GREATER NAPLES LEADERSHIPMasters Class XVIII

Healthcare Day, February 5, 2014Charles Buck Presentation

Greater Naples Greater Naples Leadership Leadership

Charles R. Buck, Jr., Sc.D.February 5, 2014

Overview of Federal Overview of Federal Health Care PolicyHealth Care Policy

• What are the big issues…and (potential) solutions?

• How does the Affordable Care Act (Obamacare) deal with (or not) the big issues?

• As community leaders…to educate you about the challenges and opportunities…and where things could go off the track

Agenda/ObjectivesAgenda/Objectives

U.S. Health Care U.S. Health Care SystemSystemIssues we talk about• Should everyone have health insurance?

− If so, how do we do that? • How can we bend the cost curve?

− Is this only a Medicare/Medicaid (entitlement) problem?

An issue we don’t talk about--Quality

• Is Quality an Issue?− How does it relate to cost?

Should Everyone Have Health Should Everyone Have Health

Insurance?Insurance?

“Values” Reasons $$ Reasons• Is healthcare a right?• International comparisons• People without coverage do

forego care … become sicker … and more expensive

• “Insurance” makes sense for most people − Lowest 50% cost 2.9%

($851/per person)− Top 1% cost 21%

($88,000/per person)

• Free rider & downward spiral• Cost shift to employers who

provide coverage • Facilitates comparative

shopping for “value”

• 2 Basic Approaches -- Single Payer or Multiple Sources of Coverage -- Coupled with a Mandate

• “Settled” -- by ACA

Universal CoverageUniversal Coverage

Current Coverage FL

• Employer 49% (149M) 42%

• Individual 5% (15M) 5%

• Medicaid16% (51M) 14%

• Medicare 13% (40M) 17%

• Other Public 1% (4M) 2%

• Uninsured 16% (49M) 20%

100% (308M)

How?How?

• 62% have FT job in family

− Employers >50 EE –

96% <50 EE –

36%• 38% poverty or below

• Pluralistic financing drives complexity

Coverage: A Few Obamacare Coverage: A Few Obamacare DetailsDetails

• Expand categories to cover all who meet financial criteria • National floor - - - 133% of FPL • Funding (current: 57% federal, 43% state)

• New enrollees − Thru 2016: 100% federal − After 2016: 90% federal

MedicaidMedicaid

• Incentives− Tax credits up to 400% FPL − Health insurance exchanges

• Penalties: Phased in Thru 2016− Greater of: 2.5% of income or $695− CBO est: 3.9M will pay penalty

Individuals (Mandate -- If Not Covered)Individuals (Mandate -- If Not Covered)

• Small employers: tax credits & exchanges• Large employers: penalized if EEs use tax credits

EmployersEmployers

Keep Your Fingers Crossed! Now to the Cost Curve!

Do We Need to Bend the Cost Do We Need to Bend the Cost

Curve?Curve?

Medicare insolvent in 2026

Need to Bend The Cost Curve by 1-2% Per Year -- Ongoing

Medicare—YES!Medicare—YES!

Do We Need to Bend the Cost Do We Need to Bend the Cost

Curve?Curve?

• Over the last 13 years healthcare premiums have outpaced inflation by X5

• Family coverage now costs $16,351

• Healthcare = 17.6% of GDP - - double other countries

Employers—YES, too!Employers—YES, too!

The Fundamental Challenge Facing All Payers is the Efficiency and Effectiveness (Quality) of Our Healthcare Delivery System

System Performance: QualitySystem Performance: Quality

• We have the best trained providers & technology in the world . . . but performance (quality) is way short of where it could be:

• “Don’t hurt me” (Safety)

− 44,000 to 98,000 patients die each year from preventable medical errors

− 1/3 of hospitalized patients are harmed or experience an adverse event

“Make me well” (clinically effective medicine)

− Americans receive about half of the specific care recommended by current research

• It’s Hard to Imagine . . . But The List is Long and Well Established

• This Level of Quality Would Not Be Acceptable in Other Industries

• There Are No Villains…

Coronary artery bypass grafting (CABG) per 1,000 Coronary artery bypass grafting (CABG) per 1,000 Medicare beneficiaries (2010) (Wennberg, et al)Medicare beneficiaries (2010) (Wennberg, et al)

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Ocala 4.3Sarasota 4.0Bradenton 3.8Panama City 3.7Tampa 3.6Jacksonville 3.6Pensacola 3.6Orlando 3.5Fort Myers 3.3Ormond Beach 3.3Fort Lauderdale 3.3Tallahassee 3.1Hudson 3.1Clearwater 3.0Lakeland 3.0St. Petersburg 2.7Gainesville 2.6Miami 2.0

CABG Variation: Evidence based care??

Variation: Spending on Chronic

CareMedicare spending per chronically ill beneficiary during Medicare spending per chronically ill beneficiary during

the last two years of life (2007)the last two years of life (2007)

Miami $94,408Fort Lauderdale $72,798St. Petersburg $68,699Tampa $62,627Orlando $62,460Clearwater $62,321Jacksonville $61,941Hudson $60,995Bradenton $59,644Panama City $59,409Sarasota $59,263Fort Myers $59,087Ormond Beach $57,990Gainesville $56,782Lakeland $54,721Ocala $53,513Pensacola $52,080Tallahassee $47,762

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

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What About Costs? What About Costs?

$765B in Excess Costs . . . 30% of The Total . . . Mostly Related to Quality and/or Poor Financial Incentives

Estimated Sources of Excess Costs in Health Care (2009)Estimated Sources of Excess Costs in Health Care (2009)Category Sources Estimate of

Excess Costs

Unnecessary Services • Overuse - - beyond evidence-established levels

• Discretionary use beyond benchmarks • Unnecessary choice of higher-cost services

$210 billion

Inefficiently Delivered Services

• Mistakes - - errors, preventable complications

• Care fragmentation • Unnecessary use of higher-cost providers • Operational inefficiencies at care delivery

sites

$130 billion

Excess Administrative Costs • Insurance paperwork costs beyond benchmarks

• Insurers’ administrative inefficiencies• Inefficiencies due to care documentation

requirements

$190 billion

Prices That Are Too High • Service prices beyond competitive benchmarks

• Product prices beyond competitive benchmarks

$105 billion

Missed Prevention Opportunities

• Primary prevention• Secondary prevention• Tertiary prevention

$55 billion

Fraud • All sources - - payers, clinicians, patients $75 billion

SOURCE: Adapted from IOM, 2010.

Doesn’t High Quality Cost Doesn’t High Quality Cost

More?More?

• Inverse Relationship Between Cost & Quality -- Often• Let’s Consider Chasing Defect Free Quality as The Way

to Bend the Cost Curve. 30% Opportunity. 11/2 Points Off of Trend for 20 Years

So…how do we move toward nearly So…how do we move toward nearly defect free quality (as a way to bend the defect free quality (as a way to bend the cost curve)?cost curve)?

Institute of Medicine Committee on Quality of Health Care in America

“People Working in Health Care Are Among The Most Educated And Dedicated Workforce In Any Industry. The Problem Is Not Bad People; The Problem Is That The Systems Need To Be Made Safer”

Quality is a Property of Systems (Organizations)− Organized Systems of Care (OSC’s)− Lessons drawn from health care and corporate America

We do know what they look like: OSC’s have The We do know what they look like: OSC’s have The Required Required ScopeScope, Leadership, Commitment & , Leadership, Commitment & Resources to….Resources to….

• Patient focused− Accountability spans patient

conditions

− Involve the patient

• Evidence based medicine− Clinical guidelines (baked in)

• Performance Transparency

We do have examples…: Kaiser-Permanente; Virginia Mason; Mayo; Geisinger; Cleveland Clinic; Lahey Clinic; Thedacare; Group Health…..And others

But, OSC’s Are a Small % of Care (Early Adopters) - - Why?

• Seek nearly defect free performance

• Quality Culture− Safe to speak up

− Team based care

• IT investment

• Process improvement tools/training

- Redesign—Patient centered

OSC’s: 2 Huge Barriers to OvercomeOSC’s: 2 Huge Barriers to Overcome

1. Cottage Industry -- Few “Organizations” to Start With

“Our current health care system is essentially a cottage industry of nonintegrated, dedicated artisans who eschew standardization.”

(NEJM: Jan. 2010)

2. Fee-For-Service Payment•Drives excess utilization

•Barriers to improvement

− Savings go elsewhere

− Good ideas aren’t reimbursed

Plus..major culture change and vested interests..

It’s Not Going To Be Easy To Change An Industry That Represents 17% of Our GDP . . . But Chasing Quality To Bend The Cost Curve is Far Better Than The Alternatives

We Have to Move Beyond The Early Adapters

Source: The Leapfrog Group, 2009.

Employers Rate VM: Leapfrog Employers Rate VM: Leapfrog Doing the Right Thing and Doing It RightDoing the Right Thing and Doing It Right

How Are We Going To Do How Are We Going To Do This?This?

1. Use purchaser leverage (Medicare & large employers) to encourage OSC development in many markets.

2. Structure competition on quality and cost (value) to drive continual improvement and spread of OSC’s…and competition between the OSC model and current system

Vision is Shared by Public & Private Purchasers . . . And Left & Right Health Care Leaders

The VisionThe Vision

ACA Has Provisions to Enable ACA Has Provisions to Enable Change …For Those Willing And Change …For Those Willing And ReadyReady

New payment methods coupled with quality performance requirements --

•ACO (Accountable Care Organization)

− Population based

•Medical Home

− Primary Care based

•Bundled Payment

− Episodic/procedure based

--3 Alternatives for Enabling Providers to Consolidate Around Sets of Patient Needs . . . To Share in Savings . . . To Meet (And Report Publicly) Quality Performance--long term payoff

In the meantime a lot is going on

• Medicare is driving shift to value purchasingo Not paying for readmissions within 30 days (20% readmissions….target

+/_ 10%)o Hospital acquired infections penaltieso Value based purchasing…public reporting

• Employers…beginning to reward clinical centers of excellence with patient incentives

• Venture money is active

• Results……survey of 74 C-suite executives from (mostly) teaching hospitals….projections to 2020--65% believe the healthcare system will be better--93% predict that their quality of care will be better--Average expected per patient cost reduction of 11.7%

• Ask questions – a few examples…..support healthcare providers who want to lead

− Does your organization accept responsibility for the full range of services for the patients it treats?

− How safe are your patients? Show me.

− Do you have a systematic mechanism to educate your physicians about what is the latest science for my condition? And, to help them practice this way?

− Do you track your patients’ outcomes and publicly report your performance?

− Are you a national best practice for any specific patient conditions? Which ones?

What Can We Do As Community Leaders…And What Can We Do As Community Leaders…And

Patients?Patients?

Push For -- And Use -- Performance Transparency -- At The Level of Patients’ Conditions

• We have the opportunity to shape a uniquely American solution to sustainable health care

• If we don’t structure a market to reward excellence…and thereby bend the cost curve…we will, like other countries be forced to drive the cost curve down by “regulation” of the current system

Greater Naples LeadershipGreater Naples Leadership

• “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”

• --Bill Gates

STOP• The end…..previous page

• The following slides are extra….not to be used or shown……..

• It would seem that both sides would favor using market forces to improve quality…and bend the cost curve

• But…− Leaders are afraid to say that our quality could be

better− It is too complicated for a sound bite− CBO won’t score it

• And…to be fair…it hasn’t been done before

Why Isn’t Anyone (The Why Isn’t Anyone (The Administration) Talking About Administration) Talking About This? This?

Lessons From Other IndustriesLessons From Other Industries

As The Largest Purchaser Medicare Must Take The Lead . . . Providers Will Need Clear & Consistent Signals to Make Difficult Changes

Auto− Need the availability of higher quality (Japanese autos) to drive

industry-wide change

Education (Charter Schools)− Need different rules to allow innovation

− Start with the “willing”

• Lots of provider attention and action around new CMS models− Many critical details still unknown− Many providers watching from the sidelines…or consolidating to

hedge their bets

• CMS driving public safety reporting…current model− Starts even unwilling providers down the early stages of the

path

“TRADITIONAL” Approaches to Medicare still on the table--

Where Are We Now?Where Are We Now?

Raise Eligibility Age Raise Eligibility Age

Premium Support (Vouchers)Premium Support (Vouchers)

Competition Among PlansCompetition Among Plans

More Cost SharingMore Cost Sharing

Raise Premiums—High Income BeneficiariesRaise Premiums—High Income Beneficiaries

Use Leverage to Reduce Drug CostsUse Leverage to Reduce Drug Costs

Malpractice ReformMalpractice Reform

Etc.Etc.

Challenge: Provider Consolidation . . . OSC’s or Challenge: Provider Consolidation . . . OSC’s or

Cartel’s?Cartel’s?

• Requires Constant Vigilance Over The Next Decade To Ensure We Head Down The Right Path

• Transparency--Continually Raising the Quality Bar – Patient Focused

• We Played This Movie Once Before…”Managed Care”

?Or?

Provider Consolidation

• Investment in quality infrastructure & culture

• Improved outcomes

• Lower costs

• Investment in quality infrastructure & culture

• Improved outcomes

• Lower costs

• Market leverage

• Higher prices

• No change in delivery

• Market leverage

• Higher prices

• No change in delivery

OSCOSC CartelCartel

Universal CoverageUniversal Coverage

Current Coverage FL

• Employer 49% (149M) 42%

• Individual 5% (15M) 5%

• Medicaid16% (51M) 14%

• Medicare 13% (40M) 17%

• Other Public 1% (4M) 2%

• Uninsured 16% (49M) 20%

100% (308M)

How?How?

• 62% have FT job in family

− Employers >50 EE –

96% <50 EE –

36%• 38% poverty or below

How Do We Cover The 49M?

Medicare: Bending the Cost Curve

• All of Them May/Should Be Considered—none addresses the fundamental problem

• Let’s take a broad look at the cost issue

Raise Eligibility Age Raise Eligibility Age

Premium Support (Vouchers)Premium Support (Vouchers)

Competition Among Health PlansCompetition Among Health Plans

More Cost SharingMore Cost Sharing

Raise Premiums-High Income Beneficiaries Raise Premiums-High Income Beneficiaries Use leverage to reduce drug costsUse leverage to reduce drug costs

Malpractice ReformMalpractice Reform

EtcEtc

Various Proposals Various Proposals (Medicare Specific)(Medicare Specific)