Is It Possible for The U.S. toIs It Possible for The U.S. to
Control Health Care Costs?Control Health Care Costs?
Stuart H...
y = 64.645x + 504.38
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The U.S. Has In The Past Tried ToThe U.S. Has In The Past Tried To
Control Health Spending---Control Health Spending---
BU...
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Why Reform Legislation InWhy Reform Legislation In
Massachusetts and ProposedMassachusetts and Proposed
National Reform Ha...
If Legislation Included SeriousIf Legislation Included Serious
Control of Costs---Control of Costs---
I fear We Could Not ...
Altman’s LawAltman’s Law
Most Every PowerfulMost Every Powerful
Constituent Group FavorsConstituent Group Favors
Health Re...
But--- Current Rebellion AgainstBut--- Current Rebellion Against
National Health Reform CentersNational Health Reform Cent...
Where Do We Go FromWhere Do We Go From
Here?Here?
Without Health ReformWithout Health Reform
Medicare Trust Fund Could GoMedicare Trust Fund Could Go
Broke By 2017Broke By ...
The Problem Is Not Medicare’sThe Problem Is Not Medicare’s
Alone It Is Our Entire Health CareAlone It Is Our Entire Health...
Even With No Change In CoverageEven With No Change In Coverage
Government Will DominateGovernment Will Dominate
Institutio...
If Payment Reductions FocusIf Payment Reductions Focus
Only on Government SpendingOnly on Government Spending
Amounts ---A...
Can Private Insurance Payments Continue ToCan Private Insurance Payments Continue To
Pay For The Shortfall In Government P...
What is Driving Increases InWhat is Driving Increases In
Health Costs?Health Costs?
Price Increases Versus Growth InPrice ...
Factors Affecting Per-Capita SpendingFactors Affecting Per-Capita Spending
Trend for Hospital Services 1994-2004Trend for ...
What Is Driving Health InsuranceWhat Is Driving Health Insurance
PremiumsPremiums
Price vs. UtilizationPrice vs. Utilizati...
Even If Price Increases NowEven If Price Increases Now
Dominate The Growth inDominate The Growth in
SpendingSpending
The F...
Any Significant Restructuring ofAny Significant Restructuring of
Healthcare Delivery System WillHealthcare Delivery System...
Options For ChangingOptions For Changing
Payment SystemPayment System
• Bundled or Case PaymentsBundled or Case Payments
•...
Aligning Incentives BetweenAligning Incentives Between
Hospitals And DoctorsHospitals And Doctors
• The Importance of a Va...
Massachusetts Actively WorkingMassachusetts Actively Working
To Develop A Cost ContainmentTo Develop A Cost Containment
St...
What Payment/Delivery SystemWhat Payment/Delivery System
Changes Was To Be In ReformChanges Was To Be In Reform
Legislatio...
Components of Reform ThatComponents of Reform That
Could Lower SpendingCould Lower Spending
• Simplify Administration Func...
Components of Reform ThatComponents of Reform That
Could Lower SpendingCould Lower Spending
• Drug PricingDrug Pricing
– H...
Components of Reform That Could ImproveComponents of Reform That Could Improve
Quality And Health System PerformanceQualit...
Components Of Reform That CouldComponents Of Reform That Could
Improve Quality And Health SystemImprove Quality And Health...
Will End of Health Reform andWill End of Health Reform and
Recent Slowdown In Growth OfRecent Slowdown In Growth Of
Health...
National Health ExpenditureNational Health Expenditure
Growth Slows In 2008Growth Slows In 2008
4.4%
6.0%
6.6%
7.9%
6.6%
0...
Growth In Spending By Type ofGrowth In Spending By Type of
ServiceService
20082008
0.7%
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4.4%
5.0%
4.5%
Administration...
But Percent Of GDP Spent onBut Percent Of GDP Spent on
Healthcare Keeps GrowingHealthcare Keeps Growing
Percentage of GDP ...
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Stewart Altman

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Stewart Altman

  1. 1. Is It Possible for The U.S. toIs It Possible for The U.S. to Control Health Care Costs?Control Health Care Costs? Stuart H. Altman, Ph.D.Stuart H. Altman, Ph.D. Sol C. Chaikin Professor of National Health PolicySol C. Chaikin Professor of National Health Policy The Heller School for Social Policy and ManagementThe Heller School for Social Policy and Management Brandeis UniversityBrandeis University
  2. 2. y = 64.645x + 504.38 0 500 1000 1500 2000 2500 3000 3500 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 PerCapitaNHEin$Per Capita Growth In Health ExpendituresPer Capita Growth In Health Expenditures Has Been Growing at 2% Above InflationHas Been Growing at 2% Above Inflation For 40 Years---For 40 Years---Will We Change It?Will We Change It?(adjusted for inflation)(adjusted for inflation)
  3. 3. The U.S. Has In The Past Tried ToThe U.S. Has In The Past Tried To Control Health Spending---Control Health Spending--- BUT----With Limited Success andBUT----With Limited Success and For a Limited Time PeriodFor a Limited Time Period
  4. 4. 0 500 1000 1500 2000 2500 3000 3500 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 PerCapitaNHEin$ Gov’t Reg. M&M Begins Managed Care ? Little Reg./Little Mkt. Y = 52.703x – 102898Y = 52.703x – 102898 Y = 40.31x – 78465Y = 40.31x – 78465 Y = 88.486x – 173967Y = 88.486x – 173967 Y = 37.925x –Y = 37.925x – 7319573195 Y = 107.95x – 1025.3Y = 107.95x – 1025.3 The Changing Growth Pattern of Per CapitaThe Changing Growth Pattern of Per Capita National Health ExpenditureNational Health Expenditure 1966-20051966-2005 (adjusted for inflation)(adjusted for inflation)
  5. 5. Why Reform Legislation InWhy Reform Legislation In Massachusetts and ProposedMassachusetts and Proposed National Reform Have LimitedNational Reform Have Limited Cost ReductionsCost Reductions
  6. 6. If Legislation Included SeriousIf Legislation Included Serious Control of Costs---Control of Costs--- I fear We Could Not RepealI fear We Could Not Repeal Altman’s LawAltman’s Law
  7. 7. Altman’s LawAltman’s Law Most Every PowerfulMost Every Powerful Constituent Group FavorsConstituent Group Favors Health Reform BUT If It is NotHealth Reform BUT If It is Not Their Plan They Prefer TheTheir Plan They Prefer The “Status Quo”“Status Quo”
  8. 8. But--- Current Rebellion AgainstBut--- Current Rebellion Against National Health Reform CentersNational Health Reform Centers On Anger of Citizens That WantOn Anger of Citizens That Want Lower CostsLower Costs However They Do Not Want AnyHowever They Do Not Want Any Restrictions on Where They Get CareRestrictions on Where They Get Care and How Much Care They Receive!and How Much Care They Receive!
  9. 9. Where Do We Go FromWhere Do We Go From Here?Here?
  10. 10. Without Health ReformWithout Health Reform Medicare Trust Fund Could GoMedicare Trust Fund Could Go Broke By 2017Broke By 2017
  11. 11. The Problem Is Not Medicare’sThe Problem Is Not Medicare’s Alone It Is Our Entire Health CareAlone It Is Our Entire Health Care SystemSystem
  12. 12. Even With No Change In CoverageEven With No Change In Coverage Government Will DominateGovernment Will Dominate Institutional PaymentsInstitutional Payments 54.4% 66.3% 37.5% 24.8% 5.5% 7.3% 2.6% 1.7% 0% 10% 20% 30% 40% 50% 60% 70% Gov. Pvt. Uncomp. Care Other Proportion Of Hospital Expenses Attributed To Patients By Payer Source 2000 2025
  13. 13. If Payment Reductions FocusIf Payment Reductions Focus Only on Government SpendingOnly on Government Spending Amounts ---Amounts --- What About Private PaymentWhat About Private Payment Rates?Rates? Does Cost Shifting Exist?Does Cost Shifting Exist?
  14. 14. Can Private Insurance Payments Continue ToCan Private Insurance Payments Continue To Pay For The Shortfall In Government PaymentsPay For The Shortfall In Government Payments Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals. (1) Includes Medicaid Disproportionate Share payments. 92.0% 85.0% 138.0% 130.0% 157.4% 60% 80% 100% 120% 140% 160% 180% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Medicare Medicaid(1) Private Payer Hospital Payment-to-Cost RatiosHospital Payment-to-Cost Ratios (Government Ratios Maintained at Current Levels)(Government Ratios Maintained at Current Levels)
  15. 15. What is Driving Increases InWhat is Driving Increases In Health Costs?Health Costs? Price Increases Versus Growth InPrice Increases Versus Growth In Use of Services!Use of Services!
  16. 16. Factors Affecting Per-Capita SpendingFactors Affecting Per-Capita Spending Trend for Hospital Services 1994-2004Trend for Hospital Services 1994-2004 -1.0% 1.0% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 94 95 96 97 98 99 00 01 02 03 04 Quantity Price Spending Source: Strunk et al. “Health Care Costs: Declining Growth Rate Pauses in 2004,” Health Affairs, June
  17. 17. What Is Driving Health InsuranceWhat Is Driving Health Insurance PremiumsPremiums Price vs. UtilizationPrice vs. Utilization 25% 75% 43% 54% 57% 46% 0% 10% 20% 30% 40% 50% 60% 70% 80% 2002 2005 2007 Percentage of Growth Related to Utilization Percentage of Growth Related to Price Increases Mckinsey Global Institute: “Accounting for the Cost of Health Care in the United States
  18. 18. Even If Price Increases NowEven If Price Increases Now Dominate The Growth inDominate The Growth in SpendingSpending The Focus Must Be On Changing theThe Focus Must Be On Changing the Delivery System To Improve ProductivityDelivery System To Improve Productivity and Eliminate Unnecessary Servicesand Eliminate Unnecessary Services
  19. 19. Any Significant Restructuring ofAny Significant Restructuring of Healthcare Delivery System WillHealthcare Delivery System Will Require Reimbursement Systems ThatRequire Reimbursement Systems That Supports Such Behavior ---Supports Such Behavior --- Fee-for-Service System Needs to beFee-for-Service System Needs to be Modified or Abandoned!Modified or Abandoned!
  20. 20. Options For ChangingOptions For Changing Payment SystemPayment System • Bundled or Case PaymentsBundled or Case Payments • Significant Pay-for-Performance Add-OnSignificant Pay-for-Performance Add-On or Penaltiesor Penalties • Value-Based PaymentsValue-Based Payments • Permit Wider Use of “Gain-sharing”Permit Wider Use of “Gain-sharing” Between Hospitals and DoctorsBetween Hospitals and Doctors
  21. 21. Aligning Incentives BetweenAligning Incentives Between Hospitals And DoctorsHospitals And Doctors • The Importance of a Value-Based Payment System --- – Allows Hospitals to Be Rewarded for More Appropriate and Cost Effective Care – Permits Hospitals to Share With Physicians The Benefits of Higher Valued Care • Need Transparency and Elimination of Conflicts of Interest
  22. 22. Massachusetts Actively WorkingMassachusetts Actively Working To Develop A Cost ContainmentTo Develop A Cost Containment StrategyStrategy • Two State Level Commissions Have RecommendedTwo State Level Commissions Have Recommended Restructuring State Health Payment SystemRestructuring State Health Payment System – Bundle or Global PaymentsBundle or Global Payments – Focus on Integrated Care With Incentives for Value AddedFocus on Integrated Care With Incentives for Value Added ServicesServices – Limits on Growth in SpendingLimits on Growth in Spending • Governor and Legislature Reviewing OptionsGovernor and Legislature Reviewing Options • Largest Private Insurer—BCBS Developed VoluntaryLargest Private Insurer—BCBS Developed Voluntary Global Payment SystemGlobal Payment System
  23. 23. What Payment/Delivery SystemWhat Payment/Delivery System Changes Was To Be In ReformChanges Was To Be In Reform LegislationLegislation
  24. 24. Components of Reform ThatComponents of Reform That Could Lower SpendingCould Lower Spending • Simplify Administration FunctionsSimplify Administration Functions – Financial and Eligibility RequirementsFinancial and Eligibility Requirements – Enrollment and DisenrollmentEnrollment and Disenrollment – Electronic Payment TransactionsElectronic Payment Transactions • Reduce Medicare SpendingReduce Medicare Spending – Medicare Advantage PlansMedicare Advantage Plans – Disproportionate Share PaymentsDisproportionate Share Payments – Update PaymentsUpdate Payments – Reduce Payments for Hospital-Acquired ConditionsReduce Payments for Hospital-Acquired Conditions and Preventable Readmissionsand Preventable Readmissions – More Powerful Medicare Advisory CommiMore Powerful Medicare Advisory Commission • Implementation of Cost Reducing PilotImplementation of Cost Reducing Pilot ProgramsPrograms • Medicare Innovation CenterMedicare Innovation Center
  25. 25. Components of Reform ThatComponents of Reform That Could Lower SpendingCould Lower Spending • Drug PricingDrug Pricing – House Would –House Would – • Require Secretary to Negotiate prices WithRequire Secretary to Negotiate prices With Pharmaceutical ManufacturersPharmaceutical Manufacturers • Increase Medicaid Drug RebatesIncrease Medicaid Drug Rebates • Require Institute of Medicine to study geographicRequire Institute of Medicine to study geographic variation in Medicare spending and recommendvariation in Medicare spending and recommend revising geographic adjustment factorsrevising geographic adjustment factors • Increase funding for comparative effectivenessIncrease funding for comparative effectiveness researchresearch • House --- Incentive payments to States that enactHouse --- Incentive payments to States that enact medical liability laws that simplify the systemmedical liability laws that simplify the system
  26. 26. Components of Reform That Could ImproveComponents of Reform That Could Improve Quality And Health System PerformanceQuality And Health System Performance • Establish Medicare and Medicaid pilot programs thatEstablish Medicare and Medicaid pilot programs that bundle payments for most healthcare servicesbundle payments for most healthcare services • Create Medicare independence at homeCreate Medicare independence at home demonstrationsdemonstrations • Establish Center for Quality ImprovementEstablish Center for Quality Improvement • Establish Community-based collaborative careEstablish Community-based collaborative care network program for chronic care and emergencynetwork program for chronic care and emergency department caredepartment care • Establish national prevention, health promotion andEstablish national prevention, health promotion and public health councilpublic health council – Remove Medicare cost sharing for proven preventative servicesRemove Medicare cost sharing for proven preventative services
  27. 27. Components Of Reform That CouldComponents Of Reform That Could Improve Quality And Health SystemImprove Quality And Health System PerformancePerformance • Long-Term CareLong-Term Care – Establish a National Voluntary Payroll Deduction InsuranceEstablish a National Voluntary Payroll Deduction Insurance Program for Community Living AssistantsProgram for Community Living Assistants – New Medicaid Options for Home and Community-based servicesNew Medicaid Options for Home and Community-based services • Workforce TrainingWorkforce Training – Increase Unused GME Positions for Primary Care andIncrease Unused GME Positions for Primary Care and General SurgeryGeneral Surgery – Increase Scholarship Funding for Primary Care and otherIncrease Scholarship Funding for Primary Care and other shortage occupationsshortage occupations • Expand Requirements for Non-profit Hospitals toExpand Requirements for Non-profit Hospitals to Conduct Community Needs Assessment and helpConduct Community Needs Assessment and help support programs to meet critical community needssupport programs to meet critical community needs
  28. 28. Will End of Health Reform andWill End of Health Reform and Recent Slowdown In Growth OfRecent Slowdown In Growth Of Healthcare Spending Blunt HealthHealthcare Spending Blunt Health Cost Containment Efforts?Cost Containment Efforts? What About The PotentialWhat About The Potential Bankruptcy of The Medicare TrustBankruptcy of The Medicare Trust Fund?Fund?
  29. 29. National Health ExpenditureNational Health Expenditure Growth Slows In 2008Growth Slows In 2008 4.4% 6.0% 6.6% 7.9% 6.6% 0% 2% 4% 6% 8% 10% 2000 2005 2006 2007 2008
  30. 30. Growth In Spending By Type ofGrowth In Spending By Type of ServiceService 20082008 0.7% 3.2% 4.4% 5.0% 4.5% Administration & Private Health Insurance Prescription Drugs Physician & Cinical Care Hospital Care Over all
  31. 31. But Percent Of GDP Spent onBut Percent Of GDP Spent on Healthcare Keeps GrowingHealthcare Keeps Growing Percentage of GDP Spent on Health care 13.6% 15.7% 15.8% 15.9% 16.2% 0% 5% 10% 15% 20% 2000 2005 2006 2007 2008
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