Health care spending slides mili - schoenman

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Dr. Julie Schoenman’s presentation for the MILI Actuarial Seminar series, “A Detailed Look at US Health Care Spending,” covers recent trends in public and private spending as well as the implications of rising spending for the federal budget outlook and for consumers.

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  • Public spending must be financed by taxes or borrowing, thus the growing share of health spending that is publicly financed has increasingly important implications for the government’s fiscal situation and for our ability to spend money on other goods and services, such as education and defense.
  • CBO’s August 2012 update to the January report did not present all of the individual data items needed for the spending part of this chart, so did not update. The revenue and spending numbers that were available did not change appreciably from those presented here.
  • Slide has been updated to account for Supreme Court decision re: Medicaid; lowers Medicaid projections, increases exchange projections.Medicaid down initially b/c of lower FMAP, then up due to Federal share of Medicaid expansionsMedicare spending down in initially due to timing of FY12 start, then up as baby boomers retire and costs/person continue to riseFederal subsidies in the exchanges begin in 2014
  • UPDATED TO INCLUDE 2011
  • Health care spending slides mili - schoenman

    1. 1. A Detailed Look atU.S. Health Care Spending Julie A. Schoenman, Ph.D.National Institute for Health Care Management Foundation Medical Industry Leadership Institute Actuarial Seminar Series October 25, 2012
    2. 2. What We Will Cover Today1. Big Picture Orientation2. Distribution of Personal Health Care Spending3. Spending through Government Entitlement Programs4. Spending through Private Health Insurance5. What’s Behind the High and Rising Spending?
    3. 3. What We Will Cover Today1.Big Picture Orientation2. Distribution of Personal Health Care Spending3. Spending through Government Entitlement Programs4. Spending through Private Health Insurance5. What’s Behind the High and Rising Spending?
    4. 4. Total National Health Spending Continues to Increase 3 $8,402 $9,000 National Health Expenditures (trillions) $8,149 $7,911 $7,628 $8,000 Per Capita Health Spending $7,251 2.5 $6,868 2.6 $6,488 2.5 $7,000 $6,114 2.4 2.3 2 $5,687 2.2 $6,000 $5,241 2.0 $4,878 1.9 $4,601 $5,000 $4,367 1.8 1.5 $4,169 1.6 1.5 $4,000 1.4 1.3 1 1.1 1.2 $3,000 $2,000 0.5 $1,000 0 $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010% GDP 13.7% 13.7% 13.8% 13.8% 14.5% 15.4% 15.9% 16.0% 16.1% 16.2% 16.4% 16.8% 17.9%17.9%NIHCM Foundation analysis of data from the National Health Expenditure Accounts.
    5. 5. U.S. Health Spending is a Dramatic Outlier Internationally United States Netherlands 17.4 France Germany Denmark Switzerland Canada Austria Belgium New Zealand SwedenUnited Kingdom Iceland Norway Spain Most developed Italy Ireland countries spent Slovenia Finland ~9.5 to 12% ofSlovak Republic Chile GDP on healthCzech Republic Israel care in 2009 Luxembourg Poland Hungary Estonia Korea Mexico % GDP, 2009 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0NIHCM Foundation analysis of data from the Organisation for Economic Cooperation and Development.
    6. 6. U.S. Spends More than Expected Based on Our Wealth $9,000 United States $8,000 $7,000 Chile, Mexico, Poland, $6,000 Estonia, Hungary, Slov Switzerland Norway $5,000 ak Republic, Czech Luxembourg Republic, Korea, IsraelPer Capita HealthSpending, 2009 $4,000 , Slovenia, New Zealand $3,000 $2,000 Spain, Italy, France, Finland, United Kingdom, Belgium, Germany, Iceland, Sweden, $1,000 Denmark, Canada, Austria, Ireland, Netherlands $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 Per Capita GDP, 2009NIHCM Foundation analysis of data from the Organisation for Economic Cooperation and Development.
    7. 7. What Does $8,400 Per Person Buy? Public Investment, $48 16% of spending Health, $267 3 Administration, $ ($1,320) is not 570 related to personal health care services Rx, DME & Other Hospital Medical Care, $2,637 Products, $1,106 84% of Home Health & spending LTC, $1,107 MD & Clinical Services, $1,670 ($7,080) is for Dentists & Other personal health Health care services Professionals, $ 560NIHCM Foundation analysis of data from the 2010 National Health Expenditure Accounts.
    8. 8. Health Spending Growth has Slowed, But Usually Outpaces GDP Growth 16 Health Spending 14 GDP Percent Change from Previous Year 12 Lowest growth rates in history of 10 National Health Expenditure Accounts 8 6 4 2 0 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 -2 -4NIHCM Foundation analysis of data from the National Health Expenditure Accounts.
    9. 9. Historically, Health Spending Has Grown 1.0 - 2.5 Percentage Points Faster than GDP Pct. Points 3.0 1975-2008 1980-2008 1985-2008 1990-2008 2.5Average Annual Rate of 2.5“Excess” Cost Growth 2.0 2.2 2.0 1.9 1.9 1.9 1.8 1.8 1.8 1.5 1.7 1.7 1.5 1.4 1.4 1.0 1.2 1.0 0.5 0.0 Medicare Medicaid All Other All Health Spending HealthSpendingNIHCM Foundation analysis of information presented in CBO’s “The Long-Term Budget Outlook.” Revised August 2011.
    10. 10. The Recent Slowdown in Spending• Temporary Blip or Systemic Change? Continuation of slowdown underway since 2002• Factors related to recent slowing in spending: o Recession  Massive loss of jobs and employer-sponsored insurance  Declining real income, substantial loss of wealth, people more cautious about spending  Reduced demand for health care services, even among those with insurance o Drugs – ongoing shift to generics, expiring drug patents, fewer new drugs coming on line o Medicare – provider payment cuts, stabilization in Part D enrollment o Medicaid – provider payment cuts, higher drug rebates, benefit restrictions o Ongoing shift to policies with more cost-sharing, employees paying higher share of rising premiums• Factors likely to affect future spending: o Economic recovery, pent-up demand for health care, higher need due to delayed care o ACA - 2014 coverage expansions and other industry changes o Aging population o Delivery/payment system changes emphasizing paying for value, informed consumers o Ongoing consolidation among providersSources: Martin et al. “Growth in US Health Spending Remained Slow in 2010; Health Share of GDP Was Unchanged from 2009.”Health Affairs, 31(1):208-19, Jan. 2012 & McKinsey Center for U.S. Health System Reform. “Accounting for the Cost of U.S. HealthCare.” Dec. 2011.
    11. 11. 2011 Uptick Return to Higher Spending Growth, or Not?Altarum analysis of monthly health spending data from the Bureau of Economic Analysis.
    12. 12. A Growing Share of National Health Spending is From Public Sources100% Other Private Revenues 90% 80% Private Households 70% Private Sources Source = 55% 60% s= 50% 68% Private Business 40% 30% Public Federal Government Public 20% Source Source s= s= 10% 32% State and Local Government 45% 0% 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009NIHCM Foundation analysis of data from the National Health Expenditure Accounts.
    13. 13. A Closer Look at Public & Private Health Care Spending, 2010 Private Sources (55%) Public Sources (45%)Total Spending by Private Sources $1,430 Total Spending by Public Sources $1,164 B BPrivate Business (20.6%) Federal Government (28.6%) Private Health Insurance Premiums $414.1 Private Health Insurance Premiums $28.5 Medicare Payroll Taxes $79.7 Medicare Payroll Tax $4.0 Workers Compensation, Disability Direct Medicare Program Spending $254.0 Insurance & Worksite Health $40.7 Direct Medicaid Program Spending $278.1Households (28.0%) All Other Health Spending $178.0 Private Health Insurance Premiums $263.1 State/Local Government (16.2%) Medicare Payroll Taxes and Premiums $162.8 Private Health Insurance Premiums $134.1 Out of Pocket Spending $299.7 Medicare Payroll Tax $11.4Other Private Sources (6.6%) Direct Medicaid Program Spending $135.9 Philanthropy, Investment, Etc. $169.9 All Other Health Spending $139.6 Source: NIHCM Foundation analysis of data from the National Health Expenditure Accounts.
    14. 14. What We Will Cover Today1. Big Picture Orientation2. Distribution of Personal Health Care Spending3. Spending through Government Entitlement Programs4. Spending through Private Health Insurance5. What’s Behind the High and Rising Spending?
    15. 15. A Word about Data SourcesNational Health Expenditure Medical Expenditure Panel SurveyAccounts (NHEA) (MEPS)Synthetic database derived from Annual survey of households aboutmyriad secondary sources their health spendingCovers total US population, including Covers civilian, non-institutionalizedmilitary, nursing home residents, etc. populationIncludes expenditures beyond personal Designed to capture payments fromhealth care services (e.g., public all sources (public, private, self-pay)health, research, investments in for personal health care servicesinfrastructure, administration)Latest available year is 2010 Latest available year is 2009Total spending reported = $2.594T Total spending reported = $1.259T
    16. 16. Relatively Few People Account for Most Personal Health Spending 100 100.0 90 Top 1% of spenders account for >20% of spending ($275 Cumulative Percent of Total Spending billion) 80 78.2 70 Top 5% of spenders account for almost half of spending ($623 60 billion) 50 Total Personal Health Care 50.5 40 Spending = $1.259 Trillion 34.8 $36 Billion $1,223 Billion 30 18.8 20 10.4 10 5.6 1.3 2.9 99 0.0 0.1 0.4 95 0 15. 0 10 4 20 30 40 50 60 70 80 90 100 Percent of Civilian Non-Institutionalized Population Ordered by Health Care SpendingNIHCM Foundation analysis of data from the 2009 Medical Expenditure Panel Survey.
    17. 17. Greatest Potential for Savings Focus on High Spenders $100,000 Total spending by top $90,061 $90,000 1% = $275 billion $80,000Mean Annual Expenditure $70,000 Total spending by top 5% = $623 billion $60,000 Total spending by top $50,000 10% = $821 billion Total $40,682 $40,000 spending by $30,000 bottom 50% = $26,767 $36 billion $20,000 $12,265 $10,000 $7,980 $236 $0 Lowest 50% Top 50% Top 30% Top 10% Top 5% Top 1% 30.7M pop. 15.3M 3.06M pop. pop. Percent of Civilian Non-Institutionalized Population Ordered by Health Care SpendingNIHCM Foundation analysis of data from the 2009 Medical Expenditure Panel Survey.
    18. 18. High Spenders are Older100% 1.4 2.7 90% 7.0 21.1 24.8 80% 12.5 75+ 70% 14.0 17.1 65-74 15.1 55-64 60% 45-54 50% 27.8 22.1 26.1 35-44 40% 19-34 30% 16.2 0-18 13.2 20% 8.7 34.5 7.3 10% 8.5 5.9 6.3 7.6 0% Lowest 50% Top 5% Top 1%NIHCM Foundation analysis of data from the 2009 Medical Expenditure Panel Survey.
    19. 19. High Spenders Report Worse Health100% 0.8 4.3 90% 18.5 26.0 22.1 80% 70% 25.2 60% Poor 32.3 31.4 Fair 50% Good 40% 28.9 Very Good 30% 23.4 Excellent 20% 40.4 19.9 10% 13.4 7.5 5.8 0% Lowest 50% Top 5% Top 1%NIHCM Foundation analysis of data from the 2009 Medical Expenditure Panel Survey.
    20. 20. High Spenders Have More Chronic Conditions & Functional Limits100% 1.9 1.3 3.490% 8.280% 31.5 Functional limitation only70% 36.560% Chronic condition, help with ADLs50% 28.9 Chronic condition, functional limitation40% Chronic condition only30% 50.0 30.920% No chronic condition, no functional limitation10% 7.4 0% Other 95% Top 5% SpendersNIHCM Foundation analysis of data contained in The Lewin Group, "Individuals Living in the Community with ChronicConditions and Functional Limitations: A Closer Look," January 2010.
    21. 21. Considerable Persistence in Spending Patterns Over Two 80% 73.9% Years 75.0% 70%Percent with Same Ranking in 63.1% 60% 54.4% 50% 44.8% 2009 40% 38.0% 30% 20.0% 20% 10% 0% Bottom 50% Top 50% Top 30% Top 20% Top 10% Top 5% Top 1% Percentile Rank by Health Care Spending, 2008Source: Cohen SB and Yu W. "The Concentration and Persistence in the Level of Health Expenditures over Time: Estimates for theU.S. Population, 2008-2009." Agency for Healthcare Research and Quality, Statistical Brief #354. January 2012.
    22. 22. Persistent High Spenders: Older People & Those Whose Health Remains a Problem Age (end of 2009) Health Status (end of 2008) 100 100 6.1 90 19.2 90 13.2 24.8 80 42.9 80 70 70 26.4 65+ 27.3 Excellent 60 45-64 60 30.9 Very Good 50 30-44 50 Good 40 27 18-29 40 Fair 40.1 29.6 0-17 Poor 30 30 26.9 20 16.6 20 10 10.6 3.1 10 23.9 14.1 3.4 10.9 3.3 0 0 Top 10% in bothTop 10% in 2008, Bottom 75% in 2009 years Top 10% in both years in 2008, Bottom 75% in 2009 Top 10% Of top 10% of spenders in 2008: 44.8% remained in top 10% and 25.4% moved to the bottom 75% in 2009Source: Cohen SB and Yu W. "The Concentration and Persistence in the Level of Health Expenditures over Time: Estimates for the U.S.Population, 2008-2009." Agency for Healthcare Research and Quality, Statistical Brief #354. January 2012.
    23. 23. Long-Term Persistence of High Spending Among Medicare Beneficiaries10090 Bottom 75% Top 25%80 Died by Jan. 1 Not in FFS70605040302010 0 1993 1994 1995 1996 1997 1998 1999 2000 2001Source: Congressional Budget Office. “High-Cost Medicare Beneficiaries.” May 2005.
    24. 24. Challenges of Controlling Costs Among High Spenders• Chronic health problems and persistence in high spending imply a role for disease management. But… • many of the same chronic problems are also highly prevalent in lower-spending groups, especially among the elderly • accurate prospective targeting of those who can most benefit from disease management can be tricky• Managing high spending at the end of life can be problematic • not all with high spending will die soon • predicting timing of death and distinguishing between care that could extend life in a meaningful way and care that does little good is often very difficult • societal reluctance to discuss end of life care, fears of rationing• Not all high spending is predictable or persistent. • hard to control the random events • may be able to manage some episodes more efficiently (e.g., clinical pathways for cancer)
    25. 25. What We Will Cover Today1. Big Picture Orientation2. Distribution of Personal Health Care Spending3. Spending through Government Entitlement Programs4. Spending through Private Health Insurance5. What’s Behind the High and Rising Spending?
    26. 26. Government Health Entitlement Programs 36 Percent of National Health Spending in 2010 Investment, 6% Public Health, 3% Other Third Party Out of Payers & Pocket, 12% Programs, 7% DOD & VA, 3% Medicaid & CHIP = Private Health $413.1B, 16% Insurance, 33% Medicare = 2010 Total Spending = $2.594 T $524.6B, 20%NIHCM Foundation analysis of data from the 2010 National Health Expenditure Accounts.
    27. 27. Government Health Entitlement Programs 21 Percent of U.S. Federal Spending in 2011 Federal Revenues Federal Spending ($3.598T) ($2.302T, excluding borrowing) 6% Net Interest 18% Non-Defense Discretionary 19% 6% Defense Discretionary Other Revenue 23% 15% Other Mandatory Payroll Taxes Spending 5% 20% Corporate Income Social Security Taxes 8% 30% Individual Income 21% 13% Medicaid & Other Taxes Health Borrowing (Deficit) Entitlements 36%NIHCM Foundation analysis of data from CBO’s “The Budget and Economic Outlook: Fiscal Years 2012 to 2022,” Jan. 2012.
    28. 28. Structure of the Medicare ProgramPART A • Hospital Insurance (HI) Trust FundInpatient & • Mandatory programPost-Acute Care • Eligible if > 40 quarters of covered employment (self/spouse) • Payroll tax, SS income tax if high income, premiums if buying into program, interest on Trust Fund reservesPART B • Supplemental Medical Insurance (SMI) Trust FundPhysician & • Voluntary programsOutpatient Care • Premiums from enrollees (~25% of program costs) • Fees on manufacturers/importers of brand name drugs (B)PART D • Transfers from state Medicaid programs (D)Outpatient Rx • General revenues (balance SMI Trust Fund each year)PART C • Capitated arrangements with private health plansManaged Care • Financed from both trust funds
    29. 29. Current Claims on the Part A Trust Fund Require General Revenues% of Taxable Payroll A Pay-As-We-Go System 7% Part A Expenditures Part A Operating Deficit: Baby boomers retiring 6% ~10,000/day Covered by Redemption of Trust Fund 5% Assets, Requiring General Revenues Part A Income 4% 2024: Part A Trust Fund Exhausted 3% 2% Periods of Operating Surplus: Trust Fund Assets Accumulate 1% and are Lent to the Federal Government, Earning Interest 0% 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080Source: A Summary of the 2012 Annual Reports, Social Security and Medicare Boards ofTrustees, www.ssa.gov/OACT/TRSUM
    30. 30. The Big Picture for Medicare: Dedicated Revenue <%GDP Expenditures historical projecte 7% d Total Medicare Expenditures Part A Trust Fund Deficit 6% Part A Trust Non-interest program income Fund 5% exhauste d 4% General Revenue Transfers to Parts B & D 3% Premiums, State Transfers, & Drug Fees 2% 1% Tax on SS Payroll Tax Benefits 0% 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080Source: A Summary of the 2012 Annual Reports, Social Security and Medicare Boards ofTrustees, www.ssa.gov/OACT/TRSUM
    31. 31. A Beneficiary Lifetime Perspective: Payroll Contributions < Expected Benefits $400,000 Medicare Expected Benefits (Net of $357,000 $357,000 $350,000 Premiums), Lifetime $300,000 Medicare Payroll Taxes, Lifetime $250,000 $200,000 Female $188,00 Male $170,000 $150,000 $119,000 $100,000 $60,000 $60,000 $50,000 $0 Single, Average WageOne-EarnerOne-Earner Couple, Average Wage Couple, Average Couple, Average Single, Average Wage Couple, Average Wage Two-Earner Two-Earner Wages WageSource: Steuerle CE and Rennane S. "Social Security and Medicare Taxes and Benefits Over a Lifetime.” Washington, DC:The Urban Institute. June 2011.
    32. 32. But the Public Perception is Very Different from RealityThinking about Medicare, do you believe that over the course ofyour career you [will] have paid… Not enough, others will support me Enough to support myself More than Ill receive 56+ 32% 34% 34% 36-55 21% 30% 49% 18-35 13% 29% 58%All Ages (18+) 21% 31% 49% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Source: Stony Brook Poll, December 2010. http://tinyurl.com/9qteyxm
    33. 33. Structure of the Medicaid Program• Covers ~60 million low-income individuals• Jointly financed by states and federal government• Voluntary program for states, all now participate• Categorical eligibility: children, pregnant women, parents with dependent children, people with disabilities, seniors (income thresholds vary by category)• States run their programs; must meet federal standards but can deviate with a waiver or exceed standards using own funds• Very few states have expanded to cover “childless adults”• ACA removed categorical eligibility and expanded eligibility to all non- elderly persons under 138% FPL• Supreme Court decision makes this expansion optional for states
    34. 34. Medicaid Enrollment vs. Spending, FY 2009100% 90% 15% 1/4 80% 10% 43% $15,453 per enrollee 70% 2/3 60% 26% 50% $13,186 Disabled 23% 40% Elderly 30% 14% $2,926 49% 20% Adults (<65) 10% 21% $2,313 Children 0% Enrollees Spending ~15% of enrollees ~40% of spending are dual eligibles is for dual eligiblesSource: Kaiser Family Foundation, “The Medicaid Program at a Glance.” September 2012.
    35. 35. Medicaid Spending is a Large and Growing State & Federal Burden Total State Expenditures, FY2011 Total Medicaid Spending ($billions) (estimated) 450 400 Federal Spending 273 State Spending 251 350 201 Medicaid 191 All Other 300 181 24% 176 182 63-64% Spending 162 34% 250 ARRA 148 200 130 118 56-57% K-12 150 158 Education 142 150 147 156 133 137 20% 100 112 122 Public 89 98Assistance Higher 50 2% Education Corrections Transport 10% 0 3% 2000 2002 2004 2006 2008 2010 7%NIHCM Foundation depiction of data from National Association of State Budget Officers. “State Expenditure Report.” Dec.2011.
    36. 36. Mandatory Federal Health Spending Projected to More Than Double in 10 Years $ billions Exchanges Medicaid $1,800 Medicare (net offsetting receipts) 6.7% 7.0% 6.2% 6.4% Other Mandatory Health Spending (net) 6.1% $1,600 Percent of GDP 5.8% 5.8% 123 6.0% 118 $1,400 5.8% 5.5% 111 5.3% 101 107 5.0% $1,200 5.1% 91 592 4.7% 4.9% 75 549 $1,000 46 514 4.0% 479 24 446 1 382 416 $800 3.0% 341 305 $600 275 253 267 899 2.0% $400 750 806 632 696 539 589 608 480 466 494 514 1.0% $200 45 $0 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 actualNIHCM analysis of data from CBO’s “An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022,” Aug. 2012.
    37. 37. And That’s the Good News• CBO’s baseline projections assume current laws remain in place and will be implemented as written, most notably: • Deep cuts in Medicare physician payment rates under the SGR formula • 2% reductions in Medicare payment rates under Budget Control Act sequestration • Cuts in Medicare provider payment updates under the ACA• Overriding any of these cuts will increase Medicare spending• Other big unknowns: • extent to which states will expand Medicaid (implications for Federal match) • extent to which people will seek subsidized coverage in the exchanges
    38. 38. Faster Growth in Health Entitlement Spending Will Dramatically Worsen Projected Deficit 10 historical projectedPrimary Surplus (+) or Deficit (-) as % of GDP 5 0 Growth at GDP -5 -10 GDP + 1% -15 GDP + 2% -20 (~Historical Average) -25 2000 2010 2020 2030 2040 2050 2060 2070 2080 Source: “2011 Fiscal Report of the U.S. Government.” Supplemental Information, Chart 5, http://www.fms.treas.gov/finrep11/supp_info/fr_supplement_info_alternative.html#chart5
    39. 39. Triangle of Painful Choices Tradeoffs Needed to Balance Budget by 2035 Health Spending Growth Relative to Potential GDP 10% -4% -3% -2% -1% +1% A 0% 9% B Defense & Other Non-Health Spending as % of GDP 8% D 7% 6% 5% 4% 3% C 2% 18% 19% 20% 21% 22% 23% 24% 25% Tax Revenue as % of GDPSource: Roehrig, C. Altarum Center for Sustainable Health Spending. As presented in The Incidental Economist Blog, Aug.15, 2012.
    40. 40. What We Will Cover Today1. Big Picture Orientation2. Distribution of Personal Health Care Spending3. Spending through Government Entitlement Programs4. Spending through Private Health Insurance5. What’s Behind the High and Rising Spending?
    41. 41. Private Health Insurance Premiums One-Third of National Health Spending, 2010 Investment, 6% Public Health, 3% Other Third Party Payers & Out of Programs, 7% Pocket, 12% DOD & VA, 3% Private Health Medicaid & Insurance = CHIP, 16% $848.7B, 33% Medicare, 20% 2010 Total Spending = $2.594 TNIHCM Foundation analysis of data from the 2010 National Health Expenditure Accounts.
    42. 42. Private Health Insurance Markets Employer-Based or Group Market Individual or Non-Group Market• Coverage purchased by employer for • Coverage purchased directly from insurer workers, dependents and, perhaps, retirees. • Individual/family is own risk pool. Health underwriting and pre-existing conditions• Risks pooled by employer group. can make coverage expensive or unavailable.• Employers and employees generally contribute to premium • Purchaser pays full premium.• Premiums excluded from taxes in most • Preferential tax treatment of premiums cases. Value of tax exclusions = $145 only for self-employed billion in 2011. • Most people purchasing coverage in this• Small, medium, large group based on market do not have access to employer- number of employees based coverage • self-employed• 60 percent of workers with employer- • employed but not offered coverage based coverage were in “self-insured” • non-dependent students plans (2012) • early retirees• Larger employers most likely to self • between jobs insure, but growing trend among smaller employers
    43. 43. Private Coverage is Dominated by Employment-Based Insurance100% Govt. employer 90% contributions (20.4%) 80% 70% Private 60% employer 89.2% 94.9% contributions 50% (52.0%) 40% Employer- 30% Based Employee 20% contributions Coverage (27.6%) Individual 10% 10.8% Market 0% 5.1% Enrollees Premiums 174.4M (2011) $839.8BSources: Fronstin P. “Sources of Heath Insurance…” EBRI Issue Brief 376, Sept. 2012; NIHCM analysis of data from the (2010)2010 National Health Expenditure Accounts, Sponsor Highlights.
    44. 44. Private-Sector Workers Paying an Increasing Share of Increasing Premiums Employment-Based Coverage Individual Policy Family Policy16000 150% 16000 146% 150% 142%14000 14000 $1502 122%12000 12000 114% 97% 100% 100%10000 10000 8000 87% 8000 $677 6000 $522 6000 50% 50% 2 4000 4000 $2655 2000 2000 0 0% 0 0% 2000 2002 2004 2006 2008 2010 2000 2002 2004 2006 2008 2010 Employee (EE) Contribution to Premium Employer (ER) Contribution to Premium Cumulative Pct. Change, EE Contribution Cumulative Pct. Change, ER Contribution Cumulative Pct. Change, Total PremiumSource: NIHCM analysis of data from the Medical Expenditure Panel Survey, Insurance Component. Data not available for2007.
    45. 45. And Facing Higher Out-of-Pocket Costs via Deductibles Average Deductible for those with a Deductible - Individual Policy 78% 78% $2,500 Average Deductible for those with a Deductible - Family Policy 80% 74% Percent of Enrollees with a Deductible 71% $2,220 70% $1,975 $2,000 59% 66% 64% $1,761 60% 52% $1,658 48% 50% $1,500 $1,351 $1,232 $1,143 $1,123 40% $1,079 $1,025 $958 $917 $1,000 $869 30% $714 $652 $573 20% $518 $500 $446 10% $0 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: NIHCM analysis of data from the Medical Expenditure Panel Survey, Insurance Component. Data not available for2007.
    46. 46. Health Spending by American Families More Than Doubled in Past Decade Family of Four, Employer-Based PPO Coverage$21,000 $20,72 Employee Out-of-Pocket Costs $19,39 8 $18,07 3 3470 Employee Contribution to Premium $16,77 4 3280 Employer Contribution to Premium $15,60 1 3005 $14,50 9 2820 0 2675 5114$14,000 $13,382 4728 $12,21 2420 4325 $11,192 4 2210 4004 $10,16 2035 3492 1920 3171 $9,23 8 2810 1760 1580 2666 2522 $7,000 2354 2055 11385 12144 9947 10744 8909 9442 7513 8362 6054 6750 5600 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: NIHCM Foundation analysis of data presented in the annual Milliman Medical Index reports, 2005-2012. Values forcomponent parts for 2002-2005 were estimated using component growth rates reported by Milliman.
    47. 47. Premiums and Deductibles Also Continue to Rise in the Non-Group Market Individual Policy Family Policy $5,000 4968 80%$5,000 80% 4596 4704 71% $4,500 4392 4428 69%$4,500 70% 70% 4128$4,000 $4,000 3888 60% 3879 60%$3,500 $3,500 50% 50%$3,000 2935 $3,000 3128 2632 3531 $2,500 2760 40%$2,500 40% 2610 2084 2486 1972 2326 2294$2,000 1864 2196 $2,000 28% 1721 30% 30% 1908 2004 1896$1,500 1728 1776 1932 27% $1,500 20% 20%$1,000 $1,000 10% 10% $500 $500 $0 0% $0 0% 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Mean Annual Premium Mean Deductible Cumulative Pct. Change - Premium Cumulative Pct. Change - DeductibleNIHCM Foundation analysis of data contained in eHealthInsurance reports “The Costs and Benefits of Individual and FamilyHealth Insurance Plans” (Nov. 2008 and Nov. 2011) and “2009 Summer Cost Report for Individual and Family PolicyHolders.”
    48. 48. High-Deductible Health Plans are Becoming Much More Prevalent Health Plan Enrollment by Plan Type for Covered Workers 20… 20… 20… Conventional 20… HMO 20… PPO 20… POS 20… HDHP/SO 20… 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Health Plan Enrollment by Plan Type for Privately Insured Individuals 20… 20… 20… Traditional 20… HDHP 20… CDHP 20… 20… 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Sources: Kaiser Family Foundation/Health Research & Educational Trust. “Employer Health Benefits, 2012 Annual Survey.”Sept. 2012 (top graph); Employee Benefit Research Institute. “Findings from the 2011 EBRI/MGA Consumer Engagement inHealth Care Survey.” EBRI Brief No. 365, Dec. 2011 (bottom graph).
    49. 49. HSA-Qualified HDHP Enrollment Rising Especially in the Large Group Market 2005 1.0 Individual 2006 Small Group 2007 Large Group 2008 Group, Size Not Known 2009 Market Not Known 2010 2011 2012 13.5 0 2 4 6 8 10 12 14 million 2005 64% 17% 19% 2006 42% 25% 33% 2007 26% 25% 49% 2008 25% 30% 46% Individual 2009 23% 30% 47% Small Group 2010 21% 30% 50% Large Group 2011 21% 24% 55% 2012 18% 22% 59% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Source: America’s Health Insurance Plans. “January 2012 Census Shows 13.5 Million People Covered by HSA/HDHPs.” May2012.
    50. 50. Health Care Premiums Growing Quickly as a Share of Personal Income • Employee share of premium up 63%. • Per-person deductibles doubled.Source: Schoen C, Fryer AK, Collins SR and Radley DC. “State Trends in Premiums and Deductibles, 2003-2010: TheNeed for Action to Address Rising Costs.” The Commonwealth Fund, November 2011.
    51. 51. Insurance Premiums Pay for Health Care Services for Enrollees Net Cost of Personal Health Care Services (88%) Insuranc e 34 28 14 9 3 12 Physician & Clinical Rx & Hospital Care Services DME Dental & Other ProfessionalTotal Private Insurance Premium Revenue = Services$848.7B Home Health & Other LTC Facilities & ServicesNIHCM Foundation analysis of data from the 2010 National Health Expenditure Accounts.
    52. 52. Net Cost of Health Insurance• Defined by NHEA framework as the difference between premiums collected and benefits paid out• All administrative costs • Claims processing • Sales and marketing • Member enrollment and customer service • Actuarial analysis and underwriting • Product development and provider contracting • Medical management • Quality improvement • Wellness programs• Rate credits to policyholders and dividends to stockholders• Taxes to government• Additions to reserves• Profits (or losses)
    53. 53. Private Health Insurance Spending Rose Almost 15 Percent in Five Years $900 14.7% increase $848.7 billion $800 $740.2 billion 102.7 Net Cost of Insurance [-------- Personal Health Care Spending -------- 23.5 $700 99.6 75.8 Home Health & Other LTC$ Billions 19.5 Facilities & Services $600 66.3 121.4 Dental & Other Professional 88% of Premiums Services $500 106.0 Prescription Drugs & DME $400 239.4 Physician & Clinical Services 211.4 $300 Hospital Care $200 285.8 $100 237.5 -] $0 2006 2010Source: NIHCM Foundation analysis of data from the National Health Expenditure Accounts.
    54. 54. Higher Spending for Hospital & Physician Services Drove More than 70 Percent of the Premium Growth $120 3% of net 4% of net 9% of net change change 14% of net change2006 to 2010 Change ($ Billions) $100 change $3.1 $9.5 $4.0 26% of net $80 change $15.4 $60 45% of net $28.0 change $108.5 $40 97 percent of change in $20 $48.3 premiums was due to growth in insurers’ spending for health $0 care services Hospital Care Physician & Prescription Dental & Other Home Health & Net Cost of Total Change in Clinical Services Drugs & DME Professional Other LTC Health Insurance Premiums Services Facilities &2006-2010 Services% Change 20.3% 13.2% 14.5% 14.3% 20.5% 3.1%14.7%Source: NIHCM Foundation analysis of data from the National Health Expenditure Accounts.
    55. 55. What We Will Cover Today1. Big Picture Orientation2. Distribution of Personal Health Care Spending3. Spending through Government Entitlement Programs4. Spending through Private Health Insurance5. What’s Behind the High and Rising Spending?
    56. 56. Deconstructing the Rising Health SpendingSpending increases may be driven by: • unit price effect - rising prices per unit of service • volume or utilization effect - higher volume of services, due to • more users of services and/or • more services used per capita • intensity or service mix effect - shift to more expensive mix of services or to more expensive providers
    57. 57. It Really is the Prices (Stupid) Evidence from Massachusetts, 2007-2009 Decomposition of Spending Growth for Privately Insured Patients Shift to More Change in Total Number of Expensive Spending Pure Price Effect Stays/Services Providers Service Mix 7.3% 6.5% 6.4%Inpatient 5.7%Stays 1.0% 1.1% 0.2% 0.3% 9.4% -0.5% -2.1%Hospital 4.6% 5.1% 5.5% 3.9%OutpatientCare 0.1% 0.1% 0.3% 0.2% -1.3% 2007-2008 2008-2009Source: Massachusetts Division of Health Care Finance and Policy. “Massachusetts Health Care Cost Trends: Trends inHealth Expenditures.” June 2011.
    58. 58. It Really is the Prices (Stupid) Evidence from Several National Payers, 2010-2011 Per Capita Spending Unit Price Utilization Intensity 10.0 9.6 5.9 7.2 5.0 6.2 3.5 3.7 4.9 4.5 2.1 1.6 1.0 1.2 0.0 Percent -0.6 -0.3 -0.4 -5.0 -4.2 Inpatient Care Outpatient Visits Other Outpatient Professional ProceduresSource: Health Care Cost Institute, “Health Care Cost and Utilization Report: 2011,” September 2012.
    59. 59. U.S. Pays More for Hospital Services Select Countries & Services(US$, 2007)$35,000 $34,358 Australia$30,000 Canada$25,000 France Sweden$20,000 United States $21,218 $17,406$15,000 $11,162$10,000 $7,962 $8,917 $4,451 $4,558 $5,000 $3,093 $2,591 $0 Normal Delivery Appendectomy CABG Hip Replacement Hernia RepairSource: Koechlin F, Lorenzoni L and Schreyer P. “Comparing Price Levels of Hospital Services Across Countries.”OECD Health Working Papers No. 53, July 2010.
    60. 60. U.S. Pays More for Hospital Services Composite Index, 29 Inpatient Services Comparative Price Levels, Hospital Services, 2007 United States 164 Italy 140 Australia 123 France 121 U.S. hospital Sweden 114 prices 64% Canada 113 higher than Finland 98 OECD average Portugal 85 Israel 62 Slovenia 59 Korea 57 OECD Average 0 20 40 60 80 100 120 140 160 180Source: Koechlin F, Lorenzoni L and Schreyer P. “Comparing Price Levels of Hospital Services Across Countries.” OECDHealth Working Papers No. 53, July 2010.
    61. 61. U.S. Pays Physicians More for the Same Services Especially Private Payers and Specialty Care Primary Care - Office Visit Fees Specialty Care – Hip Replacement $140 133 $4,500 129 3,996 $4,000 $120 104 $3,500 $100 $3,000 $80 $2,500 66 2,160 59 60 1,943 $60 $2,000 1,634 46 45 $1,500 1,251 1,340 $40 34 32 34 1,046 $1,000 1,181 674 $20 $500 652 $0 $0 Public Payers Private Payers Public Payers Private Payers Australia Canada France Germany UK US Australia Canada France Germany UK USSource: Laugesen MJ and Glied SA. “Higher Fees Paid to US Physicians Drive Higher Spending for Physician ServicesCompared to Other Countries.” Health Affairs, 30(9):1647-56. September 2011.
    62. 62. U.S. Physicians Earn More Particularly Specialists $500,000 Australia Canada France Germany UK US 442,450 $450,000 $400,000 $350,000 324,138 $300,000 $250,000 208,634 186,582 187,609 202,771 $200,000 159,532 154,380 $150,000 125,104 131,809 92,844 95,585 $100,000 $50,000 $0 Primary Care Physicians Orthopedic SurgeonsSource: Laugesen MJ and Glied SA. “Higher Fees Paid to US Physicians Drive Higher Spending for Physician ServicesCompared to Other Countries.” Health Affairs, 30(9):1647-56. September 2011.
    63. 63. Summary and Implications• Health care spending is a heavy and increasingly unmanageable burden to federal and state governments, employers and individuals.• Recent slowing in health spending growth offers a ray of hope. But is the slowdown sustainable? • Real and sustained gains in efficiency and value will be needed to offset the demographic and other pressures driving health spending upward.• The highly concentrated nature of personal health care expenditures suggests a strategy for controlling spending. But there are real challenges in managing the care of high spending patients.
    64. 64. Summary and Implications (continued)• Private premium increases are driven by underlying increases in spending for medical care for enrollees. Controlling spending for hospital and physician/clinical services will be essential to moderating growth in private premiums.• We pay more than other countries for the same services, and rising prices have been the dominant factor behind our growing spending. Attention to these high prices is warranted.• Sizing the challenge is the easy part. Finding real solutions is much harder.
    65. 65. For more information oradditional hard copies of our publications, please contact me or visit our website: jschoenman@nihcm.org 202-296-4192 www.nihcm.org

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