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Costs of Healthcare for Children and Complex Medical Cases
- 1. Costs, Charges, & Cost-Effectiveness Tuesday, May 6, 14
- 2. Pop Quiz •How much do Americans spend on health care? A)1 Trillion per year or 6% of GDP B)2 Trillion per year or 12% of GDP C)3 Trillion per year or 18% of GDP D)4 Trillion per year or 24% of GDP Pop Quiz Tuesday, May 6, 14
- 3. Pop Quiz •How much do Americans spend on health care for their kids? A)28 Billion per year or 1.3% of NHE B)285 Billion per year or 13% of NHE C)2.85 Trillion per year or all of NHE Pop Quiz http://www.cms.gov Tuesday, May 6, 14
- 4. Pop Quiz We Spend... http://www.healthcostinstitute.org •$2,100 per child •Up 4.5% in last year Child Tuesday, May 6, 14
- 5. Pop Quiz We Spend... http://www.healthcostinstitute.org •$2,100 per child •Up 4.5% in last year •$6,000 per working adult Child Adult <65yr Tuesday, May 6, 14
- 6. Pop Quiz We Spend... http://www.healthcostinstitute.org •$2,100 per child •Up 4.5% in last year •$6,000 per working adult •$18,000 per person age 65+ Child Adult <65yr Adult >65yr Cost Age Tuesday, May 6, 14
- 7. Pop Quiz We Spend... http://www.healthcostinstitute.org Child Health Expenditure Tuesday, May 6, 14
- 8. Pop Quiz Child Health Costs http://www.healthcostinstitute.org 17% of Commercial costs are out of pocket Tuesday, May 6, 14
- 9. Pop Quiz Child Health Costs http://www.healthcostinstitute.org Breakdown by Spending Category Tuesday, May 6, 14
- 10. Pop Quiz Cases http://www.healthcostinstitute.org 1. In your primary care clinic you see a 4mo baby who has conductive hearing loss. How would you counsel a family about the costs of the hearing loss and of cohlear implants? Tuesday, May 6, 14
- 11. Pop Quiz Cases http://www.healthcostinstitute.org A 9yo child in your clinic with spina bifida and 3 co-morbid conditions, who relies on 17 different health care providers, GT fed, and hospitalized 5-10x per year How would you reduce costs for this kid? Tuesday, May 6, 14
- 12. Costs to Whom? •Patient or Family •Provider or Physician •Clinic or Hospital •Health Network •Insurer or Payor •Employer or Business •Community & Society Tuesday, May 6, 14
- 13. Cost Accounting Direct Cost Expense of a specific product or process Indirect Cost - Overhead Expenses not related to a product/process Charges to Payer/Patient Bill insurers/patients get & gross revenue Hospital/ClinicTotalCosts Societal Cost Incl. productivity costs, opportunity costs Payer/PatientCharge Payer/PatientPayment Hospital/ClinicNet Insurer/Payer Pt Tuesday, May 6, 14
- 14. Pop Quiz •Obese Children Obese Adults •Greater acute & chronic dz (HTN, TIIDM, CHD, hyperlipidemia, stroke) •Obese children & adults cost more Direct Costs Example - Child Obesity Incremental Risk Acute/Chronic Dz Incremental Cost/Year of Dz x Lifetime Years Lifelong Cost of Child Obesity The Math Tuesday, May 6, 14
- 15. Pop QuizThe Math Child Obesity Costs Incremental Risk Acute/Chronic Dz Incremental Cost of Dz/Year of Dz x Lifetime Years Lifelong Cost of Child Obesity (Finkelstein, Pediatrics 2014) Tuesday, May 6, 14
- 16. Pop QuizThe Math Child Obesity Costs Incremental Cost of Dz/Year of Dz x Lifetime Years Lifelong Cost of Child Obesity (Finkelstein, Pediatrics 2014) 2.3% Greater Risk per BMI unit >25 Tuesday, May 6, 14
- 17. Pop QuizThe Math Child Obesity Costs x Lifetime Years Lifelong Cost of Child Obesity (Finkelstein, Pediatrics 2014) 2.3% Greater Risk per BMI unit >25 10% Greater Cost with Disease/Yr Tuesday, May 6, 14
- 18. Pop QuizThe Math Child Obesity Costs Lifelong Cost of Child Obesity (Finkelstein, Pediatrics 2014) 2.3% Greater Risk per BMI unit >25 10% Greater Cost with Disease/Yr x 70 Lifetime Years Tuesday, May 6, 14
- 19. Pop QuizThe Math Child Obesity Costs (Finkelstein, Pediatrics 2014) 2.3% Greater Risk per BMI unit >25 10% Greater Cost with Disease/Yr x 70 Lifetime Years = $19K-$40K per Obese Child = $4K-8K Cost to EVERY Child ($19K x 1/5 children who are obese) Tuesday, May 6, 14
- 20. Pop Quiz •Costs Roll Up By Category •Variable Costs - Vary directly with volume of patient services provided •Fixed Costs - Do not vary by volume & incurred regardless of throughput Hospital Costs Tuesday, May 6, 14
- 21. Pop QuizHospital Costs UCSF Med Ctr Example Tuesday, May 6, 14
- 22. Pop QuizHospital Costs UCSF Med Ctr Example Tuesday, May 6, 14
- 23. Pop QuizHospital Costs UCSF Med Ctr Example Tuesday, May 6, 14
- 24. Pop QuizHospital Costs UCSF Med Ctr Example Tuesday, May 6, 14
- 25. Pop QuizWho Pays? Patients & Insurers •Cost Sharing (AKA Co-Pay) Insurance Pays X% 0%X% Tuesday, May 6, 14
- 26. Pop QuizWho Pays? Patients & Insurers •Cost Sharing (AKA Co-Pay) Patient Pays 1-X% 0%X%100% Insurance Pays X% Tuesday, May 6, 14
- 27. Pop QuizWho Pays? Patients & Insurers •Cost Sharing (AKA Co-Pay) •Def: Percent of Charges Paid by Patient •Inversely Related to Premium/Deductible •Higher in Low-Cost Plans (AAP Statement) •Higher for Out-of-Network Services in HMO •Patient-Level Deterrent to Over-Use, providing “skin in the game” Tuesday, May 6, 14
- 28. Pop QuizWho Pays? Patients’ Premiums or Taxes Where Health Insurance $ Goes Payer Margin (Commercial) (Less for Public Plans) Tuesday, May 6, 14
- 29. Pop QuizWho Pays? Insurers •Reimbursement Structures •Fee-For-Service vs. Managed Care vs. Capitated vs. Integrated Care Systems •Types of Insurers (AKA Payers) •Public (Medicaid/CHIP) vs. Private •HMO vs. PPO vs. CDHP/HSA •Among Private: For-Profit vs. Nonprofit Tuesday, May 6, 14
- 30. Pop QuizWho Pays? Why Does It Matter? •Fee For Service vs. Salaried Reimbursement •FFS creates perverse incentives to maximize intervention & minimize prevention. Encourages “Sick Care”. •RCT: Peds Resident Clinic Assignments •FFS residents booked excess visits •No difference in outcomes •UCSF is largely FFS, SFGH Capitated (Hickson, Pediatrics 1987) Tuesday, May 6, 14
- 31. Pop QuizWho Pays? Why Does It Matter? •Commercial Plans Reimburse at Higher Rates •Per Member Per Month Estimates from AAP •Medicaid: $29/mo Commercial: $58/mo •Often Benchmarked against Medicare •“Medicaid pays ~%70 of Medicare rate & Commercial plans pay ~120%” •BUT Medicaid serves most complex pediatric patients (AAP Cost Model, 2011) Tuesday, May 6, 14
- 32. Pop QuizWho Pays? Why Does It Matter? •Commercial Plans Reimburse at Higher Rates •Per Member Per Month Estimates from AAP •Medicaid: $29/mo Commercial: $58/mo •Often Benchmarked against Medicare •“Medicaid pays ~%70 of Medicare rate & Commercial plans pay ~120%” •BUT Medicaid serves two thirds of complex pediatric patients with highest costs(AAP Cost Model, 2011) Tuesday, May 6, 14
- 33. Pop Quiz Peds Cost Drivers •15% of Patients 60% of Costs • Incl. Significant Acute Dz (5%), Chronic Dz (10%), Catastrophic Dz (0.4%), & Malignancy (<0.1%) (Neff, 2004 HSR) CostsPatient % 50% 0% 100% Well Kids Complex Text Tuesday, May 6, 14
- 34. Pop Quiz Peds Cost Drivers •15% of Patients 60% of Costs • Incl. Significant Acute Dz (5%), Chronic Dz (10%), Catastrophic Dz (0.4%), & Malignancy (<0.1%) (Neff, 2004 HSR) CostsPatient % 50% 0% 100% Well Kids Complex This top decile is 10x more likely to remain in the top decile year -to-year Tuesday, May 6, 14
- 35. Pop Quiz Peds Cost Drivers •15% of Patients 60% of Costs • Includes Significant Acute Dz (5%), Chronic Dz (10%), Catastrophic Dz (0.4%), & Malignancy (<0.1%). Tuesday, May 6, 14
- 36. Pop Quiz Who is Complex? UCSF has 3rd highest Case Mix Index among comparable U.S. children’s hospitals Tuesday, May 6, 14
- 37. Pop Quiz Who is Complex? •Children with Medical Complexity (CMC) About 1-3% of Children, Defined by •1) chronic/severe health conditions •2) Substantial health service needs •3) Major functional limitations •4) High resource utilization •5) Most have neuro impairment or a gastrostomy tube Tuesday, May 6, 14
- 38. Pop Quiz CMC Care Costs •Those 1-3% •10-20 % of admissions (doubled in ~20yrs) •26-49% of all inpatient bed days •41-53% of all hospital charges •Care is highly fragmented, reactive •80% of CMC costs are for inpatient care Tuesday, May 6, 14
- 39. Pop Quiz CMC Care Costs •Readmission Accounts for Large Costs •30 Day Readmission Rate is 20-25% •Often aspiration, equipment failure, surgery, seizures, feeding troubles •To Minimize Admissions NACHRI Recs... •Care Coordination to Reduce Costs •Ensure Access & Timeliness of Care Tuesday, May 6, 14
- 40. Pop Quiz CMC Care Costs •Care Coordination Reduces Costs •Other Effective Steps: Longer visit times, case managers, social workers, primary care NPs, family notebooks, individualized plans Intensive Coordination for 230 CMCs $400,000 program costs/yr $3.3 million reduction in hospital resource utilization Tuesday, May 6, 14
- 41. Pop Quiz CMC Care Costs •Cost per CMC child: $6K-70K/yr •Out of Pocket Costs to Families: 1/6th •2/3 CMCs on Medicaid (c/w ~40% all kids) •In Part Due to Low Income from Chronic Health Care Costs •In Part Because Medicaid Covers a Wider Range of Services than Commercial Tuesday, May 6, 14
- 42. Costs to Society 17% 35% 11% 8% 27% 2% Medicaid 1˙ & 2˙ Education Higher Ed Corrections Other Public Assistance State Spending - $600B - Medicaid costs grew 3% in 5 yrs - Crowding out other spending priorities Medicaid 1˙& 2˙ EducationOther Corrections HigherEd Tuesday, May 6, 14
- 43. Costs to Society 30% 29% 9% 6% 23% 2% Medicaid 1˙ & 2˙ Education Higher Ed Corrections Other Public Assistance State Spending - $600B - Medicaid costs grew 3% 2008-2013 - Crowding out other spending priorities - With Federal $$$, Medicaid is Largest Single Cost (>$200B) Medicaid 1˙& 2˙ Education Other Corrections Higher Ed Tuesday, May 6, 14
- 44. • Direct & Indirect Medical Costs & Charges – 6% – Medical Visits, Hearing Aids, Cochlear Implants • Education & Support Costs – 2% – Special Education, Interpreters, Captioning • Caregiver Costs – 27% – Employment of informal caregivers • Deadweight Costs – 9% – Loss of tax revenue, deficit of funds for health/welfare • Loss of Productivity – 56% – Lost earnings to those with hearing impairment ($55k/yr less) – Cochlear Implants double chances of having paid work compared to moderate hearing loss – 42% of the deaf ages 18-44yo are not working in the U.S. Costs - Hearing Loss Example Societal-Level Costs Patient-Level Costs Tuesday, May 6, 14
- 45. Costs - Cochlear Implants Societal- Level Savings Patient-Level Costs • Direct Medical Costs – $60,228 – Cochlear Implant $19, 153, Surgery Admission $4,612 – Audiology Visits $5,148, Rehabilitation Visits $8,984 – Device Failure, Insurance, Upgrades, Batteries $11,417 • Indirect Costs – negative/savings $111,090 – Time Off Work $4,623, Travel & Parking Expenses $5,419 – Change in Educational Costs negative $65,558 – Change in Future Earnings negative $55,574 • Net Costs (Direct+Indirect) - savings $50,862 • 12 QALYs: Hearing, Speech, Overall Well-Being Tuesday, May 6, 14
- 46. Comparing Cost in Healthcare Tuesday, May 6, 14
- 47. Incremental Cost-Effectiveness Ratio (ICER) • Change in Cost Per Change in Benefit • Incremental Benefit for Incremental Change in Resources Used Costintervention - Costbaseline Effectivenessintervention - Effectivenessbaseline Tuesday, May 6, 14
- 48. Quality Adjusted Life Years (QALYs) Full Health No Health (Dead) 0.8 1.0 0.6 0.2 0.4 0 Tuesday, May 6, 14
- 49. Quality of Life Life Years 0.8 1.0 0.6 0.2 0.4 0 Baseline Comparison Intervention 20 30 QALYs Gained = (30 x 0.8) – (20 x 0.4) = 24 – 8 = 16 QALYs Quality Adjusted Life Years (QALYs) Tuesday, May 6, 14
- 50. Costs Example – Cochlear Cost Utility = Costs/QALYs = Costs/(Years x Quality) To Medical System • Cost Utility = Direct Costs/QALYs = $60,228/12 QALYs = $5019/QALY To Patient & Society • Cost Utility = Net Costs/QALYs = SAVINGS $50,862/12 QALYs = SAVINGS of $4,238/QALY Cheng, JAMA August 20000 Tuesday, May 6, 14