Transcript Cost Effectiveness and Quality Improvement Slides

THE
COMMONWEALTH
FUND
Promoting Cost-Effective Care:
Consumer Incentives versus
“Supply Side Strategy”
Karen Davis
President, The Commonwealth Fund
Health System Change Conference
December 3, 2003
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•
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Employer Health Benefit Design
From an Economic Perspective
2
If employers shift health insurance costs backward onto employees,
rising costs don’t affect employers
– Employers should be largely indifferent to extent of employee costsharing for benefits or employee share of premium
– Employers should simply act as employees’ agent in obtaining the mix
of health benefits and wages desired by employees
– Employee can receive more in wages and less in health benefits or
more in health benefits and less in wages
In such a world, total labor compensation is largely affected by
productivity growth, e.g. if total compensation goes up 3% and health
benefits are 15% of total compensation, and projected to rise by 12% in
coming year, employer could offer:
• 12% increase in health cost, 1.4% increase in wages
• 10% increase in health cost, 1.8% increase in wages, or
• 0% increase in health costs, 3.5% increase in wages
– Employer should simply ascertain which is most preferred by
employees
In real world, unlikely that backward shifting occurs perfectly or quickly
– Employers want to obtain value for health benefit dollars
– Society wants resources used efficiently
– Equitable access to care for low-wage workers and equitable
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distribution of financial burden are important
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– Quality of care is important – e.g. no underuse or overuse or misuse
Cost-Sharing from
Consumer Perspective
3
• Cost-sharing in the U.S. is already high
• Cost-sharing creates a burden on low-income and sick
• Health care costs concentrated in sick few
• Cost-sharing leads to underuse of appropriate care
• Consumers rarely have the information to make
choices based on quality and efficiency
• Promoting cost-effective care directly by working on
the supply side is a better strategy, e.g.
– Research on cost-effective care
– Clinical guidelines, quality standards
– Public data on quality and efficiency
– Financial rewards to providers for high quality,
efficient care
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HSC Issue Brief on Cost-Sharing
• Important contribution
• Shows higher cost-sharing falls disproportionately on
low-income and sick
• Most important finding is percent of population who
are underinsured (i.e., at risk of spending more than
10% of income on health care if become seriously ill)
under various cost-sharing scenarios
• If focus on hospitalized patients – which could happen
to anyone – 2-7% underinsured under modest
copayments, 20% under cost-sharing in typical
employer plans currently, 32% in a $1000 deductible
plan similar to Health Savings Account legislation, and
66% under a $2500 deductible plan
• Trend toward higher cost-sharing will increase
numbers of underinsured
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U.S. Patient Cost-Sharing is Highest
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Per Capita Out-of-Pocket Health Care Spending in
Selected Countries, 2000
Dollars
800
707
700
600
500
405
399
335
400
328
290
300
249
240
171
200
100
0
a
United
States
Canada
a
b
Australia
OECD
Median
Japan
Germany
New
France
Zealand
1999, b 1998, c 1996
Source: Anderson et al., Multinational Comparisons of Health Systems Data, 2002.
The Commonwealth Fund, October 2002.
United
Kingdom
c
a
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Cost-Sharing Blunt Instrument for
Affecting Use of Appropriate Care
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• McGlynn NJEM June 2003 study finds that only 55%
get indicated care
– About 100 million Americans underuse care
– About 30 million Americans overuse care
• Increased cost-sharing will reduce overuse but will
also increase the extent of underuse
• Rand Health Insurance Experiment demonstrated this
• More recent study in Canada with increased costsharing demonstrates that
• NEJM December 4, 2003 study indicated prescription
drug cost-sharing leads not to filling needed
prescriptions
• Most costs are concentrated in very sick few who have
little control over decision-making for their own care,
e.g. heart attack, stroke, trauma patients
• High deductible plans not the way to control cost of
high-cost cases
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Cost Sharing Reduces Likelihood of
Receiving Effective Medical Care
Children
7
Adults
Percent*
100
80
60
85
56
71
59
40
20
0
Low-Income
Higher-Income
In Cost-Sharing Plans
* Probability of receiving highly effective care for acute conditions that is
appropriate and necessary compared to those with no cost-sharing
Source: K.N. Lohr et al., Use of Medical Care in the RAND HIE. Medical Care 24,
supplement 9 (1986): S1-87.
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Cost Sharing Reduces Both Appropriate
and Inappropriate Hospital Admissions
Percent reduction in number of hospital admissions per 1000 person-years
27
30
25
22
20
15
10
5
0
Appropriate Admissions*
Inappropriate Admissions*
*Based on Appropriateness Evaluation Protocol (AEP) instrument developed by
Boston University researchers in consultation with Massachusetts physicians
Source: A.L. Siu et al., “Inappropriate Use of Hospitals in a Randomized Trial of Health
Insurance Plans,” New England Journal of Medicine 315, no. 20 (1986): 1259–1266.
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Cost Sharing Reduces Use of Both
Essential and Less Essential Drugs and
Increases Risk of Adverse Events
Percent reduction in drugs per day
Elderly
22
10
Elderly
140
120
20
15
Percent increase in incidence per 10,000
Low Income
25
14
15
100
Low Income
117
97
78
80
9
9
43
60
40
5
20
0
0
Essential
Less Essential
Adverse Events
ED Visits
Source: R. Tamblyn et al., “Adverse Events Associated With Prescription Drug CostSharing Among Poor and Elderly Person,” JAMA 285, no. 4 (2001): 421–429.
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Health Care Costs Concentrated in Sick Few
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Distribution of Health Expenditures for the U.S.
Population, By Magnitude of Expenditure, 1997
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Expenditure Threshold
(1997 Dollars)
1%
5%
10%
50%
U.S. Population
27%
$27,914
55%
$7,995
69%
$4,115
97%
$351
Health Expenditures
Source: A.C. Monheit, “Persistence in Health Expenditures in the Short Run:
Prevalence and Consequences,” Medical Care 41, supplement 7 (2003): III53–III64.
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Hard to Design Cost-Sharing
to Avoid its Pitfalls
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• Would have to vary by income and health status
• Would have to vary by clinical indications for a given
service, e.g. an MRI is appropriate for some conditions
but not others
• Patients would have to have access to information on
quality that they do not now have
• Even primary care physicians rarely have access to
quality information on the specialists to whom they
refer patients
• Physicians are resistant to having quality data available
• Would have to change patient-physician relationship
with more control over decision-making by patients
• Plans could create networks of high quality, efficient
providers
– Although their access to quality data and riskadjusted longitudinal cost data are also limited
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There is a Better Way:
Walking on the Supply Side
• A “supply side” strategy to promoting cost
effective care shows more promise than
increased patient cost-sharing
• Instead of cost-sharing for ER use, nurse call
banks are used by Partners Health Care to call
patients with frequent use of ERs, screen for
depression, medication compliance
• Instead of cost-sharing for tests, Intermountain
HealthCare puts clinical criteria for ordering
tests before the ordering physicians
• Instead of tiered cost-sharing for hospital care,
University of Pennsylvania Hospital uses
advanced practice nurses to work with high-risk
hospitalized patients and reduce
rehospitalization
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Effect of Advanced Practice Nurse Care
on Congestive Heart Failure Patients’
Average Per Capita Expenditures
Dollars
12,000
10,000
Visits
4,000
Inpatient Care
9,618
8,000
6,000
13
6,152
8,809
4,977
2,000
0
809
1,175
Control
Intervention
Source: M.D. Naylor, “Making the Business Case for the APN Care Model,” report
to the Commonwealth Fund, October 2003; estimated charges by Mark Pauly.
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Achieving a High Performance
Health System: What it Requires
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• Expansion of government’s role:
– In setting quality standards/clinical guidelines on
effective care
– Supporting research on cost-effective care and costeffectiveness of quality improvement interventions
– Requiring public release of quality and efficiency data
– Paying for performance within public programs
(especially Medicare and Medicaid)
• Public-private partnership:
– Engage entire health care system in continuous quality
improvement
– Develop and disseminate quality improvement tools
– Identify and spread best practices
– Encourage learning collaboratives to improve care
– Promote modern information technology
– Reward quality and efficiency
• Automatic and affordable health insurance for all
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Acknowledgements
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Stephen C. Schoenbaum, Senior Vice President,
Commonwealth Fund; Stephen C. Schoenbaum,
Anne-Marie J. Audet, and Karen Davis, “Obtaining
Greater Value From Health Care: The Roles of the
U.S. Government,” Health Affairs, Nov/Dec 2003.
Barbara Cooper, Senior Program Officer,
Commonwealth Fund; Karen Davis and Barbara
Cooper, American Health Care: Why So Costly,
Commonwealth Fund, June 2003 Senate Testimony.
Research assistance – Alice Ho, Research
Associate, Commonwealth Fund
Karen Davis, Achieving a High Performance Health
System, Commonwealth Fund, forthcoming
publication January 2004.
Visit the Fund at: www.cmwf.org
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