Transcript Can - New Hampshire Center for Public Policy Studies

New Hampshire Public Health Association
October 29, 2004
Health Care Access,
Cost, and Quality
(What we don’t know can hurt us)
Doug Hall
With generous support from
1
NH Center for Public Policy Studies
Board of Directors
Martin L. Gross, Chair
John B. Andrews
Cotton M. Cleveland
John D. Crosier
Todd I. Selig
Donna Sytek
Georgie A. Thomas
James E. Tibbetts
New Hampshire Center
for Public Policy Studies
All of our reports
are available on the web:
www.nhpolicy.org
Kimon S. Zachos
Co-Directors
Douglas E. Hall
Richard A. Minard, Jr.
2
“…to raise new ideas and improve policy debates through quality
information and analysis on issues shaping New Hampshire’s future.”
HYPOTHESIS: The employment-based
health insurance system that has been
relatively stable for decades, is approaching
a “tipping point,” where it may become
unstable and could collapse.
1.
2.
3.
4.
5.
3
Rising costs of care lead to rising insurance premiums
Unable to pay increased premiums, employers increase % of
premiums to be paid by employees or substitute high deductible
plans. Some employers may drop coverage altogether.
Younger, healthier employees with low medical costs opt out of
offered insurance coverage, knowing they are at low risk.
Through this adverse selection, older, less healthy employees
constitute a larger part of the risk pool, causing average
claims/person to rise yet further.
Back to step #1. (The positive feedback loop results in rapidly
accelerating premiums and numbers of uninsured.)
Do you agree ?
• There is already sufficient money in the
health care system to provide quality
health care for all.
• Less medical care can mean better quality.
• Currently in health care, neither supply nor
demand are subject to the market force of
price.
4
Access, Cost, and Quality are
Interrelated, but How?
We don’t
have all
the pieces
to the
puzzle!
5
Access
6
Common View
Insured
Uninsured
Realistic View
Insured for what? drug rehab, prescription drugs,
mental health, “experimental” procedures, dental, …
How much annual deductible and out-of-pocket?
Pre-existing conditions
7
In NH, About 120,000 are Uninsured
Estimated Number of Uninsured NH Residents, 1999-2003
150,000
140,000
130,000
120,000
110,000
Persons
100,000
90,000
80,000
2003 survey funded by
Endowment for Health
and HNHfoundation
70,000
1999 & 2001 surveys funded
by NH Department of Health
& Human Services
60,000
50,000
40,000
30,000
20,000
Annual estimates from Current Population Survey of the
U. S. Census Bureau indicated by filled central markers
10,000
0
1999
8
2000
2001
Year
2002
2003
26%
24%
22%
20%
0%
9
Minnesota
Vermont
Hawaii
Rhode Island
New Hampshire
Connecticut
Maine
Massachusetts
Michigan
North Dakota
Wisconsin
Kansas
Missouri
Delaware
Iowa
Nebraska
Pennsylvania
Ohio
South Dakota
Utah
Virginia
Tennessee
Indiana
Maryland
Kentucky
New Jersey
Alabama
D.C.
Illinois
South Carolina
New York
Washington
Wyoming
Georgia
West Virginia
Arizona
Colorado
Oregon
North Carolina
Arkansas
Mississippi
Florida
California
Idaho
Alaska
Nevada
Montana
Oklahoma
Louisiana
New Mexico
Texas
Percent
Percent of Population Uninsured By State, 2003
28%
New Hampshire ranked 5th among
the 50 states. But confidence
intervals of the survey show that it
falls somewhere among the 20
states with the lowest rates.
18%
16%
14%
12%
10%
8%
6%
4%
95% Confidence Intervals displayed
2%
State
6% chronically uninsured
13% transitionally insured
Insurance Status of New Hampshire Adults, 2003
insured now and all year
insured now, but not all year
uninsured now, insured during year
uninsured all year
10
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percentage of Persons Insured & Uninsured by Age Group, 2001
Age 65+
Public Insurance: Medicare
Age 55-64
Age Group
Age 45-54
Private Health Insurance
(primarily employmentbased)
Age 35-44
Age 25-34
Uninsured
Age 18-24
Public
Insurance:
Medicaid, etc.
Age 0-17
0%
11
10%
20%
30%
40%
50%
Percentage
60%
70%
80%
90%
100%
This slide from
Financial Assistance Application Study
September 2002
Applicant Insurance Status
in September 2002
at New Hampshire Hospitals
(n=1,147)
1%
44%
55%
Uninsured
12
Insured, but had a Balance Due
Unknown
Who are Disproportionately
Uninsured in NH ?
•
•
•
•
•
•
•
•
•
•
•
•
13
Those between ages 18 and 30
Those who have household incomes of less than $30,000
Renters
Self-employed persons
Employees of small businesses (fewer than 50 employees)
Workers in retail, food, or construction industries
Workers who are unemployed, employed only part time, or
employed seasonally
African-Americans and those of Hispanic origin
Adults who are not registered to vote
Singles, living alone
Residents of Coos, Grafton, Carroll, and Sullivan counties;
Those with no education beyond high school or who did not
complete high school
What We Don’t Know Can Hurt Us
#1
• If the number of people who are uninsured or
underinsured begins to grow, how will we know
it?
• What is our early warning system?
• What health effects will occur and how will we
measure them?
• What will be the impact on those still insured
through additional cost-shifting?
14
Cost
15
Estimated Personal Health Care Spending in NH, 2004
(in $ million)
Other Personal
Health Care
Nursing Home Care
Total:
$7,068 million
$438
$533
Durable Equipment $83
Other Non-durables $188
$2,201
Hospital Care
Prescription Drugs $931
Home Health Care $175
Dental Services
16
Physicians, Clinics,
& Other Professional
Services
$415
$2,104
Projected Personal Health Care Expenditure in NH 2011 (in $ million)
Other Personal
Health Care
Total:
$11,227 million
$978
Nursing Home
$794
Care
$3,084
Durable Equipment $139
Hospital Care
Other Non-durables $264
Prescription Drugs
$1,857
Physicians, Clinics,
& Other Professional
Services
Home Health Care
$306
$557
17
Dental Services
$3,248
Estimated Source of Funds Personal Health Care in US, 2004
Other Public
7%
Public
Sources
Private
Sources
Medicaid
18%
Insurance
36%
Medicare
19%
Out-of-Pocket
16%
18
Other Private
4%
Personal Health Expenditure per Capita
$12,000
US
New Hampshire
Projected
$10,000
New Hampshire health spending per
capita has closely tracked national
averages. Beginning in 1995 it slightly
exceeded the national average but
projections show it falling back below
national average in about 2008.
$8,000
$6,000
$4,000
$2,000
$0
1975
19
1980
1985
1990
1995
Year
2000
2005
2010
NH Health Expenditure as % of Gross State Product (GSP)
20%
During recessions, the expansion of
the economy slows but growth in
health spending continues to grow
and it consumes greater portions of
the overall GSP.
18%
16%
14%
12%
10%
8%
Estimated
Projected
6%
4%
2%
0%
1975
20
1980
1985
1990
1995
Year
2000
2005
2010
Expenditures on Personal Health Care and Public Schools in NH
$7,000
$6,000
Personal health care
spending was 325%
of public school
spending in 2002
Personal Health Care Expenditures
Public School Expenditures
Millions of Dollars
$5,000
$4,000
$3,000
$2,000
Personal health care
spending was 166% of
public school spending
in 1975
$1,000
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
$0
21
Year
22
Age Group
85 and Over
Age 75-84
Age 65-74
Age 45-64
Age 21-44
Age 19-20
Age 15-18
Age 6-14
Age 1-5
Under 1
Percentage Enrolled
2001 NH Medicaid Enrollees as % of NH Population by Age Group
30%
25%
20%
15%
10%
5%
0%
Medicaid Spending per Enrollee by Age Group, FFY 2001
$25,000
Average Spending per Enrollee
$22,500
$20,000
$17,500
$15,000
$12,500
$10,000
$7,500
$5,000
$2,500
$0
Under 1
23
Age
1-5
Age
6-14
Age
15-18
Age
19-20
Age
21-44
Age Group
Age
45-64
Age
65-74
Age
75-84
Age
85 +
2001 NH Medicaid Enrollees by Eligibility Category
12,833
15,675
Adults
$2,336 per
person
Aged
$18,182
per person
13,507
Disabled
$19,727 per
person
Children
$2,266 per child
24
66,547
NH Medicaid Spending by Eligibility Category, FFY 2001
$4,007,029
Unknown
$36,611,492
Adults
$150,803,296
$233,326,495
Aged
Children
Disabled
Total
$691,195,787
25
$266,447,475
Aged and disabled
accounted for 72%
of the spending
26 NH Acute Care Hospitals
Revenue/Expense Measure
2001
Inpatent Admissions
124,096
Inpatient Patient-days
543,033
Gross Patient Service Revenue
Charity Care
Contractual Allowances
Net Patient Service Revenue
Net Operating Revenue
Bad Debts
Total Operating Expense
Net Operating Income
$2,857,633,144
$45,736,960
$1,077,218,351
$1,734,677,833
$1,794,578,201
$96,243,326
$1,723,705,402
$70,872,799
Source: Audited financial statements of the hospitals for 2001 and 2002 as
provided in spreadsheet form by NH Hospital Association; 4th Quarter, 2002
Trending Report, NH Hospital Association
26
2002
123,764
547,094
$3,264,893,121
$61,546,402
$1,276,061,665
$1,927,285,054
$1,989,630,720
$106,671,251
$1,905,109,946
$84,520,774
Change
-0.2%
0.8%
14.3%
34.6%
18.5%
11.1%
10.9%
10.8%
10.5%
19.3%
$1.4 Billion of Inpatient Hospital Charges, 2001
$700,000,000
$600,000,000
25% of all charges went to the most
expensive 4,377 discharges (3.7%)
42% of total
50% of all charges went to the most
expensive 16,849 discharges
(14.2%)
Charges
$500,000,000
$400,000,000
$300,000,000
17% of total
$200,000,000
11%
8%
6%
5%
$100,000,000
4%
3%
2%
80%
90%
1%
$0
10%
27
20%
30%
40%
50%
60%
70%
Percent of 119,019 Discharges
100%
Cost-Shifting
•The allocation of unpaid costs of care delivered to
one patient population through above-cost revenue
collected from other patient populations.
•For hospitals, nursing facilities and physicians, the
historical cause of cost shifting has been below-cost
reimbursement rates paid by public programs and
uncompensated care losses due to charity care and
bad debt.
Source: “Cost Shifting: An Integral Aspect of U.S. Health Care Finance,” The Lewin Group, November 2002
28
NH Hospital Revenue, 2001
(theoretical situation where all payers pay cost + 5% margin)
140%
130%
120%
110%
% of Cost Paid
100%
90%
Other
1%
Medicaid
6%
80%
70%
Third Party / Insurance
46%
60%
50%
Medicare
40%
Self-Pay
7%
40%
30%
20%
10%
0%
29
0%
% of Gross Charges by Payer
100%
NH Hospital Revenue, 2001
(actual)
Self-Pay
2%
346%
140%
130%
120%
110%
Base Case
% of Cost Paid
100%
Medicaid
6%
90%
80%
70%
Third Party / Insurance
46%
60%
50%
Medicare
40%
Other
1%
40%
30%
20%
10%
0%
30
0%
Percent of Gross Payer Charges
Bad Debt
& Charity
5%
31
Quantifying the 2001 Cost-Shift
in 26 New Hampshire Hospitals
32
Payer
Actual
Revenue
Shortfalls
Medicare
Medicaid
Bad Debt/Charity Care
Other
$559,189,410
$82,259,512
$0
$19,864,074
Surpluses
Insurance
Self-Pay
$916,840,046
$91,660,528
Operating margin
Theoretical operating margin
Actual margin
Reduced margin
Revenue
Needed to
Meet Expenses
Plus 5% Margin
Excess or
(Shortfall)
$678,444,353
$111,966,988
$85,566,423
$22,283,430
Total
($119,254,943)
($29,707,476)
($85,566,423)
($2,419,356)
($236,948,198)
$782,740,939
$27,833,046
Total
Remaining shortfall
$134,099,107
$63,827,482
$197,926,588
($39,021,610)
5.0%
2.6%
$81,373,104
$42,351,494
$39,021,610
Rough estimate of the cost to provide
the “missing” health care to those who
are currently uninsured
•
•
•
•
•
2004 health care costs in NH: $7,000 million
Uninsured are 10% of the population
Their “need gap” is mostly for physicians, hospitals, and
prescription drugs (75% of all services)
They are disproportionately younger than the insured/Medicare
population with costs about 67% of the average.
Uninsured currently receive 60% of the health care of those who
are fully insured (self-pay, cost-shifted, and subsidized).
$140 million additional cost
(By way of comparison, the State obtained $205 million net
Medicaid enhancement revenue and recoveries in 2003.)
33
371,272 Members Reported to Department of Insurance, 2003
Aetna, 300
Anthem, 101,801
Matthew Thornton,
159,848
Cigna, 69,585
34
Harvard Pilgrim,
39,738
Use of Premiums by 5 NH Health Insurers, 2003
83% of premiums paid for
claims while 17% was
administration and profit
Claims Adjustment
5%
General
Administration
9%
Net Underwriting
Gain (Loss)
3%
Total spending:
$1,255,047,786
ERs & Out of Area
2%
Outside Referrals
1%
Other Professional
Services
4%
Based on annual financial reports filed with
NH Department of Insurance
35
Pharmacy
12%
Medical/Hospital
63%
Underwriting Finances of 5 NH Health Insurers
Member-months
2001
5,280,024
2002
5,290,688
2003
4,936,816
% change
in 2 years
-6.5%
Net Premium Income
$1,194,219,196 $1,241,571,726 $1,254,608,757
Total medical and hospital claims
$973,778,586 $1,003,260,608 $1,035,193,680
Claims Adjustment Expenses
$50,160,374
$63,893,427
$68,615,016
General Administrative Expenses
$100,326,769 $107,312,895 $113,653,270
Net Underwriting Profit (Loss)
$56,638,560
$63,051,904
$36,029,896
5.1%
6.3%
36.8%
13.3%
-36.4%
Per Member Year
Net Premium Income
Total medical and hospital claims
Claims Adjustment Expenses
General Administrative Expenses
Net Underwriting Profit (Loss)
12.4%
13.7%
46.3%
21.2%
-32.0%
36
$2,714.12
$2,213.12
$114.00
$228.01
$128.72
$2,816.05
$2,275.53
$144.92
$243.40
$143.01
$3,049.60
$2,516.26
$166.78
$276.26
$87.58
What Did Each $1,000 of Health Insurance Premium Buy in 2002?
$1,000
$18
State premium tax
Admin/Claims Processing
$120
Admin/Claims Processing
$120
Net Profit $51
Net Profit $51
$800
Other Providers
$82
Provider Cost-shift
$103
$700
Prescription Drugs
$125
Other Providers
$70
$900
$600
Dollars
$18
$500
Prescription Drugs
$125
Physicians/Clinics
$266
$400
$708 paid for
health care of
the insured
$300
$200
Hospitals
$338
$100
Physicians/Clinics
$226
Hospitals
$287
$0
37
By the books
With cost-shift squeezed out
Missing Pieces of the Cost Puzzle
#1
Amounts paid in claims for different service types
by employers’ self-insured health benefit plans.
38
Missing Pieces of the Cost Puzzle
#2
List prices of all providers, including hospitals,
physician practices, laboratories, outpatient
clinics, surgery centers.
39
Missing Pieces of the Cost Puzzle
#3
Actual payment amounts made by insurers to all
types of providers under negotiated discounts
and contracts.
40
Missing Pieces of the Cost Puzzle
#4
Aggregate costs of private medical practices
broken down by standard line item costs and
numbers of units of various codes billed that
generate offsetting revenue.
41
Quality
From work by Elliott Fisher, MD, MPH, and others.
See a series of articles in Annals of Internal
Medicine, Vol. 138, #4, February 18, 2003 and
another series in Health Affairs, Web exclusive
edition, October 7, 2004.
42
If all regions of the US could adopt the Medicare
medical care practice patterns of the lowest
spending 1/5 of the US hospital catchment areas,
which of the following statements would apply?
•
U.S. health care spending would decline by over 30%.
•
The projected deficit in the Medicare Trust fund would
be postponed by at least 25 years.
•
We could send 30% of the U.S. health care workforce
to Africa and -- in theory -- improve the health of both
continents.
In a Veterans’ Administration study, less care was
consistent with both better care and better outcomes
• Followed individuals with serious chronic diseases
(6 medical conditions, 3 psychiatric conditions)
• Constrained VA hospital use to 50% of previous
level
• Clinic visits increased 10%
• Visits for urgent care declined
• No compensating use of private hospitals resulted
• Survival rates not adversely affected
(for 5 conditions improved significantly, for 4
conditions remained unchanged)
Physicians control or direct about
70% of all health care spending
• How soon will a patient return for follow-up?
• What drugs will be prescribed?
• What imaging should be performed?
• When is discharge from a hospital stay ordered?
• What diagnostic tests and procedures are ordered?
• What specialists are consulted and how often?
• Is the ICU required?
For similar conditions across different regions, practice
patterns appear to be driven by supply, not inherent need.
Supply-Sensitive Care : Highest vs Lowest Spending Regions
Physician Visits
0.5
1.00
1.5
2.0
2.5
3.0
1.00
1.5
2.0
2.5
3.0
Office Visits
Inpatient Visits
Initial Inpatient Specialist Consultations
Tests and Procedures
Electrocardiogram
CT / MRI Brain
Pulmonary Function Test
Electroencephelogram (EEG)
Hospital Utilization
Discharges
Total Inpatient Days
Inpatient Days in ICU or CCU
Procedures -- Last 6 months of life
Feeding Tube Placement
Emergency Intubation
0.5
Lower in High Spending Regions
Higher in High Spending Regions
1 Year Mortality Rate of Medicare Beneficiaries by Spending Regions
35
30
25
Annals of Internal Medicine,
Volume 138, Number 4, February
18, 2003, page 291
20
15
10
5
0
Hip fracture
N=614,503
Colorectal cancer
N=195,429
Acute myocardial
infarction
Medicare beneficiary
survey
N=159,393
N=18,190
What do higher spending hospital catchment areas
of the country get compared to lower spending?
•Additional resources
60% more spending per capita
•Content of care
Less effective care
No additional major surgery
More supply-sensitive services
•Access to care, satisfaction
Slightly worse access
No greater satisfaction
•Health outcomes
No gain in function
Mortality slightly higher
•Physician perceptions
Quality worse
Lower career satisfaction
This comparison is after having controlled for inherent regional price differences,
average levels of illness, age, sex, race, and socioeconomic conditions.
Is spending more likely to make things better?
Law of Diminishing Returns
Health Benefit
Overall, we may be in this
region of declining benefit from
more medical care
Inputs of Medical Care
What We Don’t Know Can Hurt Us
#2
• Are these results regarding quality measures
unique to the Medicare population or do they hold
true for those with private insurance as well?
• What are the uniform quality-of-care measures
and cost-of-care measures that are available for
all providers in NH and where can I get them?
51
What We Don’t Know Can Hurt Us
#3
• What is the cost of this care/service?
Is the potential benefit worth the cost?
• What is the quality of this care/service?
Is the potential benefit worth the risk?
• What are the quality and cost of alternatives?
Can I go elsewhere and get higher quality or lower cost?
52
The Important Link
Between Policy & Practice:
Information
• What are the costs and what is driving
them?
• For whom is access limited, why, and what
are the results?
• What prevention services and patterns of
care are most effective?
• How are the answers to these questions
related?
53
54
NHCPPS Health Care Finance Project
Conceptual Flow Chart of Funds in New Hampshire Health Care System
Individual and
Business Taxpayers
(A)
Ultimate Fundors: Level 1
Fundors: Level 2
County Treasury
(A)
Intermediaries: Level 3
Payments to Providers
Administration
Profits
Medicare
(A)
Federal Treasury
(B)
State Medicaid
Program
(B)
Business Owners &
Employees
(B)
Individuals
(C)
Private Sector
Employers (D)
State Treasury
(C)
Other Public
Programs
(C)
Investment Portfolios
(E)
Commercial Health
Insurers
(D)
Changes in these lines
constitute reim bursem ent
control, not "cost control."
Providers: Level 4
Nursing Homes
(A)
Private Practioners
(B)
Pharmacies
(C)
Hospitals
(D)
Independent
Laboratories
(E)
Community
Health Centers
(F)
Etc…….
This is the only point at w hich
real "cost control" can take
place.
Provider cost structures: Level 5
Salaries and w ages
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
$?
Fringe benefits
Out-of-state
$?
$?
$?
$?
$?
$?
$?
Consumable non-medical supplies
$?
$?
$?
$?
$?
$?
$?
Consumable medical supplies
$?
$?
$?
$?
$?
$?
$?
Cost of Capital (debt service)
$?
$?
$?
$?
$?
$?
$?
Over-the-counter medications
$?
$?
$?
$?
$?
$?
$?
Prescription medications
$?
$?
$?
$?
$?
$?
$?
Malpractice insurance
$?
$?
$?
$?
$?
$?
$?
Other insurance
$?
$?
$?
$?
$?
$?
$?
Utilities
$?
$?
$?
$?
$?
$?
$?
Office equipment
$?
$?
$?
$?
$?
$?
$?
Clinical equipment
$?
$?
$?
$?
$?
$?
$?
Profits
$?
$?
$?
$?
$?
$?
$?
Etc……
$?
$?
$?
$?
$?
$?
$?
In-state
55
St. Joseph Hospital, 2001
Nashua, NH
Net operating income of $10.8 million
on net revenue of $91.4 million
140%
130%
120%
110%
% of Cost Paid
100%
Medicaid
2%
90%
80%
70%
60%
Self-Pay
5%
Third Party / Insurance
55%
50%
Medicare
34%
40%
30%
20%
10%
0%
56
0%
Percent of Gross Charges by Payer
Bad Debt & Charity
4%
Net operating loss of $0.8 million
on net revenue of $13.5 million
Cottage Hospital, 2001
Woodsville, NH
140%
130%
Self-Pay
8%
120%
110%
% of Cost Paid
100%
90%
Medicaid
9%
80%
70%
Third Party / Insurance
34%
60%
50%
Medicare
44%
40%
30%
20%
10%
0%
57
0%
Percent of Gross Charges by Payer
Bad Debt & Charity
5%
Franklin Hospital, 2001
This hospital had a net operating loss of
$6.2 million on net revenue of $15.0 million
140%
130%
120%
110%
% of Cost Paid
100%
90%
80%
Medicaid
9%
70%
Self-Pay
6%
60%
50%
Third Party / Insurance
34%
40%
Medicare
46%
30%
20%
10%
0%
58
0%
Percent of Gross Charges by Payer
Bad Debt & Charity
6%
Potentially Misleading !!
Hospital A, 2001
This hospital had a net operating gain of
$4.7 million on net revenue of $55.1 million
Hospital B, 2001
190%
140%
140%
Self-Pay
2%
130%
130%
120%
120%
110%
110%
Medicaid
4%
80%
% of Cost Paid
% of Cost Paid
90%
70%
50%
Self-Pay
5%
100%
100%
60%
This hospital had a net operating loss of
$2.7 million on net revenue of $20.5 million
Third Party / Insurance
58%
40%
Medicare
31%
Other
3%
30%
Medicaid
7%
90%
80%
70%
60%
50%
40%
30%
20%
20%
10%
10%
Third Party /
Insurance
31%
Medicare
51%
0%
0%
Source of Payment
Bad Debt & Charity
3%
Source of Payment
Bad Debt & Charity
6%
Is a hospital’s shortfall caused by reimbursement that is low or
by a cost structure that is high?
We don’t know!
59