1. Health Care Reform April 28 & 29, 2010 Jack A. Lenhart, M.D. Medical Director, Valley Preferred Jack A. Lenhart, M.D. Medical Director, Valley Preferred

2. Health Care Reform Why we needed health care reform? ■ Problems of cost, quality, safety and the uninsured ■ The United States spends substantially more per person on health care than any other country ■ In 2005, the last year for which comparison statistics are available, the United States spent $6,401 per person ■ The next highest spending was in Norway - $4,364 and Switzerland - $4,177 Why we needed health care reform? ■ Problems of cost, quality, safety and the uninsured ■ The United States spends substantially more per person on health care than any other country ■ In 2005, the last year for which comparison statistics are available, the United States spent $6,401 per person ■ The next highest spending was in Norway - $4,364 and Switzerland - $4,177

3. Health Care Reform (continued) ■ Overall, United States health care expenditures are 2.4 times the average of all developed countries ■ Yet, health outcomes for United States patients whether measured by life expectancy, disease specific mortality rates or other variables are unimpressive ■ Mediocre outcomes + high cost = poor value ■ Overall, United States health care expenditures are 2.4 times the average of all developed countries ■ Yet, health outcomes for United States patients whether measured by life expectancy, disease specific mortality rates or other variables are unimpressive ■ Mediocre outcomes + high cost = poor value

4. 1942 Stabilization Act ■ Congress limited the wage increases that could be offered by firms, but permitted the adoption of employee insurance plans ■ Health benefit packages become a major means of securing workers ■ 1949 – National Labor Relations Board rules that the term “wages” included insurance benefits ■ 1954 – Internal Revenue code made employer contributions to employee health plans exempt from employee taxable income ■ Congress limited the wage increases that could be offered by firms, but permitted the adoption of employee insurance plans ■ Health benefit packages become a major means of securing workers ■ 1949 – National Labor Relations Board rules that the term “wages” included insurance benefits ■ 1954 – Internal Revenue code made employer contributions to employee health plans exempt from employee taxable income

5. Medical Cost Inflation The forces of third-party payment, and usual and customary reimbursement, Cost plus Hospital Payments ■ Hospitals paid costs plus – no incentive to deliver efficient care ■ Physician earned more by charging more for procedures, surgeries and hospital care ■ Patients were insulated from the costs, paid by employer insurance / tax free benefit The forces of third-party payment, and usual and customary reimbursement, Cost plus Hospital Payments ■ Hospitals paid costs plus – no incentive to deliver efficient care ■ Physician earned more by charging more for procedures, surgeries and hospital care ■ Patients were insulated from the costs, paid by employer insurance / tax free benefit

6. Not office visits U.S. 3.8 per capita OECD average 6.8 per capita Not over hospitalization121/1000163/1000 High tech 3x as many MRI scanners as OECD average Procedures: Coronary re-vascularization (per 100,000) 579245 Drugs: Pharmaceutical spending per capita $752$383 End Result of those Forces Leads to Over Utilization

8. Not office visits U.S. 3.8 per capita OECD average 6.8 per capita Not over hospitalization121/1000163/1000 High tech 3x as many MRI scanners as OECD average Procedures: Coronary re-vascularization (per 100,000) 579245 Drugs: Pharmaceutical spending per capita $752$383 End Result of those Forces Leads to Over Utilization

9. Physician Factors – Intervention Bias ■ Culture – thoroughness not prudence is rewarded – imperative to do everything for patient regardless of cost or effect or others ■ Fee-for-service payments misalign incentives ■ Explosion of physician ability to intervene ■ Medical malpractice and defensive medicine ■ Culture – thoroughness not prudence is rewarded – imperative to do everything for patient regardless of cost or effect or others ■ Fee-for-service payments misalign incentives ■ Explosion of physician ability to intervene ■ Medical malpractice and defensive medicine

10. Patient Factors

11. ■ United States culture embraces technologic fixes for problem ● Doing more tests and receiving more treatments; intervention provides better care ■ Direct-to-consumer marketing very successful in driving patient requests for new and more costly medicines ■ Third-party payment has largely shielded patient and family decisions from the true cost of health care ■ United States culture embraces technologic fixes for problem ● Doing more tests and receiving more treatments; intervention provides better care ■ Direct-to-consumer marketing very successful in driving patient requests for new and more costly medicines ■ Third-party payment has largely shielded patient and family decisions from the true cost of health care

12. Health Care Reform Is there any way out of this mess? ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision- making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician re-imbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient-Centered Medical Home ■ Take malpractice out of the courts – compensation system for physician and hospital error ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision- making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician re-imbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient-Centered Medical Home ■ Take malpractice out of the courts – compensation system for physician and hospital error

13. Employer-Based Culture of Wellness ■ Keep the well healthy ■ Keep those with chronic illness (Diabetes, Vascular diseases, Hypertension, Hyperlipidemia) from getting worse ■ Encourage employees to evaluate their own health risks ■ A culture that encourages employee to take responsibility for their own health ■ Keep the well healthy ■ Keep those with chronic illness (Diabetes, Vascular diseases, Hypertension, Hyperlipidemia) from getting worse ■ Encourage employees to evaluate their own health risks ■ A culture that encourages employee to take responsibility for their own health

14. Health Care Reform Is there any way out of this mess? ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision-making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician reimbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient-Centered Medical Home ■ Take malpractice out of the courts – compensation system for physician and hospital error ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision-making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician reimbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient-Centered Medical Home ■ Take malpractice out of the courts – compensation system for physician and hospital error

15. Health Care Reform Is there any way out of this mess? ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision-making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician re-imbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient-Centered Medical Home ■ Take malpractice out of the courts – compensation system for physician and hospital error ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision-making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician re-imbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient-Centered Medical Home ■ Take malpractice out of the courts – compensation system for physician and hospital error

16. Patient-Centered Medical Home ■ Team concept ■ Wellness focus ■ Improved access (virtual visits, e-mail, etc.) ■ Care coordination ■ Goals of care ■ Team concept ■ Wellness focus ■ Improved access (virtual visits, e-mail, etc.) ■ Care coordination ■ Goals of care

17. Health Care Reform Is there any way out of this mess? ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision-making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician re-imbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient Centered Medical Home ■ Take malpractice out of the courts– compensation system for physician and hospital error ■ Find a way for basic insurance for all with emphasis on wellness and prevention ■ Allow cost to effect patient and family decision-making; at least in high tech expensive care with marginal benefit (value based insurance design) ■ Develop Employer Cultures of Wellness ■ Change hospital and physician re-imbursement from paying for volume to paying for value – Pay For Performance Accountable Care Organizations ■ Alter physician compensation to encourage primary care – Patient Centered Medical Home ■ Take malpractice out of the courts– compensation system for physician and hospital error