Getting Real about Real Savings: Cost Containment in California Micah Weinberg Senior Research Fellow, California Program

Why Real Cost Containment Matters

Cost Containment: The Basics Why are our healthcare costs so high? Why are they rising so rapidly? What can we do about it (quickly)? What can California do on its own?

Why are our healthcare costs so high? Source: McKinsey Global Institute

Why are they growing so rapidly? Not (primarily) –Aging population –Less healthy population –Growing number of admissions or office visits –Provision of higher quality care Primary factor is increasing cost per episode of equivalent care –Not simply issue of fee-for-service

What can we do about it (quickly)? Source: Business Week (OECD Statistics)

What can California do on its own? California Task Force on Affordable Care Group of CA-based stakeholders seeking best way to lower costs, raise value (~$400 B, 10 yrs) –Align incentives to reduce clinical waste –Reduce administrative waste –Promote value-based consumer choice –Redress social determinants of poor health outcomes

Aligning Incentives in California

Reduce administrative waste Though smaller in scale, savings not insubstantial –Physician offices spend over 27 percent on administration and 14 percent on billing –Hospitals weigh in at 24 percent and 11 percent respectively (Kahn et al, 2005) Develop common standards and systems for: –Eligibility –Claims processing –General contracting But not just technological issue (e.g., One-E-App)

Insurance Exchanges

The role of brokers The problem of “churn” The example of Stanford One time vs. ongoing cost control

Social Determinants of Poor Health Source: Bay Area Regional Health Inequities Initiative

Thank you Micah Weinberg (916)