Stuart H. Altman. The Changing Health Care System: Economic Forces Pushing States To Become More Involved
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1 The Changing Health Care System: Economic Forces Pushing States To Become More Involved Stuart H. Altman Sol Chaikin Professor of Health Policy The Heller School for Social Policy and Management Brandeis University
2 Involvement Need Not Mean REGULATION But It Might!!!
3 Why Are Health Care Costs Rising?
4 Do We Use Too Much Health Care Services? How Do We Compare With Other Industrialized Countries?
5 Hospital Care!!!
6 Hospital Discharge Rate in Selected Countries 2005 Source: OECD HEALTH DATA 2007
7 Average Length of Stay in Hospital in Selected Countries 2005 In-patient Acute Care Days Source: OECD HEALTH DATA 2005
8 Drugs?
9 Percent of Total Healthcare Expenditures on Pharmaceuticals
10 Ok---Lets Move To Expensive Procedures
11 MRIs in Selected Countries 2005 (Units per million persons) Sources: OECD HEALTH DATA 2007
12 Cardiac Catheterization Procedures in Selected Countries 2003 Source: OECD HEALTH DATA 2005
13 Patients Using Renal Dialysis Treatment in Selected Countries 2005 Source: OECD HEALTH DATA 2007
14 What About Physician Income?
15 Specialist Physicians Remunerations, Ratio To GDP Per Capita, 2005 Source: OECD HEALTH DATA 2007
16 General Practitioners (GPs) Remunerations, Ration To GDP Per Capital, 2005 Source: OECD HEALTH DATA 2007
17 Now Lets Turn To Prices How Do Prices for Medical Services In The US Compare To Western European Medical Prices
18 Physician Fees Routine Office Visits (US$) $151 USA Fee Range USA Low End USA High End
19 Scans and Imaging CT Scan: Head (US$) $1,800 USA Fee Range $530 USA Low End USA High End
20 Hospital Charges Average Cost Per Hospital Day (US$) $12,708 USA Fee Range USA Low End USA High End
21 Drug Prices Lipitor (US$) $334 USA Fee Range USA Low End USA High End
22 Comparison of Healthcare Prices in the U.S. and European Countries Fee Type Procedure Canada France Germany Netherlands Spain UK USA Average/ Low-end USA High- End USA Medicare Scans and Imaging Physician Fees Hospital Charges CT Scan Abdomen Routine Office Visit Normal Delivery Ave Cost Per Hospital Stay $83/530 $248 $319 $258 $161 $179 $750* $1,600 $400 $30 $498 $31 $1,023 $22 TBD $32 $622 $15 $1,041 Primary care capitation Specialty salaries No Fees $59 $2,384 $`151 $4,847 $72 $1,601** $9,043 $9,840 TBD $3,535 $2,261 $3,388 $12.549* $40,680 $12,000 Total Hospital and Physician Costs Bypass Surgery Hip Replacement $14,111 $11,916 TBD TBD $15,761 $12,868 $56,472* $116,798 $22,092** $8,483 $8,200 $8,500 $7,600 $9,152 $8,347 $32,093* $67,983 $17,500 Tests and Cultures Pap Smear $27 $14 $26 $16 $20 See note above $24 $64 $17 Drug Prices Lipitor $33 $53 $48 $63 $32 $40 $125 $334 No Medicare Nexium $65 $67 $37 $102 $36 $41 $154 $424 Rx fees Non-US fees shown above came from both government sources and data files of IFHP member plans. For countries with multiple health plans or multiple regions with different payment systems, the fees reflect a representative sample of estimated average prices. Canadian scans include the government reading fees and the charges used by private scanning facilities for patients who pay their own expenses. There are no government fees associated with MRIs because this equipment is typically purchased by local health authorities and s included with fees for facility-level use. *Represents USA average fees rather than USA low-end fees. ** Representative Medicare fees from Portland, Oregon market or CMS Medicare average for tests and cultures; all other Medicare fees are averages provided by a global consulting and actuarial firm. Source: International Federation of Health Plans: Fee Report Europe, Canada and USA666
23 So It s PRICES Stupid!!!
24 How Can We Lower Prices More Efficient Delivery System Accountable Care Organizations Bundled Payments for Specific Services Pay Less for Services Through Regulation Through Market Forces Patient Cost-Sharing Limited or Restrictive Networks Through New Payment Systems
25 States Being Pushed to Be Concerned About TOTAL (Not Just Medicaid) Health Care Spending--- Why--- Problem of Rising Private Insurance Premiums
26 High Premiums Limiting Worker Compensation and Employment!
27 160% 140% Cumulative Increases in Health Insurance Premiums, Workers Contributions to Premiums, Inflation, and Workers Earnings, % 120% 100% 103% 114% 80% 88% 60% 40% 20% 0% 36% 24% 21% 27% Notes: Health insurance premiums and worker contributions are for family premiums based on a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, (April to April). Health Insurance Premiums Workers' Contribution to Premiums Workers' Earnings Overall Inflation
28 The Cost-Shift Issue---
29 Private Insurance Payments Used To Pay For Lower Government Payments 180% 160% Hospital Payment-to-Cost Ratios 157.4% 140% 120% 130.0% 138.0% 100% 92.0% 80% 60% 85.0% Medicare Medicaid(1) Private Payer Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.
30 The Primary Issue--- Should States Promote More Effective Market Activities or Develop All Payer Regulatory System
31 If Markets Are to Work! Need to Foster a Value-Based Delivery System
32 Value-Based Services Link Together Services That Improve Quality (Including Positive Outcomes) With Commensurate Costs
33 Concerns About Current System Care Often Delivered in an Uncoordinated and Fragmented Way Lack of Information Sharing Duplicative Testing Poor Care Coordination Mismanaged Care Transitions Limited Use of Cost Effectiveness in How We Use and Pay for Services Few Constraints on Prices for New Drugs and Devices
34 Accountable Care Organizations (ACO s) and Bundled Payment System Being Promoted to Change Current System
35 ACO s and Bundled Payments Offer Some Real Opportunities --- They Encourage Integration of Care Where Possible Substitute Less Expensive for More Expensive Care Reduce the Use of Marginal and Ineffective Care Limit the Stockpiling of Substitutable types of Services They Facilitate the Working Together of Hospitals, Physicians, Post Acute Care and Other Health Professionals They Lower the Cost of Expensive Treatments Bundled Payments Can Be an Interim Step To a Global Payment System
36 Why ACO s and Bundled Payments They Allow Providers to Decide What is Appropropriate Care They Reward Care That is Less Fragmented and Minimizes Duplicative and Wasteful Services They Permit Care Providers To Pay for Services Not Traditionally Considered as Health Care Services
37 But To Succeed We Need to Avoid The Errors of The Past?
38 The Errors of The Past Providers (Physicians and Hospitals) Were Required To Take More Financial Risk Than They Could Afford or Understand-- Individuals Were FORCED Into Plans They Didn t Chose and Didn t Like-- Quality of Care Measures Were Limited So Choice of Plan (By Employers) Was Based Primarily on Costs
39 The Errors of The Past For Bundled Payments The Medicare DRG Payment System Only Included Hospital Services The Medicare DRG Bundled Payment System Only Covered Medicare Beneficiaries
40 ACO s and Bundled Payments Designed To Avoid Problems of The 1990 s Providers Required To Assume Limited Risk ACO s is a Shared Savings System. Each Groups Starts From Their Current Spending Levels and Downsides Risk Limited Patients Will Not Be Locked Into a Delivery System They Don t Trust Patients Need to Sign Up With PCP But Can Change PCP or Network With No Penalty Attaining or Exceeding Quality Standards Provider Eligibility for Payment Depends on
41 ACO s and Bundled Payments Designed To Avoid Problems of The 1990 s The Medicare Bundle Will Include Physicians Services and Post Hospital Care In Addition to Hospital Services (It does Not Include Pre-Hospital Care) Medicare is Encouraging (But Not Requiring) Non-Medicare Patients to Be Included in Future Bundled Payment Systems
42 Key To Success of ACO s An Effective Primary Care System (Many Specialty Groups Wary of a Return to the 1990 s)
43 The Key To Making Bundled Payment Work Control Post-Acute Care Spending!!!
44 Avg Medicare Payment for In-Hospital Care for Select DRGs Source: RTI Inc, Post-Acute Care Episodes: Expanded 44 Analytic File, June 2011
45 2008 Medicare Acute and Post-Acute Payments for Inpatient-Initiated 90-Day Episodes Source: RTI Inc, Post-Acute Care Episodes: Expanded 45 Analytic File, June 2011
46 Major Concerns of Current Environment ACO s and Bundled Payments Use Shared Savings Approach and Not Fixed Budgets Both Approaches are Voluntary Patients Have The Right to Opt Out of ACO s Many Important Systems Not Participating
47 Nevertheless States Need To Be Active Participant In Promoting These New Delivery System Options Limit Regulatory Hurdles and Provide Financial Assistance to Financially Stressed Systems (Because of Unfavorable Payer Mix)
48 But States Need to Guard Against Big Integrated System Using Market Power To Extract Higher Private Payments
49 Letting Private Market (Commercial Insurers and Individual Providers) Set Rates Can Lead to Significant Differences in Payment Amounts Are They Justified? 49
50 The Massachusetts Story Brandeis University 50
51 Relative 2008 Massachusetts Blue Cross Hospital Payment Rates Source: BCBSMA data submitted to the attorney general. Red = teaching hospitals. 51
52 Massachusetts First State To Pass Universal Coverage Legislation Commonwealth Has Long History of Expanding Coverage and Regulating Health Spending Brandeis University 52
53 Private Sector (Insurers and Providers) Join Government Efforts to Reform Health System 53
54 Expanded Activity In Private Insurance Market After State Set Limits on Premium Increase (Could Be Below Underlying Health Service Trend) Insurers Restructure and Toughen Payment Models Introduce Limited and Tiered Network Plans Increase in High Deductible Plans 54
55 Major Healthcare Providers Promote Reform Delivery System Changes 55
56 Massachusetts Enrollment in Global Payment About 22 Percent of State Residents Pioneer ACO* Medicaid & Commonwealth Care Medicare Advantage Other Tufts HPHC Blue Cross Commercial Members Source: The Boston Globe, February 13, Figures for Pioneer ACO are estimated.
57 Massachusetts Legislature Passes Compromise Cost Containment Legislation (August of 2012) Includes Many Pieces 57
58 Chapter 224: Cost Control & Payment Reform Alternative Payment Models Review Provider Price Variation Health Workforce Support Health Planning Medicaid Payment Reform Health IT Requirements New State Oversight Bodies Transparency & Reporting Requirements Annual Spending Targets Administrative Simplification ACO Certification & Oversight Infrastructure Support Brandeis University 58
59 Spending & Delivery Reform Oversight Health Policy Commission* (11-member board) Distressed Hospital Fund $135M Executive Director and Staff Payment Reform Fund $11.5M Center for Healthcare Information and Analysis * In EOHS but not subject to EOHS control. Exempt from state civil service requirements and pay scales.
60 How Is The Commission Organized
61 Sub-Committees of Commission Cost Trends and Market Performance Establish the annual health care cost growth benchmark for total health care expenditures in the Commonwealth. Conduct annual cost trends hearings and issue a final report on health care trends. Quality Improvement and Patient Protection Examine the impact of health system changes on the quality of health care in the Commonwealth, including the impact on patient access to care, and on the providers of health care, including front-line practitioners and health care workers. Establish the role and responsibilities of the Office of Patient Protection. 61 Conduct cost and market impact reviews of health providers and health plans proposing significant market changes to the health care industry, considering the impact of these changes on cost, access, quality, and market competitiveness. Oversee the development and implementation of performance improvement plans for certain providers and plans. Track the progress of efforts regarding mental health coverage parity and ensure the integration of mental health, substance abuse disorder and behavioral health services with physical care in the development of new care delivery and payment models. Develop guidance relative to the prohibition of mandatory overtime for hospital nurses.
62 Sub-Committees of Commission Care Delivery and Payment System Reform Establish a provider organization registration program. Develop and implement standards for a certification program of Patient- Centered Medical Homes (PCMH) and Accountable Care Organizations (ACOs) and develop model payment standards to support PCMHs. Administer a competitive grant program to foster the development and evaluation of innovative health care delivery, payment models, and quality of care measures. Coordinate the advancement, adoption, and measurement of alternative payment methodologies. Coordinate with the DOI regarding the development of regulations relative to the certification of risk-bearing provider organizations. Community Health Care Investment and Consumer Involvement Develop and administer a competitive grant program to enhance the ability of certain distressed community hospitals to implement system transformation. Develop strategies for engaging with various constituencies and a communications plan for educating providers, businesses, consumers, and the general public regarding the implementation of Chapter 224. Develop strategies for helping consumers navigate health care cost and quality. Conduct an investigation relative to increased adoption of flexible spending accounts, health reimbursement arrangements, and health savings accounts. Work with other state agencies to minimize duplicative requirements. 62
63 Reaching The Goal of The Law---
64 Billions Massachusetts Statewide Heath Care Spending Targets (All Payer) 5.9%/yr 3.1%/yr 6.2%/yr 3.6%/yr Source: Author s calculation based on historical state spending estimates and projected national health spending growth from the CMS Office of the Actuary and targets set forth in Chapter Brandeis 224. University
65 States Must Also Be Mindful of What Is Happening in National Market
66 Average Annual Percent Change in National Health Expenditures, Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (see Historical; National Health Expenditures by type of service and source of funds, CY ; file nhe2010.zip).
67 Slow Down May Be Permanent David Cutler (Harvard) Believes Many Small Positive Changes In Market Providers Becoming More Efficient Less Hospital Acquired Infections Reduced Re-Hospitalization More Patient Cost Sharing Greater Use of Limited and Tiered Insurance Networks States Becoming More Active In Slowing Total Spending
68 The Recession is Only About One-Third of the Slowdown Real, per capita medical spending In 2005 dollars Actuary Forecast Gap Actual + Recession Actual Source: Authors calculations based on data from the Bureau of Economic Analysis and the Centers for Medicare and Medicaid Services
69 Past Efforts To Control Spending ---Regulation in 1970 s ---Managed Care in 1990 s Strong Negative Reactions To Both
70 Current Improvements Likely To Be More Positively Received
71 But---Most Policy Analysts Still Very Skeptical!!! What Happens If Strong Inflationary Pressures Return?
72 Health Policy Commission Not a Regulatory Body--- Ultimate Responsibility Still Within Private Sector! Brandeis University 72
73 HPC is Like The Health Systems Mother--- We Keep Reminding The System to Eat It s Vegetables
74 BUT--- If Rates Shoot Up Again What Could Happen?
75 What Could Be Next? 75
76 Which Would You Prefer?
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