Making the Transition to a Sustainable Health Care System

The Oregon Approach: so far …

Sean Kolmer, MPH Health Policy Advisor

Governor John Kitzhaber

Overview1. State and Federal Budget Issues

2. System Challenges

3. Oregon’s Path

4. Q & A

Unsustainable • Health care costs are increasingly

unaffordable to individuals, businesses, the state and local governments

• Inefficient health care systems bring unnecessary costs to taxpayers and all other purchasers

• Dollars from education, children’s services, public safety, salaries and wages

3

Oregon’s Long Term Budget

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

2009-11 LAB 2011-13 2013-15 2015-17 2017-19

Revenues (11/2010)

Expenditures

Best 4 Biennia

Worst 4 Biennia

Comparing the rate of increase in Medicaid and PEBB health care expenditures vs rate of increase in state General Fund revenue

100

150

200

250

300

350

400

2001-2003 2003-2005 2005-2007 2007-2009 2009-2011 2011-2013(proj)

2013-2015(proj)

2015-2017(proj)

2017-2019(proj)

Perc

ent C

hang

e (In

dex=

100)

Medicaid (TF) PEBB (TF) Statewide General Fund Revenue

• Medicare growth of all federal income taxes. • 2004- 8%

• 2015 – 19%

• 2025 - 32%

• 2075 – 90%

• Medicare Trust Fund assets are exhausted in 2024

2000 2025

Number of beneficiaries

39.5M 69.7M

Beneficiaries as share of pop.

13.8% 20.6%

Future of Medicare

Failure of the “Super Committee”

• Two percent reduction in Medicare spending, which must come from:

Payments to hospitals Doctors Nursing homes Other providers

• And not in benefits

Private sector facing similar cost increases

Source: Medical Expenditure Panel Survey, MEPSnet Insurance Component.

• Average per Oregon premiums (1996-2010)

• Employee only rose almost 300%

• Average per family premium rose over 300%

• As premiums have increased, cost have been shifted more and more to employees and their families (1996-2010)

• Employee only contributions rose almost 400%

• Family contributions rose 370%

System Challenges: Cost Shifting Cycle

Public Private

Those who do not fit into a

category(uninsured)

Change eligibility

Pressure on state/federal

budgets

Employers and/or

employees drop coverage

Increase in premiums, co-

pays, co-insurance

ER(uncompensated, expensive care)

If food were health care

If food prices had risen at the same rates as medical inflation since the 1930’s:

1 dozen eggs $80.20 1 roll toilet paper $24.20 1 dozen oranges $107.90 1 pound bananas $16.04 1 pound of coffee $64.17

Total for 5 items $292.51

Source: American Institute for Preventive Medicine 2007

Quality vary widely • National Data

– 44% Oregon adults over age 50 receive recommended preventive care (17th in the nation)

– 90% of hospitalized patients receive recommended care for heart attack, heart failure, pneumonia (40th in the nation)

– 66% of heart failure patients received written instructions at discharge (46th in nation)

– Best state for preventing hospital admissions for children with asthma

• Quality Corporation data showed diabetes care exceeds the national average but there is wide variation across practices

– 58% diabetics received an annual eye exam

– 82% diabetics had their kidney function checked

In Oregon, wide variation in cost for similar outcomes...

Sources: Office for Oregon Health Policy & Research. Hospital Quality Indicators Report, 2007. http://www.ohpr.state.or.us/OHPPR/HQ/index.shtml

Not working Better Even better

Payment Fee for service

Episode-based reimbursement

QualityGlobal budgeting

Incentives

Conduct procedures

Evidenced-based carePay for performance

Address root causesReduce obstacles to behavior change

Metrics Revenue improvement

QualityReduced hospitalization Reduced disparities

Better health Improved quality of lifeReduced costs

Governance

Informal relationships & referrals

Joint partnerships between organizations(e.g., mental health & behavioral health)

New community accountability linking ALL

System Challenges: Misaligned Incentives

Oregon Health Plan

15

50% of babies born in Oregon

16% of Oregonians

Thousands of providers

11% percent of total state budget

Fastest growing portion of state budget

System Challenges: Fragmentation of Care

Cost of fragmentation

• Even for all we spend, health outcomes are not what they should be – estimated 80% of health care dollars go to 20% of patients, mostly for chronic care

• Lack of coordination between physical, mental, dental and other care and public health means worse outcomes and higher costs

• Behavioral health major driver of bad outcomes and high costs– Human and financial cost

• Chronic conditions– Care delayed is too often care denied

17

Ways to Reducethe Cost of Health Care

• Reduce what we pay for it (provider cuts)

• Reduce the number of people covered

• Reduce the benefits covered

… or

• Change the way care is organized and delivered

Senate Bill 1580Launches Coordinated Care Organizations

(CCOs)

• CCOs are local health entities that deliver health care and coverage for people eligible for Medicaid (the Oregon Health Plan)

• Follow up to 2011’s HB 3650

• Strong bi-partisan support

• A year of public input – more than 75 public meetings or tribal consultations

• Built on 1994’s Oregon Health Plan that covers 600,000 Oregonians today

20

GOAL: Triple AimA new vision for a healthy Oregon

Changing health care delivery

www.health.oregon.gov

Benefits and services are

integrated and coordinated

One global budget that grows at a fixed rate

Local flexibility

Local accountability for health and

budget

Metrics: standards for

safe and effective care

Coordinated Care Organizations

www.health.oregon.gov

A local network of all types of health care providers working together to deliver care for Oregon Health Plan clients.

Care is coordinated at every point – from where services are delivered to how the bills are paid.

CCOs: governed locally

www.health.oregon.gov

State law says governance must include: • Major components of health care delivery system• Entities or organizations that share in financial risk• At least two health care providers in active practice

– Primary care physician or nurse-practitioner– Mental health or chemical dependency treatment

provider• At least two community members• At least one member of Community Advisory

Council

Community Advisory Council• Majority of members must be consumers• Must include representative from each county

government in service area• Duties include Community Health Improvement Plan and

reporting on progress

Benefits & services are integrated and coordinated

www.health.oregon.gov

• Physical health, behavioral health, dental health• Focus on chronic disease management• Focus on primary care• Get better outcomes:– Health equity– Prevention

• Community health workers/non-traditional health workers

Global budget

www.health.oregon.gov

• Current system– MCO/MHO/DCO/FFS– Payments based on actions– No incentives for health outcomes

• CCO Global Budget– One budget– Accountable to health outcomes/metrics– Local vision, shared accountability, shared savings– Flexibility to pay for the things that keep people healthy

Flexibility: pay for non-traditional health workers and other means to coordinate care

Addressing behavioral health: Reduced ED visits by 49% and reduced costs per patient $3,100.

Central Oregon pilot project

28

CCO Criteria

www.health.oregon.gov

Coordinate physical, mental health and chemical dependency services, oral health care

Encourage prevention and health through alternative payments to providers

Engage community member/health care providers in improving health of community

Address regional, cultural, socioeconomic and racial disparities in health care

Manage financial risk, establish financial reserves, meet minimum financial requirements

Operate within a global budget

Federal Oregon partnership

CCO Waiver Framework

• Waiver effective July 5, 2012• Establishment of CCO’s as Oregon’s Medicaid delivery

system in order to improve health, improve healthcare, and lower per capita costs

• Flexibility to use federal funds for improving health• Federal investment:

– $1.9 billion over five years

31

Oregon’s Accountabilities• Savings:– 2% reduction in per capita Medicaid trend– Baseline is calendar year 2011 Oregon spend– Trend 5.4% as calculated by OMB for President’s

Budget– State to achieve 4.4% by end of year 2 and 3.4%

there after.– No reductions to benefits and eligibility in order to

meet targets– Financial penalties for not meeting targets

32

Oregon’s Accountabilities

• Quality:– Measurement and benchmarks– Financial incentives (sticks and carrots) at CCO level

• Transparency• Workforce

– $2 million per year for primary care loan repayment– Training of minimum 300 additional community health

workers by end of 2015

33

Across Oregon, unprecedented

collaboration

CCOs-Wave 1 (effective 8/1/12)

www.health.oregon.gov

3535

CCO Service AreaUmpqua Health Parts of Douglas CountyFamilyCare Tri-County Clackamas, Multnomah and Multnomah

Counties, parts of Marion

AllCare Health Plan Select zips of Curry, Josephine, Jackson and Douglas Counties

PacificSource Health Plans- Central Oregon

Crook, Deschutes, Jefferson Counties, Parts of Klamath County

Trillium Community Health Plan Lane County including contiguous zips in Benton and Linn Counties

Willamette Valley Community Health Marion County including contiguous zips in Polk county

InterCommunity Health Network Benton, Lincoln and Linn counties

Western Oregon Advanced Health Coos and Curry counties

CCOs-Wave 2 (effective 9/1/12)

www.health.oregon.gov

3636

CCO Service AreaColumbia Pacific Clatsop, Columbia, Tillamook counties,

parts of Coos and Douglas

Jackson County CCO Jackson county

PrimaryHealth of Josephine County Josephine county, parts of Douglas and Jackson counties

Eastern Oregon CCO Baker, Malheur, Union, Wallowa, Sherman counties

Health Share of Oregon Clackamas, Multnomah and Washington counties

CCOs-Wave 3 & 4 (in progress)

www.health.oregon.gov

3737

CCO Service AreaCascade Health Alliance (effective 10/1/12)

Parts of Klamath county

PacificSource-Columbia Gorge CCO (effective 11/1/12)

Hood River and Wasco counties

Yamhill County CCO (effective 11/1/12) Yamhill county, parts of Marion, Clackamas, and Polk counties

OHP Providers

Providers will contract

directly with CCOs

Fee-for-service will be phased into CCO

OHP medical benefits are

not changing

Metrics will be staggered

“One of the problems we can solve is the tremendous fragmentation among the people who pay for the care and what they expect from us.”

Hood River family physician

Long-term

• Begin to have as an option the redesigned delivery system platform for other state contracts:– Public Employees Benefit Board– Oregon Educators Benefit Board

• Redesigned delivery system could be core component of health insurance exchange and an opportunity for private sector to participate

41

Cost of doing nothing…and the opportunity

For more information

www.health.oregon.gov