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Solution-Oriented Approaches to Control Health Care Costs
Alpha BenefitsMarch 31 & April 1, 2004
• HealthAmerica & HealthAssurance
• Subsidiary of Coventry Health Care, Inc.
• Statewide health plan founded in 1975
– Licensed in 59 of 67 counties
• Over 715,000 members
• 474 inpatient facilities & 19,000 providers
• Revenue run rate of $1.6 billion in 2004
• Full product spectrum
• Progressive medical management philosophy
HealthAmerica & HealthAssurance Overview
“The Perfect Storm”
Recovering Economy
MedicalMalpractice Increased
Uninsured&
Unemployment
Federal & State Budget Deficit
Increased Federal & State Regulation
ClinicalLabor
Shortage
Aging Baby Boomers
Emerging Expensive Technology
Rising Premium RatesUnhealthy Lifestyles
Insatiable Appetite for Health Care
Services
End-of-Life Issues
Lack of Checks and Balances
Health Delivery System
Consolidations
Cost Shifting - Public Sector To Private Sector
•Network management
Solutions That Work
•Effective utilization management
•Disease management programs•Quality improvement
Controls currently in place
•Administrative efficiencies•Benefit plans featuring cost-sharing
•Evidence-based medicine
Solutions That Work
•Network management
Controlling unit cost demands
Solutions That Work
•Network management
• Effective utilization managementAppropriate service,
appropriate place, fair & reasonable price
Solutions That Work
•Network management •Effective utilization management
•Appropriate service, appropriate place, fair & reasonable price
•Containing Rx costs
Industry trend information is from Buck Surveys.
12.00%
14.00%
16.00%
18.00%
20.00%
22.00%
1999 2000 2001 2002 2003 2004
HealthAmerica
Industry
Containing Rx Cost:A Case Study
Comparison of Rx Trends
•Network management •Effective utilization management
• Appropriate service, appropriate place, fair & reasonable price
• Containing Rx costs
•Disease management programs
Solutions That Work
Effective Disease Management:A Case Study
2003
Report
6 MonthsPre-
Intervention
6 MonthsPost-
Intervention
$1,103,650.86
$250,660.69
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
INPATIENT DOLLARS PAID
6 Months Pre-Intervention
6 Months Post-Intervention
Total Inpt Admits Pre Intervention-104Total Inpt Admits Post Intervention-32
Cardiac Case ManagementHealthAmerica and HealthAssurance
•Network management•Effective utilization management
•Appropriate service, appropriate place, fair & reasonable price
•Containing Rx costs•Disease management programs
Solutions That Work
• Quality improvement
•Network management •Effective utilization management
•Appropriate service, appropriate place, fair & reasonable price
•Containing Rx costs•Disease management programs•Quality improvement
Solutions That Work
• Evidence-based medicine
•Network management•Effective utilization management
•Appropriate service, appropriate place, fair & reasonable price
•Containing Rx costs•Disease management programs•Quality improvement•Evidence-based medicine
Solutions That Work
• Administrative efficiencies
•Network management •Effective utilization management
•Appropriate service, appropriate place, fair & reasonable price
•Containing Rx costs•Disease management programs•Quality improvement•Evidence-based medicine•Administrative efficiencies
Solutions That Work
• Benefit plans featuring cost-sharing
Solutions Long Overdue
•Lifestyle choices
•Emphasis on prevention and wellness
Opportunity still exists
Solutions Long Overdue
•Lifestyle choices
Big Spending:The Price We Pay
StateObesity Related
Expenditures
% of Total Medical
Spending
CA
NY
TX
PA
FL
IL
OH
MI
NJ
NC
5.5%
5.5
6.1
6.2
5.1
6.1
6.1
6.5
5.5
6.0
$7.68 billion
6.08
5.34
4.14
3.99
3.44
3.30
2.93
2.34
2.14Source: CDC
States with the highest burden of the country’s $75.1 billion in estimated medical expenditures attributable to
adult obesity.
•Lifestyle choices•7 in 10 Americans do not exercise regularly
•4 in 10 Americans are not physically active
•64% of all Americans are overweight
•440,000 people die each year from smoking
•It’s time to “walk the talk”
Solutions Long Overdue
•Lifestyle choices
Solutions Long Overdue
•Emphasis on prevention and wellness
One way to control the demand for health care services
Opportunity for Improvement
•Changing health care system’s economic orientation from treatment to prevention
•End-of-Life issues
• Inefficiencies in the health care system
•Modify physician and consumer behavior
•Eliminating medical errors•Fixing reimbursement•Regional planning approach to new technology expansion and health care services
•Medical malpractice reform
Final Take-Aways
Health benefit costs are only one component; employers need to be heard
•Support tort reform
•Embrace evidence-based medicine•Insist on regional planning for new technology and expansion
•Speak out against new benefit mandates
•Base employee cost sharing on lifestyle
Final Take-Aways
•Accept that you cannot have access to every provider, unlimited coverage, and control costs at the same time
•Accept a little noise from your employees (Rx formulary)
•Engage employees in true cost of health care
The Solution ….
• Pursue cost controls privately• Fix what we have today before
putting in a new system• Terrific opportunity still exists
– Make a goal for all constituents to work for single-digit medical trends
– Allow businesses to retain health care choices for their employees
Future
•Real cost containment requires real sacrifice
•If we are to cover everyone, we cannot cover everything
•We ration care now• Challenge is to ration in a way that
is more efficient and equitable.
