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

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 too Because costs for health care effect the cost of other goods and services Because you can make a difference Because it might effect your income Because it matters to your patients (at least some of them)

Because otherwise politicians will!

Because you pay for health care too

Because costs for health care effect the cost of other goods and services

Because you can make a difference

Because it might effect your income

Because 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

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 costs Responses to Rising Costs

How much?

How does the US compare to other countries?

History of costs

Responses to Rising Costs

Approximately how much was spent on health care in the United States in 2004? A. $1.9 Billion B . $19 Billion C. $190 Billion D . $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 life B . Americans’ demand for the best care available C . Malpractice and ‘defensive medicine’ D. Fraud and Abuse in health care

Measuring Health Care Costs Annual Expenditures % Gross Domestic Product (GDP)

Annual Expenditures

% Gross Domestic Product (GDP)

Per Capita HC Costs (Unadjusted) 1969: $268 1990: $2567 2000: $5712 2004: $6280

1969: $268

1990: $2567

2000: $5712

2004: $6280

International Health Care Spending (As % GDP)

Reasons for Rising Costs Aging 3rd Party Payers Malpractice/Defensive Medicine Fraud/Waste Administrative Costs Futile Care Technology

Aging

3rd Party Payers

Malpractice/Defensive Medicine

Fraud/Waste

Administrative Costs

Futile Care

Technology

Responses to Rising Costs Managed Care Malpractice Reform Medical Savings Accounts

Managed Care

Malpractice Reform

Medical 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 enrollees 1991: 38 million HMO enrollees

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 enrollees

1991: 38 million HMO enrollees

Managed Care--How does it save money? Gatekeeper Utilization Review Prior Authorization Evidence-based practice/Pathways Provider ‘Deselection’ Exclusions

Gatekeeper

Utilization Review

Prior Authorization

Evidence-based practice/Pathways

Provider ‘Deselection’

Exclusions

Malpractice Reforms Reducing Filing of Claims Limiting the Plaintiff’s Award Altering the Plaintiff’s Burden of Proof Changing the Judicial Role

Reducing Filing of Claims

Limiting the Plaintiff’s Award

Altering the Plaintiff’s Burden of Proof

Changing 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

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 US Payers Uninsured/Underinsured

History of Insurance in US

Payers

Uninsured/Underinsured

Where does the Money Come From?

Where does the money go?

Health Insurance in US 1850: First health insurance policy in US 1929: 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 Medicare 1966 Medicaid

1850: First health insurance policy in US

1929: 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 Medicare

1966 Medicaid

Employee-Sponsored Health Insurance History: 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)

History: 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 expenditures Medicare Medicaid CHAMPUS VA Rapidly rising proportion of all government spending

45% of all US health care expenditures

Medicare

Medicaid

CHAMPUS

VA

Rapidly 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 Hospital Part B covers Doctors Part D (new in 2006) covers medications 98% seniors participate 70-90% have “Medigap” insurance

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

Part A covers Hospital

Part B covers Doctors

Part D (new in 2006) covers medications

98% seniors participate

70-90% have “Medigap” insurance

Medicaid Federal program for ‘deserving poor’ (but only covers 40% of persons <100% FPL) Coverage and eligibility vary by state Variety of programs including coverage for pregnant women, children, disabled, dialysis, long-term care (most important provider of NH coverage)

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

Coverage and eligibility vary by state

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

BadgerCare Wisconsin version of Child Health Insurance Program Coverage 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)

Wisconsin version of Child Health Insurance Program

Coverage 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 needy Eligibility equal to ~ 130% FPL (~$800/month for single adult) No mental health/substance abuse/dental coverage 43% state, 58% local $$ funded {citizenship}

Milwaukee County program for uninsured, medically needy

Eligibility equal to ~ 130% FPL (~$800/month for single adult)

No mental health/substance abuse/dental coverage

43% 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% FPL Age Eligibility: 45 and over; occasional exceptions

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

Income Eligibility: Up to 250% FPL

Age 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)

~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)

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)

‘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 CCB Cost: $50/month Lifetime cost (30 years x $60/yr -1 month samples) =$18,000 Less proven benefits Start HCTZ Cost $5/month Lifetime Cost (30 years x $60/yr) =$1800 More proven benefits

Grab a sample of CCB

Cost: $50/month

Lifetime cost (30 years x $60/yr -1 month samples) =$18,000

Less proven benefits

Start HCTZ

Cost $5/month

Lifetime Cost (30 years x $60/yr) =$1800

More proven benefits

Can you make a difference II 20 y/o woman comes in with frequent headaches: Order MRI Cost: $3200 (AHC bill to insurance) If clinician sees 50 headaches/year total cost = $160,0000 Advise to drink extra 1.5l water/day Cost: $0-2.50 Little harm and RCT evidence of benefit

Order MRI

Cost: $3200 (AHC bill to insurance)

If clinician sees 50 headaches/year total cost =

$160,0000

Advise to drink extra 1.5l water/day

Cost: $0-2.50

Little harm and RCT evidence of benefit

Does it matter to you? The Impact of Health Insurance costs on day-to-day life

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

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.

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)

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

Local Example:

Some Blue Cross (Anthem) Plans

Indemnity Insurance Traditional “fee-for-service,” widest range of provider choices but most expensive Example: Blue Cross/Blue Shield (Anthem)

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

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

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 = $

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 evolved Resource Based Relative Value Scale (RBRVS – 1992)

Comparative values of all physician procedures

Historically developed and evolved

Resource Based Relative Value Scale (RBRVS – 1992)

Elements of RBRVS Time Training Intensity Malpractice Overhead Work

Time

Training

Intensity

Malpractice

Overhead

Sample RVU 99214 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)

99214 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? *Non-Medicare Assignment 0 7.00 0 8.20* Bill Patient 90.00 110.00 56.00 82.00 TOTAL 72.00 88.00 56.00 65.60 Insurance Pays 18.00 22.00 0 16.40 Patient Co-Pay 90.00 110.00 56.00 82.00 Allowable PPO Indemnity Medicaid Medicare

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

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

Salary vs. incentives

Incentive methods

Percentage of collections (billings)

RVU methods

Capitation distribution

Quality bonuses

Multispecialty sharing