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Slide 1
Why national IQ drops 20 points when we debate Medicare & health insurance reform: an ‘Afternoon of the Faun’ moment is nigh
Paul Gross PhD
Director, Health Group Strategies Pty Ltd Australia and Greater China
Invited address, Annual Health Congress, Sydney, 22 March 2014
Slide 2
MY FOCUS
1. Quick fixes & baby elephant hay: the May budget as an ‘Afternoon of the Faun’ moment
2. Mural dyslexia: four short-term efficiency gains
3. LTCI and longer-term funding of care of an ageing society with more disability
Slide 3
Lots more money, no real reform, uncertainty in big spending, overlaps, new gaps
1.Too many quick fixes , little reform: we must reassess outlays
Slide 4
1. Is this a health policy debate? NO 2. Is this a health financing debate? NO 3. Is today’s Medicare relevant ? NO 4. Is today’s PHI relevant? NO 5. The quotes suggest consensus? NO
“Doctor visit co-payments are a
healthy price signal not a tax”2
“Medicare Select is not the solution to
improving Australian health care
system”5
“Abbott told line DSP up with mental health
episodes”8
“Standard pricing for insurers
inevitable”12
“Health insurance unfair to younger
clients”4
“Medicare architect calls for doubling of
levy”3 “TPD policies run risk of becoming too expensive
[because definition of disability is too vague]”10
“Hospitals could save $1 billion a
year”13
“Medibank and IPN trial to give members more access to GPs
at no cost”1e
“Abolish [PHI] rebate would save $3b”6
“Clawback: government largesse with pensions falls”14
“Ramsay looks to more acquisitions as profit
climbs”11
“Disability red tape threatens to cripple the
choices of those in need”9 “Disability scheme facing cap or cuts”7
Slide 5
Access gaps caused by cost in 2010 (1st box) and 2013(2nd box) Units
0
5
10
15
20
25
30
35
40
45
Mis
s do
c 10
Mis
s do
c 13
No
fillR
x 10
No
fillR
x 13
Eith
er p
rob
10
Eith
er p
rob
13
Pro
b pa
y bi
ll 10
Pro
b pa
y bi
ll 13
$100
0+ O
OP
10
$100
0+ O
OP
13
Percent reporting five cost problems
Australia Germany Netherlands Switzerland USA
AUSTRALIA: some improvement in first 3 measures
NETHERLANDS: Worsening
Slide 6
The copayment fiasco: more gaps, retarded access, lower super, PHI role? § Safety nets for Medicare, PBS: not for allied health
services § New kids dental benefit Jan 2014: 3.5m,$1000
every 2 years but 20% < average fee = copays § OECD 2011 data: income differences in access to
GP and drugs § Commonwealth Fund Nov 2013: access with
chronic conditions worse § CHF report Feb 2014:17% copays, 75% delayed
Tx, 23% spent $1000-$2000, 23% no PHI, 14K sought access to super, 8K got it
§ MPL Jan 2014: IPN trial to give members more access to GPs at no cost: two-tier access to GPs?
Slide 7
Baby elephants with hay: MH & disability 1. MH direct costs = $14 billion è $50 billion in 2025 with
today’s payment models
2. Non-pension disability support NOW NDIS Feds: $3 billion è $22 billion è Feds: $8 billion è States: $5 billion ê States: $5 billion
3. NDIS levy up to 65 years: what happens after 65?
4. MH/NDIS interface: Feb 2014 Senate: unclear? Cut DSP if work >30 hrs? 5. DSP and carer subsidies: fastest growing outlays 1996-2012, cuts May? 6. TPD insurance under Super July 2014: rising costs, definition of disability? 7. Fixing this mess: Audit Commission, Fels, McLure
BUT likely cost $29 billion
$9 billion shortfall
Slide 8
MBS subsidies and FFS Fixing the mental health-disability mess
PHI product regulation and risk equalisation Reduce visible waste in hospital care
2. Mural dyslexia: four priorities for short-term efficiency gains on the
tax expenditure side
Slide 9
Need 43% in HC efficiency gains by 2059/60 so start with 6% efficiency gains by 2023
Expenditure 2011/12 % GDP
2059/60 % GDP
Increase % GDP
Healthcare Feds States
4.1 2.4
7.0 3.8
2.9 1.4
Aged pension Feds States
2.7 -
3.7 -
1.0 -
Aged care Feds States
0.8 -
2.6 -
1.8 -
Disability Feds States
11.2 0.2
10.2 0.5
-1.0 0.3
Totals (non-education)
All Gov
21.4 27.8 6.4
If each 1% increase in Tax/GDP causes
a loss of 1% of real per capita GDP
If each 5% improvement in healthcare efficiency reduces pressure on ALL governments by 0.5 percentage points in 2059/60
Estimated loss of real per
capita GDP in 2059/60
= 6.4%
Efficiency gains needed by 2059/60 = 43%
Slide 10
Fix the MBS copay and FFS mess
Slide 11
MBS: FLAT COPAY FIVE BETTER IDEAS
TODAY
MBS bulk billing + safety net + copayments all untied to ability to pay
AND
with no regard to
value of any tests or
appropriate use of drugs
MBS copay $6 per
visit
Hospital ER charge $6 per visit
3. MBS with lower copays if
doctor uses PCEHR
1. MBS with a
means- tested safety
net
2. MBS with means-
tested copayment
ceilings
5. Restrict bulk-billing by means-testing
4. MBS with lower copayments for effective (i.e., validated) interventions
6. Gap insurance: NOT a good idea
Slide 12
Fix the mental health – disability mess
Slide 13
Health/social care : disability loading in PHI
Economic downturn
Aging
+
chronic illness
+
disability
↓
Health and social
care financing problem
Focus responsibility and most of limited goverment budgets on
those with substantial and complex needsand needing help
→ additional social support → personal care budgets
Support rest of care-demanding population and their carers by
facilitating self-care, with budget limited funding that complements
people’s own resources
-> PHI REP disability adjuster
-> additional LTCI (+ HSA?)
LT budget costs driven by
complex medical care and multi-problem social
care
Growth of healthcare
demand: slow by private funding?
RATIONALE: basis for expanded LTCI or single national payer
Slide 14
Deregulate PHI products, fix community rating, trial of prospective equalisation
with new risk adjusters
Slide 15
PHI regulation Australia 2014 Regulation Impact on insurer costs, product
innovation or patients 1. Overlaps of PHIAC with ASIC, ACCC,
APRA, ATO, state regs
Compliance costs
Risk-averse behaviour
2. Restrictions on FEDs Increased copays by patients-> OOPs up
3. Hospital benefits paid Regulated second tier at 85% of state rates
Hospitals can pass on differences as copays ->
OOPs up
4. Product differentiation Regulated, innovation retarded
5. CR requirement on hospital policies to carry
REP contribution
Floor price for every HP -> product price
6. Community rating in current form Sustains more small funds than needed
7. Risk adjustment Restricts affordable stop-loss products
Restricts loyalty bonusus and member incentives
for better health behaviour
Slide 16
Medicare Select: Dutch version 2006-14
§ Dutch NHE grew at same rate pre-2006 § PHI funds concentration ratio: 93% in 4 funds § PHI margins: increased § Hospital efficiency: more elective surgery § Doctors: small gains in transparency § Member churning initially: now defaulters § Drugs: some efficiency gains § Prospective risk equalisation formula:
generous, stopped in 2012 § Germany rejected Dutch approach
Slide 17
Funding issues
Insurance issues
What should be uniform
(basic) public care?
What should be income-related and preference-
related care?
1.What is the preferred method of
redistribution of the
healthcare cost burden?
Taxes NOT
Expenditures
2.What type of risk-adjusted
subsidy?
1. What form of insurance is
efficient if higher
benefits require higher
individual payments?
2. What REP?
3. What mix of insurance and
incentives?
Reform of PHI: two core issues
Key questions
AND
Slide 18
Regulated PHI Impedes
innovative PHI product design
What role for health-based risk adjustment (HBRA) in prospective risk equalisation, and with what risk adjusters?
Reinsurance pool Retrospective
risk equalisation with little
incentive to cover care
outside hospitals
Unconditional flat PHI rebate
No incentive to PHI funds to improve the
health outcomes of high risks
Deregulated PHI: prospective risk equalisation
HINT: Predictability of medical expenditures at the individual patient level using disability measures = 29-51% (Kronick et al 2000)
Slide 19
HBRA
Prospective risk-adjusted
payment reflecting
comorbidity AND disability of PHI enrollee
CMS-HCC risk adjustment1 • Age • Gender • Disability status of
community residents who are disabled beneficiaries aged under 65 years
• Disease • LTC community and
institutional residents (LT>90 days)
Original reason for entitlement * Age • Disability • ESRD • Disability + current ESRD
Frailty adjustment factor (organisational level) * Functional limitations based on 6 ADLs in community residents over 55 years)
Slide 20
Get serious about visible, continuing waste in hospital use
Slide 21
Reduce 33% hospital share of NHE by 10% in 3 years = $6 billion/year
§ About 20% of all ACS admissions to acute hospitals are potentially preventable by better primary care
§ About 10-15% of all readmissions to hospitals are potentially
preventable by - pro-active care management in nursing homes and
home care - IT-driven coordination of the transitions of care of the
patient § Of the 10% of patients admitted to hospital for an overnight
stay who experience an adverse event, about 3-5 percentage points of those events (i.e., 50% of all AEs) are potentially preventable by best practice guidelines and incentives for better transparency.
Slide 22
3. Sustaining carers and personal responsibility: medium term reforms using LTCI & super
Slide 23
Efficiency gaps: home health care
Slide 24
Carer burden Australia: NSPAC Dec 2013
Data: 2011–12 Barriers to Employment for Mature Age Australians Survey, 3,007 respondents aged between 45 and 74 years.
Slide 25
Carer burden Australia: subsidy targets
“[A]nalysis of data from all respondents showed that the carers who were most likely to have a current illness, injury or disability themselves were • women, • people aged 45–54 years, • carers who were not working, and • people earning less than $20,000 per year.”
Slide 26
1. Sustain existing informal carers
2. Assist people to stay at home
3. Consumer directed choice
4. Expand funding sources in retirement
Expand respite services, TCP Expand carer options for workforce participation Carer credits (12% SG) to carer super accounts1
NDIS support of permanent disability New Integrated Home Support Program Increased # Home Care packages
Super-funded HRSA :home/NH/respite care Super-funded LTCI
Expanded personal care budgets Increase IEC to enable self care and choice of high quality care
Incentives for home care and carers, plus LTCI rebate
Slide 27
Gaps that a new LTCI could fill
GAP POTENTIAL SOLUTIONS
1. Minimal subacute care of aged & chronically ill leaves 50% in hospital beds
New LTC insurance covering care outside hospital and NH, transitional care
2. Inadequate capital investment for high-care residential care
New LTC insurance for such places, relieving Budget demands of $6 billion in 2022 (Hogan)
Slide 28 In-home supportive LTCI: $240/year GOAL:“Humana developed Points of Caregiving with its LifeSynch subsidiary; the program is available for Humana members and non-members for $20 a month with a one-year agreement ($240 a year), a cost quickly offset by the time and energy saved by the caregiver. Collaborative and consultative process, SeniorBridge’s licensed, clinical professionals conduct an in-depth assessment of each individual’s needs, preferences, strengths, support system and resources in consultation with all concerned parties then present a recommended care plan. Some of the services in a care plan : Professional Oversight and Coordination by Care Managers: Regular home visits to monitor how your loved one is feeling, medications and the general environment Customized interventions for mood and behavioral problems Help managing health finances and advocacy for access to insurance benefits and community resources Coordination of home modifications or alternate housing Hourly and Live-In Caregiving by licensed home health aides: Companionship Meal preparation and light housekeeping Shopping, errands and transportation Personal care including bathing and hygiene assistance Help transferring Private Duty Nursing Licensed RNs, or LPNs/LVNs who provide skilled care including: Wound Care Injectable Medications, Tube Feeding and Tracheotomy Care, Ventilator, End of life Palliative Care
Slide 29
The height of technical felicity is to combine sublime simplicity with just sufficient ingenuity to show how difficult it is to do.
After Piet Hein
How much of this conjecture is doable??