cost containment in healthcare - home | curatio...

CostContainmentinHealthcare

September2015

2

Cost Containment in Healthcare

September,2015

3

DEFINITION&CLASSIFICATION

WhatisaCostContainment?

v  AlmostallEuropeancountrieshaveintroducedandimplementedcostcontainmentmeasuresthatkeepexpensesincheck.

v  CostcontainmentisapracIceofmaintainingexpenselevelstoprevent

unnecessaryspendingorthoughMullyreducingexpensestoimprove

profitabilitywithoutlong-termdamage.

ClassificaIonofsetsofmeasures:

ü  Budgetshi+ing,ü  Budgetse.ng,

ü  Controls,ü  Compe55on.

BudgetShi5ing

²  PossiblythemostcommonmethodofreducinghealthexpenditureononebudgetistotrytoshiSitontosomeotherbudget,especiallythatofthepaIentsthemselves.

ExpenditurecanbeshiSedontopaIentseither

1.  Directlythroughintroducingchargesorco-paymentsfortheuseofmedicalservicesor

2.  Indirectlythroughrestric9ngtherangeofservicescoveredbythehealthinsurer.

Co-payments

Theco-paymentcouldeithertaketheformof

Ø  apercentagecontribu9on(eachpaIentpaysx%ofthetotalcostofagivencourseoftreatment)

or

Ø  afixeddeduc9ble(thepaIentpaysthefirst$xofthecost)

Ø  Intheory,co-paymentsshouldbeabletokeepdownthecostsoftreatmentthroughdiscouragingtheso-called‘frivolous’useofhealthservices.

1

Co-payments

Problem Answertothisproblem

•  Toraisetheco-payment.•  Butifco-paymentsareraisedtoalevelhighenoughtoaffectuse,theindividualsconcernedarelikelytotakeoutfurtherhealthinsurancetocoverthecost,withtheconsequencethat

thechargesordeducIblehaveli]leimpactonuse.

•  InFrance,83%ofthepopulaIonhaveprivateinsurancethatpaysallorpartofpaIents’shareofthecosts,thusvirtuallyeliminaInganyimpactondemand.

•  DatafromtheU.S.RANDHealthInsuranceExperimentandotherstudieslookingattheeffectsofco-paymentsondrugconsumpIonhavefoundsmallpriceelasIciIes:veryli]leeffectonconsumpIonofincreasesinco-payments.Moroever,theco-paymentsareusuallysettoolowsignificantlytodiscourageuse.

•  IntheUSthe22%whospent$2,000ormoreonhealthcareaccountedfor77%ofhealthspending.

2

Fundingrestric9ons

q Restric9ngthenumberandtypeoftreatmentsthatarefundedbytheinsurercanleadtoa‘one-off’reduc9oninhealthcarecosts.

TherestricIonscouldbebasedonanexaminaIonofevidenceconcerning

•  effecIveness,

•  cost-effecIveness,

and/or

•  whetherthetreatmentislargelycosmeIc.

1

Fundingrestric9ons

Restric9onscantaketheformofposi9veornega9velists.

ü  Aposi9velistdetailsthetreatmentsthatwillbefundedbytheinsurer;

ü  Anega9velistdetailsthosethatwillnot.

² MostEuropeanstateshaveintroducedposiIveornegaIvelistsforpharmaceuIcals.ThesehaveusuallybeenquiteeffecIveincreaIngatleastaoneoffreducIonincosts.

²  However,theirimpactwasoSenreducedbyashiSinprescribingpa]ernstowardsreimbursabledrugs.

2

Fundingrestric9ons

Ø  TheUKhassetuptheNaIonalInsItuteofClinicalEffecIveness(NICE),withthebriefofassessingthesuitabilityofdrugsandtreatmentsforpublicfundingundertheNaIonalHealthService.

Ø  Theprincipalcriterioniscost-effecIveness,witharoughcut-offpointof£30,000perQALY.Thatis,anytreatmentthatNICEassessesascosIngmorethan£30,000foreachextrayearoflife,adjustedforquality,thatitdeliversshouldnotbefunded.

Ø  Butitdoesnottakeaccountofaffordability:thatis,theimpactonthe

NHSbudgetortheopportunitycostofadopIngitsrecommendaIons.

Ø  Inconsequence,mostofitsacIviIessofarseemtobeapprovingdrugsthatmeetitscostperQALYcriterion,butaresoexpensivetobuythatsomecommentatorsviewitmoreasaninstrumentforcost-enhancementthancost-containment.

3

BudgetSeNng

Thebudgetscantakedifferentforms:

•  “Hard”budgets,thatis,withpenalIesforoverspendingandperhapsalsorewardsforunder-spending.

•  “So5”(target)budgets,wherearecordiskeptofthecostsofthetransacIonsundertakenbytheagentconcerned,whoismadeawareofanyoverspendingorunderspending,butwherenoimmediatepenalIesareappliedandoverspendingisautomaIcallymet.u  SuchbudgetsarelesslikelytobeeffecIveinstrumentsofcostcontainmentthanhardbudgets

Costpressurescanbecontained

§  Ifbudgetsareallocatedtotherelevantagents,and

§  ThoseagentshaveastrongincenIvetospendwithintheirbudget,throughü  penalIesforoverspending,ü  rewardsforunder-spending,ü  orboth

WaysofBudgetSeNng

•  ForagentsservingafixedpopulaIontheycanbesetonacapita9onbasis:

•  Thatis,theagentreceivesafixedamountperpersoncovered,regardlessoftheactualusemadeofthesystem.

•  Historicalspendingorac9vitylevels:

•  UnlessthoselevelsareanaccuratereflecIonofneeds,

bothnowandinthefuture,thismaysimplyperpetuatepastinefficienciesinresourceallocaIon.

ProblemsassociatedwithBudgetSeNng

Budgetsdohavetheirproblemsasinstrumentsofcostcontainment:

1.  HardbudgetswithpenalIesforoverspendingbutnorewardsforunderspendingencourageagentstospenduptotheirlimit.

2.  MosttypesofbudgetselngofferincenIvesforcreamskimmingandforbudgetshiSing;thatis,foragentstoselectthepeoplecoveredbytheirbudgetsoastofavorthosewhowillmaketheleastdemandsonthebudgetandtoshiSother,moreexpensivepaIentsontootherbudgets.

3.  Ifbudgetsaresuccessfulincontainingcosts,thentheyarelikelytocreateaneedforraIoningandwaiInglistsmaydevelop,whichcancreatepoliIcalproblems.

SuccessfulexamplesofBudgetSeNng(1)

1.  CountrieswithnaIonalhealthsystemssuchastheUnitedKingdom

havealwaysoperatedwithbudgetsatsome(usuallymost)levelsof

thesystem;andtheseareoSencountrieswithhistoricallylowlevels

ofspending.

2.  InFrancetheintroducIonofbudgetsforhospitalsin1984playedasignificantroleinreducingtheirshareofoverallhealthexpenditure.

Theydidsobyreducingthevolumeofservices,withtherelaIveprice

oftheseservicesremainingconstant.

SuccessfulexamplesofBudgetSeNng

3.  InIrelandasignificantfallintheaveragelengthofstayinhospitals(28%from1980to1993)wasa]ributedtotheefficiencypressuresonhospitalsresulIngfromIghtbudgetaryallocaIons.

4.  InGermanytheintroducIonofbudgetsforsectorsandindividualproviders,althoughofvariousformsandefficacy,weregenerallymoresuccessfulincontainingcoststhananyothermeasure.Moreover,sincethosebudgetswereabolishedin1997,Germany

againhasexperiencedupwardcostpressures.

Controls

Insurerscantrytoaffecthealthcarecoststhroughcontrolsonthewayinwhichproviderssupplyhealthcare.

o  Feesorpaymentsmadetoproviderscanbecontrolled,and,instatesystems,

thepricesofpharmaceuIcalsandothermedicalsuppliescanberegulated,ascantheprofitsofpharmaceuIcalcompaniesorothermedicalsuppliers.

o  TheuIlizaIonofprocedurescanbecontrolledbyinsurers,aswithmuchmanagedcare.

o  Also,instatesystemsatleast,the‘inputs’intothesystemcanberegulated,

withgovernmentsimposingrestricIonsoncapitalinvestmentsoronthesupplyofmedicalpersonnel.

Controls–difficul9esassociatedtoit

•  BothdoctorsandpaIentsresentcontrolsonprocedureuIlizaIon.

•  Thiscanencouragecostlyeffortstoevadethecontrols.

•  Theremaybea‘balloon’effect,withthecompressioninonepartofthesystemleadingtoexpansionelsewhere.–  Oneelementofexpenditureiscontrolled,butothersarenot.

•  E.g.thepricesofpharmaceu5calsarekeptlow,thedemandfordrugsexpands,thequan5typurchasedincreasesandtotalexpenditureonpharmaceu5calsmayincrease.

v  Controlseveralelementssimultaneously(priceandquan9ty,wagesandemployment,technologyandvolume)tohaveaninfluence

intherightdirec9on.

Referenceprice–newapproachofcontrol

Ø  Inareferencepricesystemagroupofsimilarproductsisgivenaspecificreferencepricethatisfullycoveredbyinsurance,subjecttoco-payment.

Ø  TheuseofareferencepriceasareimbursementbenchmarkimpliesthattheinsurerwillonlypaythatparIcularprice.

Ø  Anyexcessabovethereferencepricehastobepaidbytheinsuredperson.Ø  TheobjecIveistomaketheconsumersmorefiscallyawareandtotriggerprice

compeIIoninthereference-pricedpartofthemarket.

Ø  ThefirstschemeofthistypewasintroducedbyNewZealand.InEurope,Germanywasthefirsttointroduceareferencepricesystem.Itisalsousedin

Ø  theNetherlandØ  Denmark

Ø  SwedenØ  Italy

Weaknessofreferencepricesystems

v  Fromthegovernments’pointofview,theweaknessofreferencepricesystems,astheexperienceoftheNetherlandsandGermanyhasshown,isthattheirintroducIondoesnotnecessarilydecreasethedrugbudget.

v  ThereferencepricesystemsImulatesthepharmaceuIcalindustrytomakemajor

effortstopromotedrugsthatarenotcoveredbythescheme.

v  Asaresultthemarketshareoftheseexpensiveproductsincreases,andfirmsmayraisethepricesoftheseproductsfurthertorecoverlossescausedbythereferencepricesystem.

Compe99on

•  Betweeninsurersitwillkeepdownpremiums,

•  whilebetweenprovidersitwillkeepdownhospitalandothermedicalcosts.

q  Compe99onbetweeninsurers

q  Compe99onbetweenproviders

Theempiricalevidenceconcerningtheimpactofcompe99onismixed.

•  IntheUnitedStates,hospitalcompeIIoninthe1980sappearstohaveledtohighercostsand,insomecases,worsehealthoutcomes.

•  Inthe1990s,incontrastresearchfoundcompeIIonleadingtoreducIonsincostsandimprovedhealthoutcomes.

21

HEALTHCOSTCONTAINMENTANDEFFICIENCYSTRATEGIES

Strategies

Strategy CostContainmentStrategyandLogic TargetofCostContainment EvidenceofEffectonCosts

GlobalPaymentstoHealthProviders

Afixedprepaymentmadetoagroupofprovidersorhealthcaresystem(asopposedtoahealthcareplan)forallcareforallcondiIonsforapopulaIonofpaIents.

•  LackoffinancialincenIvesforproviderstoholddowntotalcarecostsforapopulaIonofpaIents.•  Inefficient,uncoordinatedcare.Notenougha]enIontomanagementofchroniccondiIons.• PrevenIonandearlydiagnosisandtreatment.

ResearchindicatesglobalpaymentscanresultinlowercostswithoutaffecIngqualityoraccesswhereprovidersareorganizedandhavethedataandsystemstomanagesuchpayments.

Episode-of-CarePayments

AsinglepaymentforallcaretotreatapaIentwithaspecificillness,condiIonormedialevent,asopposedtofee-for-service.

•  LackoffinancialincenIvesforproviderstomanagethetotalcostofcareforanepisodeofillness.•  Inefficient,uncoordinatedcare.

ResearchislimitedandshowscostsavingsforsomecondiIons.Paymentmechanismisatanearlystageofdevelopment.

Performance-BasedHealthCareProviderPayments(P4P)

PaymentstoprovidersformeeIngpre-establishedhealthstatus,efficiencyand/orqualitybenchmarksforagroupofpaIents.

• Providersnotfinanciallyrewardedforprovidingefficient,effecIveprevenIveandchroniccare.• Unnecessarycare.

Researchislimitedandindicatessomeimprovementsinqualityofcarebutli]leeffectoncosts.

1

Strategies


Collec9ngHealthData:All-PayerClaimsDatabases

AstatewiderepositoryofhealthinsuranceclaimsinformaIonfromallhealthcarepayers,includinghealthinsurers,governmentprogramsandself-insuredemployerplans.

•  InabilitytoidenIfyandrewardhigh-quality/low-costproviders.•  Lackofdatatoenableconsumerstocompareproviderpricesandcarequality.

Itistooearlytodeterminewhetherall-payerclaimsdatabasescanhelpstatescontrolcosts.

EqualizingHealthProviderRates:All-PayerRateSeNng

PaymentratesthatarethesameforallpaIentsreceivingthesameserviceortreatmentfromthesameprovider.Ratescanbesetbyastateauthorityorbyprovidersthemselves.

• Highhealthcareprices.•  LackofpricecompeIIon.•  Significantprovidercosts•  tonegoIate,trackandprocessclaimsundermanyreimbursementschedules.

Evidenceismixedbutindicatesthat,properlystructured,stateall-payerrateselngcanslowpriceincreasesbutnotnecessarilyoverallcostgrowth.

UseofGenericPrescrip9onDrugsandBrand-NameDiscounts

BuyingmoregenericprescripIondrugsinsteadoftheirbrand-nameequivalentsandpurchasingbrand-namedrugswithdiscountscansignificantlyreduceoverallprescripIondrugexpenditures.

•  Stategovernment-fundedpharmaceuIcalpurchasing,includingMedicaid,state-onlyprogramsandsomeprivate-marketpharmaceuIcalpurchasing.

Expandeduseofgenericdrugsisdocumentedtosavestates30percentto80percentoncertainwidelyusedmedicaIons,reducingexpendituresbymillionsofdollarsannually.

2

Strategies


Prescrip9onDrugAgreementsandVolumePurchasing

StatesusecombinaIonsofapproachestocontrolthecostsofprescripIondrugsincluding:• Preferreddruglists,•  Extramanufacturerprice•  rebates,• MulIstatepurchasingand• negoIaIons,andScienIficstudiesoncomparaIveeffecIveness.

• HelpsstategovernmentpublicsectorprogramsoperatemoreefficientlyandcosteffecIvely.• HoldsdownoverallstatepharmaceuIcalspending,butdoesnotdenycover-ageorservicestoindividualpaIents.

StateMedicaidprogramsareusingpreferreddruglists,supplementalrebatesandmulI-statepurchasingarrangementstosavebetween8percentand12percentonoverallMedicaiddrugpurchases.

PoolingPublicEmployeeHealthCare

ProgramsthatpoolorcombinehealthinsurancepurchasersacrossorbeyondtradiIonaljurisdicIonsorassociaIons,includingpublicemployeehealthcoveragepoolsandprivatesectorhealthpurchasingalliances.

• HighadministraIvecostsasaproporIonofsmallandmid-sizedemployerpremiums.•  Limitedabilityofsmallandmid-sizedgroupstonegoIatelowerhealthcarepricesorpremiumsorbenefit.

Evidenceindicatesarrangementsmaybenefitsmallgroupsthatjoinlargestatepoolsbuthavenotslowedoverallinsurancepremiumincreases.

PublicHealthandCostSavings

Evidenceindicatespublichealthprogramsimprovehealth,extendlongevityandcanreducehealthcareexpenditures.

PublichealthprogramsprotectandimprovethehealthofcommuniIesbyprevenIngdiseaseandinjury,reducinghealthhazards,preparingfordisasters,andpromoInghealthylifestyles.

ExtensiveresearchdocumentsthehealthbenefitsofmoreAmericansexercising,losingweight,notusingtobacco,drivingsafelyandengaginginotherhealthyhabits.Lessclearistheeffectontotalhealthcarecosts.

3

Strategies


PublicHealthandCostSavings

Evidenceindicatespublichealthprogramsimprovehealth,extendlongevityandcanreducehealthcareexpenditures.

PublichealthprogramsprotectandimprovethehealthofcommuniIesbyprevenIngdiseaseandinjury,reducinghealthhazards,preparingfordisasters,andpromoInghealthylifestyles.

ExtensiveresearchdocumentsthehealthbenefitsofmoreAmericansexercising,losingweight,notusingtobacco,drivingsafelyandengaginginotherhealthyhabits.Lessclearistheeffectontotalhealthcarecosts.

HealthCareProviderPa9entSafety

MedicalerrorsaretheeighthleadingcauseofdeathintheUnitedStates,higherthanmotorvehicleaccidents,breastcancerorAIDS.Eachyear,between500,000and1.5millionAmericansadmi]edtohospitalsareharmedbypreventablemedicalerrors.

TheesImatedannualcostofaddiIonalmedicalandshort-termdisabilityexpensesassociatedwithmedicalerrorsis$19.5billion.LongerhospitalstaysandthecostoftreaIngmedicalerror-relatedinjuriesandcomplicaIonsarethetwomajorexpendituresassociatedwithmedicalerrors.

ExamplesofpaIentsafetyiniIaIvesthatimprovepaIentcareandreducecostsexist,butevidenceofoverallsavingsislimited.RecentstrategiesincludeE-prescribing,non-paymentfor“neverevents,”regulaIngmedicalworkcondiIonsanderrorreporIng.

4

GlobalPaymentstoHealthProviders

•  HealtheconomistsandothersareincreasinglypromoIngglob-alpaymentsasanimportantstrategytoslowgrowthofhealthcareexpenditures.

Episode-of-CarePayments

Withepisode-of-carepaymentsSavingscanberealizedinthreeways:

1.  BynegoIaIngapaymentsothetotalcostwillbelessthanfee-for-service;

2.  Byagreeingwithprovidersthatanysavingsthatarisebecausetotalex-pendituresunderepisode-of-carepaymentarelessthantheywouldhavebeenunderfee-for-servicewillbesharedbetweenthepayerandproviders;

3.  FromsavingsthatarisebecausenoaddiIonalpaymentswillbemadeforthecostoftreaIngcomplicaIonsofcare,aswouldnormallybethecaseunderfee-for-service.

EpisodeofCare

Performance-BasedHealthCareProviderPayments

v  Pay-for-performanceisusedtoencourageproviderstofollowrecommendedguidelinesormeettreatmentgoalsforhigh-costcondiIons(e.g.,heartdisease)orprevenIvecare(e.g.,immunizaIons)

v  Pay-for-performanceisdesignedtoaddresshealthcareunderuse(e.g.,inadequateprevenIvecare)andoveruse(e.g.,unnecessarymedicaltests)

q  ResearchindicatesthatforsomecondiIons,P4Pcanleadtohigher-quality,lowercostcare,butbyitselfmaynotslowoverallcostgrow.

UseofGenericPrescrip9onDrugsandBrand-NameDiscounts

u ProperpharmaceuIcaluseisdocumentedtosavemoneybyavoidingcostlyhospitalizaIon,emergencyroomuse,movingtoanursinghomeorrepeatvisitstospecialists.

u MillionsofpaIentswithhighbloodpressure,

highcholesterol,chronicpain,arthriIs,sleepdisordersormilddepressiondependononeortwodailypills,forexample.

Ø  Buyingmoregenericprescrip9ondrugsinsteadoftheirbrand-nameequivalentsandpurchasingbrand-namedrugswithdiscountscansignificantlyreduceoverallprescrip9ondrugexpenditures.

PoolingPublicEmployeeHealthCare

v  Pooledpublicemployeehealthbenefitprogramsrefertoeffortstomergeorcombinestateemployeehealthinsurancewiththatofotherpublicagenciesandprograms.

PublicpurchaserstrytoloweroveralladministraIvecostsandnegoIatelowerpricesfromprovidersandinsurersusingtheirlargenumbersofenrolleesasabargainingtool.Health

costsarecontrolledbyusingsize,volumepurchasesandprofessionalexperIseto:

Ø  MinimizeandcombineadministraIveandmarkeIngcosts;

Ø  FacilitatenegoIaIonswithhealthinsurersformorefavor-ablepremiumratesandbroaderbenefitpackages;and

Ø  RelieveindividualemployersoftheburdenofchoosingplansandnegoIaIngcoverageand

paymentdetails.

References

1.  Healthcostcontainmentandefficiencies.Na5onalConferenceofStateLegislatures,20112.  HurleyJ&LiJ.(2013).HealthCareFunding,Cost-Containment,andQuality.CentreforHealthEconomics

andPolicyAnalysis(CHEPA),3.  StabileM,ThomsonS,AllinS,BoyleS,BusseR,ChevreulK,MarchildonG&MossialosE.(2013).Health

carecostcontainmentstrategiesusedinfourotherhigh-incomecountriesholdlessonsfortheUnitedStates.HealthAffairs,4(32),643-652.

4.  MathauerI&Wi]enbecherF.(2012)DRG-basedpaymentsystemsinlow-andmiddle-incomecountries:ImplementaIonexperiencesandchallenges.WHO

5.  ZiebarthN.R.(2011).AssessingtheEffecIvenessofHealthCareCostContainmentMeasures:EvidencefromtheMarketforRehabilitaIonCare.Discussionpaper.CornellUniversity

6.  HsiaoW.C.(2007).Whyisasystemicviewofhealthfinancingnecessary?HealthAffairs,4(26),950-961.7.  ChamchanC&CarrinG.(2006).AMacroeconomicViewofCostContainment:SimulaIonExperimentsfor

Thailand.ThammasatEconomicJournal2(24),73-91.8.  CarrinG.(2003).ProviderpaymentsandpaIentchargesaspolicytoolsforcost-containment:How

successfularetheyinhigh-incomecountries?HumanResourcesforHealth1(1),6.9.  EuropeanExperienceswithHealthCareCostContainment.AARPEuropeanLeadershipStudy:HealthCare

CostContainment,200610.  LeGrandeJ&TitmussR.(2003).MethodsofcostcontainmentsomelessonsfromEurope.IHEAFourth

WorldCongress11.  SanterreR.E.(2002).Costofhealthcarethroughouttheworld.Economicsinterac5onswithother

disciplines.1.

cost containment in healthcare - home | curatio...

Documents