Title: The Economic Unraveling of U.S. Health Care: Cost Shifting, Provider Segmentation, and Health Savings Accounts
1The Economic Unraveling of U.S. Health CareCost
Shifting, Provider Segmentation, and Health
Savings Accounts
- MCVs Neurology Grand Rounds
- December 14, 2006
- Rick Mayes, Ph.D.
- Assistant Professor, Department of Political
Science
2Overview
- This presentation examines
- Major economic trends in U.S. health care system
- The cost shifting and provider segmentation
phenomena and their implications for doctors,
hospitals and patients - Potential reforms and future concerns
3BACKGROUND
- Since 2000 . . .
- health insurance premiums have increased 73
- (versus 14 in general inflation and avg. wage
growth) - - avg. cost of single coverage (4,000
annually in 2005) - - avg. cost of family coverage (11,000 annually
in 2005) - The percent of companies offering health
insurance to their workers has fallen from 69 in
2000 to 60 in 2005 - (5.5 million working Americans have lost their
coverage since 2000)
4Source Kaiser Family Foundation (2005)
5Health Insurance Premiums Declining Coverage
6The Uninsured, 15.6 of the U.S. Population
(Census, 2005)
7Consequences Care Postponed Not Received
8Extreme Consequences Bankruptcy Earlier Death
- 50 of uninsured patients have debts from
previous medical care a 1/3rd are being pursued
by collection agencies - Uninsured women with breast cancer are twice as
likely to die as women with breast cancer who
have health insurance. - (Kaiser Commission, 2002)
- Men without health insurance are nearly 50 more
likely to be diagnosed with colon cancer at a
later, more dangerous stage than men with
insurance. - (Kaiser Commission, 2002)
- Upwards of 750,000 families are bankrupted by
medical debt each year, even though 80 of them
have some form of health insurance single
largest cause of bankruptcy (Health Affairs,
2005).
9Arnold and Sharen Dorsett with their children,
Dakota, Zachery and Jessica, back. Though they
had insurance, health-care costs for Zachery led
the Dorsetts to file for bankruptcy this year.
Nicole Bengiveno/The New York Times
10Cost-Shifting Hydraulic for Doctors Hospitals
B C MarginContribution
130
B
120
Cost Shift
C
A
110
Cost
100
Shortfall
Margin
90
80
70
Payment-to-Cost Ratio
60
Below Cost Payers
Above Cost Payers
50
40
30
20
10
10
80
90
70
60
50
40
30
20
0
100
Percentage of Market Share
11Physicians Cost-Shifting (or Differential
Pricing)
Source The Lewin Group, The American College of
Emergency Physicians (ACEP) Practice Expense
Study, for the American College of
Emergency Physicians.
12Community Hospitals the Role of Cost-Shifting
Source The Lewin Group analysis of data
contained in AHA TrendWatch Chartbook Trends
Affecting Hospitals and Health Systems.
13Source American Hospital Associations Annual
Survey of Hospitals (n6,800 hospitals), 2006.
Pearsons correlation coefficients
1984-1997 Medicare and Private ratios r
-.86 1980-2004 Medicare and Private ratios r
-.79 1984-1997 Medicaid and
Private ratios r -.39 1980-2004 Medicaid and
Private ratios r -.64
14Source Glenn Melnick, Uninsured Americans,
Hearing Before the Subcommittee on Health of the
Ways and Means, U.S. House of Representatives,
108th Cong., 2nd Sess. (9 March 2004)
Professor Melnicks testimony from the
Center for Health Financing, Policy and
Management, School of Policy, Planning and
Development, University of Southern
California.Technical Note Data are derived
from the Medicare Prospective Payment Systems
Impact File, Centers for Medicare and Medicaid
Services (CMS, 2004), available at
http//www.cms.hhs.gov/providers/hip
ps/ippspufs.asp, last visited October 1, 2004).
15 Source MedPAC (June 2004)
Segmentation of U.S. Health Care System is
Increasing
16Complicating the Hospital-Physician Relationship
17(No Transcript)
18(No Transcript)
19Source CMS, Office of the Actuary, 2004.
Segmentation of U.S. Health Care System Increasing
20(No Transcript)
21- POLICY implications of the significant rise in
physician-owned, for-profit - ambulatory surgery centers, specialty hospitals,
and diagnostic imaging centers - 1.) prospects for improved quality, lower costs,
and more professional autonomy - - Adam Smith and the advantages of
specialization (e.g., pins and focused
factories) - 2.) financial impact on community hospitals fair
or unfair competition? - - cherry picking the best-insured private
patients by, largely, for-profit entities - - skimming lower-cost, healthier Medicare
cases within individual DRGs - - cardiac, orthopedic, radiological services
huge proportion of hospitals net revenues - 3.) impact on communities overall access to care
- - declining volume smaller patient populations
make charity care harder to provide
22Reimbursement, Incentives Human Behavior
- Public Policy 101 Incentives structure modern
life as we know it. - e.g., IRS and tax audits, HOV lanes and toll
roads, Deans List and - academic probation, parenting, teaching,
dating, sales, Amway, etc. - Incentives come in 3 basic flavors or varieties
(e.g., smoking) - (a.) moral U.S. govt asserts that terrorists
raise money from black-market sales of cigarettes - (b.) social banning of cigarettes in restaurants
and bars - (c.) economic 3-per-pack sin tax ( but not
in Virginia obviously)
23Moral/Social Incentives and Modern Life
- The Chicago Police Department in conjunction
with the Mayor's office have now made
prostitution solicitors' information available
online. By using this website, you will be able
to view public records on individuals who have
been arrested for soliciting prostitutes or other
related arrests. The following individuals were
arrested and charged for either patronizing or
soliciting for prostitution. It is not a
comprehensive list of all individuals arrested by
the Chicago Police Department for patronizing or
soliciting for prostitution. The names,
identities and citations appear here as they were
provided to police officers in the field at the
time of arrests.
DOE/SMITH, CARLOS M/31
165XX BRENDEN LN. OAKPARK 1102 N CICERO AVE
2005/10/01 720 ILCS 5.0/11-15-A-1
DOE/SMITH, JOSE M/37 54XX S ROCKWELL ST
CHICAGO 1102 N CICERO AVE 2005/10/02 720 ILCS
5.0/11-15-A-1
DOE/SMITH, JOHN M/54 28XX W 38TH PL CHICAGO
2500 S CALIFORNIA BLVD 2005/09/06 720 ILCS
5.0/11-15-A-1
DOE/SMITH, ALEX M/28 22XX MAGNOLIA CT WEST
BUFFALO GROVE 1102 N CICERO AVE 2005/10/02
720 ILCS 5.0/11-15-A-1
24Economic Incentives and Modern Life
- - Australian prison ships in the early 1900s
- - April 15, 1987 and the disappearance of
- of 7 million American children
- - frequent flyer miles (loyalty programs)
25Segmentation of U.S. Health Care System
Increasing Concierge Medicine
Patients like Ilse Kaplan, left, receive more
personal attention from Dr. Bernard Kaminetsky in
exchange for an annual fee of about 1,650.
26Segmentation of U.S. Health Care System
Increasing HSAs
27The Moral Hazard Argument Against Expanding
Health Insurance Coverage
- Term used to describe the paradoxical fact that
insurance can change behavior of the person
insured. - example employer-provided donut insurance or
auto insurance - avg. annual amount spent on medical care (by
uninsured person) 934 - avg. annual amount spent on medical care (by
insured person) 2,347 - Conclusion I co-pays, deductibles, utilization
reviews make patients use health care more
efficiently (frugally, wisely, sparingly, etc.) - Conclusion II instead of expanding group health
insurance, reduce it
28The Moral Hazard Argument Against Expanding
Health Insurance Coverage
- Fallacy I Moral-hazard argument only makes sense
if we consume health care in the same way we
consume donuts, car repairs or consumer goods. - Fallacy II Having to pay for your own care does
not automatically make ALL of your health care
consumption more efficient. How could it? - example wifes appt. with dermatologist
- Reality cost-sharing is a very BLUNT instrument
- example RAND Corporations Health Insurance
Experiment (1971-86) - BOTTOM-LINE health insurance is moving in the
actuarial direction and away from the social
insurance model w/enormous consequences to come
29Concerns
- The ultimate cost shift employers passing on a
larger and larger share of their increased health
care costs to their employees in the form of
higher monthly wage deductions and/or increased
co-payments, deductibles, and out-of-pocket costs
(especially for employees dependents). - Beyond this strategy, more and more employers
have simply stopped offering health insurance
(16 of the U.S. population is uninsured 45.6
million individuals or the aggregate population
of 24 states, 2005)
30The Massachusetts Health Plan Individual Mandate
31Exit Questions
- (1.) What do providers have to do when every
- payer only wants to pay the marginal cost?
- (2.) Ultimately, from a political economy
- perspective, who is responsible for the
- common good (e.g., graduate medical
- education, public health insurance,
- medical research) in a competitive market?