The Vermont Health Care Commission 2005 Future Directions for Health Care Reform in Vermont Kenneth E. Thorpe, Ph.D. Robert W. Woodruff Professor and Chair.

The Vermont Health Care Commission 2005

Future Directions for Health Care Reform in Vermont

Kenneth E. Thorpe, Ph.D.Robert W. Woodruff Professor and Chair

Department of Health Policy and ManagementRollins School of Public Health

Emory [email protected]


Overview

• Crafting effective health reform solutions and providing universal access requires a clear understanding of what accounts for the growth in spending

• Key “facts” from the US and Vermont context1. 80% of total health care spending linked to

chronically ill patients2. Chronically ill receive approximately 50% of all

clinically recommended medical care3. Rise in “treated disease prevalence” accounts

for nearly two-thirds of the growth in health care spending

4. Rise in obesity prevalence in US accounted for 27% of the growth in health spending over the past 20 years.


Percent of Private Firms offering Health Insurance in Vermont, 2003 Only 55% of the 19, 236 Firms Currently Offer Health Insurance

36.80%

78.30%

88.20%

98.70% 100%

54.96%

0%

20%

40%

60%

80%

100%

120%

All 1-9 10-24 25-99 100-999 1000+

Firm Size

% O

fferin

g H

ealth

Insu

ranc

e

Source: MEPS-IC


Per Capita Spending is Lower in Vermont Yet Private Insurance is More Expensive!

$3,760

$3,472

$3,000

$3,500

$4,000

Per

Cap

ita S

pend

ing

1998

US VTSource: CMS


Single Premiums, Vermont and US Totals, 1999 and 2003: Vermont is 3.3% Higher than National Average

$2,419

$3,596

$2,324

$3,481

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

1999 2003

$

VT USSource: MEPS-IC


Family Health Insurance Premiums Are Higher in Vermont Compared to the

National Average

$9,483

$6,358

$9,249

$6,058

$0

$2,000

$4,000

$6,000

$8,000

$10,000

1999 2003

VT USSource: MEPS-IC


Where Does Vermont’s Health Care Dollar Go? More than 80% of Health Care Spending on Behalf of People with Chronic Conditions

Source: MEPS

1 Chronic Condition,

21%

2 Chronic Conditions,

18%


16%


12%

5+ Chronic Conditions,

16%

O Chronic Conditions,

17%


Distribution of Medical Care Spending by Number of Chronic Health Care Conditions, 2001

Number of Chronic Health Care Conditions

Percent of Total Health Care Spending

Percent of Population

0

1

2

3

4

5

Total All Chronic Care

17%

21%

18%

16%

12%

16%

83%

55%

24%

11%

5%

4%

1%

45%

Source: MEPS


Issue: Level vs. Trends in Spending

Level: US and Vermont Spends approximately 50% more per capita than European countries

• Traced to higher clinical and administrative expenses, fragmented purchases, and ultimately higher prices

Trends: Growth in spending in US and Vermont has risen faster that 19 of 23 OECD countries between 1980 and 2003.


Why Does Real Per Capita Health Spending Rise Over Time?

1. Rise in Treated Disease Prevalence

2. Rise in Spending Per Treated Case

3. Both


Obesity Has Doubled Among Adults in Vermont and US, 1990-2003

19.9%

10.9%

23.5%

11.6%

0%

5%

10%

15%

20%

25%

1990 2003

% O

bese

VT USSource: BRFSS


Increase in Treated Disease Prevalence in Vermont, Key Factor Driving the Growth in Health Care Spending

13.7%

28.8%

17.3%

2.8% 4.6%

18.5%

0%

5%

10%

15%

20%

25%

30%

35%

Diabetes Hypertension Hyperlipidemia

1990 2003Source: BRFSS


What Accounts for The Rise in Treated Disease Prevalence?

1. Rise in Population Disease Prevalence – fueled by obesity and other risk factors

2. Changes in threshold for treating asymptomatic patients (hypertension, hyperlipidemia, the metabolic syndrome)

3. Innovation (SSRI, statins, medical devices)


Rise in Treated Disease Prevalence Linked to the Rise in Obesity Key Single Largest Driver of Health Care Spending Over Time

% Change in Spending Over Time, 1987-2002

Rise in Obesity Prevalence Holding Technology Constant

= 11%

Rise in Additional Cost Of Treating Obese vs. Normal Weighted Patients

= 16%

TOTAL = 27%

Source: Kenneth E. Thorpe, PhD


Implications for Reform

1. Universal Coverage will need assurance that we have the ability to control spending- need policy options address both level and growth.

2. Policy options for reform need to attack the key drivers of cost—rising disease prevalence. Reforms need to result in better value care provided to all patients, but in particular to chronically ill patients.

3. Need options reducing excess clinical costs (i.e. additional costs linked to medical errors/events) and administrative costs.


Implications for ReformPotential Options for Restructuring CareChange how plans are paid and compete. 1. Consider encouraging competition around specific chronic

diseases that accounts for the most spending, most of the growth in spending. Ability to effectively treat multiple chronic conditions.

2. Develop captitated payment based on• Annual cost of providing all clinically recommended care for

patients with single or multiple chronic illnesses (starting to occur in the market today—Medicare already has the methodology for risk adjusting payments.

3. Compete on value (quality of care per dollar spent)• Best clinical outcomes at lowest cost• No co-pays or deductibles for clinically recommended services.• Promote access to state-of-the-art care by most vulnerable

patients.4. Green Mountain Health. Universal health wellness, promotion,

disease prevention benefits. What constitutes a best practice program?


Implications – Slowing the Growth in Spending

1. Key Issues: Slow rise in treated disease prevalence through,

• Slowing the rise in obesity prevalence

2. Policy Tools• School Based Interventions• New and effective health promotion, wellness,

disease prevention programs available for all adults

• Financial incentives to participate


Summary• Changes outlined above requires fundamental restructuring of

Vermont’s payment and delivery health care systems

• Explore competition among health plans and provider groups around key chronic conditions

• Develop state strategy for addressing rise in treated disease prevalence

• Develop options for reducing the level of spending (lower clinical and administrative costs)

• Devote resources to developing effective health promotion, wellness programs for use in schools, and the worksite.


Options for Financing Health Care Expansions

• Evaluate options for financing health care for all Vermont residents through the following approaches:– Savings in existing programs– Premium assessments on health plans– Innovative uses of global commitment– Others


Summary/Workplan

Workplan– What questions can we address by January 15th

(i.e. financing, economic impact, etc.)

– What approaches can be outlined/evaluated for the upcoming session (short-term changes)?

– What approaches can be outlined/evaluated for the future—long term changes?

The Vermont Health Care Commission 2005 Future Directions for Health Care Reform in Vermont Kenneth E. Thorpe, Ph.D. Robert W. Woodruff Professor and Chair.

Documents

vermont health care

health care reform

health care spending

health spending rise

chronic care

recommended care

vermonts health care

stateoftheart care