What we will cover How much we spend in the US Where the money goes Where the money is misspent Opportunities for improvement Introduction How much we spend Health Care Costs Rise Internationally 1970 2007 ID: 344508
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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
3
Physician Fees
C-Section (US$)Slide4
4
Hospital Charges
Average Cost Per Hospital Day (US$)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.
7
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
=
8
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)
9
Source: PriceWaterhouseCoopers’ Health Research InstituteSlide10
Where we misspend
Behavioral
Obesity
SmokingNon-adherenceAlcohol abuse
10
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)
11
Source: PriceWaterhouseCoopers’ Health Research InstituteSlide12
Where we misspend
12
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)
13
Source: PriceWaterhouseCoopers’ Health Research InstituteSlide14
Where we misspend
Operational
Claims processing
Ineffective use of ITStaffing turnoverPaper prescriptions
14
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
15Slide16
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
16Slide17
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
17Slide18
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.
18
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