Do We Really Have a Is The Healthcare System In Irons Problem? - PDF document

Question Confronting Healthcare Executives ‐‐‐ ”Should We Upend Our Restructuring The Care Delivery Existing Delivery System Model To System: Will Limited Growth In Lower Costs or Continue Business As Revenues Force A Change? Usual”? Stuart H. Altman Will Limits On Future Resources Force The System To Change Chaikin Professor of Health Policy Heller School for Social Policy and Management Brandeis University Do We Really Have a Is The Healthcare System “In Irons’ Problem? Altman and His Cronies Have Been Talking About The Coming of The Bogey Man For Years Yes ‐‐ Healthcare Spending Growth Has Slowed So ‐‐‐ What’s Happening? But Will It Continue? 1

Average Annual Percent Change in National Health Expenditures, 1960 ‐ 2012 18% Is The Decline In Spending 16% 14% Growth The Result Of: ‐‐‐‐ 13.1% 12% 11.0% 10% 9.5% 8.4% 8.4% 8.5% 8% 7.0% 7.1%6.8% A Slow Down In Economic Growth 6% 6.4% 6.6% 6.2% 5.5% 5.8% Or 4% 4.7% 3.8% 3.9% 3.9% 3.7% 3.8% Structural Factors Within The 2% Healthcare Syste m 0% 1970 1980 1990 93 97 98 99 2000 1 2 3 4 5 6 7 8 9 10 2011 2012 2013 Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file nhe2010.zip). Growth In Yearly Healthcare Spending Actual (2012 ‐ 2014) and Projected (2015 ‐ 2019) Medicare Actuaries Think 2012 ‐ 2014 2015 ‐ 2019 Limited Growth Will Return 6.20% As a Result of An Expanding 4.80% Economy and Aging Medicare Recipients Annual Growth in Spending Growth in Health Care Spending By Payer: Actual 2012 ‐ 2014, Projections 2015 ‐ 2019 Most Growth From Medicare and Medicaid Spending 12.0% Average Annual % Increase 9.7% 10.0% Increases! 8.0% 7.1% 6.9% Growth in Enrollment 6.0% 7.0% 6.0% 2.6% 5.1% 5.3% 4.8% 3.1% 0.5% 0.8% Even For Medicare Most of Growth Growth in Spending per 3.7% 4.0% Enrollee The Result Of More Care for Older 4.6% 4.5% 4.5% 2.0% 3.4% Total Health Consumption 3.8% 2.7% Expenditure Growth Patients 0.0% 0.3% Total Health Private Medicare Medicaid Total Health Private Medicare Medicaid Consumption Health Consumption Health Expenditures Insurance Expenditures Insurance 2012 ‐ 2014 2015 ‐ 2019 Source of Funds Source: Office of The Actuary, CMA , September 2014. 2

The Altman/Reinhardt Does It Matter? Thesis I’m a bit Older! In The Past Hospital Spending Driven More By Cost of Care WHY ‐‐‐ (Reimbursement Model) In The Future Cost of Care Likely To Be Driven More By Spending Limits (Payment Model) Private Insurance Payments Used to Pay for Lower Government Payments 140.00% Hospital Payment ‐ to ‐ Cost Ratios 134.50% In The Past ‐‐‐ Most Hospitals Able to 130.00% Make ‐ Up Shortfalls From Lower 120.00% Medicare Government Payments and 110.00% Medicaid* Uncompensated Care By Higher 100.00% 94.70% Private 90.00% Payer Payments From Pvt. Patients 91.40% 80.00% 70.00% 60.00% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 3

Government Sponsored Payments Will Become A But What About The Greater Force in Healthcare Future? System Growth in Enrollment by Payer Source, 2006 - 2022 80 71% 70 Medicare and Medicaid Percent Change in Enrollment 60 57% Enrollments Will Grow 50 Disproportionately ‐‐‐ 40 30 20 10 6% 0 Private Medicare Medicaid CMS, National Health Expenditure Projections, 2012 to 2022, January 2013. Total Health Insurance Payments by Payer Source 2006 versus 2022 (Percent of Total) As a Result Government Payments Will Dominate The Healthcare System! CMS, National Health Expenditure Projections, 2012 to 2022, January 2013. 4

Private Payments Needs To Grow Can Healthcare Providers Continue Substantially To Maintain Hospital Margins To Counted on Higher Private 180.00% Hospital Payment ‐ to ‐ Cost Ratios Insurance Payments To Make Up for 162.50% 160.00% Shortfalls In Government Medicare 140.00% Payments? Medicaid* 120.00% Private UNLIKELY! Payer 100.00% 85.00% 80.00% 80.00% 60.00% Growth in Health Care Spending By Payer: Actual 2012 ‐ 2014, Projections 2015 ‐ 2019 Even Actuaries Estimate No 12.0% Average Annual % Increase Change In Growth of Private 9.7% 10.0% 8.0% 7.1% Insurance Payments 6.9% Growth in Enrollment 6.0% 6.0% 7.0% 2.6% 5.1% 5.3% 3.1% 4.8% 0.5% 0.8% Growth in Spending per 4.0% 3.7% Enrollee 4.6% 4.5% 4.5% 2.0% 3.4% Total Health Consumption 3.8% 2.7% Expenditure Growth 0.3% 0.0% Total Health Private Medicare Medicaid Total Health Private Medicare Medicaid Consumption Health Consumption Health Expenditures Insurance Expenditures Insurance 2015 ‐ 2019 2012 ‐ 2014 Source of Funds Source: Office of The Actuary, CMA , September 2014. Will Expansion of Medicaid and Private Insurance Bail Out The System? Depends: Where You Live and Whether Non ‐ Medicaid Expansion States Change Course 5

Other Good News Slower Medicare Spending Growth Could Lessen Need to Further Cut Medicare Payment Rates But Reductions In Hospital Payment Growth Legislated In ACA Likely To Continue The Saga of Controlling What About Payments To Medicare Spending for Physicians? Physician Services 6

What Is The Medicare Physician A Few Congressional Staffers Spending Target in 1997 Thought ‐‐‐ Sustainable Growth Rate (SGR) Medicare Should Limit Its Growth In • Input Costs for Physician Services 2.0% Spending for Physician Services to The • Real GDP per capita 1.9 Growth In The Countries Real GDP! • Fee ‐ for ‐ Service Enrollment ‐ 0.2 • Changes due to law or regulation ‐ 1.5 • Sustainable Growth Rate 2.2% Actual Spending Growing Faster Than SGR 2000 ‐ 2004 • Growth In Volume of Services 5.5% Types of Services So What Happened ‐‐‐‐ • Evaluation and Management 3.6% • Imaging 10.3 • Major procedures 3.8 • Other procedures 6.4 • Test 8.2 Since 2001, actual spending for physician services has exceeded target Because of legal limits on how much physician fees could be cut in one year and past deficit between target and actual spending ‐‐‐ Deficits Put OFF ‐‐‐ So ‐‐‐ Physician fees were scheduled to be cut by 18.9% 2013 Note: Estimates shown are preliminary Source: Office of the Actuary 2008. 7

So What Can Hospitals and My Best Shot Physicians Expect In Terms of Revenue Growth Expected Hospital Revenue Growth Expected Hospital Revenue Growth • Medicaid • Medicare – Depends Where Located – Growth In Patient Demand But Limited Growth in Per Patient Rates • Medicaid Expansion States – Continued Growth In Demand For Services – Significant Changes In Program Put Off • Non-Medicaid Expansion • Existing Cuts Will Continue – Less Growth in Demand, Lower Growth in Revenue • Outside Chance The DRG System Will Incorporate – All Bets Off If Serious Cut Back In ACA Physician Payments and Post-Acute Care – Some Likelihood That SGR Will Be Revised But No Big Inc. in Phy. Payments Expected Hospital Revenue Growth Sorry ‐‐‐ But Even If SGR • Pvt. Insurance Repealed Growth In Medicare – Non-Exchange and Private Insurance Physician • Reduced Demand • Limited Growth in Payt. Rate Will Be Lim ited • Higher Patient Cost Sharing – Govt. Exchange • Expanded Demand • More Use of Tiered Network • Much Higher Patient Cost Sharing 8

Rob Mechanic and I Will Discuss Possible Options So ---What To Do! ( Depending On Your Market Place ) in Our Breakout Session Prudent Dictates---Need To Increase on Tuesday Efforts To Develop More Efficient (Lower Cost) Delivery System 9