us health care: the future - george mason university care the f… · us health care: the future...

US Health Care:The FutureWeek Two:

Controlling Costs

Bill ScanlonFor

Osher Lifelong Learning Institute April 2012

• Context– How Big is the Cost Problem?

• What Drives Costs?

• ACA Changes to Medicare

• Reducing the Federal Deficit: Health Care Options

April 23, 2012 US Health Care: The Future OLLI Week Two

PER CAPITA HEALTH CARE SPENDING PER CAPITA HEALTH CARE SPENDING AND GDP IN SELECTED COUNTRIES AND GDP IN SELECTED COUNTRIES

2002-2003 2002-2003

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0 10,000 20,000 30,000 40,000 50,000per Capita GDP ($US PPP)

per C

apita

Exp

on

Hea

lth

($U

S PP

P)

April 23, 2012US HEALTH CARE: THE FUTURE OLLI WEEK TWO

The figure for Japan is 2002 estimate; the figures for Australia, Austria, China, Hungary, Ireland, Israel, Poland, Sweden and United Kingdom are of 2002; the figures for Canada, France, Iceland, Norway and Switzerland are 2003 estimates. The rest are of 2003.

Source: OECD Health Data 2005 and WHO.

U.S.

Canada Norway

Japan

Switzerland

Germany

Israel

KoreaChina

U.K.

Australia

$1,794

Source: OECD

International Comparison of Spending on Health, 1980–2009

0

1000

2000

3000

4000

5000

6000

7000

8000

1980 1985 1990 1995 2000 2005

United StatesNorwaySwitzerlandCanadaNetherlandsGermanyFranceDenmarkAustraliaSwedenUnited KingdomNew Zealand

Average spending on healthper capita ($US PPP)

0

2

4

6

8

10

12

14

16

1980 1985 1990 1995 2000 2005

United StatesFranceSwitzerlandGermanyCanadaNetherlandsNew ZealandDenmarkSwedenUnited KingdomNorwayAustralia

Total expenditures on healthas percent of GDP

SOURCE: OECD Health Data 2011 (June 2011).

7

Health Spending as a Share of the Economy


100%

20%

CBO Projection

2008 2082

50 %

Source: CBO

Health Spending as Share of Economy


100%

20%

Historical Trend

CBO Projection

2008 2082

50 %

Source: CBO and Author Computations

Declines in Worker Compensation Mostly due to Health Care and Payroll Taxes (Medicare)


Spending on Health Services and Insurance Administration

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Public Admin.

Insurance

Other

LTC

Drugs

Physicians

Hospitals


2010--$2.3 trillion2020--$4.2 trillion

Source:CMS Actuary


It’s The Prices, Stupid: Why The United States Is So Different From Other Countries

Higher health spending but lower use of health services adds up to much higher prices in the United States than in any other OECD country.

by Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan, Health Affairs, Vol. 22. No 3, 2003.

HOSPITAL DISCHARGES PER CAPITAHOSPITAL DISCHARGES PER CAPITAIN SELECTED COUNTRIES 2005IN SELECTED COUNTRIES 2005

163158

201

245

12188

106

268

0

50

100

150

200

250

300

US UK Germany Australia France Japan Canada OECD Av.

Dis

char

ges

per 1

00,0

00 P

op


Source: OECD HEALTH DATA 2007

Source: OECD

DOCTOR VISITS PER CAPITA DOCTOR VISITS PER CAPITA IN SELECTED COUNTRIES 2005IN SELECTED COUNTRIES 2005

6.86.16.6

13.8

7

3.8

0.02.04.06.08.0

10.012.014.016.0

US

German

yJa

pan

France

Australi

a

OECD Av.Num

ber o

f Con

sulta

tions

per

Cap

ita


Source: OECD HEALTH DATA 2007Source: OECD

WHAT ABOUT EXPENSIVE MEDICAL WHAT ABOUT EXPENSIVE MEDICAL TECHNOLOGY AND PROCEDURES?TECHNOLOGY AND PROCEDURES?


High Cost of Advancing Technology

“Traditional” Technology Standard Technology circa 2000

Current Technology

X-Ray Machine$175,000

Open Surgery Instrument Set

$10,000

Cardiac Balloon Catheter$500

Scalpel$20

CT Scanner$1 million

Laparoscopic Surgery Set

$15,000

Stent$2,300

Electro cautery$12,000

CT Functional Imaging w/PET

$2.3 million

Surgery Robot~$2 million

Treated Stent$5,000

Harmonic (ultrasonic) Scalpel$30,000

Source: K. Kasper, Presentation to National Health Policy Forum

MRIMRISS IN SELECTED COUNTRIES IN SELECTED COUNTRIES 20052005

(UNITS PER MILLION PERSONS)

9.8

40.1

4.15.47.16.0

26.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

US Australia Germany UK France OECDAv.

Japan


Sources: OECD HEALTH DATA 2007

Source:OECD

CORONARY REVASCULARIZATION PROCEDURES, IN CORONARY REVASCULARIZATION PROCEDURES, IN SELECTED COUNTRIESSELECTED COUNTRIES

2004 2004

April 23, 2012US HEALTH CARE: THE FUTURE OLLI WEEK TWOSource: OECD HEALTH DATA 2007

Ang

iopl

asty

Byp

ass

Blue = BypassWhite = Stents

Source: OECD

Drug Prices in Selected Countries1999


Generics

Source: Congressional Research Service

Physician Fees in Selected Countries 2008


Ger

man

yU

K

Ger

man

yU

K

$30

Source: Laygeson and Glied, Health Affairs, 2011.

Health Care Spending Growth

• Primary driver differs between private insurance and Medicare

• Private insurance--Prices more important– Insurers have less ability to set prices– Privately insured population is healthier

• Medicare—Use of services more important– Program is a price setter– Beneficiaries are less healthy


How Much Hospital Charges Exceed Costs


Source: Maryland Rate Review Commission

“Premium Pricing” ExampleNorthern California

Sutter HealthOther Local Providers

Office Visit $349 $222

Normal Delivery $5,890 $2,052

MRI Knee Scan $1,271 $696

Colonoscopy $3,200 $2,800

Immunization $85 $16

Ear Wax Removal $175 $104


Source: Business Week Aug. 30, 2010


ACA Medicare Changes to Reduce Costs

CBO Budget Options to Reduce Excess Medicare Spending*

2015-2019

0 100000 200000 300000 400000

Medical Home

Bundle Ambulatory Care

Accountable Care Orgs.

Readmission Penalty

Health Plans

Individual Services

Excess SpendingExcess Spending

Fee Reductions

Delivery Reform


*Excess Spending is Growth More than GDP growth + 1 percent point

ACA Changes to Projected Medicare Spending

Total Change $424.B

Reduce Price Increases for

(Hospitals, Skilled Nursing Facilities, Home Health Agencies)

$146 B

Modify Medicare Advantage Plan Payments $118 B

Reduce Medicare Payments to Compensate for Hospital’s Uninsured Caret

$25 B

Prescription Drug—Close Doughnut Hole $18 B

Lower Part B Premiums Not estimated

Lower Cost Sharing Not estimated


Projected Medicare SpendingPre and Post ACA

and with only Population Growth


Billions 1000

500

2010 2019

Increase Due toPopulation

Author Calculations using CMS Actuary Data

Are the Changes Sustainable?Hospitals

While such payment update reductions would provide a strong incentive for providers to maximize efficiency, it is doubtful that many could improve their own productivity to the degree achieved by the economy at large. Over time, a sustained reduction in payment updates, …would cause Medicare payment rates to grow more slowly than, …the providers’ costs of furnishing services to beneficiaries.

CMS Office of the Actuary, January 8, 2010.


Hospital Spending

Tracks Available Funds

Higher Private Revenues

Managed CareConstrained Revenue

Post Managed Care

April 23, 2012 US Health Care: The Future OLLI Week Two By MedPAC


Making Game-Changing Investments

• AMCs uniquely willing to invest in state-of-the-art technology.

• E.g., proton therapy required $140M investment - new infrastructure

Deficit Reduction Proposals for Medicare

2011-12

House Budget 2011 and 2012 Convert to Premium SupportRaise Eligibility Age

Senate “Gang of Six” Senate Finance Comm. To figure out

National Commission on Fiscal Responsibility (Bowles-Simpson)

Consider Premium Support if growth is too highRestrict Medi-Gap policies

Bipartisan Policy Center (Domenici-Rivlin) Convert to Premium Support

Ryan-Wyden Convert to Premium Support

President’s Plan Change some premiums, cost sharing.Penalize new Medi-Gap policiesIPAB to figure out the rest


Restrict Medi-Gap First Dollar Coverage

$1984

$731

Source: Kaiser Family Foundation www.kff.org

Premium Support Experience will depend on Allowed Growth

Allowed Growth Rate

House Budget Committee—2011 Consumer Price Index

Bipartisan Policy Center GDP + 1

Ryan-Wyden GDP + 1

House Budget Committee--2012 GDP + 0.5


Questions??

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