Who Cares About Health Care?
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Transcript of Who Cares About Health Care?
Live and Be Well
Who Cares About Health Care?
Annual Business ConferenceUniversity of Michigan Business School
October 12, 2001
Isadore J. KingPresident and CEOThe Wellness Plan
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Dr. Entrepreneur
Gall Bladder Surgery $2,000 or Two For $3,000
Bring a Friend
SALE ENDS AT AGE 60
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Current Drivers of Health Care Costs
Law of Supply and Demand Inoperative Health Care Inflation Cost vs. Quality Dynamic Changes in the Practice of Medicine Consumers’ Quality of Life Demands
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Law of Supply & Demand Inoperative
Uneducated Consumer Minimal Consumer Financial Participation Supplier (Provider) Induced Demand Value Purchasing Not Effective
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Health Care Inflation
3.2%
3.4%
5.8%
3.5%
4.1%
4.2%
3.2%
4.6%
5.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1999 2000 2001CPI Health Care Prescription Drugs
Sources: www.twv.com/researchlegal/resrchstats.html & HealthINFLATION News, www.healthinflation.com
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Michigan Average Revenue Per Member Per Month
Source: Baumgarten, Allen. “Michigan Managed Care Review” Part One, 2001
Yearly Percentage Increase
8.4%
-7.4%
4.2%
6.6%5.6%
-0.5%
-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%
1998 1999 2000
$128
.48
$130
.73
$136
.10
$136
.34 $148
.57
$145
.83
$115.00
$120.00
$125.00
$130.00
$135.00
$140.00
$145.00
$150.00
1998 1999 2000
Commercial Medicaid
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Major Drug Company After Tax Profit
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1998 1999 2000
Abbott
Astra Zeneca
Bristol-Myers
Eli Lilly
Glaxosmithkein
Johnson &Johnson Merck & Co.
Novartis
Pfizer
Schering-PloughSource: Individual Company Annual Reports
20% 21% 21.5%
Average Profit Margin
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Michigan HMO Before Tax Profit
Source: Kennedy, Sheryl. “Urgency Prods HMOs To Become Lean” Detroit Free Press. Friday June 2 2000. Fin. Ed. Pg.2E.
40,500,000
-48,300,000
-87,400,000
-41,200,000
-$100,000,000
-$80,000,000
-$60,000,000
-$40,000,000
-$20,000,000
$0
$20,000,000
$40,000,000
$60,000,000
1996 1997 1998 1999
$
$$
$
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Michigan HMO After Tax Profit
Source: Baumgarten, Allen. “Michigan Managed Care Review” Part One, 2001
-45,300,000
-93,800,000
-42,600,000
-$100,000,000-$90,000,000-$80,000,000-$70,000,000-$60,000,000-$50,000,000-$40,000,000-$30,000,000-$20,000,000-$10,000,000
$0
1997 1998 1999
$
$
$
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Cost vs. Quality Dynamic
CurrentQuality
Cost
Optimum
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Quality
Cost
Optimum
Desired
Cost vs. Quality Dynamic
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Cost vs. Quality Dynamic
Quality
Cost
Optimum
Projected
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Changes In The Practice of Medicine
Biotechnology Research Findings Therapeutic Drug Advances Stem Cell Research Findings Genetic Research Findings
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Life Sciences InstituteUniversity of Michigan
“We are going to transform the practice of medicine, and this place will be one of the leaders.”
Ann Arbor NewsMarch 2001
Dr. Gil OmennExecutive Vice President
Medical AffairsUniversity of Michigan
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Consumers’ Quality of Life Demands
Living Longer is Not Enough Living Longer and Feeling Good is
Demanded Consumers Willing to Assume Greater
Responsibility for Health Status
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Strategies To Deal With Uncertainties
Growth on the Margin Continuous and Vigilant Cost Control Evidence Based Medicine Outcome Based Incentives Managed Health