System-Wide Strategies for Controlling Cost in the Private Sector Deborah Chollet Senior Fellow, Mathematica Policy Research and The Robert Wood Johnson Foundation’s State Coverage Initiatives Program ILLINOIS HEALTH FORUM Chicago, Illinois December 7, 2005

Principal methods to control cost Cost sharing to reduce utilization Cost sharing to reduce utilization  High deductible health plans  Rx formularies and tiered copayments Cost-quality connection: tiered cost sharing Cost-quality connection: tiered cost sharing Information technology Information technology Disease management programs Disease management programs Managed care/utilization management Managed care/utilization management 2

Average Annual Deductible for Single Coverage, 2000 and 2005 Source: Kaiser-HRET Survey of Employer-Sponsored Health Benefits,

Percent of Firms that Offer Health Plan with a Deductible of $1,000/$2,000+ Source: Kaiser-HRET Survey of Employer-Sponsored Health Benefits, Note: High-deductible plans had a single deductible of at least $1,000 and a family deductible of at least $2,000 in

Covering High Deductibles: HSAs and HRAs Source: Kaiser-HRET Survey of Employer-Sponsored Health Benefits, Note: High-deductible plans had a single deductible of at least $1,000 and a family deductible of at least $2,000 in HSAs are Health Savings Accounts; HSAs are Health Reimbursement Accounts. 5

Average Copayments for Prescription Drugs, 2000 and 2005 Source: Kaiser-HRET Survey of Employer-Sponsored Health Benefits,

Cost-Quality Connection Preferred provider networks Preferred provider networks Tiered coinsurance for high-quality hospitals Tiered coinsurance for high-quality hospitals 7

Information technology Consumer technology Consumer technology  Web site information: preventive care, chronic care management, relative quality and cost  Nurse hotlines  consultations Provider technology Provider technology  Electronic medical records  Pharmacy software/drug interactions 8

Disease Management 56 percent of all covered workers have a plan with disease management (DM) 56 percent of all covered workers have a plan with disease management (DM) Diagnosis triggers: Diagnosis triggers:  Diabetes – 98% of workers with DM  Asthma – 86%  Hypertension – 82%  High cholesterol – 62% Source: Kaiser-HRET Survey of Employer-Sponsored Health Benefits, Note: Estimates are for firms with 200 employees or more. 9

Utilization management Health maintenance organizations Health maintenance organizations Pre-admission certification Pre-admission certification  Inpatient – 75%  Outpatient surgery – 55% Case management for large claims – 81% Case management for large claims – 81% 10

Agenda for Health Care Cost Control Inefficient/ineffective care Inefficient/ineffective care  Inappropriate care provided  Appropriate care not provided  Medical errors Monopoly providers Monopoly providers Population health status Population health status 11