Options for MSU Faculty-Academic Staff Health Benefits

Paul B. Ginsburg, Ph.D.

Presentation to Subcommittee on Health Care Policies and Options, Univ. Comm. On Faculty Affairs, February 15, 2007

Framework: Why Does MSU Provide Health Benefits?

Most MSU faculty/staff (current and prospective) want health coverage• MSU can provide better benefits at lower cost

- Purchasing power- Formation of a pool- Experts handle a complex financial product

• MSU really acting as agent for employees- They are ultimately paying for it- Seeking to make decisions to reflect employee preferences

MSU wants employees to be covered• Good access to care when required• Reduce potential disruption from financial issues related to illness

What Happens When Premiums Increase Sharply?

Unplanned increase in compensation costs Difficult process to offset impact with smaller wage

increases• Many economists believe that higher premiums ultimately

borne by employees

Control of Premiums More Compelling Now

Premiums higher in relation to total compensation Potential for change in tax treatment of employer-

based coverage in next five years Reporting of liabilities for future health benefits

costs (GASBE)

Levels of Initiative to Address High Premiums (1)

Changes in magnitude of financial support for coverage• Coordinating coverage with employee spouses• Percent contribution for employees and for dependents• Retiree contributions and benefits

- Incentives for retirement

Changes in benefit structure• Shift responsibility to patients• Change incentives for patients• Provide information to support better patient choices

- Treatment alternatives- Provider price and quality

• Introduce incentives/support for healthier lifestyles- Stable work force makes ROI more favorable

Levels of Initiative to Address High Premiums (2)

Promote changes in local health care system• Focus on quality as well as costs• Through actions as purchaser that influence system• As a provider of medical care through faculty• Through MSU leadership in the community

- Purchaser and provider

Advocacy at state and federal level• Universal coverage• Altered tax treatment of health insurance• Medicare and Medicaid provider payment• Effectiveness research and technology assessment

Health System and Costs (1)

High costs versus rising costs• Distinct causes• Geographic variation in levels of costs

Reasons for high costs• Insurance distorts patient incentives

- More care- Insensitive to price

• Fragmentation of delivery system- Duplication of tests- Vulnerable to errors

Health System and Costs (2)

• Lack of competition over price- Concentrated markets for some segments- Role of insurance- Little information for consumers on price, quality

• Payment system that favors more services, especially new technology

• Poor consumer health habits• Dysfunctional medical malpractice system

Health System and Costs (3)

Key drivers of rising costs• Developments in medical technology

- Many are valuable Tendency to apply them too widely (e.g. Vioxx)

- Many have small or unknown benefits

• Increasing specialization in physician workforce• Physician entrepreneurship

Health System and Costs (4)

Addressing trends through reducing the level of costs• Productivity improvement often from a process that

generates discrete reductions in costs- So reductions in level of cost can be basis of reduction in trend

• Trend addressed directly through feedback to research and development

Strategies for Cost Containment

Influence consumers/patients to shop better Motivate/support providers to increase

efficiency/quality Contract with a national insurer Augment delivery system through convenience

clinics More assessment of medical effectiveness Promote better health

Patient Cost Sharing (1)

Discourage use of services Make consumer sensitive to provider prices

• This works only with certain designs

Limits to cost sharing• Need to maintain insurance’s financial protection

- Increase potential by varying deductibles and out-of-pocket maximums with salary

• 10% of individuals account for 70% of spending in a year• More cost sharing means less effective pooling of healthy

and sick

Patient Cost Sharing (2)

Patient cost sharing most advanced for prescription drugs• Tiered cost sharing design• Increasing incentives to use generics and preferred

brands• Growing challenge is specialty pharmaceuticals/biologics

- Extremely expensive- Tiered design usually not applicable- Separate cost sharing provisions

Value-Based Benefits Design

Less cost sharing for really valuable services• Part of disease management program• Solid evidence on effectiveness• Best examples with prescription drugs

- Existing tiered benefit structure- Weak diagnostic data less of an issue

• Whether to tie to services or patients- Case of statins

More cost sharing for other services• More elective services

- But services most elective already not covered- Need additional classes

Savings Vehicles (HRA/HSA)

Purposes of savings accounts• Make large deductibles acceptable• Facilitate tax sheltering

Many potential consumer-oriented advantages not unique to HRA/HSAs

Rigid benefit structure requirements a negative Little accomplishment when an option

• Challenge of addressing selection risks

“Centers of Excellence” Approaches

Data on cost and quality per episode suggest large potential• Potential greatest for expensive services with large

variation in quality- CABG surgery

Medicare unable to proceed to other services- Bariatric surgery (most common approach today)- High-end imaging (Highmark Blue Cross)

• Usually higher quality and lower costs go together• Corporate experience shows disappointing take up

- Potential for greater take up in a faculty/academic group

“Medical tourism” a version that emphasizes costs

Better Information for Consumers (1)

Treatment alternatives• Experimental evidence shows large response• Access to general sources and focus on particular

decisions

Provider quality• At rudimentary stage

- Hospital quality varies by patient type- Physician quality data almost nonexistent

• Medicare leading the charge- Clout and credibility

Better Information for Consumers (2)

Provider prices• Needs to be integrated with benefit structure

- Coinsurance rather than copayments- Deductibles

Greatest potential in outpatient area- Tiered network approaches- Experiment with “indemnity” approaches

• Actionable information versus transparency• Insurer best positioned to provide information

Managed Care (1)

What is left after the backlash?• Negotiation of provider payment through networks

- Purchaser attitudes on breadth of network Some experience with narrowing networks but not extensive

• Revival of administrative controls on some decisions- Restrictions on high-end imaging, bariatric surgery- Hospital length of stay

• Use of hospitalists to shorten hospital stays- Rapid delivery change pursued by hospitals, medical groups or

health plan

Managed Care (2)

Disease management• Little high-quality literature but passing the market test• Increasingly focused on opportunities for greatest

success- For example, only diabetics with more advanced disease

• Extensive tailoring to problems prevalent in an employee group

• Large employer can hire DM vendor directly or use the carrier’s programs

Melding Managed Care with Consumerism

Some options discussed earlier consistent with concept

High performance networks• Focus on physicians in selected specialties• Two networks based on total costs per episode and

quality of care- Data must be credible to providers- Patient incentives to use high-performing providers

• Can address hospital duopoly through total cost incentives to physicians

• Initial gains from shifting patients to more efficient providers- Larger gains from motivate/support providers to improve

Directly Encouraging Providers to Improve

Hospital quality reporting becoming more extensive• Medicare beginning physician quality reporting

Options for faculty plan• Incentives to choose higher quality providers• Support for Leapfrog initiatives

- Few have discouraged use of non-complying hospitals- Boeing (Seattle) an exception

• Initiate Bridges to Excellence program in Lansing

Pay for Performance (1)

Few would quarrel with concept• Paying more for measured quality• Question is whether it gets at those dimensions of quality

most related to outcomes and costs

Approach has greatest potential in integrated delivery—or at least large multi-specialty groups• Best position to improve to gain rewards• Challenging attribution issues in more fragmented

environments

Pay for Performance (2)

Downside of approach is opportunity cost• Whether energy/resources to improve better applied

elsewhere• Skepticism about importance of McGlynn results• Limits of what can be done in context of FFS

Alternative approaches• Incentives based on costs/quality per episode• Payment incentives to support coordination of care

- New codes for care coordination- Capitated payments applying to chronic disease in question

Medicare kidney disease program

Creation of Worksite Clinic (1)

A longstanding practice recently broadened• From occupational medicine to complete primary care

- Reduction of time cost and increasing access- Ensure that current concepts of primary care are followed

Unique potential at MSU• Most employees at single location and many families

close by• Opportunity for primary-care oriented medical schools to

innovate in delivery of primary care- Follow leading concepts- Employ information technology- Potential for successes to be replicated in community

Creation of Worksite Clinic (2)

Distinguish worksite clinic with “mini-clinic” Mini-clinic focused on convenience and low cost for

subset of primary care services• Staffed by nurse-practitioners• Long hours• Bring traffic into store

- Pharmacy- General purchases

Potential for Information Technology

Community-wide sharing holds potential for saving• Reduction in duplication of tests• Better care in emergencies• Reduction in errors

Sharing does not occur naturally• Hospitals focused on linking staff physicians to them• Providers bear most costs but insurers/purchasers get

most savings• Indianapolis best known example of community network

- Leadership of Indiana University over many years- Boston also notable—based on relationship among CIOs

More Assessment of Medical Effectiveness

The problem• Technologies that have negative or small benefits• Valuable technologies that are applied too broadly

- Examples: Vioxx, implantable defibrillators

Limited support for medical effectiveness research• Resources and delay

Conflicts of interest in development and distribution A national rather than purchaser or local agenda

Promoting Better Health (1)

Encourage healthier behavior• Recent research (Thorpe) shows obesity as major driver

of cost increases- Likelihood of other lifestyle aspect (harder to measure) also

driving costs

• Employers have been cautious with incentives for healthy lifestyles- Rewards/support for improvements more prominent than

penalties

• ROI held down by cost of rewards for existing behavior Health assessments and coaching

• King County (WA) provides incentives for both assessment and following advice

Promoting Better Health (2)

Measurements of ROI often understated because of data limitations at employer level• Few can combine health claims data with data on

disability and absenteeism

Absence of “silver bullet” in health promotion at this time

Strategy of Switching Carriers

Potential is more in innovation than lower provider payment rates• National insurers have traditionally found Michigan

regulatory environment inhospitable- Aspect of facilitating regulation of BCBSM as public utility

• BCBSM will likely have lower provider rates from its monopsony power

• Favorable stage in underwriting cycle for entry by national plan- Contract with MSU a favorable opportunity to enter Lansing

• Key is how well can BCBSM accommodate MSU’s innovation agenda- Usefulness of threat of switching

Most Promising Short-term Approaches

Application of value-based design to drug benefits Centers of excellence approaches for selected

services High-performance networks Redesign benefit structure to incorporate incentives

to consider price Disease management Risk assessments and coaching Limit premium contribution for retirees Assess ability of BCBSM to support initiatives

Most Promising Longer-term Initiatives

MSU employee/dependent clinic Community-level IT Incentives for health promotion