Presentation on theme: "Pharmacy and the Health Care System-Fall 2005"— Presentation transcript:
1 Pharmacy and the Health Care System-Fall 2005 Lee R. Strandberg, Ph.D.Emeritus ProfessorPharmacy Economics and Pubic Health&Director, Managed Care PharmacySamaritan Health Services
2 What is this course about? I. Pharmacy and the Health Care SystemPharmacy and its Relationship to the Health Care Delivery SystemII. Health EconomicsWhat causes medical care spending to increase?Who pays for medical care?
3 Health Economics -con’t. Why is the cost of producing health such an important political issue all over the world?How do other countries provide and pay for medical care?What are some of their problems?What influence does organizational structure and insurance have on demand for medical care?
4 I. Pharmacy and the Health Care System What is a ProfessionalThe Five Elements of a ProfessionThe Importance of Client TrustProfessional and Business Ethics
5 What is a Professional Expected to exercise special skill and care Has clients not customersPlaces client’s interest firstA customer determines services/goods wantedProf is held to a higher standard of behavior
6 The Five Elements of a Profession 1. A Body of KnowledgeProfession controls its training centersOne of its associations accredits academic programsControls admission into the professionConvinces the community that no one is allowed the professional title unless conferred by accredited academic programState establishes licensing and or examination
7 The Five Elements of a Profession 2. Professional AuthorityClient acknowledges the superior competence of the professionalClient surrenders a portion of own autonomy to the professionalClient trusts the professional’s judgement
8 The Five Elements of a Profession 3. Community SanctionsInclude restrictions on use of a professional titleLicensure requirements imposed by the StateAccreditation of academic programsGranting professional privileges ie., duty ( right) to respect client confidentiality
9 The Five Elements of a Profession 4. Code of EthicsVirtually all professions have oneMay or may not be as important today as they once were
10 The Five Elements of a Profession 5. Professional CultureEvery profession operates through a formal and informal networkThese networks produce the single attribute that differentiates professions from other occupations: Values, Norms and SymbolsValue: Central beliefs of a professionNorms: Accepted ways of social behavior within the professionSymbols: Recognized insignia
11 The Importance of Client Trust Prof. Authority may be most importantIt originates when clients place trust in the professional to make decisionsProfessional, in return, implicitly promises to act in client’s best interest“Social action depends on there being mutual reciprocal expectations as to how people are likely to act, and on these expectations not being too often disappointed”
12 Professional versus Business Ethics Are you viewed primarily as a professional or business personPeople will view you differently, one or the other or bothHealth care providers have to be both at the same time to meet patient needsHealth care is both an economic good and special social relationship
13 Major Elements of Health Care System: Sources of Conflict
14 Health Care Organizations by Type of Ownership Unmanaged IndemnityManaged Indemnity (PPO Plus Indemnity)IPA HMOStaff HMOPHO HMOPhysician owned HMO????
22 Five Basic Characteristics of the Health Care System 1. Respond to Incentives (people and organizations2. Quality and Quantity are infinitely expandable3. Provider Incentives lean to high tech, high cost4. Consumer is a poor judge of health care quality5. Full Insurance Coverage increases use of services
23 Evolution of National Health Policy Six Stages of National Policy1. The Beginning2. Categorical Grants in Aid3. Decades of Investment4. Organization and Delivery of Service5. Decade of Transition6. Managed Care Era
24 The Beginning Original Federal role was minimal in late 1700s Fed took responsibility for health care of militaryQuarantine was responsibility of each sea portLocal officials could not enforce quarantine regulations
25 The Beginning Major Debate Centered on State Vs Federal Rights Who Should be Responsible for Public HealthDebate Ended in Court Ruling in 1893Debates Started in Court in 1796
26 The Beginning The System is still slow to respond Government moves into areas ignored by the market
27 Categorical Grants (1935-1945) 2nd Stage 1930’s focused attention on public health issuesStates could not handle public health problemsSocial Security Act of 1935 addressed some of these issues
28 Social Security Act Originally was Social Health Ins. Act Provided money forchild health programsestablish and maintain various public health programs
29 Social Security Act Two consequences 1. Decision making shifted from local to national2. Increased involvement to non health professionals in health issues
30 3rd Stage. Decades of Investment (1946-1962) The need for investment in basic health resources became evidentCongress passed the Hill Burton Act-1946Funded 4,000 health buildings (hospitals etc..)Mandated that hospitals give free care for 20 yr..Cost $ 4 billion
31 Decades of Investment Congress also funded medical research cancer, heart, mental health…
32 Decades of InvestmentBelief at that time was spending on developing health resourcesWould increase access to careHowever, it did not increase accessProblems remain with uninsured, rural poor, urban poor, rural in generalProviders tend to locate around population centers
33 4th Stage: Organization and Delivery of Services (1963-1966) Three major themes1. Provide Consumers with money to buy health care2. Emphasis on organization and delivery of care3. Emphasis on health care planning as a means to control costs
34 Medicare. Amendment to Soc......... Sec Act in 1965 Targets those over 65 (can qualify for some features even if younger)Is an insurance programIs a Federal Program
35 Medicare Part A Covers Hospital Stays Skilled nursing facility care Some Home Health CareHospice CareNo Premium$110 Deductible-2005
36 Medicare Part B Covers Doctors’ Services Outpatient hospital services Home health careMonthly Premium $
37 Medicare Part D-Prescription Drugs Drug Program Effective Jan 2006Monthly premium-$35Beneficiary pays first $250 in drug costsPays 25% of total drug costs between $250 and $2,250Patient pays 100% between $2,250 and $5,100 (donut hole)Pay greater of $2 for generics, $5 for brand or 5% ($3600 out of pocket)
38 Part D Low Income Assistance Medicare now covers Rxs for eligibles on MedicaidState must pay fed back for this (clawback)Those below 100% of poverty pay $1-$3 co payThose above 100% will pay $2 $5 co paysMedicaid eligibles pay no premium or deductible and no drug costs above $3,600 out of pocket
39 Part D-con’t Any Medicare eligible can enroll-benefit is voluntary Can’t have other Rx coverage ie TricareQualified retiree health plans with Rx coverage equal to Part D will receive subsidies of 28% of costs for coverage above $250 and up to $5,000per Medicare enrolleeBenefit delivered through private health plans and PBMsAct requires that plans cover at least 2 drugs in each therapeutic classMedicare hired USP to develop a formularyThey proposed covering 146 classes, PBMs say that is too many, PhARMA says it is not enough
40 Part D Costs Initial CBO estimate was $400 billion (10 years) True Cost projected to be $540 billionTypical 65 yr old with drug benefit will spend 37% of Social Sec Inc on Medicare premiums, co-payments, and out of pocket expenses in 2006Will grow to 40% in 2011 and 50% by 2021Medicare prohibited from negotiating with drug manuf for best price ie., VA and State of Maine.
41 Drug Discount CardsPatient pays 100% co pay-a discount priceCard sponsors are private companies ie PBMs. AARP , Chain Drug stores72 originally approved by CMSLow enrollment because of confusing sign up proceduresMay have an annual enrollment fee of up to $30Gvt subsidies of $600 to individuals making less than $12,569 or couples $15,862/year
42 Rx Drug Coverage and Seniors 2003 DataFour in 10 did not take all drugs prescribed due to cost, side effects, perceived lack of effectiveness, or believe that they did not need the med27% lacked Rx coverage (will be covered under Part D)Half have more than one MD36% more than one pharmacy26% skipped taking meds because of cost12% spent less on basic needs because of med costs
43 Medicare Comparative Cost Adjustment Program Establishes a test competition between local private Medicare plans and traditional Medicare starting in 2010Comparisons will run for 6 years
44 Medicaid. Amendment to Soc......... Sec. Act in 1965 Targets needy and low income of any ageIs an assistance programIs a federal state partnershipProvides financial assistance-varies by state Fed match varies between $1 and $3.89 Fed 2005Covers 51 million people-more than one out of every 6 Americans (2005)
45 MedicaidCongress recently limited the number of years a person can be on Medicaid (able bodied adult)Covers out patient medicineDefine inpatient, outpatient, ambulatory
46 Medicaid and MedicareDid not address organization and delivery of health care servicesProvider Compensation was usual and customary (fee for service)Did not promote efficient use of limited health care resources
47 Fifth Stage: Decade of Transition ( 1967-1987) Addressed Development of Comprehensive Delivery Systems1. Professional Standards Review Organizations (PSRO)2. Health Maintenance Organization (HMO)3. Preferred Provider Organization (PPO)4. Pharmacy Benefit Management Companies (PBMs)
48 (1) PSRO -Amendment to Social Security Act Passed in 1972 by US CongressPurposes1. Review health care paid for by Medicare and MedicaidReview QualityTo Assure Appropriate Utilization of Services
49 PSRO- CON’T Non profit organizations funded by US Gvt Hired nurses and physicians to review hospital chartsCould deny payment to providers for causeProbably cost more than they saved
50 PSRO-CON’T --PROsWere replaced by Professional Review Organizations (PRO)-1983PROs still in operationOregon Medical PRO (OMPRO)-1220 SW Morrison PDXOMPRO does Medicaid and Medicare and Private Sector ReviewsDoes disease specific studies (asthma, anticoagulation...
51 PROsMuch of its work already being done by current managed care organizationsBut remains an independent verification of work done by others
52 (2) HMO Act of 1973Signed into law by Richard Nixon-was his cost Mgt. agendaProvided start up $$ to small HMOs$364 million provided by fedsRegence HMO started this way via Capitol Health Care in Salem mid 1970sPurpose was to stimulate development of cost management
53 HMO Definition An organization which assumes Responsibility for financing and developingComprehensive package of health benefitsGuarantee to provide care to an enrolled Pt. populationFor a fixed prepaid premium
54 HMO Vs Indemnity Insurance (Major Medical) HMO is an insurance CO + a delivery systemMajor Med is only an insurance companyIndemnity (to protect against loss)
55 HMO Vs Indemnity Insurance HMO guarantees to provide health care servicesMajor Med-you find your own health care providersno network of ;pharmacies/hospitals or doctors...
56 Capitation Vs FFSCapitation-Providers receive a fixed, monthly payment for each primary patientFFS Providers receive a fee for each service providedHow does provider payment drive behavior???
57 How did Health Insurance Start? Baylor Univ hospital in Dallas Texas 1929Local teachers paid for hospital and physician services in advancem,Was beginning of Blue Cross Blue Shield
58 How did HMOs start? Grand Coulee Dam Project -1930s Kaiser Construction Company needed health care for workersSpun off as a separate company after W.W.IIGroup Health Coop-mid 1940s SeattleA true consumer CO-op
59 Three Major Types of HMOs StaffIPA (Independent Practice Assoc )Group
60 Staff HMO (i.e............, Kaiser) Salaried MD, RPh, Nurses Owns on hospitals/clinicsIn House PharmaciesDoes not contract out for pharmacy services-such as using community pharmacies
61 IPA ( i.e., Good Health Plan) Independent physicians, alone or in groupsContracts out for pharmacy service and all other providersPhysicians paid on a fee schedule and/or risk assumption
62 Group Model (i.e............, Pacific Care) Contracts with medical clinics (exclusive)Contracts out for pharmacy services and all other providersPhysicians paid on a fee schedule and/or risk assumption
63 POS-Point of Service Model Variation of all previous modelsAllows patient to select non panel providers and pay more
64 HMO Issues from Consumer/Provider/Purchaser Viewpoint Patientwants rich benefit package/low cost/high qualityPurchaserProviderhigh quality and high income
65 Various HMOs Cigna (Ins. CO.) Regence (BCBS-Or)Network CareOregon (Academic)Good Health Plan ( Sisters of Providence)
66 Various HMOsSelect CareODS HMO (Ins. CO.)Mid Valley IPA-Salem.
68 What Tools are used by Managed Care and Employers to Manage Costs? Lower Hospital AdmissionsDrug Formularies (list of drugs pd for by HMO)Treatment ProtocolsPrescribing Protocols (what to prescribe)Providers at Financial Risk-Changes treatment patterns/incentives
70 (3) Preferred Provider Organizations (PPO) Contractual arrangement among providersand employers, / ins. companies..,to provide services to a defined pop. of patientsat established feesDoes not assume financial risk
71 PPO Examples Provider networks pharmacieshospitaldoctorsPaid FFS, but less than usual and customaryPPOs were formed to increase sales volume &to protect market share of participating providers
72 4.(PBMs) Pharmacy Benefit Mgt. CO. For and non profit corporations contracted toManage the pharmacy benefit forInsurance companies/MCOs/private employers, Gvt
73 PBM Examples 1. Advance PCS --Originally owned by McKesson Wholesale Drug CO, Eli Lilly then Rite AidMerger with Caremark underway2. Medco-PAID PrescriptionsOriginally owned by Calif. Pharmacists AssociationSpun off in the 1960s by CPHA via action from US Justice Dept....Bought by Merck, then spun off as a separate company in 2004
74 PBM Examples-CON'T Diversified Pharmaceutical Services (DPS) Originally owned by United Health Care-MinneapolisThen by Smith Kline Beecham-UKNow ??
75 Federal Trade Commission (FTC) and PBMs (1998) Sen. Wyden requested FTC investigation re monopoly-restraint of tradeApparent conflict of interests when PBM owned by pharm. manuf.Will PBM tend to push use of own products v those made by other manuf?
76 PBM’s –Unregulated Private Monopoly? Top 3 PBM’s will have 80% of all Rx businessExec from PCS-Caremark merger said it will increase their leverage with Rx manuf.Creighton School of Pharm study-Dr. Garis.
77 Sixth Stage: Managed Care Era (1988-Present) Definition: Systems, programs or actions aimed at controlling health care utilization, costs and promoting quality improvementGoals:To foster competition among providers and plansTo incorporate provider risk and incentives to promote efficiencyTo improve and document patient outcomesTo develop critical pathways designed to improve patient outcomes
78 Hospital-Sisters of Providence-The Good Health Plan Managed Care Organizations (MCOs)by ownership (MCO is new name for HMO)Hospital-Sisters of Providence-The Good Health PlanInsurance Company-HMOO-BluesStaff Model-Kaiser/Group Health CooperativePhysician-COIHS/Family CareAcademic Medical Center-CareOregon-OHSU
79 Today’s MCOs Possess: Superior data analysis technology More Provider risk assumptionMore emphasis on medical outcomesEnhanced purchaser sophistication drives more accountabilitySuperior Medical and Drug TechnologyMC Source
80 Health Insurance Continuum 1. Pure Indemnity2. Modified Indemnity3. PPO4. PHO/ Group IPA HMO5. Staff “Pure HMO”6. Equity HMO7. Consumer Choice Model/Medical Savings Accts
81 1. Pure Indemnity No Utilization Review No Provider Selection Total Freedom of ChoiceFFS PaymentExperience Rated
83 3. PPO Physician Profiling Providers selected to participate in the PPOConsumer Incentives to limit choice of providers
84 4. PHO (physician hospital organization)/Group IPA Formal Peer ReviewProvider Panel in placePayment to providers using withholds/CapitationCommunity Rated
85 5. Staff HMO (Kaiser) Formal peer review Uses Protocols Providers are employees/on salaryGroup Practice
86 6. Equity HMO (MidValley IPA-Salem) Formal Peer Review, ProtocolsProvider PanelProfit Sharing among docsOwned by Doctors
87 7. Consumer Choice –Medical Savings Accts Offers consumers a variety of choices to meet individual needsMSA accts-pay for health care with pre tax dollarsPharmacy example
88 Factors Causing Delivery System to Change 1. Declining Hospital Use2. Purchaser Pressure to reduce costs(Public and Private)3. MD numbers
89 1. Declining Hospital Use Diagnosis Related Groups (DRG Payment System)Fixed Fees for hospital services regardless of hospital costsIncreased outpatient servicesPublic Lifestyles (wellness…)Incentives to physicians to not use hospitalsGrowth of Managed Care
90 Purchaser Pressure to Manage Costs Increased contracting by employers with HMOsIncreased demand for performance/accountabilityIncreased employer sophistication
91 MD Numbers 1950-14 MDs/100,000 people nationwide 1980-20 “ 1990-24 “40% of MDs are over age 50 (2000)38% will retire within 3 yrs/12% part timeCorvallis has about 100 MDs/50,000 peopleOr 2/1000 popAustralia 2.5/1000; UK 1.7; Canada 2.1; France 3.0; Germany 3.4; US 2.7
92 Common Characteristics of Managed Care Organizations Factor: Provider Panel/Fee Schedule/UR Utilization ReviewFOC (freedom of choice of provider)Assume RiskSells insurance
93 How Employers Select/Evaluate an HMO Handout/Overhead
94 NCQA Stds now include Health Outcomes HEDIS 3.0No. CHF pts taking ACE Inhibitors (proposed)Pt satisfactions surveyMandatory Disease Management Programs (Diabetes-see Genesis rpt)Includes Medicare and Medicaid pt. pop.
95 Accreditation NCQA accredits MCOs Joint Commission accredits hospitals Joint Commission on Accreditation of Health Organizationswill move to accredit MCOs also
96 1935-1996 - Legislative History Social Sec. Act 1935Hill Burton Act 1946Medicare-Medicaid 1965PSRO 19721973 HMO Act1983 PROs (replaced PSRO)1996 Health Ins. Portability & Accountability Act (HIPAA)Medicare Modernization Act of 2003 Rx benefit starting 2006
97 1935-1996 Con’t 1983 PROs (replaced PSRO) 1988 Medicare Catastrophic Coverage ActRepealed in 1989Medicare would have covered outpatient RxFunded by Medicare eligibles-not entire working population of USA
98 1935-1996 Con’t 1990 OBRA 90 (Omnibus Budget Reconciliation Act) (Medicaid Antidiscriminatory Drug Price and Patient Benefit Restoration Act)Mandated Drug manuf. rebates back to Medicaidrebates based on lowest price drug manuf. charged to MCOsDrug Manuf have raised contract prices charged to MCO, reducing Medicaid rebates $$OBRA mandated RPh Pt Counseling (Medicaid Pts)provided basis for St Bds Phar to mandate Pt. Counseling
99 1935-1996 Con’t HIPAA (Kennedy Kassenbaum Act) Main focus is security of patient data-PrivacyMakes Ins portable from job to jobdiscussion
100 Three Health Care Cost Management Options 1. Regulatory (health care planning-Gvt control)2. Market Place Competition-Competing Delivery systems-little Gvt control3. Managed Care Approach-Combines market and regulation approachManaged Care Approach-Employer Driven over last few years
101 Group Practice of Medicine Characteristics1. Shared Facilities and equipment2. Full Time MDs3. Two or more medical specialists4. Shared patient responsibility5. Pooled income (PCs are usually a partnership-like a law firm with Partners)
102 Hospitals - General Stats (2001) Federal Hospitals 264Community Hospitals 4,956Not for profit Community-3,012For profit Community-747State/Local Gvt-1,197Handouts for 2002 stats
103 Hospitals 90% of hosp revenue is from Ins. must compete for MDs based on facilities and technologyMDs have admitting privileges, are not hosp. employeesHosp has MDs on staff i.e......, ER and Radiology
104 Hospitals are Accredited by Joint CommissionNeed accreditation to participate in Medicare/Medicaid/residenciesJoint Commissionincludes AHA, AMA, Am Society Health Systems Pharmacists
105 Provider Specialization 80 % of MDs today are specialistsbut provide primary care i.e......, Internists, OBGYN, PediatricianMDs have specialty boardsBD Qualified-complete post grad trainingBD Certified-training plus residencyNo laws covering MD specialist trainingregulated by the Medical ProfessionLooming shortage of specialists
106 MD CON'TMD gains hospital admitting privileges upon review of medical staff
107 RPh Specialties LTCF/Geriatric Nuclear Pharmacy Institutional Based Clinical Practice
109 Cost of Health Insurance-Kaiser Study Ave Annual Premium (family ) $9,068 (2003)13.9 % increase over 2002Small business (3-9 workers) 16.6% increaseMid sized ( workers) 12.4% increaseAve premium paid by a family grew 1.29% over 2002 now $201/month.Single employee pays $42/month.
110 How Much is a Billion?? billion seconds ago it was early 1950s billion minutes ago, it was about 2,000 yrs agobillion dollars in Wash DC was about 10 hrs.
111 Aging Trends: Ratio of People Age 20:64 to Those 65+ (source: WSJ )
112 Aging Trends 30 Million over age 65 in 1988 40 Million over age 65 by 201150 Million over age 65 by 2019One in Five will be over age 65 by 2030
113 General Causes of Cost Increases Demand FactorsSupply Factors
114 Demand Factors Aging Population Emergence of Chronic Diseases as Dominant Cause of MorbidityIncrease of environment and behavior risk factorsPlan Benefit DesignRepeat Hospitalization for Same Disease
115 Supply Factors Life Style (behavior, lack of preventive care) Increased UtilizationTechnologySystem Inefficienciesduplication of services/facilitieswaste/fraudIncomplete electronic medical record system
116 Cost of Unhealthy Workers People who smoke one pack per dayhave 65 % more hospitalizations than non smokerswhen both have COPDsmoking creates 50 billion in annual health care costs25% of pop smokeObesity costs employers $12 Billion per year (2003)
117 Seat Belt Use non seat belt user cost 150% more to treat than a seat belt user in same type of accident
118 Lifestyles that increase costs (handouts) lack of exercisexs weightsmokinghypertensioncholesterollack of seat belt use
119 Employee Wellness/Weight Reduction Obesity increases health care costs and absenteeism65% of US pop is overweight (2003) BMI over 25/30% are obese (BMI over 30)Defined as a BMI for men greater than 27.8; for women greater than 27.3Major differences in health care costs noted for overweight people were age 45 + and particularly among womenBMI is weight divided in inches squared times 704.5
120 Ave Annual Health Care Costs for Employees Age 45+ by BMI (1996) At Risk Overall-$2,933At Risk Men-$2,064At Risk Women-$3,610Not At Risk-$1,748Not At Risk Men-$1,202Not At Risk Women-$2,038
121 Why Do Hospital Costs Increase Staff SalariesTechnologyUncompensated CareGeneral Costs of doing business
122 Composition of Medicaid AFDC 66% of pop/26% of costElderly 15% of pop/37% of costMentally retarded, disabled 12% of pop/ 35% of cost
123 Rx Spending by Year (Billions $) 1999 $1052000 $1212001 $1392002 $1602003 $1842004 $212
124 Pharmacy Expenditures Approx 11% of total costMajority of Rxs 3rd partyAve No. Rxs/yr =4Ave No. Rxs retiree/yr 12Will become # 1 health care cost category within 4-5 yearsNumber 2 in this market behind hospital spending
125 Impact of Aging on Health Care Costs Study on 3.75 million lives (year 2000 data)Per capital lifetime cost $316,000Females $361,200 (2/5th of cost-longer lifespanMales $278,7001/3 of cost middle age50% during senior years-survivors to age 85-1/3 of cost in remaining yrs
126 Health, Life Expectancy and health spending among elderly 2003 dataCumulative health spending for healthier elderly are similar to those for less healthy elderly who die soonerHealth promotion efforts aimed at persons under 65 may improve longevity and health without increasing costsHealthy age yrsThose with at least one limitation in activity of daily living yrs
127 Methods to Manage Medication Costs 1. Maximum Allowable Cost (MAC)MCO establishes ceiling on generic pricesAverage Wholesale Price-AWPActual Acquisition Cost-AACAWP could be $567.00/AAC could be $43.00
128 2. Dispensing fees Money paid to pharmacist for dispensing Rx usually two or three dollars/RxCombined with AWP (minus) to pay for RxsAWP-12% plus $2.50 (common fee structure)
133 4. Capitation/Risk Pharmacies unlikely to have risk in future Dr prescribes so RPh can only do so much to control costsInsurance co., HMOs, employers have financial risk
134 5. Formularly List of Drugs paid for by the plan Developed based on therapeutics and cost
135 6. Generic Drugs Mandated by some plans always less expensive are all generics therapeutically equivalent to brand counterpart???Lanoxin, Theodur, Premarin, Tegretol...
136 7. Therapeutic Substitution Exchanging one brand drug for anothermust have MD OKAmoxicillin for PenicillinNaprosyn for Ibuprofen
137 8. Mail Order Prescriptions May be less expensive than retail on a per Rx basisPlan benefit usually structured, in the past, to reduce patient CoPayThis means Rx use goes up, if patient out of pocket is lessThis means total Rx costs are greater if Mail Order has lower CoPayPopular benefit, but not a cost saver for the MCODrug waste on mail order -4-12% of spend
138 9. Group Buying of Rx items Hospitals band together to buy in volumeIndependent Pharmacies band together to buy Rx itemsChains are merging to increase buying power
139 10. Benefit DesignLower out of pocket for Rx increases utilization
140 11. Treatment Protocol Lipid Example/Cardiovascular Risk Assessment Group Health Evidenced Based Medicine-CD
141 Hospital Cost Management DRG Diagnosis Related GroupFixed Fees for Hospital ProceduresEstablished by MedicareCommonly used by Ins. companiesRisk Assumption
142 Physician Cost Management RBRVSResource Based Relative Value SystemFee Schedule for MD Office visitsEstablished by MedicareCommonly used by Ins. CompaniesRisk Assumption-Capitation
143 Utilization Review Programs 1. Hospital BasedPre Admission CertificationOn Site ReviewConcurrent ReviewSeverity of Illness Reporting by MDshow overhead
144 UR- no. 2 Medication Non Adherence Definition: Overuse, underuse, misuse of Rx$177.4 billion annual cost to the system (2001 data)28 % of Medicare hospital Admissions caused by Rxs11% adverse reactions17% non compliance
145 Compliance Related to Doses per day bid- 80% compliance/ tid -60%/ qid 30%question: To what degree does compliance with a specific Rx lower total costs
146 Nonadherence and Hospitalization Oral antihyperglycemic Med non adherence and subsequent hospitalization among people with Type II Diabetes (Diabetes Care Aug 2004)Non adherence was defined as a med possession ration of less than 80%28.9 % were nonadherent to diabetic meds18.8 % and 26.9% sere non adherent to antihypertensive and lipid medsHospitalization rates increased when MPR dropped to 80% or less for diabetic pts
147 3. Drug Utilization Review (DUR) Inpatient. Focuses on use of target Rx items ie., antibioticsOutpatient Focuses on medication use patterns
148 Disease State Management (DSM) ReadingsDSM targets high cost, chronic diseasesWhere interventions can save money in 12 months or lessFor plans of under 65 age people
149 DSM (from RPh point of view) involves linking Community Based RPh clinical servicesto MCOand document outcomesHandouts-Ashville Project
150 DSM promotes patient education and responsibility RPh works to improve Rx complianceto improve adherence to treatment protocol
151 Rationing Occurs in all health care systems based on money coverage waiting time
153 Judging the Quality of Health Care Two Dimensions: Technical Process and Art of CareTechnical: Was the most appropriate treatment used?Art of Care: Manner in which the Provider interacted with Patient
154 Technical Carerefers to amount, type and manner of resource utilizationrequires correct diagnosis, proper course of treatmentrequires successfully implementing the treatmentrequires monitoring patient progressrequires stopping treatment if needed
155 Art of CareRefers to interpersonal interaction between provider and patientPatient Satisfaction measured by survey instrumentcalled SF 36. Health Status Short Form questionsmeasures patient satisfaction with care provided
156 Quality Assessment Accomplished by establishing minimum standards and measuring observed care against the standardsExample: % of pop that should be vaccinatedand Quality Improvementthe organization seeks to improve quality all the time
157 Quality Assurance (QA Programs) Organization establishes a minimum std of performanceDevelops ways to measure whether or not the std was metMeasured statistically
158 Quality Improvement Total Quality Improvement (TQM) Based on work of DemingQI: Quality Mgt and Improvement are information driven processes that involve using monitoring procedures to ensure that continuous improvement is being obtained
159 Measuring the Quality of Care Structure-equipmentProcess-how the equipment was usedOutcome-what were the results
160 Evaluation of Pharmaceuticals Efficacy: Defines Optimal Practice (clinical trials for FDA approval)Effectiveness: Compare actual with optimal practice (real world or standard care)Quality Assessment: Evaluate why actual and optimal practice differQuality Improvement: Design interventions to close gap between actual and optimal
161 Cost of Illness Analysis Calculate the Cost of a Disease i.e.., how much is spent on Diabetes each year??
162 Cost Minimization Analysis Compares costs for comparable treatments with the same clinical effectiveness and outcomesWhat is the least expensive drug to treat a disease ?
163 Cost Benefit Analysis Measures Costs and consequences only in dollars If you lower blood pressure, how much money does that save?If your patients are more compliant, how much money does that save?CBA could compare costs of a drug or non drug therapy i.e.., diet/exercise Vs drugs to control blood pressure
164 Cost Effective Analysis Measures costs in relation to therapeutic objectives in natural unitsCost to reduce blood pressure x number of points
165 Cost Utility AnalysisMeasures costs of therapeutic intervention against outcome preferences by the patientCost of cancer drugs against number of life-years gained by patient and patient’s preference for his or her quality of life when taking chemo.
167 Overview Who pays for medical care? How do they pay for it? What causes medical care spending to increase?Does medical care always increase a patient’s health status?Why is government so intimately involved in medical care and the production of health?
168 OverviewWhy is the cost of producing health such an important political issue all over the world?How do other countries provide and pay for medical care?What are some of their problems?What influence does organizational structure and insurance have on demand for medical care?
169 Health Economics Topic Areas I. Health, Health Economics and Medical CareII. Transformation of Medical Care into HealthIII. Policy Issues in Health Care FinanceIV. Global Perspective: Australia, Canada, Germany, UK and Sweden
170 I. Health, Health Economics and Medical Care A. Unique AspectsB. Health Care From an Economic PerspectiveC. Factors Influencing Demand for Medical CareD. Factors Influencing Demand for Health InsuranceE. Changes Through Time Influencing Health Care Markets
171 II. Transformation of Medical Care into Health A. Productivity of Medical CareB. How Insurance Affects Demand for Medical CareC. Role of Quality in Demand for Medical Care
172 III. Policy Issues in Health Care Finance A. Mandatory Employer Health InsB. Uninsured PopulationC. Health Care RationingD. Erosion of Plan BenefitsE. Rising Premium CostsF. Managing Process of Care v Managing CostsG. Medicare Reform Efforts
173 IV. Health Care Finance-Global-Australia, Canada, Germany, UK, Sweden A. Financing MechanismsB. Organization of Delivery SystemsC. ProblemsD. Reorganization Efforts
174 I (A) Unique Aspects-Health, Health Econ and Medical Care Government InvolvementUncertaintyAsymmetric KnowledgeExternalitiesParticipants
175 Government-State Licenses health care providers/facilities State Health Insurance CommissionerLocal Public Health ClinicsOthers
176 Uncertainty Illness is a random event (Accidents, colds, flu, pneumonia, diabetes, CHF)Illness is a behavior driven event(obesity, diet, exercise, drunken driving)Uncertainty creates hypochondriac behavior (illness anxiety)
177 Asymmetric KnowledgeLicensed health care providers usually have more knowledge than patientsMD decides what the patient needs to do and purchaseManaged Care Organizations ( MCOs) are intervening between MD-Patient re MD prescribing, requiring Prior Authorizations ( PA)
178 ExternalitiesOne person’s actions can create benefits or costs for othersCommunicable diseases ( flu, hepatitis, e-coli -handwashing-cooking)Antibiotics in the food supply/Drunken DrivingCocaine Use/Violence health care costsMedication non compliance
179 Participants Government Individual Consumers Employers Benefit ConsultantsPoliticiansConsumer GroupsInsurance Companies
180 (B) Health Care From an Economic Perspective Health as a Durable GoodHealth as a Public GoodThe Production of Health
181 Health as a Durable Good Health is a good that increases a person’s utilityPeople seek medical care to maintain/increase their health/utility
182 Health as a Public GoodThe Health of family/coworkers, or lack of it, influences us as individualsHow is health status influenced by Wall Street and the federal budget?
183 Health as a Public Good:Wall Street and Health Care ( NEJM-2-25-99) % of all HMO enrollees - investor owned HMO%Investor owned HMOs shaped the health care market - including non profitsIntensified market place competitionPushed cost containment to new levelsMore monitoring of physicians by non-MDs
184 Health as a Public Good: Wall Street and Health Care Stocks of major hospitals, HMOs and MD management companies have declined in recent yearsResulting in Insurance company mergersPharmaceutical and biotech stocks are outperforming market averagesEnbrel-Immunex from SeattleDeCode-Iceland Project
185 Health as a Public Good:1997 Balanced Budget Act Requires Medicare to cut $115 Billion/5 yearsMedicare subsidizes non-Medicare patientsWill reduce Medicare payments to hospitalsWill force hospitals to outsourceIncrease number of empty bedsMedicare Reform
186 Health as a Public Good: Trends HMOs/Insurance companies are experiencing losses/low marginsPressure to keep premium increases in checkIncreased technology costsExtremely unhappy patientscost shiftingnon covered itemsFederal Patient Bill of Rights
187 The Production of Health InvolvesMedical CareIndividual BehaviorEnvironmental FactorsEconomic FactorsOthers
188 (C) Factors Influencing Demand for Medical Care 1. Illness Events2. Systematic Factors3. Consumer Beliefs4. Provider Advice5. Income6. Money Price7. Time Price8. Medical Care Supply
189 (C) Factors Influencing Demand for Medical Care-con’t 9. Changing Inputs into Outputs10. Input Costs and Final Product Price11. Laws and Regulations12. Organizational Structures13. Final Product Price14. Individual Behavior and Public Consequences15. Rx Drug Advertising
190 1. Illness Events Overall Disease Trends in the 20th Century Issues in Infectious DiseasesAntibioticsIatrogenic Disease (Hospitals)Chronic Diseases and Infections
191 20th Century Disease Trends North America/Europe Substantial decline in mortality and an increase in life spanTransitioned from infectious diseases to chronicInfections-4.2% of Disability Adjusted Life Years (DALY)Chronic/Neoplasms-81.0% of DALYsDALY-measure of burden caused by disease and injury
192 20th Century Infectious Disease Trends Substantial declines during first 8 decadesCaused by improvements in sanitation, medical care, living conditions, economyTrend reversed in 1981-increase in deaths from infectionTrend lasted 15 years till % red.Red. Caused by decline in Aids deaths
194 Cause of Death World-Wide 1995 ( WHO) 51.9 Million Deaths33% Infectious Disease67% Other
195 Top Ten Infectious Disease Respiratory-4.4 Million DeathsDiarrhea-3.1TB-3.1Malaria-2.1Hepatitis B-1.1HIV/AIDS-1Measles, Neonatal tetanus, Whopping Cough, Roundworm, Hookworm
196 Antibiotics One-third of all Rxs are inappropriate 50 million Rxs/yr... for cold and viral inf.Up to 30% of Strep pneumonia resistance to penicillinAOM-80% of children recover without antibiotic RxMore than 70% of AOM preceded by viral resp inf.Dirty hands/surfaces v airborne droplets
197 Managing Resistance via Computer Programs Nosocomial Infections: Hospital acquired (Vancomycin Use)NEJM ArticleLDS Hospital in Salt Lake City, UTSystem reducedno. days excessive drug doseadverse eventsallergiesMIC matches
198 Antibiotic Prescribing Trends Towards more powerful new products (Zithromax, Biaxin)Increasing Dose of AmoxicillinInfluenced by:Patient ComplianceMD MCO PaymentLocal Resistance Trends
199 Reduced Prescribing Antibiotics to Children Study published in Pediatrics 2003Tracked all Rxs for 225,000 children in 9 HMOs fromAntibiotics use dropped 24% in patients under age 325% decline for those age 3-616% decline for those age 6-18
200 Number of Antibiotic Rxs/child per year by age (1996-2000) Age 3 months to 3 yrs. (2.46/1.89)Age (1.47/1.09)Age 7-18 (0.85/0.69)
201 Iatrogenic Hospital Disease Injury induced by the treatment itself1.3 million injuries per year$2 billion direct cost per year20-70 % may be preventableAdverse Drug Events ( ADEs)-19%ADE-most common cause of Iatrogenic Disease777,000 ADEs causing injury/death/year AHRQ ( )$1.56-$5.6 Billion cost
202 Iatrogenic Hospital Disease Approx. 3 hospitalized pts/1000 die-ADEApprox. 1 will have long term effects-ADEHospital Information systems reduce incidence of ADEsSome ADEs can never be stopped (Stevens-Johnson Syndrome)4 articles in handout
203 Pharmacist –Patient interviews cuts med errors Aug 15, 2004 Am J Health System PharmacyRphs and pharm students at Northwestern Mem Hosp in ChicagoInterviewed 204 pts with hrs admTo identify and resolve any discrepancies between pts med records, adm profile and actual med regimen50% of pts had med history discrepancies22% could have caused harm during hospitalization59% could have harmed pts after dischargeIntervention cost $5000-saved $39,000
204 Chronic Diseases and Infections Ulcers-H-PyloriAntibiotics and Risk of 1st Acute Myocardial Infarction ( AMI)Risk of AMI declines if patient has taken Tetracycline or QuinolonesBacteria in mouths can causeNephritisRheumatoid arthritisDermatitis, Pneumonia, Endocarditis
205 2. Systematic Factors Rate at which health depreciates over time Age, Sex, Occupation, Behavior, Race, Inherited factors...
206 3. Consumer Beliefs (Alternative Medicine) A broad set of health care practices that are not readily integrated into the dominant health care model.Alternative Medicine poses challenges to diverse social beliefs and practicesCulturalEconomicScientificMedical & Education
207 4. Provider Advice Patient’s don’t always follow expert advice non compliance (Rx , treatments - )OSU Ph D study ( Public Health & Pharmacy)
208 5. Income Individual Economy in General Health Insurance Government subsidies ( Transfer Payments)MedicareMedicaidPublic Health ProgramsOthers??
209 6. Money Price Cost of health care items Out of pocket costs--co payments, deductibles...Cost of Health Insurance Premium
210 7. Time PriceYour Personal Time to see a physician, schedule something...
211 8. Medical Care Supply No. of MDs/100,000 population Needed: /100,000 population-yr.??Varies considerably by geography and local wealthRural-20% of USA pop. 9% of MDs
212 9. Changing Inputs into Outputs-Quality Counts Def: The degree to which health services for individuals and populations increase the likelihood of desired health outcomesQuality is in the eye of the beholderMD-application of evidence-based medicinePt.-how long was the wait for an appt or RxEmployer-no complaints/low cost
213 Problems with Lack of Quality that Increase Costs Costs from Iatrogenic DiseasePhysician practice variationsLack of Information systems (already discussed)Treating chronically ill patients in an acute care model
214 Does Quality Care Drive Market Share New York State’s physician specific mortality report for CABGPhysicians & Hospitals with lower mortality rates have experienced increased businessHow many CABG procedures per year are needed to attain proficiency?
215 Hospital Volume and Surgical Mortality in the US Mortality decreases as hospital surgical volume increasesRisk varies with type of procedure12% diff for pancreatic resection0.2% diff for carotid endarterectomy64% diff for aortic aneurysm repair (hosp with 30 or fewer surgeries most risk)NEJM April 2002, JAMA March 2000.
216 10. Input Costs and Final Product Price What controls the Final Product Price of a health care item?
217 11. Laws and Regulations Health Care Mandates Coverage mandated by State lawApplies only to health insurance polices controlled by state health insurance laws1000 mandates across the USAMandates coverage for hairpieces, in vitro fertilization, pastoral counseling…Self insured companies are exemptMandates impact small businessCost impact-up to 30%
219 Organizational Structures Have different levels of efficiency and information systemsDevelop locally based on local needs/politicsAn IPA on the West Coast looks different than those on the East CoastTherefore create different health care costs and local financing options
220 US Health Care System: Drivers of Change EmployersInsurersGvtCitizensEmployeesConsumer ChoicePatients; PhysiciansHospitals; Product Suppliers; Dis.Mgt.Technology
221 13. Final Product PriceEstablished by Insurance co., HMO, Gvt
222 14. Individual Behavior and Public Consequences Obesity-Body Mass Index ( BMI) ntl 222=28.6%-Obesity costs 9% of totalSmokers: Health care costs -(millions) $9,473 smokers, non smokers $11,138Smokers cost less because they have a shorter life span. (NEJM )Cost of ViolenceCost of Illegal Drug use/infants born addicted
223 Habits: “I’ll take fries with that” ObesitySedentary lifeTobaccoRisky behavior
241 Percentage of Adults Getting Any Physical Activity 30 Minutes Per Day, 5 Days Per Week
242 Individual BehaviorFactors Associated with Women’s Adherence to Mammography Screening Guidelines27% of women had the age-appropriate number of examsMore likely to adhere if they reported participating with their MD in the decision to be screenedWere younger, had smaller families, higher education/income…see article
243 Individual Behavior Public Health/Pharmacy PHD study Asthmatic patients in OHPAmbulatory patients managed by a RPh working with pts MDBetter outcomes achieved if MD actively participated in process/supported
244 Individual Behavior-Rx non-adherence Costs more than we spend on outpatient Rxs/yr...Creates health care costs = 125% of Drug SpendBetter educated AIDS patients are more compliant57% of College grads v 37% of high school dropouts were compliantEducation makes no difference with diabetic patients complianceStatin 1 in 4 elderly pts compliant after 5 yrs
245 Rx Drug to Consumer Advertising Spending $2.5 Billion in 2000$1. 8 Billion spent 1999Up 40% over 1998Total promotional spending 1999 $13.9 BillionTen Rx items=41% of spending (1999)Claritin $137.4 million/Propecia $99.7/Viagra $93.5/Prilosec $79.5/Xenical $75.5/Lipitor $55.5/Zyban $54.8/Nolvadex $54.4/Flonase $53.5$125 mill on Vioxx-more than spent on Pepsi ads in 2000
248 D. Factors Influencing Demand for Health Insurance 1. Financial Risk2. Price of Insurance3. Tax Laws4. The Supply of Health Insurance5. Interaction of Insurance, Employers and Medical Markets
249 1. Financial RiskMost people seek insurance to avoid the high cost of illnessSome high income people do not purchase health insuranceReflects individual attitude towards risk assumption
250 Most prominent feature of Am. Health Ins coverage is its slow erosion 2. Price of Insurance/4. Supply of Ins., & 5. Interaction of Ins., Employers and Medical MarketsMost prominent feature of Am. Health Ins coverage is its slow erosionAmericans without health ins grew from 14.2% in 1995 to 16.1%-1997 (43.4 million people)% of pop without ins-17.3% 2002No. of people underinsured grew fasterCaused by deterioration of employer provided coverage-the source of coverage for nearly two in three people
251 2/4/5. Why?Because health care prices have increased more rapidly than income (Kronick Article Health Affairs Mar/Apr 1999)Lack of insurance is correlated to low incomeannual income xs $75 K; 8% with no insannual income less than $25K 24% with no ins
252 2/4/5.50% of those below Medicaid poverty line had at least 1 month with no ins.31.6% of all the poor had no ins at all in 199752% of all employees below poverty level had no ins 1996.
253 2/4/5. Employers health care premiums increased 218 % (1980-1993) Inflation adjusted GDP rose by 17% during same time periodAverage cost of a family policy PPO is above $10,000 per year (2004)Average worker pays $558 for single coverage/$2,661 family plan/yr 2004
254 2/4/5.-What Caused the Erosion in Coverage-Insured and Underinsured? 1. Rising Premiums (Technology/ Demographics/Utilization)2. Trend toward Temporary Workers3. Benefit reductions-most notable Rx drugs4. Coverage Limits-excluded items.5. Shift from HMO to POS (requires out of pocket payment-pt then submits for payment to ins co.)
255 Con’t6. Loss of Medicaid Coverage due to Welfare Reform passed by Congress7. Rising cost of Medigap coverage for over 65.8. Reduction in services to illegal immigrants (in some states)
256 3. Tax Laws Health insurance premiums and expenses are tax deductible US Tax Code subsidizes health care purchases
257 E. Changes Through Time Influencing Health Care Markets 1. Changes in Overall Economy2. Demographics3. Technology4. Price and Spending Patterns5. Growth in Medical Prices6. Medical Spending Patterns
258 1. Changes in Overall Economy A robust economy should be able to afford health care ins for employeesIs this the case now Vs s??Why was health insurance added as an employee benefit after WWII?
259 2. Distribution of US Pop by Age/Year Y2000 (%) Y Y2050UnderSource WSJ
260 3. TechnologyNew Technologies substitute for older ones at higher costRx Industry is an example-www.pharma.orgGenetically engineered drugsi.e.., treat breast cancer without side effectsEnbrel for RA
261 3. Technology Genetic information varies from person to person Pharmacogenomics-study of genes to determine how DNA variations diminish or amplify drug effectCan have a drug for 1% of populationHep C and Peg IntronGenetic Testing for Rx-Patient Compatibility
262 4/5/6.Price, Spending and Growth in Medical Expenditures Spending Trends1997 Spending was $1.092 trillion (13.5% GDP)2007 Projected $2.1 trillion (16.6% GDP)Gvt spending-40% of total in 1990Gvt spending % 1992Gvt spending-46% % 2002
263 4/5/6.-Role of Employers Paid for 60% of health care costs Deducted as a business expense
264 4/5/6-Role of GovernmentAs modern economies prosper-more is spent on health careCountries with per capita incomes above $8,500 accounted for 89% of global health spending in 1994These countries comprised 16 % of global pop.7% of DALYs
265 4/5/6. US-Spends More per Capita than other Countries-Why? 1. MDs in US are paid more/unit of service2. US hospital costs are higher3. Medical technology diffuses more rapidly and used to treat more people
266 4/5/6. Medicaid Funding Covers 51. million people Costs $257 billion 2002
267 4/5/6. Medicare Funding-4 Sources 1. Mandatory contributions from employers and employees2. General Tax revenues3. Beneficiaries Premiums4. Deductibles and co-payments pd by patients (supplemental ins.)Part A-Hospital Trust FundPart B-MD, Outpatient, Home Health..$ monthly premiumPart D. Rx-premium and co pays
268 4/5/6. Contributions of Individuals Out of Pocket spending-17.2% of all ntl health spendingDrugs the largest single cat of out of pocket
269 4/5/6. Five General Factors Driving Health Care Spending 1. Population Growth2. Economy wide Inflation3. Excess Medical Inflation4. Per Capita Use of Services5. Intensity
270 The Internet and Health Care Ultimate Knowledge BusinessImpactsOrganization of health care services (MD referrals/selection)Information available to consumersProvision of services (cyberspace HMO)Data analysisData acquisition and storageExamples from the net
271 II. Transformation of Medical Care into Health A. Productivity of Medical CareB. How Insurance Affects Demand for Medical CareC. Role of Quality in Demand for Medical Care
272 A. Productivity of Medical Care 1. Marginal and Ave Productivity2. Productivity Changes on Extensive Margin3. Productivity Changes on Intensive Margin4. Evidence on Aggregate Productivity of Medical Care5. Aggregate Data Comparisons
273 A. Productivity of Medical Care 6. Prospective, Randomized Clinical Trials7. Evidence on Productivity of Specific Treatments8. Medical Practice Variations on the Extensive Margin9. Variations in Physician Practice Patterns
274 1. Marginal and Average Productivity For almost every medical intervention, there is a point at which Incremental Productivity (Marginal) of medical care could become negative.However the Average Productivity can be high.On Average, Medical Care has been beneficial, but after a point, overall benefits can decline
275 2. Productivity Changes on Extensive Margin Productivity of health care resources varies with total amount usedMarginal productivity of health care resources will increase at low levels where none existed before i.e.., penicillin where none had been used beforeMarginal productivity will fall as more resources are usedLarge amts of care-Iatrogenic Disease
276 2. Productivity Changes on Extensive Margin Inpatient Practice Patterns-Oregon v Florida (NEJM-1994)FL MDs used 53% more resources per Medicare patient admission than did OR MDs-no apparent diff in outcomesStudy was case mix adjustedIs an example of variation in MD practice patterns
277 Medicare Spending-Miami, MPLS, Portland & Orange CA Age,Sex and Race adjusted spending for FFS Medicare PtsMiami 1996 $8,414-MPLS $3,341Portland is about same as MinneapolisHigher spend does not produce better health outcomesMeans more spending on physicians and hospital staysIf high cost areas were reduced to low cost areas, Medicare costs would decline 30% or $120 billion per year.
278 3. Productivity Changes on the Intensive Margin Frequency of doing somethingHow often should a 40 yr.... old get a physicalHow often should a 50 yr.... old get a physicalHow often PSA screenings, mammograms?
279 4. Evidence on Aggregate Productivity of Medical Care How much health care do we get from our current patterns of medical care use?JAMA study-Prof... Ware, using the SF 36, Health Status Survey-19964 yr.., 2235 patients comparing FFS v HMOPatients were age 18-97hypertension, NIDDM, AMI, CHF, Depr.
280 4. Results-JAMA studyPhysical health declined and mental health remained stable during 4 yr.. follow upphysical declines larger for elderly than nonelderlyOver 65 declines in health were more common in HMOs v FFS 54% v 28%Conc. Elderly and poor chronically ill pts had worse health outcomes in HMOs
281 4. Results-NEJM study-Canada/US AMI Canadian pts. Hospital stay 1 day longerMuch lower rate of cardiac cath/ angioplasty, and CABGAt one yr.., 24% of Canadians, 53% of US-had angioplasty or CABGCanadians-more visits to GPs, but fewer to specialistsAt 30 days, functional status was same
282 4. Results After one year, US pts had substantially more improvement Prevalence of chest pain and dyspnea at 1 yr.. was higher among Canadians34% v 21% (chest pain) & 45% v 29% (dyspnea)
283 5. Aggregate Data Comparisons Comparing Mortality Data Among Hospitals to Assess Quality of CareAre death rate comparisons among hospitals valid comparison?
284 6. Prospective, Randomized Clinical Trial Data The gold standard of researchFDA’s favorite study designMethod used for many drug, population, medical studiesProspective trials involving control and experimental groupsTreatment and non-treatment arms
285 7. Evidence on Productivity of Specific Treatments Use of Beta blockers post AMI-JAMA 1998115,015 patients 65 and older50% (USA av.) received a beta blocker post AMI hosp. Discharge30-38% in OregonAmong ideal pts., 1 yr.. death rate was 7.7% for those getting b-blocker; 12.6% for those not getting the drug
286 7. Evidence-con’t-JAMA Oct 2000 Use of Beta blockers post AMI% of patients who received beta blocker upon dischargeNational Ave 75%Oregon 77%Alaska 73%California 68%Washington 66%Hawaii 51%
287 7. Evidence-con’tWide variation in use of coronary angiography after AMIrates of angiography inversely related to risk of death from heart disease and risk of heart eventsPts followed for 1-4 yrs after AMI
288 Prescribing Variations for Cox II –Vioxx/Celebrex 27% Rxs were for lower back pain-not approved indicationOver 50% had less than a 60 day supply over a 1 year follow up, so drugs are not used for long term therapy when stomach bleeds/problems most common50% were taking 325 mg ASA which negates COX II effects74% of pts had no history of GI risksCelebrex as effective as naproxyn
289 8. Medical Practice Variations on the Extensive Margin Productivity can vary with amount of care providedSimilar to previous slide “productivity changes”..medical practice variations drive productivity variations to some degree
290 8. Con’t Hospital Readmission Rates-Boston/New Haven. NEJM 1994 Medicare Claims studyAMI, stroke, GI bleed, hip fracture, surgery (breast, colon, lung cancer)Boston’s hosp readmit rate was higherNo difference in outcomes
291 8. Con’t Place of Death Medicare data base 1992-1993 38.7% of all deaths occurred in hospitalMarked variations in all 306 hospital regions in USLow was 22.5 % in PDXHigh was 53.5% in Newark
292 9. Variations in Physician Practice Patterns What is severity of illness adjusting-how does it work?Why do it at patient or hospital levelSoftware to study this subject
293 9. What is SOISome patients, who have the same disease, are more ill than othersThere are a variety of computerized systems that “risk adjust”Some are based on key clinical findings (abstract the medical record)Others are based on information from discharge abstracts
294 9. Do Different Systems Produce Different Results? MedisGroups-predicted death rates for pneumonia & stroke well (medical record abstracting)Disease Staging-AMI (computerized discharge abstracts)MC Source/Episode Treatment Groups
295 9. Why do it? Managed Care Report Cards will not go away No other way to dialogue with MDs re quality of careAvoid penalizing providers ( Hospital and MD) who treat high risk patientsi.e.., New York CABG data by MD
296 B. How Insurance Effects Demand for Medical Care 1. Co-Payments, Deductibles2. Co Insurance Rae3. Indemnity4. Max/Min out of pocket5. Prior Authorizations
297 1. Co-Payments, Deductibles Impact of Co-payments/Deductibles on Utilization and CostAre Income sensitivePERS-Data (AHCPR Study)Group Health StudyBenefit Design, Federal Subsidies (Designing a Medicare Rx Benefit-Health Affairs 4/2000)
298 Medicare Benefit-Issues What is covered-FormularyAmount of Tax SubsidyWho is eligibleCo-paysOpen Enrollment PeriodWho will manage it? Feds or Ins/PBMsWho has financial risk-Feds or Ins co.Who has oversight?
299 2. Co-Insurance RatePatient pays a percent i.e.., 20%, Plan the balanceTypical for indemnity/major medical
300 3. Indemnity To indemnify-Protect against loss Traditional Insurance, no MD or Pharmacy networkPatient seeks out own provider, submits a paper claim
301 4. Max/Min Out of Pocket Patient must meet a front end deductible Benefits Max out at a certain level of spendingCommon in Rx benefit design
302 5. Prior AuthorizationsNEJM Study-Limiting Ambulatory Rxs and LTCF AdmitsNEJM Study-Limiting Psychotropic Rxs and use of Acute Mental Health ServicesPA on ambulatory Rxs by MCOsCelebrexViagraEnbrel; Prilosec; OHP--Claritin, Flonase
303 Guidelines for Submitting Clinical & Economic Data-Formulary Consideration Washington’s Regence Health Program ( King County Medical)Requires Drug Manuf to submitClinicalProspective and Retrospective Economic EvaluationsCBA, CEA studiesSame format used by Australia to determine drug listings for their formulary
304 Quality of Care What is quality? How should it be measured? Who should be held accountable for providing quality health care?What are the consequences of poor quality?
305 C. Role of Quality in Demand for Medical Care 1. Evaluation of Health Care Quality2. HEDIS3. Consumer Reports4. Consumer Satisfaction Surveys
306 1. Evaluation of Health Care Quality-6 Challenges in Measuring Quality 1. Identify and balance competing perspectives of major participantsQuality is in the eye of the beholderPurchaser-how well are $ being spent/lack of complaints/others??Patients-cost/access/waiting times/any problem can be fixed…MDs-mixed: financial/own judgement/patient demands
307 1. Evaluation-Con’t 2. Develop an Accountability Framework Joint Commission (JCAHO)NCQA-HEDISPublic release of inf relation to quality of care delivered by plan, hospital, medical group, MD--implies that the entity is responsible for results reportedReporting same measures for similar groups implies it’s reasonable to compare?
308 1. Evaluation-Con’t3. Establish explicit criteria for judging performance (annual mammograms)4. Indicators for External Reporting (Which HEDIS indicators should be reported)5. Balance financial and quality goals6. Facilitate Information system development
309 HEDIS-NCQA www.ncqa.org HEDIS is a set of standardized performance measures designed to ensure that purchasers and consumers have the info needed to reliably compare MCO performance.Measures Process and some outcomes
310 Process Measures-% Who received Flu ShotsVaccinationsDiabetic eye examsBreast Cancer screeningsCholesterol Mgt. after AMIBeta Blocker post AMI
311 Outcome Measures Patient satisfaction with health plan Patient functioning in daily lives
312 3/4. Consumer Reports/Consumer Satisfaction Surveys Oregon Coalition of Health Care Purchasersreviewed 11 HMOs and PPOs in PDX areaDid patient get information, was MD courteous, MD communication skills, any problems getting health carerandom sample, no mention if patients surveyed in each health plan were similar-demographically...
313 III. Policy Issues in Health Care Finance A. Mandatory Employer Sponsored Health InsuranceB. Uninsured PopulationC. Health Care RationingD. Erosion of Plan BenefitsE. Rising Premium CostsF. Managing Process of Care v Managing CostsG. Medicare Reform Efforts
314 A. Mandatory Employer Sponsored Health Insurance National Ave-per employee health care costs 1998-$4,033/yrMost small businesses oppose mandatory ins.Less than half of small business employees now receive ins via employer# declined between 1996/1998 from 52% to 47%
315 B. Uninsured Population-NY Times Feb 26, 1999 43.4 million lacked ins-1997-(44.2 million lacked ins % of pop)(42.5 million lacked ins % of pop)Men more likely than women to go without ins. 18% v 15%15% under age 1830% between ages 18-2123% between ages 25-3417% between ages 35-4414% between ages 45-64; 1 % over 65
316 B. Uninsured POP-Families USA June 2004 43.6 million uninsured in US 200281.8 million 1 out of 3 or 32.2 % under 65 were without health insurance for all or part of65 % were uninsured for six or more months84 % of those without health ins held jobs14% of Oregon’s pop is uninsured
317 B. Uninsured Pop.49% of full time workers with incomes below poverty line lack ins. Compared to 17% of all full time workersHispanics-34%Blacks 22%Asians 21%Whites 15%All care is rationed, one way or another-by employment, income, waiting lists, availability.OHP Rationing is based on an explicit listOHP started95% plus of Medicaid pts in some 20 MCOs around the state
318 OHP-RationingPrioritized all health care services into a rank ordered listBased on what is covered, not whoList of covered treatments is based on relative effectiveness of medical serviceOHP covers uninsured workers and traditional Medicaid pop.
319 OHP-What is Covered Treatments below the line are not covered Line is now 578Line 1 is Head InjuryLine 2 is DiabetesLine 745-Radial Karatotomy
320 Below the Line Low Back Pain Infertility Allergic Rhinitis Common cold Most fungal infections
321 Oregonian Survey of OHP 2-3-99 75% of OHP eligibles received all the care they needed1 in 4 ran into some kind of barrier to the care they neededOHP Barriers to receiving necessary/desired care42% service not covered38% physical/mental disability34% service denied by MD/plan
322 OHP Barriers 15% wanted to use alternative care provider 13% location 11% language11% personal barrier3% sign-language interpreter not available
323 D. Erosion of Plan Benefits Increased patient co-paymentsIncreased patient pay premiumsCost shifting in generalMore non covered items
325 F. Managing Process of Care v Managing Cost What is the difference??Which one is easier to accomplish??
326 G. Medicare Reform-The Problem Health care expenditures for Medicare pts grow 4% more rapidly that the GDPThe # of elderly are growing 1% faster than the rest of the populationElderly consumption of care is growing rapidlyIf current trends continue till 2020, cost/yr will be $25,000 (1995 dollars) v $9,200 in 1995
327 G. Medicare Growth Caused by: Growth in TechnologyUse of services (no outpatient Rx)7 TechnologiesAngioplastyCABGCardiac CathCarotid endarterectomyHip & Knee replacementLaminectomy
328 G. Medicare: Who Pays Now? 89% of Medicare revenue from taxes paid by people under age 65; income taxes; interest on the Medicare Trust Fund11% from monthly premiums from recipients
329 G. Medicare: Who Receives Benefits? 34 million people over age 655 million of whom are permanently disabled284,000 of whom - end stage renal75% have household annual Inc. under $25,000When Medicare per capita expenditures Ave $4,083
330 G. Medicare: How Much Does the Ave Person Contribute? Most beneficiaries receive far more than they contributeA couple retiring in 1998, with one wage earnerWho paid Ave Medicare Taxes since 1966Paid in $16,790 + Employer contributionPart A future benefits EST. $109,000
331 G. Medicare: What Can Be Done? 1. Slow the growth of health care spendingDecrease mat paid for services/productsProduct more with fewer resourcesSlow the rate of growth of services to patientsWill cut quality of careQuality of life will declinePatients will complain to Congress
332 G. Medicare: What Can Be Done? 2. Find ways to pay for more health careMore taxesHigher Medicare premiumsHigher Co-paysImplement a Voucher System
333 G. Medicare: What Can Be Done? 3. Restructure the Delivery SystemMandatory MCOs?Eliminate practice variations?
334 G. Medicare: Balance of Payments/State Oregon Taxpayers pay out $385 Million more than we get from MedicareWash DC, receive $638 millions over what they paid in taxesFlorida receive $6,822 millionsPennsylvania receive $2,408 millions
335 IV. Health Care Finance: A Global Perspective: Australia, Canada, Germany, UK & Sweden
336 Harvard, Commonwealth Fund Study-AU, Canada, NZ, UK, US 25% of respondents said their system works “pretty well”One in three called for “complete rebuilding”-US, NZ, AU23% of Canadians, 14% of UK would “completely rebuild”
337 Major Concern US-Affordability Canada, NZ, UK, -Gvt Funding AU, NZ, - Waiting Time
338 US US families are most likely to report access to care problem- US has the highest proportion reporting a time when they did not get needed careUS-28% say getting needed care is “difficult”US-one in three have no regular MD
339 Access to Care Canada and NZ - Access problem similar to those in US Canadians are particularly concerned about access to specialists-50% say its difficultWaiting Times-non emergency- longest in UK, shortest in US44% of UK pts-MD will come to their home nights/weekends. (UK residents least likely to report access difficulties
340 Western European Health Care Reforms (Health Affairs-Mar/Apr 99) WHO Study Four Reform Themes1. Roles of State and Market2. Decentralization3. Patient’s Rights4. Role of Public Health
341 1. Role of State and Market Presumption of public primacy is being reassessedSome countries use elements of bothCombining market-style incentives with continued public sector ownership and operation of facilities
342 2. DecentralizationDecentralization of administrative and sometimes policy authority to lower levels in the public and private sectorThis requires a supportive environment of:Sufficient local Adm. and mgt. capacityideological certainty in implementing tasksreadiness to accept several interpretations of one problem
343 3. Patients’ RightsMore patients want a greater say in selecting a MD or hospitalAlso want some say re clinical matters
344 4. Role of Public HealthIssues of health promotion and disease prevention existIn practice, health services have a limited impact on health status of a populationEducation, housing, employment, & agriculture have a greater impact
345 Strategies for Policy Intervention-WHO 1. Confronting Resource Scarcity2. Funding Health Care Systems3. Allocating Resources4. Delivering Services
346 1. Confronting Resource Scarcity Cost control--demand side1. Cost sharing - most place little emphasis on pt co-pays2. Priority setting - Always existed in Europe and was focused on implicit choices made by MDs to explicit choices made by a public political processhave restricted payments for a few things
347 1. Con’t 3. Supply Side strategies a wide range of things here such as reducing MD production# of hospital bedscontrolling price of health care workforceglobal budgetschanging ways providers are paid...
348 2. Funding SystemsUK, Nordic Countries, Ireland--predominantly tax-funded system and have universal accessThese countries are committed to a public sector roleAustria, Belgium, France, Germany, Luxembourg, Switzerland--long established statutory ins based systemsAre social ins systems & similar goals
349 3. Allocating Resources 1. Direct contracting (UK) And this is an alternative to traditional command and controlGvt acts as a purchasing agent for citizens2. Payment shiftsChange to performance related approaches (ffs tied a negotiated schedule/capped spending...
350 4. Delivery Services Efficiently Quality of care programsOutcomes assessmentClinical guidelinesProblems are in lack of good data
351 How has all this worked?Supply side reforms have worked quite well-limit amt spentDemand side-less successfulThe few countries that tried to incorporate privately accountable payers within a public structure encountered problems-Dutch, Swedes,
352 How is it worked?Many European countries have rejected cost sharing because of problems related to equity,Are now looking hard at Rx co-payments…But universal coverage remains a bedrock of their cultures
353 Australia Private ins in in a death spiral Gvt wants to give private ins holders a 30% rebateGvt has shifted many costs to private sector in recent years, so people quit and went back to public programsPrivate system will fail given current trends without cost relief from gvt
354 CanadaEach province has its own system, with fed/provincial funding-a Universal systemFed share of funding has declined--increasing local funding problemsSome provinces have cut more than others
355 Canada in 2002-Health Care Reform Top Political Issue Majority of citizens believe system needs reformingMedical Savings Accts/Improve Primary Care Delivery/Contract with private for profit providers etc.Budget Problems driving change
356 Canada Waiting TimesCancer pts wait 3 x longer than US pats for treatment (1/3 longer than Canadian MDs thought ok)Weighted Ave wait for surgery is 6.8 weeks,-not including wait to see surgery specialist of 5.1 weeksDiagnostic assessment (MRI…) weeks varies by provinceMDs in BC went on strike last month
357 Germany Has a century old universal system Is an employment based ins system founded by Chancellor Bismarck in 19th CenturyPast 20 yrs-passed laws trying to control costs and keep premium growth from exceeding employee incomesMost recent attempt is 1992 Health Structure Law
358 Germany-Health Structure Law Imposed global budgeting on MDsPlaced limits on # of MDs who be admitted into Ins PracticeFixed budgets for hospitalsAccelerated DRG systemTight controls on Rx costsFundamental change locked in political stalemate
359 Germany Political stalemate- It’s legal system largely blocks market driven changesIt has a national “any willing provider law”Has unified physician self governance (Direct relationships between docs or groups of docs and health ins funds is not possible)
360 UKNHS was created in 1948-is a publicly financed system-universal accessPM Thatcher introduced reforms in 1991GPs and Hospitals could become mini HMOs & have capitated risk for an pre determined # of pts
361 UKConcept partly developed by Prof.. Alain Entohoven of Stanford author of “Managed Competition”GP & Hospitals compete for patients using public dollars-sounds to me a lot like the OHPNHS hospitals are now called TrustsPrimary care providers now form General Practice fundholders
362 UKhas it worked?PM Tony Blair’s government has dismantled the competition experiment in favor of more central control.Health Affairs Article 2002.
363 Sweden Developed reforms like UK The changes caused major problems lack of trust between providers/purchasersgvt feared losing controlposed a threat to their fundamental principles of equal access(prbls-lack of total cost control,poor mgt., gvts need for central control)out of 6 working age Swedes is off work because of illness or injury.Disability pensions often larger than work income. 16% of ntl budget
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