USUHS MedXellence, Healthcare Policy Presentaion

1. Health Policy: Awareness and Application
CDR Glen Diehl, PhD
Program Director, Healthcare Administration and Policy
Uniformed Services University
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2. What Are We Going to Discuss
Today?
• Section 1: Health policy, values and cost
• Section 2: Fundamentals of health policy
• Section 3: Policy, history and reform
• Section 4: Health policy stakeholders
• Section 5: Government and the health policy
making process
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3. What is Health Policy?
Junior Staffers say:
• Directives for Executive Departments
• It seems expensive
• Happens in a vacuum
• A lot of old people seem concerned about it
• My Member is telling constituent groups he supports
policy that strengthens healthcare
• I think it has something to do with reform
• Don’t they throw a good party
• But there is more…..
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4. What is Health Policy?
• A pattern of government decisions and actions intended to
address a perceived health problem
• A statement of a decision regarding a goal in health care and a
plan for achieving that goal. For example, to prevent an
epidemic, a program for inoculating a population is developed
and implemented
• A means to set a political agenda involving healthcare delivery
and health status
• The placement of resources against health care issues and
challenges
Its all of these but I like the following:
• An amalgamation of values affecting healthcare from political,
economic and legal perspectives
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5. Why Values?
A simple phrase provides an illustration: “appropriate for governmental action”
Do we all agree on what is appropriate for governmental action?
- individual preferences vs. needs of the overall population
Policy is about compromise and the exchange of value relationships. It is also
about allocation and redistribution
Health policy example:
- Is healthcare a right?
If yes, then government should probably guarantee that right and healthcare
becomes appropriate for governmental action
If no, then differences in access to healthcare are seen more as a condition than
a problem
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6. What Values Are We Talking About?
• Liberty Health policy is sometimes
about value trade-offs:
• Equity
• Justice
ex. Immunization
• Security programs, health
• Efficiency surveillance programs,
organ transplants, tiered
• Transparency healthcare systems,
• Capacity etc…
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7. Why is Health Policy important?
• Healthcare Costs as a % of Gross Domestic Product is
projected at 20% by 2016.
• Health reform (arguably the biggest policy issue for the
Obama Administration
• Status of the un-insured – How many and what should we do?
• Pandemic disease – The potential to destabilize nations and
regions that are unprepared.
• Technology and innovation – Who should have access and
who controls costs?
• Medical liability – The effects of tort reform
• Understanding incentives in healthcare
• Managing uncertainty: adverse selection and moral hazard
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8. National Health Expenditures
$4,500 25%
$4,000
20%
$3,500
$3,000
15%
$2,500
$2,000
10%
$1,500
$1,000
5%
$500
$0 0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
National Health Expenditures (NHE) NHE as percent of GDP

9. Did You Know???
• Total U.S. healthcare spending: $2.1 trillion
• As part of all economic activity: 16.3%
• Avg. increase in employee based
insurance premiums since 1999: 120%
• Avg. increases in wages since 1999: 29%
• Proportion of personal bankruptcies
related to illness of medical bills: 62.1%
• Increase since 2001 in the proportion
of personal bankruptcies caused by
medical problems: 50%
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10. Why Does Healthcare Cost So Much?
“This is one of those cases in which the imagination is baffled by the
facts.” - Adam Smith
If we pay more in the U.S. for healthcare this must mean the following:
•The aging of the population drives health spending
Aging adds only about a .5% in per capita health spending for
industrialized nations
• We get better quality from our healthcare system than other nations
Not necessarily, a WHO study ranked the U.S. 37th in healthcare
amongst other nations.
• We get better health outcomes from our system
Again, this is not always the case. In fact the U.S. does not do as
well in preventive care or treatment for many acute conditions
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11. Lets Take Another Look At Healthcare Costs
The most prominent drivers of healthcare costs are:
• The Gross Domestic Product (GDP) per capita of an
industrialized nation appears to be a strong indicator on
the amount of per capita health care spending
• We pay higher prices for the same health goods and
services offered in many other nations
• We have significantly higher administrative overhead costs
• We tend to use more high cost, high-tech equipment and
procedures than other countries
• We cannot discount the effect of “defensive medicine”
triggered by American tort laws
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12. PPP = Purchasing Parity Dollars
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13. Why is Health Policy Important inside the
MHS?
• Taking care of Wounded, • Psychological health, readiness
Injured, and Ill service- and resiliency
members • Cost of care in direct care system
• Humanitarian assistance, vs. purchased care system
disaster relief support and • Global health and force health
capacity building protection surveillance
• TRICARE copay modification • Viability of residency training,
(sustaining the benefit Part II) other educational programs and
• JTF Capital Medical Region research
• Recaptialization of MHS • Partnerships and sharing with VA,
facilities HHS, DOS and other Agencies
• and activities
Information technology sharing
and integration • Investment, recruitment and
retention of human capital
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14. Growth in the Unified Medical Budget
(Excluding GWOT)
Increase
over FY2000
$70,000 $46.7B
268%
$60,000 $12.1B –26%
$2.5B – 5%
$50,000
$5.2B – 11%
($M)
$40,000 $9.0B – 19%
$30,000
$18.0B – 39%
$20,000
FY2000
Baseline
$17.4B
$10,000
$0
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
FY2000 Unified Medical Program Price Inflation Volume/Intensity/Cost Share Creep, etc.
New Users <65 Explicit Benefit Changes to <65 Explicit Benefit Changes to 65+, i.e. TFL
Volume/Intensity/CostShare Creep, etc is the residual after all explicit causes have been removed
New users accounts for increase in percentage of eligible beneficiaries under 65 who rely on TRICARE (See Slide
11 for trend)
Explicit Benefit Changes <65 are estimates base on legislative changes to the benefit (See Slide 8 for examples)
Explicit Benefit Changes to 65+ is the Normal cost to the department minus the Level of Effort for MTF Care prior
to the MERCHF

15. Increased DoD Health Benefits
1940s-1950s
Title 10 Legislated Benefit 2002
Space Required for Active Duty TRICARE Plus
Space Available for Families and Retirees TRICARE For Life
1966 TRICARE Prime Remote for AD Family Members
CHAMPUS Legislated Benefit
Civilian Health Care where MTFs do not exist. 2003
Families and Retirees <65 TRICARE Online
1993 TRICARE implements HIPPA Patient Privacy Standard
TRICARE Managed Care Legislation Elimination of AD Family Member Co-Pays
Automatic enrollment for Active Duty
Space Required for TRICARE Prime enrollees 2004
Space Available for Non-enrollees Transitional Assistance Management Program (TAMP) Expansion
Guard/Reserve TRICARE (Early Eligibility, Reserve Family Demo)
1995-1998 Elimination of Non-Availability Statements (NAS)
TRICARE Triple Option Benefits
2005
Prime, Extra and Standard
TRICARE Reserve Select
TRICARE Senior Prime Demonstration
Extended Health Care Option/Home Health Care (ECHO / EHHC)
TRICARE Maternity Care Options
1999-2000
Further Expansion:
2006
Prime Remote for Active Duty
TRICARE provider rates >=Medicare Extended TRICARE benefits for dependents whose sponsor dies on
Beneficiary Counseling & Assistance Coordinators
Active Duty
Limit deductibles/co-pays for nursing home residents under the
Pharmacy Program
Enhanced Benefit
Enhancement of TRICARE Reserve Select coverage
2001
Catastrophic Cap Reduced to $3,000
Enhanced TRICARE Retiree Dental Program 2007
TRICARE Senior Pharmacy Expansion of TRICARE Reserve Select coverage to All
Elimination of Prime Co-pays for AD Family Members Reservists
Extension of Medical and Dental Benefits to Survivors Three year Extension of Joint DoD/VA Incentive Program
School Physicals Planning/Management – Claims Processing Standardization
Entitlement for Medal of Honor Recipients Expanded Disease Management Programs
TRICARE Prime Travel Entitlement Coverage of Forensic Exams for Sexual Assaults
Chiropractic Care Program Dental anesthesia for pediatric cases

16. Budget Impact
DoD Forecast
$70.00
If DoD Health Budget
grows at recent trend
$60.00 rates, it will reach
$64B, or 10.4% of
DoD topline in 2015
$50.00
Annual Total If DoD Health
Defense
$40.00 Budget managed to
Health 8% of DoD topline,
Expenditures budget would be
($B) $30.00
$46 in 2015
$20.00
$10.00
$0.00
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Maintain Health Budget at 8% of Total DoD Budget Projections are for 10.4% by FY2015

17. Implications
• Without intervention, health care costs will
consume a larger and larger portion of DoD
budget
• In extreme case, budget pressures could impact
delivery of benefit and/or operation of Direct
Care System
• Increasing cost shares could blunt some but not
all of the growth

18. Emotion
Policy/Politics
Economics
Practice/Art
Science
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19. Section 2: Fundamentals
of health policy
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20. 3-20

21. 3-21

22. Fundamentals of Health Policy
Market failure and why it occurs:
• Public goods
• Externalities
• Asymmetry of information
• Lack of competition
• Redistribution of income
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23. Policy Definitions
• Market failure
- When markets do not provide resource allocations that
are fully acceptable
- This situation allows for a potential role of government to
“improve” allocations or provide some form of corrective
intervention
• Examples of market failure
- National Defense
- Monopolies
- Healthcare???
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24. Policy Fundamentals
• Public Goods
- Non-rival in consumption – You and I both consume
without affecting one another’s consumption of the
good ex. National park
- Non-excludable – the good is provided to everyone
ex. national defense or a lighthouse
Is healthcare a public good? It depends…
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25. Policy Definitions …
Externalities – Unintended / unplanned effects of market
behavior. This may be positive or negative.
Ex. immunizations – positive externality
medical error – negative externality
Lack of Competition
- Monopoly – A market where there is a single provider
- Monopsony – A market where there is a single buyer
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26. Policy Definitions …
Redistribution of income – transferring income or benefits from
one group to another. In healthcare this equates to two large
programs:
- Medicare
- Medicaid
- Healthcare reform may also cause a redistribution if the
individual mandate requires one group to subsidy another
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27. Policy Definitions…
Imperfect Information - Buyers and sellers are assumed to have
complete information about products and services. In the absence of
information, markets may not allocate resources properly:
Moral hazard – when one party in a transaction has more information
than another and does not behave responsibly.
ex. Presence of health insurance causes someone to take fewer
health related precautions
Adverse selection – This occurs when high risk consumers, who know
about their own health status, subscribe to an insured group composed
of lower risk individuals.
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28. Health Policy Decision-Making Tools
• Cost- benefit analysis
• Cost effectiveness analysis
• Quality Adjusted Life Years (QALYs)
• Disability Adjusted Life Years (DALYs)
• Game Theory
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29. Section 3: Policy, History
and Reform
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30. Policy and History
q Adam Smith “Wealth of Nations” 1776
- “The first duty of the sovereign is that of protecting the society from the
violence and invasion of other independent societies”. = National Defense
- “The second duty of the sovereign is that of protecting, as far as possible,
every member of the society from the injustice or oppression of every other
member of it, or the duty of establishing an exact administration of justice”.
= Administration of justice
- “The third and last duty of the sovereign or commonwealth is that of
erecting and maintaining those public institutions and those public works,
which, though they may be in the highest degree advantageous to a great
society, are, however, of such a nature, that the profit could never repay the
expense to any individual or small number of individuals, and which it
therefore cannot be expected that any individual or small number of
individuals should erect or maintain”. = Public goods
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31. More… Policy and History
• John Maynard Keynes (1926), “Liberalism and Labour”
- “The political problem of mankind is to combine three
things: economic efficiency, social justice, and individual
liberty.”
• Richard Musgrave (1958), “The Theory of Public Finance”
- Implementation of government policies have the following
effects: allocation of resources, distribution of income and
wealth, and stabilization.
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32. Notable Health Policy Scholars
Kenneth Arrow
Victor Fuchs
Uwe Reinhardt
John Iglehart
Mark Pauly
Stuart Altman
Donald Berwick
Alexandra Shields
Charles Lindblom
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33. GDP
Time
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34. Modern U.S. Healthcare History in
Short
1940s
• National health care expenditures are 4.0% of Gross National Product
• Wage and price controls are placed on American employers. Many
companies begin to offer health benefits to compensate for lower wages
• President Truman offers national health program but plan is
denounced by AMA and a House Subcommittee calls his plan a
communist plot
• Hill-Burton Act helps fund the building of new hospitals
1950s
• National health care expenditures are 4.5% of Gross National Product
• Federal responsibility for sick and poor is established
• Americans have a system of private insurance for those who can
afford it and welfare services for the poor
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35. Modern U.S. Healthcare History
in Short
1960s
• National health care expenditures are 6% of GNP
• Medicare and Medicaid signed into law by President Johnson
• 700 companies selling health insurance
1970s
• National health care expenditures are 8% of GNP
• HMO Act of 1973 provides grants and loans to expand HMOs and
offer alternative to traditional insurance
• President Nixon’s plan for National Health Insurance rejected
• RAND Study – Concludes that insurance with no copays = greater
usage
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36. U.S. Healthcare History
Continued…
1980s
• National health care expenditures are 10.5% of GNP
• COBRA of 1985 extends health coverage to those losing a job
• Medicare shifts to DRGs
• Large scale shift to privatization, contracting and corporate medicine
begins
1990s
• National health care expenditures are 13% of GNP
• Health care costs rise at double the rate of inflation. In an effort to
control
costs managed care expands
• President Clinton’s healthcare reform plan defeated by Congress
• HIPAA and SCHIP passed into law
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37. U.S. Healthcare History …
2001 – September 11th and anthrax attacks (bio-terrorism
becomes real)
2003 – Major expansion of Medicare prescription drug
benefit
2004 – HSPD 10 – First major inter-agency bioterrorism
directive
2006 – Massachusetts health reform plan
2008-2009 – Healthcare Reform???
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38. The Reform Debate
Comprehensive reform – Major overhaul of the current U.S.
healthcare system
VS.
Incremental reform – Tinkering with the existing system
The trend for healthcare reform in the U.S. points toward
incrementalism. The most significant comprehensive
reform in U.S. healthcare has been Medicare and Medicaid
as part of the Social Security Act of 1965.
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39. The Reform Debate
So, Why Reform???:
• Costs are growing at an increasing rate
• Growing number of un insured
• Diminishing access to care
• Concern over the health of U.S. economy and
unemployment
• Growing number of health coverage limitations,
increasing co pays fear of
uncovered catastrophic event
• Gaps in the quality of healthcare being provided
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40. What Will Reform Look Like?
International Flavor???
1. The Beveridge Model: William Beveridge
- Healthcare is financed by government through tax payments
- Government acts as sole payer, controls what doctors can do and
what is charged
- Examples: Great Britain, Spain, New Zealand, Cuba and most of
Scandinavia
2. The Bismarck Model: Otto Von Bismarck
- This model uses an insurance system with insurers called
“sickness funds” (about 240 funds)
- Financed jointly by employers and employees through payroll
deductions; tight government cost control regulation
- Examples: Germany, France, Netherlands, Japan, Switzerland
3. The National Health Insurance Model (NHI)
- NHI provides care for all eligible residents
- Care is offered primarily through private sector providers
- Funding for NHI is thru provincial and federal personal/corporate taxes
- Examples: Canada, Taiwan and South Korea
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41. International Flavor con’t
4. Out of Pocket Model:
- Many separate healthcare systems
- Loosely related components that include financing, insurance,
delivery
and payment
- Lack of overall “system-wide” planning and coordination
- Examples: United States and many other nations
Other features of the out of pocket model include:
- Generally those with affluence and money receive care
- In rural areas of the world millions of people may never see a
physician
- In emergency situations patients may be admitted for life-saving
care to
a medical facility if one is available
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42. But Healthcare In The U.S. Is
Somewhat Different
The Beveridge Model – This looks similar to the care
provided in the MHS and the VA
The Bismarck Model – This resembles workers who
receive healthcare benefits through their employer like
General Motors or UPS
NHI Model – Medicare closely parallels the NHI/Canada
model
Out of Pocket Model – This is how uninsured and higher
income categories generally receive care in the U.S.
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43. Politics and Compromise
What happened?
2008 - Presidential election campaign healthcare reform becomes one of the
key issues
2009 – Obama Administration takes office
Spring – Meetings with industry leaders and healthcare proposal generated
July – A series of healthcare reform bills are proposed in House Committees
August – Summer recess was used to hold town hall meetings on healthcare
Fall – Posturing for reform between Democrats and Republicans and between
the House and Senate
November – The House passes the Affordable Health Care for America Act
H.R. 3962 and forwards this to the Senate. The vote 220-215.
December – The Senate completely revises the House bill and passes H.R.
3950 on Christmas Eve. The vote 60-39.
2010 - President Obama stays the course
January – Sen. Brown (R-MA) elected to fill Sen. Kennedy’s seat. This
breaks the Democrat hold on filibuster proof majority in the Senate and
causes many to rethink their position on healthcare reform
February – President Obama’s unveils revised reform package based on the
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44. Politics and Compromise
2010 – Healthcare reform passed
March – H.R. 3950 Patient Protection and Affordable Care Act signed into
law 3/23/10
H.R. 4572 Health Care and Education Affordability Reconciliation Act
signed into law on 3/31/10
Why two healthcare reform bills?
- H.R. 3950 became the base bill or essentially the placeholder to all the
reconciliation process to be used for H.R. 4572
- H.R. 4572 became the amended health care reform act. It also included
student financial aid reform.
What is reconciliation and why was it used?
- Reconciliation is a process that allows for an up or down vote on
budget resolutions and avoids the Senate’s filibuster rules.
- Reconciliation also requires the bill to meet both short and long term
deficit reduction goals
- Provision of reconciliation bills not affecting revenues or outlays of the
federal government are prohibited.
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45. Bill Comparison
House Bill Senate Bill Reconciliation Bill
Passed House 11/07/09 by a vote of Passed Senate 12/24/09 by a vote of 60 Amends the Senate bill, by a vote of
220-215 to 39 220-211
$1.2 trillion $940 billion
Gross cost of coverage provisions $875 billion
$138 billion
Net savings $138 billion $118 billion
36 million more people would have
31 million more people would have 32 million more people would have
coverage than under current law. In
coverage than under current law. In coverage than under current law. In
Insurance coverage expansion total, 94% of the population would be
total, 92% of the population would be total, 95% of the population would be
insured
insured insured
15 million Americans would be added to 15 million Americans would be added to 16 million Americans would be added to
Expansion of Medicaid
Medicaid Medicaid Medicaid
Number of American who would remain 23 million
18 million 24 million
uninsured
4 million fewer people would have
4 million fewer people would have
6 million more people will get employer employer coverage than under current
Change in employer-provided insurance employer coverage than under current
coverage law
law
Average subsidy for people buying
$6,800 per year $5,800 per year $6,000 per year
insurance with government aid
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46. How does it impact you?
Some highlights extracted from the bill:
- Dependent children will be permitted to remain on their parents’ insurance until
their 26th birthday.
- Insurers are prohibited from dropping policy-holders when they get sick.
- Medicare is expanded to small, rural hospitals and facilities.
-Insurers are prohibited from discriminating against or charging higher rates for
any individuals based on pre-existing medical conditions.
-Insurers are prohibited from establishing annual spending caps.
- Imposes a $2000 per employee tax penalty on employers with over 50 employees
who do not offer health insurance to their full-time workers.
-Imposes a penalty of $95 , or up to 1% of income, whichever is greater, on
individuals who do not secure insurance; this will rise to $695, or 2.5% of income
by 2016.
-Chain restaurants with over 20 locations are required to display caloric content of
their foods on menus and vending machines.
-Establish health insurance exchanges, and subsidization of premiums for
individuals with income up to 400% of the poverty line, as well as single adults.
- Indoor tanning services are subjected to a 10% service tax.
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47. 3-47

48. Basic Tenets of Reform
1) Provision of virtually universal health care to
U.S. citizenry
2) Limiting the costs of health care by reducing
growth rate of costs
3) No rationing of health care in new system
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49. 3-49

50. Section 4: Stakeholders
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51. Stakeholders in Health Policy
• The President
- Office of Management and Budget (OMB)
• Congress - Oversight Committees for MHS only include:
- House Armed Services Committee (HASC)
- Senate Armed Services Committee (SASC)
- House Appropriations Committee (HAC)
- Senate Appropriations Committee (SAC)
• Executive Departments:
- Health and Human Services
- Defense
- State
- VA
• Advocacy groups and lobbyists: ex. Military coalition
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52. Stakeholder’s in More Generic
Terms
• Patients and consumers - demanders
• Healthcare providers or producers –
suppliers
• Insurers or third party payers
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53. Section 5: Government and
the Health Policy Making
Process
“To do for people what needs to be done, but which they cannot,
by individual effort, do at all, or do so well, for themselves”
- Abraham Lincoln
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54. The Primary Objectives of
Government?
• Maintain law, order and defense
• Improve efficiency
• Redistribute income/wealth
What is efficiency?
• Technical efficiency – “do not waste resources”
• Cost-effectiveness – “produce each output at the least cost”
• Allocative efficiency – “produce the types and amounts of healthcare
output which people value most”
What is redistribution of income/wealth?
• The transfer of income, wealth or property from some individuals to
others.
• Income redistribution is supposed to even the amount of income that
individuals are permitted to earn
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55. And Then There is Equity
Fairness in the provision of healthcare services and
the improvement of health status
- Should certain features of healthcare mean that
it is distributed differently from other goods and
services?
- Does it matter who receives healthcare goods
and services?
- Is the process to distribute health care services
and goods equitable?
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56. Government Policy Instruments
• Authorizations - Authorizing legislation sets policies
and funding limits for agencies/programs.
• Appropriations - Appropriations legislation is what a
department or agency needs before it can cut a
check or sign a contract.
• Tax policy
• Use of regulations
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57. How Do We Pay For Health Policy?
• General taxation
• Social insurance
• User charges
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58. The Two Primary Theories of Policy
Public interest – This model assumes there are two
primary objectives of government:
1) Improve efficiency in the market when there are:
- monopolization
- existence of externalities
2) Redistribute income in a more equitable manner
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59. The Two Primary Theories of Policy
Economic (Self interest) - This model assumes
the primary objective of government is the
redistribution of wealth. It also implies that
wealth in most cases is redistributed to those
that offer political support.
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60. Other Theories of Policy
- The Iron Triangle
- Power Clusters
- Kings and Kingmakers
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61. Now We Include the Objectives of Health
Policy
Allocation – The cost effectiveness of the production and
procurement of appropriate healthcare goods and services
Distribution – Fair financing, fair access to healthcare goods and
services, and fair payment to providers
Sustainable development – Development of appropriate
incentives for performance and health, policy development
and the management of change, and a sustainable resource
base over the long-term.
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62. Policy Making Models
(Longest model)
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63. The Healthcare Marketplace
Economic Exchanges in
Market Transactions
Demanders Suppliers
(Buyers) (Sellers)
Negotiation
Adapted from : Longest, BB. Health Policymaking in the United States, 3rd edition
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64. Policy Formulation
Policy formulation is a dynamic process:
•Formulation
•Implementation
•Modification
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65. The Policy Process on Capitol Hill
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66. I’m Just a Bill …. School House Rock
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67. Questions??
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68. Background
Slides
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69. 3-69

70. 3-70