center (12.4% vs. 6.7%) rate.3 The average annual increase for uninsured children ages 0-17 which is typically more expensive than care received from a primary was even greater; there was a 7.5% average annual growth rate in the care provider.10 In addition, hospitals and physicians are usually not number of uninsured children between 2001 and 2007 compared to fully compensated for providing care to those on publicly funded a 2.3% average annual growth rate in this population.4 programs such as Medicaid or Medicare. A recent release by CPS estimates there are 399,000 uninsured When hospitals and providers “write off” a significant portion of persons in Utah.5 This represents 15.6% of the total population, healthcare services, it increases the cost of private health insurance and ranks Utah above the national average (15.4%) in terms of the premiums. Increased premiums in turn, however, price small percentage of persons without health insurance coverage. While CPS employers and individuals out of the market, increasing the number estimates of the uninsured tend to be higher than other surveys, its of persons who are uninsured and creating a negative feedback cycle within the market. A 2008 study by Professor Jack Hadley at George Mason University estimates people receive about $56 billion in care Figure 2: Estimated Number and Percent of Utah Residents Who that is not paid for by individuals or private insurance.11 While most 320,000Lack Health Insurance Coverage, 2001-2007 of this amount is paid for by public programs (like Medicaid and 280,000 Medicare), it is estimated that 2% is cost-shifted onto private health 12 240,000 insurance premiums. Up to 12% of real uncompensated care (costs 11.6% 11.9% 200,000 10.6% that are never recouped by hospitals and providers) is cost-shifted 10.2% onto private health insurance premiums.13 9.1% 160,000 8.7% 120,000 Businesses 80,000 In 2007, 59.3% of all U.S. residents received insurance through an 14 40,000 employment-based system. Employers offer insurance through the workplace in order to promote worker productivity, obtain 0 2001 2003 2004 2005 2006 2007 tax advantages, attract high-quality workers, and because it is a 15 Number of Uninsured Percent of Population convenient way to pool risks. However, rising healthcare costs result in an increased cost to businesses providing health insurance. From Source: Utah Department of Health (UDOH). 2003 to 2007, the average health insurance premium for a family of 2 UTAH FOUNDATION october 2008 Visit www.utahfoundation.org health insurance has decreased in every category, implying that these Figure 3: Average Annual Premiums for Family Coverage, 2003-2007 employees are either purchasing their own insurance (and spending up to $10,000 to $12,000 out of pocket on health insurance per Average Annual Premiums year), going without insurance, or receiving some sort of public or $14,000 private assistance.