health care costs, access and financing

Health Care Cost, Access and Financing John Brill, MD, MPH

US HEALTH CARE COSTS--History

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400

600

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1200

Costs ($Billions)

Population(Millions)

1969: $268

1990: $2567

2000: $5712

2004: $6280

Goals

Increase awareness of health care costs and national responses to increases

Increase knowledge of funding mechanisms and programs

Promote concern about the costs of health care we provide and control

Why Should You Care?

Why Should You Care

Because otherwise politicians will!Because you pay for health care tooBecause costs for health care effect the cost of

other goods and servicesBecause you can make a differenceBecause it might effect your incomeBecause it matters to your patients (at least

some of them)

Overview

Health Care Costs National Perspective Clinician Perspective Personal Perspective

Health Care Financing: Who/What/Where/How Much/Why

Costs

How much?How does the US compare to other

countries?History of costsResponses to Rising Costs

Approximately how much was spent on health care in the United States in 2004?

A. $1.9 BillionB. $19 BillionC. $190 BillionD. $1.9 Trillion

What % of the United States Gross Domestic Product (GDP) is spent on health care?

A. 6%B. 11%C. 16%D. 21%E. 26%

According to health care economist Victor Fuchs [JAMA 269 631 (1993)] and other experts, which of the following is most responsible for the high costs of health care in the US?

A. Treating ‘hopeless’ cases at the end of lifeB. Americans’ demand for the best care availableC. Malpractice and ‘defensive medicine’D. Fraud and Abuse in health care

Measuring Health Care Costs

Annual Expenditures% Gross Domestic Product

(GDP)

US HEALTH CARE COSTSUS HEALTH CARE COSTS--History

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1200

1960

1980

2000

Costs ($Billions)

Population(Millions)

Per Capita HC Costs (Unadjusted)

1969: $268

1990: $2567

2000: $5712

2004: $6280

International Health Care Spending (As % GDP)

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UnitedStates

Japan Sweden Canada

Reasons for Rising Costs

Aging3rd Party PayersMalpractice/Defensive MedicineFraud/WasteAdministrative CostsFutile CareTechnology

Responses to Rising Costs

Managed CareMalpractice ReformMedical Savings Accounts

Managed Care

History: Early 1970s--rising costs, threatened national health insurance

1973 HMO Act--gov’t subsidies for HMO start-ups (IT’S NIXON’S FAULT!)

1976: 6 million HMO enrollees1991: 38 million HMO enrollees

Managed Care--How does it save money?

GatekeeperUtilization ReviewPrior AuthorizationEvidence-based practice/PathwaysProvider ‘Deselection’Exclusions

Malpractice Reforms

Reducing Filing of ClaimsLimiting the Plaintiff’s AwardAltering the Plaintiff’s Burden of ProofChanging the Judicial Role

Medical Savings Accounts

Premise: Individuals spend their own money more wisely than someone else’s

Example: Employer contributes $3000 per year to MSA; Employee gets to keep unused remainder

Problem: 17% of persons would exceed $3000, accounting for 86% of health care expenditures

FUNDING AND ACCESS

History of Insurance in USPayersUninsured/Underinsured

Government programs (Medicare,Medicaid, VA, CHAMPUS) account forwhat % of health care expenditures inthe United States?

A. 15%B. 30%C. 45%D. 60%E. 75%

Who is least likely to be insured?

A. Unemployed 30 y/o woman with 2children receiving $8000/year inassistance payments

B. 30 y/o woman with 2 childrenmaking $15,0000/year at aconvenience store

C. 30 y/o woman with 2 childrenmaking $15,000/year as a designer,on hemodialysis

D. 70 y/o woman receiving $12,000/yr inSocial Security payments

Match the insurance program and its description:1. BadgerCare2. Medicare3. Medicaid4. GA-MP5. Wisconsin Women’s Wellness Fund

A. Federally mandated insurance program forpersons >/= 65 and the disabled

B. Federally mandated, state-administeredinsurance program for the poor

C. Wisconsin program for uninsured poorchildren and parents

D. Milwaukee County program for uninsuredpoor

E. Wisconsin program for cancer screening foruninsured poor women over 45

Where does the Money Come From?

Where does the money go?

Health Insurance in US1850: First health insurance policy in US1929: Dallas teachers directly contract with

Baylor Hospital for services at preset monthly cost--start of Blue Cross plans

WW II: Offered as employee benefit in Portland shipyards; by 1955, 77 million Americans insured through employer

1965 Medicare1966 Medicaid

Employee-SponsoredHealth InsuranceHistory: Portland Shipyards, WWII

Response to cap on wages

The Congressional Tax Act of 1954 This act allowed employer contributions to life,

health and disability insurance, to be tax exempt

Currently 74% of Employed (Dropping)

Government programs

45% of all US health care expendituresMedicare MedicaidCHAMPUSVARapidly rising proportion of all government

spending

Medicare

Federal insurance program for elderly (>/= 65; 30 million and growing) and disabled (4 million and growing)

Part A covers HospitalPart B covers DoctorsPart D (new in 2006) covers medications98% seniors participate70-90% have “Medigap” insurance

Medicaid

Federal program for ‘deserving poor’ (but only covers 40% of persons <100% FPL)

Coverage and eligibility vary by stateVariety of programs including coverage for

pregnant women, children, disabled, dialysis, long-term care (most important provider of NH coverage)

BadgerCareWisconsin version of Child Health

Insurance ProgramCoverage for poor uninsured children and

parents (“Health Insurance for Working Families”)

No asset test; covers up to 185% FPL (e.g. $16,500 income for family of 3)

Medicaid Expansion Program (coverage same as T19)

GA-MP (General Assistance-Medical Program)Milwaukee County program for uninsured,

medically needyEligibility equal to ~ 130% FPL

(~$800/month for single adult)No mental health/substance abuse/dental

coverage43% state, 58% local $$ funded{citizenship}

Wisconsin Women’s Wellness Program

Covers Preventive (Pap, mammos) and F/U (Colpo, biopsy) care for women

Income Eligibility: Up to 250% FPLAge Eligibility: 45 and over; occasional

exceptions

Uninsured--How Many?

~40 Million Americans (~15%) at any one time

Most temporary (27% Population without insurance for at least one month in 1993)

Uninsured--Who are they?

75-85% Employed-- Part-Time or Low Wage Jobs--and their dependents

Low-Income (50% of persons <200% FPL uninsured for at least one month/year)

Minorities (33% Hispanics, 23% African-Americans)

Non-Citizens (~15% of the Uninsured)

Underinsured‘Significant limitations in coverage’ High

deductibles (>$500/yr) High Co-pays (>15%) Exclusion of basic benefits (Doctor visits,

prenatal care)Dental, vision also frequently excluded but

not included in definition~30 Million Americans, growing rapidly(274 JAMA 1302, 1995)

Can you make a difference?40 y/o man with essential HTN is started on medications

Grab a sample of CCBCost: $50/monthLifetime cost (30 years

x $60/yr -1 month samples) =$18,000

Less proven benefits

Start HCTZCost $5/monthLifetime Cost (30

years x $60/yr) =$1800

More proven benefits

Can you make a difference II20 y/o woman comes in with frequent headaches:

Order MRICost: $3200 (AHC bill

to insurance) If clinician sees 50

headaches/year total cost =

$160,0000

Advise to drink extra 1.5l water/day

Cost: $0-2.50Little harm and RCT

evidence of benefit

Does it matter to you?

The Impact of Health Insurance

costs on day-to-day life

In the 1980s the U.S. auto manufacturers started to pay more for healthcare for their employees per car, than steel per car. In 1996 GM paid $1200 in health costs per car, and foreign auto manufacturers spend as little as $100, due to younger, healthier workers, and lack of retirees.

Kleinke, J.D., The Bleeding Edge,

Alphabet Soup

Match the health organization or insurance type with its definition1. HMO (Health Maintenance Organization)2. PPO (Preferred Provider Organization)3. Indemnity4. PHO (Physician Hospital Organization)5. IPA (Independent Practice Association)

A. Traditional “fee-for-service,” widest range of provider choicesbut most expensive

B. Discounted fee-for-service among in-plan providers, coveragewith higher co-pays for out-of-plan providers. Usually can seeany provider without referral.

C. Either discounted fee-for-service or capitated payment to in-plan providers, only emergency coverage for out-of-planproviders. Generally need referral to see specialist.

D. Structure in which a hospital and physicians negotiate as anentity directly with insurers.

E. HMO that contracts with individual/groups of physicians toprovider services on a capitated or discounted fee-for-servicebasis.

HMO (Health Maintenance Organization)Either discounted fee-for-service or capitated

payment to in-plan providers, only emergency coverage for out-of-plan providers. Generally need referral.

Local Examples: Compcare, Humana, MHS

Point Of Service (POS) plans: allow enrollees to see out-of-plan providers but at substantially higher copays/deductibles. May still need referral.

Discounted fee-for-service among in-plan providers. Usually can see any provider without referral.

Local Example: Some Blue Cross (Anthem) Plans

PPO (Preferred Provider Organization)

Indemnity Insurance

Traditional “fee-for-service,” widest range of provider choices but most expensive

Example: Blue Cross/Blue Shield (Anthem)

PHO (Physician Hospital Organization)

Structure in which a hospital and physicians negotiate as an entity directly with insurers.

Local Example: MCW/Froedtert Practice Plan

IPA (Independent Practice Association)

HMO that contracts with individual/groups of physicians to provider services on a capitated or discounted fee-for-service basis.

Local Example: West Allis Physicians’ Association

Physician Billing and Payment

Coding – diagnosis (ICD) & procedure (CPT)Current procedural terminology (AMA)Relative Value Units (RVU)Conversion factor (dollars per RVU)Payment = RVU x CF = $

Relative Value Scales (RVS)

Comparative values of all physician procedures

Historically developed and evolvedResource Based Relative Value Scale

(RBRVS – 1992)

Elements of RBRVS

TimeTrainingIntensityMalpracticeOverhead

Work

Sample RVU99214 Office Visit Established; Level 4

•Work RVU – 1.10

•Overhead

•Non-facility – 1.05; facility – 0.40

•Malpractice – 0.05

•Total non-facility – 2.20

•Total facility – 1.55

•Medicare conversion factor – 37.3374

•Medicare allowable fee – $82.14 (non-facility); $57.87 (facility)

What Does Physician Collect?

Medicare Medicaid Indemnity PPO

Allowable 82.00 56.00 110.00 90.00

Patient

Co-Pay

16.40 0 22.00 18.00

Insurance Pays

65.60 56.00 88.00 72.00

TOTAL 82.00 56.00 110.00 90.00

Bill Patient 8.20* 0 7.00 0

*Non-Medicare Assignment

2004 National Physician Fee Schedule Relative Value File CPT codes and descriptions only are copyright 2003 American Medical Association. All Rights Reserved. Applicable FARS/DFARS Apply.

FULLY FULLY FULLY FULLY

IMPLEMENTEDIMPLEMENTED IMPLEMENTED IMPLEMENTED

STATUSWORK NON-FAC FACILITY MP NON-FACILITY FACILITY

HCPCS MODDESCRIPTION CODERVU PE RVU PE RVU RVU TOTAL TOTAL

99203 Office/outpatient visit, new A 1.34 1.13 0.48 0.10 2.57 1.9299204 Office/outpatient visit, new A 2.00 1.51 0.71 0.12 3.63 2.8399205 Office/outpatient visit, new A 2.67 1.80 0.95 0.14 4.61 3.7699213 Office/outpatient visit, est A 0.67 0.70 0.24 0.04 1.41 0.9599214 Office/outpatient visit, est A 1.10 1.05 0.40 0.05 2.20 1.5599215 Office/outpatient visit, est A 1.77 1.34 0.65 0.08 3.19 2.50

99221 Initial hospital care A 1.28 0.45 0.45 0.06 1.79 1.7999222 Initial hospital care A 2.14 0.74 0.74 0.10 2.98 2.9899223 Initial hospital care A 2.99 1.04 1.04 0.12 4.15 4.1599231 Subsequent hospital care A 0.64 0.23 0.23 0.02 0.89 0.8999232 Subsequent hospital care A 1.06 0.37 0.37 0.04 1.47 1.4799233 Subsequent hospital care A 1.51 0.52 0.52 0.06 2.09 2.0999242 Office consultation A 1.29 1.05 0.46 0.11 2.45 1.86

99243 Office consultation A 1.72 1.39 0.63 0.12 3.23 2.4799244 Office consultation A 2.58 1.83 0.92 0.16 4.57 3.6699245 Office consultation A 3.42 2.29 1.24 0.19 5.90 4.8599253 Initial inpatient consult A 1.82 0.68 0.68 0.11 2.61 2.6199254 Initial inpatient consult A 2.64 0.99 0.99 0.13 3.76 3.7699255 Initial inpatient consult A 3.64 1.35 1.35 0.18 5.17 5.17

99348 Home visit, est patient A 1.26 0.71 0.71 0.05 2.02 2.0299349 Home visit, est patient A 2.02 1.04 1.04 0.07 3.13 3.1399350 Home visit, est patient A 3.03 1.40 1.40 0.12 4.55 4.55

44960 Appendectomy A12.32 5.38 5.38 1.31 19.01 19.0127487 Revise/replace knee joint A25.23 16.41 16.41 4.27 45.91 45.9171010 Chest x-ray A 0.18 0.53 0.53 0.03 0.74 0.7470496 Ct angiography, head A 1.75 0.57 0.57 0.10 2.42 2.42

Evaluation and Management CPT - Documentation

•History

•HPI; ROS; PFSH

•Exam

•Areas of body

•Decision making

•Number of diagnoses

•Complexity of data

•Level of risk to patient

•Typical time

Physician Compensation

•Salary vs. incentives

•Incentive methods

•Percentage of collections (billings)

•RVU methods

•Capitation distribution

•Quality bonuses

•Multispecialty sharing