Transcript Health Care USA 1

Health Care USA
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Chapter 7
Financing Health Care
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CHAPTER OBJECTIVES
• Understand the scope and magnitude of U.S.
health care spending in relationship with other
developed countries
• Understand how the U.S. health care payment
system evolved & current trends
• Understand the related roles of government & the
private sector in financing health care
• Understand efforts to link costs with quality
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PART 1
• National Health Care Expenditures
– Influences on health care finances
– Primary components of health care expenditures
• Private Health Insurance
– Blue Cross/Blue Shield
– Commercial Insurers
– Managed Care
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Overview
•Multiple payment sources
– Working Americans’ employer health
insurance (Blue Cross/Blue Shield,
managed care plans)
– Public funds support Medicare (66 +),
Medicaid for low-income individuals
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Influences on Health Care Financing
• Providers, employers (purchasers), consumers,
politics
• Tensions- Responsibilities of
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Government
Employers
Consumers
Providers
The Market
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Health Care Expenditures in
Perspective
• 2008 expenditures= $ 2.33 trillion, 16% of
GDP, $ 7,681/person; 1/6 of total economy
• Hospital care, physician services, prescription
drugs: 3 top expenses
• Government sources finance 48% of total
expenditures
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FIGURE 7-1 National Health Expenditures per Capita and
Their Share of the Gross Domestic Product, 1960–2008.
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group.
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FIGURE 7-2
The Nation’s
Health Care
Dollar 2008:
Where It Went.
Source: Centers for Medicare and
Medicaid Services, Office of the
Actuary, National Health Statistics
Group.
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FIGURE 7-3 The Nation’s Health Care Dollar
2008: Where It Came From
1Other Public includes programs such as
workers’ compensation, public health
activity, Department of Defense,
Department of Veterans Affairs, Indian
Health Service, State and local hospital
subsidies and school health.
2Other Private includes industrial in-plant,
privately funded construction, and nonpatient revenues, including
philanthropy.
3Out of pocket includes co-pays,
deductibles, and treatments no covered by
Private Health Insurance.
Note: Numbers shown may not add to
100.0 because of rounding.
Source: Centers for Medicare and Medicaid Services, Office of
the Actuary, National Health Statistics Group.
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Factors that Decreased Expenditure Growth
• Managed care utilization controls
• Hospital prospective payment
• Managed care physician fee restrictions
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U.S. Health Spending Compared with
Other Developed Countries (2)
• 1970-2005: U.S. had largest increase in
percent of GDP devoted to health care among
29 other countries
– Lower life expectancy based on per capita income
– Lower ranking on health status indicators
– Spent > twice median spending of others per capita
on health care
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U.S. Health Spending Compared with
Other Developed Countries (2)
– With 3rd highest level of public spending on health
care, U.S. public insurance covered only 26.5% of
population
– Lower U.S. utilization rates per capita (hospital
stays and physician visits)
– Lower supply of expensive technology
– Higher income & medical care prices…not
superior health care or better outcomes
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U.S. Health Care Waste
• 30-40% of spending yields no value,
inefficiently producing valuable services
• CBO Director (2008): “future health care
spending…the single most important factor
determining the nation’s long-term fiscal
condition
– Evidence-based physician practice needed to
reduce variability
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Health Care Fraud & Abuse
• FBI 2009 estimates: $ 75-250 B
• U.S. Justice Department & HHS Inspector
General investigate, convict and exclude
providers
– 2009 : Health Care Fraud Prevention and
Enforcement Action Team using new technology
to identify and analyze suspected fraud
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Major Contributors to Increases in Health
Expenditures
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New diagnostic & treatment technology
Growth in older population
Medical specialization
Uninsured, underinsured populations
Labor intensity
Reimbursement system incentives
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New Diagnostic & Treatment
Technology
• Equipment, devices & pharmaceutical agents,
requiring advanced personnel training & new
personnel roles
– Computed tomography scanning, Magnetic
resonance imaging, PET scanning
– Pacemakers, implantable cardio-converters
– Drugs and drug marketing to consumers
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Aging Population
• Since 1900, 65+ year olds tripled in number
• 85+ year old projected at 8.9 M by 2030
– Major consumers of hospital inpatient care
– Advanced age accompanied by chronic conditions
requiring surgeries, drug therapies
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Medical Specialization
• ~60% of physicians are specialists
• Americans demand specialty care and use of
diagnostic testing
• Managed care relaxing hurdles to specialty
care referrals
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Uninsured and Under-insured
• 47 million, 16% of Americans
• Almost 75% of uninsured in households with
at least one full-time worker
• No insurance: late care, medical
complications, emergency care, avoidable
hospitalizations
• Costs passed to insurance premiums, taxes
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Labor Intensity
• People- centered services require high staff to
consumer ratio
• New technologies require new, technically
trained personnel
• Aging population contributes to home care,
other personnel needs
• 3.2 M new jobs by 2014 will be in health
services
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Economic Incentives
• Traditional payment for piece-work drove high
utilization
• Managed care, prospective payment dulled
incentives
• System still largely physician and hospital
driven with continuing incentives for over-use
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Private Health Insurance
• 1800s: movement to insure workers against
lost wages due to work injuries; later coverage
added for serious illness
• Insurance payments to medical care providers
not until 1930s
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Health Insurance Concepts
• Antithetical to “insurance” premise of
guarding against unlikely events, health
insurance evolved to pay for both routine and
unexpected events
– Indemnity coverage protected from all costs of
care; prevailed 1930s-1970 introduction of
managed care
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Blue Cross/Blue Shield
• 1930 Baylor University teachers’ contract with
Baylor, TX hospital to cover inpatient services
on an annual basis
– Model for Blue Cross development
• Blue Shield for physician payment followed in
1940s with AMA financing of Association of
Medical Care plans
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Insurance Transformed Health Care (1)
• Established hospitals as centers of medical
care proliferation & technology
• Put hospital care within easy reach of working
population
– Annual hospital admissions 50% higher for
covered individuals than nation as a whole by late
1930s
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Insurance Transformed Health Care (2)
• Private insurance countered forces that lobbied
for national health insurance, strongly opposed
by private medicine
– Focused government insurance on low-income
individuals
– Stimulated American Hospital Assn. & local
hospitals to subsidize semi-private and ward care
for low-income populations
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Features of Blue Cross & Blue Shield
• Initially, not-for-profit corporations &
community rated (without regard to
demographics, occupation, etc.), later,
experience- rated to compete with for-profit
companies
• Since 1990s, many plans converted to forprofit status
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Commercial Health Insurance
• Entered market in decade following Blues
• Used experience-rating to charge higher
premiums to less healthy; competed with Blues
for healthy persons with lower premiums
• By early 1950s surpassed Blues’ enrollment
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Managed Care
• Throughout the 1960s, rapidly increasing
Medicare expense, quality concerns by
government and industry health insurance
purchasers resulted in development of the
HMO Act of 1973
• Many employer groups had used specific,
contracted arrangements; Act opened
participation to all employers
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HMO Act of 1973
• Loans & grants for planning, implementing
combined insurance, health care delivery
organizations
• Required comprehensive services for acute and
preventive care
• Employers of >25 mandated to offer HMO
option, if available & fund premiums=to prior
plans
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HMO Fundamentals
• Links health care provision to prepayment
• Population, not individual-based
reimbursement
• Financial risk-sharing among providers,
insurers, consumers
• Intended to reverse incentives for utilization
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HMO Models
• Staff: MD employees provide primary care in
HMO-owned facilities
• Independent Practice Association:
Community-based MDs serve HMO members
on pre-paid, fee-for-service, contracted basis
• Hybrids: group practice, network, direct
contract
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Payment Methods
• Encourage cost-conscious, effective, efficient
care
• Capitation: per-member per-month fee paid in
advance whether or not services used
• Withholds: retains percentage of customary
fee, refunded if targets met
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Financial Risk-sharing
• For Providers: capitation, withholds,
expenditure targets
• For Subscribers: co-payments, deductibles
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Evolution of Managed Care (1)
• Point of Service (POS) plans spawned by demands
for out-of-network choices
• Preferred Provider Organizations (PPOs): MDs &
hospitals offer private payers & self-insured firms
negotiated fee discounts in return for business volume
guarantee (60 % of all employer-covered workers)
• Today, virtually all health insurance is some form of
managed care
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Evolution of Managed Care (2)
• Disease Management
• Use of evidence-based guidelines for
subscribers with high-risk medical and
potentially high-cost conditions
• Identified from claims data
• Insurer or contracted services to monitor
condition and ensure compliance
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Evolution of Managed Care (3)
• Primary physician “gatekeeper” role declining
in importance
– Subscriber demands for more choice in referrals
• Staff model decline
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Managed Care Backlash (1)
• Organized medicine, consumers protested
restrictions on choice of providers, referrals,
other practices
• Presidential commission est. to review patient
protections
– President Clinton imposed patient protections on
companies supplying federal workers
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Managed Care Backlash (2)
• Bipartisan Patient Protection Act proposed in
1998 never passed
• State legislatures led with 900+ laws &
regulations addressing provider and consumer
protections
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Managed Care Backlash (3)
• Consumer-Driven Health Plans: employers’
response to rising costs & demands for
consumer choice
– Employees take responsibility for health care
decisions and cost-consciousness
– Health care reimbursement or Health Savings
Accounts using high-deductible policies
– 2009: ~8% employee participation
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Trends in Managed Care Costs (1)
• 1990s: slowest rate of cost growth in years
• 1998: premiums rose again
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Insurance underwriting cycle
Prescription drug costs
Investor pressures
Consumer demands for choice
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Trends in Managed Care Costs (2)
• 1999-2009, avg. family policy premiums
increased 131% to $13,375
– Workers’ contribution: 17% single, 27%
family
• 40 hour/week minimum wage worker
($7.25/hour) gross earnings (before taxes) = $
15,080
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Impact of Rising Premiums
• Higher worker contribution results in dropped
coverage
• Employers use “benefit buy-downs,” reducing
benefit scope, increasing co-pays, and/or
deductibles
– 1% increase in premiums= 164,000 additional
uninsureds
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Managed Care “Report Card”
• 5-year literature review notes failings in dual
promise to lower costs and increase quality
– Needed:
• Systematic information systems’ revamping
• More appropriate provider incentives
• Revised, evidence-based clinical processes
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Managed Care Industry Changes
• Consolidations & mergers: 5 publicly traded
companies now enroll 103+ million members,
82% of all subscribers
• Responses to provider/consumer issues:
– States’ patient protection legislation
– Loosening of choice on patient referrals
– Patient access to policies, esp. payment denials
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PART 2
•Managed Care & Quality
•Self-funded Insurance Programs
•Government as Payer
– Cost and Quality Initiatives
•State Experiments
•Future Challenges
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Managed Care Organizations and
Quality
• American Association of Health Plans est.
1979; renamed National Committee on Quality
Assurance (NCQA) in 1990
– Independent, not-for-profit, funded by
accreditation fees and revenues from sale of a
quality indicator compendium on 250 health plans
serving 50 million Americans
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NCQA (1)
• Evaluations & accreditation on a voluntary
basis for
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Managed care organizations
Preferred provider organizations
Managed behavioral health organizations
New health plans
Disease management programs
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NCQA (2)
• Accreditation entails rigorous reviews of all
organization aspects including on-line surveys and
onsite visits:
– Management, physician credentials, member rights
& responsibilities, preventive health services,
utilization, medical records, disease management
programs, outcomes of care, measures of clinical
processes
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NCQA (3)
• Certifications for organizations that provide
– Provider credentials’ verifications
– Utilization management services
– Disease management services
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HEDIS (1)
• Health Plan Employer Data and Information
Set (HEDIS) evolved from partnership among
health plans, employers and the NCQA in
1989.
• Standardized method for MCOs to collect,
calculate, report performance information to
facilitate plan comparisons by employers,
other purchasers & consumers
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HEDIS (2)
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Data set contains 71 measures of MCO
performance in 8 domains (“Report Cards”):
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Effectiveness of care
Accessibility & availability of care
Satisfaction with care
Health plan stability
Use of service
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HEDIS (3)
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Domains, continued
6. Cost of care
7. Informed health choices
8. Health plan descriptive information
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HEDIS Promotes Transparency
• Centers for Medicare and Medicaid Services
requires all funded MCOs to report HEDIS
data
• All NCQA accredited plans must publicly
report their clinical quality data
• Many states require Medicaid managed care
plans to report HEDIS data
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Internal MCO Quality Monitoring
• Physician performance & outcomes
monitoring
• Hospital outcomes quality
• Disease management programs, e.g.
– Patient self-management education
– Risk stratification
– Outreach with clinical specialists
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Self-Funded Insurance Programs (1)
• Large employer, union or trade association
collects premiums, pays medical benefits
claims instead of using a commercial carrier
– Actuarial firm may set premiums
– Third party administrator (TPA) administers
benefits, pays claims, collects utilization data,
manages expensive cases
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Self-Funded Insurance Programs (2)
• Employer Advantages
– Avoid administrative charges of commercial
carriers
– Avoid state premium taxes
– Accrue interest on reserves
– Exemption from ERISA minimum benefits &
liability for plan coverage denial decisions
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Government as Payer: A System in Name
Only (1)
• Early focus: military, government employees, special
populations, e.g. Native Americans
• Now: Medicare, Medicaid, U.S. Public Health
Service hospitals, state, local, long-term psychiatric
facilities, Veterans Affairs, military & dependents,
workers’ compensation, public health protection,
service grants
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Government as Payer: A System in Name
Only (2)
• “System:” Mosaic of reimbursement,
vendors/purchaser relationships, matching
funds, direct services, e.g.
– Contracts with providers, not direct service
provision (Medicare, Medicaid, grants)
– Federal with State matching funds (Medicaid)
– Direct services (Veterans Affairs)
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Medicare: Historical Significance
• 1965: Title XVIII of Social Security Act
• All Americans ≥65 yrs. entitled to health insurance
benefits; 20 million entered system in 1965.
• Financed by payroll taxes
• Conceded accreditation, administration to private
sector-JCAHO…Now “JC”
• Hospital payments by local Blue Cross
intermediaries
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Initial Medicare Components
• Part A: Mandatory hospital coverage, outpatient
diagnostics, extended care facilities, home care posthospitalization; funded by Social Security payroll
taxes.
• Part B: voluntary MD coverage, tests, medical
equipment, home health; funded by beneficiary
premiums matched with federal revenues
• Cost sharing: deductibles, co-insurance; medi-gap
policies
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Additional
Medicare Components
• Part C: Managed Care Options for Private
Health Plan Enrollment (1997)
• Part D: Prescription Drug Coverage (2003)
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Growth in Medicare Expenditures
• Costs rose much more rapidly than expected
• 1976: Most cost growth due to hospital personnel,
non-personnel and profits
• Early amendments added covered services,
increased costs; quality concerns escalated
through 70s and 80s.
• Later amendments addressed cost growth
reductions and quality improvement
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Medicare Cost Containment & Quality
Improvement Measures (1)
• Comprehensive Health Planning Act (1966):
organize local health planning
• Professional Standards Review Organizations
(1972): review Medicare hospital care.
• Health Systems Agencies (1974): plan for health
resources based on population needs (replaced
CHP); plans based on local population needs
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Medicare Cost Containment & Quality
Improvement Measures (2)
• OBRA 1980, 1981 amendments to reduce hospital
lengths of stay, advocating home care
• Tax Equity & Fiscal Responsibility Act (TEFRA)
1982: Peer Review Organizations (PROs) replaced
PSROs, providing clearer cost/quality criteria;
• 2001: renamed PROs to QIOs (Quality Improvement
Organizations)
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Medicare Cost Containment & Quality
Improvement Measures (3)
• DRGs (1983): Shifted Medicare from
– Pre-set hospital case reimbursement based on
diagnosis using the International Classification of
Disease (ICDA) codes
• Rewarded efficient care, financially penalized
inefficiency
• Other insurers followed lead
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DRG Implementation (1)
• Predictions of “quicker/sicker” discharges proved
unfounded
• Federal prospective Payment Assessment
Commission (ProPac) established to review
quality
– Post-implementation research demonstrated no
deleterious effects on patient outcomes
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DRG Implementation (2)
• Slowed cost growth through length of stay
reductions, personnel reductions
• Hospitals realized increased profits
• Impact of major shifts to outpatient services,
shifting costs to private pay patients dampened
cost-containment results
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DRG Cost Containment & Quality
Improvement Measures (3)
• COBRA 1985: penalties for financiallymotivated patient transfers
• Emergency Medical Treatment and Labor
Act (1986) refined 1985 COBRA
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Cost Containment & Quality Improvement
Measures (4)
• Physician Fees: Rapidly rising Medicare payments
and specialty services prompted action:
• 1987-1989: price freeze ineffective; results
suggested offset by increased volume
• 1992: RBRVS: Pay same amount for office
procedures whether provided by specialist or
primary physician; incentives for primary care
practice; updated by AMA & specialty societies
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HIPAA
• 1996 Kennedy-Kassenbaum Bill
– Reaction to failed Clinton National Health Security
Act
• Prohibited coverage denial due to pre-existing
health condition
• Ensured continued coverage between employers
• Established “portable” Medical Savings
Accounts
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Cost Containment & Quality Improvement
Measures (5)
• Balanced Budget Act of 1997:
– Predictions of Hospital Trust Fund insolvency
– Medicare unsustainable w/o cuts in other
programs, increased taxes & budget deficits
– Medicare f-f-s outmoded in MCO environment
– Medicare gaps for low income populations
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Balanced Budget Act of 1997
– Reduce Medicare spending growth rate over 5
years through direct and indirect cost reductions
– Fund State Child Health Insurance Program
(SCHIP) to enroll 10+ million Medicaid-eligible
children
– Introduce Medicare managed care
– Enact demonstration projects on quality & cost
containment
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Balanced Budget Act Provisions
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New Medicare Part C-managed care
Demonstration projects
Prevention initiatives
Provider payment reductions
Anti-fraud & abuse provisions
Rural hospital initiatives
Outpatient & Nursing Home Prospective Payment
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Balance Budget Act Outcomes
• Significant decrease in Medicare spending
growth through 2002; $ 68 B in savings
• Private insurers’ entry through Medicare Part
C
• Successful SCHIP implementation
• Fraud & abuse financial recoveries
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Responses to BBA
• Strong resistance from affected groups
– Balanced Budget Refinement Act (1999) to
curtail MCO withdrawals from Medicare
+Choice (Part C)
– Consolidated Appropriations Act of 2000:
restored $17 B in cuts, postponed/adjusted new
payment schemes
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Ongoing Medicare Cost Reduction &
Quality Improvement Initiatives (1)
• 2001: CMS “Quality Initiative” to monitor
conformance with standards of care:
– Hospitals, nursing homes, home health care
agencies, physicians, other facilities
• Medicare Quality Monitoring System:
– Monitors quality of care delivered to Medicare f-fs beneficiaries
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Ongoing Medicare Cost Reduction &
Quality Improvement Initiatives (2)
• Hospital “Pay-for-Performance” plans to reward
positive patient results & efficient care
• “Hospital Compare” website: 20 criteria assessing
hospital conformity with evidence-based practice
• Beginning in 2008 : No reimbursement for treatment
of hospital acquired infections; investigating other
options for “never happen” events and resulting
treatment costs
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Ongoing Medicare Cost Reduction &
Quality Improvement Initiatives (3)
• Hospital Consumer Assessment of Health Care
Providers and Systems” surveys added to
“Hospital Compare” to provide patient
perspectives on hospital experience.
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Medicaid and the SCHIP
• 1965: Title XIX of Social Security Act
• Mandatory joint federal-state program
– Shared state support based on state’s per capita
income
• Basic insurance coverage for 47 M low income
individuals
• 16% of personal health service spending; 41%
of nursing home care
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Medicaid Scope
• Federal government establishes broad
guidelines; requirements are state-established
– Low income families and children
– Long-term care for older and disabled individuals
– Supplemental coverage for low-income Medicare
beneficiaries for non-Medicare covered services
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Federally Mandated Medicaid Services
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Inpatient, outpatient hospital services
Physician services
Diagnostic services
Nursing home care for adults
Home health care
Preventive health screening
Pregnancy related & child health services
Family planning services
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Medicaid Expenditure Growth
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Growth in eligible populations, longevity
Provider payment increases
Disproportionate share hospital program
Growth in intensive & long term care
Increased survival of low birth weight infants
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Medicaid Funding
• Personal income tax, corporate and excise
taxes
• Unlike Medicare, no entitlement; a transfer
payment from more affluent to needy
individuals
• Direct reimbursement to providers; no
intermediary
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Medicaid Managed Care
• 1990s: States experimented with Medicaid
managed care to stem 300% growth since
1980.
• 1993: Federal waivers allowing mandatory
managed care accelerated enrollment.
• 1997: BBA lifted all waiver requirements
• 50 states participate; majority of recipients in
managed care
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Children’s Health Insurance Program
• BBA targeted enrollment of 5 M children with
federal matching funds, 1998-2007
• By 2008, 7 M enrolled; but 8.1 M remained
uninsured
• Reauthorized in 2009 through 2013 with
enhancements
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FIGURE 7-7 Number of Children Ever Enrolled in the
Children’s Health Insurance Program.
Source: Children’s Health Insurance Statistical Enrollment Data System
(SEDS) 1/29/09
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Medicaid Quality Initiatives
• The Center for Medicaid & State Operations
(CMSO) develops & implements Medicaid &
SCHIP quality initiatives with state programs
• Division of Quality, Evaluation & Health
Outcomes provides technical assistance to
states for quality improvement initiatives
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Medicaid Quality Strategies
1.
2.
3.
4.
Evidence-based care
Payment aligned with quality
Health information technology
Partnerships with internal & external expert
organizations
5. Information dissemination, technical
assistance, sharing best practices
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Future Prospects
• Little federal action 2000-2008 left major
gaps in plans for cost control and access
improvement
• States experimented with universal coverage
since 2003
• 2008 presidential election focused on swift,
major health care reforms
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State Experiments
• Maine: make affordable coverage available to
all; decrease cost growth, expand Medicaid,
improve quality
• Massachusetts: personal responsibility
mandate with government subsidy
• Vermont: government, employer premium
assistance; state-wide plan for preventing and
managing chronic conditions
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Future Challenges
• Moral dilemma: defining values about
allocations of resources
• Breaking lose from old philosophies, value
systems and politics in implementing the
Patient Protection and Affordable Care Act of
2010
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