Future of Healthcare

By Natalie Sterner, Dan Wandsnider, Jack Travis, and Reed Wuttke

Agenda

● Healthcare Costso Obesityo Medical Technology

● Affordable Care Act & Healthcare Reformo Private Insuranceo Medicareo Medicaid

Obesity: The American Epidemic● 66.3% of Americans are overweight or obese (Anderson et al.

2007)

o BMI > 25 kg/m2

o Highest obesity rate of surveyed OECD countries● Obesity in last 50 yrs & more than doubled in last 30

yrs (Cawley et al. 2012, Burkhauser et al. 2009)

● More than ⅓ of children & adolescents overweight or obeseo Obese adolescents aged 12-19 5%-21% from 1980-

2012 (Center for Disease Control and Prevention)

Obesity Trends Among Adults

● Adults aged 20-74 years in US(Ogden et al. 2010)

● 2013: 35.5% adults aged 18 yrs & older overweight; 28.3% obese (Center for Disease Control and Prevention)

Obesity Health Consequences

● Obesity assoc. w/ Myocardial infarction, Stroke, Hypertension, Type 2 Diabetes, Cancer, Osteoarthritis, Asthma, and Depression (Cawley et al. 2012)

● Type 2 Diabetes progressively deteriorates multiple organs and systems leading to blindness, limb amputations, renal failure, coronary artery disease (Dixon 2010)

o Majority of medical costs for obesity due to Type 2 Diabetes

● Resulting in more than 300,000 annual deaths (Dixon 2010)

Costs of Obesity

● Per capita medical spending for obese people $1,429 in 2006o 42% larger than spending for normal weight people

(Finkelstein et al. 2009)

● In 2008, est. $147b of medical costs from obesityo Increase from $78.5b in 1998 (Finkelstein et al. 2009)

● Obesity prevalence accounts for 12% of growth in

healthcare spending (Thorpe et al. 2004)

● The Future: no signs of slowing down

Medical Technology: Diagnostic

● U.S. has ~3x as many CTs, MRIs, and mammographs/mil pop as OECD countries average in 2009o >2x MRI exams given/mil pop.; Fees highest: $1,080o >2x CT exams given/mil pop.; Fees highest: $510

(Squires 2012)

Medical Technology: Procedures

● Volume of Knee & Hip Replacements

2009 (Squires 2012)

Medical Technology: Procedures

Rate per 100,000 pop of Coronary Revascularization Procedures in 2003 (Peterson 2007)

● U.S. more than double OECD average

Medical Technology: Surgeries

Changes in the Surgical Treatment of Heart Attacks, 1984-1998● In 1984, 10% of

patients had surgical intervention.

● By 1998, >50% received catheterization (Cutler 2001)

Medical Technology Costs

● $18,000/discharge compared to less than $10,000 in Sweden, Australia, New Zealand, France, & Germanyo U.S. more resource intensive & prices higher (Squires 2012)

● Moral Hazard: w/ generous insurance, patients & physicians overuse treatments regardless of effectivenesso Type 2 Diabetes: less coverage, more incentives to

exercise and diet● New MT costs & estimated to account for more than ½

of LT spending growth (Smith 2009)

Medical Technology Costs

Private Insurance

● Costs of medical care ● Costs of health insurance● Affordable Care Act

o Large Employer Marketo Individual/Small Group Market

Increased Healthcare Spending

● 1980: $215 B 1998: $1.02 T 2003: $1.7 To 15% of 2003 GDP (Smith et al., 2005)

● 1998: $4,178 per capita (Anderson and Hussey, 2001)

● Most expensive 5% ~50% health spendingo Bottom 50% 3% (Zuvekas and Cohen, 2007)

Increased Insurance Spending

● 1954 IRS ruling - insurance through employers not taxed

● Consumer out of pocket spendingo 1960: 48%o 2000: 15%

(Igelhart, 2002) (Schieber, 2004)

Rising Cost of Health Insurance

(U.S. Department of Labor and the Employee Benefit Research Institute, 2012)

Rising Costs, 1999-2012

Large Employer Market

● Market already functioning acceptably well● Large employers must provide “minimum

coverage”● ACA made few reforms

o Eliminate coverage limitso Cover preventative serviceso Cover dependentso Nondiscrimination on basis of preexisting conditions

Who is Covered?

● 2004: 62.4% of non-elderly population covered through employers (Fronstin, 2005)

● 2000: 69% employers offered coverageo 2005: 60% 5 million uninsured (Kaiser Family Foundation, 2005)

(Collins, Davis, and Ho, 2005)

● 40% firms with < 10 employees provided insurance (Blumenthal, 2006)

Who isn’t Covered?

● ⅔ uninsured have incomes ≤ 200% of FPL (The Urban

Institute and the Kaiser Commission on Medicaid and the Uninsured, 2008)

● Average employer premium (Blumberg and Holahan, 2009)

o Individual: $4,800 22%o Family: $13,300 30%

Individual/Small-Group Market

● Key provisionso Expanded coverage

Cannot discriminate based on pre-existing conditions

o Mandateo Subsidies

Change in Definition of Fair Share

● Actuarial fairness ability to payo Actuarial fairness is discriminatory

● Experience rated community rated

Community-Rated Insurance

(Bradford and Max, 1997)

Challenges Faced by ACA

● Asymmetric information problem (Rothschild-Stiglitz - 1976)

o Adverse selection

● Noncompliance● Four ways to combat

o Minimum coverage requirementso Exchange certification requiremento Medical-loss ratio requirementso Risk adjustments

Medicare Overview

● Rising Costs○ Demographics

● Changes Under the ACA○ Financial ○ Cost Effectiveness○ Coverage

Medicare- Rising Costs● Increasing Medicare Costs

o Aging populaceo Life expectancy increase

Medicare-Rising Costs

● Increasing Medicare Costs Part A trust fund through 2017 (Kaplan 2011)

Medicare: ACA Overview

● Financial Changes● Part A and B Cost Saving measures

o Evidence/Efficiency Incentiveso Accountable Care Organizations

● Changes in coverageo Part A, B, C, and D

ACA: Financial Changes

● MA plan reduction● $196.3 b cut to providers over 10 years (Davis 2010)

● Increased taxes generates $400 b by 2019 (White 2010)

o Families over $250,000 o Medical Deviceso Insurers

● Medicare costs 2016 projected $20 b (Auerbach 2014)

● Part A trust fund through 2029 (Kaplan 2011)

Part A and B: Evidence/Efficiency ● Coverage with evidence development (CED)

o 46% of trials contradict practices (Prasad 2012)

o Patient-Centered Outcomes Research Institute (PCORI) $3 b through 2019 (Krumholz & Selby 2012)

Utilize Electronic health records (EHR)● $2 b savings and stopped 200 premature deaths (Mohr & Tunis 2010)

● EHR copying (Ryan & Mushlin 2014)

● Value-based purchasing (VBP) and Hospital Readmission Reduction Program (HRRP) Incentives

VBP pool 3% fine in HRRP

● 2012: ⅔ of hospitals (Gilman et al. 2014)

Part A and B: ACO

● Accountable Care Organizationso Provider Groupso Centers for Medicare and Medicaid Services (CMS)

Rewards/Penalizes 4 million enrolled (Gold 2014)

May overstate savings (Douven et al. 2015)

Part A and B: Coverage Changes

● Covered annual preventative care visito 27.5% versus 1.4% (Chung et al. 2015)

Part A and B: Coverage Changes

● Mental health coverage expansiono Preventive Care Screenings o 2008 Medicare Improvements for Patients and

Providers Act: Copayment rate 20%

Part C: Coverage Changes

● Medicare Advantage (MA) Planso 13% higher o Reductions to save $136 b

through 2020 (Kaplan 2011)

o Funding tied to Part A and B o Decrease in plans, future

enrollment? (Afendulis et al. 2012)

Part D: Coverage Changes● Part D donut hole closed by 2020 (Shrank & Niteesh 2011)

o 75% coverage

Results

Medicaid Overview

● Costs● OBRA 1990● SCHIP 1997● ACA 2010● State Examples

Costs

Marton 2007

● Medicaid Spending through Great Recession Cantor 2013

OBRA 1990

● Coverage Required:o Children born after September 30, 1983o Families below 133% PL Gordon 2003

● Coverage by 8% Card 2004

o Take up was <5% Card 2004

● Pregnant womeno 10-15% decrease in uninsured Winter 2011 o 50-60% crowd out rate Winter 2011

o No significant effect on fertility rate Deleire 2011

OBRA 1990

● Cost Shiftingo Physician Costs, Visits

25% doctors, no new patients Decker 2009

o Uninsured: $1,135 out of pocket Expansion # uninsured

Private picks up slack Clemans-Cope 2013

SCHIP

● 1997, expansion for children● Premium= Exit Rate (GA, KY) Marton 2010

● Physician participation Bronstein 2004

● BadgerCare:o coverage 8%, public insurance 25% Wolfe 2006

● Excellent health 1-5 years eligible De La Mata 2012

Affordable Care Act

● Signed 2010, implemented 2013● Poor

o 44% PL o 133% PL Artiga 2015

● Children coveredo Families <133% PL Medicaid.gov

● Eligibilityo TX: 18%, MA: 1%, WI: 4%o Individual Mandate uptake Richardson 2013

● Beneficiaries gain $4,177 Clemans-Cope 2013

Affordable Care Act

Artiga 2015

Affordable Care Act

● Gov HC Spending $12.1

billion Clemans-Cope 2013

● <44% PLo Subsidized at 100% Artiga 2015

o Gap 44% PL - 100% PL Artiga 2015

● Private Insurance 2.7% Blumberg 2012

Massachusetts

● Implemented reform 2006● ER usage 5-8% Miller 2012

o Correlated with Insurance Miller 2012

● 1.3% reporting E or G health Courtemanche 2014

● Inpatient 36% Kolstad 2012

o Evidence of crowding out

● HC Service Price 10.8% Dunn 2015

Massachusetts

Miller 2012

Discussion

Questions?

Questions

● What economic incentives could reduce the nation’s obesity prevalence?

● What are the pros and cons of Wisconsin adopting the Medicaid expansion?