Transcript SystemWideStrategiesForControllingCosts_EnriqueMartinezVidal

System Wide Strategies:
Controlling Costs
Illinois Health Forum
Chicago, Illinois
December 7, 2005
Enrique Martinez-Vidal
Deputy Director
RWJF’s State Coverage Initiatives program
National Health Spending
in Billions
$2,000
$1,600
$1,310
$1,426
$1,559
$1,679
$1,805
$1,937
$990
$1,200
$696
$800
$400
$27
$73
$246
Note:
20
03
20
04
P
20
05
P
20
02
20
01
20
00
19
95
19
90
19
80
19
70
$0
19
60
billions per year
$2,400
Selected rather than continuous years of data are shown prior to 2000. Years 2004 forward are CMS
projections.
Source: Centers for Medicaid and Medicare Services (CMS), Office of the Actuary.
18.7
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
12.0
13.3
13.3
13.2
13.3
14.1
14.9
15.3
15.4
15.6
8.8
14
P
20
05
P
20
04
P
20
03
20
02
20
01
20
00
20
98
19
96
19
93
19
90
19
80
19
70
7.0
19
% of GDP
National Health Spending as a
Share of Gross Domestic Product
Note: Selected rather than continuous years of data are shown. Years 2004 forward are CMS projections.
Source: Centers for Medicaid and Medicare Services (CMS), Office of the Actuary.
Annual increase over prior period
Average Annual Growth Rate
in National Health
Expenditures
14%
12%
12.9%
10.6%
10%
11.0%
8.9%
8.5%
8%
7.2%
5.6%
6%
5.1%
9.3%
7.7%
5.7%
4%
2%
0%
Source: Centers for Medicare and Medicaid Services, Office of the Actuary.
1970 1980 1990 1993 1995 1997 1999 2000 2001 2002 2003
Note: Selected rather than continuous years.
Source: Centers for Medicare and Medicaid (CMS), Office of the Actuary.
Spending Distribution
by Category, 2003
(Total Spending = $1.7 Trillion)
Administration
7.1%
Nursing
Home/Home
Health Care,
9.0%
Hospital Care,
30.7%
Other, 10.2%
Dental/Other
Professional,
10.3%
Prescription
Drugs, 10.7%
Physician and
Clinical
Services,
22.0%
Source: Centers for Medicare & Medicaid Services, Office of the Actuary.
Note: Other = Durable Medical Equipment, Other Non-durable Medical Products, Public Health Activity, Research, Construction.
Annual Growth in Private Health
Insurance Premiums as Reported
by Employers
18.0%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
US
14.0%
13.9%
12.9%
11.2%
10.9%
8.5%
8.2%
5.3%
0.8%
1989
1990
1993
1996
1999
2000
2001
2002
2003
2004
KFF/HRET Survey of Employer-Sponsored Health Benefits: 2004.
Data on premium increases reflect the cost of employer-based health insurance coverage for a family of four.
Percent increase represents the growth over the immediate prior year.
Why Do We Care? The Shark’s Jaws
Open
16.0%
13.9%
14.0%
12.9%
12.0%
12.0%
10.9%
10.0%
8.5%
8.2%
8.0%
6.0%
5.3%
4.0%
2.0%
0.8%
0.0%
1988
1993
1996
1999
2000
2001
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits; 2003. Dental work by Dr. Milstein.
Note: Data on premium increases reflect the cost of health insurance premiums for a family of four.
2002
2003
Health Insurance Premiums
Medical CPI
Overall Inflation
Workers' Earnings
Total Health Care Spending
as a Share of GDP
Year
2005
Percent of GDP if
health care
grows 2.5
points faster than
GDP
15.6
Percent of GDP if
health care
grows 1.0
points faster than
GDP
15.6
2020
21.6
19.8
2030
27.6
21.9
2040
35.2
24.1
Source: Henry J. Aaron, Brookings Institution, “It’s Health Care, Stupid!
Why Control of Health Care Spending is Vital for Long-Term Fiscal
Stability,” Paper presented to the Conference of the Federal Reserve Bank
of Boston, June 15, 2005.
Medicare and Medicaid Spending
as a Share of GDP
(includes State share of Medicaid spending)
Year
Percent of GDP if
health care
grows 2.5
points faster than
GDP
2005
4.2
7.8
11.5
16.1
2020
2030
2040
Percent of GDP if
health care
grows 1.0
points faster than
GDP
4.2
6.5
8.4
10.1
Source: Henry J. Aaron, Brookings Institution, “It’s Health Care, Stupid!
Why Control of Health Care Spending is Vital for Long-Term Fiscal
Stability,” Paper presented to the Conference of the Federal Reserve Bank
of Boston, June 15, 2005.
Percent of Median Family Income
Required to Buy Family Health
Insurance
18
18
16
14
12
10
8
8
6
4
2
0
1987
2004
Source: Calculations by Len Nichols, using KFF and AHRQ premium data,
CPS income data.
Labor Market Realities
Occupation
Physician
Family premium/Median wage
7.3%
History professor
15.8%
Secretary
29.1%
Carpenter
24.2%
Cook
49.8%
Source: KFF premium and BLS wage data.
Distribution of Health
Spending, Adults Ages 18-64, 2001
Source: Employee Benefit Research Institute estimates from the 2001 Medical Expenditure
Panel Survey.
Long-term Drivers (1)

Transition to Looser Managed Care

Provider Consolidation and Pushback

Labor Shortages – Nurses/Other Practitioners

Financing System





Third-party payers with no predetermined/defined limits
Relatively low patient out-of-pocket costs
Payment system pays more to providers to deliver more services
Limited information about the effectiveness of
tests/procedures/drugs/etc.
Advances in medical technology



Provide better outcomes
Same outcomes but less pain or shorter recovery
Lower unit costs (but higher utilization)
Long-term Drivers (2)

Increased resources in medical care


More physician specialists
More facilities

Rising Prevalence of Treated Disease

Lifestyle changes


Direct-to-Consumer Marketing


Obesity (linked to rising rates of diabetes, hyperlipidemia [i.e., high
cholesterol], hypertension, heart disease)
Associated with Strong Sales of Key Drugs (Lipitor, Nexium, Zocor,
Norvasc, Prevacid)
“Oversold” drivers



Population aging (debatable)
Professional liability/medical malpractice
Mandated benefits
Conclusion



Recent decline in cost trends appears to
be leveling
Today’s cost trends continue to make
insurance less affordable and strain
public finances
Current efforts to contain costs
emphasize additional patient cost sharing
and hopes for increased efficiency