Institute Forum

Expert: Nation Needs to Contain Costs of High-Risk Patients May 2009

Expert: Nation Needs to Contain Costs of High-Risk Patients

With the current economic downturn requiring taxpayer investments in infrastructure, education and other issues, the need to control health care costs may be more critical than ever, according to Harvard School of Public Health Professor Katherine Swartz.

View Professor Swartz's PowerPoint presentation

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Swartz, a professor of health policy and economics, spoke May 21 at a Rockefeller Institute of Government Public Policy Forum titled, "Mitigating the Effects of High-Risk, High-Cost Populations in the Private Health Insurance Market." She provided an overview of the "Massachusetts experience" with ensuring universal health coverage, with a focus on the need to manage and contain costs for people with high medical expenses. In response, New York officials representing the Health and Insurance departments shared perspectives on New York's challenges in expanding care to more high-risk patients.

With $2.2 trillion — 16.2 percent of the nation's gross domestic product — spent on health care in 2007 (the latest figures), Swartz expressed concern that those expenditures need to be better managed, as the country seeks to address a host of critical issues with dwindling resources. The health-care spending comes out to $7,400 per person.

Not everyone, though, is responsible for the same amount of health expenditures. In fact, it is a relatively small percentage of people — those who experience sudden accidents, and those who are older or suffering from chronic illnesses — who account for a very large percentage of the nation's medical costs. About 80 percent of the population account for about 20 percent of health-care spending, while just 1 percent of the sickest Americans account for a full 30 percent of the nation's medical expenditures.

The trick, Swartz said, is being able to efficiently manage costs when patients pass a certain threshold of spending.

Insurers' risks are greatest when consumers purchase health coverage on a voluntary basis, Swartz said. That's because healthy people are more likely to risk the cost of a sudden illness than to buy high-cost insurance. The risk is spread more evenly when everyone is required to purchase health insurance — which Massachusetts mandated in a 2006 law. All but the smallest companies in Massachusetts are required to offer health insurance, and residents who do not get insurance at work must purchase it themselves.

The "Massachusetts experience" with mandating universal health coverage has not so far prompted efforts to roll it back, Swartz said. But she added that the penalties for going without insurance coverage rise this year.

"This is the year that, in some ways, the rubber's going to hit the road," Swartz said.

She added that there are areas in which Massachusetts needs to improve its plan. For instance, relatively few of the state's residents — only 19,000 — have purchased health insurance through Commonwealth Connector, intended to help residents find affordable health insurance plans, including those subsidized by the state, she said.

Swartz offered no easy solutions to the challenge of managing the costs of the highest-risk patients and getting them affordable insurance coverage. There is no "magic bullet," she said. Ultimately, states will need help from the federal government to reduce the high medical costs associated with the riskiest patients, Swartz said.

"I don't think that states can do it alone, even a state like New York," Swartz said.

New York has especially high health costs compared to other states, she said, especially in New York City and Long Island.

New York officials responding to Swartz's comments all praised her presentation.

"It's important to take a hard look at states like Massachusetts that let everyone in," said Eileen Hayes, associate attorney in the New York State Insurance Department's Health Bureau.

Troy Oechsner, deputy superintendent for health at the New York State Insurance Department, said the state has made strides in recent years in providing health coverage to more residents through plans like Child Health Plus and Family Health Plus.

Speaking about the experience of New York's Medicaid program — the federal-state health insurance program for low-income Americans — Jay Laudato, deputy commissioner of health insurance programs for the New York State Health Department, said the state was in a good position to expand coverage to even more residents.

"There is plenty of money," he said. "We have all the money we need for universal health coverage right now."


For more:

Audio (Full)
Video of Professor Swartz's presentation


The Nelson A. Rockefeller Institute of Government, the public policy research arm of the State University of New York, conducts fiscal and programmatic research on American state and local governments. It works closely with federal, state, and local government agencies nationally and in New York, and draws on the State University’s rich intellectual resources and on networks of public policy academic experts throughout the country.