Health Care Facts for December 2009

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HEALTH CARE FACTS FOR THE FINAL PUSH

The Senate bill and a reported draft compromise are influencing the health reform debate.  The House bill has many advantages, including a public option.  Here are the facts on:

1. What We Spend Now: Why We Need Health Reform

2. The Government’s Role in Health Care: The Market Doesn’t Work

3. Controlling Costs: Where the Dollars Go, Limiting Pay to Providers

4. Medicare: How Does it Work Now?  How Much Does It Cost?

1. What We Spend Now: Why We Need Health Reform

Health Care by the Numbers – Center for American Progress  www.americanprogress.org

This year on average a family of four spent $17,000 on health care. That’s 19% of the family’s total income.

In 2019, that figure is expected to climb to $39,000 per year, which is 31% of the average family income.

Health insurance companies in some areas charge seniors 11 times more than younger Americans.

17.4% of insurance claims filed by individuals age 50 to 54 were rejected in 2006

22.3% of insurance claims filed by individuals age 55 to 59 were rejected in 2006

28.7% of insurance claims filed by individuals age 60 to 64 were rejected in 2006

16% of uninsured Americans are children.

Physicians in America waste $31 billion per year in time lost due to dealing with insurance companies. On average, thatÕs $68,274 per physician per year.

2. The Government’s Role in Health Care: The Market Doesn’t Work
Over sixty percent (60.5 percent) of health spending in the U.S. is funded by government.
Markets and competition won’t fix the problems

Advocates of the “free market” approach to health care claim that competition will streamline the costs of health care and make it more efficient. But past competitive activities in health care under a free market system have been wasteful and expensive, and are the major cause of rising costs.

There are two main areas where competition exists in health care: among the providers and among the payers. When, for example, hospitals compete they often duplicate expensive equipment in order to corner more of the market for lucrative procedure-oriented care. This drives up overall medical costs to pay for the equipment and encourages overtreatment. They also waste money on advertising and marketing. The preferred scenario has hospitals coordinating services and cooperating to meet the needs of their communities.

Competition among insurers (the payers) is not effective in containing costs either. Rather, it results in competitive practices such as avoiding the sick, cherry-picking, denial of payment for expensive procedures, etc. An insurance firm that engages in these practices may reduce its own outlays, but at the expense of other payers and patients.

3. Controlling Costs: Where the Dollars Go, Limiting Pay to Providers

Negotiating Hospital Prices: Does Medicare Pay Too Little, or Do Private Plans Pay Too Much?

Some notes on hospital consolidation,  reducing DSH payments

Hospital Concentration, DSH Payments, and Access for the Uninsured in Los Angeles County and the State of California.

Roby D, Kominski G; AcademyHealth. Meeting (2004 : San Diego, Calif.).

Abstr AcademyHealth Meet. 2004; 21: abstract no. 946.

UCLA, Center for Health Policy Research, 10911 Weyburn Avenue, Suite 300, Los Angeles, CA 90024 Tel. 310.794.3953 Fax 310.794.2686

RESEARCH OBJECTIVE: This project examines how recent trends toward concentration within the hospital industry among hospital chains and the increase in for-profit ownership (specifically Tenet Healthcare Hospitals) affects access to affordable healthcare in Los Angeles. Specifically, it investigates the impact of hospital concentration on:(1)costs and revenues, which affects the affordability of employer-provided coverage for those that have it, and(2)the competitive position of the public hospitals, which have traditionally provided a safety net to the uninsured and underinsured. The primary focus of this study is Los Angeles County, since for-profit hospital growth has been greatest in this region. For comparison purposes, we also examined data for hospitals in the rest of California, excluding Los Angeles County. We examine how hospitals performed from 1995-2000 in Los Angeles County and in the rest of California in providing care to the uninsured, staying solvent, and taking advantage of funding designed for safety net providers.

PRINCIPAL FINDINGS: There was an increase in the number of hospitals in the county owned by hospital systems. For example, Tenet Healthcare Corporation increased their market share from 8% in 1995 to 15% in 2000. In addition, Tenets concentration has greatly increased their payments from the Disproportionate Share Hospital (DSH) program. In California, Tenet owned 8 hospitals in 1995 that received DSH payments; by 2000, they owned 17. In Los Angeles County, Tenet went from owning one DSH hospital in 1995 to owning 6 by the year 2000. Overall, Tenet added 14 hospitals statewide within five years. This growth has occurred while Los Angeles County’s government hospitals have been facing financial pressures due to cutbacks and a growing uninsured population. The average total margin for Tenet hospitals grew at a healthy rate in Los Angeles County and the rest of California through 1999. From 1998 to 2000, total margins declined for all hospitals in Los Angeles County and for all hospitals in the rest of California except Tenet hospitals. Operating expenses in Tenet hospitals were fairly stable, while government hospitals in Los Angeles faced a serious problem of rising expenses without sufficient growth in patient revenue. One factor that is largely responsible for Tenets ability to achieve high profits in the current healthcare market is the Disproportionate Share Hospital (DSH) payment system. CONCLUSIONS: Tenet engaged in aggressive cost cutting, both in Los Angeles and the rest of California, and this contributed to its relatively high profit margins during 1995-2000. This is clearly one of the potential advantages of hospital chains, namely, that they can achieve greater efficiency than stand-alone facilities.Tenets profit margins grew during the 1995-2000 period because of its rapid increase in DSH payments, while other hospitals in Los Angeles County and the rest of California showed no growth in these payments. Yet during this same period, Tenets share of uninsured patient days declined and remained the lowest of any hospital group. Thus, at a time when the County’s health care system has faced substantial financial threats, Tenet was successful in rapidly increasing its DSH payments without any increase in uninsured patient days and with a large decline in the average severity of its patient mix. IMPLICATIONS FOR POLICY, DELIVERY OR PRACTICE: Los Angeles County government hospitals continue to struggle financially while a greater portion of DHS payments continue to go to Tenet hospitals. Unless limitations in the formula for distributing DSH payments are addressed by the state legislature, the efficiencies associated with hospital concentration may continue to be offset by the costs imposed on the public sector by aggressive revenue maximization practices.In addition, DSH payments to Tenet hospitals are not being targeted toward hospitals where the poor and uninsured receive most of their care. This shift in the distribution of safety net funding will affect the ability of government and non-profit hospitals to provide care to the undeserved.

A Bargain at Twice the Price? California Hospital Prices in the New Millennium

4. Medicare: How Does it Work Now?  How Much Does It Cost?

The 2010 Part B monthly premium rates to be paid by beneficiaries who file an individual tax return (including those who are single, head of household, qualifying widow(er) with dependent child, or married filing separately who lived apart from their spouse for the entire taxable year), or who file a joint tax return are:

In addition, the monthly premium rates to be paid by beneficiaries who are married, but file a separate return from their spouse and lived with their spouse at any time during the taxable year are:

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