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Lessons Learned — US Health Care Experience Perspectives from an Actuary. Anna M. Rappaport, F.S.A. 18 February 2003. Focus: US Healthcare System and The Role We Play. Agenda. . Environment. Observations. Lessons Learned. What Next?. - PowerPoint PPT Presentation
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Anna M. Rappaport, F.S.A.18 February 2003
Lessons Learned — US Health Care ExperiencePerspectives from an Actuary
Mercer Human Resource Consulting 2
Focus: US Healthcare System andThe Role We Play
Mercer Human Resource Consulting 3
EnvironmentEnvironment
Observations Observations
Lessons LearnedLessons Learned
Agenda
What Next? What Next?
Mercer Human Resource Consulting 4
EnvironmentUS sources of coverage
Private Employer plans
finance most health care for employed
Government About 45% of care is
government financed–Medicare: Americans
over age 65–Medicaid: Poor - low
assets and income–Military and some
veterans–Government employees
Insurance & HMOs Risk transfer Administration
Some individual coverage, but expensive and hard to get if in poor health
Over 40 million uninsured Americans
Mercer Human Resource Consulting 5
EnvironmentHow US health care is financed
Private Common to both Medicare Range: fully
insured to self insured
Fee for service replaced by negotiated arrangements; e.g., fee schedules, discounts
Traditional plans; Physicians paid based on schedules, fixed payment to hospitals based on diagnosis
Medicare + choice = risk contract
Fee for service = traditional method of payment
Some providers take risk
– HMOs paid on capitation basis - $/per month/per person covered
– Physician groups, hospital systems also can be capitated
Mercer Human Resource Consulting 6
More new technologies
More new technologies
Most savings maximized
Most savings maximized
ConsolidationConsolidation
Aging workforceAging workforce
Medical errorsMedical errorsMany providers
unprofitable, unstable
Many providers unprofitable,
unstable
Employee contributions
decrease
Employee contributions
decrease
EnvironmentForces driving health care in the US
Prescription drug costs
Prescription drug costs
Mercer Human Resource Consulting 7
EnvironmentPrevention vs. cure
Methods of Payment
Types ofPractitioners
Decision Making and Information
TreatmentSettings
CareGuidelines
Mercer Human Resource Consulting 8
EnvironmentCanada, UK health systems
Mercer Human Resource Consulting
Government provided coverage for all Resource strains on both systems Wait for care can be considerable
Private supplemental benefits are provided in addition to government system (supplemental benefits are growing)
Discussions with users shows
– Diversity of opinion
– Some feel systems are great, others feel they are not doing well
Mercer Human Resource Consulting 9
EnvironmentSociety of Actuaries: troubled health care project - why?
HCPENSION
PAY
Mercer Human Resource Consulting 10
Source: Table 1333, 2001 Statistical Abstract of the United States
9%
14%
7%
10%
7%8%
6%7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
U.S. Canada Japan U.K.
1980
1998
EnvironmentHealth care as a percentage of GDP
Mercer Human Resource Consulting 11
EnvironmentHealth care as a percentage of GDP
Source: Table 3.6, Hospital Authority Statistical Report 2000-2001, Hong Kong Special Administrative Region
0%
2%
4%
6%
8%
10%
12%
14%
16%
1994 1995 1996 1997 1998
U.S.
Canada
Japan
U.K.
H.K.
Mercer Human Resource Consulting 12
Agenda
EnvironmentEnvironment
Observations Observations
Lessons LearnedLessons Learned
What Next? What Next?
Mercer Human Resource Consulting 13
ObservationsSome key facts about the money
Mercer Human Resource Consulting
Hospital care = biggest expenditure (34%) Increases in costs “compound” Health care costs have increased much more rapidly than
the cost of living Typical employee benefits insulate employees from costs
Money drives treatment patterns Most expensive is not best
Fewer than 10% of the covered population account for a large proportion of the claims
Claims increase with rising age Traditionally, very high claims in last year of life
Mercer Human Resource Consulting 14
10%
35%
50%
5%
53%
25%
19%
3%
% of Employees % of Claims
$20,000/person
$150/person
ObservationsLarge claims significantly drive cost
Mercer Human Resource Consulting 15
NOTE: (1) Assumes level enrollment over five years
Expected cost impact based on $100 million annual health care spending
If trend were
reduced from 15%
to 11%
– the cumulative five
year difference
would equal $83m
or $17m per year
If trend were
reduced from 15%
to 7%
– the cumulative five
year difference
would be $157m
or $31m per year
$201
$141
$100
$115
$132
$152
$175$169
$123
$111
$152
$137
$115
$107
$123
$132
$100
$120
$140
$160
$180
$200
$220
2003 2004 2005 2006 2007 2008
Illu
stra
tive
Hea
lth C
are
Tre
nd (
in m
illio
ns)
@ 15.0% @ 11.0% @ 7.0%
ObservationsCost trends drive projections
Mercer Human Resource Consulting 16
Some experts recognize need for better integration of chronic care and for integrated management
“Reimbursement for clinical care in our state and country is designed for an acute care model and chronic care is very much an after thought. There needs to be a shift in the paradigm of care we offer to the frail elderly.”
…. from a geriatric physician
ObservationsAging and health care
Mercer Human Resource Consulting 17
0.00
0.50
1.00
1.50
2.00
2.50
3.00
20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+
Age
Re
lati
ve
Co
st
by
Ag
e
Male Female
Average employer cost = 1.0
Relative Costs by Age and Gender
Health care benefit trends Aging and health benefit costs
Mercer Human Resource Consulting 18
ObservationsAging and health care issues
CHRONIC CARE
ACUTE CARE
WOMEN ALONE
LONG-TERMCARE
COSTOF AGING
INTEGRATION
SUCCESSMEASURES
CARESETTINGS
END-OF-LIFECARE
Mercer Human Resource Consulting 19
Often looks at treatments in isolation; e.g., December 2002 study on blood pressure drugs
Much research is financed by providers, drug companies; e.g., conflict of interest
Largely focuses on conventional Western medicine
Small samples produce inconsistent findings; e.g., new study on use of hormones for mid-life women
Rarely considers economic and other non-medical issues
ObservationsResearch is not adequate
Mercer Human Resource Consulting 20
ObservationsAlternative medicine
Definition: What is it?
Alternatives: What are they? What is best?
Public acceptance: High but limited data and payment by insurance plans
Research: A woeful lack
Holistic health centers: Very limited in the US
Mercer Human Resource Consulting 21
– Managed care based on controls, contracting, defined provider networks
– Managed care sometimes used capitation
– Managed care did not work
ObservationsA changing paradigm
FEE FOR SERVICE MANAGED CARE
MANAGED CARE CONSUMER DIRECTED
– Give the consumer more power
– Give the consumer an economic stake in the result
– Restructure payments and delivery to fit
– Will it work?
Mercer Human Resource Consulting 22
New Ideas: More Consumer Influence Consumerism is a continuum
True Defined Contribution(Vouchers)
New Tiered Network Models, High-Performance
Network Delivery System
Models
Tiered CopaysHospital, MD,
RX
Consumerist Benefit Designs
Consumer Directed Health
Plan
Increasing Consumerism
Mercer Human Resource Consulting 23
Agenda
EnvironmentEnvironment
Observations Observations
Lessons LearnedLessons Learned
What Next? What Next?
Mercer Human Resource Consulting 24
Lessons Learned Actuaries could play a bigger role
Situation Actuaries have
largely been involved with insurance and benefits
System not working well - U.S. society searching out solutions
Opportunities Many opportunities
for cost-benefit analysis
Align interests of all parties
Barriers Unclear what
“successful” treatment is
Data is not user-friendly
Mercer Human Resource Consulting 25
Lessons Learned Preventive care can have biggest payoff
Opportunities Pre-natal care-very
big payoff Public health,
sanitation have very big payoff
Individuals can influence their health
Barriers But, insurance and
benefits focus on paying for acute care
Mercer Human Resource Consulting 26
Lessons LearnedWhat is paid for drives behavior
Consumer BehaviorExamples:
During 1960s and 1970s, design of benefits and insurance drove care into hospital
During 1990s surgery moved out of hospital
Provider BehaviorExample:
Providers learn how to “game” the system (reconfiguration of diagnoses)
Fraud is also an issue
Mercer Human Resource Consulting 27
Lessons LearnedAccepted practices can change radically
Hypertension study - older cheaper treatment is just as good, often better than new much more expensive drugs
Hormone study - drugs routinely used actually increase risk
TWO RECENT EXAMPLES
LONGER TERM
50 years ago - US women stayed in hospital one week + for childbirth
Today - often go home same day
Mercer Human Resource Consulting 28
Agenda
EnvironmentEnvironment
Observations Observations
Lessons LearnedLessons Learned
What Next? What Next?
Mercer Human Resource Consulting 29
Focus: US Healthcare System andThe Role We Play
Mercer Human Resource Consulting 30
What Next?How much care should we deliver?
????Who makes
the decision?
Will everyone be covered by the same system?
How much care is family
expected to provide?
Guidelines
Mercer Human Resource Consulting 31
Guidelines for medical practice/payment
Medically necessary
In patient/out patient
Diagnostictests
Electivesurgery
Transplants Hipreplacements
Generic drugformularies
Variable drug reimbursement
Life styledrugs
Maternitystays
End-of-lifecare
What Next?How much care should we deliver?
Cosmetic Surgery
Coronaryby-passes
Mercer Human Resource Consulting 32
What Next?How much will it cost?
Providers Nurse Nurse practitioner Contracted providers Specific hospitals
Payment Methods Unlimited fee-for-service Fee schedules Bundled fee schedules Capitation
Who decides on provider and payment method? Who controls quality? Who sets the price?
Mercer Human Resource Consulting 33
What Next?How much will it cost?
Issue in many countries:The role of Government Employer Individual
Do the sicker people pay more or does
everyone pay?
Is participation in the system mandated?
What is the share of theindividual in cost andhow is it paid? Premium Co-payment Payment for uncovered
items
Mercer Human Resource Consulting 34
Agenda
EnvironmentEnvironment
Observations Observations
Lessons LearnedLessons Learned
What Next? What Next?
Mercer Human Resource Consulting 35
Appendix
Mercer Human Resource Consulting 36
Basic Concepts
Prevention vs. cure Better to keep well: greater payoff for preventive
and early care Maternity care: prenatal care = healthier babies =
lower costs Some systems focus resources heavily on
sickest patients
Methods of payment Fee-for-service: pay for specific services offered Capitation: pay fee for covered person per month Salaried providers: in public system, may pay salary with
no direct link to units of care or numbers of patients
Mercer Human Resource Consulting 37
Basic Concepts
Types of practitioners Accreditation and licensing requirements Physicians, nurses, physical therapists, etc. Specialists vs. generalists(Challenge to manage care in face of specialization)
Decision makers and decision input Roles: patient, physician, guideline setters Information sources Second opinions
Mercer Human Resource Consulting 38
Basic Concepts
Treatment settings and system organizations Health maintenance organizations
(HMO): prepaid total care Preferred provider organization
(PPO): contracted network Care guidelines
–Specified by medical community–Definition of what financing program pays for–Specified by managed care organization
In-hospital vs. outpatient care Pharmaceuticals Group practice vs. individual practice