This Morning s Topics

Transcription

1 Why Does Healthcare Cost so Much? Financial Executives International Britt Berrett, PhD John McCracken, PhD This Morning s Topics 1. How Much Does U.S. Healthcare Cost? 2. How Does it Compare to Other Countries? 3. What are the Major Cost Drivers? 4. What s the Future of Healthcare? 2 1

2 The American public wants as much healthcare as they can consume cradle to grave with emphasis on putting off death as long as possible. Henry Aaron Brookings Institution 3 Average Annual Per Capita Growth Rates for NHE and GDP 14% 12% 11.8% GDP Per Capita NHE Per Capita 1% 9.4% 9.8% 8% 6.8% 8.% 6% 4% 4.3% 5.4% 3.% 5.2% 5.7% 3.8% 5.% 2% % 197s 198s 199s Projected Source: Kaiser Family Foundation 4 2

3 $12, $1, $8, $6, $4, National Health Expenditures per Capita $3.35 Trillion in 216 $2,851 $4,884 $5,687 $6,54 $7,255 $7,922 $8,44 $8,915 $9.515 $1,372 $2, NHE as a Share of GDP $ $1,112 $147 $ % 7.% 8.9% 12.1% 13.4% 14.9% 15.5% 16.2% 16.8% 17.4% 17.3% 17.6% 18.1% Source: CMS Milliman Medical Index Healthcare costs for American families have more than doubled in less than the past decade. $3, $25, $2, $15, $13,382 $15,69 $18,74 $2,728 $23,215 $25,826 $4,316 Out of Pocket $6,717 Employee Contribution $1, $5, $9,235 $11,192 $14,793 Employer Contribution $ The Milliman Medical Index measures the total cost of healthcare for a typical family of four covered by a PPO plan. 6 3

4 Distribution of Healthcare Expenses for the U.S. Population Percent of U.S. Population Ranked by Expenses Mean Exp. Top 1 Percent 27% 28% 28% 23% 23% $97,956 Top 5 Percent 55% 56% 56% 5% 5% $43,58 Bottom 5 Percent 3% 4% 3% 3% 3% > $5 The Five Most Expensive Health Conditions: Heart Disease Cancer Mental Disorders Pulmonary Disorders Trauma 7 Cumulative Increases in Health Insurance Premiums, Workers Contributions to Premiums, Inflation, and Workers Earnings 3% 25% 2% Health Insurance Premiums Workers' Contribution to Premiums Workers' Earnings Overall Inflation 242% 213% 15% 1% 5% 6% 44% %

5 How Do U.S. Healthcare Costs Compare to Those in Other Countries? 9 Total Health Expenditures per Capita $U.S., PPP Adjusted 12, $9,451 8, $6,935 4, $5,343 $5,267 $5,15 $4,611 $4,68 $4,42 $4,47 $4,15 $4,3 US SWIZ NETH GER AUS BELG CAN AUS FR JAP UK Source: OECD Health Data

6 Health Care Spending per Capita by Source of Funding Dollars ($US) Adjusted for Differences in Cost of Living 9, $8,745 8, 7, 6, 1,45 3,54 $6,8 Out-of-pocket spending Private spending Public spending 5, 4, 3, 1, $4,811 $4,698 $4,62 $4, $4,16 $3, $3,289 $3, , 1, 4,16 4,1 3,691 4,29 3,224 3,317 3,336 2,733 2,762 2,623 US SWIZ GER DEN CAN FR SWE AUS UK NZ Source: OECD Health Data What are the Likely Causes of High Healthcare Costs 12 6

7 Five Commonly Cited Culprits Higher Per Capita GDP Monopoly Pricing Power Higher Quality Medical Services Rising HealthCare Costs Overregulation Aging Population 13 Higher Per Capita GDP 14 7

8 Health Expenditure per Capita and GDP per Capita Total health expenditures per capita, U.S. dollars, PPP adjusted, 213 $1, $9, United States $8, $7, $6, $5, $4, Switzerland Germany Canada France Japan Norway Luxembourg $3, $2, Italy UK Spain Australia $1, $- Mexico $- $1, $2, $3, $4, $5, $6, $7, $8, $9, $1, GDP per capita in 212 (U.S. dollars, PPP adjusted) Source: Kaiser Family Foundation analysis of 213 OECD data 15 Higher Quality Medical Services 16 8

9 Relationship between Medicare Spending and Quality of Care Commonwealth Fund June 217 Data 17 Chronic diseases constitute a significant not being managed Gap Between well. Recommended Care And Care Actually Delivered Breast Cancer 76 Prenatal Care 73 Coronary Artery Disease Hypertension COPD 58 Hyperlipidemia 49 Diabetes Mellitus Alcohol Dependence Average Percentage of recommended care received McGlynn EA, et al., The Quality of Health Care Delivered to Adults in the United States, New England Journal of Medicine 18 9

10 Aging Population 19 Share of Total Healthcare Spending by Age Group % 9% 8% 7% 6% 5% 4% 3% 2% 1% % Under to to to to and over Share of Population 11% of spending (by 25% of population) 13% (by 22%) 9% (by 13%) 16% (by 14%) 21% (by 12%) 31% (by 14%) Share of Spending Source: Kaiser Family Foundation 2 1

11 Percent Percent of Population Age 65 or Older US NZ AUS CAN NOR NETH OECD Median UK SWIZ DEN FR SWE GER JPN Source: OECD Health Data Annual Per Capita Healthcare Costs by Age

12 Regulatory Complexity 23 How Healthcare is Purchased and Paid For How Healthcare is Purchased How Physicians are Paid Volume of Services Svc Vol./Mix Per Physician Provider/ Location Sustainable Growth Rate Conversion Factor PHYSICIAN PAYMENT Payment Adjustments Performance SGR Formula Relative Pmt. Per Service HPSA Bonus Non-MD Wages Pract. Exp. GPCI PLI RVU Practice Expense Work Professional Liability Office Space Expense Pract. Exp. RVU PLI GPCI Equipment & Supplies Work RVU Work GPCI Cost Share Weights Billable Services RUC Weighting Professional Earnings Variation Share Floor Practice Fee Areas Practice Fee Areas Medical Home PQRI P4P Gain Sharing 24 12

13 Agencies Regulating Hospitals Federal Circuit Court Supreme Court DME Regional Contractors Regional Home Health Intermediaries Board of Medicine Congress Medicare Integrity Program Contractors Regional Offices Centers for Medicare and Medicaid Services PRRB Intermediaries Carriers PROs Departmental Appeals OIG AHCA State Medicaid DOH DOI Board of Nursing FDA Other Licensing Boards State & Local Governments HOSPITALS DOT OSHA DOJ Labor/ Justice ADA OPOs SEC IRS EPA FTC FCC FBI State Licensure HHS/ HRSA HHS/ NIOSH JCAHO NRC DOL/ Employment 25 Monopoly Pricing Power of Providers 26 13

14 Hospital Supply and Use Acute care hospital beds per 1, population Hospital discharges per 1, population Source: OECD Health Data Average Length of Stay Average number of days in the hospital per visit (all causes) 21 Japan 18.2 Germany 9.5 Switzerland 9 Comparable Country Average 8.1 Austria 7.9 Canada 7.7 United Kingdom 7.4 Belgium 6.9 Sweden 6 France 5.7 Netherlands 5.6 Australia 5 United States Source: Kaiser Family Foundation analysis of 213 OECD data

15 Hospital Spending per Discharge, 212 Dollars ($US) 24, Adjusted for Differences in Cost of Living $2,932 2, 16, $15,754 $14,832 $13,54 12, 8, $11,472 $11,363 $9,975 $9,346 $8,785 $8,434 $5,586 4, US CAN NETH SWIZ DEN NOR SWE AUS FR NZ GER Source: OECD Health Data Physician Supply and Use Practicing physicians per 1, population Annual physician visits per capita Source: OECD Health Data

16 Spending on Physician Services per Capita - 25 Adjusted for Differences in Cost of Living $1,4 $1,421 $1,2 $1, $8 $6 $4 $572 $512 $385 $336 $386 $2 $ United States a Japan Australia France b Canada Germany a Source: OECD Health Data Orthopedics Plastic Surgerey Cardiology Urology Otolaryngology Radiology Gastroenterology Dermatology Anesthesology General Surgery Opthalmology Emergency Medicine Oncology Critical Care Pulmonology Pathology Ob/Gyn Nephrology Allergy/Immunology Neurology Rheumatology Psychiatry Infectious Disease Internal Medicine Endocrinology Family Medicine Pediatrics Medscape 217 Physician Salary Survey Median Salary by Specialty $44 $41 $4 $398 $396 $391 $386 $364 $352 $345 $339 $33 $324 $31 $293 $286 $28 $257 $249 $235 $235 $228 $225 $22 $29 $22 $ $1 $2 $3 $4 $5 $6 32 $489 16

17 Percentage of Specialists Among practicing physicians, 212 General Practice Specialist Not Defined United States Sweden Norway Switzerland United Kingdom Austria Comparable Country Average Belgium Germany France Canada Australia % 1% 2% 3% 4% 5% 6% 7% 8% 9% 1% Source: Kaiser Family Foundation analysis of 213 OECD data. 33 Dollars ($US) 16, 14, Total Hospital and Physician Costs Appendectomy Dollars ($US) 8, $13,91 7, Bypass Surgery $75,345 12, 6, 1, $9,845 5, 8, $6,645 4, $36,59 $4,368 $42,13 6, $4,995 $5,177 3, 4, 2, $15,742 2, 1, NETH AUS NZ SWIZ US NETH SWIZ NZ AUS US Source: International Federation of Health Plans, 213 Comparative Price Report

18 Dollars ($US) 1,4 Diagnostic Imaging Prices Dollars ($US) MRI Abdominal CT Scan 1, 1,2 $1,145 9 $896 1, $1,5 8 7 $ $ $432 $5 4 $35 3 $ AUS NETH NZ US NETH SWIZ AUS NZ US Source: International Federation of Health Plans, 213 Comparative Price Report. 35 What s the Future? U.S. healthcare costs are high and rapidly rising, in absolute terms, as a share of GDP, and in comparison to the rest of the world. This trend of cost growth is unsustainable. If something can t go on forever, it will stop. Stein s Law 36 18