Transcript Slide 1

The U.S. Health Care System:
What Can be Learned?
Bruce J. Fried, PhD
Director, Masters Degree Program
Department of Health Policy & Administration
School of Public Health
University of North Carolina at Chapel Hill
June 6, 2008
Goals for Today
• To describe the central elements of the US
health system and trends in financing
• To analyze the extent to which the goals of the
health system have been met
• To predict future directions for the health
system
• To identify lessons from the US experience
Access to
Care
Three Health
System
Goals
Quality of
Care
Contain
costs
Can we achieve all three of these goals at the same time?
The Paradoxes of the US Health
System
• An excellent system for those who access to
the system
• A poor system for those without access
• An uncertain system for many
A central point:
The US does not have a single health
care system
The US has multiple systems, each with its
own goals and patient population
Multiple Systems
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Medicare: a system for the elderly and people with certain
disabilities
•
Private insurance system for people under 65
•
Medicaid: A System for some poor people
•
The Veterans Health System
•
The military health care system
•
The Indian Health Service
•
A non-system for people under 65 without insurance
•
Dispersed public health system, mostly on the state level
Differences Among States
• The states have systems that vary in complexity
and priorities.
• Large variations across states in:
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Policies
Payment systems
Health care usage patterns
Illness burden
State and federal contributions to healthcare costs
Health System Financing
Where does the money come from?
The Major Health Financing
Mechanisms
• Out-of-pocket payment
• Private Health Insurance
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–
–
–
HMOs
Preferred Provider Organizations (PPOs)
Point-of-service Plans
High Deductible Health Plans
Conventional Health Plans
• Public Health Insurance
– Medicare
– Medicaid
– Children’s Health Insurance Plan
Private Insurance
• Private insurance includes a wide variety of health
plans and providers
• Commercial insurance companies, Blue Cross/Blue
Shield, self-insurers, and managed care
organizations (MCOs) all offer private health
insurance
• Private insurance is financed most commonly by
premium sharing between employers and
individuals, or by individuals alone
Basic Types of Private Insurance
by Funding
• Self-funded
• Group insurance
• Individual insurance
Private Health Insurance:
Some Basic Concepts and Definitions
Managed Care
Managed care is a very general term referring to an organized
effort by insurers and providers to use financial incentives and
organizational arrangements to provide health care services
efficiently at lower costs. Examples:
• Pre-authorization for care
• Restrictions on care (for example, placing limits on the number
of doctor visits)
• Financial incentives to physicians to practice more efficiently
• Restricting access to a small set of providers
(Adapted from Williams and Torrens, 6th Edition, p. 125)
Adverse Selection
• People with higher than average risk of
needing health care are more likely than
healthier people to seek health insurance.
• Adverse selection results when these less
healthy people disproportionately enroll in a
risk pool.
• The ultimate outcome of adverse selection is a
“death spiral.”
Community Rating
• A method of setting health insurance
premiums under which all policy-holders are
charged the same premium
Health Maintenance Organization
(HMO)
• Patients get almost all care (primary and
specialty) from a group of physicians and other
practitioners
• The HMO agrees to take full responsibility for
its patients’ care
• The HMO is paid a fixed, regular fee per
patient (capitation payment).
Preferred Provider Organization
(PPO)
• Providers join together to form a PPO
• The PPO physicians agree to provide services
at a discounted, fee-for-service rate to the
plan’s enrollees
• Point-of-Service (POS): PPO enrollees may
obtain services from non-PPO providers, but
at higher co-payments.
High-Deductible Health Plans
• These insurance plans have low premiums but
high deductibles
• Philosophy is that high deductibles will cause
consumers to use care more efficiently
• Costs are shifted to the consumer
• These plans are usually coupled with taxadvantaged Health Savings Accounts
• Because deductibles are so high, many people
go without care
Methods of Paying for Health
Services
• Fee-for-service
• Capitation
• Prospective Payment (for example,
DRGs)
Trends in the Cost of Care
Estimated Hospital Expenditures by
Source (total = $571 billion)
SOURCE
$ in 2004
(in billions)
% Increase from
2000
Private Insurance
203
+41%
Public Sources*
321
+35%
Out-of-Pocket
19
+36%
Philanthropy
28
+27%
Source: CMS, 2006
Estimated Physician Expenditures by
Source (total = $400 billion)
SOURCE
$ in 2004
(in billions)
% Increase from
2000
Private Insurance
194
+42%
Public Sources*
138
+42%
Out-of-Pocket
40
+25%
Philanthropy
28
+27%
Estimated Dental Expenditures by Source
(total = $82 billion)
SOURCE
$ in 2004
(in billions)
% Increase from
2000
Private Insurance
41
+32%
Public Sources*
5
+100%
Out-of-Pocket
36
+29%
Less than 1
0
Philanthropy
Estimated Nursing Home Expenditures
by Source
(total = $ 115 billion)
SOURCE
$ in 2004
(in billions)
% Increase from
2000
Private Insurance
9
+13%
Public Sources*
70
+30%
Out-of-Pocket
32
+23%
Philanthropy
4
-20%
Government Public Health
Expenditures by Source, 2004
• Total: $51 billion
• Private Sources: $0
• Public Sources: $56 billion (Federal = $9
billion; State & Local = $47 billion
Total health expenditures in the
United States were $1,309 billion
in 2000 and $1,878 billion in
2004, a 43% increase.
What is Causing the Increases?
• Rising wages in the health care sector.
• Technology
• Consumer demand for less restrictive plans
(movement from HMOs to PPOs)
• Legislation (BBRA, prescription drug) that
increases Medicare spending.
• Drugs
Estimated Prescription Drug Expenditures
by Source
(total = $188 billion)
SOURCE
$ in 2004
(in billions)
% Increase from
2000
Private Insurance
90
+50%
Public Sources
52
+86%
Out-of-Pocket
47
+42%
Philanthropy
0
-
Factors Contributing to Growth in
Prescription Drug Spending
Other
Average Annual Percent Change
18
16
14
12
10
8
6
4
2
0
Drug Utilization (Number of Prescriptions)
Drug Prices (Consumer Price Index - Drugs)
6.5
5.1
0.8
0.9
2.7
4.2
9
2.2
2.8
1980-1993
1993-1997
5
3.3
2.4
4.6
4.9
4.9
1997-2000
2000-2003
2003-2011
Calendar Years
A Closer Look at the Reason for
Prescription Drug Increases
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•
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Shift in payment from out-of-pocket to 3rd parties
An aging population
More prescriptions per person
Drug prices
(CMS)
Key Trend
Cost-shifting to patients is occurring at all
levels of the health system.
Trends in Employer-Based
Health Insurance
The level of employer-sponsored coverage is
declining in all 50 states. In 2005, three out of
five employers (60 percent) offered health
insurance coverage, down from 69 percent in
2000.
Percentage of Firms Offering Health
Benefits: 2000-2007
70%
69%
68%
66%
66%
63%
60%
61%
60%
60%
50%
40%
30%
2000 2001 2002 2003 2004 2005 2006 2007
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2007
Key Trend
Many employers are getting out of the business
of providing health insurance. For those
continuing to offer insurance, patients are
paying a higher proportion of the total
premium, and paying higher co-payments and
deductibles.
Public Insurance Programs
Medicare
Medicaid
Children’s Health Insurance Program
Veterans Administration
Indian Health Service
Medicare
• Basics
• Medicare is a federal program that covers individuals
65 and over, as well as some people with specific
diseases and disabilities.
• Administration
• Medicare is a single-payer program administered by
the government; single-payer refers to the idea that
there is only one entity (the government) performing
the insurance reimbursement function.
Medicare Gaps
• Many gaps in Medicare coverage
– Incomplete coverage for skilled nursing facilities
– Incomplete preventive care coverage, and no coverage
for dental, hearing, or vision care.
– Consequences of incomplete coverage
• The vast majority of enrollees obtain supplemental
insurance: “Medigap”
• Overall, seniors pay about 22% of their income for health
care costs despite their Medicare coverage.
Source: The Kaiser Family Foundation
The Problem of Costs in
Medicare
• From 1950 to 2004, the percentage of Americans ages
75 and older rose from 3 percent to 6 percent. The
number is projected to reach 12 percent by 2050
• A small number of sick people account for most health
care expenditures. According to one report, 10 percent
of patients accounted for 69 percent of health
expenditures.
Options to Reduce Medicare
Expenditures
•
Beneficiary premiums and cost-sharing
•
Scaling back tax cuts (so more general revenues available)
• Reduce provider payments
• Reduce Medicare benefit package
• Increase age of eligibility
• Change Medicare from defined benefits to defined
contribution
Other Cost Containment
Strategies for Medicare
• Hospital and physician payment mechanisms
• Disease management and clinical practice
guidelines
• Cost-shifting to consumers
Medicaid
•
Medicaid is a program designed for the low-income and
disabled.
•
By federal law, states must cover very poor pregnant women,
children, elderly, disabled, and parents.
•
Childless adults are not covered, and many poor individuals
make too much to qualify for Medicaid.
•
States’ Autonomy
• States have the option of expanding eligibility if they so choose
Medicaid Administration
•
The states and the District of Columbia are responsible for
administering the Medicaid program.
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Effectively, 51 different Medicaid programs in the country.
•
Financing
– Medicaid is financed jointly by the states and federal government
through taxes.
– Every dollar that a state spends on Medicaid is matched by the
federal government at least 100%
– In poorer states, the federal government matches each dollar
more than 100%
– Overall, the federal government pays for 57% of Medicaid costs.
Medicaid Concerns
• Difficulty finding providers that
accept Medicaid due to its low
reimbursement rate
• Increasing costs and Medicaid
managed care
• While a national program, there is
variation in benefits among states
Paying for Health Care
A mix of methods
Hospital Payment
• Since the early 1980s, hospitals are
reimbursed by a prospective payment system
based on Diagnosis Related Groups (DRGs)
• Pay-for-Performance
• Financing medical education
Physician Payment: Many
Variations
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•
•
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Fee-for-service
Capitation
Salary
Resource-Based Relative Value Scale (RBRVS) is a
system used to determine how much money medical
providers should be paid. It is currently used by
Medicare and nearly allo HMOs.
Provider Incentives
by Type of Payment
• Fee-for-Service: Over-treat
• Prepayment:
– Decrease costs by under-treating
– Unload high-cost patients
– Focus more on prevention
• Salaried providers: No financial incentive for
productivity
Hospital Responses to Reduced
Revenues
• Two out of three CEOs report their hospitals are making
money, but only one-third report margins in excess of 4
percent.
• Reduce costs: shorter lengths of stay
• Alternatives to emergency departments
• Outpatient care: Sixty-three percent of all surgical
operations in community hospitals in 2003 were
performed on outpatients, up from 51 percent in 1990
and 16 percent in 1980.
Trends
A System Under Stress
Key Trend
Health care spending continues to increase
faster than inflation. According to government
projections, health care spending will climb
from its current level of 16 percent of the gross
domestic product to 20 percent, about $4
trillion, within a decade.
A Health System Under Stress:
The Uninsured
The US faces not only a problem with the
uninsured but also with people who are underinsured.
Number of Nonelderly Uninsured, in
Millions: 1998-2006
50
47
45
43
42
41
39
40
43
44
45
40
38
35
Source: US Census Bureau, Changed methods in 1999
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
99
19
98
30
A System Under Stress: Cost of
the Uninsured
Preventable morbidity and mortality
associated with being uninsured
translates into a loss of between $65
billion and $130 billion annually.
Key Trend
• Lack of insurance coverage is an issue that is
increasingly affecting the middle class. This
may put pressure on politicians to reform
health financing.
A System Under Stress:
Consumers
Thirty-five percent of U.S. consumers
expect their direct health care costs to
increase by more than 25 percent over
the next few years.
A System Under Stress:
Hospitals
Forty-eight percent of hospital emergency
departments report being at or over capacity.
A System Under Stress: The
Public Sector
While health care costs continue to grow
and health insurance becomes less
affordable, the public sector has fewer
resources to respond to growing needs
for coverage or subsidized care.
Key Trend
Healthcare reform efforts are taking place at the
state level rather than on the federal level.
But much depends on the November 2008
election
What Can be Learned?
• Much to be learned from mistakes
• All policy changes have anticipated and
unanticipated consequences