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Private Sector Options for Improving
Access, Quality, and Cost of Care
In a
The 21st Century Intelligent Health
System
Ronald E. Bachman FSA, MAAA
President & CEO, Healthcare Visions, Inc.
[email protected]
Sr. Fellow – Center for Health Transformation
404-697-7376
Creating Change Requires a Common Vision
The Missing Link
Desire for
Change
Desire for
Change
+
+
A Common
Vision
Vision
Future State
+
Process for
Change
+
Process for
Change
=
POSITIVE
CHANGE
=
Political Debates
& Expensive
False Starts
A Vision for Transformation
NOT Cost Shifting, Tweaking, or Reform
1
Who Do You Trust? Who Do You Distrust?
Government & Political Solutions
versus
Private Sector and Free Markets
If one trusts government more than private sector (distrusts greedy
profit oriented health companies), then it seems natural to advocate
government controlled solutions (e.g. single payer, expanded
Medicare, Canadian style)
If one trusts the private sector more than government (distrusts
inefficient, wasteful, politically motivated lobbyist controlled
politics), then it seems natural to advocate free market solutions
(e.g. increased competition, individual ownership, personal
responsibility, lower taxes, tax credits)
2
What is a 21st Century Intelligent Health
System?
In a 21st Century Intelligent Health System, the individual has:
1.
accurate, timely knowledge of health needs;
2.
access to the best information about how to maintain personal
health;
3.
4.
knowledge of whom to see and where to go for health services, and
confidence that health providers are practicing medicine using the
best practices based on the most up-to-date understanding of
outcomes-based medicine.
Most importantly, the 21st Century Intelligent Health System must
provide access to affordable insurance coverage for those currently
uninsured. No one can be left behind.
3
Healthcare Consumerism
the
Basis for a 21st Century Intelligent Health
System
Transformation to a 21st Century Intelligent Health System is
much more than employers implementing high deductible
Consumer-Driven healthcare (CDHC) plans with attached
saving accounts.
The future is about empowering individuals with information
and financial responsibility to support a position of
ownership. It’s about supporting and rewarding healthy
behaviors regardless of plan design.
It’s about engaging employees, employers, providers,
carriers, and other stakeholders in a new relationship that
deals with health rather than sickness and disease.
4
Supply Controls or Demand Controls
Healthcare seems to have two basic choices to control costs:
1. Managed care & HMOs - The “supply of care” is limited by a
third party who controls the access to medical services (e.g.
utilization reviews, medical necessity, gatekeepers,
formularies, scheduling, types of services allowed), or
2. Consumerism - The member controls their “demand for
care” because of a direct and significant financial
involvement in the cost of care, rewards for compliance, and
the information to make wise health and healthcare value
driven decisions.
5
Supply Controls Are Failing
High Healthcare Costs Climbing Higher
Patients have lost control of their own
healthcare, and are not truly engaged
in the process of managing their
health
Patients are frustrated with managed
care “rules” and the impact on time
and productivity
“After long relying on managed-care
companies as their weapon against
health costs, U.S. employers are
considering a fundamental change in
strategy: turning the fight over to their
employees.”
- Wall Street Journal,
February 2000
Patients don’t understand healthcare
costs – costs are not transparent
6
The Moral Imperative:
Saving Lives and Improving Health
44,000 to 98,000 deaths annually from medical errors (Institute of
Medicine)


7,391 deaths resulted from medication errors (Institute of Medicine)
225,000 deaths annually from medical errors including 106,000 deaths
due to "nonerror adverse events of medications" (Starfield)

180,000 deaths annually from medication errors and adverse reactions
(Holland)


20,000 annually to 88,000 deaths annually from nosocomial infections
2.9 to 3.7 percent of hospitalizations leading to adverse medication
reactions

2.4 to 3.6 percent of hospital admissions were due to (prescription)
medication events (Australian study)

42% of people believed they had personally experienced a medical
mistake (NPSF survey)

7
The Tragedy of the Uninsureds

18,000 people die every year because they are uninsured.
Uninsured adults have a 25% greater rate of dying than adults
with insurance.

Uninsured trauma victims are less likely to be admitted to the
hospital or receive the full range of needed services. They are 37%
more likely to die of their injuries.

Uninsured children are 70% more likely to go without care for
common childhood conditions such as asthma, ear infections, and
sore throats.

Uninsured children are five times more likely to have an unmet
need for medical care each year

8
The Tragedy of the Uninsureds
Uninsured women are 36% less likely to get a pap smear, and 60%
less likely to get a mammogram.


Uninsured men are 40% less likely to get a prostate examination.
The ripple effects of being uninsured and having poor health are felt
throughout society. Uninsured children have impaired development and
poor school performance. Uninsured adults have more absences from
work, more unscheduled sick days, and greater rates of disability.

The 2004 Kaiser Family Foundation study found the societal costs of
the uninsured to be $125 billion.

Regardless of how one views the issue, the cost to society is high.
Without insurance - the health, lives, and financial security of families
are at extreme risk.
9
The Private Sector Solution calls for
A “300 Million Payer System”
The Center for Health Transformation endorses the goal
of access to insurance for all Americans with care
provided in a 21st Century Intelligent Health System.
We can achieve 100% coverage through market-based
solutions, private/corporate efforts, tax incentives,
direct public subsidies, strong community support, and
faith-based outreach programs.
Personal responsibility, individual ownership,
portability, and healthcare consumerism are the
hallmarks of such a system.
10
Mega Trends
Leading to Healthcare Consumerism
1.
Personal Responsibility
2.
Self-Help, Self-Care
3.
Individual Ownership
4.
Portability
5.
Transparency (the Right to Know)
6.
Consumerism (Empowerment)
11
Healthcare Consumerism
Healthcare Consumerism is about transforming a
health benefit plan into one that puts economic
purchasing power—and decision-making—in the
hands of participants.
It’s about supplying the information and decision
support tools they need, along with financial
incentives, rewards, and other benefits that
encourage personal involvement in altering health
and healthcare purchasing behaviors.
12
Healthcare Consumerism
If Healthcare Consumerism is the basis for a new system of
health and healthcare, it MUST solve our country’s most
difficult problems.
Healthcare Consumerism must improve ACCESS, QUALITY,
and COST.
In addition to expanding individual and employer-based
insurance, there must be a Consumer-centric Medicaid,
Consumer-centric Medicare, a solution to the uninsured.
13
It’s NOT just the Burden of the Consumer:
Everybody has a New Role
Managed Care System Future Healthcare
Focus
Supply side & Healthcare
Supply & demand side
Health & Healthcare
Employer
Financier &
manager
Financier & Facilitator
Employee
Passive, sheltered &
entitled
Active, informed &
incented, a consumer
Provider
Dominant & in distress
Accountable caregiver
MCO
Provider oversight &
care gatekeeper
Case Manager, SMM
insurer
Quality Metrics
Health plan level
Consumer level
Administration
Disconnected
Integrated
Banks
Not sigificantly involved
Funds manager
14
The Core of Consumerism
The Unifying Theme
for a
Health and Healthcare Strategy is:
Behavioral Change
“Implement only if it supports
behavioral change consistent with the
strategy”
15
Two Basic Principles for
Successful Consumerism
1.
Must work for the Sickest Members, as
well as the healthy
2.
Must work for those not wanting to get
involved in decision-making, as well as
the “techies”
16
The Evolution
of Healthcare Consumerism
Future Generations of Consumerism
Traditional
Plans
1st Generation 2nd Generation 3rd Generation
Traditional
Consumerism Consumerism Consumerism
Plans
with
Focus on
Focus on
Integrated
Consumer
Discretionary
Behavior
Health &
Information
Spending
Changes
Performance
4th Generation
Consumerism
Personalized
Health &
Healthcare
Behavioral Change and Cost Management Potential
Low Impact
---- ---- ---- ---- ---- ---- ---- ---- ----
High Impact
17
The Promises of Consumerism
Major Building Blocks
of Consumerism
Personal Care
Accounts
Wellness/Prevention
The Promise of Demand Control & Savings
The Promise of Wellness
Early Intervention
Disease and Case
Management
Information
Decision Support
Incentives &
Rewards
The Promise of Health
The Promise of Transparency
The Promise of Shared Savings
It is the creative
development,
efficient delivery,
efficacy, and
successful
integration of these
elements that will
prove the success or
failure of
consumerism.
18
The
Consumerism
Grid
Personal Care
Accounts
Wellness/Prevention
Early Intervention
Disease and Case
Management
Information
Decision Support
Incentives &
Rewards
1st Generation
Consumerism
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Discretionary
Spending
Focus on
Behavior
Changes
Integrated
Health &
Performance
Initial
Account Only
Activity &
Compliance
Rewards
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Web-based
Worksite wellness, Genomics, predictive
100% Basic
behavior change safety, stress & error
modeling push
Preventive Care support programs
reduction
technology
Passive Info
Discretionary
Expenses
Compliance
Population Mgmt,
Wireless cyber –
Awards, disease Integrated Hlth Mgmt, support, cultural
specific allowances Integrated Back-toDM, Holistic care
Work
Personal health Health & performance Arrive in time info
mgmt, info with info, integrated health
and services,
incentives to access
work data
information therapy
Cash, tickets,
Trinkets
Health Incentive Non-health corporate
Accounts, activity
metric driven
based incentives
incentives
Information,
health coach
Personal dev. plan
incentives, health
status related
Potential Savings from
Full Implementation of Consumerism
Achievement of savings and improved outcomes is dependent upon both
the Type and Effectiveness of the programs implemented.
Gross* Savings as % of Total Plan Costs
(Programs Applicable to All Members)
Traditional plans
Effective
Programs
Implemented
Consumerism Plans
Passive
1st Generation
2nd Generation
3rd Gen & Future
Basic
2%
3%
7%
10%
Expanded
3-4%
5-8%
12-15.0%
20.0+%
Complete
4%
7%
17%
25%
Comprehensive
(Future)
5%
10%
20%
30%
*Excludes Carry-over HRAs/HSAs and any added
Administrative Costs of Specialized Programs
20
Areas of Impact to
Improve Health, Save Lives, and
Lower Costs
Low Users
No
Claims
% Mem
% Dollars
Generally
Healthy
15%
48%
High
Users
Acute Episodic Conditions
Chronic & Persistent
.
Conditions
.
O/P, Low
In/P, High
.
O/P, Low
In/P, High
Maternity
14%
3%
3%
Wellness - Lifestyle
Prevention
0%
Medium
Users
12%
15%
12%
63%
Maximize
5%
4%
1%
21%
20%
15%
Minimize
32%
% Dollars
12%
12%
Catastrophic
Wellness - Lifestyle
Minimize
% Mem
Very High
Users
Early Intervention 32%
17%
Maximize
Wellness56%
- Clinical
Wellness - Clinical
21
A Paradigm Shift
HSA & Market Solutions for Old Problems ?
1. Federal Support and Subsidies For HSAs & HDHPs
2. Major initiatives to address the 45 million uninsured
problem in the U.S.
3. Major initiatives to restructure the individual and small
group healthcare market place. Cross-state selling and new
players entering the market.
4. 45-50% Individual Policy ownership in 5-10 years
(currently 5-7%).
5. The development of Consumer-centric Medicaid and
Consumer-centric Medicare
22
Federal Legislative Proposals
Supporting Market-based Solutions
1. Leveling the playing field by making the same tax relief
available to individuals and employers. Americans who
purchase HSA-qualified insurance policies on their own should
have the same tax advantages as people who obtain insurance
through their employer.
2. Eliminating all taxes on out-of-pocket spending through
HSAs. Americans with HSAs should be able to pay for all of their
care tax-free.
3. Making health insurance portable. Americans should be able
to own the insurance policy that goes along with their HSA, and
keep it when they change or lose their jobs without worrying
about paying higher premiums if they become sick.
23
Federal Legislative Proposals
Supporting Market-based Solutions
4. Strengthening the buying power of America’s small businesses.
Small businesses should have the same access to price efficiencies as
large businesses when purchasing health insurance.
5. Passing medical liability reform. Limit costly and frivolous lawsuits
that waste scarce resources, increase health care costs, and drive
doctors out of business.
6. Improving adoption of health information technology. Electronic
health records that reduce costs and improve the efficiency and
effectiveness of medical treatment should be widely used.
24
Federal Legislative Proposals
Supporting Market-based Solutions
7. Empowering consumers through information. All Americans
should be able to obtain easy-to-understand information about the
price and quality of the health care they receive from their medical
provider and insurance carrier.
8. Providing affordable coverage for vulnerable Americans.
Americans with low incomes and persistently high medical expenses
should receive additional assistance.
9. Promoting prevention, wellness, and fitness. The President
encourages all Americans to lead a healthy lifestyle to prevent
disease and improve their overall quality of life.
25
Consumer-centric Medicaid
The 21st Century Medicaid Act
Medicaid should be divided into three distinct sub-programs, each
administered separately with its own rules and structures. However,
all the sub-programs should be based on the following principles:
1. A 21st Century Medicaid System will focus on wellness,
prevention, early detection, and independent living.
2. A 21st Century Medicaid System will integrate the family
and community into the healthcare and the lives of loved ones.
3. A 21st Century Medicaid system will leverage innovations in
science and technology, quality systems, and best practices in
every aspect of providing care for its beneficiaries.
26
Consumer-centric Medicaid
To achieve real transformation in Medicaid:
One program design cannot meet the needs of such
distinct and separate groups of beneficiaries –
1. the poor.
2. people with disabilities (Aged, Blind, Disabled), and
3. the frail elderly.
Consumer-centric Medicaid as described in this
presentation focuses on the first group
27
Cost Control Levers
A comparison between Managed Care
and Consumer-centric Medicaid
Managed Medicaid
Consumer-centric Medicaid
1. Eligibility
Legislated Reductions Graduation to Private Ownership
2. Benefit Design
Fairly Fixed
Asset Accumulation
3. Cost Sharing
Minimal
Shared Savings-Pay 4 Compliance
4. Premium Sharing Non-existent
Income based
5. Service Costs
Forced Price Controls Shared Savings-Pay 4 Performance
6. Utilization
Supply Managed
Demand Controlled
Creating the Possible…
28
Two Choices for the Future of Medicaid:
Managed Care or Consumerism
Consumerism &
1st Generation 2nd Generation 3rd Generation 4th Generation
Consumerism Consumerism Consumerism Consumerism
Demand Control
Traditional
Medicaid
Plans
Traditional
with
Medicaid
Consumer
Plans
Information
&
Managed Care
Managed Care &
Supply Control
Focus on
Discretionary
Spending
Focus on
Behavior
Changes
Integrated
Health &
Productive
Citizenry
Personal
Ownership of
Health and
Healthcare
4th Gen
3rd Gen
1st Gen
2nd Gen
Managed Care
Managed Care Managed Care Managed Care
Ltd Benefits, Ltd Eligibility, Restrictive
Rx Formulary,
Ltd Network In/P Review,
Social Service
Providers,
O/P Review
Benefit
High
Reductions
Discounters
More Supply
Controls,
Scheduled
Benefits,
Prioritized
Diagnoses
Behavioral Change and Cost Management Potential
Low Impact
---- ---- ---- ---- ---- ---- ---- ---- ----
High Impact
29
The
Consumer-centric
Medicaid
Grid
Personal Care
Accounts
Health Management
1st
Generation
Consumerism
2nd
Generation
Consumerism
3rd Generation
Consumerism
4th Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Productive
Citizenry
Personal
Ownership of
Health and
Healthcare
Allocation to Individual Activity
purchase Private & Compliance
Coverage
Rewards
Individual, Family
& Group
Rewards
Conversion to
Private HSAs, Use
for non-Healthcare
100%
Web-based
Preventive Care behavior change
thru Debit Cards support programs
Wellness,
Stress, Juv Justice,
Violence, MH/SA
Genomics, predictive
modeling push
technology
Focus on
Discretionary
Spending
Disease specific
Functionality Focus,
Wireless cyber –
focus, (Diabetes,
Population Mgmt,
support, Holistic
MH/SA), Special
Cultural DM,
care
Case Mgmt Svcs Integrated Hlth Mgmt,
Tele, Personal and Info on Quality and
Personal
Family hlth mgmt, Health Disparities,
Responsibilities,
Community
Multi-Cultural needs,
Self-care,
Resources
Faith Based Outreach information therapy
Zero balance acct,
Non-health State
Subsidies for
Potential if
activity based
initiatives
movement to Indiv.
unexpected Funds incentives,P4P,P4C
or Employment
Based Coverage
Information,
health coach,
Cash &
Counseling
Payor /
Education,
Intermediary
Communication, Information
& Decision Support Tools Sponsored, Paper
Based
Disease and Case
Management
Incentives &
Rewards
30
Consumer-centric Medicare with Health
Opportunity Accounts (HOAs)
Add to Medicare a Health Opportunity Account (HOA). The
account starts with a zero balance and would be funded through
a number of sources including employers offering post
retirement healthcare supplements, tax deductible individual
contributions, and Medicare deposits based upon voluntary
patient participation in cost effective treatments, and through
compliance incentives programs.
Like Health Savings Accounts, HOAs would be funded individual
accounts under the control of the Medicare beneficiary.
31
Ways to increase the level of Consumer-centric
Medicare HOA funds:
1. Employers could provide post retirement health insuirance
contributions directly into the HOA.
2. Medicare could establish incentive programs to reward
compliance with “best practices” medical care and treatments.
3. Medicare could reward patients that with HOA incentives if they
use hospitals with proven cost effective programs for the diagnosis
being treated.
4. Medicare beneficiaries that use hospitals with recognized quality
standards would receive an HOA incentive bonus.
32
Ways to increase the level of Consumer-centric
Medicare HOA funds:
5. HOA incentives could be awarded to encourage using
physicians with better outcomes.
6. Medicare beneficiaries could be allowed to contribute
to their HOAs with tax deductible contributions.
7. Medicare beneficiaries could be allowed to transfer
(tax free) a certain amount of life insurance cash value
directly into their HOA.
8. HOAs would accumulate tax-free. As with current
HSAs, investments would be through government
approved financial investment vehicles.
33