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The Seven Deadly Sins: Chronic Care and the Future Of American Healthcare

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Ian Morrison. The Seven Deadly Sins: Chronic Care and the Future Of American Healthcare. [email protected] The Seven Deadly Sins. Pride Anger Envy Greed Gluttony Sloth Lust. Seven Deadly Sins. Proud Republicans Angry Democrats

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the seven deadly sins
The Seven Deadly Sins
  • Pride
  • Anger
  • Envy
  • Greed
  • Gluttony
  • Sloth
  • Lust
seven deadly sins
Seven Deadly Sins
  • Proud Republicans
  • Angry Democrats
  • Envy: The Uninsured and underinsured who are envious of people with access to health care that adds true value and protects the chronically ill
  • Greed: why healthcare is about incomes not outcomes (tax policy, provider reimbursement and return on investment)
  • Gluttony and Sloth: A powerful double act fueling the obesity epidemic, the depression epidemic, and the failure of the SF Giants
  • Lust: It’s all we have left
republicans and perotians are the natural majority of the united states
Republicans and Perotians are the Natural Majority of the United States

Perot cost Bush the Elder in 1992

Nader cost Gore in 2000

republicans grow with income
Republicans Grow with Income

Republican Vote by Family Income

63% of $200K Plus (2% of electorate)

$50K Plus is 55% of electorate

$75K Plus is 32%

moral values versus moral values
“Moral Values” versus Moral Values
  • “Moral Values” aka Divisive Social Issues that appeal to Christian Conservative Voters
    • Abortion
    • Gay Marriage
    • Stem Cell Research
  • Some Other Examples of Moral Values
    • Healthcare is a Right
    • Poverty is bad
    • Don’t pollute the environment
    • Don’t burden our children with a mountain of debt
    • Don’t Shoot Any Living Creature unless they are trying to shoot you
exit poll results availability and cost of health care
Exit Poll Results: Availability and Cost of Health Care

Bush Wins the Unconcerned in a Landslide

what to expect under bush 43 release 2 0
What to Expect Under Bush 43 Release 2.0
  • Tax policy as health policy
    • Make the tax cuts permanent
    • Large deficits
    • Pressure on Medicare reimbursement
    • Medicaid: no help
  • Health Insurance Market
    • Talk about the uninsured but remember the 7, 14, 28, 56 Rule
    • HDHPs: Shitty coverage for all
  • Medicare Policy
    • Pay for Performance
    • WIPDBS Implementation
    • Reimportation given the Drug Industry’s demonization
    • Private Sector Medicare PPOs: Say What?
    • HSAs
  • Malpractice Reform?
continuing backlash against health care industries
Continuing Backlash Against Health Care Industries

* In 1997 “computer companies” were rated together (I.e. hardware and software companies were not measured separately

** Because airlines were not included in 1997, the trend for airlines is from 1998 - 2002

health care tops list of industries public wants to see more regulated
Health Care Tops List of Industries Public Wants to See More Regulated

Should Be More Regulated

Generally Honest & Trustworthy

Managed Care Companies

Health Insurance Companies

Pharmaceutical Companies


medicare drug benefit
Medicare Drug Benefit


Catastrophic Coverage


Out-of-Pocket Spending

$2850 Gap

No coverage

Medicare Part D Benefit

+ ~$420 in annual premium


Partial Coverage up to Limit




Equivalent to $3,600 in out-of-pocket spending: $250 deductible + $500 (20% cost-sharing on $2000) + $2850 (100% cost sharing in the “gap”)

Source: Kaiser Family Foundation

medicare bill the ten commandments
Medicare Bill The Ten Commandments
  • There shall be competition (Even if it is unpopular, doesn’t work and there are no willing HMOs or congressional districts willing to participate in it)
  • There shall be liberty for seniors to be confused by a myriad of private health plan and drug coverage offerings
  • There shall be skin in the game (consumer responsibility for payment through co-payments, deductibles and premium sharing) because it is good for consumers to pay at the point of care (it will stop them overusing the Medicare system for recreational purposes and it teaches seniors that they should look after themselves in their forties and fifties)
  • There shall be no supplementary coverage because supplementary coverage nullifies skin in the game
  • There shall be no new taxes for rich people, only raised premiums for all
  • There shall be privatization because private is better than public (don’t argue, this is a commandment)
  • There shall be unrestricted free choice of plans each of which has a restricted choice of doctors because choice is good
  • There shall be no Canadian drugs in the veins of Americans even if the drugs are made in America and purchased by Americans
  • There shall be big differences in coverage among seniors but thou shall not covet thy neighbor’s coverage
  • There shall be no senior left behind……….. in traditional Medicare
obesity trends among u s adults brfss 1985
Obesity Trends* Among U.S. AdultsBRFSS, 1985

No Data <10% 10%-14% 15%-19% 20%-24% 25%

(*BMI 30, or ~ 30 lbs overweight for 5’4” woman)

obesity trends among u s adults brfss 1986
Obesity Trends* Among U.S. AdultsBRFSS, 1986

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1987
Obesity Trends* Among U.S. AdultsBRFSS, 1987

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1988
Obesity Trends* Among U.S. AdultsBRFSS, 1988

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1989
Obesity Trends* Among U.S. AdultsBRFSS, 1989

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1990
Obesity Trends* Among U.S. AdultsBRFSS, 1990

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1991
Obesity Trends* Among U.S. AdultsBRFSS, 1991

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1992
Obesity Trends* Among U.S. AdultsBRFSS, 1992

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1993
Obesity Trends* Among U.S. AdultsBRFSS, 1993

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1994
Obesity Trends* Among U.S. AdultsBRFSS, 1994

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1995
Obesity Trends* Among U.S. AdultsBRFSS, 1995

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1996
Obesity Trends* Among U.S. AdultsBRFSS, 1996

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1997
Obesity Trends* Among U.S. AdultsBRFSS, 1997

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1998
Obesity Trends* Among U.S. AdultsBRFSS, 1998

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 1999
Obesity Trends* Among U.S. AdultsBRFSS, 1999

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 2000
Obesity Trends* Among U.S. AdultsBRFSS, 2000

No Data <10% 10%-14% 15%-19% 20%-24% 25%

obesity trends among u s adults brfss 2001
Obesity Trends* Among U.S. AdultsBRFSS, 2001

No Data <10% 10%-14% 15%-19% 20%-24% 25%

(*BMI 30, or ~ 30 lbs overweight for 5’4” woman)

obesity drivers
Obesity Drivers
  • We are eating more (duh!)
  • We are eating out more (In 1970 34% of the food budget was consumed outside the home in late 1990s it was 47%)
  • Everything is supersized at home and at McDonalds
  • We stopped smoking
  • We are all working too much especially women
  • We don’t exercise enough because we are all working too much
  • The only people who are exercising and eating right are people who were thin in the first place or bulemic celebrities or rich people who don’t work or French
Supersize Everything Part 1

National Geographic August 2004

supersize everything part 2
Supersize Everything Part 2

Source: Young and Nestle, Am J Public Health , 2002

obesity how far upstream do you go
Obesity: How Far Upstream Do You Go?
  • Metabolic medical management
    • Drugs
    • Surgery 140,00/year we could be doing 15 million
    • The Fat Trapper and Exercise in a Bottle
  • Wellness and health promotion
  • Public Health Style Prevention
  • Reinvigorate participation not competition in athletics
  • Financial incentives :Weighted Premiums or Tax BMI
  • Urban Design: RAND and IFTF
  • Tax Policy
    • Fat taxes not Flat taxes
    • Iowa corn farmers: from corn syrup to ethanol
    • Fast Food as Tobacco companies
    • No subsidy for cars, urban sprawl, commuting, drive thrus
    • Give all the money to Head Start and public school PE
what s the national game plan for financing chronic care
What’s the National Game Plan for Financing Chronic Care?
  • Consumer Deflected Healthcare: Retail care and Catastrophic coverage
  • Discounted fee for service everywhere
  • Siloed delivery systems
  • No incentive for coordination
  • No IT infrastructure
  • All delivered through a pluralistic Gong Show of providers intent of maximizing their income under the perverse and toxic incentives they face
  • That should work pretty well, eh?
consumer responsibility for payment
Consumer Responsibility for Payment
  • Defined Benefit to Defined Contribution: not necessarily in pure form
  • “Skin in the game” no matter what
  • The Ross Perot Effect
  • Transparency in Pricing: The End of the Hostellerie de Plaisance Model
  • Break the Culture of Entitlement
  • “Let Them Eat Choice”
  • The political and economic context is crucial
  • Tiering no matter what
  • Ability to pay shapes service, choice, network and technology
  • The backlash against coverage erosion
chronic care a long way to go
Chronic Care: A Long Way to Go


Source: Improving the Care of the Chronically Ill: Is it Good Business? Ed Wagner, MD, MPH. MacColl Institute for Health Innovation, Group Health Cooperative, 11/03

Source: Chronic Disease Management Through Quality Improvement – the Basics. Chris Rauscher, MD (Canada), 5/04

the argument for consumer responsibility for payment
The Argument For Consumer Responsibility for Payment
  • Consumers have been progressively insulated from the cost of care for the last 40 years
  • If they only knew how much healthcare cost and had to pay they would use it less
  • If they were responsible for paying they would also take more responsibility to become healthy and cost the system less
  • Consumers should have the right to choose and to trade up to better quality with their own money
  • When they are make rational consumer choices the market will be working and whatever is spent will be appropriate like any other market or sector of the economy
the argument against consumer responsibility for payment
The Argument Against Consumer Responsibility for Payment
  • The 5/50 Problem: Most consumers that are heavy users have significant co-morbidity or serious illness like cancer, they didn’t choose this health status
  • One day in an American hospital and they are over their maximum deductible, so……
  • Catastrophic coverage is a green light for excessive care by hospitals and procedure-oriented specialists
  • While skin in the game can clearly move people around does it save money overall?
  • The equity problems:
    • A de facto reallocation of resources from poor to rich (my access to the collective social capital of health insurance is better because I can come up with the economic down payment for physician visits and tests)
    • Poor people with chronic illnesses will be disproportionately affected by consumer responsibility for payment
consumer exposure to health care costs is about to increase
Consumer Exposure to Health Care Costs is About to Increase

Per capita amount of personal health care expenditures paid out-of-pocket

Percentage of total personal health care expenditures paid out-of-pocket


Source: Centers for Medicare and Medicaid Services

consumer directed health plan prototype
“Consumer-Directed Health Plan” Prototype
  • Employer funds only
  • Notional account
  • Section 105 Plan
  • Balance rolls over yr to yr
  • Employer controls growth %
  • Employer controls exit rules
    • Vesting
    • COBRA
    • Retiree medical
    • Coverage for alternative care

Employer contributes to cost of catastrophic coverage

Employee purchases catastrophic coverage


  • Participant responsibility
  • Can fund through Section 125 plan



  • Ensures good health
  • Neutralizes “hoarding”


  • Consumer education
  • Chronic disease management
  • Health promotion
  • Online tools
  • Telephonic support



high deductible health plans for five years
High Deductible Health Plans for Five Years
  • Consumer Directed Health Plans (CDHP) and HSAs are a subset of and a stalking horse for High Deductible Health Plans(HDHP)
  • HDHP will grow and CDHPs will grow fast BUT from a very small base.
  • The leading edge benefit design – CDHPs – will drag all plan designs toward higher deductibles.
    • 1973: Nixon passed HMO legislation and thought he’ll get Kaiser but instead he got PPOs.
    • 2003: Bush passed MMA thinking he’ll get tax-sheltered HSAs (CDHPs) but instead he will get high-deductible plans.
  • The ideology of consumer-driven health care has been implemented before the infrastructure to make it viable has been built.
hdhp consumer behavior
HDHP Consumer Behavior
  • HDHP are not necessarily young immortals
  • Two populations: those that have a choice and those forced into HDHP
  • Not sophisticated or confident shoppers
  • Pay more out of pocket (duh!)
  • And have very significant compliance problems which are mitigated considerably by first dollar coverage of preventive services
impacts of hdhp providers
Impacts of HDHP: Providers
  • Retail care: capture the high end and the desperate frequent fliers
  • Big impact on pediatrics, internal medicine
  • Scopers and gropers will be impacted by specific procedure deductibles but CDHP is a green light for the esoterica
  • Overuse by the rich and well, to-do; under-use by the poor, sick
  • Supplier-induced demand will explode among the well insured and well heeled
  • Not brilliant for the chronically ill
skin in the game matters
“Skin in the Game” Matters
  • Trading down twice as often as trading up
  • Rapid increase in generic and therapeutic substitution
  • Poor, chronically ill most effected
  • Starting to lead to adverse health outcomes like the uninsured
  • Dumb cost shifting without sophisticated chronic care management is not the right answer in the long-term
the obesity solution tiered fast food formularies
The Obesity Solution: Tiered Fast Food Formularies


The All Lettuce Whopper Free

The All Lettuce Whopper with Cheese $15

Real Whopper with Cheese $35


Water Free

Diet Coke $0.99

Regular Coke $15

Supersized Regular Coke $35

the emerging value context
The Emerging Value Context
  • Rising costs
  • Rising cost shifting to consumers
  • The Fat Trapper, Bariatric Surgery and the “Swaning of America”
  • Infatuation with Technology based care
  • Evidence that Innovation makes a difference
  • Expect more Innovation in long term although gaps in the short run
  • Potential Paradigm Emerging
    • High cost, High efficacy, High Customization but unaffordable
    • The Concorde Syndrome
  • The Quest for Value
    • IOM: Balancing cost, quality, access and equity
    • Evidence based medicine and evidence based benefit design
    • Pay for Performance
    • Value Purchasing
      • Count Value: Higher Value Options are identified
      • Make Value Count: Higher value options reinforced by the market
      • Capture Value Gain: Consumer Migration and Provider Re-engineering
A Market Approach to Costs

“Employers believe that consumer pressure is a powerful, underutilized lever for improving quality and efficiency. They believe that higher quality and lower cost will result if consumers spend more of their own money for services they believe are high quality, and if providers respond by improving their performance. For this strategy to succeed, consumers will have to be activated to seek more efficient, higher quality care and physicians will have to be rewarded for delivering it.”

Robert Galvin, Sounding Board

NEJM, September 19, 2002

  • Transparency
  • Incentives and Rewards
  • Focus on Quality and Efficiency
supply sensitive care can be measured for specific providers
Supply-Sensitive Care Can Be Measured for Specific Providers


NYU Medical Center 76.2


Cedars-Sinai Medical Center 66.2


Mount Sinai Hospital 53.9


UCLA Medical Center 43.9

NY Presbyterian Hospital 40.3

Mass. General Hospital 38.8


Brigham & Women's Hospital 31.9

Boston Medical Center 31.5

Beth Israel Deaconess 29.2

UCSF Medical Center 27.2

Stanford University Hospital 22.6




Physician Visits During the Last Six Months of Life

six purchasing elements for value breakthrough in health care
Count Value:Higher value options are identified and made available

1. Health Plans are routinely assessed on 6 IOM dimensions of performance*, starting with: risk & benefit-adjusted total cost PMPY, HEDIS and CAHPS; and implementation of breakthrough elements 2-6

2. Individual Providers and Provider Organizations are routinely assessed on 6 IOM dimensions of performance, starting with (allocative) efficiency, effectiveness, and patient centeredness

3. Health & Disease Management Programs and Treatment Options are routinely assessed on 6 IOM dimensions of performance

Make Value Count:Higher value options are reinforced by the market

4. Consumer Support enables consumers to recognize higher value plans, providers, health and disease management programs, and treatment options in a timely and individualized manner

5. Benefit Architecture encourages all consumers to select high value options

6. Provider Payment incents high performance today and re-engineering to enable higher performance tomorrow

Six Purchasing Elements for Value Breakthrough in Health Care

Plan, Provider & Vendor Accountability

Capture Value Gains:Breakthroughs in health benefits value occur

Today’s Gain: MigrationConsumers migrate to more efficient, higher quality plans, providers, health and disease management programs, and treatment options (= an initial 5-15 net percentage point offset of future cost increases; and > 2  quality reliability)

Tomorrow’s Gain: Re-engineeringSensing a much more performance-sensitive market, health plans, providers, health and management programs, and biomedical researchers create stunning breakthroughs in efficiency and quality of health benefits (= further net percentage point offsets of future cost increases; and > 4  quality reliability)

*6 Institute of Medicine performance dimensions: Safe, Effective, Patient-centered, Timely, Efficient, Equitable

Source: Pacific Business Group on Health

what we have learned to date
What We Have Learned to Date
  • Consumers don’t have the tools yet
  • Consumers will discriminate but will likely forego, defer or trade down more than trade up
  • Plan Level Story:
    • Like choice and are slightly more likely to trade down when have to pay
  • Provider Level Story
    • Don’t see much difference in quality
    • Tiered Networks: West versus East
    • Haven’t paid to get a better doctor
  • Therapy Level Story
    • Trading down twice as often as trading up
americans lack knowledge of health care costs
Americans Lack Knowledge of Health Care Costs

Source: Wall Street Journal/Harris Interactive, June 24-28, 2004

pay for performance
Pay for Performance
  • Common metrics for quality measurement
    • Historic competition in the quality industry
    • Problems of data measures
    • Problems of electronic infrastructure
  • Significant financial incentives for providers
  • Penalty for poor performing providers
  • Disproportionate allocation of premium increases to best performers
  • Rewards could be based on objective historical measures (IHA), price/positioning (BHCAG), patient satisfaction (Wellpoint), medical group assessments (Pacificare), or redesign criteria (Leapfrog, PBGH)
  • Still very little at risk for highly compensated people like doctors compared to private sector
  • Need CMS to lead the charge
  • Need Daughter of Capitation
examples of pay for performance arnold epstein et al nejm jan 22 2004
Examples of Pay for Performance(Arnold Epstein et al, NEJM, Jan. 22, 2004)
  • United Kingdom “has recently adopted a payment-for-performance initiative of unprecedented size and scope. Nearly a third of a G.P.’s income will depend on practitioner’s performance as defined by 130 quality indicators.”
  • GE, Partners Healthcare, Tufts Health Plan, Lahey Clinic and other employers in Massachusetts “Bridges to Excellence” program:Maximum bonuses to physicians $55 per patient per year, with up to $100 for diabetes patients.
  • Integrated Healthcare Association (IHA), a collaboration of 6 California health plans, which cover 8 million lives. Up to $100 million will be available for but specific formula not yet defined.
  • Anthem Blue Cross & Blue Shield of New Hampshire reward physicians (very modestly) who provide certain preventive measures, based on HEDIS.
value purchasing conclusions
Value Purchasing: Conclusions
  • Value purchasing is cost shifting in drag (unless we have information, build infrastructure, create institutions)
  • Value purchasing will grow because employers and health plans will push it
  • Because consumers don’t see big value differences this will mean
    • Pay to stay (with my current doctors)
    • Trading down based on costs for commodities
    • Foregoing care or deferring care
  • Lack of adequate infrastructure will fuel public discontent
    • Cost shifting as a gotcha rather than informed consumerism
  • Ideally it will move market but….
    • Will it save total costs? (International)
    • Do the value players have the capacity to absorb more patients (drugs it’s easy, hospitals and doctors it’s hard)
    • A triumph of ideology over infrastructure
how can we impact costs
How Can We Impact Costs?



Preventive Coverage

  • Catastrophic:
  • DSM
  • Pay for performance
  • IT (e.g., CPOE, etc.)
who pays more who benefits
Who Pays More? Who Benefits?













- O +



hit and chronic care
HIT and Chronic Care
  • HIT is good thing don’t get me wrong
  • EMR is a PET
  • It won’t save money quickly
  • Expectations are too high, but ……
    • You gotta spend to save
    • You create a platform for improvement
    • We do not have another idea
    • Strong bi-partisan support conceptually ….. Show me the money
  • The power of simple disease registries: what can you achieve on 3x5 cards and a telephone
  • Enough conferences already, let’s get going
  • What about the vast rabble of American doctors?


Market Nirvana

Four Scenarios for Health Care


Minor Delivery System Reform



Tiers R’Us


Rational Healthcare

Major Delivery System Reform

scenario 1 tiers r us
Scenario 1: Tiers R’ Us
  • The SUVing of American Healthcare
  • We pay more for choice and control
  • WIPDBS brings the market to Medicare
  • Chronically ill, low income beware
  • Catastrophic coverage for the very sick
  • The benefits of benefit design: save employers money
  • Trading down more often than trading up
  • A world of opportunity and risk
  • Private sector celebrated
scenario 2 bigger government
Scenario 2: Bigger Government
  • Major backlash against cost shifting to consumers
  • 2008 election run on the retirement and health security issues of the middle class
  • Protect the baby-boom at all costs
    • Medicare Advantage for All or
    • Pay or Play or
    • Expanded Medicare and FICA tax or
    • Fill the donut holes, stick it to pharma, shore up the entitlement
  • Live with the consequences
    • Politicization of healthcare spending
    • Rationing and restriction
    • Lower Innovation
    • Lower profits
    • Equity over efficiency
    • Rising costs and taxes
scenario 3 market nirvana
Scenario 3: Market Nirvana
  • Break the Culture of Entitlement
  • Consumers learn to discriminate and pay
  • We buy care not cars
  • Incentives for health and personal responsibility
  • Catastrophic coverage and retail medicine for all
  • Utilization based on ability to pay
  • The rise of cheapo plans and delivery systems
  • Reaching high end retail customers is key
  • Delivery reform is market-based not evidence-based
  • Opportunities abound for the entrepreneurial
  • America’s economic base as private sector healthcare
  • High quality, high service, low equity
scenario 4 national rational healthcare
Scenario 4: National Rational Healthcare
  • Universality and Delivery System Redesign
  • Evidence-based floors and ceilings
  • Pay for Performance
  • Daughter of Capitation
  • Reference-pricing and cost-effectiveness criteria for new technology
  • Financial rewards for clinical redesign
  • Universal Mandated Coverage
    • Employer and individual mandates or
    • Expanded Medicare Advantage or
    • Expanded Safety Net Delivery Floor
  • Expanded Access and Rational Design
  • Delivery System Innovation rewarded
  • All enabled by a 21st century IT and bioscience infrastructure
floors and ceilings not universal care
Floors and Ceilings: Not Universal Care
  • Tiers no matter what, so pick your poison
  • Tiered Insurance
    • No coverage for many
    • Shitty coverage for most
    • Great coverage for the rich and the lucky
  • Tiered delivery
    • Primary care clinics and adequately supported public hospitals
    • Community hospitals and economically restricted networks for the middle class
    • It’s good to be rich because you get the best healthcare in the world
    • Don’t be poor, don’t get sick. Don’t retire
a closing thought on lust despite bob dole as spokesman
A Closing Thought on Lust:Despite Bob Dole as Spokesman……..

Consumers who have talked to a doctor about a drug that is advertised (2000).

Conclusion: Republicans would have more sex if it wasn’t for their allergies.