Download Exhibit 1. Synergistic Strategy: Potential Cumulative Savings

Confronting Costs: Stabilizing U.S. Health Spending
While Moving Toward a High Performance System
Overview and Key Findings of a New Report from
The Commonwealth Fund Commission on a
High Performance Health System
Cathy Schoen, Senior Vice President and Stuart Guterman, Vice President
and Executive Director of the Commission
The Commonwealth Fund
Release Charts - January 9, 2013
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Confronting Costs - Whole System Approach
• Rising health costs putting pressure on businesses and families as
well as federal and state budgets - AND the economy
– Spending projected to reach 21% of GDP by 2023 – up from 18%
– Private health spending rising faster than Medicare per person
– Premiums on a path to equal 31% of median income by 2023
– Similar market forces contributing to high and rising costs
• Broad evidence we can do better if we focus on value
– Evidence of waste, poorly coordinated/unsafe care, excess prices,
high administrative costs
– Slow spread of innovative systems
– Growing concentration of market power among providers – need for
more consistent payment approaches across payers
• Comprehensive strategy: better health, better care at lower costs
– Accelerate care system innovation and improve the way health care
markets function
• ARC modeled potential impact 2013 to 2023
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Synergistic Policies to Stabilize Costs
• Set target to hold total health spending growth to GDP
growth, while moving toward high performance system
• Three pillars - synergistic policies
– Provider payment reforms to promote value and accelerate
health care delivery system innovation
– Policies to expand and encourage high-value choices by
consumers, armed with better information on quality and costs
– Systemwide action to improve how markets function, including
lower administrative costs and set targets for spending growth
• Potential to save a cumulative $2 trillion NHE over 10 years
– $1.04 trillion in federal savings; avoid physician fee cuts
– Substantial savings for families, businesses, state governments
– Policies interact to align provider and consumer incentives,
across public and private payers
• Critical to start soon and together – savings accumulate
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Potential Cumulative Savings by Payer Compared to Current
Baseline Projection, 2013-2023
Net impact in $ billions*
Total
NHE
Federal
govt.
State and
Private
Households
local govt. employers
-$686
–$345
–$84
–$66
–$192
2013-2023 -$2,004
–$1,036
–$242
–$189
–$537
2013-2018
Note: NHE = National Health Expenditures.
*Net effect does NOT include potential impact of spending target policy.
Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes
that the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician
fees are instead increased by 1% in 2013 and held constant from 2014 through 2023.
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Synergistic Strategy: Cumulative Savings 2013-2023
Payment Reforms to Accelerate Delivery System Innovation
•
•
•
•
($1,333 B)
Pay for value: replace the SGR with provider payment incentives to improve care
Strengthen patient-centered primary care and support care teams
Bundle hospital payments to focus on total cost and outcomes
Align payment incentives across public and private payers
Policies to Expand Options and Encourage High-Value Choices ($189 B)
• Offer new Medicare Essential plan with integrated benefits through Medicare,
offering positive incentives for use of high-value care and care systems
• Provide positive incentives to seek care from patient-centered medical homes,
care teams, and accountable care networks (Medicare, Medicaid, private plans)
• Enhance clinical information to inform choice
Other Systemwide Actions to Improve How Health Markets Function ($481 B)
• Simplify and unify administrative policies and procedures
• Reform malpractice policy and link to payment*
• Target total public and private payment (combined) to grow at rate no greater than
GDP per capita**
* Malpractice policy savings included with provider payment policies.
**Target policy was not scored.
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Projected National Health Expenditures (NHE), 2013-2023:
Potential Impact of Synergistic Strategy
NHE in trillions
$6.0
Current Baseline NHE projection
$5.5
Projected NHE net of policy impacts
$5.0
$5.1
$4.0
$2.9
$3.0
$2.0
$1.0
NHE as percent of GDP—
Current projection: 18% in 2013→21% in 2023
Under unified strategy: 18% in 2013→19% in 2023
Cumulative NHE savings under synergistic strategy: $2.0 trillion
$0.0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Note: NHE = National Health Expenditures; GDP = Gross Domestic Product.
Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that
the cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are
instead increased by 1% in 2013 and held constant from 2014 through 2023.
Provider Revenues Continue to Grow: Impact on Projected
Annual Spending for Hospital and Physician, 2013-2023
Spending in billions
$1,800
Hospital (Baseline)
$1,600
Hospital (Net of Policy Impacts)
$1,646
Physician (Baseline)
$1,400
$1,509
Physician (Net of Policy Impacts)
$1,200
$1,000
$1,122
$902
$1,055
$800
$597
$600
Projected growth of hospital spending, 2013-2023:
--Baseline projection: 82% (6.2% annual)
--Net of policy impact: 67% (5.3% annual)
Projected growth of physician spending, 2013-2023:
--Baseline projection: 88% (6.5% annual)
--Net of policy impact: 77% (5.9% annual)
$400
$200
$0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Data: Estimates by Actuarial Research Corporation for The Commonwealth Fund. Current baseline projection assumes that the
cuts to Medicare physician fees under the sustainable growth rate (SGR) formula are repealed and basic physician fees are
instead increased by 1% in 2013 and held constant from 2014 through 2023.
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Confronting Costs While Improving Performance
• Comprehensive, market-wide approach needed with focus
on value, care system innovation
• Confronting cost growth requires
– Accelerating spread of patient-centered, coordinated care
systems, on foundation of primary care and teams
– Intensified multi-payer efforts to hold care systems accountable
– Information systems to compare, learn, and spur action
• Substantial federal savings could offset cost of repealing
scheduled cuts in physician fees (SGR)
• High stakes for the economy – not just federal budget
– Rising health spending saps resources that could be invested
wages, jobs, schools, roads, science/technology
• Key to act soon and together
– Public and private payers acting in concert
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Thank You!
David Blumenthal, M.D.
President
Chair, Commission on a High
Performance Health System
[email protected]
Stuart Guterman
Vice President
Executive Director,
Commission on a High
Performance Health System
[email protected]
Mark Zezza
Senior Program Officer,
Payment and System Reform
[email protected]
The Commonwealth Fund Commission
on a High Performance Health System
Melinda Abrams
Vice President,
Patient-Centered Coordinated Care
[email protected]
Actuarial Research Corporation staff, under the direction of Jim Mays, developed the estimates for this report.
For more information, please visit: www.commonwealthfund.org
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Background Additional Report Exhibits
• Chart 11: High Performance Health System Framework and Criteria
to Guide Policies to Stabilize Spending Growth
• Chart 12: International Health Spending Comparison, 1980-2010
• Chart 13: Projected Total Spending by Major Payer
• Chart 14: Projected Rates of Increase Medicare Cost Per Person
Compared to Private Insurance and GDP
• Chart 15: Private Premium Increases Compared to Wages and
Incomes, Actual and Projected to 2021
11
Framework: High Performance Health System
Criteria to Stabilize Spending Growth
• Set targets for total spending growth
• Pay for value to accelerate delivery system reform
for better outcomes, better care, at lower costs
• Address the system-wide causes of health
spending growth – not just federal health costs
• Align incentives for providers and consumers
across public and private payers
• Protect access and enhance equity, but also
engage and inform consumers
• Invest in information systems to guide action
12
International Spending on Health, 1980–2010
Average spending on health
per capita ($US PPP)
Total health expenditures as
percent of GDP
18
$8,000
US
$7,000
16
SWIZ
NETH
$6,000
14
CAN
12
GER
FR
10
AUS
UK
8
JPN
US
NETH
FR
GER
CAN
SWIZ
UK
JPN
AUS
Note: PPP = Purchasing power parity.
Source: Commonwealth Fund analysis, based on OECD Health Data 2012.
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
0
1988
$0
1986
2
1984
$1,000
1982
4
1980
$2,000
1980
6
2010
$3,000
2008
$4,000
2006
$5,000
Projected U.S National Health Expenditures (NHE)
by Source, 2013-2023
$ Billions NHE
13
$5.5 Trillion
32%
Federal
Government
18%
State & Local
Government
5000
$4.0 Trillion
4000
$2.9 Trillion
31%
3000
28%
2000
18%
24%
18%
25%
1000
26%
26%
28%
26%
2013
2018
2023
18%
19%
21%
Private Employers
(including "other
private revenue")
Households
0
%GDP:
Source: Estimates by Actuarial Research Corporation for The Commonwealth Fund.
14
Medicare Spending Per Enrollee Projected to Increase Slower than
Private Insurance Spending Per Enrollee and GDP Per Capita
Annual rate of growth, in percent
8.0
GDP per capita
7.0
Medicare spending per enrollee
6.0
Employer-sponsored insurance spending per enrollee
5.0
3.7
4.0
3.0
4.6
4.5
3.8
2.9
2.7
2.0
1.0
0.0
2008–2011
2011–2021 (projected)
Note: GDP = Gross Domestic Product.
Source: CMS Office of the Actuary, National Health Expenditure Projections, 2011–2021, updated June 2012.
15
Premiums Rising Faster Than Inflation and Wages
Cumulative Changes in Insurance
Premiums and Workers’ Earnings,
1999–2012
Projected Average Family Premium as
a Percentage of Median Family Income,
2013–2021
Percent
Percent
Health Insurance Premiums
200%
180%
Workers' Contribution to Premiums
180%
Workers' Earnings
160%
172%
Overall Inflation
140%
35
30
25
120%
22 23
20
100%
15 12 13
80%
60%
47%
10
38%
5
15
17
18 18 18 18
19
24 25
26 26
27
28
29
30
31
20
20%
0%
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
40%
Projected
Data: Kaiser Family Foundation/Health Research and Educational
Trust, Employer Health Benefits Annual Surveys, 1999–2012.
Data: Fund authors’ estimates based on CPS ASEC 2001–12,
Kaiser/HRET 2001–12, CMS OACT 2012–21.
Source: Commonwealth Fund Commission, Confronting Costs, January 2013