State Health Care Reform: Key Questions and Answers

Studies | Health

No. 311
Monday, April 21, 2008
by Linda Gorman and R. Allan Jensen


  1. This study is based on Linda Gorman and R. Allan Jensen, “Minority Report,” in Blue Ribbon Commission for Health Care Reform, Final Report to the Colorado General Assembly, January 31, 2008, Chapter 10.  Available at  Access verified February 19, 2008.
  2. With respect to Colorado, the Lewin Group has presented a number of charts showing average family health spending by income group under various reform proposals.  Usually the groups shown are incomplete and the numbers presented do not provide a picture of overall spending or how many families are in each group.  They also do not include the economy-wide effects of various tax increases on jobs, business formation and incomes.  In slide 18 of a November 15, 2007, presentation, the effect on people with incomes below $50,000 was given for each $10,000 in income.  For amounts above $50,000 the increments increased to $24,999 and then to $49,999.  In 2004-2006, the Census Bureau put median household income in Colorado at $54,039.  As the chart is restricted to averages between income groups, it is impossible to know what will happen to overall average spending.  The November 1, 2007, interim report by the Lewin Group stated that “About 70.4 percent of all Colorado families would see a net increase in health spending of $20 or more.”  The Lewin Group, Colorado Model 5: Cost and Coverage Impacts, November 15, 2007, powerpoint presentation to the Blue Ribbon Commission on Health Care Reform, Denver, Colorado.  Final report, revised November 28, 2007, slide number 18; Lewin Group,  Technical Assessment of Health Care Reform Proposals, an interim report prepared for the Colorado Blue Ribbon Commission for Health Care Reform, November 1, 2007, page 122.

  3. Greg Scandlen, “Will Mandatory Health Insurance Work?” National Center for Policy Analysis, Brief Analysis No. 569, September 6, 2006.  Available at

  4. National Heart, Lung and Blood Institute, “JNC 7 Express:The Seventh Report of the Joint National Committee on Prevention, Detection, Evaluation, and Treatment of High Blood Pressure,” U.S. Department of Health and Human Services, National Institutes of Health, NIH Publication No. 03-5233, December 2003, page 7.  Available at  Access verified November 28, 2007.

  5. There is a growing amount of literature exploring possible relationships between treatment for high blood pressure and the onset of type 2 diabetes.  For an example, see Effie L. Kuti, William L. Baker and C. Michael White,“The development of new-onset type 2 diabetes association with choosing a calcium channel blocker compared to a diuretic or beta-blocker,” Current Medical Research and Opinion, Vol. 23, No. 6,June 2007, pages 1,239-1,244; Sameer Stas, Lama Appesh and James Sowers,“Metabolic safety of antihypertensive drugs: myth versus reality,” Current Hypertension Reports, Vol. 8, No. 5, September 2006, pages 403-408.

  6. For sample literature on the topic of problems with quality measurement and report cards see Timothy P. Hofer et al., “The Unreliability of Individual Physician ‘Report Cards’ for Assessing the Costs and Quality of Care of a Chronic Disease,” Journal of the American Medical Association, Vol. 281, No. 22,June 9, 1999, pages 2,098-2,105; Rachel Sorokin, “Alternative Explanations for Poor Report Card Performance,” Effective Clinical Practices, Vol. 3, No. 1, January/February 2000, pages 25-30; David M. Shahian et al., “Comparison of Clinical and Administrative Data Sources for Hospital Coronary Artery Bypass Graft Surgery Report Cards,” Circulation, Vol. 115, No. 12, March 27, 2007, pages 1508-1510; Sharon-Lise T. Normand et al.,“Assessing the Accuracy of Hospital Clinical Performance Measures,” Medical Decision Making, Vol. 27, No. 1, January/February 2007, pages 9-20; Andrew J. Epstein, “Do Cardiac Surgery Report Cards Reduce Mortality? Assessing the Evidence,” Medical Care Research and Review, Vol. 63, No. 4, August 2006, pages 403-426; Harlan M. Krumholz et al., “Evaluation of a Consumer-oriented Internet Health Care Report Card: The Risk of Quality Ratings Based on Mortality Data,” Journal of the American Medical Association, Vol. 287, No. 10, March 13, 2002, pages 1,277-1,287.

  7. For a general discussion of the Dutch experience see Ezekiel Emanuel, “Whose Right to Die?” Atlantic Monthly, Vol. 279, No. 3, March 1997, pages 73-79.

  8. For an example of a case in which care provided by the Veterans Health Administration (VHA) is counted as care for the uninsured, see Jack Hadley and John Holahan, “How Much Medical Care Do the Uninsured Use, And Who Pays For It?” Health Affairs, Web exclusive, February 12, 2003.  The problem, of course, is that the VHA is not supposed to serve those who are not veterans.  The second problem is that people meeting the criteria for lifetime health care from the VHA might rationally consider themselves insured and would not purchase private policies or enroll in other public ones.

  9. Helen Levy and David Meltzer, “What Do We Really Know about Whether Health Insurance Affects Health?” Catherine G. McLaughlin, ed., Health Policy and the Uninsured (Washington, D.C.: Urban Institute Press, 2004), Chapter 4.

  10. For examples see Jesse M. Pines and Kevin Buford, “Predictors of frequent emergency department utilization in Southeastern Pennsylvania,” Journal of Asthma, Vol. 43, No. 3, April 2006, pages 219-223; B. C. Sun, H. R. Burstin and T. A. Brennan, “Predictors and Outcomes of Frequent Emergency Department Users,” Academic Emergency Medicine, Vol.10, No. 4, April 2003, pages 320-328; K. A. Huntet al.,“Characteristics of Frequent Users of Emergency Departments,” Annals of Emergency Medicine, Vol. 48, No. 1, July 2006, pages 1-8; K. K. Fulda and R.  Immekus, “Frequent Users of Massachusetts Emergency Departments: A Statewide Analysis,” Annals of Emergency Medicine, Vol.48, No. 1, July 2006, pages 6-16; Peter J. Cunningham, “What Accounts for Differences in the Use of Hospital Emergency Departments across U.S. Communities?” Health Affairs, Web exclusive, Vol. 25, No. 5, September/October 2006, pages 324-336; Stephen Zuckerman and Yu-Shu Shen, “Characteristics of Occasional and Frequent Emergency Department Users: Do Insurance Coverage and Access to Care Matter?” Medical Care, Vol. 42, No. 2, February 2004, pages 176-182.Urban Institute researchers Zuckerman and Shen concluded that “The uninsured do not use more [ER] visits than the insured population as is sometimes argued.” In fact, “the publicly insured are overrepresented among [ER] users.”

  11. The Lewin Group estimated that total Colorado health spending is about $30 billion.  This implies that the estimated cost of uncompensated hospital care for the uninsured in Colorado is less than 3 percent of overall spending.  In another context, the Lewin Group estimated that about 40 percent of the Colorado hospital shortfall is passed along to private payers.  If correct, this would suggest that hospital care for the uninsured is about 1 percent of total spending.  The reform proposal created by the Commission would increase health spending in Colorado by $2.7 billion, $854 million of which would come from an increase in personal income taxes.  Blue Ribbon Commission for Health Care Reform, Final Report to the Colorado General Assembly, January 31, 2008, pages 38 and 119.

  12. In a personal communication with the Commission staff, the Lewin Group cited a paper on physician pricing by Thomas Rice et al. as a source for its assumption that shortfalls in reimbursement were passed along to private payers in the form of higher hospital charges.  However, Rice’s paper discussed the effect of changes in Medicaid compensation on the volume of services provided; thus, Lewin’s reference to this paper was apparently in error.  The remainder of the communication simply said that “Our [Lewin’s] own analysis of hospital data indicates that about 40 percent of the increase in hospital payment shortfalls (i.e., revenues minus costs) in public programs were passed on to private payers in the form of the cost-shift during the years studied.  Based upon this research, we estimate that 40 percent of increases in reimbursement would be passed back to payers in the form of reduced charges.”

  13. Will Fox and John Pickering, “Payment Level Comparison Between Public Programs and Commercial Health Plans for Washington State Hospitals and Physicians,” Premera Blue Cross, May 2006.  Available at  Access verified February 19, 2008.

  14. PriceWaterHouseCoopers, Actuarial Review of Capitation Rates in the TennCare Program, March 1999, Comptroller of the Treasury, State of Tennessee.

  15. Jonathan Gruber and Kosali Simon, “Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?” National Bureau of Economic Research,Working Paper No. 12858, January 2007, page 28.

  16. Nine percent was chosen because research suggests that 75 percent of people with incomes in the subsidy range considered spending 9 percent or less on health care.

  17. M. Susan Marquis et al., “Subsidies and the Demand for Individual Health Insurance in California,” Health Services Research, Vol. 39, No. 5, October 2004, page 1,564.  To develop its estimates of coverage, the Lewin Group uses an average price elasticity of -0.34 percent to estimate the price elasticity of the demand for health insurance.  Its estimate is derived from data from the Current Population Survey for 1987 to 1997.  However, the Lewin Group goes on to say that it varies the elasticities that it uses by income.  For those with incomes of $10,000 the income elasticity is assumed to be -0.55.  For those with incomes of $100,000 the price elasticity is assumed to be -0.09. While the Lewin assumptions may be among the most reasonable available, how accurately this application of elasticities mirrors actions in the real world is unknown.  The Lewin Group, “Cost and Coverage Impacts of Five Proposals to Reform the Colorado Health Care System, Appendix D: The ‘Solutions for a Healthy Colorado’ Proposal,”December 29, 2007, page D-11.

  18. Chris Swart, Nina Troia and Dorothy Ellegaard, “BadgerCare Evaluation,”Wisconsin Department of Health and Family Services, Office of Strategic Finance, Evaluation Section, July 2004, page 54.  Available at  Access verified February 19, 2008.

  19. M. Kate Bundorf, Bradley Herring and Mark Pauly, “Health Risk, Income, and the Purchase of Private Health Insurance,” National Bureau of Economic Research, Working Paper No. 11677, September 2005.

  20. Jonathan Gruber and Ebonya Washington, “Subsidies to Employee Health Insurance Premiums and the Health Insurance Market,” National Bureau of Economic Research, Working Paper No. 9567, March 2003.

  21. Tarren Bragdon, “Eight Challenges for Dirigo Health in 2006,” DirigoWatch, Vol. 3, No. 1, January 30, 2006.

  22. Patrick Bajari, Han Hone and Ahmed Khwaja, “Moral Hazard, Adverse Selection and Health Expenditures: A Semiparametric Analysis,” National Bureau of Economic Research, Working Paper No. 12445, August 2006; M. Susan Marquis and Melinda Beeuwkes Buntin, “How Much Risk Pooling Is There in the Individual Insurance Market?” Health Services Research, Vol. 41, No. 5, October 2006, pages 1,782-1,800. 

  23. “U.S. employers’ health benefit cost continues to rise at twice inflation rate, Mercer survey finds,” Mercer Group, Press release,November 19, 2007.  Available at  Access verified February 19, 2008.

  24. Hannah Yoo, “January 2007 Census Shows 4.5 Million People Covered by HSA/High-Deductible Health Plans” AHIP Center for Policy and Research, April 2007.  Available at

  25. Greg Scandlen, “Working as Intended: What We Have Learned About Consumer Driven Health Care,” Consumers for Health Care Choices, November 2007.  Available at  Access verified February 19, 2008.

  26. Evidence on the effectiveness of electronic health records in improving care differs.  Jesse C. Crosson et al., “Electronic Medical Records and Diabetes Quality of Care: Results from a Sample of Family Medicine Practices,” Annals of Family Medicine, Vol. 5, 2007, pages 209-215; Crosson et al. found that practices not using electronic medical records were more likely to meet their standards for high quality care.

  27. “VA could spend $20M on data breach response,” FierceHealthIT, June 17, 2007.  Available at  See also Daniel Pulliam, “VA sets aside $20 million to handle latest data breach,” Government Executive, June 14, 2007.  Available at  Access verified March 4, 2008.

  28. For an example, see Ross Koppel et al., “Role of Computerized Physician Order Entry Systems in Facilitating Medication Errors,” Journal of the American Medical Association, Vol. 293, No. 10, March, 9, 2005, pages 1,197-1,203. 

  29. “Errors clearer on other end of the stethoscope,” Associated Press, November 21, 2007.  Available at  Access verified February 19, 2008.

  30. For an introduction to one segment of the argument against electronic medical records in their current form see Robert E. Hirschtick, “Copy-and-Paste,” Journal of the American Medical Association, Vol. 295, No. 20, May 24/31, 2006,  pages 2,335-36; and Robert E. Hirschtick, “Copy-and-Paste-and-Paste—Reply,” Journal of the American Medical Association, Vol. 296, No. 19, November 15, 2006,  pages 2,315-16.

  31. BBC News, “Crackdown on waiting-list ‘fiddles,’” British Broadcasting Corporation, December 19, 2001.  Available at  Access verified February 19, 2008.

  32. Mark V. Pauly and Bradley Herring, “Risk Pooling and Regulation: Policy and Reality in Today’s Individual Health Insurance Market,” Health Affairs, Vol. 26, No. 3, May/June 2007, pages 770-779.

  33. Bradley Herring and Mark V. Pauly, “The Effect of State Community Rating Regulations on Premiums and Coverage in the Individual Health Insurance Market,” National Bureau of Economic Research, Working Paper No. 12504, August 2006.

  34. Conrad F. Meier, Destroying Insurance Markets (Chicago, Ill.: Heartland Institute, 2005).

  35. Leigh Wachenheim and Hans Leida, The Impact of Guaranteed Issue and Community Rating Reforms on Individual Insurance Markets (Brookline, Wis.: Milliman, Inc., August 2007).

  36. “Innovations in Chronic Care,” America’s Health Insurance Plans, March 2007. Available at  Access verified February 19, 2008.

  37. John E. Schneider, Carey M. Gehl Supple and Janet Benton, “Legal and Economic Analysis of Health Insurance Exchange Mechanisms,” Health Economics Consulting Group, May 24, 2007.  Available at  Accessed March 2, 2008.

  38. These include ERISA, the implications of using the Section 125 provisions of the IRS code, HIPAA and COBRA 1985, list billing and guaranteed issue.

  39. “Plan of Operations: Three Year Financial Plan/Budget,” Commonwealth Health Insurance Connector Authority, December 14, 2006.

  40. See “Is Managed Competition the Answer?” in John C. Goodman, Gerald L. Musgrave and Devon M. Herrick, Lives at Risk: Single-Payer National Health Insurance Around the World (Lanham, Md.: Rowman & Littlefield, 2004), Chapter 2.

  41. The Lewin Group, “Cost and Coverage Impacts of Five Proposals to Reform the Colorado Health Care System, Appendix F: “Colorado Health Services Program” Single-Payer Proposal,” prepared for the Colorado Blue Ribbon Commission for Health Care Reform, Denver, Colorado, December 29, 2007, pages F-3 to F-11.

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