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ANNA RAPPAPORT CONSULTING STRATEGIES FOR A SECURE RETIREMENT SM Health Care Today: Filling in the Big Picture John Marshall Law School April 28, 2006.

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Presentation on theme: "ANNA RAPPAPORT CONSULTING STRATEGIES FOR A SECURE RETIREMENT SM Health Care Today: Filling in the Big Picture John Marshall Law School April 28, 2006."— Presentation transcript:

1 ANNA RAPPAPORT CONSULTING STRATEGIES FOR A SECURE RETIREMENT SM Health Care Today: Filling in the Big Picture John Marshall Law School April 28, 2006

2 Anna Rappaport presentation at John Marshall Law School April 28, 2006 1 The Present and Future Organization of Medicine Today medicine stands at a crossroad. No one can fully grasp the content of medical science and medical art or forsee the path which the newer knowledge will follow more than a decade hence. No one can fully comprehend the present position of medical practice in society or anticipate the form it is destined to take. From the Milbank Memorial Fund Quarterly, Vol. 12, No. 2, 1934

3 Anna Rappaport presentation at John Marshall Law School April 28, 2006 2 Stakeholders Patients/Families Employed Patients/Families Retired Patients/Families Disabled Patients/Families Unemployed Public Providers Employers Insurers Regulators

4 Anna Rappaport presentation at John Marshall Law School April 28, 2006 3 Agenda Filling in some facts Mercer survey highlights Defining the future landscape

5 Anna Rappaport presentation at John Marshall Law School April 28, 2006 4 Filling in Some Facts How the US compares Reasons for higher spending in the US Claims distribution: A few people account for most of the cost Illness and injury as contributors to personal bankruptcy Negotiating prices: how the Amish drive down costs Medical errors and the tort system

6 Anna Rappaport presentation at John Marshall Law School April 28, 2006 5 How the US Compares Source: Health Spending in the United States and the Rest of the Industrialized World, Health Affairs, Volume 34, Number 4, page 905 US Spending is Higher % of GDP 2002

7 Anna Rappaport presentation at John Marshall Law School April 28, 2006 6 Reasons for higher spending in the US Higher incomes and higher medical prices are major factor Price example – 2002 average cost of hospital day –U.S. $2,434 –Canada 870 –Less in other OECD countries Malpractice is not a major factor in difference – cost of defending claims in 2001 =.46% of total health spending Supply issues: Surprisingly, Americans have access to fewer health care resources than people in most other OECD countries measured in three major categories: hospital beds per capita, physicians and nurses per capita, and MRI and CT scanners per capita. Source: Health Spending in the United States and the Rest of the Industrialized World, Health Affairs, Volume 34, Number 4, pages 903-906

8 Anna Rappaport presentation at John Marshall Law School April 28, 2006 7 Typical Claim Distribution Few People: Majority of the Cost 53% 25% 35% 50% 3% 5% 10% 19% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % Claimants% Cost

9 Anna Rappaport presentation at John Marshall Law School April 28, 2006 8 Implications of Claim Distribution Big difference between different buyers Anti-selection = big issue Voluntary individual market solutions dont work Risk adjustment key for future Big question: who will pay for the high cost claimants?

10 Anna Rappaport presentation at John Marshall Law School April 28, 2006 9 Illness and Injury as Contributors to Personal Bankruptcy Study focuses on links between personal medical costs and bankruptcy Studied sample of 1771 bankruptcy filings in 2001 28% of filers reported illness or injury as cause for bankruptcy Estimate that 1.9 to 2.2 million Americans (debtors and dependents) experienced medical bankruptcy The overwhelming majority of uninsured medical debtors had found coverage to be unaffordable of effectively unavailable Source: Himmelstein, David and others, Illness and Injury as Contributors to Bankruptcy, 2005, Health Affairs – Web Exclusive Market Watch

11 Anna Rappaport presentation at John Marshall Law School April 28, 2006 10 Negotiating Prices: How the Amish Drive Down Costs Amish and Mennonite are generally uninsured Elders negotiated with Heart of Lancaster Regional Medical Center (community spent $5 million/year at center) Result: –Total hip replacement: negotiated $16,578 vs.$37,260 national average –Adult appendectomy: $5,527 vs. $19,957 –C-section: $5,000 vs. $13,458 50% payment required in cash up-front Elders pledged that community members would not sue for malpractice Source: Millman, Joel, How the Amish Drive Down Medical Costs, Wall Street Journal, February 21, 2006

12 Anna Rappaport presentation at John Marshall Law School April 28, 2006 11 Medical Errors and the Tort System 34% of public were personally involved in a situation where a preventable medical error occurred Consequences to the public experiencing errors –16% significant loss of time –16% severe pain –11% long term disability –8% death Reforming the tort liability system will not solve a major part of the health care cost problem as malpractice payments represent only 0.5% of total health spending – US is fairly similar to UK, Canada and Australia in malpractice spending Sources: (1) Kaiser Family Foundation, Trends and Indicators in the Health Care Marketplace, Exhibit 7.17; (2) Health Spending in the United States and the Rest of the Industrialized World, Health Affairs, Volume 34, Number 4, page 910

13 Anna Rappaport presentation at John Marshall Law School April 28, 2006 12 Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans About the Survey Largest and most comprehensive annual survey Established in 1986, national probability sample used since 1993 2,999 employers participated All employers with 10 or more employees are surveyed; size groups examined separately in this presentation include: -small employers – 10-499 employees -large employers – 500+ employees -jumbo employers – 20,000+ employees Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans

14 Anna Rappaport presentation at John Marshall Law School April 28, 2006 13 Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans Total health benefit cost increase slows for the third straight year All Employers Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans

15 Anna Rappaport presentation at John Marshall Law School April 28, 2006 14 Strategy will be significant or very significant Strategy Small Employers Large Employers Jumbo Employers Care management31%62%81% Consumerism34%55%71% Data transparency27%35%54% High-performance networks26%33%51% Collective purchasing29%25%24% Scaling back benefits/shifting cost to employees 21% 24%17% Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans Employers see care management, consumerism as top cost management strategies for the next five years

16 Anna Rappaport presentation at John Marshall Law School April 28, 2006 15 Percent of large employers offering program Program20052004 One or more disease management programs 67%58% Health risk assessment46%35% Behavior modification program30%21% Nurse advice lines64%59% Health advocate services37%31% Complex case management65%---- Catastrophic case management66%59% End-of-life case management40%---- Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans Growth in use of care management programs

17 Anna Rappaport presentation at John Marshall Law School April 28, 2006 16 Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans Action All Employers Large Employers Jumbo Employers Provided access to website on health conditions 41%69%84% Provided access to website on provider quality and cost 40%49%53% Provided utilization modeling tool to help with plan selection 17%21%47% Replaced copayments with coinsurance 10%22%50% Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans Actions taken to promote consumerism

18 Anna Rappaport presentation at John Marshall Law School April 28, 2006 17 Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans Consumer-directed health plans concentrated among jumbo employers in 2005 Percent of employers offering plan 200520042003 All employers2%1%<1% Small employers (10-499)2%1%<1% Large employers (500+)5%4%1% Jumbo employers (20,000+)22%12%9% Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans

19 Anna Rappaport presentation at John Marshall Law School April 28, 2006 18 Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans Decline in retiree medical coverage levels off in 2005 Large Employers Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans

20 Anna Rappaport presentation at John Marshall Law School April 28, 2006 19 Number of employees Source: Mercer Health & Benefits, LLC, 2005 National Survey of Employer-Sponsored Health Plans Trends in Employer Plans: Mercers 2005 National Survey of Employer-Sponsored Health Plans Offer retiree coverage in 2005, by employer size

21 Anna Rappaport presentation at John Marshall Law School April 28, 2006 20 Moving into the Future: Defining Key Issues QUALITYACCESS COST Choose two You cant have all three! Future of employer role depends on total health care system issues

22 Anna Rappaport presentation at John Marshall Law School April 28, 2006 21 Lessons Learned The payment system often drives the patterns of care –Ex: if care is paid for in the hospital and not out of the hospital, care will shift –Ex: if care is paid for if job related and not otherwise, there will be job related problems Liability system can influence patterns of caresometimes improving quality but maybe leading to unnecessary care Costs can increase beyond anyones expectations High-cost claimants drive market possibilities Technology can lead to marvelous results, but it also can cost a lot Sometimes people focused on the latest technology forget the basics

23 Anna Rappaport presentation at John Marshall Law School April 28, 2006 22 Big Questions What rights does the public have to health care? Who will define the risk pools? How do we reduce the number of uninsured? How can we keep costs under control? What role will employers take in financing and providing health care? What role will state and federal government take in regulating, financing and providing health care? How will those without employer coverage gain access to care? How will resources be allocated to public health, acute care and chronic care?

24 Anna Rappaport presentation at John Marshall Law School April 28, 2006 23 Big Questions (continued) How will decisions about individual care be made? What control/management systems will be in place? What will be the role and who will control academic medical centers? How will managed care evolve? What systems will be used to control that excessive care is not provided? What is appropriate care at the end of life? Who can make decisions about end of life care and choosing when to die? Will insurers be allowed to underwrite individuals without any restrictions? Will risk adjustment methods be developed?

25 Anna Rappaport presentation at John Marshall Law School April 28, 2006 24 Big Questions (continued) What liability will be imposed on providers, insurers? What limits will there be on liability? Where will early retirees without employer coverage get their coverage? Who will define standards for quality of care? Who will set/negotiate prices? Will providers be allowed to charge different prices to different customers?

26 Anna Rappaport presentation at John Marshall Law School April 28, 2006 25 Appendix: Additional Data

27 Anna Rappaport presentation at John Marshall Law School April 28, 2006 26 National Health Expenditures Percentage of GDP 1993 13.4% 2003 14.9 2006 16.0* 2014 18.7* *Estimate Per Capita 1993 $3,353 2003 5,670 2006 6,830* 2014 11,045* Source: US Health Spending Projections for 2004-2014, Health Affairs, Feb. 2005

28 Anna Rappaport presentation at John Marshall Law School April 28, 2006 27 Uninsured A growing problem –44.7 million – 2003 –40.0 million – 1999 Consequences –47% postponed seeking care because of cost (compared to 15% of insured) –37% did not fill a prescription because of cost (compared to 13%) Result of uninsured not getting care – 57% painful temporary disability –19% long term disability Source: Kaiser Family Foundation, Trends and Indicators in the Changing Health Care Marketplace (Exhibits 7.1, 7.6, 7.7)

29 Anna Rappaport presentation at John Marshall Law School April 28, 2006 28 Nursing Home Costs Average $74,000/year Average stay is 2.5 years 11% of 65 year old men and 28% of women will need more than five years of care at home or in a facility Among benefit claimants with a three year benefit limit, 8% will exhaust benefits in policy Source: Jonathon Clements, Getting Going, Wall Street Journal. Feb. 22, 2005


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