Bending the Cost Curve September / October Issue Release September 9, 2009 Bending the Cost Curve September 9, 2009 Susan Dentzer Editor-in-Chief Health Affairs.

Download Report

Transcript Bending the Cost Curve September / October Issue Release September 9, 2009 Bending the Cost Curve September 9, 2009 Susan Dentzer Editor-in-Chief Health Affairs.

Bending the Cost Curve
September / October
Issue Release
September 9, 2009
Bending the Cost Curve
September 9, 2009
Susan Dentzer
Editor-in-Chief
Health Affairs
Bending the Cost Curve
September 9, 2009
Health Affairs gratefully acknowledges
the generosity of the following
organizations for support of this issue:
Bending the Cost Curve
September 9, 2009
Ronald A. Williams
Chairman and CEO
Aetna Inc.
Bending the Cost Curve
September 9, 2009
Increased Spending On
Health Care: Long-Term
Implications For The
Nation
Michael Chernew
Richard Hirth
David Cutler
Bending the Cost Curve
September 9, 2009
Health spending growth over time almost
consistently exceeds income growth
Andrea Sisko, Christopher Truffer, Sheila Smith, Sean Keehan, Jonathan Cylus, John A. Poisal,
M. Kent Clemens, and Joseph Lizonitz,
Health Spending Projections Through 2018: Recession Effects Add Uncertainty To The Outlook,
Health Affairs, Vol 28, Issue 2, w346-357w
Copyright ©2009 by Project HOPE, all rights reserved.
Bending the Cost Curve
September 9, 2009
What will happen if the gap
between health spending and
income growth doesn’t
shrink?
Bending the Cost Curve
September 9, 2009
Caution
• The numbers you are about to see:
– Are not a forecast of what will happen
– Are intended to illustrate the
ramifications of health care spending
growth IF past trends continue
– (PLEASE NOTE THE “IF”)
Bending the Cost Curve
September 9, 2009
Basic idea
• Every year (almost) we get richer
– Some of the money goes to health care, some goes
to other goods and services
1948
2005
Bending the Cost Curve
September 9, 2009
As we spend more, spending growth has
bigger consequences
2% of 1960 health care
spending
2% of current health care spending
Bending the Cost Curve
September 9, 2009
Burden of health care
(2007 – 2020)
Health care
(31%)
All else
1% excess health care spending
growth
Health care
(44%)
All else
2% excess health care spending
growth
Bending the Cost Curve
September 9, 2009
Burden of health care
(2050-2083)
Health care
(63%)
All else
1% excess health care spending
growth
2% excess health care spending
growth
Bending the Cost Curve
September 9, 2009
Per-Capita Spending on Non-health Goods and Services, In
2000 Dollars, Assuming Different Gaps Between Real Per
Capita GDP and Health Care Cost Growth, 2007-2083
Dollars (2000)
100000
90000
No Gap
80000
70000
60000
One percentage-point gap
50000
40000
Two percentage-point gap
30000
20000
Source:
Authors’
tabulations
10000
0
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
Bending the Cost Curve
September 9, 2009
Spending on Non-health Goods and Services,
Assuming Different Gaps Between Real Per Capita GDP and
Health Care Cost Growth, 2007-2083
Dollars (2000)
100000
90000
No Gap
80000
70000
60000
One percentage-point gap
50000
40000
Two percentage-point gap
30000
20000
10000
0
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
Bending the Cost Curve
September 9, 2009
Implications
• Burden of financing health care will grow
dramatically
--This is a much bigger issue than ‘how do we
finance health reform’
• Health care spending will eventually have to slow
– Regardless of whether we have health reform
– Our mission must be how to slow spending
and preserve value
• Equity consequences are enormous
Bending the Cost Curve
September 9, 2009
Is Health Care Spending
Excessive?
If So, What Can We Do
About It?
Henry J. Aaron, Brookings Institution
Paul B. Ginsburg, Center for Studying
Health System Change
Bending the Cost Curve
September 9, 2009
Is Health Care Spending Excessive?
Yes!
If So, What Can We Do About It?
A lot.
Its complicated.
It will take time.
Done right, it will enhance health.
Done wrong, it could damage health
Bending the Cost Curve
September 9, 2009
Recognized Facts
 The United States spends more per capita on health care
than do other developed nations
 Prices for many forms of care are higher in the United
States than in other developed nations
 Low- or no-benefit activities (administration, defensive
medicine, duplicative procedures) are costly, but probably
have not added materially to the rate of growth of spending
 Projected increases in public health care spending are the
major source of projected budget deficits
 Despite high spending and prices, the benefits from increased
care spending vastly exceed the increased cost
Bending the Cost Curve
September 9, 2009
Why is spending …so high? growing
so fast?
Demand
Institutional Factors
Insurance
Tax System
Income Growth
Litigation
Pricing and pay levels
Patent system
Supply
Research
Fee for Service
Number of Providers
Provider mix
Organization of
delivery system
Equipment and procedures
Drugs
Comparative effectiveness
Bending the Cost Curve
September 9, 2009
Conclusions
“The case that the United States spends more than is optimal on
health care is overwhelming.”
but
“To lower spending without lowering net welfare, it is necessary
to organize the delivery of care to promote efficient cooperation
among the many providers and practitioners involved in
delivering modern treatment, to conduct costly research over
many years to identify which procedures are effective at
reasonable cost, to develop protocols that enable providers to
identify in advance patients in whom expected benefits of
treatment are lower than costs, to design incentives that
encourage providers to act on those protocols, and to educate
patients on why such protocols should be sustained. …It is also
necessary to provide research support to maintain the flow of
beneficial innovations.”
Bending the Cost Curve
September 9, 2009
Why Does Health Spending
Outpace Economic Growth?
The Roles of Income,
Insurance, and Technology
Sheila Smith
Joseph P. Newhouse
Mark Freeland
Bending the Cost Curve
September 9, 2009
Background
• Well known that US spends more on medical
care per person than other countries
• Many policies narrow this gap without changing
the steady-state growth rate, but “sustainability”
implies reducing that rate
• I and others have argued new technology is the
main driver of health cost growth
• We look anew at why costs have increased as a
share of GDP in all OECD countries
Bending the Cost Curve
September 9, 2009
Health Spending Has Grown Faster than GDP, Especially in the US
G-7 omitting Germany and Italy*
Annual pct pt excess over GDP
Growth
3.5
3.2
3.0
2.8
2.5
2.0
1.5
1.0
Annual %
Health $
Growth - %
GDP Growth,
1970-2007
1.3
0.9
Avg excl US
is 1.5 pct pts
0.7
0.5
0.0
Can
Fra
Jap
UK
US
Since 2003 the gap between the US vs Can, Fr, UK has grown.
Bending the Cost Curve
September 9, 2009
We Use New Methods and New Data to Update
Earlier Estimates
• Our main methods point: Changing medical
technology, growth in income, and growth in
insurance coverage all interact to cause higher
health care spending
• New data: earlier studies used data through
1990, our study uses data from 1960-2007
• We estimate the proportion of growth in
spending that can be attributed to various causes
Bending the Cost Curve
September 9, 2009
Our Results: The Factors Driving US Spending
Growth, 1960-2007
• Growth in income: 29-43%
• Changing medical technology: 27-48%, of which
27 percentage points is an interaction between
technology and income
• Demographics (mainly aging): 7%
• Increased insurance coverage: 11%
– We were unable to estimate interactions of
technology and income with insurance
Bending the Cost Curve
September 9, 2009
Conclusions (Looking Backward)
• Medical spending growth (the “curve”) was
driven by underlying factors that interacted
– Countries with growing incomes wanted to spend
a disproportionate amount on health care
– Physicians, hospitals, pharma, and device
companies found a market for new technology that
improved outcomes (and some that didn’t)
– Life expectancy, quality of life improved in all
developed countries (mostly low-tech)
Bending the Cost Curve
September 9, 2009
Speculations (Looking Forward)
• Health care in 2007 was over 10% of GDP in 7
countries (Austria, Belgium, Canada, France,
Germany, Switzerland, and the US)
• Continued growth above GDP will raise
opportunity costs; →greater efforts to slow
– Insurance, both public and private, is likely to be
less permissive on reimbursement
– Reducing low value care, boosting patient
compliance can at least buy time (a free snack)
Bending the Cost Curve
September 9, 2009
“Why Americans Can’t
(or Won’t) Talk Honestly
About Health Care
Spending”
Bruce C. Vladeck and Thomas Rice
Bending the Cost Curve
Bending the Cost Curve
September 9, 2009
September 9, 2009
The American Health System is
Riddled with Inefficiency, Variable
Quality, Waste, and Abuse
All of these problems must be energetically
addressed, but they are tangentially related, at
most, to the problem of health care spending.
Bending the Cost Curve
Bending the Cost Curve
September 9, 2009
September 9, 2009
It’s the Prices, Stupid!
Americans use substantially fewer physician
visits, hospital days, and prescription drugs
than citizens of countries which cover
everyone at 12-13% of GDP.
And many of those countries use fee-for-service
in much, if not all, of the health care market
•It’s now how you pay, but how much.
Bending the Cost Curve
Bending the Cost Curve
September 9, 2009
September 9, 2009
It’s All About Market Power
In the US, we exacerbate the fundamental
imbalance between sellers and buyers in the
health care market by insisting on the
fragmentation of buyers’ market power
•That’s what the fight about the public plan is
all about
•Shifting responsibility to atomized
consumers (“consumer choice” plans, high
deductibles, etc.) makes matters even worse
Bending the Cost Curve
Bending the Cost Curve
September 9, 2009
September 9, 2009
Why We Won’t Talk About
the Real Problems
The major cause of the difference in per capita
spending between the US and other affluent
countries is the size of the “rents” commanded by
suppliers of health care goods and services (and
their consultants). But in order to reduce health
care spending, we can either reduce the quantity of
health care goods and services we supply to people
(and more than 50 million Americans are already
seriously undersupplied), or reduce payments to
rent-holders.
Guess what we talk about?
Bending the Cost Curve
September 9, 2009
Medicare Governance and
Provider Payment Policy
Hoangmai H. Pham, M.D., M.P.H.
Paul B. Ginsburg, Ph.D.
James Verdier, J.D.
Bending the Cost Curve
September 9, 2009
The problem…
Current provider payment policy is
vulnerable to political micromanagement
by Congress and the White House
Often favors special interests rather than
beneficiaries and taxpayers
Not data driven or economically sound
Not transparent
CMS is inadequately funded to
implement policy
Bending the Cost Curve
September 9, 2009
Reform debate drives pressure for
change
Who will develop, pilot, refine new payment
methods?
 Too detailed for Congressional action
 Need consistency over time and programs
 Requires more resources and political
insulation than CMS has currently
Congress has committed to future action to
control costs, but how?
 Losers (some providers) are more vocal
than winners (beneficiaries and taxpayers)
Bending the Cost Curve
September 9, 2009
What we learn from other agencies
• Broad policy directions from White House and
Congress
• Sole agency heads generate more cohesive
policies than boards
• Boards allow greater transparency and broader
representation
• Distinguished leadership raises bar for
interference
• Long, odd-year terms insulate from election
politics, but a President should be able to pick an
agency head
Bending the Cost Curve
September 9, 2009
Two possible solutions…
Medicare Policy Board (more similar to President’s
IMAC than Sen. Rockefeller’s “MedPAC on
steroids”)
 Accountable to the President and Congress for
adherence to broad policy goals
 Political independence to craft detailed policies
 High prestige, full-time directors with staggered
terms
 Broad representation
 Resources, staff to support data-driven decisions
 Coordinated with CMS and DHHS
Bending the Cost Curve
September 9, 2009
Two possible solutions…
A more independent CMS and MedPAC
review
New agency outside of DHHS or elevate
to Cabinet level department
MedPAC remains in legislative branch
but “scores” all Medicare legislation
(impact on access, quality, costs)
Predictable, increased funding for CMS
Bending the Cost Curve
September 9, 2009
From Volume to Value:
Better Ways to Pay for
Health Care
Providers would be better able to
reduce costs and improve quality
under Episode-of-Care and
Comprehensive Care Payment systems
Harold D. Miller
President & CEO, Network for Regional Healthcare Improvement
and
Executive Director, Center for Healthcare Quality and Payment Reform
Bending the Cost Curve
September 9, 2009
Healthcare Costs Can Be Reduced Without
Rationing
Healthy
Consumer
Continued
Health
Preventable
Condition
No
Hospitalization
Acute Care
Episode
Efficient,
Successful
Outcome
High-Cost
Successful
Outcome
Complications,
Infections,
Readmissions
Bending the Cost Curve
September 9, 2009
Current Payment Systems
Penalize Quality and Reward Volume
Healthy
Consumer
Continued
Health
Preventable
Condition
$
No
Hospitalization
Acute Care
Episode
Fee-for-Service Payment
Pays More for Bad Outcomes
and Less When People Stay Healthy
Efficient,
Successful
Outcome
High-Cost
Successful
Outcome
Complications,
Infections,
Readmissions
Bending the Cost Curve
September 9, 2009
Episode-of-Care Payment to Improve Efficiency
and Outcomes in Acute Care
Healthy
Consumer
Continued
Health
Preventable
Condition
Episode-of-Care
Payment
A Single Payment
For All Care Needed
From All Providers in
the Episode,
With a Warranty For
Complications
No
Hospitalization
Acute Care
Episode
Efficient,
Successful
Outcome
High-Cost
Successful
Outcome
Complications,
Infections,
Readmissions
Bending the Cost Curve
September 9, 2009
Comprehensive Care Payment to Help Prevent
Episodes from Occurring
Healthy
Consumer
Continued
Health
Preventable
Condition
No
Hospitalization
Acute Care
Episode
Comprehensive
Care Payment
A Single Payment For All Care
Needed From All Providers During
The Course of the Year; Payment
Would be Higher for Sicker Patients
Efficient,
Successful
Outcome
High-Cost
Successful
Outcome
Complications,
Infections,
Readmissions
Bending the Cost Curve
September 9, 2009
Which Payment System Is Best?
It Depends on the Disease/Condition
Inefficiency
Cost
Per
Episode
Underpayment
Episode Payment
Comprehensive Care Pmt.
+
Episode Payment
Examples:
Hip Fractures,
Labor & Delivery
Examples:
Heart Disease,
Back Pain
Fee for Service
Comprehensive Care Pmt.
(or Year-Long Episodes)
Examples:
Immunizations,
Simple Injuries
Examples:
COPD,
Congestive Heart Failure
Underuse
Frequency of Episodes
Overuse
Bending the Cost Curve
September 9, 2009
The Right Payment Level (Price) is as
Important as the Right Method
APPROACHES TO SETTING PRICES
Regulation
Maryland sets all-payer
rates for hospital services
Large Payer Dictation
Congress/CMS establish
the rates Medicare will pay
Result varies depending on
Small Payer Negotiation size of payer vs. provider
Competition
Providers set prices in order
to attract more patients
Bending the Cost Curve
September 9, 2009
If We Bought Autos Like Healthcare, We’d All Be
Driving a Lexus
HYUNDAI SONATA
LEXUS LS 460
5 yr/60,000m warranty
5 star crash rating
4 yr/50,000m warranty
No crash rating
MSRP: $22,450
MSRP: $63,825
$1,000 Copay:
$1,000
$1,000
10% Coinsurance:
$2,245
High Deductible:
$10,000
Price Difference:
$0


$6,383
$10,000
$41,375
Bending the Cost Curve
September 9, 2009
Do Better Payment Systems Work?
Comprehensive Care Payment
– Minnesota Patient Choice
• Providers bid on total risk-adjusted price to care for
patients,
and patients pay more if they select higher-cost care
systems
• Results: Patients select lower-cost providers/care
systems;
Providers reduce their costs
Episode-of-Care Payment: 10-40% Savings/Episode
–
–
–
–
Texas Heart Institute: 13% savings
Michigan orthopedic surgeon: 40% savings
Medicare Heart Bypass Demo: 10-37% savings
PROMETHEUS Estimates: 10-24% savings
Bending the Cost Curve
September 9, 2009
Implementing New Payment Systems
• Payment Reforms Are Necessary, But Not Sufficient:
Providers Will Need to Restructure Care Delivery
– Payment systems and care delivery processes will
need to “co-evolve” over several years to reap the
benefits of lower utilization without harming
patients or providers
• Medicare Needs to Follow as Well as Lead
– Several states, regions, and payers are already
implementing episode-of-care and comprehensive
care payment systems, but providers can’t
efficiently change the way they deliver care unless
most or all payers, including Medicare, participate.
– We can’t wait for more “Demonstrations;” Medicare
needs the flexibility to participate in regionallydriven reforms now
Bending the Cost Curve
September 9, 2009
For More Information...
www.PaymentReform.org
Bending the Cost Curve
September 9, 2009
Aligning Payment Incentives
for a High Performance U.S.
Health System
Karen Davis
President, The Commonwealth
Fund
[email protected]
www.commonwealthfund.org
Bending the Cost Curve
September 9, 2009
We Can’t Continue on our Current Path: Growth in National Health
Expenditures per Capita
Average spending on health per capita ($US PPP)
8000
United States
Canada
France
Germany
Netherlands
United Kingdom
7000
6000
5000
4000
3000
2000
1000
0
1980
1984
Data: OECD Health Data 2009 (July 2009)
1988
1992
1996
2000
2004
Bending the Cost Curve
September 9, 2009
Promising Strategies for Payment
Reform and Care Coordination
1. Patient-Centered Medical Home: Medical Home fee; global
primary care fee
2. Multi-specialty physician group practice and accountable
care organizations: global physician fee, Medicare group
practice demonstration payment model, partial or full
capitation
3. Hospital: global acute care case rate (discharge plus 30
days); global hospital case rate plus physician inpatient;
global hospital case rate plus physician plus post-acute care
4. Integrated delivery system: global patient-level payment
(capitation)
Supported by: Rewards for high performance & shared savings
Bending the Cost Curve
September 9, 2009
Global patientlevel payment
(capitation)
Global hospital
and post-acute
care case rate
Global hospital
case rate
Global
physician fee
Global primary
care fee
Less
Feasible
More
Feasible
FFS and DRGs
Disconnected Primary care Multispecialty Hospital
MD practices, MD group
MD group
systems
hospitals
practices
practices
Integrated delivery
systems
Continuum of Organization
Source: A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health
Care Delivery System for High Performance, (New York: The Commonwealth Fund, August 2008).
Rewards for High Performance and
Shared Savings
Continuum of Payment Bundling
Organization and Payment Methods
Health System Reform Proposals (effective 8-9-09)
Bending the Cost Curve
September 9, 2009
Senate
HELP
proposal
7/15/09
Path
Senate
Finance Committee
policy options
House of Representatives
Tri-Committee
7/31/09
Increase Medicare PCP
payments 5%

Payments to patientcentered practices; savings
to patients with designated
medical home

Accountable care organizations

Share cost-savings w/
physicians
Conduct pilot programs in
Medicare, Medicaid; adopt
if successful
Slowing rate of Medicare payments in
high cost areas



Bundled payments


Productivity improvement

Rx and device savings



Resetting Medicare Advantage rates



Independent Payment Council


Quality Measurement, Reporting, and
Improvement



Comparative effectiveness



Health information technology



Public Health and Prevention

Health goals and priorities for
performance improvement

Payment reform
Enhanced payment to primary care
Medical home / coordinated care
Increase Medicare and
Medicaid PCP payments
Grants to support medical
home model

Conduct pilot programs in
Medicare, Medicaid; adopt
if successful
Conduct pilot programs in
Medicare, Medicaid; adopt
if successful

?





Bending the Cost Curve
September 9, 2009
Future Direction for Greater Care Coordination
and Fundamental Payment Reform
• Center on Delivery and Payment System Innovation
• Rapid cycle multi-payment innovations in Medicare,
Medicaid, other state payers, private payers
• Harmonization of public and private payment in
Medicare, public/co-op plan, private plans
• Fundamental payment reform – accountable care
organizations, medical homes, bundled hospital acute
care, transitional care, and follow-on care
• Independent Payment Commission
• Establishment of Center on Medical Effectiveness and
Health Care Decision-Making; link coverage and
payment decisions to evidence-based findings
• Medicare budget savings targeted on high cost areas,
high cost providers, waste, and unsafe or ineffective care
Bending the Cost Curve
September 9, 2009
Thank You!
Stephen C. Schoenbaum, M.D., Executive
Vice President and Executive Director,
Commission on a High Performance
Health System, [email protected]
Cathy Schoen, Senior Vice
President for Research and
Evaluation, [email protected]
Sara Collins,
Vice President,
[email protected]
For more information, please visit:
www.commonwealthfund.org
Stu Guterman, Assistant
Vice President,
[email protected]
Rachel Nuzum,
Senior Policy
Director
[email protected]
Kristof Stremikis,
Senior Research
Associate,
[email protected]
Bending the Cost Curve
September 9, 2009
OIG’s 5-Principle
Health Care Integrity
Strategy
Lewis Morris
Chief Counsel
Office of Inspector General
Department of Health and
Human Services
Bending the Cost Curve
September 9, 2009
OIG’s Five Principle Strategy





Enrollment
Payment
Compliance
Oversight
Response
Bending the Cost Curve
September 9, 2009
Principle 1: Enrollment
• Scrutinize individuals
and entities that want
to participate as
providers and
suppliers prior to
their enrollment in
the programs.
Bending the Cost Curve
September 9, 2009
Principle 2: Payment
• Establish payment
methodologies that
are reasonable and
responsive to changes
in the market.
Bending the Cost Curve
September 9, 2009
Principle 3: Compliance
• Assist health care
providers and suppliers
in adopting practices
that promote
compliance with
program requirements
and quality/safety
standards.
Bending the Cost Curve
September 9, 2009
Principle 4: Oversight
• Vigilantly monitor
programs for
evidence of fraud,
waste, and abuse.
Bending the Cost Curve
September 9, 2009
Principle 5: Response
• Respond swiftly to
detected frauds, impose
sufficient punishment to
deter others, and
promptly remedy
program vulnerabilities.
Bending the Cost Curve
September 9, 2009
John Rowe, MD
Mailman School of Public
Health,
Columbia University
Bending the Cost Curve
September 9, 2009
Health Affairs gratefully acknowledges
the generosity of the following
organizations for support of this issue: