1. Trends in Healthcare Costs and the Concentration of Medical Expenditures Trends in Healthcare Costs and the Concentration of Medical Expenditures Steven Cohen, Ph.D. and David Meyers, M.D. National Advisory Council July 13, 2012

2. Significance of the Issue Health care expenditures: Over one-sixth of the U. S. GDP Over one-sixth of the U. S. GDP Rate of growth exceeds other sectors of the economy Rate of growth exceeds other sectors of the economy Recent moderation in rate of growth Recent moderation in rate of growth Expenditure distribution is highly concentrated Expenditure distribution is highly concentrated Among the largest components of the Federal and states’ budgets Among the largest components of the Federal and states’ budgets Cost containment of continuing concern to private and public payers Cost containment of continuing concern to private and public payers

3. Most Recent Cost Statistics In 2010 total expenditures = $2.6 trillion In 2010 total expenditures = $2.6 trillion – 17.9% of GDP – 3.9% increase over 2009 – growth remained slow – $8,402 per capita Projected to be ~20% of GDP in next decade Projected to be ~20% of GDP in next decade Source: Anne B. Martin, David Lassman, Benjamin Washington, Aaron Catlin and the National Health Expenditure Accounts Team, Anne B. MartinDavid LassmanBenjamin WashingtonAaron Catlin Health Affairs, January 2012

4. Medical Expenditure Panel Survey (MEPS ) Data resources: Annual Survey of 14,000 households: Provides national and state estimates (most populous) of health care use, expenditures, insurance coverage, sources of payment, access to care and health care quality Provides national and state estimates (most populous) of health care use, expenditures, insurance coverage, sources of payment, access to care and health care quality Permits studies of: Distribution of expenditures and sources of payment Distribution of expenditures and sources of payment Role of demographics, family structure, insurance Role of demographics, family structure, insurance Expenditures for specific conditions Expenditures for specific conditions Trends over time Trends over time

5. Medical Provider Component Targeted Sample All associated hospitals and associated physicians All associated hospitals and associated physicians Sample of associated office-based physicians Sample of associated office-based physicians All associated home health agencies All associated home health agencies All associated pharmacies All associated pharmacies Data Collected Dates of visit Dates of visit Diagnosis and procedure codes Diagnosis and procedure codes Charges (except Rx) and payments Charges (except Rx) and payments

6. MEPS Insurance Component Annual survey of 40,000 establishments National and state Level estimates of employer sponsored coverage: Availability of health insurance Availability of health insurance Access to health insurance Access to health insurance Cost of health insurance Cost of health insurance Benefit and payment provisions of private health insurance Benefit and payment provisions of private health insurance

7. Trends in medical care costs, coverage and use Impact of economic and behavioral factors, payment and individual demand on health care service utilization and expenditures Distribution of expenditures, concentration and persistence of high levels Distribution of expenditures, concentration and persistence of high levels Expenditures for chronic conditions: focus on patients with multiple chronic conditions Expenditures for chronic conditions: focus on patients with multiple chronic conditions

8. Who Uses MEPS Data? Who Uses MEPS Data? MEPS IC data are used by the Bureau of Economic Analysis in computing the nation’s GDP. MEPS IC data are used by the Bureau of Economic Analysis in computing the nation’s GDP. White House, CBO, CRS, Congress and the Treasury: frequent requests for findings on health expenditures, insurance coverage and sources of payment. White House, CBO, CRS, Congress and the Treasury: frequent requests for findings on health expenditures, insurance coverage and sources of payment. Used extensively by the GAO to determine trends in employee compensation Used extensively by the GAO to determine trends in employee compensation Used by Treasury to determine amount of the small employer health insurance tax credit as part of the Affordable Care Act Used by Treasury to determine amount of the small employer health insurance tax credit as part of the Affordable Care Act

10. Assess Trends in Concentration of Healthcare $s and Distributional Cost Estimates Percentage of expenditures Source: National Medical Care Expenditure Survey, 1977; National Medical Expenditure Survey, 1987; Medical Expenditure Panel Survey, 1996 and 2008.

11. Characteristics that Influence High Levels of Expenditures Chronic condition(s): heart disease, cancer, mental disorders, COPD, diabetes Chronic condition(s): heart disease, cancer, mental disorders, COPD, diabetes End of life care End of life care In-patient care, unnecessary re-admissions In-patient care, unnecessary re-admissions Medical errors Medical errors Overuse of healthcare services Overuse of healthcare services Obesity Obesity

12. 12 Health Care Costs Concentrated in Sick Few —Sickest 10% Account for 65% of Expenses Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey (2009) Distribution Distribution of health expenditures for the U.S. population, by magnitude of expenditure, 2009 1% 5% 10% 50% 65% 22% 50% 97% 2009

13. Expenditures in billions of dollars Total expenditures for the 5 most costly conditions among the overall population and among the highest 5 percent based on their overall medical expenditures, 2009

14. Number of Treated Chronic Conditions 0-12-3 4 or more All adults (18 and over) Estimate SEEstimateSEEstimateSE Average expenditures $ 2,36762 $ 8,478303 $ 16,257665 Age 18-44 Average expenditures $ 1,86262 $ 8,165744 $ 14,7462,308 Age 45-64 Average expenditures $ 2,721117 $ 8,129462 $ 17,6851,284 Age 65 and over Average expenditures $ 4,878401 $ 8,979452 $ 15,553820 Medical Expenditures for Individuals with Chronic Conditions, 2009 Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey; excludes dental and OME $s

15. Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2008 Percentage of population with same percentile rank in 2009 Persistence in the level of health care expenditures, U.S. civilian noninstitutionalized population, 2008 to 2009 Percentile rank by health care expenditures, 2008 Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, HC-121, HC129, and HC-130 (Panel 13, 2008  2009)

16. Factors for Cost Projection Models Demographic/economic characteristics: Age; sex; race/ethnicity; marital status; region; MSA classification, family size, poverty status Demographic/economic characteristics: Age; sex; race/ethnicity; marital status; region; MSA classification, family size, poverty status Health status measures: health status; activity limitations Health status measures: health status; activity limitations Health insurance coverage: full year insured; part year insured; uninsured Health insurance coverage: full year insured; part year insured; uninsured Health conditions: Diagnosis of arthritis; cancer; BMI; cerebrovascular disease; diabetes; heart disease; high blood pressure; high cholesterol; mental health; back pain; pregnancy Health conditions: Diagnosis of arthritis; cancer; BMI; cerebrovascular disease; diabetes; heart disease; high blood pressure; high cholesterol; mental health; back pain; pregnancy Accidental events: trauma Accidental events: trauma Utilization measures: prior year inpatient events; ambulatory visits; number of prescribed medicine purchases Utilization measures: prior year inpatient events; ambulatory visits; number of prescribed medicine purchases Expenditure measures: prior yr. total health care spending Expenditure measures: prior yr. total health care spending

17. Profiles for Improvement The Camden Coalition focused on thirty-six super-utilizers. They averaged 62 hospital and E.R. visits per month before joining the program and 37 visits after—a 40% reduction.* The Camden Coalition focused on thirty-six super-utilizers. They averaged 62 hospital and E.R. visits per month before joining the program and 37 visits after—a 40% reduction.* Their hospital bills averaged $1.2 million per month before and just over $0.5 million after— a 58% reduction. Their hospital bills averaged $1.2 million per month before and just over $0.5 million after— a 58% reduction. Finding the next “Hot Spot:” Can we lower medical costs by giving the neediest patients better care? Finding the next “Hot Spot:” Can we lower medical costs by giving the neediest patients better care? Focused efforts on the role of prevention and care management, obesity control, patient safety, accountable care organizations and reductions in medical errors. Focused efforts on the role of prevention and care management, obesity control, patient safety, accountable care organizations and reductions in medical errors. *Atul Gawande, The Hot Spotters. The New Yorker, 1-24-11 *Atul Gawande, The Hot Spotters. The New Yorker, 1-24-11)

18. HHS Vision & Strategic Framework on Multiple Chronic Conditions Foster health care and public health system changes to improve the health of individuals with multiple chronic conditions Foster health care and public health system changes to improve the health of individuals with multiple chronic conditions Maximize the use of proven self ‐ care management and other services by individuals with multiple chronic conditions Maximize the use of proven self ‐ care management and other services by individuals with multiple chronic conditions Provide better tools and information to health care, public health, and social services workers who deliver care to individuals with multiple chronic conditions Provide better tools and information to health care, public health, and social services workers who deliver care to individuals with multiple chronic conditions Facilitate research to fill knowledge gaps about, and interventions and systems to benefit, individuals with multiple chronic conditions Facilitate research to fill knowledge gaps about, and interventions and systems to benefit, individuals with multiple chronic conditions U.S. Department of Health and Human Services. Multiple Chronic Conditions—A Strategic Framework: Optimum Health and Quality of Life for Individuals with Multiple Chronic Conditions. Washington, DC. December 2010.

19. A Home for AHRQ’s Efforts Around Multiple Chronic Conditions (MCC) MCC is an organizing focus of AHRQ’s Prevention and Chronic Care Portfolio MCC is an organizing focus of AHRQ’s Prevention and Chronic Care Portfolio – Applying a comprehensive approach recognizing the need for primary, secondary, and tertiary prevention of MCC

20. Primary Prevention Increasing access and appropriate utilization of clinical preventive services to prevent chronic conditions. Increasing access and appropriate utilization of clinical preventive services to prevent chronic conditions. – Centers for Excellence in Clinical Preventive Services – Support for the US Preventive Services Task Force – Developing composite measures for the receipt of clinical preventive services among older adults

21. Bending the Curve Transforming primary care to empower people to manage chronic conditions and slow the rate of progression. Transforming primary care to empower people to manage chronic conditions and slow the rate of progression. – PCMH Research Research Evaluation Evaluation Implementation Implementation Convene Federal Collaborative on the PCMH Convene Federal Collaborative on the PCMH – Care Coordination – Team-based Care

22. Improving Care for People with MCC The aims of AHRQ’s MCC Research Network are to: – improve understanding about interventions that provide the greatest benefit to MCC patients, – the safety and effectiveness of interventions that may be affected by MCC, – and interventions that may need to be modified for specific patient populations.

23. AHRQ MCC Research Network 18 exploratory grants funded in 2008 with a focus on the use of preventive services 18 exploratory grants funded in 2008 with a focus on the use of preventive services 14 additional exploratory grants funded in 2010 under ARRA focused on comparative effectiveness 14 additional exploratory grants funded in 2010 under ARRA focused on comparative effectiveness 13 infrastructure development grants funded in 2012 under ARRA which will result in publicly available data sets 13 infrastructure development grants funded in 2012 under ARRA which will result in publicly available data sets A Learning Network and Technical Assistance Center designed to support the overall effort. A Learning Network and Technical Assistance Center designed to support the overall effort.

24. Early Results Dr. Cary Gross and his team at Yale University were awarded a grant to develop a framework for determining which elderly patients are most likely to benefit from colonoscopy screening. Dr. Cary Gross and his team at Yale University were awarded a grant to develop a framework for determining which elderly patients are most likely to benefit from colonoscopy screening. They found that a substantial number of Medicare beneficiaries received screening even when potential harms outweighed potential benefits. They found that a substantial number of Medicare beneficiaries received screening even when potential harms outweighed potential benefits. They propose ways to improve screening for older adults with and without multiple chronic conditions. They propose ways to improve screening for older adults with and without multiple chronic conditions.

25. Issues for Further Consideration Impact of trends: The proportion of the population with multiple chronic conditions is likely to continue as a consequence of the aging of the population and rising obesity rates Impact of trends: The proportion of the population with multiple chronic conditions is likely to continue as a consequence of the aging of the population and rising obesity rates Related concerns: Attention to impact of high medical expenditures on affordability and healthcare burdens Related concerns: Attention to impact of high medical expenditures on affordability and healthcare burdens Effects on AHRQ Priority Populations: elderly, chronic disease(s), end of life care Effects on AHRQ Priority Populations: elderly, chronic disease(s), end of life care Analytical needs: Extended longitudinal profiles, research initiatives and modeling efforts to identify strategies to improve health outcomes and reduce expense for this population Analytical needs: Extended longitudinal profiles, research initiatives and modeling efforts to identify strategies to improve health outcomes and reduce expense for this population

26. What is AHRQ’s role? What is AHRQ’s role? Where are the opportunities? Where are the opportunities? Recommendations on data enhancements, research initiatives, modeling efforts? Recommendations on data enhancements, research initiatives, modeling efforts? Questions for the Advisory Council