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Initial Presentation: Factors Affecting Health Care Costs

(HJR 687)

May 21, 2013

Joint Commission on Health Care

Stephen Bowman

Background: HJR 687 (2013)Patron: Delegate John M. O’Bannon, III

Study Mandate:o Identify factors considered to be the primary contributors to

increasing health care costs

o Report on promising policies, practices, and initiatives expected to help control health care costs while maintaining quality of care.

o Review approaches undertaken in other states and countries to control health care costs, and

o Examine the likely impact of federal Patient Protection and Affordable Care Act provisions on the cost of health care.

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HJR 687 Study Plan1st Presentation (May):

Review primary contributors to increasing health care costsRequest JCHC member suggestions regarding:

Additional Issues to AnalyzeAdditional Questions to Address

2nd Presentation (October):Review policies that help control health care costs while maintaining quality of care, Review approaches undertaken in other states and countries to control health care costs, Examine PPACA impact on the cost of health care, andAdditional issues requested by members.

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U.S. and International Health Care

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3

Selected Countries Comparison Health Care Spending as a Percentage of GDP (2010)

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11% 12% 12%10%

9%

7%

10%

18%

0%2%4%6%8%

10%12%14%16%18%20%

Canada France Germany Greece Italy Korea UnitedKingdom

UnitedStates

Source: OECD Health Data Set 2012 Frequently Requested Data.

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Source: International Federation of Health Plans, 2012 Comparative Price Report.

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Health Care Systems Review: MRI Exams and Machines Per Capita(2009)

7

5.6

8.2

15.4

7

22

22.4

43.1

12.2

10.5

5.9

31.6

23

46.7

57.5

60.2

95.2

74.2

3.6

97.7

0 20 40 60 80 100 120

AustraliaCanadaDenmark

FranceGermany

IcelandItaly

JapanNetherlands

New ZealandU.K.U.S.

MRI exams per 1,000 population MRI machines per million population

Source: The Commonwealth Fund, International Profiles of Health Care Systems, 2012, November 2012.

Health Care Systems Review: Access to Care (2010)

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65%

45%

62%

66%

72%

78%

45%

57%

93%

70%

57%

28%

41%

28%

7%

16%

22%

34%

31%

5%

19%

9%

0% 20% 40% 60% 80% 100%

AustraliaCanada

FranceGermany

NetherlandsNew Zealand

NorwaySweden

SwitzerlandU.K.U.S.

Waited two months or more for specialist appointmentAble to get same- or next-day appointment when sick

Source: The Commonwealth Fund, International Profiles of Health Care Systems, 2012, November 2012.

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Health Care Systems Review: Public Views of Health System (2010)

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24%

38%

42%

38%

51%

37%

40%

44%

46%

62%

29%

55%

51%

47%

48%

41%

51%

46%

45%

44%

34%

41%

0% 10% 20% 30% 40% 50% 60% 70%

AustraliaCanada

FranceGermany

NetherlandsNew Zealand

NorwaySweden

SwitzerlandU.K.U.S.

Fundamental changes neededWorks well, minor changes needed

Source: The Commonwealth Fund, International Profiles of Health Care Systems, 2012, November 2012.

U.S. Health Care Spending

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U.S. Distribution of National Health Expenditures, by Type of Service (in Billions), 2010

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Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file nhe2010.zip).

Nursing Care Facilities & Continuing Care

Retirement Communities, $143.1 (5.5%)

U.S. Annual Average Percent in Consumer Price Index, 1936-2008

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Source: U.S. Bureau of Labor Statistics, Spotlight on Statistics, Health Care, November 2009.

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13

The Lowest Income Families Pay the Highest Share of Income to Finance Health Care (2004)

14

8

6

4

2

0

Perc

enta

ge o

f Inc

ome

Non-Institutionalized Institutionalized

QuintilesNational Lowest

Source: Lower-Income Families Pay A Higher Share Of Income Toward National Health Care Spending Than Higher-Income Families DoPatricia Ketsche, et al., Health Affairs, September 2011 30:1637-1646.

Private Out-of-Pocket Spending

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2nd 3rd 4th 5th

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5% of the U.S. Population Accounts for 50% of Health Care Spending

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SOURCE: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), Household Component, 2010

21%

50%

65%75%

82%97%

3%

Top 1% Top 5% Top 10% Top 15% Top 20% Top 50% Bottom50%

0%

20%

40%

60%

80%

100%

Percent of U.S. Population Accounting for Percent of U.S. Health Care Spending

U.S. Distribution of Average Spending Per Person, 2009

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Average Spending Per Person

Age (in years)<5 $2,4685-17 $1,695

18-24 $1,834

25-44 $2,739

45-64 $5,511

65 or Older $9,744

SexMale $3,559

Female $4,635

Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), 2009.

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Health Care Cost Drivers

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Health Care Drivers A 2012 Report by the Bipartisan Policy Center listed 13 primary cost drivers:

Fee-for-service reimbursement;

Fragmentation in care delivery;

Administrative burden on providers, payers and patients;

Population aging, rising rates of chronic disease and co-morbidities, as well as lifestyle factors and personal health choices;

Advances in medical technology;

Tax treatment of health insurance;

Insurance benefit design;

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Source: Bipartisan Policy Center, What is Driving Health Care Spending, September 2012 .

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Health Care Cost Drivers (Cont’d) Lack of transparency about cost and quality, compounded by limited data, to inform consumer choice;

Cultural biases that influence care utilization;

Changing trends in health care market consolidation and competition for providers and insurers;

High unit prices of medical services;

The health care legal and regulatory environment, including current medical malpractice and fraud and abuse laws; and

Structure and supply of the health professional workforce, including scope of practice restrictions, trends in clinical specialization, and patient access to providers.

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Source: Bipartisan Policy Center, What is Driving Health Care Spending, September 2012 .

Disease Prevalence Had No Net Impact on Health Care Spending Growth 1996-2006

Decomposition of Real Per Capita Health Spending : 1996-2006

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Source: Charles S Roehrig and David M. Rosseau, The Growth In Cost Per Case Explains Far More Of US Health Spending Increases Than Rising Disease Prevalence, Health Affairs September 201130:91657-1663;.

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Factors Accounting for Growth in U.S. Health Care Costs

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8

6

4

2

0

Ave

rage

Ann

ual %

Cha

nge

National Health Care Costs

Medical Prices

Population

Use and Intensity

2000-06 2007-09 2010

Source: Bipartisan Policy Center, What is Driving Health Care Spending, September 2012 citing CMS Office of the Actuary, published in Health Affairs 2013; 31:208-219.

JAMA Study: One-third of U.S. Medical Care Spending Is Wasted

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Source: Aon, Jump In! Reshape the System: Provider Delivery and Payment Reform, 2013 Aon Hewitt Health Care Forums citing Eliminating Waste in U.S. Health Care, Berwick and Hackbarth,, JAMA 2012.

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Current Slowdown in Health Costs’ Rise …U.S. health care spending grew at only 3.9% annually between 2009-2011• Lowest health care growth rate in 50 years

Recent studies suggest several factors contributed to the slowdown, but disagree to the extent of each • 77% of changes are a result of the broader economy

(Kaiser Family Foundation)• 37% of health care slowdown due to recession (Cutler)• 20% due to rising out-of-pocket payments (Chernew)• Less rapid development of medical treatment

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Source: Annie Lowrey, Slowdown in Health Costs’ Rise May Last as Economy Revives, New York Times, May 6, 2013.

2nd Study Presentation (October)Review of policies that help control health care costs while maintaining quality of care,

Review approaches undertaken in other states and countries to control health care costs,

Examine PPACA impact on the cost of health care, and

Additional Issues requested by members.

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Areas to Be ReviewedState, country and market approaches to control health care costs through:• Better health care outcomes• Value-based health care purchasing• Health care delivery design• Health care payment design• Health care oversight design• Transparency

Avenues to encourage competition in the health care market

Patient Protection and Affordable Care Act impacts on health care costs

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Appendix: International Health Care Price Comparisons

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14

27

Source: International Federation of Health Plans, 2012 Comparative Price Report.

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Source: International Federation of Health Plans, 2012 Comparative Price Report.

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Source: International Federation of Health Plans, 2012 Comparative Price Report.

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Source: International Federation of Health Plans, 2012 Comparative Price Report.

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Source: International Federation of Health Plans, 2012 Comparative Price Report.