The document discusses problems with the current US healthcare system, including rising costs and the large number of uninsured Americans. It examines factors contributing to high costs such as administrative overhead, prices, and overutilization of services. Solutions proposed include creating a value-based and quality-driven healthcare market through publishing outcomes data, competition among providers, and payment reforms that reward effective and efficient care rather than fee-for-service. The document advocates for prioritizing reductions in costs in order to expand access to more Americans.

1. Benefits and Beyond C. 8 Improving access to health care. Thomas E. Murphy

2. 10/09/09 Thomas E. Murphy 2 March 23, 2010 – Patient Protection and Affordable Care Act

3. 10/09/09 Thomas E. Murphy 3 What led up to this?

4. U.S. offers excellent health care. It is designed to cover all Americans. Most coverage is employment based and 98% of employers with over 200 employees provide health insurance. But – the cost is too high. Result: cost sharing increased, some small employers abandoning coverage, and too many uninsured. And, since health care is largely tied to employment . . . 4 What’s wrong? 10/09/09 Thomas E. Murphy

5. Fear that “you are a pink slip away from losing health care.” Fear of dropped coverage when sick and exclusion of pre-existing condition. 5 And, Unemployment is 9.6%. 10/09/09 Thomas E. Murphy

6. Continuing coverage under COBRA has been expensive. Stimulus Law – a temporary gov’t subsidy to buy COBRA. Ended May 31, 2010. 10/09/09 Thomas E. Murphy 6 Coverage after layoff? (photo: www.medicine.net)

7. Problems? Issues? Alternatives? Health Policy? Health Care Reform? Let’s look a little deeper! 10/09/09 Thomas E. Murphy 7 What does the data show

8. 8 Employer Coverage is down! 10/09/09 Thomas E. Murphy

9. 47% of firms with 3-9 employees 72% of firms with 10-24 employees 93% of firms with over 50 employees 98% of firms with over 200 employees 10/09/09 Thomas E. Murphy 9 Employer sponsored overall coverage - 59% (+180,000,000)

10. 10/09/09 Thomas E. Murphy 10 What’s Wrong?

11. 11 Our health care system**There is some overlap – for example, 27 million buy individual health policies. 10/09/09 Thomas E. Murphy

12. 10/09/09 Thomas E. Murphy 12 U.S. Residents-No health insurance (in millions – U.S. Census)

13. 13 High Costs Impede Access “My friend ends her own business and gets a job with Starbucks” to get health care. Annual H.C. cost in the U.S. depends on what? (where, who, deductible) Employee total cost sharing is around +30%. U.S. pays more for health care:16.2% of GDP vs. 12% average for other OECD countries. 10/09/09 Thomas E. Murphy

14. From 2000-2010, health care premiums have increased 130% and other out-of-pocket cost sharing features have increased 115%. 10/09/09 Thomas E. Murphy 14 The increasing cost shift

15. Current System is too expensive because of: Inappropriate care (35%). Medical errors: 100,000 deaths per year. Third party payer – lack of market dynamics. No value based competition Poor health culture (high obesity and resulting chronic diseases), poor health education, and lack of patient compliance. Tax treatment, and other reasons . . . 15 Why do we cost more? 10/09/09 Thomas E. Murphy

16. Our multi-layered administrative systems cost $35 billion annually more than other OECD countries. Our prices and salaries of health care goods and services are much higher than European countries. We have more and quicker access to technology –such as imaging, robotic surgery, R/x. No government subsidies or price leverage except Medicare and Medicaid. 16 Why do we cost more? 10/09/09 Thomas E. Murphy

17. Why do we cost more? How to control? Cutting is not the answer Aging Population High expenditures in last 3 months of life 3d party long term care system Highest compensation for providers. High R/X marketing and R&D costs.. 10/09/09 Thomas E. Murphy 17

18. Malpractice and defensive medicine Third party payer system removes the consumer from “engagement” and making informed decisions. (Photos: www.medicine.net) 10/09/09 Thomas E. Murphy 18 More cost drivers . . .

19. U.S. life expectancy, infant mortality, access to health care is below OECD leaders. U.S. ranks last in “patient safety” among 5 top OECD countries Research says, however, this is not result of health care system but rather culture and education. Adult obesity is over 30% and the cause of a number of chronic diseases. 10/09/09 Thomas E. Murphy 19 But are we better?

20. 10/09/09 Thomas E. Murphy 20 The David, growing up in America!

21. U.S. is best place to be for serious health problems. Survival rates per 100,000 for major and acute health problems is highest. U.S. leads world in research, innovation, and new drug therapies. (70% of innovation comes from U.S.) U.S. has shortest wait lists by a large margin for elective procedures, and in many cases for medically necessary treatments. 21 But. . . The reality is . . . . 10/09/09 Thomas E. Murphy

22. Cost is the chief reason nearly 50 million are uninsured. And why employers and government are struggling to continue health insurance. 10/09/09 Thomas E. Murphy 22 What is the Problem?

23. High Cost makes access difficult! How do we reduce costs? Need more data . . . Could we enhance access with lower costs? Would a quality-driven market system reduce costs? What are the other choices? Let’s look at more data 10/09/09 Thomas E. Murphy 23

24. If cost is the problem how do we best deal with it? Can we reduce our costs and still assure high quality and efficacy? What if we conducted a “SURGE” against costs? 10/09/09 Thomas E. Murphy 24 The solutions? What data do we need to make a policy decision?

25. 10/09/09 Thomas E. Murphy 25 Cost Allocation in the U.S. Kaiser foundation, 2009

26. 10/09/09 Thomas E. Murphy 26 Cost Averages* Depend On:*For state pricing see: www.healthcare.org

27. 27 The health care reform baton is being passed – 2010-2014! Affordable Care Act of 2010 is “access reform” – it is not health care reform that in large part was driven by high numbers of uninsured and the high costs of our health care. 10/09/09 Thomas E. Murphy

28. Just less than 50% do not meet Medicaid standards, and cannot afford health care. Some, 24.5%, however, qualify for Medicaid but choose not to enroll. 20% can afford private coverage but choose not to buy it. Most work. 8% are business owners 28 Who are the 50 million uninsured? 10/09/09 Thomas E. Murphy

29. Most are uninsured for less than one year. 55% are between the ages of 18 and 35; many decide they are healthy and don’t need insurance. 7% have household incomes in excess of $75,000; 22% made over $50,000 in 2007. Disproportionate number of black and Hispanic are uninsured. 10/09/09 Thomas E. Murphy 29 Who are the Uninsured?

30. 10/09/09 Thomas E. Murphy 30 Problems – Insurance Underwriting

31. Cost shifting Unreimbursed care Community rating Need old and young, healthy and sick to pool risk. Pre-existing condition. (HIPAA) No guaranteed issue Right to cancel Individual coverage premiums based upon health status Not much portability except for COBRA Adverse selection State control over insured plans 10/09/09 Thomas E. Murphy 31 Health Insurance Underwriting

32. When sick people are without insurance, they don’t need insurance, they need health care. 10/09/09 Thomas E. Murphy 32 But remember . . . (Photo: www.medicine.net)

33. The most powerful instrument in our system that generates the utilization of health care resources and higher costs – is – the physician’s ordering pen. 10/09/09 Thomas E. Murphy 33 And really remember . . .

34. Insurance companies do not write prescriptions or order MRIs. While they add costs to our system, high utilization and prices are major cost drivers in U.S. 10/09/09 Thomas E. Murphy 34 And . . .

35. 10/09/09 Thomas E. Murphy 35 Range of Reform Solutions

36. 10/09/09 Thomas E. Murphy 36 A “Surge” against costs!

37. Tax law change Creating quality and value-based markets for health care (-25%) New types of integrated care models Improved pre-natal care education and access Mitigate chronic disease risk factors Electronic medical records – reduce errors HSAs, Wellness, increase engagement Tort Reform – reduce unnecessary care (-10-20%) Interstate insurance competition - Reduce administrative costs. And more. . . 10/09/09 Thomas E. Murphy 37 Surge on Costs – What might work?

38. Convert Medicaid to Defined Contribution Plan. Merge insurance markets – individual and small employer. Pay for results not separate services Capitation of fees (DRGs) Change Supply Side Services Encourage integrated care organizations. Simplify claims processing Assure access to Primary Care 10/09/09 Thomas E. Murphy 38 Surge on Costs

39. 39 The 80/20 rule: Preventive Care Put your resources here:  Preventive and Chronic care 10/09/09 Thomas E. Murphy

40. Change reimbursement system – reward success and pay for non-traditional services that enhance efficiency and effectiveness Is the office visit the only way medicine can be dispensed? Is capitation a reasonable approach vs. fee for service? Encourage integrated health providers. 40 What’s this “Supply-Side” focus? 10/09/09 Thomas E. Murphy

41. What happens when providers compete on basis of quality and price? Look at what has happened to the outcomes and prices for Lasik surgery. Wal-Mart - $4.00 for many drugs. See also, www.rx.com/ Walk in clinics in retail stores. Urgent care centers vs. hospital emergency rooms. 41 Supply side emphasis? 10/09/09 Thomas E. Murphy

42. Employer paid health insurance is not taxed as ordinary income to the employee. This is unfair to those who buy insurance on their own; the premiums are paid after tax. If we tax employer paid premiums, employees will search for ways to find their own health plans. The plan will suit their needs and will be portable. No longer dependent upon employment. Forgone tax revenue runs between $90-$130 billion. 42 What about tax change and reform? 10/09/09 Thomas E. Murphy

43. One approach is to limit the exemption from income to $5000 per year. Any higher value would be subject to income tax. In addition, all out of pocket costs for health care would be deductible, thus encouraging purchase of more cost efficient plans. This would not necessarily cause employers to drop sponsored care – there are competitive and productivity reasons to continue. And, employers can deduct expense. 43 Tax changes and health care 10/09/09 Thomas E. Murphy

44. Full deductibility of self-purchased high deductible health care plan and contributions to HSAs. Could be offset by a refundable tax rebate? Should this be available to all or only those who purchase a plan (HDHCP) on their own? Tax preference is based upon convenience and efficiency of employer sponsorship and lack of employee leverage and knowledge to make purchasing decisions themselves. 44 Tax changes and health care 10/09/09 Thomas E. Murphy

45. The view is that this change would engender fairness between those who currently participate in an employer sponsored plan and those who pay for their own insurance. It also will provide a portable health care plan not dependent upon employment. It should have the effect of making health care more affordable and decrease number of uninsured. 45 Tax changes and health care 10/09/09 Thomas E. Murphy

46. Principle of compensating differentials – more health care costs reduces other elements of compensation. Good health care is never “free!” Someone is paying for it. 10/09/09 Thomas E. Murphy 46 Tax changes – a few principles

47. What do we do first? Reduce costs? Increase access? Our health care bridge is burdened with high costs; why would we put more people on the bridge? 10/09/09 Thomas E. Murphy 47 How to prioritize – access or costs?

48. Consequences of + Access? Mandated or Public Mandated or Public Public or mandated system must be financed- it is not free. Underwriting savings not sufficient to finance. Financed by taxes, fines, rationing, artificial reduction of reimbursements. Must have a standard policy with limits on cost sharing and minimum requirements on coverage. Providers must comply with medical protocols Public or State option may swallow the private sector. 10/09/09 Thomas E. Murphy 48

49. Consequences? Costs will increase! Increased Gov’t. Employment (HHS HQ) Must rely on community ratings Limited underwriting and premium differentiation. Impact on quality and consumer satisfaction? Will a dual system arise as it has in some EU contries? Non-profit insurance system 10/09/09 Thomas E. Murphy 49

50. Free medical education? Give subsidies to purchase – how much and for what? Arbitrarily imposed price controls on medicine and insurance providers. 10/09/09 Thomas E. Murphy 50 Consequences . . .

51. 10/09/09 Thomas E. Murphy 51 New quality based market?

52. 52 It’s a leap, but we can do this! 10/09/09 Thomas E. Murphy

53. A quality and value based competition model would be a sound basis for reforming health care in the U.S. It could be a dynamic choice to make health care affordable! 10/09/09 Thomas E. Murphy 53 Murphy says:

54. 10/09/09 Thomas E. Murphy 54 A Measured Approach to Reform

55. Allow competition to drive quality improvements and make service more affordable– as it has done in other industries. Centerpiece: clinical outcomes data! 10/12/10 Thomas E. Murphy 55 Data is the key!

56. Reducing the costs of health care and making it more affordable through market changes are aimed at the core cause of the health care crisis in the U.S. 10/09/09 Thomas E. Murphy 56 A Focused Approach

57. Quality, value, and cost are not rewarded. Competition should be structured so that it is quality and value based; this will lead to lower costs. This would be REAL health care reform!(See: “My View” at this link) See also the Mayo Clinic Health Policy Center’s Recommendations: Create Value Coordinate Care Reform payment system Health Insurance for all. 10/12/10 Thomas E. Murphy 57 More specifically. . .

58. Competition drives improvements in quality and cost. Rapid innovation is diffused through the industry. Excellent competitors grow, weaker rivals exit the market. Quality improves, prices fall, value increases, and the market accommodates more consumers 10/12/10 Thomas E. Murphy 58 Traditional Competitive Model

59. Health care must be a patient centered system Currently, it serves others – TPAs, Providers, Sponsors, Patients, Unions, Government. 10/12/10 Thomas E. Murphy 59 Competition in health care?

60. Also, the scope of health care is too narrow: it focuses on a disease, illness, or injury. It should focus on the full cycle of care for a medical condition. There is very little integration of care relating to this condition. The system is structured around medical specialties –who are like “free agents” – performing their function and billing accordingly. 10/12/10 Thomas E. Murphy 60 Condition vs. Disease

61. Would reward value No government or sponsor imposed “solutions.” Providers would arrive at solutions to successfully compete in this new market 10/09/09 Thomas E. Murphy 61 A value-based market model:

62. How many cardiac bypass surgeries? What results? How many post surgical infections? What were length of stay and charges? Complications Re-admissions 10/09/09 Thomas E. Murphy 62 The centerpiece – outcomes data!

63. Published patient outcomes per unit of cost at the medical condition level. We currently pay for services rendered – appropriate or not and in some few cases for the provider’s adherence to certain medical protocols. Outcomes should be but are not considered. We have the ability to review clinical outcomes data NOW! – but we don’t 10/12/10 Thomas E. Murphy 63 How should we measure?

64. 10/09/09 Thomas E. Murphy 64 Who is doing the best job – give them our business!

65. We have no real quality records of providers. We have no access to charges or prices. A third party selects providers and pays them. We don’t compare. 10/09/09 Thomas E. Murphy 65 Health consumers-is this a market?

66. It is a “zero sum” approach. The gain of one party comes at the expense of the other. Provider costs are simply shifted from one party to another. There is no market system to reward “value” – cost and quality. 10/12/10 Thomas E. Murphy 66 Distorted “Competition” Models

67. 10/12/10 Thomas E. Murphy 67 Current vs. Future Model

68. Provider consolidations have occurred everywhere – hospitals, physicians, suppliers. This has enabled them to increase reimbursements. Prices are up. But, there are very little net efficiency gains and few efforts to integrate care. No “value” created. Participants and sponsors pay more. 10/12/10 Thomas E. Murphy 68 Mergers- increase bargaining leverage

69. An “artificial” grouping of providers In network practices lead to limited choices. The network is not chosen because of quality outcomes. The network is not focused on medical conditions, improving quality, and reducing costs. 10/12/10 Thomas E. Murphy 69 Competition to corral patients and limit choice

70. Utilization review adds administrative costs to the system without sufficient returns. Capitation can lead to rationing to mitigate financial risk. Malpractice litigation leads to “defensive” and inappropriate care. The more procedures that are ordered the higher reimbursement level for the providers. The only risk free instrument is the stethoscope – other procedures carry risk 10/12/10 Thomas E. Murphy 70 Limit or unnecessarily add services

71. It should occur at medical condition level – where we measure and evaluate the full cycle of care – diagnosing, prevention, monitoring, treatment, and ongoing management of the condition. Value can be created by directing our employees and participants to those providers with the best clinical outcomes. 10/12/10 Thomas E. Murphy 71 Competition is at wrong level

72. Some physicians do a far better job than others. The same for hospitals Typically the best provide services at lower costs – “they get it right the first time!” 10/12/10 Thomas E. Murphy 72 Health Care is not a commodity!

73. Cost reduction should be viewed over the full cycle of care – not just a particular episode of care. Competition should be viewed over a broader geographic scheme – not just local referrals. True integration of care should occur with the objective of offering superior health value. 10/12/10 Thomas E. Murphy 73 Challenge the assumptions

74. Absolutely necessary for patients and sponsors – but not available. Often can lead to important process improvements. Is critical to create informed and engaged consumers and payers of health care. See the Cincinnati and other experiences where payers used clinical outcomes data to direct their participants to the “best providers.” Costs went down! 10/12/10 Thomas E. Murphy 74 The importance of outcomes datahttp://onlinelibrary.wiley.com/doi/10.1002/hrm.3930340407/abstract

75. Should be assisting members in finding the best value care and improving their overall health. They do not. The “annual enrollment” undermines an objective to look at long term health approaches. Billing is incomprehensible and providers are encouraged to under treat. Out of network restrictions lead to poor provider choices. 10/12/10 Thomas E. Murphy 75 New incentives for TPAs

76. Fee for service – creates outcome problems Capitation leads to implicit rationing. Supply driven demand leads to providers “filling up” their capacity. No competition on results means there are no incentives for “quality outcomes.” Create a quality outcomes-based market and the Providers – not government or insurance companies – will find the best way to deliver health care 10/12/10 Thomas E. Murphy 76 Incentives for providers

77. Often believe health care is a commodity They deal with inflation by simply shifting costs to employees. Encourage HSAs but ignore the importance of informed consumers who must make a number of important choices without the requisite data. Employers do not realize the financial VALUE of health care as a benefit. It is often, just a cost to bear. 10/12/10 Thomas E. Murphy 77 Employer Perspectives

78. Competition among providers based upon results and relating to a medical condition over a cycle of care should be the focus. The competition should not be based upon compliance with protocols, but real results. Results based competition will lead to provider learning and sharing of medical information. 10/12/10 Thomas E. Murphy 78 Let’s Review Some Principles

79. Value based competition should lower costs because the best providers will “get it right the first time.” Results are the feedback for providers and the criteria for selection by the participants. The pursuit of quality does not end. It is “continuous.” 10/12/10 Thomas E. Murphy 79 Some Principles

80. An endless pursuit of quality by providers incented by a new health reform system – will lead to: Fewer medical errors and more “appropriate care.” Disease management and real integrated care A migration from diagnosis and treatment to addressing causes. Cost reductions and improved affordability. 10/12/10 Thomas E. Murphy 80 Some Principles

81. 10/12/10 Thomas E. Murphy 81 Needed Data

82. Some outcomes data shows that patients treated at certain cystic fibrosis centers have a 14 year additional life expectancy than those treated at “average centers.” After New York city hospitals started collecting and disseminating severity adjusted mortality data for cardiac bypass surgery, deaths declined by 41%. In a 4 year period. Data can be used to educate providers! 10/12/10 Thomas E. Murphy 82 Outcomes vary by provider . . .

83. It has been slow in coming. Who should have access? What should the data system measure? How doe one acuity adjust? How can change happen? 10/12/10 Thomas E. Murphy 83 Where’s the data? Electronic Medical Records?

84. 10/12/10 Thomas E. Murphy 84 What are barriers?

85. TPAs focus on discounts versus patient value. Medicare and other government systems have the wrong incentives and do not encourage patient value. Governments so far have equated “process compliance” with “quality.” Systems do not encourage integration of care. Artificial and arbitrary suppression of provider fees will not create value 10/12/10 Thomas E. Murphy 85 What are barriers?

86. Mindsets against being held accountable for results. Lack of management expertise in the medical provider industry. Medical education does not focus on value driven health care. Health care delivery is too local depriving access to best providers. 10/12/10 Thomas E. Murphy 86 What are barriers?

87. Physicians are often “free agents.” Hospitals take on too many services. The payers of health care have not insisted on accessing quality outcomes data and using it to develop their networks. 10/12/10 Thomas E. Murphy 87 What are barriers?

88. 10/12/10 Thomas E. Murphy 88 Providers are “pushing” back fees

89. 10/12/10 Thomas E. Murphy 89 TPAs! Orchestrate the best care!

90. Enable patients to make informed choices of providers. (Not restrict choice with networks) Measure and reward providers based upon results. (Not micromanage provider activities.) Maximize the value of care over the full cycle of a medical condition. (Not minimize costs.) Minimize administrative tasks and costs. (Not overwhelm providers and patients with paperwork) 10/12/10 Thomas E. Murphy 90 New Roles for TPAs

91. Compete based upon their subscribers’ health results (not cost) New focus: 10/12/10 Thomas E. Murphy 91 New Roles for TPAs Long term health- Improved life expectancy and quality of life

92. United Health Group and United Resource Networks. Cigna and Quality Networks Blue Cross and Blue Shield of Minnesota (Disease Management) Blue Cross and Blue Shield of Mass. (Rewards Provider Excellence: reward excellence, higher margins, gains sharing, reward accurate diagnosis) 10/12/10 Thomas E. Murphy 92 Some examples

93. 10/12/10 Thomas E. Murphy 93 And, very importantly . . . To create and manage a single, comprehensive medical record for its patients

94. Active participation in managing personal health: healthy life style, embrace preventive care, comply with provider recommendations, make informed choices about providers and treatments. Choose TPAs and plans based upon these values. 10/12/10 Thomas E. Murphy 94 New Roles for Patients

95. New Roles for Employers New Perspective on Value Stop the mindless cost shifting Evaluate TPAs based upon “value” not cost. Insist on value based choices of providers Support healthy life styles among employees Establish long term relationship with TPAs and providers. Hold internal benefit staff accountable for long term health and good financial returns on health care benefits 10/12/10 Thomas E. Murphy 95

96. First and foremost . . . No law required. 10/12/10 Thomas E. Murphy 96 Public Policy . . . Priority: Move to Value Based Competition!

97. Enable More Access Lead to real health reform 10/12/10 Thomas E. Murphy 97 This will . . . Enhance quality, reduce costs, and make health care more affordable.

98. Employer and individual mandates. Guarantee affordable health insurance for all. Single payer, universal health care system Move to individual choice and ownership of health insurance by making it more affordable, tax deductible or, if low income, subject to tax credits. 10/12/10 Thomas E. Murphy 98 Then, If needed a New Delivery System?

99. 10/12/10 Thomas E. Murphy 99 Everyone should have access to quality health care!

100. Preserve what we already do well Sustain our innovation and research. Focus on quality, cost effectiveness, and value. What about choice? Is this important? We should retain employment as primary locus for health care delivery. Portability – Yes! Should consumers share in some of the costs of health care? 10/09/09 Thomas E. Murphy 100 Values to maintain:

101. People who paid nothing for health care used 30% of health care resources. Cost sharing can enhance informed utilization and positively affect quality. 10/09/09 Thomas E. Murphy 101 We need patient engagement. . The market, by exposing clinical outcomes data will drive health care providers to improve quality and deliver value. Failure to do so will leave them . . .

102. 10/09/09 Thomas E. Murphy 102 Without any “customers”

103. Should the sponsors tell providers how to practice medicine? Or, should they say let me see how you are doing and we will give you our business? 10/09/09 Thomas E. Murphy 103 A market that drives quality and value – See: Mayo Clinic proposal

104. Without comprehensive legislation and without burdensome costs! Can implement before January 2014! The Market will drive providers, TPAs, and others to find the optimal utilization of health care resources! This will lead to quality based and AFFORDABLE health care. 10/09/09 Thomas E. Murphy 104 The Value Based Market .

105. 10/09/09 Thomas E. Murphy 105 The Path to a healthy America

106. 10/12/10 Thomas E. Murphy 106 They are depending on us . . .