1. HEALTH CARE SPENDING OUT OF CONTROL? IT’S THE INCENTIVES—STUPID! SIEPR-FACS CONFERENCE STANFORD UNIVERSITY SEPTEMBER 10, 2003 ALAIN ENTHOVEN

2. DEFINITION OF TERMS PPO PPO HMO HMO CARRIER HMO CARRIER HMO PREPAID GROUP PRACTICE PREPAID GROUP PRACTICE POS POS

3. EMPLOYER A PAYS 90% (2003 FAMILY MONTHLY PREMIUMS) H PLAN PREMIUM ER PAYS EE PAYS PPO$1050$945$105 PACCARE75067575 BLS CA 68061268 KAISER61054961

4. EMPLOYER B PAYS 100% H PLAN PREMIUM ER PAYS EE PAYS PPO$1050$10500 PACCARE7507500 BLS CA 6806800 KAISER6106100

5. EMPLOYER C PAYS 80% H PLAN PREMIUM ER PAYS EE PAYS PPO$1050$840210 PACCARE750600150 BLS CA 680544136 KAISER610488122

6. EMPLOYER D DROPPED THE HMOs H PLAN PREMIUM ER PAYS EE PAYS PPO$1050840-10500-210

7. EMPLOYER E PAYS ALL BUT $100 H PLAN PREMIUM ER PAYS EE PAYS PPO$1050$950$100 PACCARE750650100 BLS CA 680580100 KAISER610510100

8. EMPLOYER F HIRES ONE CARRIER TO OFFER 3 PLANS H PLAN PREMIUM ER PAYS 80% EE PAYS 20% PPO$1050$840210 POS950760190 HMO850680170

9. STANFORD, WELLS FARGO, U.C. AND H-P FIXED AMT H PLAN PREMIUM ER PAYS EE PAYS PPO$1050$520$530 PACCARE750520230 BLS CA 680520160 KAISER61052090

10. HOW MANY EMPLOYEES IN EACH? D OR F (SINGLE CARRIER) 77% A,B,C (HIGH FLAT %) 9 E (FIXED EE PMT) 1 STANFORD ET AL 5% OTHER DON’T KNOW 8 FORTUNE 500 9.6% w/choice+fixed $

11. STANFORD et.al. AFTER TAX H PLAN PREM ER PAY EE PAY EE NAT POS$1050520530318 PAC750520230138 BLS68052016096 KAISER6105209054

12. WHY A SINGLE CARRIER? HISTORY HISTORY ADMINISTRATIVE COST ADMINISTRATIVE COST ADVERSE SELECTION ADVERSE SELECTION EFFECTIVE MANAGED CARE MAY NOT EXIST IN THEIR AREA EFFECTIVE MANAGED CARE MAY NOT EXIST IN THEIR AREA

13. WHY CHOICE OFFERING EMPLOYERS SUBSIDIZE MORE COSTLY CARE? HISTORY HISTORY “GIVEAWAY-TAKEAWAY” DILEMMA “GIVEAWAY-TAKEAWAY” DILEMMA FEAR NEGATIVE EMPLOYEE REACTION FEAR NEGATIVE EMPLOYEE REACTION

14. CUTTING COST w/o CUTTING QUALITY OF CARE I REGIONAL CONCENTRATION OF COMPLEX SURGERY REGIONAL CONCENTRATION OF COMPLEX SURGERY DISEASE PREVENTION, EARLY DETECTION DISEASE PREVENTION, EARLY DETECTION CHRONIC DISEASE MANAGEMENT CHRONIC DISEASE MANAGEMENT PROCESS RE-ENGINEERING PROCESS RE-ENGINEERING

15. CUTTING COST w/o CUTTING THE QUALITY OF CARE II TOTAL VALUE DRUG SELECTION AND PURCHASING TOTAL VALUE DRUG SELECTION AND PURCHASING EVIDENCE-BASED PRACTICE GUIDELINES EVIDENCE-BASED PRACTICE GUIDELINES ELECTRONIC MEDICAL RECORDS ELECTRONIC MEDICAL RECORDS CQI: MISTAKES COST MONEY CQI: MISTAKES COST MONEY

16. CUTTING COST w/o CUTTING THE QUALITY OF CARE III SAFETY CULTURE & ERROR REDUCTION SAFETY CULTURE & ERROR REDUCTION ALLIED HEALTH PROFESSIONALS ALLIED HEALTH PROFESSIONALS MATCH RESOURCES TO NEEDS MATCH RESOURCES TO NEEDS STANDARDIZE EQUIPMENT, etc. STANDARDIZE EQUIPMENT, etc.

17. EFFECTIVE MANAGED CARE COHESIVE GROUPS OF MDs UNDER COMMON MANAGEMENT COHESIVE GROUPS OF MDs UNDER COMMON MANAGEMENT SELECT PHYSICIANS FOR QUALITY, EFFICIENCY AND TEAMWORK SELECT PHYSICIANS FOR QUALITY, EFFICIENCY AND TEAMWORK PHYSICIANS AND PATIENTS THERE BY CHOICE PHYSICIANS AND PATIENTS THERE BY CHOICE INTEGRATE FINANCING AND DELIVERY INTEGRATE FINANCING AND DELIVERY

18. EFFECTIVE MANAGED CARE INTEGRATE FULL SPECTRUM OF CARE INTEGRATE FULL SPECTRUM OF CARE EVIDENCE-BASED GUIDELINES EVIDENCE-BASED GUIDELINES SHARED COMPREHENSIVE MEDICAL RECORD SHARED COMPREHENSIVE MEDICAL RECORD CQI/TQM: PROCESS IMPROVEMENT CQI/TQM: PROCESS IMPROVEMENT

19. EFFECTIVE MANAGED CARE MUST BE A MATTER OF CHOICE FOR DOCTORS AND PATIENTS

20. WHAT MUST BE DONE? EVERYONE IN: WIDE CHOICE WIDE CHOICE RESPONSIBLE CHOICE RESPONSIBLE CHOICE INDIVIDUAL CHOICE INDIVIDUAL CHOICE INFORMED CHOICE INFORMED CHOICE MULTIPLE CHOICE MULTIPLE CHOICE

21. EXCHANGES ARRANGE MULTIPLE CHOICE CalPERS CalPERS CALIFORNIA CHOICE CALIFORNIA CHOICE PacADVANTAGE PacADVANTAGE

22. PUBLIC POLICY INCENTIVES FOR EMPLOYERS TO CREATE EXCHANGES AND OFFER MULTIPLE CHOICE INCENTIVES FOR EMPLOYERS TO CREATE EXCHANGES AND OFFER MULTIPLE CHOICE ERISA EXEMPTION FOR EXCHANGES ERISA EXEMPTION FOR EXCHANGES REQUIRE FIXED DOLLAR CONTRIBUTIONS REQUIRE FIXED DOLLAR CONTRIBUTIONS LIMIT THE TAX BREAK LIMIT THE TAX BREAK

23. IMPLICATIONS FOR MEDICARE COST BURDEN WILL BECOME INTOLERABLE COST BURDEN WILL BECOME INTOLERABLE MEDICARE IS LOCKED INTO FFS COSTS MEDICARE IS LOCKED INTO FFS COSTS MUST BE TRANSFORMED INTO A MARKET DRIVEN MODEL MUST BE TRANSFORMED INTO A MARKET DRIVEN MODEL

24. IMPLICATIONS FOR MEDICARE TRANSITION A LOT EASIER IF PRIVATE SECTOR WERE THERE TRANSITION A LOT EASIER IF PRIVATE SECTOR WERE THERE TAX BREAK SUBSIDIZES ABILITY OF PRIVATE SECTOR TO COMPETE WITH MEDICARE TAX BREAK SUBSIDIZES ABILITY OF PRIVATE SECTOR TO COMPETE WITH MEDICARE WE NEED BOTH PUBLIC AND PRIVATE SECTORS IN A MANAGED COMPETITION MODEL WE NEED BOTH PUBLIC AND PRIVATE SECTORS IN A MANAGED COMPETITION MODEL