Trends In Health Care Industry

1. Trends In Health Care Industry KNH 413

2. Difficult questions • What is health insurance? • What is health care versus health insurance? • Is one or both a right or a privilege?

3. Trends in Health CareOutline I. Where We Spend our Health Care Dollars II. Major Trends on Health Care Industry • 1. Increase in Health Care Costs • 2. Cost Control Strategies • Avoid Risks • Share Risks • 3. Shifts in Hospitalization III. Who Pays for Health Care • A. Where health care dollars come from • B. Types of health care plans

4. Average Cost Health Care Plan in US Family = $11,480; Single = $4,242 (2006 data) Health Care CostsHealth Care Plan vs Health Care per Capita Average Per Capita Cost Health Care (2005 Data for UK, 2006 data US) Note: Family coverage is defined as health coverage for a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006. Organization for Economic Co-Operation and Development http://www.oecd.org/

5. Where Personal Care Dollars Went: 2006 National Health Expenditures, US $2.105 Trillion/year Source: Health Care Financing Administration

6. Summary of Charts • Healthcare cost are high • Healthcare $ go primarily for personal care • Personal care $ divided among many different categories, therefore can not focus cost controls on just one category.

7. Trends in Health Care • 1. Costs of Health Care Increasing • 2. Strategies to Control Cost • 3. Shifts in Hospitalization

8. Health Plan Costs: 1988 - 2006Rising faster than earnings and inflation http://www.kff.org/insurance/7148/sections/ehbs04-1-2.cfm

9. Paying for Health Care US Spends More on Health Care Percent of GDP* Spent on Health Care Health Care Spending Per Capita *GDP = Gross Domestic Product

10. FYI: Are We Getting Our $’s Worth?Life Expectancy: 1960-2005 Males Females OECD Health Data 2006. http://www.oecd.org/document/16/0,2340,en_2825_495642_2085200_1_1_1_1,00.html

11. Health Care Costs: Strategies to Control CostsHealth Care Cost SurveyFactors causing  health care costs From Henry J. Kaiser Family Foundation http://www.kff.org/about/index.cfm

12. Trends in Health Care • 1. Costs of Health Care Increasing • 2. Strategies to Controls Cost • 3. Shifts in Hospitalization

13. Strategies to Control Cost • Strategies to Control Cost • 1. Avoiding Risk (financial risk) • 2. Shared Risk (financial risk)

14. Strategies to Control CostsAvoid Risk: Don’t Provide Health Benefits http://www.census.gov/hhes/www/hlthins/hlthin06/fig07.pdf

15. Strategies to Control CostsShare Risk • Share financial risk with benefiters • Increase Co-pay • Share financial risk with health care providers

16. Strategies to Control CostsIncreased Utilization a Factor in ’d Health CareCosts • Significant portion of increased health care costs from increased utilization • Personal Choice? Average Annual Percent Change Source: CMS, Office of the Actuary, National Health Statistics Group.

17. Strategies to Control Costs: Share RiskSharing Risk w/ Benefitees • RAND Health Insurance Experiment • “Enrollee cost sharing greatly affects both necessary and unnecessary health service use.” • “Those who paid nothing used 40 percent more services.” • 3-yrs of experiment no effect on health status Keeler, Emmett B., et al. 1987. "Effects of Cost Sharing on Physiological Health, Health Practices, and Worry." Health Services Research 22:279-306.

18. Strategies to Control Cost: Share RiskIncrease Deductibles/Out-of-Pocket Expenses to Share Risks Benefitees paying higher deductibles and more of expense for prescription drugs

19. Strategies to Control Cost: Share RiskHigher Costs for Services “Outside” the Plan • Insurance companies have contracts with providers for lower fees. • Go outside these plan providers…. You share more of the cost.

20. Strategies to Control Cost: Share RiskFYI: Determinants of HealthShared Risk Tries to Influence Patient to Alter Things Can Control Patients Determinants of Patient’s Health Source: Center for Disease Control

21. Strategies to Control Cost: Share RiskShare Risk w/ Health Care Providers • No more “blank checks” • Two Scenarios for Food Costs at College • Open account for food and costs gets put on state tax payers cost. • State gives PSU set amount of $ for semester of food, and PSU gets to keep any leftover $.

22. Strategies to Control Cost: Share RiskShare Risk w/ Health Care Providers • No more “blank checks” • Two Scenarios for Food Costs at College • Open account • System give you set amount • How about giving some of this profit back to “you” the student?

23. Strategies to Control Cost: Share RiskShift Types of Health Plan Contracts From Fee-For-Service Fee-For-Service World, Volume Yields Profit Profit Variable Expenses Dollars Fixed Expenses Loss Revenue Patient Encounters

24. Strategies to Control Cost: Share RiskShift Types of Health Plan Contracts To Prospective Payments Plans Prospective, Volume Yields Loss Revenue Loss Profit Variable Expenses Dollars Fixed Expenses Patient Encounters

25. Strategies to Control Cost: Share RiskShift in Type of Health Care Plans that Shares Risk’s w/ Health Care Providers * * * * * *

26. Trends in Health Care • 1. Costs of Health Care Increasing • 2. Cost Controls and Competition • 3. Shifts in Hospitalization • Inpatient to Outpatient • Shorter Lengths of Stay

27. Shifts in HospitalizationHospital Expenditures: Inpatient vs. Outpatient Shares • Less expensive to treat outpatient Percent of Total Source: CMS, Office of the Actuary, National Health Statistics Group.

28. Shifts in HospitalizationShort-Stay Hospitals: Discharges and Length of Stay Discharges per 1,000 Days Source: U.S National Center for Health Statistics, Vital and Health Statistics, Series 13.

29. Conclusions of Health Trends • 1. Health Care costs primarily on personal care. • 2. Controlling costs difficult • spending not concentrated in specific area(s). • can’t just focus spending controls. • 3. Consumer/patient important fact in effort to control costs.

30. Paying for Health Care • A. Where health care dollars come from. • B. Types of health care plans • Government – Federal/State • Private • C. Types of health care contracts

31. Paying for Health Care Where Nation’s Health Dollar Dollars Came From: 2006 http://cms.hhs.gov/researchers/pubs/datacompendium

32. Types of Health Care PlansGovernment Plans • Medicare – Federal Program since 1965 • Eligibility • Part A (Hospital Insurance) • Part B (Medical Insurance) • Part C (Medicare Advantage) • Part D (Prescription drug coverage)

33. Types of Health Care PlansGovernment Plans • Medicaid – Federal/State Program since 1965 • Eligibility • Low income + specific categories of individuals. • Broadly defined categories are (established by Feds) • Coverage • Each state sets own guidelines • …but basic services (e.g. hospitalization and pediatric services) required to receive federal dollars

34. Types of Health Care PlansPrivate Health Insurance • 100’s of policies • Employer sponsored • Typically, employer pays majority of premiums. • Typically, employee has some, but limited choice. • Self-employed • You decide, you pay • Usually very expensive

35. Types of Health Plan Contracts • Traditional • Managed Care • Health Maintenance Organization (HMO) • Preferred Provider Organization (PPO) • Point of Service (POS)

36. FYI: National Health Spending by Source of Funds, 2000 Source: OECD Health Data 2002 2nd ed.