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Medicare Prescription Drugs Improvement and Modernization Act of 2003: What Do Employers Think?. Robert S. Galvin, MD Medicare Prescription Drug Congress February 26, 2004. What The Bill Isn’t. Perfect. What The Bill Is. “The Triumph Of Experience Over Hope” Apologies to Samuel Johnson. - PowerPoint PPT Presentation
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Robert S. Galvin, MDMedicare Prescription Drug CongressFebruary 26, 2004
Medicare Prescription Drugs
Improvement and Modernization
Act of 2003:
What Do Employers Think?
Medicare Prescription Drugs
Improvement and Modernization
Act of 2003:
What Do Employers Think?
2
What The Bill Isn’tWhat The Bill Isn’t
Perfect Perfect
3
What The Bill IsWhat The Bill Is“The Triumph Of Experience Over Hope”
Apologies to Samuel Johnson• Government Can Act on Health Care
• Employers Included in Dialogue
• Favors Competitive / Market Approach . . . But With Safety Net
• Pushes Transparency / Quality Agenda
• Encourages Consumerism . . . Creates Possibility of New Solutions
4
The Devil (And The Angel) Is In The DetailsThe Devil (And The Angel) Is In The Details
• Details of ‘Actuarial Equivalency’
• FASB Guidance
• HSA Design
• Rules for PBMs and Health Plans
5
Employer OptionsEmployer Options
• Drop Retiree Coverage: Government Safety Net
• Take Employer Subsidy
• Coordinate With Medicare As Primary
6
Cost = Price x UseCost = Price x Use
Why Is No One Talking About the “U” Word?Why Is No One Talking About the “U” Word?
Price Use
’99 5 10 8
’00 2 12 4
’01 5 6 3
’02 6 9 4
’03 5 4 4
Mix
7
Cost and Quality Must Be IntegratedCost and Quality Must Be Integrated
Paying More Means Using Less . . . Without Regard To Quality
More Gradual Change Avoids Quality Problems
8
Why Is No One Talking About the “Q” Word?Why Is No One Talking About the “Q” Word?
Use = Price Sensitivity x Compliance x Quality
(Appropriateness)
Use = Price Sensitivity x Compliance x Quality
(Appropriateness)
Risk DaysSigma = 2.75Defect = 11%
Days Where Necessary Therapy Was Lacking
118,206
Days Where Unneeded Therapy Was Provided
8,904,000
Therapy Dispoused84,000,000
9
Over Utilization• Overuse• Duration• Duplication
Misuse• Drug-Drug• Drug-Disease
Under Utilization
56.1% 42.6% 1.2%
What Kind of Risk?What Kind of Risk?
10
Quality Saves MoneyQuality Saves Money
Conflicts Tracked: 81,423
Changes Made : 29,864 Change Rate: 37%
Duration 40%
Drug Disease 25%
Overuse 25%
Drug Interaction 5%
Duplicate Therapy 5%
Source of Savings (Approx) by Defect
’03: $10MM Saved
’04: Send Letter to Physician and Patient
Results
11
Wall Street JournalDecember 4, 2004
12
A Market Approach to CostsA Market Approach to Costs“Employers believe that consumer pressure is a powerful, underutilized
lever for improving quality and efficiency. They believe that higher quality and lower cost will result if consumers spend more of their own money for
services they believe are high quality, and if providers respond by improving their performance. For this strategy to succeed, consumers will
have to be activated to seek more efficient, higher quality care and physicians will have to be rewarded for delivering it.”
Sounding BoardNEJM, September 19, 2002
Transparency
Incentives and Rewards
Focus on Quality and Efficiency
13
What Policies Will Accelerate Us Getting To The Right Lower Quadrant?
Efficiency and Quality Create Value Efficiency and Quality Create Value
15 58
26
1083
611
-40%
-20%
0%
20%
40%
-150%-100%-50%0%50%100%150%
Effectiveness (Actual v. Expected Complications)
Effic
ienc
y (A
ctua
l v. E
xpec
ted
Cos
t)
Hospital B
Hospital A
Hospital G
Hospital E
Hospital F
Hospital D
Hospital C
14
National Centers of Excellence: An ExampleNational Centers of Excellence: An Example
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31
United Resource Network
$85,886$191,591
$273,701
$90,604$15,101
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Average CaseCharges
Average Case
Payment
Less: Effective Care
Savings
Less: COEDiscount
Advantage
URN Per Case
“Traditional Health Plan Experience”
“Centers of Excellence Effect”