Health Care TransformationAn Employers’ Perspective

Bipartisan Policy CenterApril 24, 2008

Sally WelbornSenior Vice President – Corporate Benefits

Wells Fargo & Company

2

About Wells Fargo

• 165,000 active Team Members• 15,000 retired Team Members with health care through Wells Fargo• Over 300,000 individuals covered by health plans provided by Wells

Fargo• Over $1 Billion in health care spend annually• Located in all 50 states (and some international)• 156 years old and the result of hundreds of mergers and acquisitions

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The Health Care Problem

• Quality• Safety• Cost• Coverage Decline/Cost Shifting

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The Health Care Problem

• Unexplainable Practice Variation by Physicians– Overuse, Underuse and Misuse– Patients get recommended care only about half the time

• Americans less and less healthy– Chronic Conditions are on the increase– Lack of exercise, Unhealthy eating habits

• Americans dying from unsafe health care– Estimate 98,000 people die annually due to medical errors

• Health Care System wasteful and inefficient– No incentives and/or misaligned incentives for patient, provider and

health plan to “do the right thing”– Little information on cost/quality available to enable patient or engage

providers• Uninsured (or underinsured) population large and growing• Diverse Population with Diverse Needs

BOTTOM LINE: UNSUSTAINABLE HEALTH CARE COST INCREASES FOR EMPLOYERS AND EMPLOYEES

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Premium and Trend Context

• Health insurance premium increases have consistently exceeded the CPI and worker earnings

• Premium increases are “eating” all potential wage increases for workers and their retirement savings

• Key drivers of premium increases:– Absence of market forces rewarding better quality

and more efficient care (fee-for-service versus “whole person”)

– Impact of new technologies, health labor shortages, aging population and poor population health

– Decreased plan competition– Provider monopolistic practices– Cost-shifting from under funding of Medicare,

Medicaid and the uninsured

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Market Realities and Impact of Cost Increases

• Some Employers Dropping Coverage – 4% fewer Americans with Commercial insurance– Large decrease in coverage for the middle classes– Over one-third of the uninsured nationwide earn more than

200% of the federal poverty level• Many Employers Dramatically Changing Offerings

– Increasing share of costs to employees (contributions, rising point-of-service payments, larger deductibles)

– Thinner plan designs • Threat to Many Consumers Health Status and Financial

Security – Risk of consumers avoiding care and preventive services– Major driver of personal bankruptcies

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1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999*

2000 2001 2002 200340%

50%

60%

70%

80%

90%

100%

98%96%

95%

94%92%

89%

85%

82%

75%

67% 65%

56%

52% 52%

48%

Percent of working adults insured, by household income quintile1987-2003

Highest Quintile

Fourth

Third

Second

Lowest Quintile

* In 1999, CPS added a follow-up verification question for health coverage. Source: Analysis of the March 1988–2004 Current Population Surveys by Danielle Ferry, Columbia University, for The Commonwealth Fund.

Adapted from “A Need to Transform the U.S. Health Care System: Improving Access, Quality, and Efficiency,” compiled by A. Gauthier and M. Serber, The Commonwealth Fund, October 2005.

A Politically Unstable TrendMiddle Income Workers are Losing Insurance Most Quickly(Uninsurance kills ~5,000 annually; rising ~450 annually)

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Quality Shortfalls: Getting it Right 50% of the Time

Alcoho

l Dep

ende

nce

UlcersHea

dach

e

Hyperl

ipide

miaAsthma

Orthop

edic

Condit

ions

Conge

stive

Hea

rt Fail

ure

Corona

ry Arte

ry Dise

ase

Prenata

l Care

0% 20% 40% 60% 80% 100%

10.5%22.8%

32.7%40.7%

45.2%45.4%

48.6%53.0%53.5%53.9%

57.2%57.7%

63.9%64.7%

68.0%68.5%

73.0%75.7%

Adherence to Quality Indicators

Percentage of Recommended Care Received

Adults receive about half of recommended care

54.9% = Overall care 54.9% = Preventive care 53.5% = Acute care56.1% = Chronic care

Not Getting the Right

Care at the Right Time

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BUT…Truly Excellent Care and Rapid Improvements are PossibleImprovement in Screening and Health Status for Californians with Diabetes: Results of Measurement, QI, Reporting and Pay-for-Performance

2000 2001 2002 2003 2004 2005 20060

10

20

30

40

50

60

70

80

90

100

71

7782

8891 93 94

42

47

5256

61

6771

LDL Screening

LDL <130

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What If We Don’t Do Anything???

• US businesses less competitive globally

• Wage increases depressed• Employment opportunities dampened• More and more uninsured Americans

and therefore, more cost shifting to employers

?????

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Wells Fargo …. Aspirational Goals

• For Team Members (Employees)• Coverage to assure access to right care at right time• Information to be a good consumer  (price, quality, access etc) • Improvement in trend of future employee premium increases • Incentives to get right treatment (and get back to work)• Better quality of life• Affordable health care and health insurance• Respectful of diverse needs and desires

• For Providers • Keen appreciation and pressure resulting from their patients having a stake in costs

and outcome • Incentives to provide evidence-based medicine• Rewarding better performing providers• Better outcomes and greater efficiency

• For Wells Fargo • Endorsement of philosophy that health coverage is integral part of offering to ensure

our team members’ financial success and part of our strategy to promote productive and engaged work force

• Moderation in the rate of health cost increases• Improved team member wellness and productivity • Reduction in number of uninsured in U.S.

Ideal State: Sustainable Health Care Trend, Better Quality Care

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What catalyst will begin to move the market closer to Ideal Health Care State?

The Consumer/Patient will !!• Transparency

– When patients have information to support asking their doctors about treatment costs and differences in quality, the market will finally respond in developing national standards of cost and quality reporting

• Incentives to seek right care at right time– When consumers have a reason to ask about the cost of treatment

choices they will change the way they “purchase” health care• Cost and Quality Tradeoffs

– When providers understand the patient is “at risk” for the differences in cost and quality, efficiency will improve

If consumer/patients are engaged and making better choices, and providers are under pressure from patients to provide more effective/efficient care, potential impact to health care trend can be 5 to 40%. (Arnie Milstein)

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Wells Fargo Health Plan Offerings

• PPO offered in all states with small copay in-network• Two consumer directed health plans offered in all states

– Front end Health Reimbursement Account to pay for first health care expenses followed by deductible depending on plan and coverage level, followed by traditional PPO with limit on out of pocket expenses

– Incentives for chronic condition management– Prevention paid at 100%, no deductible; mental health provided in

additional stand alone benefit• Health Savings Account/High Deductible Plan offered in all states

– Recently offered to support members who desire HSA • High quality HMO’s offered where available

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Major Levers of Change for Employers

• Plan selection and holding plans accountable for assuring that right care is provided at the right time

• Rational plan selection approach for employees

• Benefit design

• Promoting system change with stakeholders and policy makers

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Wells Fargo Plan Selectionand Accountability Considerations• Selection of “Best-in-Class” Health Plans

– Strong network with strong network management– Outstanding health management programs and vision– Effective integration of DM/health management– Clear vision regarding consumer activation and excellent consumer tools– Demonstrate flawless administrative capabilities

• Holding Health Plans Accountable– Claims Target and Network Discount Guarantees – Savings Guarantees for Chronic Condition Management and Preference

Sensitive Care Coaching– Measure compliance around Evidence Based Medicine and standards of care – Member service delivery platform effectiveness– Guarantee Value of Next Generation Networks (i.e. High Performance Networks)

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Standard Contracting Assessment Areas

• Core Plan Administration– Plan Collaboration – HIT, PPO Administration– Value-Based Plan Design– Reducing Disparities &

Cultural Compentence• Consumer Engagement• Provider Measurement &

Rewards• Pharmaceutical Management• Prevention & Health

Promotion• Chronic Disease

Management– Diabetes– Cardiovascular disease– Low back pain– Total population management

• Behavioral Health

Provider Measurement & Rewards:• Provider Performance Transparency

Practitioners and/or Groups Hospitals

• Shared Decision Making Support• Electronic Personal Health Record• Price Transparency• Pharmaceutical Management• CAHPS Ratings

Chronic Disease Management:• Member Identification• Targeted/Tailored Messaging• Member Reminders• Inbound/Outbound Calls & Support

Prevention & Health Promotion:

• Worksite Health Promotion• Health Risk Appraisals• Preventive Screening (Cancer/ Immunization)

• Tobacco Cessation• Obesity• Maternity Care

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Plan Selection: Sample for “Core Plan Administration” Elements

25

5

73

30

17

11

9

30

18

11

10

25

462

25

11

72

28

13

10

4

35

24

11

6

35

31

18

16

0

10

20

30

40

50

60

70

80

90

100

Health Net Kaiser N Kaiser S PacifiCare Blue Cross HMONationalAverage

HMOBenchmark

HMO Max

Health IT

ProviderContracting

Plan Design &PurchaserSupport

Accreditation& PerformanceReporting

HMO A HMO B HMO C HMO D HMO E

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Providing Employees with data to make rational decisions

Member Ranking based on • Premiums• Out of Pocket

Costs• Physician

Selection• Plan level

quality indicators

• Plan Features and Services

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Benefit Design Can Address Many Issues

• Respond to diverse employee needs and desires– Wells Fargo offers HMO’s, CDHP and PPO’s

• Encourage member behavior– Rx plan designs to encourage best drug for condition at lowest cost

• Incent health management– Innovative Program in WF CDHP plan – Rewards for Action

• Eliminate real (or perceived) financial barriers to care– Incentives for chronic care management

• Foster accessing preventive care with low or no cost coverage

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CDHP Incentives for Chronic Care Management

Incentive Phase Maximum Annual Reward

Education – online information program completed

$50

Recommended Care – Obtain all recommended care for the condition

$150

Track Your Health – Enter lab and clinical indicators online

$150

Prescription Monitor – Fill and adhere to recommended prescriptions

$150

Total Potential Incentive Earned Annually $500

Rewards For Action Program Diabetes; Asthma; Coronary Artery Disease; Chronic Obstructive Pulmonary Disorder; Coronary Heart Failure; Hypertension

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Wells Fargo Lessons – We Can Make a Difference, but We Can’t Solve the Problem Alone

Lessons:• Thoughtful plan selection and design leads to

cost reductions and savings• With tools and incentives, consumers will be

better engaged in their care• Plan designs and engaging consumer can lead

to better outcomes

BUT….Costs are rising because we have VERY little impact over the broader system failures

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Other Systemic Changes Must Also Take Place

• Improved Health Information Technology (EMR)– Elimination of waste in the system due to archaic systems and

processes– Creates the forum to provide transparency to support other

initiatives• Reduction in provider errors and inappropriate provider

practice patterns• Alignment of provider payment and incentives

Wells Fargo has influence in these areas through various initiatives such as PBGH, NBGH, Health Information Technology Leadership Panel, Leapfrog, but…

ONE EMPLOYER CANNOT DO IT ALONE AND NATIONAL SOLUTIONS ARE NEEDED!!!

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Wells Fargo Challenges and National Solutions

Wells Fargo Challenges National Solutions • Inefficient administrative processes and lack of

transparency• Interoperable health information technology

standards• Public payer support for e-prescribing and

electronic medical records• Demand on plans to promote higher performing

providers and better treatments undercut by lack of data and consistent reporting on both treatments and provider performance

• Adoption and use of nationally standardized performance measures for doctors, groups, hospitals and treatments

• National comparative effectiveness information to inform value-based benefit design

• Targeting on better chronic care management can lead to unclear/mixed messages – Wells Fargo represents small portion of any provider’s patient mix

• Leadership on chronic care management including appropriate reimbursement structures

• Efforts to change payments to reward better quality (e.g., support for Calif. IHA Pay-for-performance) are tiny in face of toxic FFS payment

• Need changes to public and private payment to reward and encourage improvement, excellence and right care delivered at the right time

• Federal and private collaboration on medical home model and other pay for performance models

• Wells Fargo and Team Member costs driven in part by cost of uninsured and under-funded public programs

• Move to covering all Americans and away from cost-shift to employers & insured individuals