1 © copyright life insurance company of north america 2005 intervention & preventative programs...
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1 © Copyright Life Insurance Company of North America 2005
Intervention & Preventative Programs to Reduce Healthcare Costs
Barton Margoshes, MDChief Medical Officer
CIGNA Group Insurance
2 © Copyright Life Insurance Company of North America 2005
Key Points
•Employee benefits costs will continue to rise
•Demographic trends will likely create the “Perfect ‘Benefits’ Storm”
•Healthcare and Disability costs are linked
•A company’s competitive advantage depends on its workers
•Keeping employees healthy and at work is a viable and essential business strategy
•Quality oriented programs that integrate and coordinate patient-centric services such as Disease Management and Behavioral Health/EAP can reduce total costs
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Rising Healthcare Costs
• Healthcare costs continue to significantly outpace the rate of inflation
• Health care in U.S. represents 16% of GDP. Estimated to reach 20% by 2015
• Since 2000, premiums for family coverage have increased by 59%, compared with inflation growth of 9.7% and wage growth of 12.3%
- Kaiser Family Foundation & Health Research and Educational Trust Employer Health Benefits 2004 Survey
• Total health premiums paid by employers have risen rapidly
Hewitt Health Value Initiative™ 2003
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The Aging Workforce
• In 2010, 51% of labor force will be over 40
- Bureau of Labor Statistics, Monthly Labor Review, Nov. 2001
• In 2003, Americans aged 55 and older made up approximately 12% of the workforce - the highest percentage ever recorded
- Bureau of Labor Statistics, Monthly Labor Review, May 2002
• Aging labor force is expected to cause 37% increase in incidence of disability
- JHA Factbook 2001
• Health care costs rise with age
Applied Research and Analysis Directorate 2004
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Department of Labor 2004
Workers on Long-Term Disability
Labor force grew only by 11% in the
same 10 year period
62% increase
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Chronic Conditions
• Approximately 125 million Americans suffer from at least one chronic condition – expected to reach 157 million by 2020
- Business and Health 10/20/03
• The 5 illnesses where costs increased the most were heart disease, asthma, mental disorders, cancer and hypertension
- Health Affairs 8/04
• In 2000, U.S. spent $774 billion to treat chronic conditions – that’s 70 percent of the total spend on healthcare
- 2003 Mercer/Marsh survey
• “The highest rate of increase in medical and disability claimscosts is among 30- to 39-year-olds, and both are due to obesity.”
- Helen Darling, president of the National Group on Health, a Washington, D.C. consortium of 208 large employers
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Growing Impact of Obesity
• Obesity drove 27% of medical cost increases between 1987 and 2001
- The Impact of Obesity on Rising Medical Spending, Health Affairs, Web Exclusive, 2004
• For the obese employee population
• Annual health care costs are 37.4 percent higher
• Annual hospital inpatient days are 45 percent higher
• Lost workdays annually due to obesity are 39.3 million
- Jacobsen, M. "The Epidemic of Obesity: The Costs to Employers and Practical Solutions" 2002
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Average Cost to Treat Obesity vs. Normal Weight
Source: Kenneth Thorpe, Emory University
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Another View of the Cost of Obesity
Overweight Obese More Obese Extremely Obese
up to 30 lbs 30 to 60 lbs
over 60 to 100 lbs
overmore than 100 lbs
over
Men/Women Men/Women Men/Women Men/Women
Medical Costs $169/$495 $392/$1,071 $569/$1,549 $1,591/$1,359
Absenteeism $6/$93 $$70/$302 $643/$936 $436/$805
Total $175/$588 $462/$1,372 $1,212/$2,485 $2,027/$2,164
Source: American Journal of Health Promotion, Sept/Oct.
Employer with 1,000 lives: Represents > $285,000 additional costs
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Economic Burden of Painful Conditions
$0$2,000$4,000$6,000$8,000
$10,000$12,000$14,000$16,000$18,000
Absence andDisability
Medical Costs
White, A, et. al; JOEM, Sept. 2005
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Impact of Chronic Conditions
“Disease Management of Chronic Conditions Offers Opportunities forImproved Clinical and Financial Outcomes” Intracorp 2002
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Impact of Mental Health Costs
● More than 85% of primary care physician visits have a psychological component
– American Medical Association 2002
● 40% of disabilities have a behavioral component
– Managed Behavioral Health News 1998
● Mental stress/depression claims are the fastest growing disability claim
– Mercer/Marsh Time Off and Absence Survey 2003
● Depressed workers lose about 5.6 hours of productive time on the job each week, compared with 1.5 hours for non-depressed workers
– Journal of the American Medical Association 2003
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• Nearly 1 in every 10 adults in the U.S. experiences some form of depression every year.1
• 3 of the top 10 most costly prescribed drugs in the U.S. are anti-depressants2 with other conditions.
• Depression often co-occurs with other conditions, e.g. heart disease, stroke, diabetes cancer, perinatal, Parkinson’s, HIV/AIDS
• Untreated or inappropriately treated depression leads to higher medical costs
Why Focus on Depression?
1-National Institute for Mental Health, 2004; 2- Pharmacy Benefit Report 2003 edition;
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Draining Your Company’s Productivity
Leading cause of absenteeism and diminished productivity2
The second leading cause of disability in the U.S.1
0
1
2
3
4
5
6
LostProductivityHours/Week
DepressedNon-Depressed
Impact on Productivity2
1 - National Health Care Quality Report: Mental Health Effectiveness, 2003.2 - Substance Abuse and Mental Health Services Administration and National Institutes of Health. Mental Health: A Report to the Surgeon General, 1999.
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What Can We Do About It?
Integrated Health Management
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Integrated Health Management Rationale
• Health and disability are inextricably linked
• Enhancing health can lead to lower medical and disability costs
• IHM addresses the largest segment of benefit costs: medical, absence, lost productivity
• Optimal use and integration of existing programs promotes better health and productivity
• Prevention of illness and disability should be primary goal
• Health and Disability follow the same continuum
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The Health and Productivity Continuum
Health Risk Acute Illness Recovery Chronic
Fully Productive
Productivity Risk
Absence Return to Work
Long Term Disability
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An Integrated Health & Productivity Management Model Should Consider…
Health related systems:
● Healthcare
● Incidental absence & FMLA
● Short and long term disability
● EAP/Behavioral health
● Pharmacy
● Wellness and disease management
● Workers compensation
Non-health related systems:
● Corporate culture
● Policies and procedures
● Benefit plan designs
● Alignment of incentives
● Training and human resources
● Employee communication
● Data integration
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An Integrated Health Management Model
Disability & HealthCare Connect
Confidential, unpublished property of CIGNA. No unauthorized duplication or distribution.
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Integrated Health Management Impact
• 20% of employees were responsible for 91% of employee medical costs
• Employees on short term disability represented only 5% of employees but were responsible for 35% of employee medical costs
• Most of the top cost drivers are the same for both disability and medical
• Disability claimants with chronic conditions experience longer durations whether or not the disability was primarily due to the chronic condition
• Short term disability (STD) durations and return to work percentages are consistently better
• Employees engaged in Disease Management - Cardiovascular Disease and Low Back Pain programs - experience shorter disability durations and a lower incidence of short term disability
• EAP interventions resulted in a decrease in lost productivity
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12%Shorter STD
durations
6%Higher Return to Work rate
0%
5%
10%
15%
20%
For a 10,000 life employer this represents between $300,000 and $600,000 in direct
disability cost savings per year
IHM Results in Shorter Disability Durations
Confidential, unpublished property of CIGNA. No unauthorized duplication or distribution.
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Why Disease Management?
Chronic conditions drive a significant portion of total health care expenses
● Higher medical claims
● Higher pharmacy claims
● More frequent disability claims
● Reduced productivity
Better management improves outcomes; can deliversignificant savings
Source: CIGNA HealthCare
15.3% 9.0%
3.8%
36.9%
5.7%
29.2%
Recurrent Others Healthy & Routine
Chronic Catastrophic Acute
Distribution of CostBy Disease Type
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AdmissionRate
Reduction
MedicalCost
Savings
Asthma
Diabetes
Cardiac
Low Back
COPD
Total:
9%
8%
15%
20%
5%
12%
5%-6%
7%-9%
8%-12%
14%-17%
9%-10%
9%-11%
Disease Management Delivers Cost Savings
Condition
Improvedhealth
lowers cost
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Disease Management Reduces Both Medical and Disability Costs
Confidential, unpublished property of CIGNA. No unauthorized duplication or distribution.
Condition Admission Rate
Reduction
Medical Cost Savings
Disability Incidence
Rate Reduction
Disability Duration
Reduction
Cardiac 15% 8-12% 3% 7.7%
Low Back 20% 14-17% 1% 18%
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Does EAP Make a Difference?Do EAPS Make a Difference?
General Motors reported that use of EAP generated a 72% reduction in dollars paid for accident and disability benefits for employees with substance abuse problems
Ford and GM reported their EAP’s generated a 9:1 ROI
LA Department of Water and Power reported their EAP generated a 2.5:1 ROI
EAPA reports effective EAP programs resulted in:
● 27% few workers comp claims
● 57% improvement in absenteeism
● 48% improvement in employee retention
● 58% decline in employees reporting on the job physical health problems
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What We All Would Like to See!
Average Medical & Disability Costs for Employees
$515
$1,300
$375
$16
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
Low er 80% ofEE's
Top 20% ofEE's not on
STD
EE's on Dis(med+ dis) on
STD
PE
PM Disability
CostsMedicalCosts
Confidential, unpublished property of CIGNA. No unauthorized duplication or distribution.
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Questions?