US Health Spending: Trends and Comparisons

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1 $8,000 Health Spending per Person $7,290 Dollars per Person $6,000 $4,000 $4,763 $3,895 $3,601 $2,992 $2,000 $0 Canada France Norway United OECD (2009) for 2007 Kingdom United States US Health Spending: Trends and Comparisons Day 5 Health and Wealth Around the World

2 How Much Does Health Care Cost? Out of Pocket Costs Health Insurance Premiums Employer Employee Government Spending (Your Taxes) Medicare Medicaid ACA Subsidies

3 Spent on All Kinds of Health Care Inpatient & Outpatient Physician and Other Professional Services Drugs: Prescription and Over the Counter

4 Dollars ($US) Average Health Care Spending per Capita, Adjusted for Differences in Cost of Living 4 * Source: OECD Health Data 2014.

5 Health Care Spending as a Percentage of GDP, Percent * GDP refers to gross domestic product. Source: OECD Health Data 2014.

6 Employer Health Benefits Survey Release Slides September 10, 2014

7 Average Annual Premiums for Single and Family Coverage, $2,196 $2,471* $2,689* $3,083* $3,383* $3,695* $4,024* $4,242* $4,479* $4,704* $4,824 $5,049* $5,429* $5,615* $5,884* $6,025 $5,791 Single Coverage $6,438* Family Coverage $7,061* $8,003* $9,068* $9,950* $10,880* $11,480* $12,106* $12,680* $13,375* $13,770* $15,073* $15,745* $16,351* $16,834* $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 * Estimate is statistically different from estimate for the previous year shown (p<.05). SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,

8 Average Percentage of Premium Paid by Covered Workers for Single and Family Coverage, % 45% 40% Single Coverage Family Coverage 35% 30% 27% 26% 26% 28% 27% 28% 26% 27% 28% 27% 27% 30%* 28% 28% 29% 29% 25% 20% 15% 14% 14% 14% 16% 16% 16% 16% 16% 16% 16% 17% 19%* 18% 18% 18% 18% 10% 5% 0% * Estimate is statistically different from estimate for the previous year shown (p<.05). SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,

9 Cumulative Increases in Health Insurance Premiums, Workers Contributions to Premiums, Inflation, and Workers Earnings, % Health Insurance Premiums Workers' Contribution to Premiums Workers' Earnings 200% Overall Inflation 212% 191% 150% 131% 127% 100% 50% 72% 38% 54% 0% 17% 43% 28% 13% 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).

10 US Health Spending Costs on Average $8,745 per Year per Person More than any Other Country Reduces take-home pay, both via Insurance Premiums and Taxes So, is the US Healthier?

11 What did We Learn over the Last Four Weeks (and gave Thanks for last Thursday)? The USA is Rich and Healthy! Compared with Most Other People in the World, and Compared with 100 Years Ago But Not Compared to Many Other OECD Countries

12 Remaining Life Expectancy at Age 50

13 US Health Outcomes Life Expectancy is Lower than Western European Countries Infant Mortality is Higher Gains in Life Expectancy at Age 50 are Smaller

14 What s going On? The US Spends More Money And Has Worse Health Outcomes

15 Percent of Population OECD (2009) Obesity Canada France Norway United Kingdom 34 United States

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17 Why is the US Less Healthy while Costing More? Unhealthy Behaviors Cost = P (Price) x Q (Quantity and/or Quality)

18 Magnetic Resonance Imaging (MRI) Machines per Million Population, * Source: OECD Health Data 2014.

19 Diagnostic Imaging Prices, Dollars ($US) MRI Dollars ($US) CT Scan (abdomen) Notes: US refers to the commercial average. MRI refers to magnetic resonance imaging; CT refers to computed tomography. Source: International Federation of Health Plans, 2013 Comparative Price Report.

20 Total Hospital and Physician Costs, Dollars ($US) Appendectomy Dollars ($US) Bypass Surgery Notes: US refers to the commercial average. Appendectomy prices reflect a blend of inpatient and outpatient prices based on relative utilization in each setting. Source: International Federation of Health Plans, 2013 Comparative Price Report.

21 Hip Replacement Inpatient Cases per 100,000 Population, * ** *** Data from publicly-funded hospitals only. Source: OECD Health Data 2014.

22 Pharmaceutical Spending per Capita, 2012 Adjusted for Differences in Cost of Living 22 Dollars ($US) * Source: OECD Health Data 2014.

23 Spending on Health Insurance Administration per Capita, 2012 Adjusted for Differences in Cost of Living 23 Dollars ($US) * Source: OECD Health Data 2014.

24 Number of Practicing Physicians per 1,000 Population, * Source: OECD Health Data 2014.

25 Accounting for the (Additional) Cost of Health Care in the US Other 16% Drugs 13% Staff salaries 8% Malpractice insurance 4% Health adminsitration 19% Profits/taxes 14% Medical salaries 18% Equipment/ devices 8% McKinsey and Company

26 Why is the US Less Healthy while Costing More? Unhealthy Behaviors Higher Prices Hospitals Salaries Pharmaceuticals Administration Limited Incentives for Reduced Cost and/or Higher Quality

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29 Organization of Care Matters Gawande, The Cost Conundrum, The New Yorker, June, 2009 Fee for Service: Providers are paid more if they prescribe/use more services Salaried Providers: Less incentive to increase utilization Group practices with salaried providers are often cheaper/better quality (Mayo, Kaiser, Group Health)

30 Medicare for All? Reduce: Admin Costs Insurance Company Profits NOT: Change Behavior/Health Reduce Medical Salaries Reduce Drug Prices Change Organization 31

31 Consumer Incentives Moral Hazard: If insured against adverse outcome, incentive to avoid is reduced. If have health insurance, worry less about the cost of services => consume more services and/or less cost-effective services.

32 Montana University System (2010) URx: Rethinking our Rx program: A New Strategic Approach

33 WHY URx (2010) Prescription drugs were the largest and fastest rising cost component of our plan. Our Plan = our self insured offerings Medical, Pharmacy, and Dental. We our plan and our members - pay 100% of our pharmacy costs through our premiums and out-of-pocket cost sharing. Prescription drugs accounted for roughly 31% of our health care expenditure. We spent approximately $69,500 per day for prescription drugs. We spent more for prescription drugs than doctors or hospitalizations. 34

34 What OUR data tells us. Rise in Plan Cost resulted from Rise in Drug Prices - NOT Increased Member Utilization URx was built out of necessity Existing prescription drug business model steers purchases to the medications with the largest built in profit margin. Does not matter if it s generic or brand, effective or not effective, pink or blue. 35

35 As of % of members on Lipitor had never tried equally effective, lower cost alternatives Lipitor is a Well Advertised medication With URx (2011) DRUG Lipitor Simvastatistatin Lipitor Simva- 90 Day Supply Plan $326 $163 $298 $26 Costs Member Costs $60 $20 $149 FREE 36

36 Millions of Dollars Prescription Drug Costs Non-Specialty Fiscal Years

37 Millions of Dollars Prescription Drug Costs Non-Spec Specialty Total Fiscal Years

38 Spending Growth was Worth It Yes, spending has grown tremendously. But better health care has accomplished much.

39 Heart Attack Death Rates Deaths per 100,000 Pop'n Canada France Norway United Kingdom United States OECD 2009 "Acute Myocardial Infarction"

40 Deaths per 100,000 Pop'n Cerebrovascular Death Rates Canada France Norway United Kingdom United States 0 OECD

41 McKinsey Global Institute How the world could better fight obesity

42 The War on Obesity The Economist Nov 22, 2014

43 End of Life Spending es/issue.aspx?con=

44 Summary US Spends A Lot on Health Care Health Outcomes are NOT Better than other OECD Countries Multiple Causes: Behavior, Prices, Organization of Care, Incentives Spending Trends Have Implications for the Federal Budget