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Donna Lynne, DrPH, President Kaiser Permanente Colorado

December 9, 2010. Health Care Cost A Perspective. Donna Lynne, DrPH, President Kaiser Permanente Colorado. 1. Introduction. Health Care: Why is it so expensive?. What we will cover: How much we spend in the U.S. What is unique in Colorado Where the money goes

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Donna Lynne, DrPH, President Kaiser Permanente Colorado

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  1. December 9, 2010 Health Care Cost A Perspective Donna Lynne, DrPH, President Kaiser Permanente Colorado 1

  2. Introduction Health Care: Why is it so expensive? • What we will cover: • How much we spend in the U.S. • What is unique in Colorado • Where the money goes • Where the money is misspent • Opportunities for improvement 2

  3. How much we spend Health Care Costs Rise Internationally (1970 – 2007) Source: OECD Health Data 2009. Health care cost rise based on total expenditure on health as % of GDP. Countries are USA, Germany, Austria, Switzerland, United Kingdom and Canada. 3

  4. Physician Fees C-Section (US$) 4

  5. Hospital Charges Average Cost Per Hospital Day (US$) 5

  6. Total Hospital and Physician Costs Hip Replacement (US$) 6

  7. And what we get US ranks poorly in results . . . Source: Organization for Economic Cooperation and Development, 2005 7

  8. How much we spend in U.S. U.S. health care spending (in billions of dollars) 4.4 Trillion 2,509 2,379 2,241 2,113 1,353 714 253 75 28 Source: Centers for Medicare and Medicaid Services 8

  9. Sources of coverage Colorado United States Uninsured: 17% Uninsured: 16% Employer: 55% Employer: 49% Other Public: 1% Other Public: 3% Medicare: 12% Medicare: 10% Individual: 5% Individual: 6% Medicaid: 16% Medicaid: 10% Source: Kaiser Family Foundation 9

  10. Employer-sponsored insurance Source: Kaiser Family Foundation 10

  11. But Colorado is a bit healthier than U.S. Source: Kaiser Family Foundation 11

  12. Health Care Cost Continuum 1% of people % of Healthcare Expenditures 100% 80% % of 30% total cost Costs 60% 40% 20% 10% total cost 0% total cost 0% % of People  0% 20% 40% 60% 80% 100% % of Membership 70% of people 20% of people Source: Milliman USA Healthcare Cost Guidelines, 2001 Claims Probability Distribution, non-KP. 12

  13. Where we misspend • Buckets of wasteful spending: • Behavioral • = $303 billion to $403 billion wasted • Clinical • = $312 billion wasted • Operational • = $126 billion to 315 billion wasted $1.2 trillion in waste = Source: PriceWaterhouseCoopers’ Health Research Institute 13

  14. Where we misspend • Behavioral • ($303 billion to $403 billion wasted) • Obesity ($200 billion) • Smoking ($567 million to $191 billion) • Non-adherence ($100 billion) • Alcohol abuse ($2 billion) Source: PriceWaterhouseCoopers’ Health Research Institute 14

  15. Where we misspend • Behavioral • Obesity • Smoking • Non-adherence • Alcohol abuse • The opportunities • Make change easier or financially advantageous • Incentives • Easy access to coaching/advice • Provide options • Healthy catering/cafeteria • Healthy communities Source: PriceWaterhouseCoopers’ Health Research Institute 15

  16. Where we misspend • Clinical • ($312 billion wasted) • Defensive medicine ($210 billion) • Preventable hospital readmissions ($25 billion) • Poorly managed diabetes ($22 billion) • Medical errors ($17 billion) • Unnecessary ER visits ($14 billion) • Treatment variations ($10 billion) • Hospital acquired infections ($3 billion) • Over-prescribing antibiotics ($1 billion) Source: PriceWaterhouseCoopers’ Health Research Institute 16

  17. Where we misspend • Clinical • Defensive medicine • Preventable hospital readmissions • Poorly managed diabetes • Medical errors • Unnecessary ER visits • Treatment variations • Hospital acquired infections • Over-prescribing of antibiotics • The opportunities • Electronic Medical Records • Disease registries • Medical home • Patient empowerment • Online access to own medical record • Access to clear information Source: PriceWaterhouseCoopers’ Health Research Institute 17

  18. Where we misspend • Operational • ($126 billion to $315 billion wasted) • Claims processing ($21 billion to 210 billion) • Ineffective use of IT ($81 billion to $88 billion) • Staffing turnover ($21 billion) • Paper prescriptions ($4 billion) Source: PriceWaterhouseCoopers’ Health Research Institute 18

  19. Where we misspend • Operational • Claims processing • Ineffective use of IT • Staffing turnover • Paper prescriptions • The opportunities • Greater investment in IT • Streamline regulation • Investment in training and development of health care professionals Source: PriceWaterhouseCoopers’ Health Research Institute 19

  20. The opportunities America’s Big Cost Drivers in Health Care: • ABCD’s of chronic disease . . . • Asthma • Blood pressure control (hypertension) • Coronary artery (heart) disease / Congestive heart failure • Diabetes • Depression Modifiable risk factors: All heavily impacted by weight, diet, smoking, adherence to treatment plans, and physical activity. 20

  21. Prevention is part of the cure The opportunities 21

  22. The US (and Colorado) is predominately an employer-based system Employers cover approximately 60% of all people in the health care system Employers have engaged is extensive cost shifting of health care costs to employees Employers have largely been unsuccessful in slowing the cost of health care; current focus wellness Employer-Based System 22

  23. Health Insurance Premiums Cumulative Changes in Health Insurance Premiums, Inflation, and Workers’ Earnings, 1999-2008 Source: Centers for Medicare and Medicaid Services 23 23

  24. The workplace perspective Employers and employees pay more: Average health insurance premiums for family plans Worker contribution Employer contribution 1999 $1,543 $4,247 $5,790 Total per family per year 2000 $3,515 $9,860 $13,375 Total per family per year 24

  25. State Paid $178 million in FY 2008-2009 for Health Insurance – 71% Employees paid $71 million in FY 2008-2009 for Health Insurance – 29% Offers a choice of two health plans to its employees Kaiser Permanente United Healthcare Retiree medical provided through PERA Unfunded liability Colorado State of Colorado 25

  26. Retiree Health Benefits Among All Large Firms (200 or More Workers) Offering Health Benefits to Active Workers, Percentage of Firms Offering Retiree Health Benefits, 1988-2009* **Tests found no statistical difference from estimate for the previous year shown (p<.05).No statistical tests are conducted for years prior to 1999. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009; KPMG Survey of Employer-Sponsored Health Benefits, 1991, 1993, 1995, 1998; The Health Insurance Association of America (HIAA), 1988. 26

  27. December 9, 2010 Health Care Cost A Perspective Donna Lynne, DrPH, President Kaiser Permanente Colorado 27

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