Download - Health Reform and Cost Control
Health Reform and Cost Control
To:National Academy for State Health Policy
By:John Sheils
October 16, 2008
© Ingenix, Inc. 2
Limits on Family Premium Payments as a Percentage of Income – Massachusetts Model
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110
2.3%
3.7%
4.5%
5.5%
6.5%
7.5%
2.8%
4.3%
5.3%
6.3%
7.5%
8.6%
Annual Income in Thousands
Individuals
Families 3+
No Limit
No Limit
0%0%
© Ingenix, Inc. 3
Cost of Capping Premium Payments as a Percentage of Income Under a Mandate for All to Have Coverage
Premiums at 50th Percentile
Health Plan
Single $4,397
Married Couple $8,794
Married with Children
$10,824
One Parent $8,165
Impact of Limiting Premiums as a Percent of Income in
2008
Program Costs 2008
$109.1 billion
Families Receiving Subsidies in 2008
20.8 million
© Ingenix, Inc. 4
Projected Rates of Growth in Health Spending and Wages Based Upon OACT Projections
7.9% 7.8%
6.7% 6.7%6.5%
3.7%3.4%
3.8% 3.8% 3.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2004 2006 2008 2010 2012 2004 2006 2008 2010 2012
Health Spending Growth Wage Growth
a/ Wage growth assumed to be equal to CPI + 1.0 percent.See: National Health Expenditures Accounts; Office of the Actuary of the Centers for Medicare and Medicaid Services (CMS).
© Ingenix, Inc. 5
Federal Cost of Limiting Family Premium Payments to a Percentage of Family Income Using Massachusetts Limits
$0
$50
$100
$150
$200
$250
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$109.1$119.0
$129.8$141.5
$154.2$167.9
$182.9
$199.2
$216.9
$236.1Ten Year Cost:
$1.66 Trillion
© Ingenix, Inc. 6
Cost of Limiting Family Health Insurance Premiums to a Percentage of Income Under Alternative Cost Growth Assumptions
Ten Year at 8.3% Growth:
$1.78 Trillion
Ten Year at 7.3% Growth:
$1.66 Trillion
Ten Year at 6.3% Growth:
$1.54 Trillion
$109.1$119.0
$129.8
$141.5
$154.2
$167.9
$182.9
$199.2
$216.9
$236.1
$107.8$116.2
$125.2$134.9
$145.4
$156.6
$168.6
$181.6
$195.5
$210.4
$110.5
$121.2
$134.5
$148.2
$163.4
$180.0
$198.2
$218.1
$240.0
$263.9
$100
$140
$180
$220
$260
$300
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
© Ingenix, Inc. 7
Estimated Factors Driving Health Spending Growth: 2001-2005
Percent of Total Growth
Volume and Intensity
Excess MedicalInflation
(provider prices) a/
Utilization/Intensity a/
Demographics
GeneralInflation
PopulationGrowth
39.0%
61.0%49.7%
32.7%
12.8%
4.8%
Average Annual Rate of Growth = 7.8%
a/ Estimated split by excess medical inflation and utilization/intensity is based upon data published by OACT of CMS.Source: The Lewin Group analysis of data from the Centers for Medicare and Medicaid Services, Office of the Actuary.
Volume and Intensity
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The Health Savings Account (HSA) Model for Wisconsin
All Residents Enrolled in HSA Except Medicare and
Medicaid
High Deductible Plan $1,200
HSA Contribution $500
Percentage of Total Health Spending in Excess of Selected Deductible Amounts for Non-
Aged
Deductible Amount
Percentage Over Deductible Amount
$1,000 83.8%
$1,200 WHP 81.7%
$2,000 73.3%
$3,000 65.5%
$4,000 59.4%
$5,000 54.3%
$6,000 49.9%
$7,000 46.2%
$8,000 42.9%
$9,000 40.1%
$10,000 37.5%
Impact on Spending
Spending for Covered Group
$19.5 billion
Estimated Heath Expenditure Savings of 2.1 percent
$403 million
© Ingenix, Inc. 9
Quality of Care: Over Use and Under Use of Health Services
Uti
liza
tion
Cost
Under Users of Care Over Users of Care
Mode of Medical Practice
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Health Expenditures for 11 Conditions Suitable for Patient Decision AIDS (PtDA) for Medicare Beneficiaries
Condition
Total in Spending
2008 (billions)
Share of Care Subject to
PtDA
Estimated Percent
Savings from PtDA
Atrial Fibrillation $21.7 4.4% -29.4%
Hypertension $30.4 38.2% 5.4%
Tube Feeding in Dementia $10.7 4.1% 39.0%
Chronic Obstructed Pulmonary Disease
$6.6 0.2% 19.2%
Colon/Rectal Cancer $8.2 23.4% 41.0%
Prostate Cancer $11.9 14.7% 8.9%
Hysterectomy $3.1 18.7% 16.1%
Benign Prostate Hyperplasia $1.0 3.1% 0.7%
Lower Back $53.0 18.4% 20.3%
Angina $12.2 1.2% 11.9%
Breast Cancer $11.1 0.2% 2.1%
Potential Savings: $3.8 billion Per Year
© Ingenix, Inc. 11
Impact of Clinical Guidelines Research with Financial Incentives to use Evidence-Based
YearSpending on
Chronic Conditions
Percent of Care With Evidence Based Research Savings from
Chronic Disease
ManagementCurrent LawWith Increased
Research
2008 $1,004.1 27.4% 28.2% 1.1%
2012 $1,316.2 37.0% 41.4% 1.6%
2017 $1,834.0 49.0% 58.8% 2.3%
Annual Funding for Research: $450 millionPatient Incentive: Lower Co-pays for Evidence Based CareProvider Incentive: Lower Payment where Care is not IndicatedChronic Care Management Savings: $10 - $20 billion Per Year
© Ingenix, Inc. 12
Health Information Technology
Electronic Medical Records (EMR) – Access to all patient care
Computer Assisted Clinical Decision Support – Evidence Based Medicine
Computerized Practitioner Order Entry (CPOE) Systems – Reduced errors
Interoperable EMR – access to EMR across patient caregivers
Savings Under Current Trends (i.e., in baseline)
-10%
10%
30%
50%
70%
90%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Perc
en
t P
en
etr
ati
on
$77 billion in annual savings
Adoption rate base on Bower (2005), “Diffusion and Value of Healthcare Information Technology”, Rand corporation 2005, MG-272.
© Ingenix, Inc. 13
Medical Home with Primary Care Case Management
Medical Home Model Savings
Required to declare Medical Home: no gate keeping incentives
None
Higher copay for specialty services without referral a/ 4%
Primary Care Case Management b/ 4%
a/ Based on IPA HMO utilization savings.b/ E.T. Moriany et al., “A Cost Analysis of the Iowa Medicaid
Primary Care Case Management Program”, HSR, August 2006.
0.0% 0.0% 0.2% 0.6% 1.0% 1.8% 3.3%6.9%
17.4%
68.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1 2 3 4 5 6 7 8 9 10
Decile Ranking of Beneficiaries from Least Costly to Most Costly
Source: The Lewin Group estimates using the Health Benefits Simulation Model (HBSM).
© Ingenix, Inc. 14
International Comparison of Spending on Health, 1980 - 2004