Mind Your Ps and Qs

Amy Downs and Nina RoumellDecember 4, 2014

Levers to Reduce the Price and Quantity of Health Care

• After a lull, health care cost growth is increasing again.

• Health care markets don’t operate like typical markets.

• A number of opportunities exist that may reduce costs.

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A Long Way to Go Average Total Single Premium (In Dollars), Private-Sector Establishments, United States And Colorado, 2000-2012

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What Drives Costs? Where To Start?

Breaking Down Health Care Cost:

A Simple Formula

Alfred E. Neuman’sCosmic Health Care Law

The Technology Conundrum

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SOURCE: Health Care Costs: Key Information on Health Care Costs and their Impact, Kaiser Family Foundation, 2009

Traditional Insurance: Buffet-Style Demand

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Health Behaviors DriveAnnual Health Care Costs

Tobacco $289 Billion

Obesity $190 Billion

Alcohol $224 Billion

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Fee for Service: It’s About the Money

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Colorado Business Group on Health; PROMETHEUS

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Levers that Keep Costs in Check

1. Consumers bear costs of purchases.

2. Buyers make choices based on transparent information.

3. Competition exists among suppliers to add value to services and products.

In Traditional Markets . . .

Consumers Bearing the Cost

More Skin in the Game

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Show Me the Money: High Deductible Plans

46%

10%

5%

2%

1%

21%

28%

24%

20%

14%

26%

39%

54%

58%

57%

7%

24%

17%

12%

9%

8%

20%

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

1993

1999

2003

2008

2013

Conventional HMO Preferrred Provider Network Point of Service High deductible

Enrollment by Insurance Plan Type, United States, 1993-2013

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Benefit Design: Tipping the Scale

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Reference Pricing

Cholesterol lowering

medications

Source: National Institute for Health Care Reform

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Reference Pricing: From Theory to Practice

Robinson J C , and Brown T T Health Aff 2013;32:1392-1397

©2013 by Project HOPE - The People-to-People Health Foundation, Inc.

Shifting Risk—and Reward—to Employees

Encouraging employees to take responsibility for their health and health care

High-deductible plans

Wellness incentives

Transparency

Transparent Information for Informed Choices: Cost and Quality

• Health Insurance Marketplaces • All Payer Claims Databases

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Engaging Consumers in Medical Decisions

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Increasing Competition

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Buying in bulk: Walmart and Lowes

• Crossing state lines to use providers (Centers of Excellence)

• Bundled payment

Increasing Competition Among Providers

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Providers Bearing More Risk

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Bundled Payments: One-Stop Shopping

Defensive Medicine and Tort Reform

SB 14-187: Colorado Commission on Affordable Health Care

• 12-member group will conduct in-depth analysis of Colorado’s health care cost drivers.

• Goal: Recommend ways to contain costs while improving access and quality.

Containing Health Care Costs

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• After a lull, health care cost growth is increasing again.

• Health care markets don’t operate like typical markets.

• A number of opportunities exist that may reduce costs.

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Amy Downs Nina Roumell downsa@coloradohealthinstitute.org roumelln@coloradohealthinstitute.org