1. Trends In Health Care Industry KNH 413

2. Difficult questions What is health insurance? What is health care versus health insurance? Is one or both a right or a privilege?

3. Trends in Health Care Outline I. Where We Spend our Health Care Dollars II. Major Trends on Health Care Industry 1. Increase in Health Care Costs 2. Cost Control Strategies Avoid Risks Share Risks 3. Shifts in Hospitalization III. Who Pays for Health Care A. Where health care dollars come from B. Types of health care plans

4. Health Care Costs Health Care Plan vs Health Care per Capita Average Cost Health Care Plan in US Family = $11,480; Single = $4,242 (2006 data) Note: Family coverage is defined as health coverage for a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006. Average Per Capita Cost Health Care (2005 Data for UK, 2006 data US) Organization for Economic Co-Operation and Development http://www.oecd.org/

5. Where Personal Care Dollars Went: 2006 Source: Health Care Financing Administration National Health Expenditures, US $2.105 Trillion/year

6. Summary of Charts Healthcare cost are high Healthcare $ go primarily for personal care Personal care $ divided among many different categories, therefore can not focus cost controls on just one category.

7. Trends in Health Care 1. Costs of Health Care Increasing 2. Strategies to Control Cost 3. Shifts in Hospitalization

8. Health Plan Costs: 1988 - 2006 Rising faster than earnings and inflation http://www.kff.org/insurance/7148/sections/ehbs04-1-2.cfm

9. Paying for Health Care US Spends More on Health Care Percent of GDP* Spent on Health Care Health Care Spending Per Capita *GDP = Gross Domestic Product

10. FYI: Are We Getting Our $’s Worth? Life Expectancy: 1960-2005 MalesFemales OECD Health Data 2006. http://www.oecd.org/document/16/0,2340,en_2825_495642_2085200_1_1_1_1,00.html

11. Health Care Costs: Strategies to Control Costs Health Care Cost Survey Factors causing  health care costs Public Opinion Poll Spring 2005 “…Very Important factor in causing higher health care costs.” “…Most Important factor in causing higher health care costs.” High profits of drug and insurance companies 71%35% # of malpractice lawsuits58%19% Amount of greed and waste in health system 59%14% Aging of the population50%8% Use of expensive, high-tech medical equipment and drugs 46%8% Dr’s make too much money31%5% People having little incentive to look for lower cost doctors / services 34%4% From Henry J. Kaiser Family Foundation http://www.kff.org/about/index.cfm

12. Trends in Health Care 1. Costs of Health Care Increasing 2. Strategies to Controls Cost 3. Shifts in Hospitalization

13. Strategies to Control Cost 1. Avoiding Risk (financial risk) 2. Shared Risk (financial risk)

14. Strategies to Control Costs Avoid Risk: D on’t Provide Health Benefits http://www.census.gov/hhes/www/hlthins/hlthin06/fig07.pdf

15. Strategies to Control Costs Share Risk Share financial risk with benefiters Increase Co-pay Share financial risk with health care providers

16. Strategies to Control Costs Increased Utilization a Factor in  ’d Health Care Costs Significant portion of increased health care costs from increased utilization Personal Choice? Average Annual Percent Change Source: CMS, Office of the Actuary, National Health Statistics Group.

17. Strategies to Control Costs: Share Risk Sharing Risk w/ Benefitees RAND Health Insurance Experiment “Enrollee cost sharing greatly affects both necessary and unnecessary health service use.” “Those who paid nothing used 40 percent more services.” 3-yrs of experiment no effect on health status Keeler, Emmett B., et al. 1987. "Effects of Cost Sharing on Physiological Health, Health Practices, and Worry." Health Services Research 22:279-306.

18. Strategies to Control Cost: Share Risk Increase Deductibles/Out-of-Pocket Expenses to Share Risks Benefitees paying higher deductibles and more of expense for prescription drugs

19. Strategies to Control Cost: Share Risk Higher Costs for Services “Outside” the Plan Insurance companies have contracts with providers for lower fees. Go outside these plan providers…. You share more of the cost.

20. Strategies to Control Cost: Share Risk FYI: Determinants of Health Shared Risk Tries to Influence Patient to Alter Things Can Control Patients Determinants of Patient’s Health Source: Center for Disease Control

21. Strategies to Control Cost: Share Risk Share Risk w/ Health Care Providers No more “blank checks” Two Scenarios for Food Costs at College Open account for food and costs gets put on state tax payers cost. State gives PSU set amount of $ for semester of food, and PSU gets to keep any leftover $.

22. Strategies to Control Cost: Share Risk Share Risk w/ Health Care Providers No more “blank checks” Two Scenarios for Food Costs at College Open account System give you set amount How about giving some of this profit back to “you” the student?

23. Strategies to Control Cost: Share Risk Shift Types of Health Plan Contracts From Fee-For-Service Profit Revenue Fixed Expenses Variable Expenses Dollars Patient Encounters Fee-For-Service World, Volume Yields Profit Loss

24. Strategies to Control Cost: Share Risk Shift Types of Health Plan Contracts To Prospective Payments Plans Loss Revenue Fixed Expenses Variable Expenses Dollars Patient Encounters Prospective, Volume Yields Loss Profit

25. Strategies to Control Cost: Share Risk Shift in Type of Health Care Plans that Shares Risk’s w/ Health Care Providers * * * * * *

26. Trends in Health Care 1. Costs of Health Care Increasing 2. Cost Controls and Competition 3. Shifts in Hospitalization Inpatient to Outpatient Shorter Lengths of Stay

27. Source: CMS, Office of the Actuary, National Health Statistics Group. Percent of Total Shifts in Hospitalization Hospital Expenditures: Inpatient vs. Outpatient Shares Less expensive to treat outpatient

28. Discharges per 1,000 Days Source: U.S National Center for Health Statistics, Vital and Health Statistics, Series 13. Shifts in Hospitalization Short-Stay Hospitals: Discharges and Length of Stay

29. Conclusions of Health Trends 1. Health Care costs primarily on personal care. 2. Controlling costs difficult spending not concentrated in specific area(s). can’t just focus spending controls. 3. Consumer/patient important fact in effort to control costs.

30. Paying for Health Care A. Where health care dollars come from. B. Types of health care plans Government – Federal/State Private C. Types of health care contracts

31. Paying for Health Care Where Nation’s Health Dollar Dollars Came From: 2006 http://cms.hhs.gov/researchers/pubs/datacompendium

32. Types of Health Care Plans Government Plans Medicare – Federal Program since 1965 Eligibility Part A (Hospital Insurance) Part B (Medical Insurance) Part C (Medicare Advantage) Part D (Prescription drug coverage)

33. Types of Health Care Plans Government Plans Medicaid – Federal/State Program since 1965 Eligibility Low income + specific categories of individuals. Broadly defined categories are (established by Feds) Coverage Each state sets own guidelines …but basic services (e.g. hospitalization and pediatric services) required to receive federal dollars

34. Types of Health Care Plans Private Health Insurance 100’s of policies Employer sponsored Typically, employer pays majority of premiums. Typically, employee has some, but limited choice. Self-employed You decide, you pay Usually very expensive

35. Types of Health Plan Contracts Traditional Managed Care Health Maintenance Organization (HMO) Preferred Provider Organization (PPO) Point of Service (POS)

36. FYI: National Health Spending by Source of Funds, 2000 Source: OECD Health Data 2002 2 nd ed.