Health Care in California: Costs and Insurance

1
Health Care in CaliforniaCosts and Insurance

• Dana P. Goldman, Ph.D.Director and RAND
  Chair,Health Economics

2
Health Care Spending as a Share of U.S. Economic
Output Has Been Rising Steadily
16
14.9
14
12
Health care spending as a percentage of GDP
10
8
6
5.1
4
2
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
Source Centers for Medicare Medicaid
Services, 2004.
3
We Spend More Than One-half of Our Health Care
Dollars on Hospital andPhysician Services
Total spending (2002) 1.6 trillion
Source California HealthCare Foundation, 2004a.
4
Age Is a Powerful Predictor ofHealth Care Use
9,000
8,000
7,000
6,000
Spending(2000)
5,000
4,000
3,000
2,000
1,000
0
0
10
20
30
40
50
60
70
80
90
100
Age
5
Demographics Explain Some of the Increase in
Costs
14
12
10
Percentage of population
8
6
4
Age 6574
2
0
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
Source Hobbs and Stoops, 2002.
6
Consider the Impact of a Compound to Extend
Lifespan

• Reducing caloric intake of animals by 30
  increases life expectancy by 25
• Chemical compounds can mimic this behavior in
  rodents
• Scenario assumes such a compound for elderly
• Taken by everyone at a cost similar to
  nutritional supplements (1/day)
• Extends life expectancy by 15 years

7
Aged Population Would Grow by13 Million by 2030
Total Number of Elderly (65)
90
80
71
70
Population
60
(millions)
50
Status Quo
40
30
2000
2005
2010
2015
2020
2025
2030
Year
8
Much More Heart Disease
55
50
45
44
with heart
disease
Status Quo
40
35
30
2000
2005
2010
2015
2020
2025
2030
Year
9
Health Care SpendingWould Be 50 Higher in 2030
Elderly Health Care Spending
1000
900
800
Billions
700
of 1998
621
600
dollars
500
400
Status Quo
300
2000
2005
2010
2015
2020
2025
2030
Year
10
Outline

• Overall Trends
• Sources of Payment
• The Uninsured
• Premiums
• Cost-sharing
• Prescription Drugs

11
The Federal Share of Total Health Care Spending
Has Been Rising Steadily
Medicare and Medicaid enacted
100
80
Percentage of total health care spending
Private
60
40
Federal
20
0
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
Source Centers for Medicare Medicaid
Services, 2004.
12
Medicare Is the Dominant Payer for theElderly,
Private Insurance for Those Under 65
Source of payment (1999)
Under age 65
Age 65 and over
Private insurance(54)
Private insurance(14)
Source Olin and Machlin, 2003.
13
The Share of Health Care Paid Out-of-Pocket Is
Falling
60
Out-of-pocket spending as a percentage of all
personal healthcare spending
50
40
Percentage of total spending
30
20
10
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2001
2002
Source Centers for Medicare Medicaid
Services, 2004.
14
Outline

• Overall Trends
• Sources of Payment
• The Uninsured
• Premiums
• Cost-sharing
• Prescription Drugs

15
The Uninsured Population Is Rising Nationwide
24
20
18
16

Percentage of
United States 17
population
13
under age 65
12
who are
uninsured
8
4
0
1987
1989
1991
1993
1995
1997
1999
2001
Source California HealthCare Foundation, 2004c.
16
Most of the Nonelderly Receive Their Health Care
Coverage from Their Employer
Employer sponsored(63)
Source Kaiser Commission on Medicaid and the
Uninsured, 2003a.
17
Over One-third of the Uninsured Nationwide Earn
More Than 200 Percent of the Federal Poverty Level
18
16
14
12
Number of U.S. population under age 65 who are
uninsured (millions) 2002
10
8
6
4
2
0
lt100 Federal poverty level
100199
200
Source Kaiser Commission on Medicaid and the
Uninsured, 2000, 2002, 2003a, and 2003b.
18
Young Adults Are Most Likelyto Be Uninsured
Age
Under 18
1824
2534
3554
5564
0
5
10
15
20
25
30
35
Percentage of age group who are uninsured (2002)
Source Institute of Medicine, 2004.
19
Most of the Uninsured Live in Families with at
Least One Worker
No workers
in family
19
Source Kaiser Commission on Medicaid and the
Uninsured, 2003a.
20
Large Firms Almost Always Offer HealthInsurance
Smaller Firms Often Do Not
Number
of workers
319
2049
50199
200
0
20
40
60
80
100
Percentage of California employers offering
health benefits (2002)
Source The Henry J. Kaiser Family Foundation
and Health Research and Educational Trust, 2003b.
21
Outline

• Overall Trends
• Sources of Payment
• The Uninsured
• Premiums
• Cost-sharing
• Prescription Drugs

22
Workers in California Pay About 25 Percentof
Their Health Insurance Premiums
2002
2,845
Single
2001
2,357
2002
7,472
Family
2001
6,266
Source The Henry J. Kaiser Family Foundation
and Health Research and Educational Trust, 2003b.
23
Health Insurance Premiums Are RisingRapidly
Nationwide
2
0
1
6
A
v
e
r
a
g
e
p
e
r
c
en
t
a
g
e
g
r
o
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t
h
i
n
1
2
United
p
r
i
v
a
t
e
States
h
e
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l
t
h
11
8
i
n
s
u
r
a
n
c
e
p
r
e
m
i
u
m
s
4
0
1
98
8
1
98
9
1
9
9
0
1
9
9
3
1
9
9
6
1
99
9
2
00
0
2
0
0
1
2
0
0
2
2
0
0
3
Source The Henry J. Kaiser Family Foundation
and Health Research and Educational Trust, 2003a
and 2004.
24
HMO Premiums Are Rising in California
170
166
160
150
Average
premium
140
revenue per
person, per
130
month
(dollars)
120

1
1
2
1
1
0
100
1997
1998
1999
2000
2001
2002
Source Baumgarten, 2004.
25
Outline

• Overall Trends
• Sources of Payment
• The Uninsured
• Premiums
• Cost-sharing
• Prescription Drugs

26
The Price of a Day in the Hospital RoseTenfold
over the Past 40 Years
1,400
1,200
1,000
Cost per
800
inpatient day
(dollars)
600
400
200
0
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
Includes total nonfederal short-term general
and other special hospitals.
Note Adjusted to constant 2002 dollars with GDP
deflator.
Source American Hospital Association, 1983 and
2004.
27
Over Time, the Number of MRI Machinesand MRI
Procedures Has Increased
2.0
U.S. Canada
1.6
1.4
MRI sites
per 100,000
population
0.6
0.4
0.0
1993
1997
1999
2001
Source Baker L and Atlas S (2004) Canadian
Institute for Health Information, (2003) OECD
Health Data (2002) Statistics Canada, CANSIM
(2004)
28
HMO Enrollees Are Facing Higher Co-Payments for
Physician Office Visits
87
Source The Henry J. Kaiser Family Foundation
and Health Research and Educational Trust, 2003a.
29
Cost Sharing Has No Effect on Functioning or
General Health
Free care
2550 cost sharing
Physical functioning
95 cost sharing
0
20
40
60
80
100
Score on health status measure
Source Newhouse and the Insurance Experiment
Group, 1993.
30
Outline

• Trends
• Sources of Payment
• The Uninsured
• Premiums
• Cost-sharing
• Prescription Drugs

31
Prescription Drug Expenditures Have Been Rising
at Double-Digit Rates
20
18
16
14
Percentage
12
annual increase
in prescription
10
drug spending
8
6
Price
growth
4
2
0
1987
1989
1991
1993
1995
1997
1999
Source Berndt, 2001.
32
The Share Paid Out-of-Pocket forPrescription
Drugs Has Fallen
100
80
60
Percentage of
prescription
drug spending
40
20
Public 22
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
Source Centers for Medicare Medicaid
Services, 2004.
33
The Share of Workers Facing Three-TierCo-Payments
for Prescription Drugs Has Increased
100
80
Percentage of
60
U.S. insured
workers with
cost-sharing
40
type
Payment does not varyby drug type
20
0
2000
2001
2002
2003
Notes Numbers may not sum to 100. Workers with
cost-sharing type
other/dont know are excluded.
Source The Henry J. Kaiser Family Foundation
and Health Research and Educational Trust, 2003a,
Exhibit 9.1.
34
Co-Payments Can Have a Large Effect on Service
Use Including Prescription Drugs
Therapeutic class
45
NSAIDs
Antihistamines
44
34
Antihyperlipidemics
Antiulcerants
33
32
Antiasthmatics
Antihypertensives
26
Antidepressants
26
Antidiabetics
25
0
10
20
30
40
50
Reduction in days supplied when co-payments
double ()
Note NSAIDnonsteroidal anti-inflammatory drug,
such as Celebrex.
Source Goldman et al., 2004.
35
What Have We Learned?

• Health costs rising rapidly
• Demographics
• Technology
• Most people think we got value for the money
• Looking forward
• Rising costs mean higher premiums
• Pricing people out of the market
• Are there ways to do better with the same amount
  of money?

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37
Health Care in CaliforniaQuality of Care

• Elizabeth A. McGlynn, Ph.D.
• Associate Director, RAND Health
• RAND Corporate Chair in Health Care Quality

38
Quality Has Multiple Dimensions
Elements of Quality Care Type of Quality
Problem People get the care they
need Underuse People need the care they
get Overuse Provided safely Error Timely D
elays Patient-centered Unresponsive Delivered
equitably Disparities Delivered
efficiently Waste
IOM, Crossing the Quality Chasm (2001)
39
We Have Made Significant Advances in Measuring
and Reporting on Quality

• Good tools exist to measure quality
• More information is available today about quality
  than ever before
• But, we know less than we would like
• What is available may be difficult to find and
  interpret
• Available sources of information often give
  different answers

40
What Do We Know About Quality?
41
American Adults Receive About Half of
Recommended Care
Care that meets quality standards
McGlynn et al., NEJM (2003)
42
There Is Substantial Room for Improvement Across
All Types of Care
43
Quality of Care for Heart and Lung Problems
Varies Widely
McGlynn et al., NEJM (2003)
44
Significant Variation Exists in Management of
Adults General Medical Problems
McGlynn et al., NEJM (2003)
45
Care for Geriatric Conditions Is Poorer Than Care
for General Medical Conditions
Medical conditions
Geriatric conditions
Care that meets standards
Care that meets standards
Wenger et al., ( 2003)
46
Quality of Preventive Care for the Elderly Is
the Poorest
Treatment
Follow-up
Diagnosis
Prevention
47
Quality of Care for the Elderly Varies by
Condition
Stroke
Pneumonia
Falls
Osteoarthritis
End-of-life care
0
20
40
60
80
100
Percentage of recommended care received
Wenger et al., (2003.)
48
And You Arent Safe Anywhere
Boston
Overall
Cleveland
Greenville
Indianapolis
Lansing
Little Rock
Miami
Newark
Orange Co
Phoenix
Seattle
Syracuse
30
40
50
60
70
80
90
100
of recommended care received
Source Kerr et al., 2004.
49
And You Arent Safe Anywhere
Boston
Overall
Cleveland
Preventive
Greenville
Indianapolis
Lansing
Little Rock
Miami
Newark
Orange Co
Phoenix
Seattle
Syracuse
30
40
50
60
70
80
90
100
of recommended care received
Source Kerr et al., 2004.
50
And You Arent Safe Anywhere
Boston
Overall
Cleveland
Preventive
Greenville
Indianapolis
Acute
Lansing
Little Rock
Miami
Newark
Orange Co
Phoenix
Seattle
Syracuse
30
40
50
60
70
80
90
100
of recommended care received
Source Kerr et al., 2004.
51
And You Arent Safe Anywhere
Boston
Overall
Cleveland
Preventive
Greenville
Indianapolis
Acute
Lansing
Chronic
Little Rock
Miami
Newark
Orange Co
Phoenix
Seattle
Syracuse
30
40
50
60
70
80
90
100
of recommended care received
Source Kerr et al., 2004.
52
Performance in Orange County Mirrors What We
Found in Other Communities
Kerr et al., (2004)
53
Does It Matter If Standards Are Met?
54
Does It Matter If Standards Are Met?
55
Does It Matter If Standards Are Met?
56
Does It Matter If Standards Are Met?
57
Does It Matter If Standards Are Met?
58
What Information Is Available To You?
59
Private and Public Policymakers Are Focusing on
Facilitating Consumer Decisionmaking

• Many consumers may be able to choose their
• Health plan
• Medical group
• Physician(s)
• Hospital
• Treatment(s)
• Choice is valued for itself and as an instrument
  of change
• Good information is essential if consumers are to
  make good choices

60
Choosing a Health Plan

• When choosing a health plan, people often
  consider
• How much it will cost
• Premiums
• Out-of-pocket expenses
• Whether their doctor is part of the health plan
• How responsive the health plan is to their
  individual needs
• Whether the care they need/want from the provider
  they prefer will be paid for

61
Where Can I Find Information About Health Plans?

• Employers have information in open enrollment
  materials
• People frequently talk to others whose opinions
  they value
• Sources of public information include
• www.ncqa.org
• www.cms.hhs.gov
• www.opa.ca.gov
• www.healthscope.org

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63
Choosing a Hospital

• Where does my doctor think I should go?
• How close is it to my house?
• If I am really sick, will I be taken care of?
• Is anything bad going to happen to me while I am
  in there?
• Will I be treated with respect?
• How well do they do the procedure/treatment I
  need?

64
Where Can I Get Information About Hospitals?

• People frequently rely upon their doctor
• Friends, family members and other trusted sources
• Public information includes
• www.healthscope.org
• www.jcaho.org
• www.calhospitals.org
• www.healthgrades.com

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69
Some Concluding Thoughts

• Consumers willing to invest time can find a lot
  of data on quality
• Substantial gaps remain in what we know
• Different displays may create confusion
• Different results may create overall distrust
• Public release of information is having an effect
• Providers are looking at their results
• Action plans are being developed
• Public investment will be required
• To increase the ease of data retrieval
• To standardize methods for reporting results

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