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MMS State of the State Conference: Susan Dentzer - Rationalizing Health Spending and Getting Top Value in Health Care


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MMS State of the State Conference: Susan Dentzer - Rationalizing Health Spending and Getting Top Value in Health Care

  1. 1. Rationalizing Health Spending and Getting Top Value in Health Care: Challenges and Opportunities for Massachusetts and Beyond by Susan Dentzer Editor-in-Chief, Health Affairs The Massachusetts Medical Society State of the State Health Care Conference October 23, 2008
  2. 2. This presentation at a glance <ul><li>Current growth rates in health spending imperil the Massachusetts reforms </li></ul><ul><li>Overall health spending projections and impact on Medicare, and the nation’s overall fiscal health </li></ul><ul><li>What are the key drivers of higher health spending, and where does “excess” cost growth come from? </li></ul><ul><li>Issues in “bending the curve” of cost growth -- including how we bend it without sacrificing what we want </li></ul>
  3. 3. Massachusetts’ Health Reforms: NewsHour with Jim Lehrer on PBS, April 28, 2008 <ul><li>SUSAN DENTZER: “Amid the mixed public verdict about the Massachusetts health reforms, dozens of questions remain… </li></ul><ul><li>“ How can the costs of covering hundreds of thousands of uninsured people be sustainable over time, especially when the underlying rate of growth of health care costs is not?” </li></ul><ul><li>LORI ABRAMS BERRY (CEO, Lynn Community Health Center): “We haven't tackled the cost problem in a serious way. And what it requires is much, much more work than insuring people.” </li></ul>
  4. 4. Massachusetts’ Health Reforms: NewsHour with Jim Lehrer on PBS, April 28, 2008 <ul><li>SUSAN DENTZER: “So back in the state legislature, Massachusetts Senate President Therese Murray has introduced a bill [passed and signed into law 8/10/08] that would broadly attack many elements of rapidly rising health costs.” </li></ul><ul><li>THERESE MURRAY (D), “Massachusetts Senate president: We have to figure out: Does everybody need the latest robot? Does everybody need the latest scan or laser? Why can't we have this done in one place and not replicate these kind of services all over the state?” </li></ul>
  5. 5. “ An Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Health Care” <ul><li>Requires development of quality improvement and cost containment goals and performance benchmarks </li></ul><ul><li>The promotion of electronic health records systems </li></ul><ul><li>Measures to increase the availability and accessibility of primary care and to improve the quality of chronic care </li></ul><ul><li>Dissemination of health care quality and cost data to consumers, providers and insurers </li></ul><ul><li>Requirements that pharmaceutical and medical device manufacturing companies to report to state Department of Public Health any payment or gift of more than $50 made to a healthcare professional. </li></ul><ul><li>Gifts to be publicly reported on the state's Web site </li></ul><ul><li>Measures to improve primary care delivery – e.g., retail clinics </li></ul>
  6. 6. National Trends
  7. 7. Copyright ©2008 by Project HOPE, all rights reserved. Sean Keehan, Andrea Sisko, Christopher Truffer, Sheila Smith, Cathy Cowan, John Poisal, M. Kent Clemens the National Health Expenditure Accounts Projections Team, Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming To Medicare, Health Affairs, Vol 27, Issue 2, w145-155w
  8. 8. Pros and cons <ul><li>Alfred E. Neuman’s famous equation of health care spending (as per Uwe Reinhardt) </li></ul><ul><li>$1 of health spending = $1 health income </li></ul><ul><li>Ergo, booming health spending means booming health economy, which is good </li></ul>
  9. 9. Pros and Cons <ul><li>If we spend so much on health care, we have less to spend on everything else </li></ul><ul><li>Thought experiment: What would happen if real (inflation-adjusted) per capita health spending grew just one percentage point faster than real per capita GDP, versus if spending grew by 2 percentage points faster than real per capita GDP? </li></ul><ul><li>Both rates are above historical norms </li></ul>
  10. 10. Pros and Cons <ul><li>Michael E. Chernew, Richard A. Hirth, and David M. Cutler Increased Spending On Health Care: How Much Can The United States Afford? Health Affairs, July/August 2003; 22(4): 15-25. </li></ul><ul><li>1% point gap: health care is “affordable” through 2075; 55% of real increase in per capita income goes to health care </li></ul><ul><li>2% point gap: health care affordable only through 2039; 124.2% of real increase in per capita income devoted to health care (e.g., impossible) </li></ul>Michael E. Chernew, Department of Health Care Policy, Harvard Medical School
  11. 11. Copyright ©2003 by Project HOPE, all rights reserved. Michael E. Chernew, Richard A. Hirth, and David M. Cutler, Increased Spending On Health Care: How Much Can The United States Afford?, Health Affairs, Vol 22, Issue 4, 15-25
  12. 12. Strengths of U.S. health care: a sampling <ul><li>Innovation and access to new </li></ul><ul><li>treatments and technologies </li></ul><ul><li>Prestigious world class </li></ul><ul><li>academic medical centers </li></ul><ul><li>Higher cancer survival rates than rest of world </li></ul><ul><li>Convenience </li></ul>
  13. 13. Health Care: We’re Getting Value <ul><li>Analysis of increased spending on MI care, 1984-98 </li></ul><ul><li>Nearly half of cost increases (45 percent) result from people getting more intensive technologies over time; increased prices account for 33 percent. </li></ul><ul><li>Life expectancy for the average person with a heart attack was just under five years in 1984 but had risen to six years by 1998. </li></ul>David Cutler, Harvard (top); Mark McClellan, Brookings Source: David M. Cutler and Mark McClellan Is Technological Change In Medicine Worth It? Health Affairs , September/October 2001; 20(5): 11-29.
  14. 14. Health Care: We’re Getting Value <ul><li>Authors valued the health benefit of this additional year of life at $100,000. </li></ul><ul><li>Subtracting “value” (what we would pay for an extra year of life) from costs, the net benefit is about $60,000 </li></ul><ul><li>Equals $7 gain for every $1 spent. </li></ul><ul><li>Source: David M. Cutler and Mark McClellan, Is Technological Change In Medicine Worth It? Health Affairs , September/October 2001; 20(5): 11-29. </li></ul>David Cutler, Harvard (top); Mark McClellan, Brookings
  15. 15. We don’t pay for goods and services with “value,” but with dollars: See It’s a Wonderful Life <ul><li>Classic dialogue (actors Jimmy Stewart, Henry Travers) </li></ul><ul><li>George Bailey (Stewart): “You don't happen to have eight thousand bucks on you?” </li></ul><ul><li>Clarence Oddbody, Angel Second Class (Travers): “Oh, no, no. We don't use money in heaven.” </li></ul><ul><li>George Bailey: “Comes in pretty handy down here, bub.” </li></ul>
  16. 16. The Value Equation? U.S. versus the rest of the Organization of Economic Cooperation and Development Countries* <ul><li>U.S. has highest per capita expenditure on health care (50% greater than Luxembourg or Switzerland) </li></ul><ul><li>U.S. per capita spending grew from </li></ul><ul><li>$5,800 to $6,800 --17% -- in the 3 years from 2003 to 2006 </li></ul><ul><li>The US spends ~$650 billion more annually on health care than peer OECD countries after adjusting for higher national income (wealth) </li></ul><ul><li>*the world’s 30 largest industrialized countries </li></ul><ul><li>Source: McKinsey Global Institute; OECD </li></ul>
  17. 17. <ul><li>Roughly 44 percent of financing is through public programs (federal, state, local) </li></ul><ul><li>Roughly 56 percent is private (out of pocket plus premiums for private health coverage) </li></ul><ul><li>In absolute dollars, public financing of health care in US = 5.8% of GDP; median for OECD countries is 5.9% of GDP </li></ul><ul><li>One interpretation: as share of GDP we have at least as big a publicly financed health sector as other industrialized countries; we just have a far bigger private sector component in addition </li></ul><ul><li>US public sources spent $2,051 per person in 2000, making the US one of the top four spenders worldwide in terms of public coverage and ahead of United Kingdom’s $1,429 </li></ul><ul><li>Source: Gerald P. Anderson, Uwe E. Reinhardt, Peter S. Hussey and Varduhi Petrosyan, “It’s the Prices, Stupid: Why the United States Is So Different From Other Countries.” Health Affairs , vol. 22, no. 3, pp. 89-105. </li></ul>U.S. health spending: Public vs. private
  18. 18. Backdrop of Fiscal Concerns: The Nation’s Implied Promises about Medicare <ul><li>Present value of promised benefits as of 2006 </li></ul><ul><li>Social Security: $6.4 trillion </li></ul><ul><li>Medicare Part A (hospital insurance): $11.3 trillion </li></ul><ul><li>Medicare Part B (doctors and outpatient): $13.1 trillion </li></ul><ul><li>Medicare Part D (prescription drugs): $7.9 trillion </li></ul><ul><li>Total Medicare: $32.3 trillion (omitting Part C, Medicare Advantage plans) </li></ul><ul><li>Total Medicare and Social Security: $38.7 trillion </li></ul><ul><li>Source: Government Accountability Office, 2007 </li></ul>
  19. 19. “ Excess” U.S. Spending on Health Care: Where Does It Go? <ul><li>Outpatient care accounts for 65% of the spending above expected </li></ul><ul><li>Growth is fueled by rising demand, technological innovation coupled with higher reimbursement, insurance benefit design, and physician self referral </li></ul><ul><li>Hospital outpatient care was the fastest growing component of overall outpatient spending from 2003 to 2006 </li></ul><ul><li>Compound annual growth rate: 9.3% </li></ul><ul><li>*Source: McKinsey Global Institute Analysis, 2008 </li></ul>
  20. 20. “ Excess” U.S. Spending on Health Care: Where Does It Go? <ul><li>*Source: McKinsey Global Institute Analysis, 2008 </li></ul><ul><li>Hospital inpatient spending grew 6 percent annually between 2003 and 2006 </li></ul><ul><li>75 percent of the increase was hospital prices </li></ul>
  21. 21. What’s Happening in Massachusetts? Hospital utilization of chronically ill Medicare beneficiaries, last 6 months of life <ul><li>Total Medicare reimbursements per enrollee, last 6 months of life (adjusted), 2001-2005 </li></ul><ul><li>$29,541 per beneficiary , sixth highest state rate (only NJ, DC, CA, NY and MD are higher) </li></ul><ul><li>Hospital days per decedent, last six months of life, 2001-2005: 11.57 days, 23 rd highest state rate </li></ul><ul><li>For comparison, 9.64 days per decedent in Maine, 8.77 days in Vermont, 9.39 days in New Hampshire, 11.62 in Connecticut </li></ul><ul><li>Source: Dartmouth Atlas of Health Care, </li></ul>
  22. 22. “ Excess” U.S. Spending on Health Care: Where Does It Go? Prescription Drugs <ul><li>*Source: McKinsey Global Institute Analysis, 2008 </li></ul><ul><li>U.S. pays far more for branded pharmaceuticals, less for generics than other OECD </li></ul><ul><li>U.S. consumers pay for higher pharma marketing </li></ul><ul><li>expenditures in U.S. </li></ul>
  23. 23. “ Excess” U.S. Spending on Health Care: Where Does It Go? <ul><li>*Source: McKinsey Global Institute Analysis, 2008 </li></ul><ul><li>U.S. spends $91 billion more annually than would be expected on health administration and insurance </li></ul><ul><li>$34 billion annually on administration and marketing of private health insurance </li></ul><ul><li>Largely attributable to existence of private insurance system, which is intrinsically more expensive </li></ul><ul><li>With respect to public insurance administration, 20% of increase over last 3 years has come in spending to administer Medicare Part D </li></ul>
  24. 24. The Value Equation? U.S. versus the rest of the Organization of Economic Cooperation and Development Countries* <ul><li>U.S. has lower life expectancy and higher infant mortality </li></ul><ul><li>Leaving aside social determinants of health, we know U.S. health care isn’t “fixing” the situation </li></ul><ul><li>*the world’s 30 largest industrialized countries </li></ul><ul><li>Source: McKinsey Global Institute; OECD </li></ul>
  25. 25. What are the key drivers of long-term increases in health spending? <ul><li>The Synthesis Project, Center for Studying Health System Change (funded by Robert Wood Johnson Foundation) </li></ul><ul><li>Paul Ginsburg, director, right </li></ul><ul><li> and </li></ul>
  26. 26. What is Driving the Growth in Health Care Spending? <ul><li>Advancing technology </li></ul><ul><li>Accounts for between one-third and two-thirds of growth in health spending </li></ul><ul><li>Technology drives spending through both substitution and expansion </li></ul><ul><li>Much technology beneficial </li></ul><ul><li>Some doesn’t provide sufficient value or is applied too broadly </li></ul>
  27. 27. Example: Imaging <ul><li>Between 1997 and 2004, the number of MRI scanners in Massachusetts tripled to 145 </li></ul><ul><li>Roughly equal to total MRI scanners in Canada </li></ul><ul><li>From 1998 to 2002, the number of patient MRI scans in the state increased by 80 percent, to almost 500,000 a year. </li></ul><ul><li>Nationally, more than 7,000 sites offering MRI, performing more than 26 million scans annually </li></ul><ul><li>Each additional MRI scanner associated with 733 additional MRI procedures among Medicare beneficiaries, 1995-2004 </li></ul><ul><li>Source: Liz Kowalczyk, Boston Globe, September 28, 2004; Health Affairs (forthcoming); IMV Medical Information </li></ul>
  28. 28. What is Driving the Growth in Health Care Spending? <ul><li>Health Status </li></ul><ul><li>Increasing rates of obesity a major drier of health spending </li></ul><ul><li>Explains approximately 12 percent of growth of health spending in recent years (Congressional Budget Office) </li></ul><ul><li>Will continue as driver until obesity trend reversed </li></ul><ul><li>Source; The Synthesis Project; Congressional Budget Office </li></ul>
  29. 29. What is driving the growth in health spending ? <ul><li>Productivity in the health care sector is in all likelihood increasing at a low rate </li></ul><ul><li>There is little competition on the basis of price </li></ul><ul><li>Benefit structures offer little reward for choosing low-cost providers </li></ul><ul><li>Fee-for-service payment penalizes rather than rewards re-engineering care to increase efficiency </li></ul><ul><li>Source: The Synthesis Project </li></ul>Real health care: It’s not like on “House”
  30. 30. What is Not Driving Health Spending to a Substantial Degree <ul><li>Not demographics; “aging” of population at present roughly stable </li></ul><ul><li>This will change in future </li></ul><ul><li>Not medical malpractice – neither a large factor in health care costs or a major driver of spending growth </li></ul>Source: The Synthesis Project
  31. 31. What is to be done?
  32. 32. Minimize unnecessary variations in supply-sensitive health care: The Dartmouth Institute Agenda
  33. 33. Variations in Chronic Disease Care <ul><li>2006 edition of the Dartmouth Atlas of Health Care </li></ul><ul><li>Analysis of records of 4.7 million Medicare enrollees from 2000-2003 </li></ul><ul><li>Enrollees had at least one of 12 chronic illnesses </li></ul><ul><li>Atlas examined care and cost in last 6 months of life </li></ul>
  34. 34. Inexplicably wide range in care and cost <ul><li>Average number of days spent in hospital, chronically ill Medicare beneficiaries, last 6 months of life </li></ul><ul><li>10.1 at Stanford University Hospital </li></ul><ul><li>12.9 at Mayo Clinic (St. Mary’s Hospital, Rochester MN) </li></ul><ul><li>16.5 at Massachusetts General Hospital </li></ul><ul><li>23.9 at New York Presbyterian, NYC (right) </li></ul>
  35. 35. Physician visits in last 6 months of life <ul><li>New York University Medical Center: 76.2 visits </li></ul><ul><li>Robert Wood Johnson University Hospital, NJ (right): 57.7 </li></ul><ul><li>University of Kentucky hospital: 18.6 visits </li></ul>
  36. 36. Commonwealth Fund’s “Bending the Curve” report, Dec. 2007 <ul><li>A package of initiatives could slow U.S. health spending growth by $1.5 trillion over 10 years, through such measures as </li></ul><ul><li>Promoting health information technology: $88 billion </li></ul><ul><li>Comparative effectiveness research: $368 billion </li></ul><ul><li>. </li></ul><ul><li>Patient shared decision-making: $9 billion </li></ul>Source: C. Schoen, S. Guterman, A. Shih, J. Lau, S. Kasimow, A. Gauthier, and K. Davis, Bending the Curve: Options for Achieving Savings and Improving Value in U.S. Health Spending, The Commonwealth Fund, December 2007. Commonwealth Fund President Karen Davis
  37. 37. Commonwealth Fund Recommendations <ul><li>Promoting Health and Disease Prevention: </li></ul><ul><ul><li>reducing tobacco use - $191 billion </li></ul></ul><ul><ul><li>reducing obesity - $283 billion </li></ul></ul><ul><ul><li>positive incentives for health - $19 billion </li></ul></ul><ul><ul><li>creating positive incentives for health </li></ul></ul><ul><ul><li>Realigning Incentives to Encourage Quality and Efficiency </li></ul></ul><ul><ul><li>Hospital pay-for-performance - $34 billion </li></ul></ul><ul><ul><li>Episode of care payment - $229 billion </li></ul></ul><ul><ul><li>Strengthening Primary Care and Care Coordination - $194 billion </li></ul></ul><ul><ul><li>Limit federal tax exemptions for employer premium contributions - $131 billion </li></ul></ul>
  38. 38. Commonwealth Fund Recommendations <ul><li>Correct Price Signals in Health Care </li></ul><ul><li>Reset “benchmark” rates for Medicare Advantage Plans - $50 billion </li></ul><ul><li>Negotiate Prescription Drug prices under Medicare - $43 billion </li></ul><ul><li>All-payer provider payment methods and rates - $122 billion </li></ul><ul><li>Limit payment updates in high-cost areas: $158 billion </li></ul>
  39. 39. The Solutions? It’s partly the payment system, dummy! <ul><li>Fee-for-service system “increasingly viewed as an obstacle to achieving effective, coordinated and efficient care”* </li></ul><ul><li>One solution: Base payment in whole or part on total care of patient across an acute episode of illness or period of time </li></ul><ul><li>Endorsed by Institute of Medicine Committee on Redesigning Health Insurance Performance Measures, Payment and Performance Improvement Programs </li></ul><ul><li>*Source: Karen Davis, “Paying for Care Episodes and Care Coordination,” NEJM vol. 356:1166-1168, March 15, 2007 </li></ul>
  40. 40. RAND Health’s Advice to State <ul><li>Substantial infrastructure investments may be needed to rationalize care and curb excess spending </li></ul><ul><li>E.g., HIT; electronic health record/personal health record platforms and data analysis </li></ul><ul><li>Revised payment methodologies </li></ul>Elizabeth McGlynn, PhD RAND Corp.
  41. 41. Synthesis Project Recommendations <ul><li>Better target medical technology to patients likely to obtain high value </li></ul><ul><ul><li>Effectiveness research </li></ul></ul><ul><ul><li>Provider payment reform </li></ul></ul><ul><ul><li>Consumer incentives to use most efficient providers </li></ul></ul><ul><li>Reduce obesity, improve wellness </li></ul><ul><li>Improve efficiency through provider payment reform </li></ul>Source: Synthesis Project report posted at
  42. 42. Price Transparency <ul><li>Increasing feature of “medical tourism” destinations </li></ul><ul><li>E.g., Bumrungrad Hospital, Bangkok, Thailand </li></ul><ul><li>One of Thailand’s leading hospitals and has a range of services available for overseas patients </li></ul><ul><li>Already certified by some US insurers to provide care and be reimbursed (e.g., Aetna) </li></ul><ul><li>Web site allows price comparisons ( ) </li></ul><ul><li>E.g., “package price” for CABG = $14,470 </li></ul>
  43. 43. Americans and Chronic Illness <ul><li>Chronic disease is the #1 cause of death and disability in the US </li></ul><ul><li>More Americans suffer from chronic illness than voted in the last Presidential election </li></ul><ul><li>Expenditures on chronic illness account for 75% of total US health spending </li></ul><ul><li>About 2/3 of the rise in spending over the past 20 years is linked to rising prevalence of chronic disease </li></ul>Source: Partnership to Fight Chronic Disease, Policy Platform, September 2007
  44. 44. The Solutions? <ul><li>Chronic Care Model </li></ul><ul><li>Includes: </li></ul><ul><ul><li>organizational support </li></ul></ul><ul><ul><li>clinical information services and disease registries </li></ul></ul><ul><ul><li>team-based care </li></ul></ul><ul><ul><li>case management </li></ul></ul><ul><ul><li>regular follow-up </li></ul></ul><ul><ul><li>For patient: decision support, self-management support, community resources </li></ul></ul>
  45. 45. The Solutions? <ul><li>The “Patient-Centered Medical Home”* </li></ul><ul><li>Based on ongoing personal relationship with physician who provides and coordinates continuous and comprehensive health care through team of health care professionals </li></ul><ul><li>Care is coordinated across health care system (hospitals, home health agencies, nursing homes, consultants etc. </li></ul><ul><li>* Source: American Academy of Pediatrics, American Academy of Family Physicians, American Osteopathic Association, American College of Physicians joint statement of principles, February 2007 </li></ul>
  46. 46. The Patient-Centered Medical Home <ul><li>Evidence-based medicine and clinical decision-support tools </li></ul><ul><li>Physician accountability for continuous quality improvement through voluntary performance measurement </li></ul><ul><li>Information technology supports optimal patient care, enhanced communication </li></ul><ul><li>Open scheduling, expanded hours </li></ul>
  47. 47. How Geisinger Does It <ul><li>Source: Ronald A. Paulus, Karen Davis, and Glenn D. Steele Continuous Innovation In Health Care: Implications Of The Geisinger Experience. Health Affairs , September/October 2008; 27(5): 1235-1245. </li></ul>
  48. 48. <ul><li>Anatomy </li></ul><ul><li>2.6 million in service area </li></ul><ul><li>43 of PA’s 67 counties (including Geisinger Health Plan) </li></ul><ul><li>Rural, aging, non-transient </li></ul><ul><li>Medical informatics (strategic commitment) </li></ul><ul><li>> 700 physicians </li></ul><ul><li>40 community practice sites; ~200 primary care physicians </li></ul><ul><li>Multiple specialty hospitals and ASCs </li></ul><ul><li>Tertiary/quaternary care medical centers and specialty hospitals </li></ul><ul><li>Hub & Spoke “Continuity of Care” design </li></ul>Geisinger Health System
  49. 49. Targets for the Geisinger Transformation <ul><li>Unjustified variation </li></ul><ul><li>Fragmentation of care-giving </li></ul><ul><li>Perverse payment incentives </li></ul><ul><ul><li>Units of work </li></ul></ul><ul><ul><li>Outcome irrelevant </li></ul></ul><ul><li>Patient as passive recipient of care, not active participant </li></ul>Managing to Success
  50. 50. Transformation Initiatives* <ul><li>Geisinger Medical Home (ProvenHealth Navigator) </li></ul><ul><li>Chronic Disease Care Optimization </li></ul><ul><li>Transitions of Care </li></ul><ul><li>ProvenCare SM for acute episodic care (the “warranty”) </li></ul><ul><li>*Achievable only through innovation </li></ul>
  51. 51. <ul><li>What is Needed (at the least): </li></ul><ul><li>Care model design capabilities </li></ul><ul><li>Dedicated innovation team </li></ul><ul><li>Financial incentive alignment </li></ul>
  52. 52. ProvenHealth Navigator <ul><li>Partnership between clinical delivery and insurance organization </li></ul><ul><li>Includes components of chronic care management, Medical Home, and Patient-Centered Primary Care </li></ul><ul><li>Partnership between primary care physicians and GHP that </li></ul><ul><li>provides 360-degree, 24/7 continuum of care </li></ul><ul><li>“ Embedded” nurses </li></ul><ul><li>Assured easy phone access </li></ul><ul><li>Follow-up calls post-discharge and post-ED visit </li></ul><ul><li>Telephonic monitoring/case management </li></ul><ul><li>Group visits/educational services </li></ul><ul><li>Personalized tools (e.g., chronic disease report cards) </li></ul>
  53. 53. Admission Metrics -13.8% 232/1,000 269/1,000 Lewisburg -20% 291/1,000 365/1,000 Lewistown 0% 311/1,000 311/1,000 GHP MC Medicare Percent Reduction First Year of Pilot Jan-Oct. 2007 Baseline Pre-Program Jan – Oct. 2006
  54. 54. Readmission Metrics -48.0% 7.9% 15.2% Lewisburg (645 pts) -12.3% 17.8% 20.3% Lewistown (2,120 pts) -18.5% 15.9% 19.5% All Medical Home Sites -2.3% 16.6% 17.0% GHP MC Medicare GHS Sites 0% 16.5% 16.6% GHP Managed Care (MC) Medicare % Reduction First Year: Pilot 2006 Q4 – 2007 Q3 Readmission Rate Baseline: Pre-Program 2005 Q4 – 2006 Q3 Readmission Rate
  55. 55. “ Supply-chain” management <ul><li>How Wal-Mart brought the U.S. the $4-a-month generic subscription </li></ul><ul><li>Recognized retail pharmacists on average reaped 80% margin on generic drugs </li></ul><ul><li>Priced monthly prescriptions at $4 to undercut $5/month health plan co-pays on generics </li></ul><ul><li>“ Gave margin back” to customers </li></ul><ul><li>Now many retailers offer them – Target, Safeway etc. </li></ul>John Agwunobi, President, Health & Wellness Business Unit, Wal-Mart Stores Division. Former U.S. Assistant Secretary of Health, HHS
  56. 56. Conclusions <ul><li>U.S. probably not likely to create “global budget” or overall ceiling on health spending </li></ul><ul><li>Ergo, question is: How do we get the health care we value and want and banish the part that is unnecessary or wasteful? </li></ul><ul><li>How do we improve Americans’ health while doing this? </li></ul><ul><li>Narrow efforts probably amount to “squeezing the balloon” </li></ul>
  57. 57. The Lessons? <ul><li>No magic bullets; battle must be waged on multiple fronts </li></ul><ul><li>Substantial infrastructure investments may precede savings – e.g., HIT, comparative effectiveness research </li></ul><ul><li>Major systems changes needed – e.g., payment reform to encourage efficiency; performance-based payment; reexamining certificate-of-need? </li></ul><ul><li>Major delivery system changes probably needed; e.g., accountable health organizations? </li></ul><ul><li>Increasing wellness/fighting obesity may require more public health than conventional health care interventions </li></ul>
  58. 58. The Verdict on Reforming Health Care? “ Somebody has to do something, and it’s just incredibly pathetic that it has to be us.” --the late Jerry Garcia of the Grateful Dead