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Health Care Costs, Access And Financing


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Health Care Costs, Access And Financing

  1. 1. Health Care Cost, Access and Financing John Brill, MD, MPH 1969: $268 1990: $2567 2000: $5712 2004: $6280
  2. 2. Goals <ul><li>Increase awareness of health care costs and national responses to increases </li></ul><ul><li>Increase knowledge of funding mechanisms and programs </li></ul><ul><li>Promote concern about the costs of health care we provide and control </li></ul>
  3. 3. Why Should You Care?
  4. 4. Why Should You Care <ul><li>Because otherwise politicians will! </li></ul><ul><li>Because you pay for health care too </li></ul><ul><li>Because costs for health care effect the cost of other goods and services </li></ul><ul><li>Because you can make a difference </li></ul><ul><li>Because it might effect your income </li></ul><ul><li>Because it matters to your patients (at least some of them) </li></ul>
  5. 5. Overview <ul><li>Health Care Costs </li></ul><ul><ul><li>National Perspective </li></ul></ul><ul><ul><li>Clinician Perspective </li></ul></ul><ul><ul><li>Personal Perspective </li></ul></ul><ul><li>Health Care Financing: Who/What/Where/How Much/Why </li></ul>
  6. 6. Costs <ul><li>How much? </li></ul><ul><li>How does the US compare to other countries? </li></ul><ul><li>History of costs </li></ul><ul><li>Responses to Rising Costs </li></ul>
  7. 7. 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
  8. 8. What % of the United States Gross Domestic Product (GDP) is spent on health care? A. 6% B. 11% C. 16% D. 21% E. 26%
  9. 9. 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
  10. 10. Measuring Health Care Costs <ul><li>Annual Expenditures </li></ul><ul><li>% Gross Domestic Product (GDP) </li></ul>
  11. 12. Per Capita HC Costs (Unadjusted) <ul><li>1969: $268 </li></ul><ul><li>1990: $2567 </li></ul><ul><li>2000: $5712 </li></ul><ul><li>2004: $6280 </li></ul>
  12. 13. International Health Care Spending (As % GDP)                                                                                           
  13. 14. Reasons for Rising Costs <ul><li>Aging </li></ul><ul><li>3rd Party Payers </li></ul><ul><li>Malpractice/Defensive Medicine </li></ul><ul><li>Fraud/Waste </li></ul><ul><li>Administrative Costs </li></ul><ul><li>Futile Care </li></ul><ul><li>Technology </li></ul>
  14. 15. Responses to Rising Costs <ul><li>Managed Care </li></ul><ul><li>Malpractice Reform </li></ul><ul><li>Medical Savings Accounts </li></ul>
  15. 16. Managed Care <ul><li>History: Early 1970s--rising costs, threatened national health insurance </li></ul><ul><li>1973 HMO Act--gov’t subsidies for HMO start-ups (IT’S NIXON’S FAULT!) </li></ul><ul><li>1976: 6 million HMO enrollees </li></ul><ul><li>1991: 38 million HMO enrollees </li></ul>
  16. 17. Managed Care--How does it save money? <ul><li>Gatekeeper </li></ul><ul><li>Utilization Review </li></ul><ul><li>Prior Authorization </li></ul><ul><li>Evidence-based practice/Pathways </li></ul><ul><li>Provider ‘Deselection’ </li></ul><ul><li>Exclusions </li></ul>
  17. 18. Malpractice Reforms <ul><li>Reducing Filing of Claims </li></ul><ul><li>Limiting the Plaintiff’s Award </li></ul><ul><li>Altering the Plaintiff’s Burden of Proof </li></ul><ul><li>Changing the Judicial Role </li></ul>
  18. 19. Medical Savings Accounts <ul><li>Premise: Individuals spend their own money more wisely than someone else’s </li></ul><ul><li>Example: Employer contributes $3000 per year to MSA; Employee gets to keep unused remainder </li></ul><ul><li>Problem: 17% of persons would exceed $3000, accounting for 86% of health care expenditures </li></ul>
  19. 20. FUNDING AND ACCESS <ul><li>History of Insurance in US </li></ul><ul><li>Payers </li></ul><ul><li>Uninsured/Underinsured </li></ul>
  20. 24. Where does the Money Come From?
  21. 25. Where does the money go?
  22. 26. Health Insurance in US <ul><li>1850: First health insurance policy in US </li></ul><ul><li>1929: Dallas teachers directly contract with Baylor Hospital for services at preset monthly cost--start of Blue Cross plans </li></ul><ul><li>WW II: Offered as employee benefit in Portland shipyards; by 1955, 77 million Americans insured through employer </li></ul><ul><li>1965 Medicare </li></ul><ul><li>1966 Medicaid </li></ul>
  23. 27. Employee-Sponsored Health Insurance <ul><li>History: Portland Shipyards, WWII </li></ul><ul><ul><li>Response to cap on wages </li></ul></ul><ul><li>The Congressional Tax Act of 1954 </li></ul><ul><ul><li>This act allowed employer contributions to life, health and disability insurance, to be tax exempt </li></ul></ul><ul><li>Currently 74% of Employed (Dropping) </li></ul>
  24. 28. Government programs <ul><li>45% of all US health care expenditures </li></ul><ul><li>Medicare </li></ul><ul><li>Medicaid </li></ul><ul><li>CHAMPUS </li></ul><ul><li>VA </li></ul><ul><li>Rapidly rising proportion of all government spending </li></ul>
  25. 29. Medicare <ul><li>Federal insurance program for elderly (>/= 65; 30 million and growing) and disabled (4 million and growing) </li></ul><ul><li>Part A covers Hospital </li></ul><ul><li>Part B covers Doctors </li></ul><ul><li>Part D (new in 2006) covers medications </li></ul><ul><li>98% seniors participate </li></ul><ul><li>70-90% have “Medigap” insurance </li></ul>
  26. 30. Medicaid <ul><li>Federal program for ‘deserving poor’ (but only covers 40% of persons <100% FPL) </li></ul><ul><li>Coverage and eligibility vary by state </li></ul><ul><li>Variety of programs including coverage for pregnant women, children, disabled, dialysis, long-term care (most important provider of NH coverage) </li></ul>
  27. 31. BadgerCare <ul><li>Wisconsin version of Child Health Insurance Program </li></ul><ul><li>Coverage for poor uninsured children and parents (“Health Insurance for Working Families”) </li></ul><ul><li>No asset test; covers up to 185% FPL (e.g. $16,500 income for family of 3) </li></ul><ul><li>Medicaid Expansion Program (coverage same as T19) </li></ul>
  28. 32. GA-MP (General Assistance-Medical Program) <ul><li>Milwaukee County program for uninsured, medically needy </li></ul><ul><li>Eligibility equal to ~ 130% FPL (~$800/month for single adult) </li></ul><ul><li>No mental health/substance abuse/dental coverage </li></ul><ul><li>43% state, 58% local $$ funded </li></ul><ul><li>{citizenship} </li></ul>
  29. 33. Wisconsin Women’s Wellness Program <ul><li>Covers Preventive (Pap, mammos) and F/U (Colpo, biopsy) care for women </li></ul><ul><li>Income Eligibility: Up to 250% FPL </li></ul><ul><li>Age Eligibility: 45 and over; occasional exceptions </li></ul>
  30. 34. Uninsured--How Many? <ul><li>~40 Million Americans (~15%) at any one time </li></ul><ul><li>Most temporary (27% Population without insurance for at least one month in 1993) </li></ul>
  31. 35. Uninsured--Who are they? <ul><li>75-85% Employed-- Part-Time or Low Wage Jobs--and their dependents </li></ul><ul><li>Low-Income (50% of persons <200% FPL uninsured for at least one month/year) </li></ul><ul><li>Minorities (33% Hispanics, 23% African-Americans) </li></ul><ul><li>Non-Citizens (~15% of the Uninsured) </li></ul>
  32. 36. Underinsured <ul><li>‘Significant limitations in coverage’ High deductibles (>$500/yr) </li></ul><ul><ul><li>High Co-pays (>15%) </li></ul></ul><ul><ul><li>Exclusion of basic benefits (Doctor visits, prenatal care) </li></ul></ul><ul><li>Dental, vision also frequently excluded but not included in definition </li></ul><ul><li>~30 Million Americans, growing rapidly </li></ul><ul><li>(274 JAMA 1302, 1995) </li></ul>
  33. 37. Can you make a difference? 40 y/o man with essential HTN is started on medications <ul><li>Grab a sample of CCB </li></ul><ul><li>Cost: $50/month </li></ul><ul><li>Lifetime cost (30 years x $60/yr -1 month samples) =$18,000 </li></ul><ul><li>Less proven benefits </li></ul><ul><li>Start HCTZ </li></ul><ul><li>Cost $5/month </li></ul><ul><li>Lifetime Cost (30 years x $60/yr) =$1800 </li></ul><ul><li>More proven benefits </li></ul>
  34. 38. Can you make a difference II 20 y/o woman comes in with frequent headaches: <ul><li>Order MRI </li></ul><ul><li>Cost: $3200 (AHC bill to insurance) </li></ul><ul><li>If clinician sees 50 headaches/year total cost = </li></ul><ul><li>$160,0000 </li></ul><ul><li>Advise to drink extra 1.5l water/day </li></ul><ul><li>Cost: $0-2.50 </li></ul><ul><li>Little harm and RCT evidence of benefit </li></ul>
  35. 39. Does it matter to you? <ul><li>The Impact of Health Insurance </li></ul><ul><li>costs on day-to-day life </li></ul>
  36. 41. 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 ,
  37. 42. Alphabet Soup
  38. 44. HMO (Health Maintenance Organization) <ul><li>Either discounted fee-for-service or capitated payment to in-plan providers, only emergency coverage for out-of-plan providers. Generally need referral. </li></ul><ul><li>Local Examples: </li></ul><ul><ul><li>Compcare, Humana, MHS </li></ul></ul><ul><li>Point Of Service (POS) plans: allow enrollees to see out-of-plan providers but at substantially higher copays/deductibles. May still need referral. </li></ul>
  39. 45. <ul><li>Discounted fee-for-service among in-plan providers. Usually can see any provider without referral. </li></ul><ul><li>Local Example: </li></ul><ul><ul><li>Some Blue Cross (Anthem) Plans </li></ul></ul>PPO (Preferred Provider Organization)
  40. 46. Indemnity Insurance <ul><li>Traditional “fee-for-service,” widest range of provider choices but most expensive </li></ul><ul><li>Example: </li></ul><ul><ul><li>Blue Cross/Blue Shield (Anthem) </li></ul></ul>
  41. 47. PHO (Physician Hospital Organization) <ul><li>Structure in which a hospital and physicians negotiate as an entity directly with insurers. </li></ul><ul><li>Local Example: </li></ul><ul><ul><li>MCW/Froedtert Practice Plan </li></ul></ul>
  42. 48. IPA (Independent Practice Association) <ul><li>HMO that contracts with individual/groups of physicians to provider services on a capitated or discounted fee-for-service basis. </li></ul><ul><li>Local Example: </li></ul><ul><ul><li>West Allis Physicians’ Association </li></ul></ul>
  43. 49. Physician Billing and Payment <ul><li>Coding – diagnosis (ICD) & procedure (CPT) </li></ul><ul><li>Current procedural terminology (AMA) </li></ul><ul><li>Relative Value Units (RVU) </li></ul><ul><li>Conversion factor (dollars per RVU) </li></ul><ul><li>Payment = RVU x CF = $ </li></ul>
  44. 50. Relative Value Scales (RVS) <ul><li>Comparative values of all physician procedures </li></ul><ul><li>Historically developed and evolved </li></ul><ul><li>Resource Based Relative Value Scale (RBRVS – 1992) </li></ul>
  45. 51. Elements of RBRVS <ul><li>Time </li></ul><ul><li>Training </li></ul><ul><li>Intensity </li></ul><ul><li>Malpractice </li></ul><ul><li>Overhead </li></ul>Work
  46. 52. Sample RVU <ul><li>99214 Office Visit Established; Level 4 </li></ul><ul><li>Work RVU – 1.10 </li></ul><ul><li>Overhead </li></ul><ul><ul><li>Non-facility – 1.05; facility – 0.40 </li></ul></ul><ul><li>Malpractice – 0.05 </li></ul><ul><li>Total non-facility – 2.20 </li></ul><ul><li>Total facility – 1.55 </li></ul><ul><li>Medicare conversion factor – 37.3374 </li></ul><ul><li>Medicare allowable fee – $82.14 (non-facility); $57.87 (facility) </li></ul>
  47. 53. 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
  48. 55. Evaluation and Management CPT - Documentation <ul><ul><li>History </li></ul></ul><ul><ul><ul><li>HPI; ROS; PFSH </li></ul></ul></ul><ul><ul><li>Exam </li></ul></ul><ul><ul><ul><li>Areas of body </li></ul></ul></ul><ul><ul><li>Decision making </li></ul></ul><ul><ul><ul><li>Number of diagnoses </li></ul></ul></ul><ul><ul><ul><li>Complexity of data </li></ul></ul></ul><ul><ul><ul><li>Level of risk to patient </li></ul></ul></ul><ul><ul><li>Typical time </li></ul></ul>
  49. 56. Physician Compensation <ul><ul><ul><li>Salary vs. incentives </li></ul></ul></ul><ul><ul><ul><li>Incentive methods </li></ul></ul></ul><ul><ul><ul><ul><li>Percentage of collections (billings) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>RVU methods </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Capitation distribution </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Quality bonuses </li></ul></ul></ul></ul><ul><ul><ul><li>Multispecialty sharing </li></ul></ul></ul>