health care and the us economy: problems and prospects seattle economics council february 8, 2012...
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Health care and the US Economy: Problems and Prospects
Seattle Economics Council February 8, 2012
Mary McWilliams
Executive Director
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Source: OECD Health Data 2011 (June 2011).
Average Health Care Spending per Capita, 1980–2009Adjusted for differences in cost of living
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Dollars
THECOMMONWEALTH
FUND
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Health care employment rises despite recession
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Health care is a bigger problem than Social Security
5Source: Congressional Budget Office
Public Sector Pays Over Half of Health Care
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Out of Pocket Spending a Decreasing Percentage of Total
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Among Persons Under 65, Approximately 1 in 7 Persons Is Uninsured and 1 in 5 Has Public Coverage
Primary Source of Insurance for Persons Under Age 65
Source: 2010v1 Washington State Population Survey.
Employer Coverage60.4%
Public Coverage20.9%
Individual Coverage4.9%
Uninsured13.8%
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The Percent Uninsured Has Returned to the Level of the Early 1990s and Employer Coverage Has Declined Over Time
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Health Care Costs Have Wiped Out Real Income Gains
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
1999 2009
Monthly Income for Typical U.S. Family of Four
Inflation on Non-Health Care GoodsHealth Care Taxes, Premiums, ExpensesNet Available Income
Source: "A Decade of Heallth Care Cost Growth Has Wiped Out Real Income Gains For an Average US Family," Health Affairs, September 20011
$ 95 for spending
$ 945 for health care
$ 870 for inflation
$1910 more income
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Reducing Healthcare Spending Requires Less Hospital Spending
$0 $200,000 $400,000 $600,000 $800,000
Nursing Care Facilities
Administration & Insurance Costs
Prescription Drugs
Other Services & Products
Physician and Clinical
Hospitals
U.S. Healthcare Expenditures (Millions)
Total U.S. Healthcare Expenditures, 2009
$0 $100,000 $200,000 $300,000 $400,000
Nursing Care Facilities
Administration & Insurance Costs
Prescription Drugs
Other Services & Products
Physician and Clinical
Hospitals
U.S. Healthcare Expenditures (Millions)
Increase in U.S. Healthcare Expenditures, 2000-2009
Hospitals are the largest component ofhealthcare spending and of increasesin healthcare spending
The Cost Curve is Already Bent
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2000 2003 2004 2005 2006 2007 2008 2009 2010
Source: CMS, Office of Actuary
% G
row
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Actu
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pen
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g O
n H
ealth
Serv
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Actual SpendingOn Health Services
% Growth NHE
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1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
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2.6
HOSPITAL ADMISSION TRENDS2000-2011
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
Source: Banc of America Securities LLC
Patient visits at lowest level seen in over 7 years
Source: IMS Health, National Disease and Therapeutic Index, Apr 2011
TOTAL PATIENT VISIT IN US
1,511 Apr 2011
1,616 Aug09
1.563 J un04
1.656 J un05
1.641 J un06
1.653 J un07
1.676 Sep05
1.607 J un08
1.671 Dec06
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ROLLING MAT
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Imaging Volume SlumpSource: Thomson Reuters
-15%
-10%
-5%
0%
5%
10%
15%
2007 2008 2009 2010 MAT Mar 2011 YTD Mar 2011
% G
RO
WTH T
Rx
Total market
Generics
Brands
Generics continue to grow strongly
Source: IMS Health, National Prescription Audit, Mar 2011, Branded generics disaggregated
Branded Generics Disaggregated
19© 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Many Increases in CostsDue to Price, Not Utilization
Chart 4.6: Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare, and Medicaid, 1989 – 2009
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2009, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.
Medicare
Medicaid(1)
Private Payer
70%
80%
90%
100%
110%
120%
130%
140%
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Seattle is One of the Nation’s “Cost-Shift” Markets
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Medicare and Commercial Inpatient Spending Per Member, 2007Medicare IP PMPM Index Commercial IP PMPM Index
Low Cost for Medicare & Commercial
Cost Shift fromMedicare to Commercial
High Cost for Medicare & Commercial
22© 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Wide Variation in Prices Per Delivery in MA Hospitals…
Source: Massachusetts Health Care Cost Trends: Price Variation in Health Care ServicesMassachusetts Division of Health Care Finance and Policy, June 2011
23© 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
…With No Relationship to Quality
Source: Massachusetts Health Care Cost Trends: Price Variation in Health Care ServicesMassachusetts Division of Health Care Finance and Policy, June 2011
The Secret to Cost Containment: Not Population Health but Subpopulation
Health
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Dartmouth Atlas shows wide variation in cost
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Wide Swings in Cost and Care The Dartmouth Atlas uses Medicare claims data to track how cost
and quality vary across the U.S.
The Results: There is a 2.5 fold variation in Medicare spending by region
(population-adjusted) Patients in high-cost areas are not sicker nor do they have
better health outcomes More health care spending does not result in living better or
longer. In fact, the opposite may be true
Reducing unwarranted variation could improve quality and reduce spending 30%
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Tale of Two Cities: Miami vs. Minneapolis
* Effective care index includes: pneumonia vaccination; breast & colon cancer screening; eye exams, HbA1c & blood lipid monitoring for diabetes; and, aspirin therapy, beta blockers, ACE inhibitors and reperfusion with thrombolytic agents or PTCA for heart attack victims. Source: Health Affairs
More Money Does Not Improve Value
Medicare Spending
(per capita, adjusted)
$7,847 $3,664
Specialist Visits
(last 6 mos. of patient’s life)
25.1 3.8
Hospital Stays
(inpatient days)
14.1 6.6
Care Index* 49.9% 52.6%
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What Drives Decisions on Care?
Doctors decide based on local medical opinion and supply of medical resources, not on science or what informed patients want
Doctors have surprisingly little information on what works or the “right” amount of care
This is why Congress is funding “comparative effectiveness” research
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Supply-Sensitive Care: Is More Health Care Better?
People assume that more care is better Reinforced by fee-for-service
payment Where more care is provided,
patients with chronic conditions do not have better health
“Supply of services” accounts for 50% of the regional variation
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Alliance Role: Show How Care Varies and Promote Better Value
The driving force: Ron Sims and King County Purchasers, Providers, Plans & Patients 2 million lives in 5 counties Funded by participant fees and grants Nationally recognized by the Robert Wood Johnson
Foundation and the federal Secretary of Health and Human Services
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Generic prescribing shows wide variation across and within medical groups
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What gets measured, gets managed, as hospital metrics show
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Resource Use Varies by Delivery System
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How Will Transparency Make a Difference? Creates public accountability Sets targets for improvement Stimulates dialogue among
providers to compete Gives consumers more information
about care they need and how providers vary Results may be tied to provider pay incentives and/or
network design Improving results will reduce the personal and financial
cost of chronic disease and preventable conditions
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Transparency: Necessary but Not Sufficient – Need to Pay Providers for Value, not Volume We now reward providers for
delivering more services to more people, not for better quality
Providers are not rewarded for keeping people healthy
Fundamental payment reform is needed to reward value
Medicare, the largest payer, sets payment standards, but local innovations are underway
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Organized Systems of Care Are Needed for New Payment Models
Deliver and/or arrange full range of services Skilled in quality and cost management Coordinate care with specialists and others Engage patients in shared decision-making and help patients self-manage
their conditions Commit to creating a better way to deliver care to
patients Supported by Electronic Health Record
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Prospects for Real Health Reform
The Good News: There is agreement that the system is
unsustainable We know what’s needed to fix it
The Bad News: The challenge is execution It will be disruptive and take time to fix
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What’s Needed to Fix the System
Research into what works Focus on chronic care prevention and management Coordination of patients’ care Organized systems of care New ways to pay doctors and hospitals Patient access to evidence-based information on
quality and cost
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Challenges to Fixing the System
One person’s “waste” is another person’s revenue Hospitals have huge capital investments New provider payment systems are unproven and complex
to administer Conversion from paper to electronic health records is costly
and slow “Organized Systems” can be cartels and drive up costs Comparative effectiveness research takes time and money The public assumes that more care is better
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The Public Needs to Understand What’s at Stake
High rates of overtreatment, under treatment, and misuse of medical services endanger their health
U.S. cannot prosper when 18% of the economy wastes 30% of what it spends
Diverting resources from education and innovation to medical care imperils our global competitiveness
If U.S. keeps borrowing to pay for ineffective care, we and our children will pay the price
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