Sarah Iselin presented the need for technology for providers under payment reform at MassTLC's breakfast seminar on 4/24/12

1. HEALTH REFORM 2.0:
FROM COVERAGE TO COSTS AND
THE ROLE OF TECHNOLOGY
SARAH ISELIN
Mass Technology Leadership Council
April 24, 2012
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2. Massachusetts Now Has the Lowest Rate
of Uninsurance in the Country
PERCENT UNINSURED, 2000–2010, ALL AGES
16.1% 16.3%
14.9% 15.2% 14.7% 14.9%
13.9%
13.1%
U.S.
AVERAGE
7.4%
6.7% 6.4%
5.9% 5.7%
2.6% 2.7%
1.9%
MASS.
2000 2002 2004 2006 2007 2008 2009 2010
NOTE: The Massachusetts-specific results are from a state-funded survey, the Massachusetts Health Insurance Survey (MHIS), which estimated that 372,000 Massachusetts residents were uninsured in
2006, or 6.4 percent of the state's population. Using a different methodology, researchers at the Urban Institute estimated that 507,000 Massachusetts residents were uninsured in 2005, or
approximately 8.1 percent of the total population. Starting in 2008, the MHIS sampling methodology and survey questionnaire were enhanced. These changes may affect comparability of the 2008
and later results to prior years. The national comparison presented here utilizes a different survey methodology, the Current Population Survey, which is known to undercount Medicaid enrollment in
some states.
SOURCES: Urban Institute,
Health Insurance Coverage and the Uninsured in Massachusetts: An Update Based on 2005 Current Population Survey Data In Massachusetts, 2007; Massachusetts Division of
Health Care Finance and Policy, Massachusetts Health Insurance Survey 2000, 2002, 2004, 2006, 2007, 2008, 2009, 2010; U.S. Census Bureau, Current Population Survey 2010.
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3. But the Highest Per Person Health Care Spending…
PER CAPITA PERSONAL HEALTH CARE EXPENDITURES, 2009
$10,000
$9,000
$8,000
$7,000
NATIONAL AVERAGE
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
UT AZ GA ID NV TX CO AR CA AL VA SC TN NC OK MS OR KY MI MT NM IN IL KS WA LA HI IA MO WY NE SD OH FL WI MNMD NJ VT WV PA ND NH RI NY DE ME CT AK MA
State
NOTE: District of Columbia is not included.
SOURCE: Centers for Medicare & Medicaid Services, Health Expenditures by State of Residence, CMS, 2011.
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4. Though Health Reform Helped, Costs Are Still a Problem
for Many Massachusetts Residents
2006 2010
20%
19% 19%
18%
10%
6%
Had Out-of-Pocket Spending at or Above 10% Family Income Problems Paying Medical Bills
Had Had Medical Debt
SOURCES: Massachusetts Health Reform Survey, 2010
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5. Overall Spending Will Double Between 2009 and 2020
ACTUAL AND PROJECTED MASSACHUSETTS TOTAL PERSONAL HEALTH CARE EXPENDITURES, 1991-2020
(BILLIONS OF DOLLARS)
ACTUAL PROJECTED $123
$116
$109
$103
$97
$92
$86
$81
$77
$72
$68
$61
$56 $58
$52
$48
$45
$42
$39
$36
$33
$30 $31
$27 $28
$23 $24 $25
$20 $21
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
SOURCES: Centers for Medicare& Medicaid Services, Health Expenditures by State of Residence, CMS, 2011; Massachusetts Division of Health Care Finance and Policy, “Massachusetts Health Care Cost
Trends, Historical (1991-2004) and Projected (2004-2020),” November 2009.
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6. The More We Spend on Health Care, the Less
We Have for Other Things
STATE BUDGET FY 2001 VS. FY 2011 (BILLIONS OF DOLLARS)
FY2001 FY2011
$16
+$5.1 B (+59%) -$4.0 Billion (-20%)
$14
STATE EMPL.
+40%
$12
$10
-15%
$8 STATE EMPL.
$6 MEDICAID/
HCR -13%
+61%
-11%
$4 MEDICAID/
HCR
-23%
-50%
-38% -33%
$2
$0
Health Public Mental Education Infra/ Human Local Public
Coverage Health Health Housing Services Aid Safety
SOURCE: Data extracted from Massachusetts Budget and Policy Center’s Budget Browser
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8. Costs Are Now the Most Important
Health Care Issue for the Public
Q PLEASE TELL ME IF YOU CONSIDER IT TO BE A CRISIS, A MAJOR PROBLEM,
A MINOR PROBLEM, OR NOT A PROBLEM IN THE STATE OF MASSACHUSETTS.
A High cost of health care
25% 53%
Crisis Major problem
78%
Limited ability to get needed health care
14% 32% 46%
Low quality of health care services
11% 22% 33%
Long wait time for medical appointments
5% 26% 31%
SOURCE: Blendon, R.J. et al., 2011. “Public Perceptions of Health Care Costs in Massachusetts.”
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9. And the Public Is Ready for Major Action
by the State Government
Q HOW IMPORTANT IS IT FOR THE STATE GOVERNMENT OF MASSACHUSETTS TO
TAKE SOME MAJOR ACTION TO ADDRESS RISING HEALTH CARE COSTS IN THE STATE?
A Very Important
74%
88%
Somewhat Important
14%
Not Very Important
3%
Not At All Important
1%
MA State Government should not try to
address rising costs in state
6%
SOURCE: Blendon, R.J. et al., 2011. “Public Perceptions of Health Care Costs in Massachusetts.”
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10. Key Affordability/Cost-Related
Developments in Massachusetts
2006 2007 2008 2009 2010 2011 2012
 Health  Much of  Cost  Special  Government  Governor  Cost
reform Chapter 58 Containment Commission reports and Patrick files Containment
passes enacted, e.g.: Part 1 (Ch. on Payment hearings on payment Part 3?
(Ch. 58) – MassHealth 305) passes Reform cost drivers reform
– Begins path expansion – Increased – Recommends  Governor legislation
to near – Commonwealth transparency move to rejects small  Special
universal Care about cost global group Commission
coverage – Consumer drivers payment premiums on Provider
affordability – Reports on Price
 Cost
schedule health Reform
insurer and
Containment
– New health Part 2 (Ch.
plan options for hospital
“reserves” 288) passes
young adults
– Aims to
– Employer Fair
control
Share
premiums
for small
business,
individuals
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11. Technological Advances in Care Have Been a Major Driver
of Health Care Spending Growth
CONTRIBUTION TO GROWTH IN SPENDING 1960 – 2007 OECD COUNTRIES Using data from
developed countries
around the
world, economists
Technology estimate that advances in
Income Effects medical technology
29% 26%
explain up to about half
of the total increases in
real spending between
1960 and 2007; this is
split evenly between
5% straight technological
Medical Price advances in care, and the
Inflation 27% fact that as income
7%
grows, consumers
Population Aging demand proportionally
11%
Technology- more high tech care.
Increased Income Interaction
Insurance
Coverage
SOURCE: Smith S, Newhouse JP, Freeland, MS. “Income, Insurance, and Technology: Why Does Health Spending Outpace Economic Growth? Health Affairs 2009; 28(5): 1276-1284.
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12. Much of the Increased Spending on Medical Technology
Has Bought Increased Health Value
Technological advances in
care have dramatically
increased the costs of
medical treatments. In
Additional Health one study, economists
Value found that the cost to
Net Benefit of $70,000
Additional treat a heart attack rose
Cost of
$60,000
$10,000 between 1984
Treating
and 1998. But the
Heart Attacks
improvement in care
created $70,000 “worth”
of health over the same
period, measured as the
dollar value of additional
years of life gained by a
Increase in
Treatment Cost patient undergoing the
$10,000 more advanced
Heart Attack Treatment 1984 - 1998 treatments.
SOURCE: Cutler, D.M. and M. McClellan, 2001. “Is Technological Change in Medicine Worth It?” Health Affairs, 20 (5): 11-29.
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13. But Certainly Not All of It
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14. Health Care Technology – Especially Information
Technology – Can Be a Major Health Care Cost-Saver
$80 Billion in
potential savings
SOURCE:Hillestad, R et al. 2005. “Can Electronic Medical Record Systems Transform Health Care? Potential Health? Potential Health Benefits, Savings and Costs”
Health Affairs, 24 (5): 1103-1117.
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15. But Mere Installation of Technological Tools Will Not
Yield Cost Savings Alone
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16. Increased HIT Adoption Could Be Cost-Saving or Cost-
Additive in Massachusetts
PROJECTED SAVINGS AS A SHARE OF SPENDING 2010–2020
Utilize bundled payment -5.9% -0.1%
Institute hospital all-payer rate setting -4.0% 0.0%
Institute regulation for academic medical centers -2.7% -0.2%
Eliminate payment for adverse hospital events -1.8% -1.1%
Increase adoption of HIT -1.8% 0.6%
Institute reference pricing for academic medical centers -1.3% -0.1%
Expand scope of practice for NPs and PAs -1.3% -0.6%
Promote growth of retail clinics -0.9% 0.0%
Create medical homes -0.9% 0.4%
Decrease resource use at end of life -0.2% -0.1%
Encourage value-based insurance design -0.2% 0.2%
Increase use of disease management -0.1% 1.0%
-7% -6% -5% -4% -3% -2% -1% 0% 1% 2%
SOURCE: RAND. “Controlling Healthcare Spending in Massachusetts: An Analysis of Options.” 2009.
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17. It’s All About Incentives
The current payment system, called fee-for-service (FFS), rewards
doctors and hospitals for doing more.
This is doubly true for new medical technologies, as newer, high-tech
services tend to garner higher payments.
Providers also face few incentives to invest in information technology
that could help reduce unnecessary use of health care.
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18. Special Commission on the Health Care
Payment System’s Recommendation
CURRENT FEE-FOR-SERVICE PATIENT-CENTERED GLOBAL
PAYMENT SYSTEM PAYMENT SYSTEM
THE PROBLEM THE SOLUTION
Care is fragmented instead of Global payments made to a group of
coordinated. Each provider is paid for providers for all care. Providers are not
doing work in isolation, and no one is rewarded for delivering more care, but
responsible for coordinating care. for delivering the right care to meet
Quality can suffer, costs rise and there is patient’s needs.
little accountability for either.
$
$
$ $ $ $
PRIMARY CARE
HOSPITAL
SPECIALIST
HOSPITAL SPECIALIST PRIMARY HOME HOME HEALTH
CARE HEALTH
GOVERNMENT, PAYERS AND PROVIDERS WILL SHARE RESPONSIBILITY FOR PROVIDING
INFRASTRUCTURE, LEGAL AND TECHNICAL SUPPORT TO PROVIDERS IN MAKING THIS TRANSITION.
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19. Information Technology Will Be Key for the Success of
Payment Reform
Under global payments, providers will face greater incentives to invest
in innovative technologies that help manage and coordinate care across
settings.
Provider groups accepting global payments will need tools and IT to help
“divide the pie.”
Insurers and providers will also need innovative ways to engage
consumers in selecting high-value care.
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20. But How Much We Pay – Prices – Is Just as Important as
the Way We Pay for Care
BCBSMA COST DRIVERS FROM 2004-2008
PERCENT OR INCREASE IN COSTS DUE TO CHANGE IN PRICE VS. PROVIDER/SERVICE MIX VS. UTILIZATION
100%
90% UTILIZATION
(number of visits)
80%
70%
PROVIDER MIX AND SERVICE MIX
60%
58.0%
53.3% 54.8% 53.8%
50%
40%
33.1%
30% UNIT PRICE
(amount providers get paid)
20%
10%
0%
NOTES:
2004 2005 2006 2007 2008
1) Reflects fully-insured commercial trend
2) “Unit price” reflects increases in provider rates. “Provider Mix and Service Mix” reflect changes in the location of care (shift to more expensive providers) and the intensity of services provided.
“Utilization” reflects increases in the number of services provided.
SOURCE: Office of Attorney General Martha Coakley, March 2010, “Investigation of Health Care Cost Trends and Drivers.”
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21. The Crux of the Current Political Debate Centers on the
Appropriate Role for Government and the Market
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22. Stay Tuned…
 Massachusetts has made health care “universally accessible, but not yet
universally affordable…Massachusetts led the nation on health care reform
and is poised to lead again on cost containment.”
-Governor Deval Patrick
 “…I think more immediately the issues of the health care debate and the
budget really are going to require our attention”
-House Speaker Robert A. DeLeo
 “A careful, phased-in transition of this system-wide reform [removing fee-
for-service within 5 years] is achievable. But we need to take the first step
this year.”
-Senate President Therese Murray
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