Transcript Minnesota Health Care Market Trends and Strategies for Cost Containment Health Care Transformation Task Force July 30, 2007 Julie Sonier Director, Health Economics Program Minnesota Department of.

Minnesota Health Care Market
Trends and Strategies for Cost
Containment
Health Care Transformation Task Force
July 30, 2007
Julie Sonier
Director, Health Economics Program
Minnesota Department of Health
Overview of Presentation
 Background
 Recent trends in health insurance coverage in
Minnesota
– Factors contributing to the decline in employer coverage
 Cost trends: private markets and public programs
 Drivers of health care cost increases
 Cost containment strategies to date:
– Private market
– State government
Background
- Health care cost growth is not a new problem
- Most health care spending is incurred for a small
share of the population
- Minnesota health care spending
Historical Perspective: Health Care Spending
Growth is Not a New Problem
Growth in National Health Care Spending,
Adjusted for Inflation
18%
15%
12%
9%
6%
3%
0%
1970
1975
Total
1980
1985
1990
Private health insurance
Source: Centers for Medicare and Medicaid Services
1995
2000
Medicare/Medicaid
2005
From: “The Sad History of Health Care Cost Containment as Told in One Chart,”
Drew Altman and Larry Levitt, Health Affairs, Web Exclusive, January 23, 2002
Health Care Spending as a Share of
Gross Domestic Product
19.6%
20%
17.5%
16.0%
13.8%
15%
12.4%
9.1%
10%
7.2%
5.2%
5%
0%
1960
1970
1980
1990
2000
2005
2011*
2016*
*Projected. Source: Centers for Medicare and Medicaid Services. Spending estimates as of January 2007;
projections as of February 2007.
Health Spending is Highly Concentrated
Among Relatively Few People
97%
Share of total spending
100%
80%
69%
55%
60%
40%
27%
20%
0%
Top 1% of
Population
Top 5% of
Population
Top 10% of
Population
Top 50% of
Population
Source: Berk and Monheit, “The Concentration of Health Care
Expenditures, Revisited,” Health Affairs, March/April 2001. Expenditure estimates for civilian noninstitutionalized population.
Health Care Spending Trends: Minnnesota
and U.S.
2000
Total Health Care Spending
Minnesota
U.S.
$19.3 billion
$1,264.4 billion
Health Care Spending Growth,
2000 to 2005 (avg. annual):
Minnesota
U.S.
2005
$29.4 billion
$1,860.9 billion
8.8%
8.0%
Per Capita Health Care Spending:
Minnesota
U.S.
$3,917
$4,476
$5,742
$6,276
Health Care Spending as a Share
of the Economy:
Minnesota
U.S.
10.5%
12.8%
12.7%
15.0%
Sources: MDH Health Economics Program, Centers for Medicare and Medicaid Services (spending for
health services and supplies, a subset of total national health spending)
Minnesota Health Care Spending by Source
of Funds, 2005
Total Spending $29.4 Billion
Private Health
Insurance
43.5%
Other Public
Spending
7.0%
Medicare
14.6%
Medical
Assistance
17.8%
Out-of-Pocket
14.0%
Source: MDH Health Economics Program
Other Private
3.0%
Minnesota Health Care Spending by Type
of Service, 2005
Total Spending $29.4 Billion
Other Spending
15.2%
Hospital Care
29.3%
Prescription Drugs
11.9%
Long Term Care
(including Home
Care)
15.4%
Physician Services
21.7%
Source: MDH Health Economics Program
Other Professional
Services
3.1%
Dental Services
3.5%
What Savings Are Needed to Achieve 20%
Reduction in Health Care Spending by
2011?
2005 Minnesota Health Care Spending
Projected growth rate of national
spending, 2005 to 2010
2010 Minnesota spending (assuming
national projected growth rate)
20% savings
$29.4 billion
39.7% total growth
6.9% avg annual growth
$41.1 billion
$8.2 billion
Recent Trends in Health Insurance
Coverage
Uninsurance Rate Trends in Minnesota
8%
7%
7.4%*
6.3%
6%
5.4%*
5.7%
5%
4%
3%
2%
1%
0%
1995
1999
2001
*Indicates statistically significant difference (95% level) from prior survey year.
Source: 1995, 1999, 2001, 2004 Minnesota Health Access Surveys
2004
Sources of Insurance in Minnesota, 2001
and 2004
80%
70%
68.4%
62.9%*
60%
50%
40%
30%
25.1%*
21.2%
20%
10%
5.7% 7.4%*
4.7% 4.6%
0%
Employer
Individual
2001
Source: 2001 and 2004 Minnesota Health Access Surveys
* Indicates a statistically significant difference from 2001.
Public
2004
Uninsured
Factors Contributing to a Decline in
Employer Coverage
 Lower share of population employed in 2004
vs 2001 (72.3% vs 75.0%)
 Changes in job characteristics. For example:
– Increase in temporary/seasonal jobs
– Smaller share of population working for very
large employers, where employer-based
coverage is more likely
 Decline in employer coverage was largely
the result of declining access, not take-up
Access to Employer Coverage: Offer, Eligibility,
and Take-up Rates, 2001 and 2004
Non-Elderly Minnesotans' Access to Employer-Based Insurance
97.7% 95.7%*
95.3% 95.0%
Of Those With Connection, %
Eligible
Of Those Eligible, % Enrolled
(Take-up)
100%
84.1%
80.3%*
80%
60%
40%
20%
0%
Connection to Employer Offering
Coverage
2001
*Indicates a statistically significant difference from 2001.
Source: 2001 and 2004 Minnesota Health Access Surveys
2004
Private and Public Cost Pressures
Private Health Insurance Premium and Spending
Trends, 1995 to 2005
% change from previous year
Per Minnesota Resident With Private Health Insurance
16.0%
16%
12.1%
12%
8%
15.5%
12.9%
12.2%
10.1%
9.8%
8.8%
7.9%
7.3%
8.9%
9.0%
7.4%
6.8%
4.5%
4.3%
4%
11.2%
10.5%
2.1%
0.9%
1.0%
0.5%
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Premiums
Expenses
Source: MDH Health Economics Program. Fully-insured market only.
Percent change from previous year
Key Minnesota Health Care Cost and
Economic Indicators, 1995 to 2005
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1995
1996
Health care cost
1997
1998
1999
2000
Per capita income
2001
2002
Inflation
2003
2004
2005
Workers' wages
Notes: health care cost is MN privately insured spending on health care services per person, and does
not include enrollee out of pocket spending for deductibles, copayments/coinsurance, and services
not covered by insurance..
Sources: Health care cost data from Minnesota Department of Health, Health Economics Program; per capita
personal income from U.S. Department of Commerce, Bureau of Economic Analysis; inflation data from
U.S. Bureau of Labor Statistics (consumer price index); workers’ wages from MN Department of Employment
and Economic Development
Total Cost Per Person and Health Plan/Enrollee
Shares, 1997 to 2005
Minnesota Fully-Insured Private Market
$4,000
$3,500
$489
$433
$3,000
$382
$340
$2,500
$2,000
$1,500
$1,000
$152
$197
$184
$221
$1,517
$1,637
$1,781
$2,011
1997
1998
1999
2000
$297
$2,217
2001
$2,560
$2,829
$3,039
$3,247
2003
2004
2005
$500
$0
Health Plan Cost
Source: MDH Health Economics Program.
2002
Enrollee Cost
Medical Assistance Enrollment and
Spending Growth
% change from previous year
20%
15%
10%
5%
0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-5%
-10%
Enrollment
Total Spending
Source: Minnesota Department of Human Services.
Spending per Enrollee
% change from previous year
MinnesotaCare Enrollment and Spending
Growth
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-20%
-30%
Enrollment
Total Spending
Source: Minnesota Department of Human Services.
Spending per Enrollee
GAMC Enrollment and Spending Growth
% change from previous year
40%
30%
20%
10%
0%
-10%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-20%
-30%
Enrollment
Total Spending
Source: Minnesota Department of Human Services.
Spending per Enrollee
Summary: Private and Public Cost
Pressures
 Erosion in private insurance coverage is
likely linked to rising costs
 Public programs face dual sources of cost
pressure:
– Rising enrollment
– Rising cost per person
 Despite recent slower cost growth, current
trends not sustainable in the long run
– Cost of private insurance still growing much
faster than incomes, inflation
Drivers of Health Care Cost Growth
Drivers of Health Care Spending: Many
Levels of Analysis
$ Spent on Health Care
Who pays (employers, consumers, govt, etc.)?
What services are purchased (hospital, drugs, etc.)?
What causes changes in spending for a particular
category of service?
Price
Quantity
Change in mix of services provided
Factors affecting price:
-Market structure
-Labor costs & other inputs
-Technology
-Economy/general inflation
-Other factors
Factors affecting quantity/type of services:
-Prevalence of disease
-Demographics
-Lifestyle/behavior
-Genetics
-Environment
-Technology
-Consumer and provider incentives
- Other factors
Health Care Cost Drivers: Spending Growth and
Shares of Total Growth by Service, 2003 to 2005
Minnesota Fully-Insured Private Market
30%
24.2%
25%
20.9%
18.6%
20%
13.8%
15%
10%
13.1%
9.2%
7.1%
12.7%
10.7%
8.5%
8.2%
5.9%
5%
3.9%
0%
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Note: growth rates calculated as annual growth per enrollee over the 2-year period. “Other medical” includes skilled nursing facilities,
home health care, emergency services, services of health professionals other than physicians and dentists, durable medical goods,
and chemical dependency/mental health.
Source: MDH Health Economics Program.
How Is Minnesota’s Age Distribution
Changing?
100%
16%
16%
18%
29%
35%
35%
23%
26%
80%
60%
40%
20%
25%
32%
31%
20%
21%
20%
18%
30%
29%
27%
26%
25%
1990
2000
2010
2020
2030
0%
Sources: U.S. Census Bureau and Minnesota State Demographic Center
60+
35 to 59
20 to 34
Under 20
Projected Minnesota Population Growth,
by Age Group
2000-2010
60+
40 to 59
20 to 39
Under 20
2000-2020
2000-2030
0%
20%
40%
60%
80%
Source: Minnesota State Demographic Center
100%
120%
Variation in Health Care Spending by Age
Per Capita U.S. Health Care Spending by Age, 2004
$12,000
$9,914
$10,000
$9,017
$8,000
$6,694
$6,452
$6,000
$2,000
$3,571
$3,496
$4,000
$2,165
$1,855
$1,074
$2,747
$2,711
$1,445
$0
Under 5 to 14 15 to
5
24
25 to
34
35 to
44
45 to
54
55 to
64
65 to
74
75+
Under
65
65+
Total
Source: Agency for HeatlhCare Research and Quality, Medical Expenditure Panel Survey, data for per
capita spending by age group in the Midwest. Excludes spending for long-term care institutions.
Obesity Trends* Among U.S. Adults
BRFSS, 1990
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
Obesity Trends* Among U.S. Adults
BRFSS, 1991
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1992
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1993
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1993
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1994
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1994
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1995
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1996
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Obesity Trends* Among U.S. Adults
BRFSS, 1997
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20
Obesity Trends* Among U.S. Adults
BRFSS, 1998
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20
Obesity Trends* Among U.S. Adults
BRFSS, 1999
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20
Obesity Trends* Among U.S. Adults
BRFSS, 2000
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20
Obesity Trends* Among U.S. Adults
BRFSS, 2001
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2002
(*BMI(*BMI
≥30,
oror~
30lbs
lbs
overweight
5’ 4” person)
30,
~ 30
overweight
for 5’4” for
person)
No Data
<10%
10%–14%
15%–19%
20%–24%
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2003
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2004
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
≥25%
Impact of Rising Obesity on Health Care
Costs (National study)
 Increasing prevalence
– Between 1987 and 2001, obesity prevalence increased
10.3 percentage points, while normal weight prevalence
declined 13 percentage points
 Widening gap between health care spending for
obese vs normal weight population
– Difference grew from 15% to 37%
 As a result of both these factors, obesity-related
health spending accounted for an estimated 27% of
inflation-adjusted per capita health spending
increases
– 41% of the rise in heart disease spending
– 38% of the rise in diabetes-related spending
Source: Thorpe et al., “The Impact of Obesity on Rising Medical Spending,” Health Affairs, October 2004.
Technology
 Advances in technology can be reflected in:
– Better diagnosis – more cases identified
– Better treatment – more cases treatable
– Higher (or lower) cost per treated case
 Most economists agree that advances in technology
have accounted for a majority of increases in health
care spending over time
 Recently, we have seen renewed policy concerns
about a “medical arms race”
– MDH report to the legislature on medical facilities
highlighted distorted signals that current payment systems
send to markets
Technology
 Cutler, “Your Money or Your Life”:
– In general, technological advance has been
“worth it” in terms of benefits that exceed costs
– However, there are pervasive problems:
• Opportunities to prevent the need for high-tech
interventions are missed
• Overuse, misuse, and underuse of care
– “You get what you pay for”: The system we have
pays well for intensive interventions and doesn’t
pay well for care management and prevention
David Cutler, “Your Money or Your Life,” Oxford University Press, 2004
Medical Facilities Investment:
Why is this an issue?
 Competition does not necessarily lead to
lower prices:
– Consumer price sensitivity is limited because
most bills are paid by insurance
– Some types of facilities have high fixed costs:
building more of them than needed results in
each facility spreading these costs over a smaller
number of people
– Because consumers prefer broad provider
networks, health plans often do not have
leverage to discourage unnecessary facilities by
excluding them from provider networks
Medical Facilities Investment:
Why is this an issue?
 Regions with higher supply of health care resources
have higher use of “supply-sensitive” care and
higher costs, but do not have better health
outcomes.
 Physician self-referral may lead to overuse of
certain types of services
 Payment systems distort investment incentives by
overpaying for some types of services and
underpaying for others
 Quality of care: health outcomes for some types of
services are better at high-volume providers. In
these cases, it is preferable to encourage a small
number of “centers of excellence.”
Factors Influencing Medical Facility
Investment
 Technological advance
 Demographics: population growth, aging, illness burden (e.g.,




rise in obesity)
Renovation/replacement of existing facilities
Variation in profitability by type of service
– Competition for market share in profitable service lines:
cardiac care
– Cross subsidies from profitable to unprofitable services
– Cost shifting among payers
Physician self-referral
System efficiency
Major Study Findings
 Current payment systems send distorted market signals that
influence medical facility investments.
– Need to adjust payment mechanisms to accurately reflect
relative costs of services.
 “Fixing” the payment system cannot be separated from larger
issues related to cost and quality:
– Even with accurate payments, problems associated with
paying for volume of procedures will remain
– Paying for volume discourages efficiency and does nothing
to ensure value and quality of services
Market Responses/Cost Containment
Strategies
Market Structure Strategies
 Pooled purchasing
– Reduces overhead and increases bargaining power
– However, impact on medical costs is limited
– Adverse selection likely to be a problem in voluntary pools
 Strategies to increase competition among plans
 Strategies to increase competition among providers
– Price/quality transparency initiatives
– New forms of health care delivery: retail clinics
 Strategies to control investment in new facilities
Technology-Related Strategies
 Prior to widespread use of new technology, more
consistent evidence of effectiveness and costeffectiveness vs. existing treatments
– Current national debate on evaluation of cost-effectiveness
 Proposals to control or limit investment in expensive
new facilities
 In addition to overuse, underuse and misuse of
technology are also problems
– Incentives for appropriate use
Lifestyle/Behavior Related Strategies
Prevention
Some employers are encouraging and
rewarding healthy lifestyles
– Reimbursement for health club
membership (if used)
– Different premiums for smokers/nonsmokers
Consumer/Provider Incentives
Insurance benefit design
– Structure of deductibles, copays, etc.
– Comprehensiveness of benefits
• E.g., limited benefit products for young adults
Tiered networks
– Incentives for consumers to use lowercost, higher-quality providers
Price/quality transparency initiatives
Quality/Value
 Management of chronic disease
– Better management of patients with chronic disease (such
as diabetes or asthma) may reduce complications and save
money
– Current payment systems pay well for high-tech
interventions, but not necessarily for care management that
would prevent the need for intervention
 Value-based purchasing/pay for
performance
– Create incentives that rewards high quality, cost-effective
care
 Patient safety
Variation in Use of Care
 Research studies have shown large regional
variation in patterns of care, but more care does not
necessarily lead to better outcomes
– Example: Medicare enrollees in high-spending regions
received 60% more care but did not have better quality or
outcomes of care
 Potential for cost savings by reducing variation in
care practices – by one estimate, Medicare savings
could be close to 30%*
 Need for more research/knowledge about
effectiveness and outcomes
*”Geography and the Debate Over Medicare Reform,” John E. Wennberg et al., Health Affairs
web exclusive, 13 February 2002.
Conclusions
 Many factors that are driving increased costs are not
directly controllable, but opportunities to reduce cost
growth do exist
 Need to focus on activities that contain costs rather
than shifting them around (to other services or to
other payers)
 Consumers need to play a role in cost containment,
but need more and better information in order to
make better decisions
 All stakeholders (health plans, providers, employers,
consumers and government) need to play a role in
finding solutions