52 Healthcare Economics

52

Healthcare Economics

David A. Margolin and Lester Rosen

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“It was the best of times it was the worst of times.” How prophetic was Charles Dickens when applied to health care in America today. ¹ We are currently experiencing unprecedented technologic and therapeutic advancements; however, these come at a tremendous price. Healthcare expenditures have increased by double digits for the past decade, physician reimbursement has decreased over the past 10 years, and hos- pitals have closed and healthcare systems have filed for bank- ruptcy. ² Furthermore, healthcare expenditures are forecasted to grow more than 7.0% per year over the next 10 years ³ (Figure 52-1). ⁴

Multiple interrelated events have led to the current state of healthcare finance. With the advent of the resource-based relative value system (RBRVS), physicians have shifted from price setters to price takers. Technology costs, although providing an improvement in patient care, have skyrocketed. Although the life expectancy of the population has not increased dramatically over the past decades, the

“baby boomers” are here and continue to shift the average age of the American population to one that requires increased utilization of healthcare resources. In 2003 it was estimated that forty-five million or 15.6% of Americans had no health insurance, and millions more were underinsured, putting a strain on state and federal budgets to provide care. ⁵ Last but not least is the current professional liability crisis, resulting in increased malpractice rates and driving special- ists from specific locations. Despite this, physicians still are able to provide quality care for their patients and receive reasonable compensation. Nonetheless, in the ever-changing face of the socioeconomic landscape, physicians need a solid basis that allows them to function in today’s practice environment.

This chapter covers the RBVRS and Medicare reimburse- ment, the types of contractual agreement between insurers and practitioners and insurers and patients, and what to expect in the future.

The Reimbursement Process

Medicare

The key to begin to understand the business of medicine is to understand the basics of Medicare. While private payers vary in their reimbursement rates and policies, most are tied in some form to the Medicare system. Medicare was created in 1965 by the federal government as a social insurance program designed to provide all adults over the age of 65 with com- prehensive healthcare coverage at an affordable cost.

Medicare is administrated by the Center for Medicare and Medicaid Services (CMS), formerly known as the Health Care Financing Administration. When the program began in 1966, 19.1 million persons were enrolled; in 2004, Medicare had more than 41 million enrollees and is forecasted to include almost 80 million people by 2030 (Figure 52-2). ⁶ Medicare is divided into several parts.

Medicare Part A, also known as hospital insurance, helps pay for inpatient hospitalizations, skilled nursing care (SNF), home health and hospice care. Part A is financed primarily through federal payroll taxes (FICA) paid by both employees and employers. In 2004 the current FICA tax was 7.65% of earned income, of which 1.45% went toward Medicare Part A. Individuals who receive social security benefits or rail- road retirement benefits are automatically enrolled in Part A.

Individuals under 65 who receive social security disability or

those with end-stage renal disease for more than 24 months

are also eligible for Part A. Despite current misconcep-

tions, Medicare Part A is not free. Although there is no

monthly premium, Medicare enrollees are responsible for

copayments associated with the services provided. In 2004

there was an $840 copay for each hospital stay of 1–60 days,

and after 150 days of inpatient hospitalization all costs

were the patient’s responsibility. Part A covers nothing for

the first 20 days of SNF care and only $105 for days 21–100.

Similar to inpatient hospitalization, there was no coverage for SNF after 100 days.

Medicare Part B, also known as Medical Insurance, pro- vides coverage for payments to physicians for services provided. This includes outpatient medical and surgical serv- ices, supplies, diagnostic testing, and some home health care.

Part B is funded by a combination of the federal government’s general revenues (75%) and individual monthly premiums (25%). In 2004 Part B did not cover routine physical exami- nations. However, the federal government has responded to citizens’ urging and has instituted a physical examination when one enters into Medicare and covers screening for some specific diseases. Part B covers screening for breast can- cer, cervical cancer, prostate cancer, and colorectal cancer.

Medicare covers fecal occult blood testing every 24 months, flexible sigmoidoscopy every 48 months, colonoscopy for high-risk individuals once every 24 months or for average risk individuals every 10 years. Medicare also covers barium ene- mas every 24 or 48 months depending on your risk stratifica- tion. New in 2004 was a prescription drug benefit plan available to Medicare beneficiaries in 2006.

Unlike Part A, Medicare Part B has monthly premiums. In 2004 the premium for those who enrolled at the onset of eli- gibility was $66.60 per month. If one enrolls at eligibility, this premium is deducted from your social security or railroad retirement check. You can opt out of Part B. Similar to Part A, Part B enrollees are responsible for copayments and deductibles. For physician services, deductible was $100 per calendar year and a 20% copayment of Medicare-approved rates. Copayments for outpatient procedures were charged at a different rate than office services, and the copayment varied based on the procedure performed.

Whereas Part A and B are considered traditional Medicare, Medicare Part C or Medicare + choice is the government’s plan to shift the cost and risks of Medicare patients to the private sector. In Part C, private payers receive a monthly payment per covered individual (capitated amount) to provide all of Part A and B services. Private payers then tailor these plans to cover anticipated needs. These plans often provide benefits not seen in traditional Medicare, such as prescription drugs, routine physicals, preventative care, eyeglasses, and hearing aids. However, because these plans are privately administered, individual choice is often severely limited with regard to physicians and hospitals.

In late 2003, the federal government instituted another new category of Medicare. Medicare Part D, prescription drug coverage, was signed into law in December 2003. In response to the cost of prescription drugs for seniors, in December, the government instituted a program that will start in 2006. This program will provide for prescription drugs with an initial deductible of $250 dollars and a monthly premium of $35.

There will be a 75% subsidy for drug cost between

$251–$2250. The federal government will pay for all drugs after a recipient pays $3600 or $5100 in total cost. Special assistance will be provided for low-income seniors as well.

New to Part D is the institution of means testing. Individuals with incomes $160,000 and above will be subjected to higher Part B and Part D premiums.

Medicare Resources

According to the Office of Management and Budget, Medicare in 2004 had a budget of $302 billion forecasted to grow to more than $317 billion by 2008. ⁷ That budget is determined by legislation and is formula based. It involves the Medicare Economic Index, a weighted index, and the sustain- able growth rate. The sustainable growth rate compares the cumulative actual spending for physicians’ services since 1997 to a cumulative target amount of spending over the same

16%

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Percent of GDP

$11,000

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1960 1965 1970 1975 1980 1985 1990 1995 2000

NHE % of GDP

GDP

NHE Flat 1993-2000

F IGURE 52-1. Healthcare expenditures.

The green line shows the per- centage of the gross national product going to national health expen- diture. The scale on the left axis measures it. The purple line, for gross domestic product (GDP), and the blue line, for national health expenditure (NHE), in billions of dollars, measured by the right axis scale. http://hspm.sph.sc.edu/Courses/Econ/Classes/nhe00/.

F IGURE 52-2. Expected number of Medicare beneficiaries. The

number of people Medicare serves will nearly double by 2030.

Note:

Numbers may not sum because of rounding. (Source: CMS,

Office of the Actuary. From Centers for Medicare & Medicaid

Services, June 2002 edition, section III.B.1, p 4).

time period. Without new federal spending legislation, Medicare spending is not allowed to grow by more than $20 million/year (budget neutrality). However, the government has made exceptions to increases in Medicare spending for new technologies and pilot programs. For more details, the complete Medicare fee schedule can be found in the Federal Register online at http://www.gpoaccess.gov/fr/index.html.

Hospital (Part A) Reimbursement

Until the mid-1980s, the federal government and most private payers reimbursed hospitals retrospectively for all reasonable costs involved in the care of a covered individual. With this form of reimbursement, to compete and remain solvent, hos- pitals invested in the latest, most advanced technology. This allowed hospitals to increase patient care volume and expand services; however, it was done without regard to cost or effi- ciency. Although this methodology had its advantage, it led to a continuing upward spiral in healthcare costs and a signifi- cant duplication of services.

In response to sharply increasing hospital costs, the federal government instituted a prospective payment system. This was modeled after a system developed by Fetter and associ- ates at Yale University that categorized patients based on pri- mary and secondary diagnosis, primary and secondary procedures, age and length of stay, and then set a uniform cost for each category. ⁸ These diagnostic related groups (DRGs) set a maximum amount that would be paid for the hospital care of Medicare patients for a specific problem. In 2003 there were 538 DRGs. Each DRG contains a list of specific diagnoses and procedures based on the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). ⁹ ICD-9 is a coding system that lists specific diseases, diagnoses, and medical acuity. By using this system, Medicare has grouped related ICD-9 codes that use similar hospital recourses in specific DRGs.

Private payers have followed Medicare’s lead and began using a prospective payment system. It was believed that by using a prospective payment system, hospitals would have a true incentive to improve efficiency and keep cost low.

Although this may have initially slowed the growth of hospi- tal costs and forced improved efficiency in healthcare deliv- ery, it has not been the panacea that was expected. Hospital costs, although initially controlled, returned to double-digit increases by 2002. ¹⁰ Although the reasons for the continued increase in hospital costs are multifactorial, the failure of DRGs to truly control cost can best be summed up this way:

“Hospitals prefer management strategies that are designed to enhance revenues over cost control measures that may be resisted by the physician staff.” ¹¹

Despite the reluctance of physicians to change practice pat- terns, hospitals have tried to increase their efficiency, and with technologic advances, it has been possible to shift procedures from the inpatient setting to outpatient/ambulatory center.

Although this had some albeit minimal impact in physician

reimbursement, it helped decrease resource utilization. In response to this, to account for this shift in location, Medicare has developed a prospective payment system called the ambu- latory payment classification (APC). APCs, similar to DRGs, are specific reimbursement groupings that Medicare pays to facilities. For these outpatient services, Medicare pays a spe- cific rate per procedure determined by the APC in which the procedure is grouped. Specific medical devices and drugs are exempt from this and are reimbursed in addition to the APC fee. These are called pass throughs. Other devices that do not receive pass through are often charged to the patient by pri- vate payers. In 2004, four APC classifications covered the majority of outpatient anorectal procedures. APCs reimburse facilities between $209 (APC 148, lateral internal anal sphincterotomy) and $1210 (APC 150, hemorrhoidectomy) with a patient copayment between $ 41 and $ 437.

With changes in location of services in a constant state of flux, Medicare needed to develop an appropriate and timely methodology to respond to this shift. To add some stability to APC payments and achieve these goals, the Secretary of Health and Human Services (head of CMS) appointed an Advisory Panel on APC Groups. This panel of physicians deals with issues concerning resource use, assigning new cur- rent procedural terminology (CPT®) codes to APCs, and reassigning codes to different APCs.

Physician Reimbursement

Currently physician reimbursement from Medicare is a three- step process: 1) appropriate coding of the service provided by utilizing CPT®; 2) the appropriate coding of the diagnosis using ICD-9 code; and 3) CMS determination of the appro- priate fee based on the RBRVS.

CPT® is a uniform coding system that was developed by the American Medical Association (AMA). CPT® originated in 1966 and has undergone yearly updates based on changes in medical and surgical procedures and the development of new technology. CPT® is a proprietary product of the AMA.

The CPT® editorial panel is composed of 16 members in multiple specialties as well as the insurance industry.

Advisors from more than 90 medical and surgical specialties advise them. They meet four times a year to consider addi- tions and deletions to the code list. A service may be brought before the CPT® editorial panel by any specialty, private physician, insurer, or device manufacture. To receive consid- eration for a new code, a procedure must meet certain require- ments: it must be done by a reasonable number of the specialty that presents the code, be performed at reasonable frequency, be done throughout the country, and have peer- reviewed literature supporting its efficacy. The editorial panel allows advisors from other specialties to comment on any pro- posal. The editorial panel then reviews the clinical description of the procedure or service that describes the typical patient.

After assuring that it meets all of the above requirements and

that the service should not be coded with a preexisting code,

the committee will give the service a unique CPT® code. The code then moves to the Relative Value Update Committee (RUC) where it receives a value relative to other codes (RVU). CPT® also uses a series of modifiers in addition to the original code to better describe the service provided. This allows not only for better data collection regarding the fre- quency and complexity of services but also for appropriate reimbursement by Medicare.

Medicare implemented the RBRVS in 1992. Previously physicians were reimbursed based on “usual, customary and reasonable charges” (UCR). UCRs were based on the physi- cian’s most frequent charge for the service (usual), the aver- age charge for that service in the area (customary), and the actual charge for the service (reasonable). ¹² Individuals within the federal government, private insurers and non- procedure-based medical specialties thought that this system perpetuated increasing healthcare costs and inequities in med- ical care. These individuals believed that this system served as an incentive for physicians to inflate charges even in those instances in which actual costs were decreasing and to continue the inequities in fees between proceduralists and nonproceduralists. In response to this, the federal government instituted the Medicare fee schedule.

The Medicare fee schedule was based on the work of a research team led by William Hsiao, a Harvard economist under contract to CMS. ^13–15 The Harvard study ranked proce- dures and services relative to each other based on the amount of physician work necessary to perform the procedure or serv- ice. Work was defined as a combination of the time used to perform the service and the complexity of service (mental effort, knowledge, judgment and diagnostic acumen, techni- cal skill, physical skill, psychological stress, and potential iatrogenic risk). ¹⁶ Work was then broken down into three time periods, preservice, intraservice, and postservice.

Preservice work for surgical procedures has come to be defined as the physician work provided from the day before, until the time of the operative procedure (i.e., skin incision).

This may involve any or all of the following: hospital admis- sion work-up, the preoperative evaluation including the procedural work-up, review of records, communicating with other professionals, patient and family, and obtaining consent; and, dressing, scrubbing, and waiting before the operative procedure, preparing patient and needed equip- ment for the operative procedure, positioning the patient, and other non-”skin-to-skin” work done in the operating room before incision. Preservice work does not include the consul- tation or evaluation at which the decision to provide the procedure was made.

Intraservice work includes all “skin-to-skin” work that is a necessary part of the procedure. The time measurement for the intraservice work is from the start of the skin incision until the incision is closed.

Unlike preservice work, postservice work varies depending on the magnitude of the procedure. In an effort to accurately assign the amount of postprocedure work, specific CPT®

codes have been assigned specific global periods. There are currently three postprocedural global periods: 0 days, 10 days, and 90 days. Routine postprocedure care includes physician work after skin closure that is done on the day of the procedure, including non-”skin-to-skin” work in the oper- ating room. This includes patient stabilization in the recovery room, communicating with the patient and other profession- als (including written and telephone reports and orders), and patient visits on the day of the procedure. For a surgical service with a global period of 10 or 90 days, the postservice work includes all of the above, and in addition postoperative hospital care, including the intensive care unit if needed;

other in-hospital visits; discharge day management serv- ices; and office visits within the assigned global period of 10 or 90 days. ¹⁷

For nonsurgical services such as office evaluation and man- agement (E&M) services, the preservice work includes preparing to see the patient, reviewing records, and commu- nicating with other professionals. The intraservice work includes the work provided while the physician is with the patient and/or family. This includes the time in which the physician obtains the history, performs a physical evaluation, and counsels the patient. The postservice work for nonproce- dural services includes arranging for further services, review- ing results of studies, and communicating further with the patient, family, and other professionals, including written and telephone reports as well as calls to the patient.

Whereas the study by Hsiao and colleagues ¹⁴ initially val- ued only 200 codes and ranked them according to physician work, the RUC subsequently valued and ranked each CPT®

code relative to other codes. New codes were valued using provider surveys to obtain an appropriate work value. These surveys allow for individuals who perform the procedures to value pre-, intra-, and postservice work relative to established codes. According to federal law, the relative value of codes is reviewed every 5 years by the RUC allowing for corrections in the relativity of the codes. Currently, physician work is not the only value used to calculate an RVU. Whereas the work RVUs (wRVU) makes up the majority of the total RVUs (tRVU) for a specific CPT® code, RVUs are also calculated for practice expense (peRVU) and malpractice (mRVU) for each code. Similar to wRVUs, peRVUs are calculated based on the amount of resources used in the pre-, intra-, and post- service time. This includes not only the nursing and ancillary staff key to the procedure or service but also supplies used during the pre- and postprocedure periods. If the procedure is performed in the office, intraservice personnel and supplies are included. For procedures done in a facility, usually a hos- pital, these costs are reimbursed based on the DRG (Part A) and paid to the healthcare facility and not to the physician.

Malpractice RVUs are calculated from actual malpractice

premium data obtained throughout the country. Using pre-

vious CMS claims, a value for each CPT® code is determined

based on a risk factor for the dominant specialty that provides

service. ¹⁸

Final physician reimbursement by CMS is then multiplied by a geographic practice cost index (GPCI), which is sup- posed to adjust payments for differences in physician practice costs across geographic areas. For a given service, multiply- ing the service-specific Physician Work, Practice Expense, and Malpractice Expense RVUs by their respective GPCIs determines the payment amount in a given geographic area.

Next, these three products are summed, yielding a geograph- ically adjusted RVU total for the service. This number is then converted to dollars by a conversion factor, which in 2004 was

$37.3374 per RVU. It is expected to increase 1.5% in 2005.

As an example, in 2004 for CPT® code 44140 (colectomy, partial; with anastomosis) {(wRVU * wGPCI) + (peRVU * peGPCI) + (mRVU * mGPCI)} * 37.3374 = $ CMS reim- bursement. As seen, the amount paid varies per region:

San Francisco, CA: (20.97 wRVU * 1.068 wGPCI) + (8.69 peRVU * 1.458 peGPCI) + (2.58 mRVU * 0.669 mGPCI)

* 37.3374 = $1373.72

Boston, MA: (20.97 wRVU * 1.041 wGPCI) + (8.69 peRVU

* 1.239 peGPCI) + (2.58 mRVU * 0.803 mGPCI) * 37.3374 = $1294.43

New Orleans, LA: (20.97 wRVU * 1.0 wGPCI) + (8.69 peRVU * 0.945 peGPCI) + (2.58 mRVU ^* 1.240 mGPCI) * 37.3374 = $1209.03

Little Rock, AR: (20.97 wRVU * 1.000 wGPCI) + (8.69 peRVU * 0.847 peGPCI) + (2.58 mRVU * 0.389 mGPCI)

* 37.3374 = $1095.26

Although Medicare is an extremely large and at times an unwieldy way to manage healthcare and healthcare-related costs, understanding it is key to understanding both hospital and physician reimbursement by private payers. Most private payers today use CPT® codes to identify physician services.

Although private payers do not have to follow the rules set forth by the federal government (for instance, they often do not recognize surgical modifiers), they find that CPT® is a well-established and familiar system allowing for correct physician coding. Private payers in noncapitated contracts often set reimbursement based on a percentage of the Medicare fee schedule. The percentage reimbursement will often vary by region. The larger payers have taken this one step further using Medicare to develop their own fee schedule.

Again using CPT® terminology, companies will adjust payment based on the individual service provided; for exam- ple, paying E&M codes 105% of Medicare, office-based procedures 110% of Medicare, and surgical procedures 115%. This is often modified regionally based on the rules of supply and demand. In areas with a paucity of a specific specialty, reimbursement is high as opposed to a saturated market where the insurance company can play one physician or group against another to obtain a favorable contract.

Hospital payments are similar. Private payers reimburse hospitals either as a percentage of the DRG or on a per diem based on the service provided. For outpatient procedures, hospitals are often reimbursed as a percentage of the APC.

Private Payers

Whereas the impact of Medicare on the economic landscape of medicine is clear, the role and type of private payers is more cloudy. Health insurance comes in many forms and has different relations with its customer and its physician providers. Traditionally, there were two types of nongovern- mental insurance, individual insurance and group insurance.

Individual insurance allows a person to buy health insurance for themselves and their family. However, because of the inability of the insurer to spread the financial risk among many people, individual insurance is becoming prohibitively expensive. The majority of people obtain health insurance through some type of group. This allows for cheaper individ- ual payments as group purchasing allows the insurer to spread the risk over a larger number of people. Group insurance can be obtained through employers, professional societies (ACS, etc.), or other organizations (AARP, etc.).

Regardless of how insurance is purchased, the types of insurance plans are distinctly different. The most costly is the fee-for-service plan, also known as an indemnity plan in which individuals are free to seek care from any physician or hospital they choose. No preapproval is required. Individuals submit the bills to their carrier and if the deductible has been met, if there is one, the insurance company pays for medical services at the UCR. These plans are often structured so that there is a copayment for all services. The use of copayments and deductibles by insurers is a method of risk sharing. Not only do these costs help defray the cost of providing care for the insurers, but they are designed to make individuals think twice before seeking unnecessary care. In traditional fee-for- service plans, an individual may be responsible for 20% of the bill. Also, they may be responsible for the difference between the UCR and the billed charges.

To help control increasing healthcare costs and stimulate a more efficient use of healthcare resources, managed care organizations were developed. Since the early 1990s they have evolved into a variety of complex organizational struc- tures. They use a variety of tools to manage preauthorization functions, control healthcare costs, and share the risks associ- ated with group coverage.

Health maintenance organizations (HMOs) were designed to meet these ends. Although HMOs are still in the process of evolution, they characteristically represent the most restrictive type of health maintenance organization. In this model, the HMO restricts patient access in nonemergency incidents to HMO-contracted physicians and hospitals. Out-of-pocket costs for individuals are traditionally low for HMO physi- cians; however, individuals are responsible for all costs for non-HMO physicians.

Most HMOs initially used a “gatekeeper” or primary care

physician for specialist referral. Subsequently, HMOs have

loosened gatekeeper requirements for specialist referral. This

model has propagated the development of healthcare systems,

multispecialty groups that are either owned by or contracted

with the HMO to provide complete patient care. In these instances, the physicians function as employees of the system.

The physician group is then paid a capitated fee (amount per patient per month to provide total care) which is divided among the medical care providers at a rate determined by the medical group administration.

The next iteration of managed care organizations is the preferred provider organization (PPO). Similar to HMOs, PPOs enter into contracts with healthcare providers and hospitals to provide member care. Often more choice and flexibility are available to the patient than in the traditional HMO model but at the cost of higher beneficiary premiums.

Unlike HMOs, PPOs do not own physician practices. To have access to the PPOs beneficiaries and be listed in the “net- work,” physicians often agree to reduce their normal fees.

PPOs traditionally do not use a “gatekeeper,” thus allowing patients increased access to self-referred specialty care.

The most recent variation in managed care organizations is the development of “Point of Service” plans, a mixture of traditional HMO and PPO plans. In this type of plan, if a patient first sees their primary care physician to receive a referral, much like an HMO, the copay, if present, is neg- ligible. Patients are also able to see “network” physicians with minimal financial responsibility. Patients may seek care from someone outside the “network” without a referral.

In these instances, the physician is paid a rate less than is characteristically billed, usually the same rate as in network physicians, and the patient is responsible for the difference. This provides increased patient flexibility but at increased cost.

The Future

Despite hopes that managed care would provide cost stability to health care in America, after costs initially slowed, they have continued to increase at a rate higher than the consumer price index and personal income (Table 52-1 ). ¹⁹ Is this a fail- ure of managed care or has managed care reached its capacity with regard to improving efficiency and cost containment?

The answer is unclear; however, experts now tout a “con- sumer-centric” or “consumer-driven” healthcare model as the future of healthcare delivery. Harvard Professor Regina Herzlinger initially described a system that allows users to become active consumers. ¹⁷ Similar to making any large pur- chases, individuals are given the opportunity to choose from specific benefit packages that will fit their particular need.

Aside from having choice, individuals are given information allowing them to make educated and informed choices.

Herzlinger and others envision a healthcare market place sim- ilar to a successful industry in which individuals are given control, choice, and information. With the increasing number of consumers in need of healthcare resources, these experts see the Internet as a way of rapid dissemination of healthcare information. ^20–23

Although consumer-centric health care and health reim- bursement arrangements (HRAs) seem to be recreating the way health care is funded, there are potential problems. This model assumes that consumers are sophisticated enough to make sound healthcare choices, not just those based on cost.

As Abramowitz notes, “Choosing based on price is impossible for consumers to do intelligently. The bottom line is that con- sumers lack the information necessary to use the money wisely. So consumer driven health care, as it is being discussed today, will be a market failure.” ²⁴ Another potential problem is that individuals will feel obligated to use all of their HRA or employer contributions, especially as the year end approaches and individuals run the risk of losing their contributions.

The initial manifestation of a hope to address some of the potential pitfalls of consumer-centric health care is the devel- opment of defined contribution plans in which employers pro- vide a set amount to individuals for health care, along with information regarding employer-approved healthcare choices.

Often these are tied to a safety net for catastrophic cost. The idea is to empower individuals and to give them the necessary information to make good choices. Further development of consumer-driven health care is the development of HRAs.

This IRS plan gives a tax advantage to employers who con- tribute defined contributions to employee-controlled accounts for healthcare spending. Any monies not spent during the year are rolled over to help fund the following year’s plan. The thought was that this combined with a high deductible plan would lower healthcare costs. These types of plans also raise some questions: is the unused portion of the plan eligible to be rolled over in an IRA/401K? Can these funds be used for nontraditional health care? What about domestic partners?

Are these funds portable? These questions will only be answered by time and possibly federal legislation. Will this next generation of changes significantly help to control healthcare costs? The answer is unclear; however, one current benefit is the increasing individual awareness and education that these plans foster.

Despite the many and varied attempts to control healthcare costs, an unacceptably large number of Americans are still unable to obtain adequate healthcare coverage. This has led to the call in some quarters for the development of universal coverage. Senator Edward Kennedy put it best in a 2003 edi- torial: “Health care is not just another commodity. It is not a gift based on the ability to pay.” ²⁵ Proponents of universal coverage envision a system that provides access to care when needed and effective preventative care in a cost-effective man- ner that is delivered and paid for in an equitable way.

Although these are laudable goals, practical application remains a long way off. As seen from above, the increasing role and complexity of Medicare and Medicaid has not even incrementally achieved these objectives. Will the government be willing to push forward with universal health care and the subsequent development of a two-tiered healthcare system, one for the wealthy and one for the remainder of Americans?

Only time will tell.

T ABLE 52-1. Selected national economic indicators: 2000–2004 Calendar year 2001 2001 2001 2002 2002 2002 2002 2003 2003 2003 2003 2004 Indicator 2000 2001 2002 2003 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Gr oss domestic pr oduct Billions of dollars 9,817 10,101 10,481 10,988 10,088 10,096 10,194 10,329 10,428 10,542 10,624 10,736 10,847 11,107 11,262 11,451 P ersonal income Personal income in billions 8,430 8,713 8,910 9,204 8,690 8,727 8,771 8,804 8,912 8,944 8,981 9,049 9,146 9,256 9,364 9,523 Disposable income in billions 7,194 7,469 7,857 8,213 7,382 7,606 7,528 7,734 7,869 7,891 7,936 8,039 8,146 8,318 8,349 8,531 Prices

Consumer price inde x, all items 172 177.1 179.9 184 177.5 177.8 177.3 177.9 179.8 180.6 181.2 183 183.7 184.6 184.6 186.3 All items less medical care 167 171.9 174.3 178.1 172.4 172.5 171.9 172.5 174.3 174.9 175.4 177.2 177.9 178.6 178.6 180.2 Medical care 261 272.8 285.6 297.1 271.6 274.2 276.6 280.9 284 287.2 290.3 293.5 295.5 298.4 300.9 305.7 Annual per cent change continues Gr oss domestic pr oduct Billions of dollars 5.9 2.9 3.8 4.8 2.7 2.4 2.4 3 3.4 4.4 4.2 3.9 4 5.4 6 6.7 P ersonal income Personal income in billions 8 3.4 2.3 3.3 3.8 2.5 2.4 1.6 2.6 2.5 2.4 2.8 2.6 3.5 4.3 5.2 Prices

Consumer price inde x, all items 3.4 2.8 1.6 2.3 3.4 2.7 1.9 1.3 1.3 1.6 2.2 2.9 2.1 2.2 1.9 1.8 All items less medical care 3.3 2.7 1.4 2.2 3.3 2.6 1.7 1 1.1 1.4 2.1 2.7 2 2.1 1.8 1.7 Medical care 4.1 4.6 4.7 4 4.6 4.5 4.7 4.5 4.6 4.8 5 4.5 4 3.9 3.7 4.2

Base period = 1982–84, unless noted. Note : Q designates quarter of year . Unlik e T ables 1-6, quarterly data on GDP , personal income, and disposable personal income, are seasonally adjusted at annual rates. Sour ces : U.S. Department of Commerce, Bureau of Economic Analysis: Surv ey of Current Business. W ashington. U.S. Go v ernment Printing Of fice. Monthly reports for January 1998–October 2003; U.S. Department of Labor , Bureau of Labor and Producer Price Inde x es. W ashington. U.S. Go v ernment Printing Of fice. Monthly reports for January 1999–March 2004. http://www .cms.hhs.go v/statistics/health-indicators/t7.asp.

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