1. Health Care Financing and Information Technology: A Historical Perspective HIM 3000

2. What is a “system”? HEALTHCARE SYSTEM: A network of integrated components designed to work together coherently HEALTHCARE SYSTEM: A network of integrated components designed to work together coherently

3. Key Domestic Crises 43.6 million people are uninsured and another 30+ million are under-insured 43.6 million people are uninsured and another 30+ million are under-insured As healthcare gets more expensive, more people are left behind As healthcare gets more expensive, more people are left behind Medicare – Under-funded and getting more costly Medicare – Under-funded and getting more costly Medicaid – reliant on State’s Budgets Medicaid – reliant on State’s Budgets Torts; Malpractice Costs Torts; Malpractice Costs New Healthcare Threats: Bio-terrorism New Healthcare Threats: Bio-terrorism Vaccines; Infectious Disease; Response issues Vaccines; Infectious Disease; Response issues

4. Financing Health care expenses in the U.S. have nearly doubled from 1992- 2002 Health care expenses in the U.S. have nearly doubled from 1992- 2002 At current rate, expected that costs will double again by 2012 At current rate, expected that costs will double again by 2012 (source CMS, 2004) (source CMS, 2004)

5. Long Range – Total Medicare

6. Comparing Countries

7. Where does this money come from?

8. Reimbursement Multiple systems exist for reimbursement to providers (you) and hospitals: Multiple systems exist for reimbursement to providers (you) and hospitals: Fee-for service (rare) Fee-for service (rare) Discounted/negotiated fee-for-service Discounted/negotiated fee-for-service Capitation Capitation

9. So how good is this system? WHO (World Health Organization) rankings of countries health care system performance: WHO (World Health Organization) rankings of countries health care system performance: 1st: France 1st: France 2nd: Italy 2nd: Italy 3rd: San Marino 3rd: San Marino ……. ……. 35th: Dominica 35th: Dominica 36th: Costa Rica 36th: Costa Rica 37th: United States 37th: United States 38th: Slovenia 38th: Slovenia

10. What do we have in the U.S.? U.S. “SYSTEM”: Hodgepodge of financing, insurance, delivery, and payment mechanisms that remain unstandardized and loosely coordinated… The system is functionally fragmented because it is not subject to overall planning, direction, and coordination from a central agency. U.S. “SYSTEM”: Hodgepodge of financing, insurance, delivery, and payment mechanisms that remain unstandardized and loosely coordinated… The system is functionally fragmented because it is not subject to overall planning, direction, and coordination from a central agency.

11. Prospective Payment System Social Security Ammendments of 1983, Medicare pays hospitals a uniform national fixed payment per case based on about 468 diagnosis related groups (DRGs0

12. Health Maintenance Organizations 1970’s-1990’s Prepaid group practices, ie Kaiser Permanente A group or practice or affiliation of independent practitioners that contracts with patients to provide comprehensive health care for a fixed period payment specified in advance A group or practice or affiliation of independent practitioners that contracts with patients to provide comprehensive health care for a fixed period payment specified in advance

13. Era of managed Care Health Maint. Org. (HMO) Prefererred- provider org. (PPO) Point of service (POS) High- deductible plan Insure via prepayment for health services Arrange discounted fee for service rates Adds PPO option to HMO plan req. high ded. req. high ded. Offers a health spending acct to pay ded. Offers a health spending acct to pay ded. Cont next slide

14. Managed care Cont (HMO)Choi ce of provider limited to those within HMO -providers bear risk for cost of care PPO Offers incentives for enrollees to use contracted providers -poviders do not bear risks for the cost of care POS Allows for free choice of provider with finan. Incentive to use HMO providers

15. Technology Spending new incentives 1. Incentives for purchasers and consumers to seek value and information 2. Incentives for health plans and providers to improve quality and to reduce costs 3. Potential incentives for providers to under serve patients 4. Incentive for health plans to attract the healthiest possible populations.