System Wide Strategies: Controlling Costs Health Care Coverage in Hawaii Turning Point or Tipping...
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Transcript of System Wide Strategies: Controlling Costs Health Care Coverage in Hawaii Turning Point or Tipping...
System Wide Strategies:
Controlling Costs
Health Care Coverage in Hawaii
Turning Point or Tipping PointOctober 17, 2005
Enrique Martinez-VidalDeputy Director
RWJF’s State Coverage Initiatives program
National Health Spendingin Billions
$27 $73$246
$696
$990
$1,310$1,426
$1,559$1,679
$1,805$1,937
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
bil
lio
ns
pe
r y
ea
r
Note: Selected rather than continuous years of data are shown prior to 2000. Years 2004 forward are CMS projections.
Source: Centers for Medicaid and Medicare Services (CMS), Office of the Actuary.
7.0
12.013.3 13.3 13.2 13.3
14.1 14.9 15.3 15.4 15.6
18.7
8.8
0.02.04.06.08.0
10.012.014.016.018.020.0
% o
f G
DP
Note: Selected rather than continuous years of data are shown. Years 2004 forward are CMS projections.
Source: Centers for Medicaid and Medicare Services (CMS), Office of the Actuary.
National Health Spending as a
Share of Gross Domestic Product
Average Annual Growth Rate
in National Health Expenditures
Source: Centers for Medicare and Medicaid Services, Office of the Actuary.
10.6%
12.9%
11.0%
8.5%
5.6%5.1%
5.7%
7.2%
8.9% 9.3%
7.7%
0%
2%
4%
6%
8%
10%
12%
14%
1970 1980 1990 1993 1995 1997 1999 2000 2001 2002 2003
An
nu
al in
cre
ase
ove
r p
rio
r p
eri
od
Note: Selected rather than continuous years. Source: Centers for Medicare and Medicaid (CMS), Office of the Actuary.
Source: Centers for Medicare & Medicaid Services, Office of the Actuary.
Note: Other = Durable Medical Equipment, Other Non-durable Medical Products, Public Health Activity, Research, Construction.
Spending Distributionby Category, 2003
(Total Spending = $1.7 Trillion)
Hospital Care, 30.7%
Prescription Drugs, 10.7%
Dental/Other Professional,
10.3%
Other, 10.2%
Nursing Home/Home Health Care,
9.0%
Administration 7.1%
Physician and Clinical
Services, 22.0%
Share of Health Care Spending vs.
Share of the Increase, 2003
12%
6%
8%
8%
14%
24%
26%
7.1%
9.0%
10.2%
10.3%
10.7%
22.0%
30.7%
0% 5% 10% 15% 20% 25% 30% 35%
Administration
Nursing Home/Home Health Care
Other
Dental/Other Professional
Prescription Drugs
Physician and Clinical Services
Hospital Care
Contribution to the Increase Share of Spending
Note: Health spending categories total to National Health Expenditures.
Source: Centers for Medicare and Medicaid Services (CMS).
Annual Growth in Private Health Insurance Premiums as Reported by Employers
18.0%
14.0%
8.5%
0.8%
5.3%
8.2%
10.9%
12.9%13.9%
11.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1989 1990 1993 1996 1999 2000 2001 2002 2003 2004
US
KFF/HRET Survey of Employer-Sponsored Health Benefits: 2004.
Data on premium increases reflect the cost of employer-based health insurance coverage for a family of four. Percent increase represents the growth over the immediate prior year.
Total Health Care Spending as a Share of GDP
Year Percent of GDP if health care
spending grows 2.5 percentage
points faster than GDP
Percent of GDP if health care
spending grows 1.0 percentage
points faster than GDP
2005 15.6 15.6
2020 21.6 19.8
2030 27.6 21.9
2040 35.2 24.1
Source: Henry J. Aaron, Brookings Institution, “It’s Health Care, Stupid! Why Control of Health Care Spending is Vital for Long-
Term Fiscal Stability,” Paper presented to the Conference of the Federal Reserve Bank of Boston, June 15, 2005.
Medicare and Medicaid Spending
as a Share of GDP(includes State share of Medicaid spending)Year Percent of GDP if
health care spending grows 2.5 percentage
points faster than GDP
Percent of GDP if health care
spending grows 1.0 percentage
points faster than GDP
2005 4.2 4.2
2020 7.8 6.5
2030 11.5 8.4
2040 16.1 10.1Source: Henry J. Aaron, Brookings Institution, “It’s Health Care, Stupid! Why Control of Health Care Spending is Vital for Long-
Term Fiscal Stability,” Paper presented to the Conference of the Federal Reserve Bank of Boston, June 15, 2005.
Percent of Median Family Income Required to Buy Family
Health Insurance
8
17
0
2
4
6
8
10
12
14
16
18
1987 2003
Source: Calculations by Len Nichols, using KFF and AHRQ premium data, CPS income data.
Labor Market Realities Occupation Family premium/Median wage
Physician 7.3%
History professor 15.8%
Secretary 29.1%
Carpenter 24.2%
Cook 49.8%
Source: KFF premium and BLS wage data.
Distribution of Health Spending, Adults Ages 18-64, 2001
Source: Employee Benefit Research Institute estimates from the 2001 Medical Expenditure Panel Survey.
Long-term Drivers (1)
Transition to Looser Managed Care
Provider Consolidation and Pushback
Provider Capacity Constraints Patient Reporting More delays, unmet need Physicians working longer hours ER Overflow, patient diversion Shortages of nurses and staffed hospital beds
Long-term Drivers (2) Financing System
Third-party payers with no predetermined/defined limits Relatively low patient out-of-pocket costs Payment system pays more to providers to deliver more
services Limited information about the effectiveness of
tests/procedures/drugs/etc.
Advances in medical technology Provide better outcomes Same outcomes but less pain or shorter recovery Lower unit costs (but higher utilization)
Increased resources in medical care More physician specialists More facilities
Long-term Drivers (3) Rising Prevalence of Treated Disease
Lifestyle changes Obesity (linked to rising rates of diabetes, hyperlipidemia [i.e.,
high cholesterol], hypertension, heart disease)
Direct-to-Consumer Marketing Associated with Strong Sales of Key Drugs (Lipitor, Nexium,
Zocor, Norvasc, Prevacid)
“Oversold” drivers Population aging (debatable) Professional liability/medical malpractice Mandated benefits
Types of Possible Remedies (1)
Purchasing to Improve Quality/Patient Safety Pay for performance Tiered networks The Leapfrog Group
Purchasing Strategies to Reduce Costs Pooled purchasing, rebates, etc
Wellness Programs Disease Management Information Technology Evidence-Based Medicine Improve Efficiency (i.e., appropriate care
settings)
Types of Possible Remedies (2)
Consumer-Related Strategies Changes to Consumer Cost Sharing Consumer Education (Performance Guides, Cost
Transparency) Consumer-Directed Health Care
Supply Controls Ration Services, CON, professional supply, technology
diffusion Price Controls
Hospital Rate Regulation Public Program Payment Formulae Use Monopsony Power of State
Current Employer Strategies for Offering
Insurance Compete for labor, most of whom expect ESI
Impose more employee cost-sharing Higher percentage of premium Less generous coverage
• More cost-sharing at point of service (higher co-insurance or copays)
• Reduced benefits• Limit choice of providers
Consumer-Directed Health Care
Demand more quality/accountability initiatives Information (quality/cost) Disease / care management
Long-Term Options for Coverage
Promote evidence-based medicine
Promote private coverage expansions
Be prepared to increase public financing for those unable to pay
Long-Term Options to Control Costs
Develop Approaches to Drive Administrative & Clinical Waste from System—new roles for patients, providers and health plans
Create Incentives for Physicians, Bio-Tech/Pharma/Device Industry to Develop High Benefit-Lower Cost Approaches
Focus on Care Management for Chronically Ill Patients
Will Require Substantial New Investment in: Evidence-Based Data, Incentives to Use It Restructuring How We Deliver Care (IOM Style Models) New payment incentives that pay for quality and
performance. Medicare could pay a key role here.
Conclusion Recent decline in cost trends
appears to be leveling Today’s cost trends continue to
make insurance less affordable and strain public finances
Current efforts to contain costs emphasize additional patient cost sharing and hopes for increased efficiency