Medical Care Cost Drivers

Transcription

1 Mike Barton, Willis Transparency in benefit design: the next stage of product delivery May 2007 Medical Care Cost Drivers Several factors are driving both medical cost and health care inflation: Ageing population Shift in America to more sedentary lifestyles $7,000 $6,000 $5,000 $4,000 Employer Cost to Cover an Employee Per Year The practice of medicine $3,000 $2,000 Benefit designs that camouflage true costs $1,000 $ Proliferation of lifestyle drugs Physician Practice Variability IOM reports that 44,000 to 98,000 Americans die each year from medical errors Americans spend an estimated $70 billion per year on incorrectly prescribed drugs 95% of Americans with heart failure do not receive the most appropriate therapy, resulting in 100,000 more deaths than would otherwise occur 60,000 strokes per year are preventable in individuals with atrial fibrillation Reference: To Err is Human - Building a Safer Health System Institute of Medicine (IOM), Committee on Quality of Health Care in America, Linda T. Kohn, Janet M. Corrigan, and Molla S. Donaldson, Editors National Academy Press, Washington DC, copyright 1999

2 Employer Impact Scary Stats: Medical inflation has exceeded 10% for 10 straight years Cost Benefit Equation Benefits have been reduced on average 5% each of the last two years Employee costs have risen 4.5% in the last two years Costs Benefits Costs Employee Dissatisfaction Employees are less satisfied with employer sponsored benefits than ever before Benefits What impact can employers have on trend? > Adopt incentive laden Wellness programs to encourage healthy lifestyles > Mandate Disease Management programs vs. voluntary enrollment > Roll out plan designs that take advantage of consumer directed health care alternatives > Offer consumer based plans that are written and communicated in a common language (vs. carrier speak or provider billing codes) > Embrace High Performance networks (HNP s) to encourage physicians to practice evidence based medicine.* *Rand corporation indicates there are 283 rules of medicine. Physicians follow these rules only 56% of the time. Medical Benefits Today Carrier nomenclature insists on an arcane language known as: Copays, Coinsurance, Out of Pocket Maximums, and Deductibles. Few people speak this language

3 Member: John T. Doe Group Name: ABC Company P.O. BOX HARTFORD, CT Notes: This is the claim detail for the bills received on 05/09/01. This statement includes activity on your Flexible Spending Account. Remarks: 1 - Expenses for drugs provided while outpatient are not covered. Flexible Spending Account Remarks: A- $ is not reimbursable because your full elected medical contribution has been reimbursed under this account EK55T25L00 Please Retain for Future Reference Date Printed: 05/10/01 Page 1 of 1 For Customer Service please call: Middle Street Middletown CT Or write to the address shown above. For Flexible Spending Account information please call: This Payment Has Been Applied From Your Flexible Spending Account: Member ID: Please refer to ID Card Group Number: AB DAMG7D Total Patient DATE AND SUBMITTED NEGOTIATED NOT PAYABLE SEE YOUR YOUR AMOUNT PAID PLAN YOUR SHARE OF Responsibility TYPE OF SERVICE CHARGES AMOUNT REMARKS COPAY DEDUCTIBLE REMAINING AT PAYS AMOUNT REMAINING General Hospital A Column Totals $1, $ $25.00 $ $ $ $75.00 $ C + D + E + H = Plan Summary for 01/01/01-12/31/01 Description Payment Summary: Flexible Spending Account Annual Election Year To Date Remainder 01/01/01-12/31/01ble $ $ $0.00 Individual Limits Annual Limit Year To Date Remainder Sent To : General Hospital In Network Deductible $ $ $00.00 Date Sent: 05/15/2001 In Network Share of Amount Remaining (Coinsurance) $ $75.00 $ Amount: $ Out of Network Deductible $ $ $75.00 Out of Network Share of Amount Remaining (Coinsurance) $ $00.00 $ Individual Lifetime Maximums: Limit Used Medical $1,000, $ CONTINUED ON FOLLOWING PAGE Exhibit A Explanation of Benefits (EOB s) Member EOB with FSA Integration Display > Does anyone understand these? 2 JOHN DOE 1000 MIDDLE STREET MIDDLETOWN CT EXPLANATION OF BENEFITS THIS IS NOT A BILL QUESTIONS? Contact us at aetnanavigator.com 1 Claim Activity for John T Doe (Self)11t I Patient Responsibility 05/01/01 Outpatient Surgery 1, % A B C D E F G H I 4 General Hospital May Bill You: $ I 5 6 Medical Insurance Translated > There is no natural link between provider billing codes and consumer medical benefits. > Having established this, why are benefit services represented in two languages no one speaks, much less understands? > Answering this question gets at the heart of why Managed Care has not solved America s health care crisis. Common sense and benefit design > Benefits and Provider services need to be aligned and communicated in plain English. > There are only 558 known adult disease states. The top 80 cover 80% of all care delivered. > American s are capable of understanding and buying health care without the unnecessary inclusion of artificial, industry specific terms, that serve only to confuse and camouflage the purchasing process.

4 Medical Provider Billing Provider billing systems utilizes a mysterious system of alphanumeric digits known as CPT-4 and ICD9 codes. Fewer people speak this language What if provider charges were posted in plain English? What if provider charges were posted in plain English?

5 What if medical benefits and provider charges were aligned? Cost Transparency The White House has issued an Executive Order mandating providers to post & publish their fees. Aetna has launched beta tests in Cincinnati, Ohio where all provider costs are posted on-line. More carriers are experimenting with provider contract transparency in an effort to enable consumerism. Aetna Supports Executive Order to Broaden Transparency in Health Care The executive order, aimed at creating valuebased competition in health care, focuses on the use of information technology standards, the need for quality standards developed by the medical community, the sharing of aggregate data on the episodic price of care, and the creation of incentives to measure and promote overall quality in care. Aetna August 22, 2006 How does benefit design impact cost? > The industry s latest attempt to address the health care crisis relies extensively on the notion of consumerism espoused in high deductible plans. > CDHC models contemplate that consumers with skin in the game will make better purchasing decisions regarding their health care. > This is made problematic when the decision making calculus is rendered moot by the consumers inability to decipher and compare two incomprehensible languages.

6 Why will this work? > Why? Adam Smith predicated that people will act in their best interests given information necessary to make reasonable decisions. This in turn creates market pressure to compete for the consumers business thus aligning price with demand. > The American economy is founded on this simple principle. > Why should the treatment of health care be any different? What needs to be done? > The ground swell around consumerism is evident. There appears to be no turning back. But what needs to happen to turn a promising notion into sound practical application? > The basic building blocks to reducing Health Care costs are pretty simple: Improve America s Health Employer deployed Wellness and Disease Management programs to improve the health and wellbeing of their employees. The key here lies in adoption and recidivism rates. Mandates or incentives must be applied to increase usage. Design Insurance Programs encouraging consumerism insures have developed CDHC products to engage patients in their health care treatment. Practice Better Medicine The carrier industry is working hard to encourage fact based medicine through high performance networks, transparency, and improved reimbursement mechanisms. The clinical result will be the creation of physician guidelines to practice more effectively and efficiently. Effective Government Intervention Regulatory devices need to be instigated which facilitate free market conditions in the health care space. Chiefly; 1) limited tort reform, and 2) legislation to simplify billing codes and require providers to post costs. The New Health Care Economy > Insurance benefits include no words like deductibles, coinsurance, copays or out-ofpocket maximums. > Insurance benefits are described as a fixed dollar reimbursement/procedure. > Providers and carriers will post the cost/procedure. > Provider networks are irrelevant since benefits are now defined contribution style (e.g., reimbursement/procedure). > Reverse auctions occur where providers compete to perform a specialized procedure for a patient with elective care needs (a la Lending Tree.com ). > Employer health insurance contributions (averaging $4,500/ee/year) are not paid to insurers, but to the employee s HSA. > Employees purchase only claims administration and stop loss coverage while selfinsuring claims through the employer subsidized HSA. > Employees pay 100% of the fixed expense premium based on individual election (e.g., stop loss at $7,000, $10,000 or $15,000 per family per year).

7 So what is the payoff? The intelligent combination and coordination of these activities will lead to quiet revolution in health care delivery. The integration of what is currently working with new ideas will result in a new age of health care where individuals both understand their treatment plan as well as its costs. In this world, trend can be reduced to a number consistent with CPI and employers can regain focus on their core business versus managing their health insurance budget. Mike, you are trying to boil the ocean Dr. Don Storey, July 2006 Closing Comments May 2007 Anything is possible Just ask Erik Weihenmayer