Private Sector Options for Improving Access, Quality, and Cost of Care In a The 21 st Century Intelligent Health System Ronald E. Bachman FSA, MAAA President.

Private Sector Options for Improving Access, Quality, and Cost of Care

In a

The 21st Century Intelligent Health System

Ronald E. Bachman FSA, MAAAPresident & CEO, Healthcare Visions, Inc.

[email protected]. Fellow – Center for Health Transformation

404-697-7376

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Creating Change Requires a Common Vision

Desire for Change

Desire for Change

+A Common

Vision+

Process for Change

=POSITIVECHANGE

+Vision

+Process for Change

=Political Debates & Expensive False Starts

The Missing LinkThe Missing Link Future StateFuture State

A Vision for Transformation

NOT Cost Shifting, Tweaking, or Reform

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Who Do You Trust? Who Do You Distrust?

Government & Political Solutions versus

Private Sector and Free Markets

If one trusts government more than private sector (distrusts greedy profit oriented health companies), then it seems natural to advocate government controlled solutions (e.g. single payer, expanded Medicare, Canadian style)

If one trusts the private sector more than government (distrusts inefficient, wasteful, politically motivated lobbyist controlled politics), then it seems natural to advocate free market solutions (e.g. increased competition, individual ownership, personal responsibility, lower taxes, tax credits)

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What is a 21st Century Intelligent Health System?

In a 21st Century Intelligent Health System, the individual has:

1. accurate, timely knowledge of health needs;

2. access to the best information about how to maintain personal health;

3. knowledge of whom to see and where to go for health services, and

4. confidence that health providers are practicing medicine using the best practices based on the most up-to-date understanding of outcomes-based medicine.

Most importantly, the 21st Century Intelligent Health System must provide access to affordable insurance coverage for those currently uninsured. No one can be left behind.

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Healthcare Consumerism the

Basis for a 21st Century Intelligent Health System

Transformation to a 21st Century Intelligent Health System is much more than employers implementing high deductible Consumer-Driven healthcare (CDHC) plans with attached saving accounts.

The future is about empowering individuals with information and financial responsibility to support a position of ownership. It’s about supporting and rewarding healthy behaviors regardless of plan design.

It’s about engaging employees, employers, providers, carriers, and other stakeholders in a new relationship that deals with health rather than sickness and disease.

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Supply Controls or Demand Controls

Healthcare seems to have two basic choices to control costs:

1. Managed care & HMOs - The “supply of care” is limited by a third party who controls the access to medical services (e.g. utilization reviews, medical necessity, gatekeepers, formularies, scheduling, types of services allowed), or

2. Consumerism - The member controls their “demand for care” because of a direct and significant financial involvement in the cost of care, rewards for compliance, and the information to make wise health and healthcare value driven decisions.

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High Healthcare Costs Climbing Higher

Patients have lost control of their own healthcare, and are not truly engaged in the process of managing their health

Patients are frustrated with managed care “rules” and the impact on time and productivity

Patients don’t understand healthcare costs – costs are not transparent

“After long relying on managed-care companies as their weapon against health costs, U.S. employers are considering a fundamental change in strategy: turning the fight over to their employees.”

- Wall Street Journal, February

2000

Supply Controls Are Failing

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The Moral Imperative:

Saving Lives and Improving Health

44,000 to 98,000 deaths annually from medical errors (Institute of Medicine)

7,391 deaths resulted from medication errors (Institute of Medicine)

225,000 deaths annually from medical errors including 106,000 deaths due to "nonerror adverse events of medications" (Starfield)

180,000 deaths annually from medication errors and adverse reactions (Holland)

20,000 annually to 88,000 deaths annually from nosocomial infections

2.9 to 3.7 percent of hospitalizations leading to adverse medication reactions

2.4 to 3.6 percent of hospital admissions were due to (prescription) medication events (Australian study)

42% of people believed they had personally experienced a medical mistake (NPSF survey)

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The Tragedy of the Uninsureds

18,000 people die every year because they are uninsured.

Uninsured adults have a 25% greater rate of dying than adults with insurance.

Uninsured trauma victims are less likely to be admitted to the hospital or receive the full range of needed services. They are 37% more likely to die of their injuries.

Uninsured children are 70% more likely to go without care for common childhood conditions such as asthma, ear infections, and sore throats.

Uninsured children are five times more likely to have an unmet need for medical care each year

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The Tragedy of the Uninsureds

Uninsured women are 36% less likely to get a pap smear, and 60% less likely to get a mammogram.

Uninsured men are 40% less likely to get a prostate examination.

The ripple effects of being uninsured and having poor health are felt throughout society. Uninsured children have impaired development and poor school performance. Uninsured adults have more absences from work, more unscheduled sick days, and greater rates of disability.

The 2004 Kaiser Family Foundation study found the societal costs of the uninsured to be $125 billion.

Regardless of how one views the issue, the cost to society is high. Without insurance - the health, lives, and financial security of families

are at extreme risk.

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The Private Sector Solution calls for A “300 Million Payer System”

The Center for Health Transformation endorses the goal of access to insurance for all Americans with care provided in a 21st Century Intelligent Health System.

We can achieve 100% coverage through market-based solutions, private/corporate efforts, tax incentives, direct public subsidies, strong community support, and faith-based outreach programs.

Personal responsibility, individual ownership, portability, and healthcare consumerism are the hallmarks of such a system.

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Mega Trends Leading to Healthcare Consumerism

1. Personal Responsibility

2. Self-Help, Self-Care

3. Individual Ownership

4. Portability

5. Transparency (the Right to Know)

6. Consumerism (Empowerment)

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Healthcare Consumerism

Healthcare Consumerism is about transforming a health benefit plan into one that puts economic purchasing power—and decision-making—in the hands of participants.

It’s about supplying the information and decision support tools they need, along with financial incentives, rewards, and other benefits that encourage personal involvement in altering health and healthcare purchasing behaviors.

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Healthcare Consumerism

If Healthcare Consumerism is the basis for a new system of health and healthcare, it MUST solve our country’s most difficult problems.

Healthcare Consumerism must improve ACCESS, QUALITY, and COST.

In addition to expanding individual and employer-based insurance, there must be a Consumer-centric Medicaid, Consumer-centric Medicare, a solution to the uninsured.

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It’s NOT just the Burden of the Consumer: Everybody has a New Role

Managed Care System

Future Healthcare

Focus Supply side & Healthcare Supply & demand side Health & Healthcare

Employer Financier & manager

Financier & Facilitator

Employee Passive, sheltered & entitled

Active, informed & incented, a consumer

Provider Dominant & in distress Accountable caregiver

MCO Provider oversight & care gatekeeper

Case Manager, SMM insurer

Quality Metrics Health plan level Consumer level

Administration Banks

Disconnected Not sigificantly involved

Integrated Funds manager

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The Core of Consumerism

The Unifying Theme for a

Health and Healthcare Strategy is:

Behavioral ChangeBehavioral Change

“Implement only if it supports behavioral change consistent with the

strategy”

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Two Basic Principles for Successful Consumerism

1. Must work for the Sickest Members, as well as the healthy

2. Must work for those not wanting to get involved in decision-making, as well as the “techies”

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The Evolution of Healthcare ConsumerismFuture Generations of Consumerism

Behavioral Change and Cost Management Potential

Low Impact ---- ---- ---- ---- ---- ---- ---- ---- ---- High Impact

Traditional

Planswith

ConsumerInformation

2nd Generation Consumerism

Focus onBehaviorChanges

TraditionalPlans

3rd Generation Consumerism

IntegratedHealth &

Performance

1st Generation Consumerism

Focus on Discretionary

Spending

4th Generation Consumerism

Personalized Health & Healthcare

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The Promises of Consumerism

Personal CarePersonal CareAccountsAccounts

Incentives & Incentives & RewardsRewards

Wellness/PreventionWellness/Prevention

Early InterventionEarly Intervention

Disease and Case Disease and Case ManagementManagement

InformationInformation

Decision SupportDecision Support

The Promise of Demand Control & Savings

The Promise of Wellness

The Promise of Shared Savings

The Promise of Transparency

The Promise of Health

It is the creative development,

efficient delivery, efficacy, and successful

integration of these elements that will

prove the success or failure of

consumerism.

Major Building Blocks of Consumerism




IntegratedHealth &

Performance



Spending


Personalized Health & Healthcare

Personal Care Personal Care AccountsAccounts


Wellness/PreventionWellness/Prevention



InformationInformation

Decision SupportDecision Support

Initial Account Only

Activity & Compliance

Rewards

Indiv. & Group Corporate Metric

Rewards

Specialized Accts,Matching HRAs,Expanded QME

100% Basic Preventive Care

Web-based behavior change

support programs

Worksite wellness,safety, stress & error

reduction

Genomics, predictive modeling

push technology

Information, health coach

Compliance Awards, disease

specific allowances

Population Mgmt, Integrated Hlth Mgmt,

Integrated Back-to-Work

Wireless cyber –support, cultural DM, Holistic care

Passive Info Discretionary

Expenses

Personal health mgmt, info with

incentives to access

Health & performance info, integrated health

work data

Arrive in time info and services,

information therapy

Cash, tickets, Trinkets

Health Incentive Accounts, activity based incentives

Non-health corporate metric driven

incentives

Personal dev. plan incentives, health

status related

The Consumerism

Grid

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Potential Savings from Full Implementation of ConsumerismAchievement of savings and improved outcomes is dependent upon both the Type and Effectiveness of the programs implemented.

Gross* Savings as % of Total Plan Costs(Programs Applicable to All Members)

EffectivePrograms

Implemented

Traditional plans

Consumerism Plans

Passive 1st Generation 2nd Generation 3rd Gen & Future

Basic 2% 3% 7% 10%

Expanded 3-4% 5-8% 12-15.0% 20.0+%

Complete 4% 7% 17% 25%

Comprehensive (Future) 5% 10% 20% 30%

*Excludes Carry-over HRAs/HSAs and any added Administrative Costs of Specialized Programs

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Areas of Impact to Improve Health, Save Lives, and

Lower Costs

Low Users Medium Users

High Users

Very High Users

No Claims

Generally Healthy

Acute Episodic Conditions .

O/P, Low In/P, High Maternity

Chronic & Persistent . Conditions .

O/P, Low In/P, High

Catastrophic

% Mem 15% 48% 14%

3% 3% 12% 4% 1%

% Dollars 0% 12% 15%

12% 5% 21%

20%

15%

% Mem 63% 32% 17%

% Dollars

12% 32% 56%

PreventionPrevention Wellness - LifestyleWellness - Lifestyle

Minimize


Wellness - ClinicalWellness - Clinical

Maximize

Minimize

Maximize

Wellness - LifestyleWellness - Lifestyle

Wellness - ClinicalWellness - Clinical

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A Paradigm ShiftHSA & Market Solutions for Old Problems ?

1. Federal Support and Subsidies For HSAs & HDHPs

2. Major initiatives to address the 45 million uninsured problem in the U.S.

3. Major initiatives to restructure the individual and small group healthcare market place. Cross-state selling and new players entering the market.

4. 45-50% Individual Policy ownership in 5-10 years (currently 5-7%).

5. The development of Consumer-centric Medicaid and Consumer-centric Medicare

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Federal Legislative Proposals Supporting Market-based Solutions

1. Leveling the playing field by making the same tax relief available to individuals and employers. Americans who purchase HSA-qualified insurance policies on their own should have the same tax advantages as people who obtain insurance through their employer.

2. Eliminating all taxes on out-of-pocket spending through HSAs. Americans with HSAs should be able to pay for all of their care tax-free.

3. Making health insurance portable. Americans should be able to own the insurance policy that goes along with their HSA, and keep it when they change or lose their jobs without worrying about paying higher premiums if they become sick.

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4. Strengthening the buying power of America’s small businesses. Small businesses should have the same access to price efficiencies as large businesses when purchasing health insurance.

5. Passing medical liability reform. Limit costly and frivolous lawsuits that waste scarce resources, increase health care costs, and drive doctors out of business.

6. Improving adoption of health information technology. Electronic health records that reduce costs and improve the efficiency and effectiveness of medical treatment should be widely used.

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7. Empowering consumers through information. All Americans should be able to obtain easy-to-understand information about the price and quality of the health care they receive from their medical provider and insurance carrier.

8. Providing affordable coverage for vulnerable Americans. Americans with low incomes and persistently high medical expenses should receive additional assistance.

9. Promoting prevention, wellness, and fitness. The President encourages all Americans to lead a healthy lifestyle to prevent disease and improve their overall quality of life.

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Consumer-centric MedicaidThe 21st Century Medicaid Act

Medicaid should be divided into three distinct sub-programs, each administered separately with its own rules and structures. However, all the sub-programs should be based on the following principles:

1. A 21st Century Medicaid System will focus on wellness,prevention, early detection, and independent living.

2. A 21st Century Medicaid System will integrate the family and community into the healthcare and the lives of loved ones.

3. A 21st Century Medicaid system will leverage innovations inscience and technology, quality systems, and best practices inevery aspect of providing care for its beneficiaries.

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Consumer-centric Medicaid

To achieve real transformation in Medicaid:

One program design cannot meet the needs of such distinct and separate groups of beneficiaries –

1. the poor.

2. people with disabilities (Aged, Blind, Disabled), and

3. the frail elderly.

Consumer-centric Medicaid as described in this presentation focuses on the first group

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Cost Control LeversA comparison between Managed Care and Consumer-centric Medicaid

1. Eligibility

2. Benefit Design

3. Cost Sharing

4. Premium Sharing

5. Service Costs

6. Utilization

Consumer-centric Medicaid

Graduation to Private Ownership

Asset Accumulation

Shared Savings-Pay 4 Compliance

Income based

Shared Savings-Pay 4 Performance

Demand Controlled

Managed Medicaid

Legislated Reductions

Fairly Fixed

Minimal

Non-existent

Forced Price Controls

Supply Managed

Creating the Possible…

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Two Choices for the Future of Medicaid:Managed Care or Consumerism

Behavioral Change and Cost Management Potential

Low Impact ---- ---- ---- ---- ---- ---- ---- ---- ---- High Impact

Traditional Medicaid

Planswith

Consumer Information

&Managed Care



TraditionalMedicaid

Plans


IntegratedHealth &

Productive Citizenry



Spending


Personal Ownership of Health and Healthcare

2nd Gen Managed Care

Ltd Eligibility, In/P Review, O/P Review

3rd Gen Managed Care

Restrictive Rx Formulary,Social Service

Benefit Reductions

1st Gen Managed Care

Ltd Benefits, Ltd Network

Providers,High

Discounters

4th Gen Managed Care

More Supply Controls, Scheduled Benefits, Prioritized Diagnoses

Consumerism &

Demand Control

Managed Care & Supply Control

mjthompson001

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IntegratedHealth &

Productive Citizenry



Spending


Personal Ownership of Health and Healthcare

Personal Care Personal Care AccountsAccounts


Health ManagementHealth Management


Education, Education, Communication, InformationCommunication, Information & Decision Support Tools& Decision Support Tools

Allocation to purchase Private

Coverage

Individual Activity & Compliance

Rewards

Individual, Family & Group Rewards

Conversion to Private HSAs, Use for non-Healthcare

100% Preventive Care thru Debit Cards

Web-based behavior change

support programs

Wellness,Stress, Juv Justice, Violence, MH/SA

Genomics, predictive modeling

push technology

Information, health coach,

Cash & Counseling

Disease specific focus, (Diabetes, MH/SA), Special Case Mgmt Svcs

Functionality Focus, Population Mgmt,

Cultural DM, Integrated Hlth Mgmt,

Wireless cyber –support, Holistic

care

Payor / Intermediary

Sponsored, Paper Based

Tele, Personal and Family hlth mgmt,

Community Resources

Info on Quality and Health Disparities,

Multi-Cultural needs, Faith Based Outreach

Personal Responsibilities,

Self-care, information therapy

Potential if unexpected Funds

Zero balance acct, activity based

incentives,P4P,P4C

Non-health State initiatives

Subsidies for movement to Indiv.

or Employment Based Coverage

The Consumer-centric

Medicaid Grid

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Consumer-centric Medicare with Health Opportunity Accounts (HOAs)

Add to Medicare a Health Opportunity Account (HOA). The account starts with a zero balance and would be funded through a number of sources including employers offering post retirement healthcare supplements, tax deductible individual contributions, and Medicare deposits based upon voluntary patient participation in cost effective treatments, and through compliance incentives programs.

Like Health Savings Accounts, HOAs would be funded individual accounts under the control of the Medicare beneficiary.

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Ways to increase the level of Consumer-centric Medicare HOA funds:

1. Employers could provide post retirement health insuirance contributions directly into the HOA.

2. Medicare could establish incentive programs to reward compliance with “best practices” medical care and treatments.

3. Medicare could reward patients that with HOA incentives if they use hospitals with proven cost effective programs for the diagnosis being treated.

4. Medicare beneficiaries that use hospitals with recognized quality standards would receive an HOA incentive bonus.

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Ways to increase the level of Consumer-centric Medicare HOA funds:

5. HOA incentives could be awarded to encourage using physicians with better outcomes.

6. Medicare beneficiaries could be allowed to contribute to their HOAs with tax deductible contributions.

7. Medicare beneficiaries could be allowed to transfer (tax free) a certain amount of life insurance cash value directly into their HOA.

8. HOAs would accumulate tax-free. As with current HSAs, investments would be through government approved financial investment vehicles.

Private Sector Options for Improving Access, Quality, and Cost of Care In a The 21 st Century Intelligent Health System Ronald E. Bachman FSA, MAAA President.

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