benefits and beyond c. 8 health care reform

Benefits and Beyond C. 8

Improving access to health care.Thomas E. Murphy

Thomas E. Murphy 210/09/09

March 23, 2010 – Patient Protection and Affordable Care Act


What led up to this?

Thomas E. Murphy 4

U.S. offers excellent health care. It is designed to cover all Americans. Most coverage is employment based and

98% of employers with over 200 employees provide health insurance.

But – the cost is too high. Result: cost sharing increased, some small

employers abandoning coverage, and too many uninsured. And, since health care is largely tied to employment . . .

What’s wrong?

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Thomas E. Murphy 5

Fear that “you are a pink slip away from losing health care.”

Fear of dropped coverage when sick and exclusion of pre-existing condition.

And, Unemployment is 9.6%.

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Thomas E. Murphy 6

Continuing coverage under COBRA has been expensive.

Stimulus Law – a temporary gov’t subsidy to buy COBRA. Ended May 31, 2010.

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Coverage after layoff? (photo:

www.medicine.net)

Thomas E. Murphy 7

Problems? Issues? Alternatives? Health Policy? Health Care

Reform? Let’s look a little

deeper!

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What does the data show

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1996

2004

2009

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Uninsured

Employer Coverage is down!

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47% of firms with 3-9 employees

72% of firms with 10-24 employees

93% of firms with over 50 employees

98% of firms with over 200 employees

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Employer sponsored overall coverage - 59% (+180,000,000)


What’s Wrong?

Thomas E. Murphy 11

Our health care system**There is some overlap – for example, 27 million buy individual health policies.

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U.S. Residents-No health insurance (in millions – U.S. Census)

1993 38

2004 42

2006 47.5

2007 45.4

2008 46

2009 50

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“My friend ends her own business and gets a job with Starbucks” to get health care.

Annual H.C. cost in the U.S. depends on what? (where, who, deductible)

Employee total cost sharing is around +30%.

U.S. pays more for health care:16.2% of GDP vs. 12% average for other OECD countries.

High Costs Impede Access

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From 2000-2010, health care premiums have increased 130% and other out-of-pocket cost sharing features have increased 115%.

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The increasing cost shift

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Current System is too expensive because of: Inappropriate care (35%).

Medical errors: 100,000 deaths per year. Third party payer – lack of market

dynamics. No value based competition

Poor health culture (high obesity and resulting chronic diseases), poor health

education, and lack of patient compliance. Tax treatment, and other reasons . . .

Why do we cost more?

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Thomas E. Murphy 16

Our multi-layered administrative systems cost $35 billion annually more than other OECD countries.

Our prices and salaries of health care goods and services are much higher than European countries.

We have more and quicker access to technology –such as imaging, robotic surgery, R/x.

No government subsidies or price leverage except Medicare and Medicaid.


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Thomas E. Murphy 17


How to control? Cutting is not the answer

Aging Population High expenditures in

last 3 months of life 3d party long term

care system Highest compensation

for providers. High R/X marketing

and R&D costs..

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Thomas E. Murphy 18

Malpractice and defensive medicine

Third party payer system removes the consumer from “engagement” and making informed decisions.

(PHOTOS: WWW.MEDICINE.NET)

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More cost drivers . . .

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U.S. life expectancy, infant mortality, access to health care is below OECD leaders.

U.S. ranks last in “patient safety” among 5 top OECD countries

Research says, however, this is not result of health care system but rather culture and education. Adult obesity is over 30% and the cause of a number of chronic diseases.

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But are we better?


The David, growing up in America!

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U.S. is best place to be for serious health problems.

Survival rates per 100,000 for major and acute health problems is highest.

U.S. leads world in research, innovation, and new drug therapies. (70% of innovation comes from U.S.)

U.S. has shortest wait lists by a large margin for elective procedures, and in many cases for medically necessary treatments.

But. . . The reality is . . . .

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Thomas E. Murphy 22

Cost is the chief reason nearly 50 million are uninsured.

And why employers and government are struggling to continue health insurance.

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What is the Problem?

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High Cost makes access difficult!

How do we reduce costs?

Need more data . . .

Could we enhance access with lower costs?

Would a quality-driven market system reduce costs?

What are the other choices?

Let’s look at more data

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If cost is the problem how do we best deal with it?

Can we reduce our costs and still assure high quality and efficacy?

What if we conducted a “SURGE” against costs?

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The solutions? What data do we

need to make a policy decision?


Cost Allocation in the U.S. Kaiser foundation, 2009

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Where/Type* Individual Family

Nation $2965 $6328

New York $13296

Iowa $5609

No deductible $12500

High deductible ($10,000)

$5380

*2009 Costs

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Cost Averages* Depend On:*For state pricing see: www.healthcare.org

http://www.healthcare.org/

Thomas E. Murphy 27

The health care reform baton is being passed – 2010-2014!

Affordable Care Act of 2010 is “access reform” – it is not health care reform that in large part was driven by high numbers of uninsured and the high costs of our health care.

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Thomas E. Murphy 28

Just less than 50% do not meet Medicaid standards, and cannot afford health care.

Some, 24.5%, however, qualify for Medicaid but choose not to enroll.

20% can afford private coverage but choose not to buy it.

Most work. 8% are business owners

Who are the 50 million uninsured?

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Thomas E. Murphy 29

Most are uninsured for less than one year.

55% are between the ages of 18 and 35; many decide they are healthy and don’t need insurance.

7% have household incomes in excess of $75,000; 22% made over $50,000 in 2007.

Disproportionate number of black and Hispanic are uninsured.

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Who are the Uninsured?


Problems – Insurance Underwriting

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Cost shifting Unreimbursed care Community rating Need old and

young, healthy and sick to pool risk.

Pre-existing condition. (HIPAA)

No guaranteed issue

Right to cancel Individual coverage

premiums based upon health status

Not much portability except for COBRA

Adverse selection State control over

insured plans

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Health Insurance Underwriting

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When sick people are without insurance, they don’t need insurance, they need health care.

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But remember . . . (Photo:

www.medicine.net)

Thomas E. Murphy 33

The most powerful instrument in our system that generates the utilization of health care resources and higher costs – is – the physician’s ordering pen.

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And really remember . . .

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Insurance companies do not write prescriptions or order MRIs.

While they add costs to our system, high utilization and prices are major cost drivers in U.S.

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And . . .


Range of Reform Solutions


A “Surge” against costs!

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Tax law change Creating quality and

value-based markets for health care (-25%)

New types of integrated care models

Improved pre-natal care education and access

Mitigate chronic disease risk factors

Electronic medical records – reduce errors

HSAs, Wellness, increase engagement

Tort Reform – reduce unnecessary care (-10-20%)

Interstate insurance competition -

Reduce administrative costs.

And more. . .

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Surge on Costs – What might work?

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Convert Medicaid to Defined Contribution Plan.

Merge insurance markets – individual and small employer.

Pay for results not separate services

Capitation of fees (DRGs)

Change Supply Side Services

Encourage integrated care organizations.

Simplify claims processing

Assure access to Primary Care

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Surge on Costs

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The 80/20 rule: Preventive Care

Put your resources here: Preventive and Chroniccare

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Thomas E. Murphy 40

Change reimbursement system – reward success and pay for non-traditional services that enhance efficiency and effectiveness

Is the office visit the only way medicine can be dispensed?

Is capitation a reasonable approach vs. fee for service?

Encourage integrated health providers.

What’s this “Supply-Side” focus?

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Thomas E. Murphy 41

What happens when providers compete on basis of quality and price? Look at what has happened to the outcomes and prices for Lasik surgery.

Wal-Mart - $4.00 for many drugs. See also, www.rx.com/

Walk in clinics in retail stores. Urgent care centers vs. hospital emergency

rooms.

Supply side emphasis?

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http://www.rx.com/

Thomas E. Murphy 42

Employer paid health insurance is not taxed as ordinary income to the employee.

This is unfair to those who buy insurance on their own; the premiums are paid after tax.

If we tax employer paid premiums, employees will search for ways to find their own health plans. The plan will suit their needs and will be portable. No longer dependent upon employment.

Forgone tax revenue runs between $90-$130 billion.

What about tax change and reform?

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Thomas E. Murphy 43

One approach is to limit the exemption from income to $5000 per year. Any higher value would be subject to income tax.

In addition, all out of pocket costs for health care would be deductible, thus encouraging purchase of more cost efficient plans.

This would not necessarily cause employers to drop sponsored care – there are competitive and productivity reasons to continue. And, employers can deduct expense.

Tax changes and health care

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Thomas E. Murphy 44

Full deductibility of self-purchased high deductible health care plan and contributions to HSAs.

Could be offset by a refundable tax rebate? Should this be available to all or only those who purchase a plan (HDHCP) on their own?

Tax preference is based upon convenience and efficiency of employer sponsorship and lack of employee leverage and knowledge to make purchasing decisions themselves.


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Thomas E. Murphy 45

The view is that this change would engender fairness between those who currently participate in an employer sponsored plan and those who pay for their own insurance.

It also will provide a portable health care plan not dependent upon employment.

It should have the effect of making health care more affordable and decrease number of uninsured.


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Principle of compensating differentials – more health care costs reduces other elements of compensation.

Good health care is never “free!” Someone is paying for it.

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Tax changes – a few principles

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What do we do first?

Reduce costs? Increase access? Our health care

bridge is burdened with high costs; why would we put more people on the bridge?

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How to prioritize – access or costs?

Thomas E. Murphy 48

Consequences of + Access?

Mandated or Public Mandated or Public

Public or mandated system must be financed- it is not free.

Underwriting savings not sufficient to finance.

Financed by taxes, fines, rationing, artificial reduction of reimbursements.

Must have a standard policy with limits on cost sharing and minimum requirements on coverage.

Providers must comply with medical protocols

Public or State option may swallow the private sector.

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Thomas E. Murphy 49

Consequences?

Costs will increase! Increased Gov’t. Employment (HHS HQ)

Must rely on community ratings

Limited underwriting and premium differentiation.

Impact on quality and consumer satisfaction?

Will a dual system arise as it has in some EU contries?

Non-profit insurance system

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Thomas E. Murphy 50

Free medical education?

Give subsidies to purchase – how much and for what?

Arbitrarily imposed price controls on medicine and insurance providers.

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Consequences . . .


New quality based market?

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It’s a leap, but we can do this!

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Thomas E. Murphy 53

A quality and value based competition model would be a sound basis for reforming health care in the U.S. It could be a dynamic choice to make health care affordable!

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Murphy says:


A Measured Approach to Reform

04/08/2023Thomas E. Murphy 55

Allow competition to drive quality improvements and make service more affordable– as it has done in other industries.

Centerpiece: clinical outcomes data!

Data is the key!

Thomas E. Murphy 56

Reducing the costs of health care and making it more affordable through market changes are aimed at the core cause of the health care crisis in the U.S.

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A Focused Approach


Quality, value, and cost are not rewarded.

Competition should be structured so that it is quality and value based; this will lead to lower costs.

This would be REAL health care reform! (See: “My View” at this link)

See also the Mayo Clinic Health Policy Center’s Recommendations: ◦ Create Value◦ Coordinate Care◦ Reform payment

system◦ Health Insurance for

all.

More specifically. . .

http://managementandbeyond.com/blog

http://managementandbeyond.com/blog

http://www.mayoclinic.org/healthpolicycenter/recommendations.html




Competition drives improvements in quality and cost.

Rapid innovation is diffused through the industry.

Excellent competitors grow, weaker rivals exit the market.

Quality improves, prices fall, value increases, and the market accommodates more consumers

Traditional Competitive Model


Health care must be a patient centered system

Currently, it serves others – TPAs, Providers, Sponsors, Patients, Unions, Government.

Competition in health care?


Also, the scope of health care is too narrow: it focuses on a disease, illness, or injury.

It should focus on the full cycle of care for a medical condition.

There is very little integration of care relating to this condition.

The system is structured around medical specialties –who are like “free agents” – performing their function and billing accordingly.

Condition vs. Disease

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Would reward value

No government or sponsor imposed “solutions.”

Providers would arrive at solutions to successfully compete in this new market

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A value-based market model:

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How many cardiac bypass surgeries?

What results? How many post

surgical infections? What were length

of stay and charges?

Complications Re-admissions

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The centerpiece – outcomes data!


Published patient outcomes per unit of cost at the medical condition level.

We currently pay for services rendered – appropriate or not and in some few cases for the provider’s adherence to certain medical protocols.

Outcomes should be but are not considered. We have the ability to review clinical

outcomes data NOW! – but we don’t

How should we measure?


Who is doing the best job – give them our business!

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We have no real quality records of providers.

We have no access to charges or prices.

A third party selects providers and pays them.

We don’t compare.

10/09/09

Health consumers-is this a market?


Current vs. Future Model


Utilization review adds administrative costs to the system without sufficient returns.

Capitation can lead to rationing to mitigate financial risk.

Malpractice litigation leads to “defensive” and inappropriate care.

The more procedures that are ordered the higher reimbursement level for the providers.

The only risk free instrument is the stethoscope – other procedures carry risk

Limit or unnecessarily add services


It should occur at medical condition level – where we measure and evaluate the full cycle of care – diagnosing, prevention, monitoring, treatment, and ongoing management of the condition.

Value can be created by directing our employees and participants to those providers with the best clinical outcomes.

Competition is at wrong level


Some physicians do a far better job than others.

The same for hospitals

Typically the best provide services at lower costs – “they get it right the first time!”

Health Care is not a commodity!


Absolutely necessary for patients and sponsors – but not available.

Often can lead to important process improvements.

Is critical to create informed and engaged consumers and payers of health care.

See the Cincinnati and other experiences where payers used clinical outcomes data to direct their participants to the “best providers.” Costs went down!

The importance of outcomes datahttp://onlinelibrary.wiley.com/doi/10.1002/hrm.3930340407/abstract

http://onlinelibrary.wiley.com/doi/10.1002/hrm.3930340407/abstract

http://onlinelibrary.wiley.com/doi/10.1002/hrm.3930340407/abstract


Should be assisting members in finding the best value care and improving their overall health. They do not.

The “annual enrollment” undermines an objective to look at long term health approaches.

Billing is incomprehensible and providers are encouraged to under treat.

Out of network restrictions lead to poor provider choices.

New incentives for TPAs


Fee for service – creates outcome problems Capitation leads to implicit rationing. Supply driven demand leads to providers

“filling up” their capacity. No competition on results means there are

no incentives for “quality outcomes.” Create a quality outcomes-based market

and the Providers – not government or insurance companies – will find the best way to deliver health care

Incentives for providers


Often believe health care is a commodity They deal with inflation by simply shifting

costs to employees. Encourage HSAs but ignore the importance

of informed consumers who must make a number of important choices without the requisite data.

Employers do not realize the financial VALUE of health care as a benefit. It is often, just a cost to bear.

Employer Perspectives


Competition among providers based upon results and relating to a medical condition over a cycle of care should be the focus.

The competition should not be based upon compliance with protocols, but real results.

Results based competition will lead to provider learning and sharing of medical information.

Let’s Review Some Principles


Value based competition should lower costs because the best providers will “get it right the first time.”

Results are the feedback for providers and the criteria for selection by the participants.

The pursuit of quality does not end. It is “continuous.”

SOME PRINCIPLES


An endless pursuit of quality by providers incented by a new health reform system – will lead to:

Fewer medical errors and more “appropriate care.”

Disease management and real integrated care

A migration from diagnosis and treatment to addressing causes.

Cost reductions and improved affordability.

SOME PRINCIPLES


Needed Data


Some outcomes data shows that patients treated at certain cystic fibrosis centers have a 14 year additional life expectancy than those treated at “average centers.”

After New York city hospitals started collecting and disseminating severity adjusted mortality data for cardiac bypass surgery, deaths declined by 41%. In a 4 year period.

Data can be used to educate providers!

Outcomes vary by provider . . .


It has been slow in coming.

Who should have access?

What should the data system measure?

How doe one acuity adjust?

How can change happen?

Where’s the data?Electronic Medical Records?


What are barriers?


TPAs focus on discounts versus patient value.

Medicare and other government systems have the wrong incentives and do not encourage patient value.

Governments so far have equated “process compliance” with “quality.”

Systems do not encourage integration of care.

Artificial and arbitrary suppression of provider fees will not create value

What are barriers?


Mindsets against being held accountable for results.

Lack of management expertise in the medical provider industry.

Medical education does not focus on value driven health care.

Health care delivery is too local depriving access to best providers.

What are barriers?


Physicians are often “free agents.”

Hospitals take on too many services.

The payers of health care have not insisted on accessing quality outcomes data and using it to develop their networks.

What are barriers?


Providers are “pushing” back fees


TPAs! Orchestrate the best care!


Enable patients to make informed choices of providers. (Not restrict choice with networks)

Measure and reward providers based upon results. (Not micromanage provider activities.)

Maximize the value of care over the full cycle of a medical condition. (Not minimize costs.)

Minimize administrative tasks and costs. (Not overwhelm providers and patients with paperwork)

New Roles for TPAs


Compete based upon their subscribers’ health results (not cost)

New focus:

New Roles for TPAs

Long term health-

Improved life expectancy

and quality of life


United Health Group and United Resource Networks.

Cigna and Quality Networks Blue Cross and Blue Shield of Minnesota

(Disease Management) Blue Cross and Blue Shield of Mass.

(Rewards Provider Excellence: reward excellence, higher margins, gains sharing, reward accurate diagnosis)

Some examples


And, very importantly . . .

To create and manage a single, comprehensive

medical record for its patients


Active participation in managing personal health: healthy life style, embrace preventive care, comply with provider recommendations, make informed choices about providers and treatments.

Choose TPAs and plans based upon these values.

New Roles for Patients


New Roles for Employers

New Perspective on Value Stop the mindless cost shifting

Evaluate TPAs based upon “value” not cost.

Insist on value based choices of providers

Support healthy life styles among employees

Establish long term relationship with TPAs and providers.

Hold internal benefit staff accountable for long term health and good financial returns on health care benefits


First and foremost . . . No law required.

Public Policy . . . Priority:

Move to Value Based Competition!


Enable More Access

Lead to real health reform

This will . . .

Enhance quality, reduce

costs, and make health care more affordable.


Employer and individual mandates. Guarantee affordable health insurance for

all. Single payer, universal health care system Move to individual choice and ownership of

health insurance by making it more affordable, tax deductible or, if low income, subject to tax credits.

Then, If needed a New Delivery System?


Everyone should have access to quality health care!

Thomas E. Murphy 100

Preserve what we already do well

Sustain our innovation and research.

Focus on quality, cost effectiveness, and value.

What about choice? Is this important?

We should retain employment as primary locus for health care delivery.

Portability – Yes! Should consumers

share in some of the costs of health care?

10/09/09

Values to maintain:


People who paid nothing for health care used 30% of health care resources.

Cost sharing can enhance informed utilization and positively affect quality.

10/09/09

We need patient engagement. .

The market, by exposing clinical outcomes data will drive health care providers to improve quality and deliver value.

Failure to do so will leave them . . .


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Without any “customers”


Should the sponsors tell providers how to practice medicine?

Or, should they say let me see how you are doing and we will give you our business?

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A market that drives quality and value – See: Mayo Clinic proposal



Without comprehensive legislation and without burdensome costs!

Can implement before January 2014!

The Market will drive providers, TPAs, and others to find the optimal utilization of health care resources!

This will lead to quality based and AFFORDABLE health care.

10/09/09

The Value Based Market

.


10/09/09

The Path to a healthy America


They are depending on us . . .

benefits and beyond c. 8 health care reform

Health & Medicine