Health Care: Why is it so expensive? - PowerPoint Presentation

Slide1

Health Care: Why is it so expensive?

What we will cover:

How much we spend in the U.S.

Where the money goesWhere the money is misspentOpportunities for improvement

IntroductionSlide2

How much we spend

Health Care Costs Rise Internationally (1970 – 2007)

2

Source: OECD Health Data 2009. Health care cost rise based on total expenditure on health as % of GDP. Countries are USA, Germany, Austria, Switzerland, United Kingdom and Canada.Slide3

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Physician Fees

C-Section (US$)Slide4

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Hospital Charges

Average Cost Per Hospital Day (US$)Slide5

Total Hospital and Physician Costs

5

Hip Replacement (US$)Slide6

US ranks poorly in results . . .

Relative Ranking

Australia

Canada

Germany

New Zealand

United Kingdom

United States

Life Expectancy

1

2

4

3

4

6

Infant Mortality

2

2

1

4

4

6

Tobacco

Use

3

2

6

4

5

1

Obesity

3

2

1

4

5

6

Avoidable Death

1

2

3

4

5

6

Health Exp Per Capita

$3,128

$3,326

$3,287

$2,330

$2,724

$6,401

Source: Organization for Economic Cooperation and Development, 2005

And what we get

6Slide7

U.S. health care spending

(in billions of dollars)

28

75253

7141,353

2,113

2,241

2,379

2,509

4.4 Trillion

How much we spend in U.S.

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Source: Centers for Medicare and Medicaid ServicesSlide8

Buckets of wasteful spending:

Behavioral

= $303 billion to $403 billion

wastedClinical = $312 billion wasted

Operational

= $126 billion to 315 billion wasted

Where we misspend

$1.2 trillion

in waste

=

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Source: PriceWaterhouseCoopers’ Health Research InstituteSlide9

Where we misspend

Behavioral

($303 billion to $403 billion wasted)

Obesity ($200 billion)Smoking ($567 million to $191 billion)

Non-adherence ($100 billion)Alcohol abuse ($2 billion)

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Source: PriceWaterhouseCoopers’ Health Research InstituteSlide10

Where we misspend

Behavioral

Obesity

SmokingNon-adherenceAlcohol abuse

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The opportunities

Make

change easier or financially advantageous

Incentives

Easy access to coaching/advice

Provide

options

Healthy catering/cafeteria

Healthy

communities

Source:

PriceWaterhouseCoopers

’ Health Research InstituteSlide11

Where we misspend

Clinical

($312 billion wasted)

Defensive medicine ($210 billion)

Preventable hospital readmissions ($25 billion)

Poorly managed diabetes ($22 billion)

Medical errors ($17 billion)

Unnecessary ER visits ($14 billion)

Treatment variations ($10 billion)

Hospital acquired infections ($3 billion)

Over-prescribing antibiotics ($1 billion)

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Source: PriceWaterhouseCoopers’ Health Research InstituteSlide12

Where we misspend

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Clinical

Defensive medicine

Preventable hospital readmissions

Poorly managed diabetes

Medical errors

Unnecessary ER visits

Treatment variations

Hospital acquired infections

Over-prescribing of antibiotics

The opportunities

Electronic

Medical Records

Disease registries

Medical home

Patient empowerment

Online access to own medical record

Access to clear information

Source:

PriceWaterhouseCoopers

’ Health Research InstituteSlide13

Where we misspend

Operational

($126 billion to $315 billion wasted)

Claims processing ($21 billion to 210 billion)Ineffective use of IT ($81 billion to $88 billion)

Staffing turnover ($21 billion)

Paper prescriptions ($4 billion)

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Source: PriceWaterhouseCoopers’ Health Research InstituteSlide14

Where we misspend

Operational

Claims processing

Ineffective use of ITStaffing turnoverPaper prescriptions

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The opportunities

Greater investment in IT

Streamline regulation

Investment in training and development of health care professionals

Source: PriceWaterhouseCoopers’ Health Research InstituteSlide15

America’s Big Cost Drivers in Health Care:

ABCD’s of chronic disease . . .

Asthma

Blood pressure control (hypertension)Coronary artery (heart) disease / Congestive heart failure

DiabetesDepression

Modifiable risk factors:

All heavily impacted by weight, diet, smoking, adherence to treatment plans, and physical activity.

The opportunities

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Prevention is part of the cure

Condition

Preventive strategy

Cost per individual for prevention

Cost per individual for treatment

Colon Cancer

Early detection (colonoscopy)

$1,300/procedure

$14,451/year

Lung Cancer

Smoking cessation (nicotine patch)

$300/program

$20,833/year

Heart Disease

Exercise

(gym membership)

$402/year

$4,215/year

Diabetes

Nutritional counseling

$50 to $200/session

$2,414/year

Skin Cancer

Wearing

sunscreen

$11/bottle

$665/visit

The opportunities

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The US

is predominately an employer-based system

Employers cover approximately 60% of all people in the health care system Employers have engaged

in extensive cost shifting of health care costs to employees Employers have largely been unsuccessful in slowing the cost of health care; current focus wellnessEmployer-Based System

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Among All Large Firms (200 or More Workers) Offering Health Benefits to Active Workers, Percentage of Firms Offering Retiree Health Benefits, 1988-2009*

*

*Tests found no statistical difference from estimate for the previous year shown (p<.05).No statistical tests are conducted for years prior to 1999.

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009; KPMG Survey of Employer-Sponsored Health Benefits, 1991, 1993, 1995, 1998; The Health Insurance Association of America (HIAA), 1988.

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Retiree

Health BenefitsSlide19

AMERICA’S CHECKUP

The quality of care varies widely among sex, race, age, and regionSlide20

GREAT BRITAIN

Insured 100% of population insuredSpending7.5% of GDP

Funding Single payer system funded by general revenues (National Health System); operates on huge deficitPrivate Insurance10% of Britons have private health insurance

Similar to coverage by NHS, but gives patients access to higher quality of care and reduce waiting timesPhysician CompensationsMost providers are government employeesSlide21

GREAT BRITAIN

Physician ChoicePatients have very little provider choiceCopayment/Deductibles

No deductiblesAlmost no copayments (prescription drugs)Waiting TimesHuge problemBenefits Covered

Offers comprehensive coverageTerminally ill patients may be denied treatmentSlide22

CANADA

InsuredSingle payer system – 100% insuredEach province must make insurance:

Universal (available to all)Comprehensive (covers all necessary hospital visits)Portable (individuals remain covered when moving to another province)

Accessible (no financial barriers, such as deductible or copayments)FundingFederal government uses revenue to provide a block grant to the provinces (finances 16% of healthcare)The remainder is funded by provincial taxes (personal and corporate income taxes)Spending9% of GDPPrivate InsuranceAt one time all private insurance was prohibited; changed in 2005Many private clinics now offer services on the black marketSlide23

CANADA

Physician CompensationPhysicians work in private practicePaid on a fee-for-service basisThese fees are set by a centralized agency; makes wages fairly low

Physician ChoiceReferrals are required for all specialist services except the EDCopayment/DeductiblesGenerally no copayments or deductibles

Some provinces do charge insurance premiumsWaiting TimesLong waiting listsMany travel to the U.S. for healthcareSlide24

FRANCE

InsuredAbout 99% of population coveredCost

3rd most expensive health care system11% of GDP

Funding13.55% payroll tax (employers pay 12.8%, individuals pay 0.75%)5.25% general social contribution tax on incomeTaxes on tobacco, alcohol and pharmaceutical company revenuesPrivate Insurance“more than 92% of French residents have complementary private insurance”These funds are loosely regulated (less than U.S.); the only requirement is renewability These benefits are not equally distributed (creates a two-tiered system)Slide25

FRANCE

Physician CompensationProviders paid by national health insurance system based on a centrally planned fee schedule – fees are based on an upfront treatment lump sum (similar to DRGs in US)

However, doctors can charge whatever they wantThe patient or the private insurance makes up the difference

Medical school is freeLegal system is fairly tort aversePhysician ChoiceFair amount of choice in the doctors they chooseCopayment/Deductible10% to 40% copaymentsWaiting Times

Very little waiting lists/timesTechnology

Government does not reimburse new technologies very generously Little incentive to make capital investments in medical technology Slide26

GERMANY

Insured99.6% of population – sickness funds

Those with higher incomes can buy private insuranceThe federal gov. decides the global budget and which procedures to include in the benefit package

FundingSickness funds are financed through a payroll tax (avg. 15% of income)The tax is split between the employer and employee Private insurance9% of Germans have supplemental insurance; covers items not paid for by the sickness fundsOnly middle- and upper-class can opt out of sickness fundsPhysician CompensationReimbursement set through negotiation with the sickness fundsProviders have little negotiating powerVery low compensation

Significant reimbursement caps and budget restrictionsSlide27

GERMANY

Copayment/DeductiblesAlmost no copayments or deductiblesTechnologyLow technology compared to U.S.

Waiting TimesWHO reported that “waiting lists and explicit rationing decisions are virtually unknown”Benefits CoveredThere is an extensive benefit package which even includes sick pay (70% to 90% of pay) for up to 78 weeksSlide28

JAPAN

InsuredUniversal health insurance based around a mandatory, employment-based insurance“The Employee Health Insurance Program” requires that all companies with 700 or more employees to provide workers with health insurance

Small business workers join a government-run small business national health insurance planThe self-employed and the retired are covered by Citizens Insurance Program administered by municipal governmentsCosts

Not as high as U.S.; average household spends $2300 per year on out-of-pocket costsJapans have a healthy lifestyle – lower incidence of diseaseFunding8.5% (large business) or an 8.2% (small business) payroll taxPayroll taxes are split almost evenly between employer and employeeThose who are self-employed or retired must pay a self-employment taxPrivate InsuranceVery rare for Japanese to use this; less than 1%Slide29

JAPAN

Physician CompensationHospital physicians are salaried Non-hospital physicians are paid on a fee-for-service basisHospitals and clinics are privately owned but the government sets the fee schedule

Physician ChoiceNo restrictions on physician or hospital choiceNo referral requirements

Copayment/DeductiblesCopayments are 10% to 30% Capped at $677 per month for the average familyTechnologyHigh levels of technology; comparable to U.S.Waiting TimesSignificant problem at the best hospitals b/c they cannot charge higher pricesSlide30

5 MYTHS ABOUT HEALTH CAREAROUND THE WORLD

It’s all socialized medicine out there

Many countries provide universal coverage using private providers, hospitals and insurance plansOverseas, care is rationed through limited choices or long lines – some truth.

Foreign health systems are inefficient, bloated bureaucraciesCost control stifles innovationFalse. This pressure to control cost can generate innovationHealth insurance companies have to be cruelInsurance plans in other countries accept all applicantsCannot deny on the presence of a preexisting conditionCannot cancel as long as you pay your premiumSlide31

What is good about

the U.S. system?

US is responsible for more than 53% of Drug Research DollarsBest Medical Education and Training in the WorldEight of the top 10 medical Advances in the past 20 years was developed in the USNobel Prizes in Medicine have been awarded to more Americans than to researchers in all other countries combined

Eight of the 10 top-selling drugs are made in the USUS has the highest breast, colon, and prostate cancer survival rates in the world