Trends In Health Care Industry

KNH 413

Difficult questions What is health insurance? What is health care versus health

insurance? Is one or both a right or a

privilege?

Trends in Health Care

OutlineI. Where We Spend our Health Care Dollars

II. Major Trends on Health Care Industry 1. Increase in Health Care Costs

2. Cost Control Strategies Avoid Risks Share Risks

3. Shifts in Hospitalization

III. Who Pays for Health Care A. Where health care dollars come from B. Types of health care plans

Health Care CostsHealth Care Plan vs Health Care per Capita

Average Cost Health Care Plan in US Family = $11,480; Single = $4,242 (2006 data)

Note: Family coverage is defined as health coverage for a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006.

Average Per Capita Cost Health Care

(2005 Data for UK, 2006 data US)

Organization for Economic Co-Operation and Development http://www.oecd.org/

Where Personal Care Dollars Went: 2006

Source: Health Care Financing Administration

National Health Expenditures, US

$2.105 Trillion/year

Summary of Charts Healthcare cost are high Healthcare $ go primarily for personal

care Personal care $ divided among many

different categories, therefore can not focus cost controls on just one category.

Trends in Health Care 1. Costs of Health Care Increasing 2. Strategies to Control Cost 3. Shifts in Hospitalization

Health Plan Costs: 1988 - 2006Rising faster than earnings and inflation

http://www.kff.org/insurance/7148/sections/ehbs04-1-2.cfm

Paying for Health Care

US Spends More on Health Care

Percent of GDP* Spent on Health Care Health Care Spending Per Capita

*GDP = Gross Domestic Product

FYI: Are We Getting Our $’s Worth?Life Expectancy: 1960-2005

Males Females

OECD Health Data 2006. http://www.oecd.org/document/16/0,2340,en_2825_495642_2085200_1_1_1_1,00.html

Health Care Costs: Strategies to Control CostsHealth Care Cost Survey

Factors causing health care costs

Public Opinion Poll Spring 2005

“…Very Important factor in causing higher health care costs.”

“…Most Important factor in causing higher health care costs.”

High profits of drug and insurance companies

71% 35%

# of malpractice lawsuits 58% 19%

Amount of greed and waste in health system

59% 14%

Aging of the population 50% 8%

Use of expensive, high-tech medical equipment and drugs

46% 8%

Dr’s make too much money 31% 5%

People having little incentive to look for lower cost doctors / services

34% 4%

From Henry J. Kaiser Family Foundation http://www.kff.org/about/index.cfm

Trends in Health Care 1. Costs of Health Care Increasing 2. Strategies to Controls Cost 3. Shifts in Hospitalization

Strategies to Control Cost

Strategies to Control Cost 1. Avoiding Risk (financial risk)

2. Shared Risk (financial risk)

Strategies to Control Costs

Avoid Risk: Don’t Provide Health Benefits

http://www.census.gov/hhes/www/hlthins/hlthin06/fig07.pdf

Strategies to Control Costs

Share Risk Share financial risk with benefiters

Increase Co-pay

Share financial risk with health care providers

Strategies to Control CostsIncreased Utilization a Factor in ’d Health Care

Costs

Significant portion of increased health care costs from increased utilization

Personal Choice?

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Source: CMS, Office of the Actuary, National Health Statistics Group.

Strategies to Control Costs: Share Risk Sharing Risk w/ Benefitees

RAND Health Insurance Experiment “Enrollee cost sharing greatly affects both

necessary and unnecessary health service use.”

“Those who paid nothing used 40 percent more services.”

3-yrs of experiment no effect on health status

Keeler, Emmett B., et al. 1987. "Effects of Cost Sharing on Physiological Health, Health Practices, and Worry." Health Services Research 22:279-306.

Strategies to Control Cost: Share Risk Increase Deductibles/Out-of-Pocket Expenses to Share Risks

Benefitees paying higher deductibles and more of expense for prescription drugs

Strategies to Control Cost: Share Risk

Higher Costs for Services “Outside” the Plan

Insurance companies have contracts with providers for lower fees.

Go outside these plan providers…. You share more of the cost.

Strategies to Control Cost: Share Risk FYI: Determinants of HealthShared Risk Tries to Influence Patient to Alter Things Can Control

Patients Determinants of Patient’s Health

Source: Center for Disease Control

Strategies to Control Cost: Share Risk Share Risk w/ Health Care Providers

No more “blank checks” Two Scenarios for Food Costs at

College Open account for food and costs gets put

on state tax payers cost.

State gives PSU set amount of $ for semester of food, and PSU gets to keep any leftover $.

Strategies to Control Cost: Share Risk Share Risk w/ Health Care Providers

No more “blank checks” Two Scenarios for Food Costs at College

Open account

System give you set amount

How about giving some of this profit back to “you” the student?

Strategies to Control Cost: Share Risk Shift Types of Health Plan Contracts From Fee-For-Service

Profit

RevenueFixed ExpensesVariable Expenses

Dollars

Patient Encounters

Fee-For-Service World, Volume Yields Profit

Loss

Strategies to Control Cost: Share Risk Shift Types of Health Plan Contracts To Prospective Payments Plans

LossRevenue

Fixed Expenses

Variable Expenses

Dollars

Patient Encounters

Prospective, Volume Yields Loss

Profit

Strategies to Control Cost: Share Risk Shift in Type of Health Care Plans that Shares Risk’s w/ Health Care Providers

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Trends in Health Care 1. Costs of Health Care Increasing 2. Cost Controls and Competition 3. Shifts in Hospitalization

Inpatient to Outpatient Shorter Lengths of Stay

Source: CMS, Office of the Actuary, National Health Statistics Group.

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Less expensive to treat outpatient

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Source: U.S National Center for Health Statistics, Vital and Health Statistics, Series 13.

Shifts in Hospitalization Short-Stay Hospitals: Discharges and Length of Stay

Conclusions of Health Trends 1. Health Care costs primarily on personal

care. 2. Controlling costs difficult

spending not concentrated in specific area(s). can’t just focus spending controls.

3. Consumer/patient important fact in effort to control costs.

Paying for Health Care A. Where health care dollars come from. B. Types of health care plans

Government – Federal/State Private

C. Types of health care contracts

Paying for Health Care

Where Nation’s Health Dollar Dollars Came From: 2006

http://cms.hhs.gov/researchers/pubs/datacompendium

Types of Health Care Plans

Government Plans Medicare – Federal Program since 1965

Eligibility

Part A (Hospital Insurance)

Part B (Medical Insurance)

Part C (Medicare Advantage)

Part D (Prescription drug coverage)

Types of Health Care Plans

Government Plans Medicaid – Federal/State Program since

1965 Eligibility

Low income + specific categories of individuals. Broadly defined categories are (established by

Feds)

Coverage Each state sets own guidelines …but basic services (e.g. hospitalization and

pediatric services) required to receive federal dollars

Types of Health Care Plans

Private Health Insurance 100’s of policies Employer sponsored

Typically, employer pays majority of premiums.

Typically, employee has some, but limited choice.

Self-employed You decide, you pay Usually very expensive

Types of Health Plan Contracts Traditional

Managed Care Health Maintenance Organization (HMO)

Preferred Provider Organization (PPO)

Point of Service (POS)

FYI: National Health Spending by Source of Funds, 2000

Source: OECD Health Data 2002 2nd ed.