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New Health Plan Strategies for New Health Plan Strategies for Containing Medical CostsContaining Medical Costs
Leonard Davis Institute of Health EconomicsLeonard Davis Institute of Health Economics
2002/2003 Health Policy Seminar Series2002/2003 Health Policy Seminar Series
University of PennsylvaniaUniversity of Pennsylvania
John W. Rowe, M.D.John W. Rowe, M.D.February 21, 2003February 21, 2003
Health Insurance Premiums v. General InflationHealth Insurance Premiums v. General Inflation
Sources: Towers Perrin (red) and the Department of Labor (blue)
4.0%3.0%
10.0%
2.0%
12.0%
6.0%
12.0%13.0%
15.0%
7.0%
4.0%
2.5%3.2%3.2%
3.2%2.8%
1.0%1.9%1.9%
2.3%2.5%
2.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Health Insurance Premium ChangeGeneral Inflation
Factors Driving Rising Costs in HealthcareFactors Driving Rising Costs in Healthcare
Percentage Points
Percent of Total Increase
Medical Trend 13.7% 100%General Inflation (CPI) 2.5% 18%
Drugs, Medical Devices and Medical Advances
3.0% 22%
Rising Provider Expenses 2.5% 18%
Government Mandates and Regulation
2.0% 15%
Increased Consumer Demand 2.0% 15%
Litigation and Risk Management 1.0% 7%
Other Categories 0.7% 5%
Source: PricewaterhouseCoopers, April 2002.
Shares of Overall Health Care Spending GrowthShares of Overall Health Care Spending Growth
31% 32% 37%
34% 27%
21%
30% 34% 28%
14%7%5%
0%
20%
40%
60%
80%
100%
1999 2000 2001
Physician Services Physician Services
Prescription Drugs Prescription Drugs
Hospital Inpatient Hospital Inpatient
Hospital Outpatient Hospital Outpatient
1999 - 20011999 - 2001
Source: Milliman USA Health Cost Index
OverviewOverview
Why are Medical Costs Rising?
What are Health Plans doing to control Medical Costs?
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
The Erosion of Managed Care – V+C
Backlash
Managed Care Lite
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Aging - V
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Aging - V
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Provider Consolidation - C
Leveraging - C
Aging - V
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Provider Consolidation - C
Cost Shifting & Government Funding - C
Leveraging - C
Aging - V
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Provider Consolidation - C
Government Mandates & Legislative Changes - C
Leveraging - C
Cost Shifting & Government Funding - C
Aging - V
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Provider Consolidation - C
Technology - C
Leveraging - C
Cost Shifting & Government Funding - C
Government Mandates & Legislative Changes - C
Aging - V
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Provider Consolidation - C
Expectations - V
Leveraging - C
Cost Shifting & Government Funding - C
Government Mandates & Legislative Changes - C
Technology - C
Aging - V
The Erosion of Managed Care – V+C
Why are healthcare costs rising so dramatically?Why are healthcare costs rising so dramatically?
Prescription Medication – V+C
Provider Consolidation - C
Perspectives on DeathPerspectives on Death
Scotland - Imminent
France - Inevitable
United States - Optional
What do people want from their health care system?What do people want from their health care system?
Afghanistan
Portugal
Canada
United States
California
West Los Angeles
Reduce mortality
Reduce morbidity
Improve functionality
Feel better
Look better
Look real good
Source: Jamie Robinson - The Aetna Executive Speaker Action Series Presentation January 9, 2002
Strategies to Control CostsStrategies to Control Costs
Pharmacy - Formulary- Tiering- Mail Order
Hospital and Physician Contracts
Benefits Structures
Patient Care Management- Disease Management - Care Management- Utilization Management- Hospitalists
Consumer Driven Health Plans
Consumer Driven Health PlansConsumer Driven Health Plans
Provide a greater role for employees in:
Selecting Providers
Choosing Health Plans
Designing Benefit Packages
Sharing Financial Risk
Co
nsu
mer
Co
nsu
mer
Recep
tion
Recep
tion
Consumer InvolvementConsumer Involvement
Tiered NetworksTiered Networks
Health Reimbursement ArrangementsHealth Reimbursement Arrangements
A La CarteA La Carte
Customized PackagesCustomized Packages
Traditional PlansTraditional Plans
Courtesy of Ken Sperling, Hewitt Associates, February 2003
Co
nsu
mer
Co
nsu
mer
Recep
tion
Recep
tion
Consumer InvolvementConsumer Involvement
Tiered NetworksTiered Networks(PacifiCare, HealthNet)(PacifiCare, HealthNet)
Health Reimbursement ArrangementsHealth Reimbursement Arrangements(Aetna, Lumenos)(Aetna, Lumenos)
A La CarteA La Carte(Vivius, My Health Bank)(Vivius, My Health Bank)
Customized PackagesCustomized Packages(Humana, Highmark)(Humana, Highmark)
Traditional PlansTraditional Plans(Cigna, United)(Cigna, United)
Courtesy of Ken Sperling, Hewitt Associates, February 2003
The Aetna HealthFund, Release 1.0The Aetna HealthFund, Release 1.0
Health Care Spending Account
1. Employer Funded2. High Deductible3. Expenditures Apply 100% Toward Deductible4. Single & Family Options5. Unused Balances Roll Over
Full Coverage for In-Network Preventive Services
Linked to PPO Networks
No Referrals Self Insured & Fully Insured Models
Fully Integrated Services & Features
Aetna HealthFund, Release 1.0Aetna HealthFund, Release 1.0 Patient Care Management
-Disease Management-Case Management
Decision Support Tools-Hospital Comparison-Price a Medical Procedure-Evaluate Doctors-Price a Drug
Claims Management-On-Line Adjudication
Benefit Explanation – Eligibility (On-Line)
Information Therapy (SimpleSteps, Informed HealthLine)
Monthly Statement
The Jury is Out!The Jury is Out!
Will These Products Sell?
Will Consumers Access Information and Use it Effectively?
Will Information Regarding the Quality of Individual Physicians and Hospitals become Sufficiently Robust?
Will Access to Care Expand or Contract?
Will We Witness Selection Bias?
Will the Appeal of Consumer Driven Health Plans Serve to Ultimately Reduce the Ranks of the Uninsured?