HMOs , the PCP Members…

AND THE PCP NATIONAL ORGANIZATION

Insights & Compilation of Data on Health Care Financing by Eugenio Jose F. Ramos, M.D.Regent Coordinator, Committee on HMOs & Philhealth

Objectives

To broaden the scope of every PCP member’s appreciation of the many other issues affecting health care delivery in the Philippines

To initiate a wider and deeper discussion on the HMO issues affecting medical practice

To acquire a better capture of the bigger – national – role of the PCP in leading or adapting to changes in access to health care and health care delivery; to formulate a national stand from a leadership point of view in order to catalyze health policy changes

To give every member, PCP chapter and component society the tools that can empower and encourage them to be health leaders in their own regions and communities.

The PCP towards making a stand

PCP doctors are specialists whose expertise provides real benefits to the public. To prepare them adequately for discussions with a broad slice of Philippine society involved in health care financing ( HMOs, policy-makers, politicians), they should fully understand and appreciate the “big picture’ of Philippine healthcare and not just HMOs and their professional fees.

The PCP is not against HMOs , but is against what HMOs are doing that are detrimental to and not conducive to patients’ and doctors’ welfare.

The PCP, when it makes its official stand on HMOs, must necessarily wear the hat of a broad healthcare leader and opinion-molder, cognizant of and sensitive to the current sociopolitical and economic issues and the impact / implications of its stand to both society and the medical profession, and aptly prepared to take on the repercussions of the changes it seeks to lead.

However, if and when PCP comes up with a stand, it must have ‘teeth’ in imposing compliance from members. It must be ready to execute the changes it seeks to lead. It must prepare for the challenges to effective execution given that more than 60% of PCP members are just affiliate members who may be vulnerable to the offers of the HMOs.

PCP’s stand will focus on patients’ benefits and fair compensation for the level and quality of medical expertise rendered.

Relationship of Health & EconomicsRelationship of Health & Economics

Improvement in health status

Improvement in worker

productivity

Contributes to a better economy

More resources allocated for health

!

?

Perspectives of Analysis that the PCP must fully grasp The Philippine Society

Cultural nuances & sensitivities Media & politics

The Filipino Patient Beliefs & practices

The health Care Financier (Payor) Out-of-pocket 3rd party payors ( employers) Managed Care ( HMOs, Insurance)

The health Care Provider The credentialed specialists The generalists Alternative Medicine & Folk Medicine

The Elements in Managed Care Issues

1. Government & governance 2. HMOs ( healthcare delivery

systems) 3. Healthcare recipients ( the patients) 4. Healthcare providers ( the doctors)

1. Government & governance

Majority of Filipinos do not have healthcare coverage/ insurance Aim is to provide/improve access to healthcare

of more Filipinos The gov’t does not have the resources to

provide access to all Filipinos Access of majority of Filipinos to healthcare

services is either inadequate or substandard

2. The HMOs

Are a business enterprise Must control resource utilization

Diagnostic tests Medications Professional fees Scope of coverage

Must regulate doctors’ behaviors Must select ‘ inexpensive’ doctors

3. The HMO patient

Feels secure that he has medical coverage in times of need

Benefits from ‘economies of scale’ that Managed Care provides

Oftentimes misses the point about the nature of his coverage for the fee that he pays, e.g., makes demands like a private patient, complains of the requisite processes and procedures

4. The medical doctor

Finds being a part of an HMO useful at the start Will need to gain perspective on health

economics and the concept of managed care; otherwise, encounter difficulties adjusting

May start complaining later when private practice picks up

May be inclined or be perceived to be partial to private patients – who provide less inconvenience and more income.

Definition of Health EconomicsDefinition of Health Economics

““Can be broadly defined as Can be broadly defined as the application of the the application of the theories, concepts and theories, concepts and techniques of economics techniques of economics to the healthcare sector.”to the healthcare sector.”

Allocation of resources between various health promoting activities.

Determination of the quantity of resources used in healthcare delivery to improve health.

Organization and funding of health organizations.

Efficiency of the allocation and use of resources for health

Assessing the effects of preventive, curative, rehabilitative health services on individuals and society

Economics and Health Buying Capacity

In 2003In 2003 Per capita spending for health:Per capita spending for health:

P1,662 per Filipino per year – about 40-45% is spent for drugsP1,662 per Filipino per year – about 40-45% is spent for drugs

Per capita spending for drugs:Per capita spending for drugs:

Php 770 per capita per year or Php 4,262 per household per year or Php Php 770 per capita per year or Php 4,262 per household per year or Php 355/month355/month

Threshold household income :Threshold household income : Php 352,500/year or Php 29,375/month

2.86 2.883.16 3.14

3.33 3.373.44 3.34 3.3 3.25

3.01

2.72.9

0

0.5

1

1.5

2

2.5

3

3.5

per

cen

t

'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

Share of Health Expenditure to GNP

WHOWHO recommends 5.0%recommends 5.0%

Filipino Household Ranking Filipino Household Ranking Eleven Basic NeedsEleven Basic Needs

1.1. FoodFood

2.2. Economic Economic Base/LivelihoodBase/Livelihood

3.3. WaterWater

4.4. Medical ServicesMedical Services

5.5. EducationEducation

6.6. ClothingClothing

7.7. Power/EnergyPower/Energy

8.8. Shelter Shelter

9.9. Ecological Balance Ecological Balance

10.10. Mobility Mobility

11.11. Sports Sports

National Health Survey 1991National Health Survey 1991

Health Finance & Managed Care Health Finance & Managed Care (Who foots the bill?)(Who foots the bill?)

Philippine Health ExpendituresPhilippine Health ExpendituresUses of Health ExpendituresUses of Health ExpendituresSources of ExpendituresSources of ExpendituresAlternative Modes of Financing Alternative Modes of Financing

HealthcareHealthcare

PERCENT SHARE OF HEALTH EXPENDITURES BY USE OF FUNDS

0.0010.00

20.0030.0040.00

50.0060.0070.00

80.0090.00

1991 1992 1993 1994 1995 1996 1997

Year

Pe

rce

nt

PERSONAL PUBLIC OTHERS

16.13

71.82

14.66

7.61 13.51

76.26

DETAILS OF PRIVATE SOURCES HEALTH EXPENDITURES

1991 1992 1993 1994 1995 1996 1997

Amount (in billion pesos)

PRIVATE SOURCES 20.32 23.52 26.60 30.66 38.32 43.43 47.93

Out-of-Pocket 17.10 19.63 22.62 25.92 32.88 37.12 40.96

Private Insurance 1.25 1.53 1.42 1.46 1.47 1.63 1.99

HMOs 0.46 0.54 0.70 0.92 1.30 1.73 2.04

Employer-based Plans 1.22 1.44 1.44 1.84 2.04 2.26 2.18

Private Schools 0.30 0.38 0.43 0.53 0.64 0.69 0.77

Share to total (percent)

PRIVATE SOURCES 54.4 56.4 56.3 55.4 57.5 55.9 54.2

Out-of-Pocket 45.8 47.0 47.9 46.8 49.4 47.7 46.3

Private Insurance 3.3 3.7 3.0 2.6 2.2 2.1 2.2

HMOs 1.2 1.3 1.5 1.7 2.0 2.2 2.3

Employer-based Plans 3.3 3.4 3.0 3.3 3.1 2.9 2.5

Private Schools 0.8 0.9 0.9 1.0 1.0 0.9 0.9

AMOUNT (in billion pesos)SOURCE OF FUNDS

Health Expenditure by Sources of

Funds

0

500

1000

1500

2000

2500

SO

UR

CE

OF

FU

ND

S

SO

CIA

L I

NS

UR

AN

CE

PR

IVA

TE

SO

UR

CE

S

Series1

Series2

Series3

Series4

Series7

Series6

Series5

46.3

HEALTH EXPENDITURE BY SOURCE OF FUNDS

13.64 14.24 15.9819.14

22.1927.73

34.12

3.39 3.97 4.64 5.57 6.10 6.59 6.37

20.3223.52

26.6030.66

38.3243.43

47.93

0

10

20

30

40

50

60

1991 1992 1993 1994 1995 1996 1997

Year

Am

ount

(in

bill

ion

peso

s)

GOVERNMENT SOCIAL INSURANCE PRIVATE SOURCES

Philippine Total Health Expenditures 1991 -2003

47.454.6

65.276.2

87.193.5

103.4113.5116.6115.4

136

35.9 39.6

020406080

100120140160

'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

Bil

lio

n P

eso

s

National Statistical Coordination Board : 2003National Statistical Coordination Board : 2003

How does a family produce How does a family produce health?health?

A household’s ability to afford costs of health A household’s ability to afford costs of health goods and activities depends on:goods and activities depends on:

The household’s income and wealthThe household’s income and wealth Access to credit and other resources outside Access to credit and other resources outside

the householdthe household Alternative demands on and uses of family Alternative demands on and uses of family

members timemembers time

Household production of health: a micro-economic perspective of health transitions. Household production of health: a micro-economic perspective of health transitions.

DaVanzo & GertlerDaVanzo & Gertler

1988/97 Distribution of Expenditures of Families 1988/97 Distribution of Expenditures of Families by Major Expenditure Itemby Major Expenditure ItemIn Percent (%)In Percent (%)

19881988 199719971.1. FoodFood 50.8 50.8 43.943.92.2. HousingHousing 12.7 12.7 15.415.43.3. Fuel/Light/WaterFuel/Light/Water 5.55.5 5.3 5.34.4. Transpo./Communication Transpo./Communication 4.74.7 5.6 5.65.5. Clothing Clothing 4.24.2 3.3 3.36.6. Personal care Personal care 3.33.3 3.2 3.27.7. Education Education 2.92.9 3.7 3.78.8. Other Expenditures Other Expenditures 2.92.9 3.1 3.19.9. Household OperationsHousehold Operations 2.52.5 2.3 2.310.10. Special Occasions Special Occasions 2.32.3 2.4 2.411.11. FurnishingsFurnishings 2.2 2.2 3.3 3.312.12. Tobacco Tobacco 2.12.1 1.3 1.313.13. Medical Care Medical Care 1.71.7 2.2 2.214.14. Alcohol Beverages Alcohol Beverages 1.21.2 0.8 0.815.15. Taxes Taxes 1.11.1 2.7 2.716.16. Gifts Gifts 0.90.9 1.0 1.017.17. Recreation Recreation 0.50.5 0.4 0.4

1988/97 Family Incomes & Expenditures Survey1988/97 Family Incomes & Expenditures Survey

Household Level Health Spending Household Level Health Spending EstimatesEstimates

In 1997In 1997 Average Filipino Average Filipino

household income household income estimates: 120,000/yrestimates: 120,000/yr

Filipinos allocated onlyFilipinos allocated only 2.0%2.0% for medical for medical care!care!

This represents only This represents only about about P2,500 per P2,500 per household/yrhousehold/yr

National Household Income SurveryNational Household Income Survery* Philiippine National Health Accounts 1991-2000* Philiippine National Health Accounts 1991-2000

In 2000In 2000 *Total healthcare *Total healthcare

expenditures: expenditures: P 113B P 113B

Total population: Total population: 77M Filipinos77M Filipinos

This represents only This represents only P1,486 per Filipino P1,486 per Filipino per yearper year

Universal Coverage and the Phil. National Health Insurance Corporation

Only 60% of Filipinos have some form of health insurance coverage. 50 % of the population die without seeing a doctor.

Financing of healthcare is mainly out-of-pocket. The Phil. National Health Insurance Law of 1988(?) was passed with

the objective of achieving universal coverage within (15?) years . This led to the creation the Phil. National Health Insurance Corporation.

The challenge has always been where to get the funds to move forward and keep the corporation running. Part of the initial move was the integration of Medicare into Philhealth.

Major thrust has been towards streamlining the processes, ensuring the integrity of the system, and weeding out inefficiencies and corruption.

Another option was to tap the various HMOs to broaden the reach of health coverage to more Filipinos.

With broader Philhealth coverage, more Filipinos enrolled with HMOs, the percentage of the population without health insurance coverage would be expected to diminish.

PhilHealth: Benefit Payments

2.94.2

6.8 7.7 8.810.9

13

0

2

4

6

8

10

12

14

1998 1999 2000 2001 2002 2003 2004

Bil

lion

pes

os

Standard and adequate healthcare services entail out-of-pocket expenses Only a minority of Filipinos can pay for adequate

healthcare Even substandard/inadequate healthcare services

entail out-of-pocket expenses Something needs to be done to improve both

access to and quality of healthcare services Managed-Care is an attempt to provide better

access to better healthcare services to more Filipinos

Health Finance: Out-of-PocketHealth Finance: Out-of-Pocket

An individual pays a health provider or facility, from his pocket, each time he avails of medical services.

Adv:Adv: Individual spends money only when he Individual spends money only when he avails & doesn’t spend anything if not. avails & doesn’t spend anything if not.

Disadv:Disadv: Individual develops problems in Individual develops problems in securing money, or suffers from financial securing money, or suffers from financial distress when seriously sick (ex. IHD- distress when seriously sick (ex. IHD- CABG). CABG).

Health Finance: InsuranceHealth Finance: Insurance

An individual pays a premium which will cover his hospital expenses up to a certain limit, for a period of one year.

AdvAdv: the individual pays a relatively small: the individual pays a relatively small amount of money which will assure him amount of money which will assure him of a big hospitalization coverage for 1 of a big hospitalization coverage for 1 year. year.

Disadv:Disadv: the individual who does not get seriously the individual who does not get seriously sick requiring hospitalization within the sick requiring hospitalization within the coverage period is not able to utilize coverage period is not able to utilize services. services.

Insurance: RisksInsurance: Risks

Risk on the IndividualRisk on the Individual

Not to be able to use the coverage w/in Not to be able to use the coverage w/in period. Premiums may not be refunded.period. Premiums may not be refunded.

Risk on the Insurance CompanyRisk on the Insurance Company

Over-utilization of coverage: Over-utilization of coverage: ““Hazards”Hazards”

Increases in the prices of hospital / Increases in the prices of hospital / surgical care.surgical care.

Insurance: HazardsInsurance: Hazards

Consumer-Initiated Moral HazardConsumer-Initiated Moral Hazard: The tendency for members The tendency for members to use inappropriate and expensive health services given that to use inappropriate and expensive health services given that a 3a 3rdrd party shoulders part or the whole of expenses. party shoulders part or the whole of expenses.

Provider-Initiated Moral Hazard:Provider-Initiated Moral Hazard: The tendency for providers to The tendency for providers to charge prices beyond what might be considered as fair charge prices beyond what might be considered as fair compensation for services rendered, given that those insured compensation for services rendered, given that those insured become less sensitive to prices.become less sensitive to prices.

Adverse Selection:Adverse Selection: The tendency for members who are less The tendency for members who are less likely to use the program benefits not to enroll and remit likely to use the program benefits not to enroll and remit contributions leaving a pool of high risk member population.contributions leaving a pool of high risk member population.

Health Finance: Health Maintenance Health Finance: Health Maintenance Organizations (HMOs)Organizations (HMOs)

The consumer pays a premium which will The consumer pays a premium which will give him a comprehensive health care give him a comprehensive health care program through a “package of program through a “package of benefits”. benefits”.

This is not a a merely hospitalization This is not a a merely hospitalization coverage but a complete preventive, coverage but a complete preventive, curative, and rehabilitative package.curative, and rehabilitative package.

HMOs & Managed Care

Managed Care fundamentally aims for optimal and efficient use of limited health care resources to achieve the greatest good for the greatest number.

This utilitarian principle aims to distribute health care benefits equitably to as many as possible.

HMOs are business organizations that derive its growth and profits thru the principles of managed care. Necessarily, it is essential that they meet the critical volume of enrollees ( cardmembers) and rationalize the utilization of resources to limit expenditures and maximize revenues.

By the nature of the business, HMOs must have the expertise in actuarial science and must drive efficient and evidence-based medical practice.

Managed Care, like a cooperative, requires efficient/effective management of health resources Provide the greatest good to the greatest number at

the lowest cost. Managed Care, therefore, requires compliance with

guidelines and regulations, and avoidance of practices and behaviors that are not cost-efficient or cost-effective

Since the gov’t doesn’t have the adequate means to comprehensively address the healthcare needs of the nation, the HMOs in the private sector are an arm that can fill the gap.

HMO & Private Insurance Contribution

2.04

1.99

2.7

2.2

2.8

2.4

3.3

2.65

3.7

2.9

4.2

3.4

4.7

3.4

0

1

2

3

4

5

6

7

8

9

B Pesos

1997 1998 1999 2000 2001 2002 2003

HMO Priv. Ins.

SOURCE OFSOURCE OF FUNDS FUNDS

(Billion Pesos)(Billion Pesos) Growth 2001 – 2003

20012001 20022002 20032003

GOVERNMENTGOVERNMENT 42.242.2 34.634.6 46.546.5 5.09%

NationalNational 20.020.0 18.518.5 22.722.7 6.75%

LocalLocal 22.322.3 17.817.8 23.823.8 3.36%3.36%SOCIAL INSURANCESOCIAL INSURANCE 9.39.3 10.610.6 1313 19.8%19.8%

MedicareMedicare 9.09.0 10.310.3 12.812.8 21.1%21.1%

Employee’s Employee’s CompensationCompensation

0.30.3 0.30.3 0.20.2 (33%)

PRIVATE SOURCESPRIVATE SOURCES 63.663.6 68.668.6 74.774.7 8.7%

Out-of-PocketOut-of-Pocket 51.151.1 54.854.8 59.859.8 8.2%

Private InsurancePrivate Insurance 2.9 3.4 3.4 8.6%

HMOs 3.7 4.2 4.7 13.5%

Employer-Based PlansEmployer-Based Plans 4.54.5 4.84.8 5.05.0 5.5%

Private SchoolsPrivate Schools 1.41.4 1.51.5 1.91.9 17.8%17.8%

OTHERSOTHERS 1.51.5 1.71.7 1.81.8 10%

ALL SOURCESALL SOURCES 116.6116.6 115.4115.4 136.0136.0 8.3%

HMO Package of BenefitsHMO Package of Benefits

Annual Physical Annual Physical ExaminationExamination

Out-Patient BenefitsOut-Patient Benefits Preventive Health Care Preventive Health Care

(immunization, nutrition (immunization, nutrition education, etc.education, etc.

In-Patient Coverage In-Patient Coverage (including Surgery)(including Surgery)

Emergency CoverageEmergency Coverage

Dental BenefitsDental Benefits Maternal BenefitsMaternal Benefits Optical BenefitsOptical Benefits Executive CheckupExecutive Checkup Insurance BenefitsInsurance Benefits

TASKS TO ACCOMPLISH

August to October 2006( Before the Mid-Year Convention)

Timetable for PCP Chapters & Component Societies between August and September 2006

Mobilize the leaders of the chapters & component societies to stimulate discussion on the ‘big picture’ in their respective areas of jurisdiction using this Powerpoint as springboard.

Expand the discussion to a broader base per component society and chapters. Give them targets in terms of discussion , decision points, timelines Capacitate them to analyze their respective circumstances and to come

up with their own modus vivendi and operandi with the HMOs in their respective regions.

Consider rates being defined and stratified according to region Propose rates. For example, P350 for subspecialist; P300 internist, P250

family physician; P200 GP Come up with scenarios: Can HMO members choose to personally pay

for their non-HMO doctors, but still be covered by HMOs for hospitalization.

Share outputs of discussions to PCP secretariat for dissemination to other chapters and component societies. Be guided by the “ NEXT STEPS” in the next slides.

NEXT STEPS after carefully studying the “ Big Picture”

Acknowledge as GIVEN: The HMOs are here to stay regardless of whether we make a stand one way or the other.

Work towards a consensus among chapter / component society members Resolve: A clear majority of PCP members in the chapter /

component society are determined and willing to fully support the stand of the chapter and the consequences of such stand.

Establish the boundaries and details of the stand ( including but not limited to ff:) A. Rates:

What is a reasonable rate? What is an unreasonable rate? What is timely payment of fees? What is unacceptably late? What is level of priority of payment of doctors’ fees versus (other)

hospital fees?

NEXT STEPS after carefully studying the “ Big Picture”

B. Patients’ issues choice limited to doctors in the HMO list? How patients are treated by HMOs and how HMOs affect the relationship of

HMO patients and their doctors How are the HMO patients’ rights and welfare protected? Are HMOs a major player in health care delivery in your chapter?

C. Doctors’ issues What are the non-negotiables as far as the doctors are concerned? What are the doctors willing to offer to support universal health insurance

coverage and good governance in health care? What doctors’ behaviors must be stopped, changed, improved?

D. HMO Management issues What are HMO practices that need to be changed, stopped, improved? How can the HMOs best collaborate with the PCP chapter to improve access

to health care by more Filipinos? After integrating and consolidating all of your positions to all of the

foregoing questions, what now, finally, is the stand of your chapter / component society regarding the HMOs ? Please define your stand clearly by drilling down to 5-10 key points.

PCP Board Action ( Sept - Oct)

Collate outputs of component societies and chapters Distinguish local from national issues; Distinguish issues that are strategic to

the role and position of PCP as a national organization from issues that are operational in nature.

Meet with Dr. Benito Reverente (for further probing) Firm up PCP Board position for a national strategy

that requires local execution (engagement at the chapter level) That requires execution at the national level ( level of policy and national stand)

Meet with AHMOPI excom Explore ways to help HMOs cut down cost in health care delivery thru practice

guidelines and formularies Check on practices of HMOs that, by trying to cut costs in the short term actually

cause higher costs in the long term, e.g., delay in referral to specialists Determine factors that cause delay in timely payment of fees, low rates for

specialized services Firm up PCP Board position prior to Oct mid-year convention. Prepare draft for Iloilo presentation