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Managed Care Economics
Health Care Finance
From the Blues to Managed Care
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What Does Life Expectancy Tell Us?
The Last 100 Years 25 Years in 1850 50+ Years in 1950 About 75 now Lower for Blacks and Native Americans
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What made the Difference?
25 - 72 Sanitation Immunizations Disease Control All Public Health
72-75 Antibiotics Chronic Disease Treatment
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Quality of Life
When Social Security was started, less than 5% of the population lived to 65 Now a significant number of people live into their 80s Most of them are fairly healthy and active
Many chronic diseases and conditions have been controlled Allergies Diabetes
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The Downside - Health Care Costs Too Much
Many People Cannot Afford It Diverts Dollars From Other Things Hurts Global Competitiveness
Cars in Canada Low Cost Labor
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Costs More Than Other Countries
Health As % of GNP Has More than Doubled in 50 Years
It is 20%-50% Higher Than Europe Their Health Statistics Are Just As Good Do They Know Something We Don't?
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U.S. Has A Lower Life Expectancy than Most Other Industrialized Countries
Taken as a major criticism of the US system Is life expectancy really the right measure?
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Life Expectancy Is Not Health
Bias Weighted Toward the Young One Baby Is Worth Several Grannies
Only Life Counts Discounts Quality of Life Nursing Home Is As Good As the Ski Slopes Masks Aging Population Masks Improved Health
A Good Measure for Developing Countries
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What Complicates Health in the US?
We Have 3rd World Public Health Ineffective Prenatal Care Poor Immunization Practices Limited Access to preventive and routine care
Teen Pregnancy Prematurity Poor Parenting
Developed World Leader in AIDS
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Non-medical Issues
The Problem of the Poor Poor Education Poor Health Habits Cannot Afford Prevention
Geography Too Many Isolated Areas Expensive to Deliver Care
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How has the Health Care Umbrella been Expanded?
Sin to Sickness Alcoholism Drug Abuse
Mental Health Services Nursing Homes Vanity Surgery Should Compare Total Social Welfare Budget with
Europe
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The Core Problem
Public Health Does Not Work Well but Medicine Does, for people who can get it Old People Are Healthier Middle-aged (Middle-Class) People Do Well
Drugs and Devices Matter
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Second Order Demographics
More Old People More Care Per Person Costs Have to Go up Much cheaper in a country where few people live
to be 65
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Paying for Medical Care
Pre-WW II Mostly Private Pay Some Employer Provided - Kaiser
WW II Price Controls
Post WW II Health Insurance As Benefit Private Insurance The Blues Medicare/Medicaid
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Blue Cross - Blue Shield
Developed by Docs and Hospitals Sold to Teachers Assure Access Assure Payment
Reimbursement Policy Pay Whatever Was Charged Subsidize the Rural Areas Subsidized Over-bedding and Over Treatment
Federal Programs
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Social Security Income and Disability
1930s Lifted the elderly out of poverty Provided disability insurance for workers The disability is quite a big and valuable program
and pays for a lot of medical care
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Hill-Burton
Post-WWII Funded construction of community hospitals Had community service requirements, but those
have all expired Created the US emphasis on hospital based care Spent from the 1970s to the 1990s reducing
hospital beds to control costs Excess beds or Surge Capacity?
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The Great Society
Medicare Old People Certain disabled people
Medicaid Poor People Nursing Homes
About 40% of medical dollars Fought by the AMA Made Docs Rich
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No Good Old Days for Patients
Gaming the System under Fee For Service Right to Die As Example Cannot Just Open the Checkbook
Greed Is Not Good in Medical Care Fee for Service Drives Unnecessary Care Hospitals Have to Care More About Money
Than Patients Rich Docs Are Not Always Better Docs
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Federal Interventions
Feds Pay About 40% of Health Care Other Plans Follow the Feds Usual and Customary Charges for Docs
Based on the Community Adjusted for the Docs Previous Charges Complex
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Hospital Costs
Big Dollars Are in the Hospital Charges Docs only get 20-25% of the health care budget Hospitals get a lot of the rest Drugs are an increasing share Fee for Service Drove Unnecessary Care Open-end Reimbursement drove High Prices Hospitals did not even know costs
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Diagnosis Related Groups - DRGs - 1983
Watershed in Health Care Reimbursement Prospective Payment (Capitation) Based on Admitting Diagnosis Fixed Payment Some Adjustments
Encouraged health insurers to also manage physician care
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Making Money Under DRGs
Fewer Tests and Procedures Complete Reversal of Prior Reimbursement No Bump for ICU
Reduce Length of Stay Dropped About 20% at Once, continued to drop Ideal Is Out the Door, Dead or Alive Patients Discharged Much Sicker
Which Was Right, Then or Now?
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Federal Laws Enabling Managed Care for Docs
Federal HMO Act in the 1970s Preempted State Laws Banning Prepaid Care
ERISA Passed to allow labor unions to negotiate national
health plans with big employers Preempts state regulation of certain self-insured
health plans Gave self-insured plans an edge and drove most
employers to them
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Managed Care Organizations - MCOs
Insurance Plans That Control Patient Care Includes the Old Alphabet Soup
HMOs PPOs IPAs
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Two Major Variables
Employer or Contractor Do the docs work for the plan or a captive group? Do the docs contract with many plans, treating
patients based on different plan benefits? Open or Closed
Do the docs treat only patients from a single plan or a mix of plans?
Why do these matter? Leverage on the doc's decisions
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Direct Controls on Costs
Pay Less for Services Use Market Power to Bargain Control Access Points Limit Hospital Stays Limit Tests, Procedures, and Referrals
Direct Control of Access Pre-approval Tell the Docs What to Do Most Honest
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Indirect Controls
Capitation CRF--Consultation and Referral Funds Withhold and Incentive Pools Stop-loss and Reinsurance Total Capitation
Economic Credentialing Dumb Down Services Free Ride on Other Plans or the Government
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Deferring Care
Stop-gap Care Keep You Out of the Hospital Keep You Away From Specialists Managing Crises, Not Solving Problems Only works in the short term, but plans only think
in the short term Unsustainable Policies - Plans Are Going Broke
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How Patients Get Hurt - Easy Answers
Denied Care - the Usual Lawsuit Incompetent Care by Bad Doc Incompetent Care by a Non-doc Putting Patients in Dangerous Facilities Not Using Proper Drugs Simple Negligence
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Good Docs Do Bad Things
Too Little Time to See the Patients Inadequate Labs and X-ray Available Locked Into Problematic Specialists Patients Cannot Get in to See You Lose Control in the Hospital
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Why Fears of Malpractice do not Improve Care
Too Far Away in Time Too Uncertain Fight for Quality - Die Today
Lose Your Job Get Hit With Restrictive Covenants Get Blackballed by Other Plans Get Reported to the BOME for Alleged Bad Care
ERISA Preemption
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Kill the Messenger Phase - 1990s
Plans Will Not Tolerate Dissent Key Issues:
Avoid Notice of Problems Keep Other Staff in Line Keep Patients in the Dark Keep Regulators Ignorant
Gag Rules Fire’em Gresham’s Law
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Where Does ERISA Preemption Come In?
Series of Case in the 1980s and 1990s Suits against Plans (not docs) claiming malpractice
through plan decisions or incentives Courts ruled that you could sue the individual doc for
malpractice Could not sue plans for malpractice injuries because
ERISA preempted state claims against plans Plans that employed physicians could be vicariously
liable
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Plan Medical Directors
Plan Medical Directors wore the plan hat and also made medical care decisions
Most plans provided medically necessary care Exclusions for quack care Exclusions for experimental care
Deciding if care is medically necessary is a medical decision
Some states required these decisions to be made by docs licensed in the state, not by accountants in New Jersey or India
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Pegram
Pegram is a case about a doc wearing both hats She is a plan owner as well as a treating physician The court is trying to decide if the plan should be
liable for her decisions or whether ERISA preemption should apply.
