Transcript Why Does MSU Provide Health Benefits?

Options for MSU FacultyAcademic Staff Health
Benefits
Paul B. Ginsburg, Ph.D.
Presentation to Subcommittee on Health
Care Policies and Options, Univ. Comm.
On Faculty Affairs, February 15, 2007
Framework: Why Does MSU Provide
Health Benefits?
 Most MSU faculty/staff (current and prospective) want
health coverage
• MSU can provide better benefits at lower cost
- Purchasing power
- Formation of a pool
- Experts handle a complex financial product
• MSU really acting as agent for employees
- They are ultimately paying for it
- Seeking to make decisions to reflect employee preferences
 MSU wants employees to be covered
• Good access to care when required
• Reduce potential disruption from financial issues related to illness
What Happens When Premiums
Increase Sharply?
 Unplanned increase in compensation costs
 Difficult process to offset impact with smaller wage
increases
• Many economists believe that higher premiums ultimately
borne by employees
Control of Premiums More Compelling
Now
 Premiums higher in relation to total compensation
 Potential for change in tax treatment of employer-
based coverage in next five years
 Reporting of liabilities for future health benefits
costs (GASBE)
Levels of Initiative to Address High
Premiums (1)
 Changes in magnitude of financial support for coverage
• Coordinating coverage with employee spouses
• Percent contribution for employees and for dependents
• Retiree contributions and benefits
- Incentives for retirement
 Changes in benefit structure
• Shift responsibility to patients
• Change incentives for patients
• Provide information to support better patient choices
- Treatment alternatives
- Provider price and quality
• Introduce incentives/support for healthier lifestyles
- Stable work force makes ROI more favorable
Levels of Initiative to Address High
Premiums (2)
 Promote changes in local health care system
• Focus on quality as well as costs
• Through actions as purchaser that influence system
• As a provider of medical care through faculty
• Through MSU leadership in the community
- Purchaser and provider
 Advocacy at state and federal level
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Universal coverage
Altered tax treatment of health insurance
Medicare and Medicaid provider payment
Effectiveness research and technology assessment
Health System and Costs (1)
 High costs versus rising costs
• Distinct causes
• Geographic variation in levels of costs
 Reasons for high costs
• Insurance distorts patient incentives
- More care
- Insensitive to price
• Fragmentation of delivery system
- Duplication of tests
- Vulnerable to errors
Health System and Costs (2)
• Lack of competition over price
- Concentrated markets for some segments
- Role of insurance
- Little information for consumers on price, quality
• Payment system that favors more services, especially
new technology
• Poor consumer health habits
• Dysfunctional medical malpractice system
Health System and Costs (3)
 Key drivers of rising costs
• Developments in medical technology
- Many are valuable
 Tendency to apply them too widely (e.g. Vioxx)
- Many have small or unknown benefits
• Increasing specialization in physician workforce
• Physician entrepreneurship
Health System and Costs (4)
 Addressing trends through reducing the level of
costs
• Productivity improvement often from a process that
generates discrete reductions in costs
- So reductions in level of cost can be basis of reduction in trend
• Trend addressed directly through feedback to research
and development
Strategies for Cost Containment
 Influence consumers/patients to shop better
 Motivate/support providers to increase
efficiency/quality
 Contract with a national insurer
 Augment delivery system through convenience
clinics
 More assessment of medical effectiveness
 Promote better health
Patient Cost Sharing (1)
 Discourage use of services
 Make consumer sensitive to provider prices
• This works only with certain designs
 Limits to cost sharing
• Need to maintain insurance’s financial protection
- Increase potential by varying deductibles and out-of-pocket
maximums with salary
• 10% of individuals account for 70% of spending in a year
• More cost sharing means less effective pooling of healthy
and sick
Patient Cost Sharing (2)
 Patient cost sharing most advanced for prescription
drugs
• Tiered cost sharing design
• Increasing incentives to use generics and preferred
brands
• Growing challenge is specialty pharmaceuticals/biologics
- Extremely expensive
- Tiered design usually not applicable
- Separate cost sharing provisions
Value-Based Benefits Design
 Less cost sharing for really valuable services
• Part of disease management program
• Solid evidence on effectiveness
• Best examples with prescription drugs
- Existing tiered benefit structure
- Weak diagnostic data less of an issue
• Whether to tie to services or patients
- Case of statins
 More cost sharing for other services
• More elective services
- But services most elective already not covered
- Need additional classes
Savings Vehicles (HRA/HSA)
 Purposes of savings accounts
• Make large deductibles acceptable
• Facilitate tax sheltering
 Many potential consumer-oriented advantages not
unique to HRA/HSAs
 Rigid benefit structure requirements a negative
 Little accomplishment when an option
• Challenge of addressing selection risks
“Centers of Excellence” Approaches
 Data on cost and quality per episode suggest large
potential
• Potential greatest for expensive services with large
variation in quality
- CABG surgery
 Medicare unable to proceed to other services
- Bariatric surgery (most common approach today)
- High-end imaging (Highmark Blue Cross)
• Usually higher quality and lower costs go together
• Corporate experience shows disappointing take up
- Potential for greater take up in a faculty/academic group
 “Medical tourism” a version that emphasizes costs
Better Information for Consumers (1)
 Treatment alternatives
• Experimental evidence shows large response
• Access to general sources and focus on particular
decisions
 Provider quality
• At rudimentary stage
- Hospital quality varies by patient type
- Physician quality data almost nonexistent
• Medicare leading the charge
- Clout and credibility
Better Information for Consumers (2)
 Provider prices
• Needs to be integrated with benefit structure
- Coinsurance rather than copayments
- Deductibles
 Greatest potential in outpatient area
- Tiered network approaches
- Experiment with “indemnity” approaches
• Actionable information versus transparency
• Insurer best positioned to provide information
Managed Care (1)
 What is left after the backlash?
• Negotiation of provider payment through networks
- Purchaser attitudes on breadth of network
 Some experience with narrowing networks but not extensive
• Revival of administrative controls on some decisions
- Restrictions on high-end imaging, bariatric surgery
- Hospital length of stay
• Use of hospitalists to shorten hospital stays
- Rapid delivery change pursued by hospitals, medical groups or
health plan
Managed Care (2)
 Disease management
• Little high-quality literature but passing the market test
• Increasingly focused on opportunities for greatest
success
- For example, only diabetics with more advanced disease
• Extensive tailoring to problems prevalent in an employee
group
• Large employer can hire DM vendor directly or use the
carrier’s programs
Melding Managed Care with
Consumerism
 Some options discussed earlier consistent with
concept
 High performance networks
• Focus on physicians in selected specialties
• Two networks based on total costs per episode and
quality of care
- Data must be credible to providers
- Patient incentives to use high-performing providers
• Can address hospital duopoly through total cost
incentives to physicians
• Initial gains from shifting patients to more efficient
providers
- Larger gains from motivate/support providers to improve
Directly Encouraging Providers to
Improve
 Hospital quality reporting becoming more extensive
• Medicare beginning physician quality reporting
 Options for faculty plan
• Incentives to choose higher quality providers
• Support for Leapfrog initiatives
- Few have discouraged use of non-complying hospitals
- Boeing (Seattle) an exception
• Initiate Bridges to Excellence program in Lansing
Pay for Performance (1)
 Few would quarrel with concept
• Paying more for measured quality
• Question is whether it gets at those dimensions of quality
most related to outcomes and costs
 Approach has greatest potential in integrated
delivery—or at least large multi-specialty groups
• Best position to improve to gain rewards
• Challenging attribution issues in more fragmented
environments
Pay for Performance (2)
 Downside of approach is opportunity cost
• Whether energy/resources to improve better applied
elsewhere
• Skepticism about importance of McGlynn results
• Limits of what can be done in context of FFS
 Alternative approaches
• Incentives based on costs/quality per episode
• Payment incentives to support coordination of care
- New codes for care coordination
- Capitated payments applying to chronic disease in question
 Medicare kidney disease program
Creation of Worksite Clinic (1)
 A longstanding practice recently broadened
• From occupational medicine to complete primary care
- Reduction of time cost and increasing access
- Ensure that current concepts of primary care are followed
 Unique potential at MSU
• Most employees at single location and many families
close by
• Opportunity for primary-care oriented medical schools to
innovate in delivery of primary care
- Follow leading concepts
- Employ information technology
- Potential for successes to be replicated in community
Creation of Worksite Clinic (2)
 Distinguish worksite clinic with “mini-clinic”
 Mini-clinic focused on convenience and low cost for
subset of primary care services
• Staffed by nurse-practitioners
• Long hours
• Bring traffic into store
- Pharmacy
- General purchases
Potential for Information Technology
 Community-wide sharing holds potential for saving
• Reduction in duplication of tests
• Better care in emergencies
• Reduction in errors
 Sharing does not occur naturally
• Hospitals focused on linking staff physicians to them
• Providers bear most costs but insurers/purchasers get
most savings
• Indianapolis best known example of community network
- Leadership of Indiana University over many years
- Boston also notable—based on relationship among CIOs
More Assessment of Medical
Effectiveness
 The problem
• Technologies that have negative or small benefits
• Valuable technologies that are applied too broadly
- Examples: Vioxx, implantable defibrillators
 Limited support for medical effectiveness research
• Resources and delay
 Conflicts of interest in development and distribution
 A national rather than purchaser or local agenda
Promoting Better Health (1)
 Encourage healthier behavior
• Recent research (Thorpe) shows obesity as major driver
of cost increases
- Likelihood of other lifestyle aspect (harder to measure) also
driving costs
• Employers have been cautious with incentives for healthy
lifestyles
- Rewards/support for improvements more prominent than penalties
• ROI held down by cost of rewards for existing behavior
 Health assessments and coaching
• King County (WA) provides incentives for both
assessment and following advice
Promoting Better Health (2)
 Measurements of ROI often understated because
of data limitations at employer level
• Few can combine health claims data with data on
disability and absenteeism
 Absence of “silver bullet” in health promotion at this
time
Strategy of Switching Carriers
 Potential is more in innovation than lower provider
payment rates
• National insurers have traditionally found Michigan
regulatory environment inhospitable
- Aspect of facilitating regulation of BCBSM as public utility
• BCBSM will likely have lower provider rates from its
monopsony power
• Favorable stage in underwriting cycle for entry by national
plan
- Contract with MSU a favorable opportunity to enter Lansing
• Key is how well can BCBSM accommodate MSU’s
innovation agenda
- Usefulness of threat of switching
Most Promising Short-term
Approaches
 Application of value-based design to drug benefits
 Centers of excellence approaches for selected
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services
High-performance networks
Redesign benefit structure to incorporate incentives
to consider price
Disease management
Risk assessments and coaching
Limit premium contribution for retirees
Assess ability of BCBSM to support initiatives
Most Promising Longer-term
Initiatives
 MSU employee/dependent clinic
 Community-level IT
 Incentives for health promotion