Today’s Session • Trends in government and commercial health plan payments Community Hospital Strategies for a • Private payer cost containment strategies Changing Private Insurance Market • Community hospital market context • Discussion of strategic options Stuart Altman, Ph.D and Robert Mechanic, MBA Brandeis University The Estes Park Institute February 10, 2015 2 Brandeis University Slow Growth in Privately Insured Lives Will Intensify Competition for These Patients Growth in Enrollment by Payer Source, 2006 ‐ 2022 80 71% As a Result Government 70 Percent Change in Enrollment 57% 60 Payments Will Dominate The 50 Healthcare System! 40 30 20 6% 10 0 Private Medicare Medicaid CMS, National Health Expenditure Projections, 2012 to 2022, January 2013. 2013 Private Per ‐ Person Spending Rose 3.9% Private Payer Spending Growth Service Type 2013 Change Has Been Driven by Price Admissions ‐ 2.3% IP Prices +6.7% Increases ‐ Not Volume Growth OP Visits ‐ 2.8% Expect Health Plans to Attack OP Prices +6.4% Prices – By Linking Them to What Brand Drugs ‐ 15.5% Brand Prices +21.2% Consumers Have to Pay Brandeis University 6 1
Narrow Network Health Plans Emerging Payer Strategies Dominate Many Individual Exchanges • Tiered and narrow network plans • Defined contribution benefit plans and health exchanges (public & private) • Consumer cost sharing changes • Reference pricing + consumer incentives • Payment reforms 7 Brandeis University 8 Narrow Networks Have Substantially How much volume will shift with a 15% Lower Premiums premium discount? Broad Network = $500/mo Narrow Network = $425/mo Subsidy Based on Low Cost Plan Subsidy Dollar Narrow Broad Effective Subsidy Network Network Discount Premium Premium None $0 $425 $500 15% 50% $213 $213 $288 26% 75% $319 $106 $181 41% 90% $383 $42 $117 64% 9 10 Brandeis University Percentage of Large Firms Considering Offering Benefits Through a Private Estimated Health Insurance Coverage in 2017 Exchange and the Percentage of Covered Workers Currently in a Private Exchange, by Firm Size, 2014 Total Nonelderly Population = 279 million Uninsured 30% 10% Uninsured 200 ‐ 999 Workers 19% 25% Medicaid/CHIP 1,000 ‐ 4,999 Workers 16% 25% 24% 23% 23% Medicaid/CHIP 5,000 or More Workers 13% Exchange 20% 9% ALL LARGE FIRMS (200 or More Workers) 20% Private 18% 10% Private Non-Group / 8% Non- Other 15% Group/Other 13% 12% Employer- Employer- 10% 58% sponsored 56% sponsored 5% Insurance Insurance 3% 3% 3% 2% 0% Firm Considering Offering Benefits through Firm Considering a Defined Contribution Covered Workers Enrolled at a Firm a Private Exchange Approach Offering Benefits Through a Private or Without Health Reform With Health Reform Corporate Exchange (56 Million Uninsured) (29 Million Uninsured) NOTES: 2% of large firms did not know if they were considering a private exchange and 3% did not know if they were considering a defined contribution approach. A private exchange is one created by a consulting company, not by either a federal or state government. Private exchanges allow employees to choose from several health benefit options offered on the NOTE: This assumes that all states choose to expand Medicaid eligibility up to 138% FPL January 2014. exchange. SOURCE: Congressional Budget Office, February 2013. Total may not equal 100% due to rounding SOURCE: Kaiser/HRET Survey of Employer ‐ Sponsored Health Benefits, 2014. 2
Now Republicans Control The Congress Does Anyone Remember the Ryan Plan? Brandeis University 13 14 Brandeis University Percentage of Covered Workers Enrolled in a Plan with a General Patients Are Paying More and Looking for Annual Deductible of $2,000 or More for Single Coverage, By Firm Size, 2006 ‐ 2014 Hassle Free Services That Cost Less 50% All Small Firms (3 ‐ 199 Workers) 40% All Large Firms (200 or More Workers) All Firms 34% 31% 30% 28%* 27% 20% 18% 20% 16% 15% 14% 12%* 12%* 10% 10% 7% 7%* 11%* 5%* 6% 8% 3% 7% 3% 5% 4% 1% 2% 3%* 0% 1% 2006 2007 2008 2009 2010 2011 2012 2013 2014 * Estimate is statistically different from estimate for the previous year shown (p<.05). Note: These estimates include workers enrolled in HDHP/SO and other plan types. Average general annual health plan deductibles for PPOs, POS plans, and HDHP/SOs are for in ‐ network services. Brandeis University 16 SOURCE: Kaiser/HRET Survey of Employer ‐ Sponsored Health Benefits, 2006 ‐ 2014. Large Employers Are Taking Matters into Their Own Hands Brandeis University 17 Brandeis University 18 3
Continuum of Payment Options Volume Value What New Models Lie Between the Current Models? Fee ‐ For Shared Bundled Capitation/ Medicare Service Savings 1 Payment Risk ‐ Share Advantage with P4P Less Risk More Risk 1 With risk sharing starting in 3 ‐ 5 years. 19 20 Options Insurance Market Consolidated Competitive Collaborate with Consolidated Cultivate Support Do We Really Need Insurance Local Insurer to Among Local Achieve Companies? Why Don’t We Cut Hospital Market Physicians and Key “Reasonable” Employers Spending Growth Out the Middleman? Move Aggressively Promote Status as Competitive to Earn Preferred “Must Have” Status with High ‐ Hospital and Value Care and Aggressively Build Population Health High ‐ Value Care Management Model Discussion of Options Questions • For reducing unit costs? Stuart Altman and Robert Mechanic • For managing total medical expenses? The Heller School for Social Policy & Management • For new payment models? The Health Industry Forum • For attracting more patients? Brandeis University altman@brandeis.edu • For partnering with health plans? mechanic@brandeis.edu www.healthforum.brandeis.edu Brandeis University 24 23 4
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