Health Care Cost Drivers and Policy Options

1
Causes of and Potential Solutions to the High
Cost of Health Care

• Health Care Cost Drivers and Policy Options
• Kenneth E. Thorpe, Ph.D.
• Robert W. Woodruff Professor and Chair
• Department of Health Policy and Management
• Rollins School of Public Health
• Emory University
• October 10, 2002

2
Options for Controlling Costs

• Managing Consumption
• Copays, benefit design
• Pharmaceutical benefit design
• Preauthorization
• Behavioral and Lifestyle Intervention
• Managing the Delivery of Care
• Disease and Care Management
• Broader Structural Reforms

3
Managing the Consumption of Healthcare

• Benefit Design
• Employer Premium Contribution
• Increase Cost Sharing
• Reduce Benefits
• Broader Reforms
• Consumer-Driven Models
• Behavioral and Lifestyle Interventions

4
Managing Pharmaceutical Spending Managing the
Components of Growth
Price Increases (20 35)
Increased Number of Prescriptions (30 40)
Changing Mix of Drugs (25 33)
Rx Trend (15 25)

• General
• Economic
• Trends

• Direct-to-Consumer (DTC)
• Advertising
• Rising Incidence of
• Chronic Disease

• March of Science
• Rising Number of
• New Molecular Entities

Why?

• Competitive
• Binding
• Price Negotiation

• Better Formulary Management
• Tiering Structure
• Mandatory Generic Substitution

Options
5
Behavioral and Lifestyle Interventions Can They
Work?

• YES! But again, design matters
• Targets smoking, stress, weight, blood
  pressure, high risk activities
• Key Design Feature
• Risk assessment
• High participation among high risk individuals
  (use financial incentives in plan design)
• Savings Range from zero to a return on
  investment (ROI) of 61

6
Managing the Delivery of Healthcare

• Care and Disease Management
• Typical Conditions
• COPD, CHF, Coronary Artery Disease, Diabetes,
  Asthma
• Others
• Hypertension, Behavioral Health, Cancer, Pain
  Management
• COPD Chronic Obstructive Pulmonary Disease
• CHF Congestive Heart Failure

7
Care and Disease Management Does it Work?

• Evaluations Whats Possible?
• Best designed programs could save 10 to 30 for
  specific group patients
• Ex Congestive heart failure (fluid in lungs)
  sends typical patient to hospital 2-3 times per
  year
• Intervention? NEED IT AT HOME!
• Expert to teach patient about disease
• Importance of medication compliance
• Diet
• Monitoring weight
• Check in with patient remotely or in person

8
Managing the Delivery of Healthcare
High
Low

• Intensive Monitoring
• Weight
• Blood Pressure
• Glucose Levels
• Pulse
• Pulse Ox
• Care direction and
• physician communication
• Requires community based
• (home) and physician care

• Predictive Modeling
• Health Risk
• Assessment
• Condition Education

• Nurse on demand
• Care reminders
• Medication
• Compliance

9
Managing Medicaid Spending

• Reduce covered benefits
• Control utilization (commercial disease
  management modules)
• Limit provider payments
• Freeze enrollment
• Manage drug costs (through negotiations over
  price, lock-in disease management savings with
  drug companies)

10
Managing the Market and Delivery System

• Size Matters (Medicaid State Employees)
• Pharmaceutical negotiations
• Hospital / Provider contacts
• Regulation
• Certificate of Need (CON)
• Rate-setting
• Patient Safety Initiative and Error Reduction
• Reporting systems
• Interventions (computerized physician order entry)