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Financing Healthcare (Part 2) Lecture C
- 1. Introduction to Health Care and Public Health in the U.S. Financing Health Care, Part 2 Lecture c This material (Comp 1 Unit 5) was developed by Oregon Health & Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number 90WT0001. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
- 2. Financing Health Care, Part 2 Learning Objectives - 1 • Describe the revenue cycle and the billing process undertaken by different health care enterprises. (Lecture a) • Explain the billing and coding processes, and standard code sets used in the claims process. (Lecture a) 2
- 3. Financing Health Care, Part 2 Learning Objectives - 2 • Identify different fee-for-service and episode- of-care reimbursement methodologies used by insurers and health care organizations in the claims process. (Lecture b) • Review factors responsible for escalating health care expenditures in the United States. (Lecture c) • Discuss methods of controlling rising medical costs. (Lecture d) 3
- 4. What’s Driving the High Cost of Health Care in the U.S. • Review U.S. health care expenditures and medical inflation • Examine the factors contributing to the increase in health care expenditures in the United States • Describe the Emergency Medical Treatment and Active Labor Act (EMTALA) • Discuss the cost of care to the uninsured 4
- 5. Factors Contributing to High Health Care Expenditures • Technology • Increased demand and utilization – Chronic disease – Aging population • Administrative costs – 7% of health care expenditures in the U.S. – Twice the average of other industrialized countries 5
- 6. Technology and National Health Care Expenditures • Congressional Budget Office Estimates – 40-50% of total expenditures • Technology in health care – Procedures – Equipment – Processes by which medical care is delivered 6
- 7. Technology - 1 • Previously untreatable conditions – Arthritis in hips and knees • New medical and surgical procedures – Angioplasty – Joint repairs/replacements 7
- 8. Technology - 2 • Medical devices – Computerized Tomography (CT) scanners – MRI imaging – Implantable defibrillators • Health Information Technology (HIT) – Electronic medical records – Telemedicine 8
- 9. Pharmaceutical Costs • Estimated 10% of total health care expenditures – $298 billion in 2014; $40.3 billion 1990 – Average ~12% increase over the last 10 years – Drug costs inflated above Consumer Price Index (CPI)/other health care sectors • Increased availability – Medications for chronic disease o e.g. cholesterol, diabetes • Increased demand – Cancer chemotherapy 9
- 10. Administrative Costs • Approximately 7% of annual U.S. health care expenditures • Administrative costs more than twice average of other western industrialized nations • Estimated excess expense = $91 billion 10
- 11. Physician/Hospital Costs • Increased demand – Utilization o Positron emission tomography (PET) o Magnetic resonance imaging (MRI) – Techniques o Minimally invasive surgery da Vinci robotic surgery o Imaging techniques 11
- 12. Chronic Disease - 1 • Ongoing, generally incurable, illness or condition – Heart disease – Obesity – Cancer – Diabetes • Preventable/Manageable through: – Early detection – Diet – Exercise – Medical treatment 12
- 13. Chronic Disease - 2 • Affects 1 of 2 adults in the U.S. • Accounts for 7 of 10 deaths • Daily activity limitations for 1 in 4 with chronic disease • Obesity major concern and contributor – 1 in 3 adults – 1 in 5 children between ages 2 and 19 13
- 14. Chronic Disease and Health Risk Behaviors • CDC: Four health risk behaviors – Lack of physical activity – Poor nutrition and obesity – Tobacco use – Excessive alcohol consumption 14
- 15. Prevalent Chronic Diseases • Asthma • Chronic obstructive pulmonary disease • Chronic renal failure • Congestive heart failure • Coronary artery disease • Diabetes • Mood disorders/senility • Cancer • Hypertension 15
- 16. Chronic Disease and Increased Demand for Services • Increased Utilization of Services – Management/treatment to decrease risk of complications o For example, aggressive treatment of diabetes to avoid such complications as heart disease, kidney failure, or blindness – Early intervention at risk groups o For example, weight loss, smoking cessation 16
- 17. Early Detection and Prevention • Increased Preventive Services – Detection o Screening mammograms o Colonoscopy – Prevention o Immunizations 17
- 18. Increased Demand: Aging • Increased utilization of services for chronic illness above age 64 • 1946-1964: 66 million children • Medicare eligibility beginning in 2011 – Additional 10 million enrollees by 2018 – Projected costs > $13,000 per capita with comparable increase in Medicare costs 18
- 19. The Uninsured • Receive – Less preventive care – Diagnosed at more advanced disease states – Once diagnosed, received less therapeutic care – Have higher mortality rates • Cost of care is twice as much for uninsured vs. insured 19
- 20. The Uninsured 2014 • Enrollment in ACA coverage corresponds with large declines in the uninsured rate – Uninsured rate dropped from 16.2%, last quarter of 2013 to 12.1%, last quarter of 2014 • Barriers: – 48% coverage too expensive – 12% unemployed or not offered through work – 13% ineligible 20
- 21. EMTALA • Emergency Medical Treatment and Active Labor Act of 1986 – Legal mandate to offer medical care to all patients regardless of ability to pay – Anyone presenting to an ED must be: o Examined to determine if there is an emergency o Treated until stabilized, discharged to self care or continuing care o Transferred to a facility capable of providing care if the facility is unable to provide the required care 21
- 22. ED Utilization and Uninsured • Uninsured care cause for ED overcrowding? – 2008, Weber examined ED use o Percent of uninsured using the ED did not change over 10 years o Non-poor insured with PCP accounted for most increase in ED visits 22
- 23. Emergency Department Overcrowding • Lack of key clinical staff a driver of overcrowding • Care provided to uninsured and patients with non-urgent conditions not a cause of overcrowding • Evidence links overcrowding to reduced health care quality and patient safety 23
- 24. Financing Health Care, Part 2 Summary – 1 – Lecture c • U.S. health care expenditures highest worldwide – Both per capita and % GDP • Factors – Increase demand and utilization o Aging and chronic disease – Technology – Pharmaceutical costs – Administration costs 24
- 25. Financing Health Care, Part 2 Summary – 2 – Lecture c • EMTALA – Not resulted in increased utilization by the uninsured – Not a major cause of increased utilization of the ED • Uninsured costs – 7% of total health care expenditures in 2004 – Receive less care and treatment, sicker, higher mortality rates 25
- 26. Financing Health Care, Part 2 References – 1 – Lecture c References Adapted from: DeLia, D., Cantor, J., Emergency department utilization and capacity; The Synthesis Project, Robert Wood Johnson Foundation. Research Synthesis Report 17, July 2009. California Healthcare Foundation. Health care costs 101: reaching a spending plateau? http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/PDF%20H/PDF%20 HealthCareCosts15.pdf November 2015. Accessed January 24, 2017. Callahan, D. (n.d.). The Hastings Center Bioethics Briefing Book. Retrieved January 24, 2017, from http://www.thehastingscenter.org/uploadedFiles/Publications/Briefing_Book/health%2 0care%20costs%20chapter.pdf Centers for Medicare and Medicaid Services. National health expenditure accounts. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/NHE-Fact-Sheet.html. Updated December 2, 2015. Accessed January 24, 2017. 26
- 27. Financing Health Care, Part 2 References – 2 – Lecture c References Fisher E, Bynum J, Skinner J. The Policy Implications of Variations in Medicare Spending Growth. The Dartmouth Atlas: The Dartmouth Institute for Health Policy and Clinical Practice Center for Health Policy Research, February 27, 2009. Available at: http://www.dartmouthatlas.org/downloads/reports/Policy_Implications_Brief_022709.p df. Accessed January 24, 2017. Robert Wood Johnson Foundation. Available at: http://www.rwjf.org/. Source for health issue research and health policy. Accessed January 24, 2017. The Congress of the United States Congressional Budget Office. Washington DC: 2008 [cited July 31, 2010]. Technological Change And The Growth Of Health Care Spending. Available at: http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31- TechHealth.pdf. Accessed January 24, 2017. 27
- 28. Financing Health Care, Part 2 References – 3 – Lecture c References The Peterson Center on Healthcare and the Kaiser Family Foundation. Menlo Park, CA (2016) Health costs. Available from: http://www.healthsystemtracker.org/. Provides background information, links to key data and policy information on US healthcare costs. Last accessed January 24, 2017. Weber EJ, Showstack JA, Hunt KA, et al. “Are the Uninsured Responsible for the Increase in Emergency Department Visits in the United States?” Annals of Emergency Medicine 52(2): 108–115, 2008. 28
- 29. Introduction to Health Care and Public Health in the U.S. Financing Health Care, Part 2 Lecture c This material was developed by Oregon Health & Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number 90WT0001. 29
Notas do Editor
- Welcome to Introduction to Health Care and Public Health in the U.S.: Financing Health Care, Part 2. This is lecture c. The component, Introduction to Health Care and Public Health in the U.S., is a survey of how health care and public health are organized and how services are delivered in the U.S. It covers public policy, relevant organizations and their interrelationships, professional roles, legal and regulatory issues, and payment systems. It also addresses health reform initiatives in the U.S.
- The objectives for Financing Health Care, Part 2 are to: Describe the revenue cycle and the billing process undertaken by different health care enterprises. Explain the billing and coding processes, and standard code sets used in the claims process.
- Identify different fee-for-service and episode-of-care reimbursement methodologies used by insurers and health care organizations in the claims process. Review factors responsible for escalating health care expenditures in the U.S. And discuss methods of controlling rising medical costs.
- This lecture discusses the high cost of health care services in the U.S., including U.S. health care expenditures and medical inflation, and the factors that contribute to the increasing health care expenditures in the U.S. It also describes the Emergency Medical Treatment and Active Labor Act, or EMTALA; its provisions for care for the uninsured; and its potential contribution to increasing medical costs. Finally, this lecture details the cost of care for the uninsured.
- The factors that contribute to higher health care expenditures include technology, increased demand for and utilization of health care due to chronic disease and the aging population. This results in rising hospital and physician costs, as well as increased pharmaceutical demand and cost. In addition, administrative costs account for approximately seven percent of health care expenditures in the U.S., twice the average of other industrialized countries.
- The Congressional Budget Office, or CBO, estimates that almost one-half of the health care expenditures in the U.S. are due to the cost of technology. The CBO refers to technology in health care as the procedures, equipment, and processes used in the delivery of health care services.
- Over the years, technology has led to advances in medicine that have prolonged the life expectancy of the average person. Previously untreatable conditions, along with new medical and surgical procedures, have permitted individuals to survive conditions that, if not fatal, were debilitating. For example, arthritis in hips and knees, which created mobility issues for people, can now be treated with hip and knee replacements that allow individuals to continue an active lifestyle for many years. Artery blockages in the heart can now be treated with angioplasty, resulting in increased survival rates for illnesses that previously proved fatal. At the same time that technology permits individuals to live longer, the improved survival rates place additional pressure on the health care system through increased demand and utilization of services.
- Medical imaging equipment such as computerized tomography, or CT, scanners and magnetic resonance imaging, or MRI, equipment permits physicians to look inside the body and create a picture of the damage resulting from an injury or illness. Despite the high cost of purchase and operation, easy availability of these devices increases utilization. Medical devices such as implantable defibrillators permit survival and treatment of life threatening heart rhythms. In the next few years, the government will invest billions of dollars in health information technology to aid in the delivery of high quality, cost-efficient care and the sharing of information among providers, especially via electronic medical records, or EMRs. Telemedicine will become ubiquitous. Already, an x-ray taken digitally at a hospital or a remote clinic can be transmitted to a radiologist in another state or country for interpretation.
- New technology has permitted the pharmaceutical industry to develop new medications for the treatment of disease. Pharmaceutical costs are estimated to be approximately ten percent of the total health care expenditures annually. These costs have increased seven-fold since 1990. During the last decade, pharmaceutical costs have increased annually by an average of twelve percent per year, far exceeding the consumer price index and inflation in other health care sectors. Part of these costs relate to increased utilization and demand for medications to treat terminal or chronic disease. For example, medications to treat illnesses and conditions such as diabetes, HIV, and elevated cholesterol, have increased survival. Yet, at the same time, this may lead to increased utilization of health care services and newer, more expensive medications, which will ultimately drive up health care costs. Another example involves the demand for new drugs, such as cancer chemotherapy, that may increase survival by only a few months, but may cost many times more than established treatments.
- Administration costs are estimated to contribute to approximately seven percent of the total health care expenditures in the U.S. A study by the McKinsey Global Institute found that administrative costs account for more than twice the average spent by other industrialized nations, and contribute ninety-one billion dollars annually in excess health care expenditures in the U.S.
- Along with new technology, increased demand and utilization also contributes to increased hospital and physician costs. Hospitals may wish to improve their competitive standing and enhance the reputation of their facility in the community by purchasing the latest equipment and offering related services. In addition, there may be increased demand for specific devices or services by both providers and patients. Some examples include imaging techniques such as positron emission tomography, referred to as the PET scan, magnetic resonance imaging or MRI, and da Vinci robotic surgery. It has been argued that although these technologies are expensive, increased utilization of these devices and techniques can improve quality and reduce costs through their advanced diagnostic capabilities, or by reducing complications and shortening length of stay. However, the increase in demand for both hospital and physician services and the concomitant increase in costs may offset any savings.
- Care and treatment of individuals with chronic disease constitutes a large portion of the expenditures on health care in the U.S. Chronic diseases are ongoing, generally incurable illnesses or conditions, such as heart disease, obesity, cancer, and diabetes. These diseases are often preventable, and frequently manageable through early detection, improved diet, exercise, and medical treatment.
- The Centers for Disease Control and Prevention, or CDC, estimates that as of 2012 approximately one out of two adults had at least one chronic disease and that seven out of the top ten causes of death were due to chronic disease. The CDC estimates that one of every four individuals has limitations in daily activities as a result of their chronic disease. The CDC also points out that obesity is a contributor to chronic disease, and is rapidly becoming a major health concern and a source of increased health care expenditures.
- The CDC identifies four health risk behaviors that contribute to the development and increase of chronic disease including the lack of physical activity, poor nutrition and obesity, tobacco use, and excessive alcohol consumption. Many of these activities have been linked to other illnesses, such as alcohol consumption and smoking with various types of cancer, and poor nutrition and obesity with diabetes, heart disease, and high blood pressure.
- This slide lists the most prevalent chronic diseases in the U.S., many of which are preventable and/or manageable. Other than mood disorders and senility, obesity and smoking are major contributors in the development of seven of the nine chronic illnesses listed, and considered preventable.
- Care for chronic illness requires increased utilization of health care services and resources. Management of chronic illness attempts to prevent further deterioration of the condition, maintain a satisfactory state of health and well-being, and decrease the risk of developing complications. For example, aggressive control of blood sugar can avoid damage to small blood vessels that could lead to heart disease, kidney failure, or blindness. In addition, early intervention with at-risk groups, such as smokers or the obese, may increase spending and utilization, but have the potential to result in lower long-term costs.
- Additional resources are spent in the early detection and prevention of illness, for example, using screening mammograms to detect breast cancer, or immunizations to prevent infectious disease.
- The increase in the incidence of chronic disease associated with the aging of the population and the subsequent demand for medical services is expected to contribute significantly to the increase in health care expenditures in the U.S. in the coming years. There is increased cost after age 64. Sixty-six million children were born between 1946 and 1964, a group called baby boomers, and the oldest of the group became eligible for Medicare in 2011. Projected national health care expenditures per capita are expected to rise above thirteen thousand dollars with much of the burden due to Medicare costs associated with the baby boomers’ increased utilization of health care services.
- In 2009, the number of uninsured rose to approximately 50 million people or one-sixth of the population. In general, the uninsured receive less preventive care, are diagnosed at a more advanced disease state because of delay in seeking treatment, receive less therapeutic care due to high costs of treatment after being diagnosed with an illness or chronic disease, and have higher mortality rates. The cost for care at a more advanced disease state is twice as much for the uninsured compared to an insured individual with the same disease.
- Under the ACA, as of 2014, Medicaid coverage eligibility has expanded to include nearly all adults with incomes at or below 138 percent of the federal poverty level, although not all states have elected to adopt the Medicaid expansion. Tax credits are also available for people who purchase coverage through a health insurance marketplace. Millions of people have enrolled in these new coverage options. Cost still poses a major barrier to coverage for the uninsured. In 2014, 48 percent of uninsured adults said that the main reason they lacked coverage was because it was too expensive. Eligibility is also a barrier: 12 percent of uninsured adults mentioned work-related reasons, such as being unemployed or not having an offer through work, and 13 percent said they were told they were ineligible or could not get coverage due to their immigration status.
- The Emergency Medical Treatment and Active Labor Act, or EMTALA, is a federal law that requires hospitals to provide emergency medical care to patients, regardless of their ability to pay. Anyone presenting to an emergency room requesting evaluation for an illness must be examined to determine if there is an emergency, treated until stabilized if there is one, and discharged to self-care or continuing care. If the hospital is unable to provide the care at its facility, then the patient must be transferred to a facility able to provide the care.
- It is often believed that the uninsured account for overcrowding and use of an excessive amount of services through the emergency department, or ED under the EMTALA Act. However, in 2008, Weber published a retrospective study and found that the percentage of uninsured using the emergency department did not change over ten years. The research found that most of the increase was due to non-poor insured with a primary care physician as their usual source of care, using the ED for non-urgent care.
- A 2009 Robert Wood Johnson study found that the lack of key ED staff is the primary cause of overcrowding, and not overuse by the uninsured or for treatment for non-urgent conditions. This overcrowding is associated with a decrease in quality of care, longer waiting periods for care in the ED, and reduced patient safety.
- This concludes lecture c of Financing Health Care, Part 2. In summary, the U.S. has the highest per capita national health care expenditures and the highest national health care expenditures as a percentage of GDP in the world. Factors driving costs include increased demand and utilization due to aging and chronic disease, technology, pharmaceutical costs, and high administration costs.
- Contrary to popular perception, the EMTALA Act has not increased utilization of the emergency department by the uninsured. Information from a study published in 2008 suggests that the percentage of uninsured using the emergency department (ED) did not increase significantly over a ten-year period. Rather there was an increase in utilization of the ED by insured individuals with a normal source of primary care. The total cost of care for the uninsured is approximately seven percent of all health care expenditures. In general, the uninsured receive less care and treatment for chronic disease and acute illness, are sicker when they seek care, and have a higher mortality rate. The challenge of the health care delivery system is to reduce or slow costs, maintain quality of care, and improve outcomes and accessibility to care.
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