1 Kaplan University Unit 7 Town Hall Federalism and the Health Care System (slides from various sources)

2 The Problem Employers’, who provide health care coverage for over 60% of adults under 65 and children, most serious benefits problems continue to be rising health care costs and uneven quality Costs up 50% in the past five years; 14% in 2003; 10%-14% in 2004; 8%-10% in In the US, growing problem of affordability – affects job growth and leads to more uninsured Other social needs neglected No end in sight

3 Source: Kaiser/HRET Annual Survey of Employer-Sponsored Health Benefits, 2003 Summary of Findings. The Health Insurance Association of America (HIAA): 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), and Medical Inflation: ; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey: Note: Data on premium increases reflect the cost of health insurance premiums for a family of four. Increases in Health Insurance Premiums vs. Other Indicators, 1988–2004 High Costs and Low Economic Growth Hurt U.S. Competitiveness

4 National Health Expenditures: Percentage Change and Share of Gross Domestic Product (GDP),

5 Health Care Spending Per Capita Total health spending per capitaGDP per capita Source: Organization for Economic Cooperation and Development (OECD) data, Note: Growth rates are calculated from national currency units, not U.S. dollar purchasing power parties (PPPs).

6 Problems in Health Care Quality ConditionPercentage of Recommended Care Received Low back pain68.5 Coronary artery disease68.0 Hypertension64.7 Depression57.7 Orthopedic conditions57.2 Colorectal cancer53.9 Asthma53.5 Benign prostatic hyperplasia53.0 Hyperlipidemia48.6 Diabetes mellitus45.4 Headaches45.2 Urinary tract infection40.7 Hip fracture22.8 Alcohol dependence10.5 Source: Elizabeth McGlynn, et al, “The Quality of Health Care Delivered to Adults in the United States,” NEJM, Vol. 348: June 26, 2003 (No. 26).

7 Unsustainable Business Model Corporate America cannot make or sell enough in this economy to keep absorbing these increases. Percentage of people employed is below where it was more than 3-4 years ago – “jobless recovery”. Must find new ways and new resolve to tackle these problems head-on with leverage from combined purchasing power of large employers.

8 There must be incentives to help drive system toward efficiency/medically appropriate utilization/ high-performing hospitals. Purchasers and consumers must reward/select quality, efficiency and innovation. –consumers and providers need useful information –transparency is essential –urgency is needed Cost Sharing Is Only Part of Strategy

9 Technology Assessment Needed Solutions have to take into account U.S. appetite for new technology. Solutions have to include source for objective, authoritative technology assessment; fast tracked to avoid inappropriate delays. Physicians need to take a very hard look at new technology and help patients understand fully the benefits and harms or risks of new and old technology. Consumers need to understand benefits and risks or harms of all technology.

10 Chronic Disease and Complex Case Management Can Work Solutions must recognize important aspects of health status under individual’s control – national obesity epidemic: a tragic example. Attack 70% of costs for 10% of covered lives in any given year. Physicians can have a significant effect on patient behavior (e.g. smoking cessation) but often do not address important risk factors.

11 Quality/ Patient Safety Important Hospitals with better safety/quality records, forthcoming with data on procedures volumes, are better for employees and will save overall costs (e.g., infection rates affect length of stay and morbidity, mortality, are costly). Quality performance data will be increasingly tied to financial incentives (Pay for Performance). Employees need to learn: more costly services/providers are not necessarily better.

12 Cost Trends Continue to Decrease Somewhat Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005

13 Identifying the Best Performers Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Moderate Performers Poor Performers Best Performers

14 Best Performers Succeed in Other Ways Too Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Employees’ understanding of health care cost challenges faced by the organization has improved Emphasizes individual accountability and responsibility more than other organizations

15 Employers’ Perspective on Their Ability to Influence Key Health Care Outcomes Is in Flux Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Cost management Quality Involvement of employees in health care decision making

16 Quantitative Analysis Is a Growing Factor in Shaping Employers’ Strategies Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Hard dollar ROI calculations in decision-making Quantitative analysis of health care data

17 Best Performers Use Quantitative Analysis Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Managing to predetermined targets Quantitative analysis of health care data

18 Best Performers Have a Different Perspective on What Influences Key Outcomes Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Side-by-side coverage comparisons Tax impact modeling tools Utilization- based modeling tools

19 Best Performers Rely on Health Management Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Implement lifestyle behavior change program through a health plan Implement an obesity-reduction program for employees Implement lifestyle behavior change program through a specialty vendor Implement disease management through a specialty vendor Integrate health-related benefits

20 Best Performers Continue to Reserve Judgment Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 In their ability to manage costs In their ability to increase employee involvement in health care decision making That their company will offer health benefits in 10 years

21 Offering a Health Savings Account (HSA) Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Considering – 47% Not likely/ definitely not – 27% Offering in 2005 – 8% Plan on offering in 2006 – 18%

22 Positive Aspects of HSAs Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Engage employees more in managing their health Shift costs to employees Make ER contributions into an account-based arrangement Expand options for employees Lower health care costs, including premiums

23 Problematic Aspects of HSAs Source: 10 th Annual National Business Group on Health/Watson Wyatt Trends Survey Note: Survey data is based on responses from 555 companies covering 10 million lives, surveyed between November 2005 and January 2005 Need for increased health education Plan design complexity Regulatory and legal issues unresolved Possible negative employee feedback Technology requirements Not likely to control costs Loss of employer control over funds contributed to the accounts

24 Best Performers Checklist Begin laying the groundwork to manage health through lifestyle behavior change programs Be “activist” in their consumer activation approach, giving employees the tools to be better consumers Offer an HDHP and don’t let the implementation complexities be a barrier Consider integrating health and disability benefits Be aware of provider or “supply side” performance

25 Conclusions Providers, purchasers, payers, consumers, and governments have to work together to create a system that is efficient, safe, effective, based on scientific evidence, timely and patient-centered. Many global corporations have used breakthrough thinking, innovation and exceptional execution to be successful. That same strategy and drive will enable employers to provide quality care and benefits to employees and their families and moderate medical spending. Through public-private collaborations, we can make a positive difference.

Patents and Prescription Drugs Generally, a prescription drug’s patent lasts for about 20 years, but it is 20 years from when the substance is first made, not from when it is first marketed. After the testing for FDA approval is done, a company usually has about 4 years left on the patent before the patent expires and the drug then becomes a generic. 26

Should patent law be changed? Why do we have it (it is in Article One of the U.S. Constitution)? Questions/comments/thanks, JG 27