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UniversalCoverage:ANobleGoal

DemandsComplex

and

Difficult

Choices

WilliamC.

Hsiao,

PhD,

FSA

K.T.LiProfessorofEconomics

HarvardSchoolofPublicHealth

Barcelona,Spain

May16,2012

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Outline

UniversalCoverage:thedifficultchoices

Efficiencygainsasanapproachto

financeuniversalcoverage

Thestrategy

of

United

States

to

achieve

andsustainuniversalcoveragethrough

efficiencygains.

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Reliance of countries on Out-of-

Pocket Spending (OOP)

Source: WHO estimates for 2010, countries with population > 600,000

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CostGrowth

in

Europe

Source:European

Commission

2010

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Whatis

Universal

Coverage

and

Why?

UniversalCoverage(UC)isallpeoplehaveaccess

to

services

and

do

not

suffer

financial

hardshippayingforthem.

WHO,WHA58.33,May,2005

WhyUC?

Promotingandprotectinghealthisessentialtohumanwelfareandsustainedeconomicandsocial

development.

WHO.TheWorldHealthReport,2010

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UniversalCoverage

Universalcoverageisaneffectivestrategy

to

achieve

noble

goals.

Universalcoverageinvolvesdifficult

choices

and

trade

offs:

Breadth

Scope

Depth

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PerformanceDimensions

of

Health

Systems

HealthOutcomesFinancialRisk

Protection

Public

Satisfaction

Level

Distribution

Source:Hsiao,

1998

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NeedFund

to

Make

UC

aREALITY

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DifficultChoices

Under

Financial

Constraint

Tradeoffs:

Breadth:Expandpopulationcovered?

Scope:Expandhealthservicescovered?

Depth:Expandamountofchargescovered? Reducepatients outofpocket

paymentsuch

as

co

payment

or

under

the

tablepaymentforcoveredservices.

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Howto

Finance

Universal

Coverage?

Expandcoverage

and/or

sustain

UC

requirefunding

How

to

generate

the

funding

for

UC?Additionalornewsourcesof

financingEfficiencygains

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AlternativeFinancingPathways

EfficiencyGains

FinancingSources

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PotentialEfficiency

Gains

WHOWorldHealthReport2010:

Thisreport

estimates

that

from

20%to40%ofallhealthspending

iscurrentlywastedthroughinefficiency.

$1ofefficiencygain=$1ofnewfunding

FinancingsourcesforUC: Additionalfunds

+EfficiencyGains.

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TheCauses

of

Inefficiency

Allocativeinefficiency

Politicsandbureaucraticmanagement

PoorGovernancestructure,patronage

Poormanagement

Corruption

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Potential

Efficiency

Gains:

Drug

Pricing

Sources:Coma

(Catalonia),

Godman

(Austria)

ExpertRev.PharmacoeconomicsOutcomesRes.2009

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AnIllustration

of

Drug

Reference

Pricing

in

Austria

Source:Godman,

Expert

Rev.

Pharmacoeconomics

Outcomes

Res.

2009

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PotentialEfficiency

Gains:

Hospital

Payments

Sources:Farrar,BMJ,2009; Herwartz,Christian

AlbrechtsUniversittKiel,2011;Biorn,Health

CareManagement

Science, 2003

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Kyrgyzstan:ACaseStudyinEfficiencyGains

ThroughComprehensive

Reform

Sources:Balabanova

et

al.

London

School

of

Hygeine

and

Tropical Medicine,

2011;

Kutzin,etal.BulletinoftheWorldHealthOrganization,2009

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Kyrgyzstan:HealthSystem

Performance

Sources:Balabanova

et

al.

London

School

of

Hygeine

and

Tropical Medicine,

2011;

Kutzin,etal.BulletinoftheWorldHealthOrganization,2009

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ProblemsConfronting

USA

50millionAmericansuninsured;another50

70million

inadequately

insured.

Howtoachieveuniversalcoverage?AffordableCareAct(ObamaCare).

Howto

finance

and

sustain

coverage

EfficiencyGains:

Preventionandprimarycare

Medicalhomes;

Accountable

Care

Organizations

Paymentreform: Capitation,Payforperformance

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TheIncreasingCostsofHealthCare

SqueezeOut

OtherPublicSpendingPriorities

22

MASSACHUSETTSSTATEBUDGET,FY2001VS.FY2011

SOURCE: MassachusettsBudgetandPolicyCenterBudgetBrowser.

STATESPENDING(BILLIONSOFDOLLARS) FY2011FY2001

+$5.1B

(+59%)

38%

33%

15%

23%

13%

50%

11%

$4.0B

(20%)

HealthCareCoverage

(StateEmployees/GIC;

Medicaid/HealthReform)

Public

Health

Mental

HealthEducation Infrastructure/

Housing

Human

Services

Local

Aid

Public

Safety

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Massachusetts:

Alternative

Quality

Contract

Sources:

Song,

et

al.

NEJM 2011;

Mechanic,

et

al.

Health

Affairs 2011;

Chernew,etal.HealthAffairs 2011

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Potential

Efficiency

Gains

through

Medical

Homes

Interventions StaffIncreasesandExpanded

VisitTimes

SalaryPaymentforPhysiciansandTimeAllottedforDesktop

Medicine Results

ImprovementsinPatientSatisfaction,Quality,andHospitalizationRates

Estimatedsavings

of

$10.30

per

memberpermonth

MedicalHomePilot

Interventions TransferofCaseandPopulation

ManagementtoPrimaryCarePractice

SharedsavingsIncentivesfor

Physicians Results

18%reductioninhospitaladmissions

36%reductioninhospital

readmissions

ProvenHealthNavigator

Sources:Reid,etal.HealthAffairs,2010;

Gilfillan,etal.AmericanJournalofManagedCare,2010.

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Summary

AchievingUCrequiresprioritysettinganddifficulttradeoffs. Alternativepathwaysare:

Breadth:population

covered.

Scope:essentialservicestobecovered.

Depth:amountofpatientsstillhavetopay.

Efficiencygains+additionalfundingisthestrategyto

mobilize

necessary

financing

for

UC.

Assureadequatesupplyofeffectiveandefficientservicesrequirehealthsystemreformsin

organization,payment,

regulation,

governance

and

management