Frequently Asked Questions about
Reforming Utah's Health Care System
Health
Care System Reform
What is wrong with Utah’s health system?
Utahns face many of the same health system problems as other states and the nation. Costs are rapidly rising, too many lack health insurance, and the quality of care sometimes suffers because of the misplaced incentives within the system. If we don’t act, these problems will continue to worsen.
How many people in Utah do not have health insurance?
Estimates vary, but the state health department conservatively estimates that we have 306,000 people in our state without health insurance. This is about 14% of the population – or about one in every seven Utahns. Approximately 90,000 Utah children lack health insurance.
How rapidly are health care costs rising?
In the last ten years, median household income in Utah increased by 15%, while family health insurance premiums in Utah increased by 109%. This trajectory is unsustainable. In 2006, premium increases were twice that of earnings and more than twice that of inflation. If not addressed these rapidly escalating costs will result in the cost of health insurance consuming half of household median income in 10 years, and exceeding household income in less than 20 years.
Why are health care premiums rising so fast?
Premium costs are rising rapidly for many reasons, some within our control and others outside of our control. The aging population raises costs because older people consume more health care. Technological advances provide valued treatment options, but also raise premium costs.
Experts agree that the most important cost driver within our control is utilization. Health care providers face incentives to over-prescribe care to avoid medical malpractice, meet patient expectations, raise compensation or increase certainty in their diagnosis. Patients face incentives to over-consume care because they lack information on the true cost of treatment and much of the treatment is paid for with other people’s money. As a consequence, choices are made without the benefit of full information about the costs and benefits. The health care market is broken.
What is the relationship between cost and access?
As costs rise, more people lose coverage. This further compounds the problem as people avoid or delay treatment, yet ultimately end up seeking care in emergency rooms – the most expensive type of care. Much of that cost – hundreds of millions of dollars – is passed on to those who are still struggling to purchase coverage. It is also passed on to taxpayers, who bear the cost of public insurance and safety net programs for those who might otherwise be insured in the private market. The cycle repeats and the problems get worse every year.
What happens if we don’t act?
Costs will continue to rise and more and more people will end up on the roles of the uninsured. Even worse, we will face the increasing likelihood that a once-size-fits-all government-run system will be imposed on us. Many leading presidential candidates have already proposed big government solutions. We have a window of opportunity to act now, while the Bush administration has encouraged states to serve as laboratories of reform, and create a homegrown, uniquely Utah solution.
Doesn’t Utah have good health care?
Yes. We are fortunate to have the lowest health care costs in the nation. Doctors and hospitals provide first-rate care and insurance companies compete vigorously to contain costs. Even with these strengths, health care cost increases are unsustainable and far too many Utahns lack the peace of mind that comes with having health insurance coverage. The problem gets worse every year.
How do you propose to fix Utah’s health system?
The problems in Utah’s health system cannot be addressed in isolation. Experts agree that the system can only be fixed by addressing the three pillars of health system reform – cost, quality and access. For example, costs cannot be controlled unless incentives are properly aligned. Incentives cannot be properly aligned in less everyone has basic coverage (access) and markets are fair and transparent. Quality will not improve without better information and expanded coverage.
We propose a business-minded approach that relies on the private health insurance and health care markets to meet Utah’s health care needs. Our approach encourages personal responsibility, maximizes consumer choice, strengthens market forces and allows us to take control of our own health care.
What are you specifically proposing to do?
As a first step, we would create incentives for people to take personal responsibility for their good health by focusing on wellness and prevention and paying for the care that they receive. Insurance benefits would be priced to reward responsible behavior and co-payments for preventative and primary care would be priced very affordably.
Similarly, we would require all insurance carriers licensed in our state to provide an essential benefits package that is designed and priced so that patients make treatment choices based on value (what they receive based on what they pay). As treatment becomes more elective (ex. shoulder surgery) the patient’s contribution (co-payment or co-insurance) would become more expensive, forcing the patient to evaluate tradeoffs between cost and comfort. All “life care” such as cancer treatment or life threatening emergencies would be covered. Information on cost and quality would be completely transparent to the patient.
Next, the state would charter a non-for-profit corporation called the Utah Health Insurance Exchange. The Exchange would function like a stock market to connect individuals with insurers and allow people to purchase insurance with pre-tax dollars (a benefit that only some enjoy today). Individual policies would be completely portable as a person’s circumstances change.
Finally, just like we require that Utah drivers (by way of our no fault insurance law) and homeowners (by way of mortgage lending requirements) have essential insurance coverage, we would require that every Utahn have essential health insurance coverage. In this way, Utahns would have the peace of mind that comes with having three of the largest household expenditures – transportation, housing and health care – covered with basic insurance. Those who cannot afford essential health insurance would be eligible for a public subsidy based on a sliding scale of a person’s income relative to the federal poverty level.
How much will this cost and will we actually be able to contain health care costs?
The average health insurance policy in Utah currently costs approximately $4600 per person per year. We estimate that the essential benefit package (described earlier), which is structured to realign the patient’s incentives for receiving care, will cost approximately $3200 per year. This 30% savings occurs, in part, because patients will have “skin in the game” as they make choices about the care that they receive.
Costs will be contained as health care consumers have more information about the cost and quality of their care and incentives to make decisions based on value. Our proposal will also stimulate vigorous competition for individual policies through the health insurance exchange.
Why is an individual requirement for health insurance necessary?
Clearly, you can’t buy insurance just when you need the coverage. A prerequisite to a healthy insurance market is that people participate when they don’t need it. We all share risk together.
With other large household purchases – automobiles and housing – we require consumers to have insurance coverage. We do this because of the public interest at stake; when we share in the risk, the potential costs to any one of us are reduced. Health insurance is the same, with one major difference: if you show up for care, you still get the service even if you don’t pay.
As a result, many people who can afford health insurance go without it because they know they will still receive treatment if the show up at an emergency room or clinic. This treatment is mandated by federal law. The individual requirement will eliminate free riders in our health system, help everybody to receive preventative treatment and lower health care costs over the long haul.
Is the current health system unfair?
Yes, the current system is unfair to individuals, businesses and taxpayers. Those who are insured face premiums that are 17% higher to pay for health care provided to those who are uninsured. People who are self-employed or in the individual market for health insurance do not get to pay for their health care costs with pre-tax dollars like everybody else. There is very little disclosure about costs and so people fear that costs are not fairly charged.
What about health care quality? Does your plan address that?
Our proposal makes substantive progress in addressing health care costs and access and creates a structure for significant quality improvements to take root. Quality, which is equally important to cost and access, will be improved by making the health care system more transparent and by sharing information about cost and quality.
How long will it take to reform the health care system?
Comprehensive reform will take 2-3 years. We will support legislation this year that creates a framework for positive change. In subsequent years, and after significant public involvement, we will support legislation that builds upon this framework and completes Utah’s transformation to an enhanced health care system that will strengthen our economy and provide people with health security.
Learn more about the process and
proposals for Health Care System Reform in Utah:
