Are We Heading For a Train Wreck?:The US Health Care System in 2007

Richard Lichtenstein Ph.D, MPHDepartment of Health Management and Policy

School of Public HealthUniversity of Michigan

“The problem of providing satisfactory medical care to all the people of the

United States at costs which they can meet is a pressing one. At the present

time, many persons do not receive service which is adequate either in quantity or quality, and the costs of service are inequitably distributed.

The result is a tremendous amount of preventable physical pain and mental waste. Furthermore, these conditions are…largely unnecessary. The United States has the economic resources, the

organizing ability and the technical experience to solve this problem.”

Source: Committee on the Costs of Medical Care. Medical Care for the

American People: The Final Report of the Committee on the Costs of Medical

Care. Chicago: The University of Chicago Press. October 31, 1932

The nation’s health care system is a “tangled, highly fragmented web that often wastes resources

by providing unnecessary services and duplicating efforts, leaving unaccountable gaps in care and failing to build on the

strength of all health professionals.”

The Institute of Medicine, Crossing the Quality Chasm. 2001

World Health Organization (WHO) Definition of Health

“Health is a state of complete physical, mental, and social

well-being and not merely the absence of disease or

infirmity.”

The Traditional Health Care System in the US Has Had

Several “Fatal” Flaws• System of Financing Care

(Fee-for-service system; fragmented payments)

• Organization of Services“A Paradox of Excess and Deprivation”*

• Insurance Coverage of the PopulationHealth coverage is not a right in America

*Enthoven and Kronick, NEJM 320:29-37. 1989

PROBLEMS WE FACE AS A RESULT:

• COSTS

• ACCESS TO COVERAGE AND CARE

• QUALITY AND ACCOUNTABILITY

• RACIAL AND ECONOMIC DISPARITIES in HEALTH AND CARE

9

U.S. Total and Per Capita Expenditures on Health Care, 1965-2005

$0

$500

$1,000

$1,500

$2,000

$2,500

Expe

nditu

res (

Bill

ions

)

$-$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000

Per Capita

Total (billions) Per Capita

Source: Health, United States, 2001, Table 114; Health Affairs, National Health Spending in 2005, Jan-Feb. 2007.

$6,697

Both total and per capita spending on health have skyrocketed.Health Care Costs: Magnitude of Growth

$172

$1.988 Trillion

$35 Billion

!/28/07

General Motors Health Care Costs

• $5.4 billion in health spending in ’05– $1.4 billion in 2002 for prescription drugs

(31% of healthcare costs)– $1,500 per vehicle

• 3.1 retirees/active worker, compared to Toyota with .02 retirees/active worker

Source: Detroit News February 10, 2005 and March 11, 2004 and NYTimes.com May 19, 2006

General Motors Health Care Costs

• In October, 2005, GM and the UAW negotiated to increase costs of care to retirees. Active workers now contribute $1/hour for retiree health care.

• Unfunded liability of $85 billion (in 2006 dollars) for future health care costs for workers and retirees.

Source: Detroit News February 10, 2005 and March 11, 2004 and NYTimes.com May 19, 2006

13

Government Health Expenditures as a Percent of Total Government Expenditures: Selected Years, 1960-2004

0%

5%

10%

15%

20%

25%

30%

1960

1970

1980

1990

1994

1996

1998

2000

2002

2004

Perc

ent o

f Tot

al G

ov't.

Exp

endi

ture

s

Federal Health Expenditures State and Local Health Expenditures

Source: Health, United States, 2006, Table 120

Health care is consuming an increasing percentage of public budgets.

Health Care Costs: Impact on the Public Sector

Michigan spent 25% of its budget on health in 2003

New York State spent over 45% of its budget on Medicaid in 2004-2005.

Medicare Expenditures and Non-Interest Income by Sourceas a Percent of GDP -2007

Source: Status of the Social Security and Medicare Programs. A SUMMARY OF THE 2007 ANNUAL REPORTS http://www.ssa.gov/OACT/TRSUM/trsummary.html), 2007

Spending on Medicare Drug Benefit

• Between 2006-2015 expenditures for the Medicare Drug Benefit estimated $724 bill.

• One-time increased expenditures 2005-2006 of 27.8% due to addition of benefit

• Projected growth in Medicare expenditures on drugs of 7.3% annually between 2006-2014

Source: Kaiser Family Foundation Fact Sheet, April 2005 using data from CMS/Office of the Actuary

16

ACCESS TO CARE: The Uninsured

Percent of Non-Elderly Population Without Health Insurance Coverage, 1987-2005

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%19

87

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2005

Source: US Census Bureau, Historical Health Insurance Tables, http://www.census.gov/ (accessed May, 14, 2007)

In 2007, the US Census Bureau revised downwards the figures for 2004-05 (methodological issue) . 2003 data not revised.

The wording of CPS questions implies that these estimates represent the number uninsured for the entire calendar year. However, comparisons with other data sources (such as MEPS and SIPP) suggest that the CPS figures are much closer to point-in-time than full-year estimates. Some of the dip observed in 1999 and later years reflects the addition of a verification question that reduced the number uninsured for calendars years 1999 and later.

Americans without health insurance increased by 1.4 million in 2003.

*2005: 44.8 million Americans were uninsured

Quality is Uneven

Americans Received Recommended health care only 54.9% of the time!

McGlynn, EA, Asch, SM, Adams,J, et al. (2003) ”The Quality of health care delivered to adults in the United States.” NEJM 348:2635-45

How good is American health care?Based on an extensive literature review performed at RAND in 1998:

• Only 50% of Americans receive recommended preventive care

• Patients with acute illness:70% received recommended treatments30% received contraindicated treatments

• Patients with chronic illness:60% received recommended treatments20% received contraindicated treatments

Schuster MA, McGlynn EA, Brook RH. How good is the quality of healthcare in the United States? Milbank Quarterly 1998; 76(4):517-63 (Dec).

Hospital Safety and Medical Errors

Leapfrog Group Hospital Safety Measures

• Evidence-Based Hospital Referral (EHR)

• Computer Physician Order Entry (CPOE)

• ICU Physician Staffing (IPS) “Intensivists”

Leapfrog has added over 20 other safety measures since beginning with these

Racial and Economic Disparities

Infant Mortality Rates by Race*United States, 1970-2003

0

10

20

30

40

1970

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

All races White Black

Source: Health, United States, 2006, Table 22

Dea

ths p

er 1

,000

Liv

e B

irth

s

*Race of mother

Years of Potential Life Lostdue to Diabetes Mellitus,

by race and Hispanic Origin, 2003

0

100

200

300

400

Yea

rs lo

st*

White BlackAm. Indian or Alaskan Asian/Pacific IslanderHispanic

Source: Health, United States, 2006, Table 30* Age-adjusted years lost before age 75 per 100,000 population under 75 years of age.

What would be the characteristics of a well-designed system?

(At least, this was what we thought for several years!)

IOM Aims for the 21st Century Health Care System

• Safe• Effective• Patient-centered• Timely• Efficient• Equitable

Source: IOM, Crossing the Quality Chasm, 2001, p. 5-6

1. Coverage

• We need universal coverage to make the system work.– “There will be no universal coverage unless it

is mandated by the Government.” (Lichtenstein)

– “You can’t have universal coverage without a police state” (Newt Gingrich)

2. Financing

• Link the population to providers and hold the providers accountable for costs and quality.

• Rely primarily on prepaid, capitated payments.

• Single payment integrates physician and “facilities.”

3. Services

• Match level and type of services to needs of the population- Epidemiologically-based planning.

• Focus on primary care and prevention.• Create a hierarchy of services.• Concentrate high cost/low incidence

procedures in regional centers.

4. Cost Containment

• Reduce unnecessary care --hospital days, procedures, lab tests, etc.

• Less duplication of costly technology.• More reliance on primary care providers;

less on sub-specialists.• Cost-effective prevention.• Lower administrative costs.

5. Quality and Accountability

Systems should be held Accountable for Quality and Cost, They should:

• Promote clinical effectiveness research.• Only use effective procedures, therapies, tests, etc.

(Evidence-Based Medicine)• Use clinical “guidelines,” “clinical pathways,” etc.• Reduce errors• Increase Patient Centeredness• Follow ideals of TQM, CQI, Six Sigma, LEAN

Reporting Systems such as HEDIS Can Be Used to Evaluate

Hospitals and Health Plans• Patient Satisfaction• Quality of Care• Costs• Access• Population Health Status

From the late 1980s through the early 1990s, a “Revolution” in the

Organization of the Delivery System Occurred --

But it happened through market mechanisms, not government

intervention (i.e. The Clinton Health Plan)

There Was a Shift in the Health Care Paradigm

PhysiciansPhysicians Solo PracticeSolo Practice

HospitalsHospitals Free-standing,Free-standing, communitycommunity

InsuranceInsurance IndemnityIndemnity

PurchasersPurchasers PassivePassive

Group Practice orEmployed

Networks & IntegratedDelivery Systems

Managed Care

“Prudent Purchaser”as Proactive Partner

Source: J. Billi, MD, U of M

Change in Physician RolesTraditional: • Self-employed• Solo practice• Single specialty groups• Fee-for-service

reimbursement for care of individual patients

• No “gate keeping”• Autonomy

Managed Care Era:• Employed• Group practice• Multi-specialty groups • Capitated for care of

a population• Primary care physician

gatekeeper• Accountability

Source: J. Billi, M.D., U of M

The Paradigm Shift was Closely Associated with the Movement to

Managed Care and Integrated Delivery Systems

*BUT,* Since the late 1990s, the paradigm has shifted again!--Away

from tightly managed care and toward a modified fee-for-service

system.

36

ACCESS TO CARE: Enrollment in Various Types of Employment-Based Health Insurance

.

Source: American Hospitals Association, TrendWatch ChartBook, 2006 (http://www.aha.org/aha/research-and-trends/health-and-hospital-trends/2006.html, accessed May 28, 2007)

(1)

0%10%20%30%40%50%60%70%80%90%100%

1988 1993 1996 1999 2002 2005

ConventionalPPOHMOPOS

The Decline of the Hospital

The Hospital is no Longer the “Center of the Health Care

Universe.”

It is Now Becoming One of the Pieces of an Integrated Delivery

System.

Since 1981, there has been an incredible decrease in the use of

inpatient care• Decline of 80 million patient days per year

– Financial Incentives (e.g. managed care)– New Technology (e.g. Laparoscopy, new Rxs)– Early Ambulation

• More hospital-based surgery is performed on an outpatient basis than inpatient

Major Trends in the Hospital Sector during the late 80’s and

90’s:Mergers

AcquisitionsDownsizing

Re-engineeringIntegration

System FormationManaged Care

Many of these trends have stopped or even reversed!

• System “divorces” (Stanford and UCSF)• Virtual Integration• Physician Practice Management Groups have collapsed

Trends in Private Sector Health Care Financing

• Shift of cost of care to employees– Higher share of premiums– Premiums for dependents– Higher Co-pays and Deductibles (e.g. for hospital)

• Consumer–Directed Health Plans– Health Savings Accounts, – Defined Contribution Plans

• Avoidance of Employee Coverage (Walmart)– Contractors– Part-time employees

OTHER MAJOR ISSUES• The Future of Medicare

– Unsustainable Growth in Costs• Medicaid, SCHIP and the Uninsured

– Will we ever cover the whole population?• Physician Workforce Issues

– Will we have a physician surplus or a shortage?• Nursing Shortage

– How can we train more American Nurses?• **How will we afford the costs of new

technology?**

The solutions to these problems are complex:

Beware of anyone who says they know a simple solution to our

health care dilemma!