Controlling Costs and Rewarding Quality: The Large Employer Perspective

1
Controlling Costs and Rewarding QualityThe
Large Employer Perspective

• ACC Medical Directors Institute
• October 20, 2006

Helen Darling, President National
Business Group on Health
2
The Problem

• Employers, who provide health care coverage for
  over 60 of adults under 65 and children, most
  serious benefits problems continue to be rising
  health care costs and uneven quality.
• Compared to just 7-8 years, employers paying 100
  more for health care costs
• Growing problem of affordability affects job
  growth and leads to more uninsured (46.6
  million/15.9 of the population)
• Other social needs neglected
• No end in sight

3
National Health Expenditures Change and Share
of Gross Domestic Product, 1965-2015
All are worried about costs but even more
worried about future costs.
4
Annual Cost per Employee Will Reach 8,748 in
2007

• In 2007, employers are facing a 6 percent
  increase in health care costs, an average of 518
  per employee, to a total of 8,748. This does
  not include retirees. (Towers Perrin, 2006)
• Family coverage in 2007 will reach 12,948.
• Average employee total out of pocket costs
  (premium share and coinsurance) projected to be
  3,305 in 2007. (Hewitt, 2006)
• Wages havent kept up with health care costs. An
  employee at the minimum wage would earn an amount
  equal to 80 of the health care premium costs.

5
Health Care Spending Per Capita Hurts Our Global
Competitiveness

Source Organization for Economic Cooperation and
Development (OECD) data, 2002. Note Growth rates
are calculated from national currency units, not
U.S. dollar purchasing power parties (PPPs).
6
Some of the Worst Costs/Disabilities Ahead

• Obesity has had an alarming impact on avoidable
  medical claims.
• Per person health care spending for obese adults
  in 2002 was 56 higher than normal weight adults.
  
• Per person costs were greater and there were many
  more obese people by 2002.
• Increase in number of people treated is far more
  serious and costly than increases in prices.
• Per case treatment of high cholesterol increased
  five fold (between 1987 2002)
• Growth in treated prevalence accounted for nearly
  90 of cost increase

Source Kenneth Thorpe, et al. Health Affairs
Web Exclusive July December 2004.
7
Problems in Health Care Quality
68.5
Source Elizabeth McGlynn, et al, The Quality of
Health Care Delivered to Adults in the United
States, NEJM, Vol. 3482635-2645 June 26, 2003
(No. 26).
8
Unsustainable Business Model

• Corporate America cannot make or sell enough in
  this economy to keep absorbing these increases
  and be competitive in a global economy.
• Workers may tire of giving their pay raises to
  the health system or they will also just keep
  paying more.
• We must have a healthier, more productive,
  educated workforce to compete.
• We must find new ways and new resolve to tackle
  these problems head-on with leverage from
  combined purchasing power of large employers,
  health plans and government working
  collaboratively with hospitals and physicians.

9
Strategic and Tactical Changes Needed

• Track One Pragmatic solutions based on best
  practices and new ideas, implementable in the
  near term.
• All incentives must be aligned
• Track Two Strategic and structural changes in
  delivery system that will change health care
  costs/value equation in long term by improving
  product significantly (mortality, morbidity,
  productivity) and reducing cost increases.

10
Primary Emphasis of Health Care Strategy For the
Next 2 Years
11
Best Performers Focus More on Quality
1
Annual Survey of Employers, 585 employers
covering 13 million people, March 2006.
National Business Group on Health and Watson Wyatt
12
What Do Employers Want?

• High quality, effective, evidence-based care
  provided at lowest possible (efficient) cost.
• This means that there will be no waste due to
  care that is
• Ineffective
• Inappropriate
• Harmful
• Also, care will be delivered in the least costly,
  most appropriate setting.
• Provided by a professional with the most
  appropriate training and competencies for the
  needed care without unnecessary charges, while
  still of high quality and safe.

1
13
Solutions

• Many cost drivers require many solutions, but in
  alignment with each other, all moving in
  direction of waste reduction, greater safety and
  higher quality.
• How do we know there is waste?
• How much money could be saved?
• The Care of Patients with Severe Chronic
  Illness
• If resources and utilization of efficient
  providers were realized by all providers managing
  care of people with severe chronic illnesses
  during the last two years of their lives,
  Medicare spending for this group would be reduced
  by 30.

1
Source Dartmouth Atlas Project, June 2006
14
NCEBBD Action Framework
NCEDDD Action Framework
National Business Group on Health
Issues are complex but we HAVE to improve.
Employers can support evidence-based medicine by
using four levers.
15
Employer Leverage

• Support payment reform to reward primary care and
  primary care like services.
• Support effective use of appropriateness
  guidelines and centers of excellence.
• Support payment reform and coverage changes that
  reimburse physicians, nurses, and other
  appropriate health professionals for high value,
  evidence-based preventive and screening services,
  care coordination, high value, educational
  coaching services that attack lifestyle choices
  that make people sick and disabled (sedentary
  life-styles, obesity, smoking, not using
  seatbelts/helmets, etc.).

1
This does not mean more money on top of what is
already being spent.
16
Employer Leverage

• Support with differential payments to encourage
  optimal provider use and delivery system models.
• Support HIT, and personal health records (PHRs
  and electronic medical records) to enable more
  efficient use of human capital and drive medicine
  toward evidence-based treatments.
• Support medical liability reform to reduce or
  eliminate, defensive medical practices.
• Support research on most effective evidence-based
  practices and tie coverage to evidence.
• Ensure physician groups support and agree to
  decisions.

1
17
Conclusion

• We are grateful for the work of the American
  College of Cardiology with its deep historic
  commitment to quality and excellence.
• We support national recognition and reward
  programs to accelerate the commitment to, and
  benefits of, high performing physicians,
  appropriate use of imaging and centers of
  excellence.
• Thank you for the opportunity to work together.

1