Katherine Swartz Harvard School of Public Health Public Policy Forum Rockefeller Institute of Government May 21, 2009

Transcription

1 How Can States Address the Effects of People with Very High Medical Care Expenses? Katherine Swartz Harvard School of Public Health Public Policy Forum Rockefeller Institute of Government May 21, 2009

2 Overview Management of medical care for very high-cost people needed to expand insurance coverage High-cost people are not all high-risk States risk management strategies Can states manage risks of high costs alone? 2

3 Tensions Rising Uninsured Numbers ~ 50 million uninsured Americans and similar number under-insured Efforts to expand coverage have focused on expanding Medicaid, providing subsidies to near-poor But costs of care are rising faster than general prices and incomes 3

4 Tensions Growth in Health Care Spending $2.2 trillion in 2007 more than $7,400 per person; 16.2% of GDP Medicaid 7% of federal budget; 21.5% of state budgets Medicare 13% of federal budget How do we pay for expanding health insurance coverage? 4

5 Self-Insured Firms and Public Sector Employers Also Concerned Unfunded liabilities for health care costs of retirees Premiums for current employees now 7% of compensation recession an incentive to reset ESI Firms (small & large) concerned about high-cost people 5

6 Risk in Insurance 1. Spending could be higher than predicted (due to flu; new vaccine) 2. Adverse selection: disproportionate number of people with extremely high costs among their own enrollees 6

7 Cumulative Percent of Expenditures What Do We Mean by Very High Cost? Distribution of Health Care Expenditures Cumulative Percent Percent of Population Source: Monheit, Medical Care

8 Are People in Top Percentiles Always High-Risk People? Less than 1/3 of people in top 5% in one year are in top 5% in following year 45% of people in top 5% are in top 10% in following year 60% of people in top 10% are not in top 10% in following year Regression to the mean but 70% of people in top 50% are in top 50% in following year 8

9 Reasons People Are in Top Percentiles Top 1% random occurrences People in top 10% for two consecutive years are more likely to be older, female, and have chronic condition Conditions: cancer, mental disorders, arthritis, diabetes, pneumonia, connective tissue disorders, stomach, hypertension Insurers concern: top 1% especially, but focus on top 10% for adverse selection 9

10 Forms of Competition to Avoid High-Risk People Market segmentation Companies specialize Selection mechanisms Medical underwriting Refusal to issue a policy Exclusion of coverage for pre-existing conditions Many policies with different covered benefits 10

11 Current State Efforts to Address Adverse Selection Risk Risk management strategies that involve: everyone some people high-risk people 11

12 Overview of States Risk Management Strategies Strategies that Involve All Residents and Reduce Adverse Selection Risk - Merging the small group and individual markets - Insurance exchanges - A requirement that everyone have insurance coverage Strategies that Affect Some People but Have Less Effect on Adverse Selection Risk - Community rating of premiums - Group purchasing arrangements State Strategies Aimed Directly at High-Risk People -High risk pools -Assessments of insurers -Reinsurance 12

13 I. Strategies that Involve Everyone Require everyone to have insurance coverage, with subsidies for near-poor Merge the small group and individual insurance markets Create an insurance exchange market-like entity 13

14 Massachusetts Experience, 1 Little push-back on requirement so far: 187,000 newly insured in private plans 174,000 in CommCare 76,000 in MassHealth Requests for exemptions coming more from people 55 to 64 facing higher premiums 14

15 Massachusetts Experience, 2 Subsidies larger for lower income and fewer people enrolling among those with incomes > 200% FPL Subsidy funds needed exceeded predictions Growth in health care costs an issue Small group and individual markets merged little fanfare 15

16 Massachusetts Exchange: Commonwealth Connector Provides choice, Section 125 plans, ease of payments Commonwealth Choice (unsubsidized) premiums rose 5% July ~19,000 purchasers as of Sept 08 Catch: Premiums have to be same for policies purchased thru Connector as for policies available in market not yet resolved 16

17 II. Strategies that Involve Some People Community rating of premiums NY Community rating can exacerbate adverse risk selection Group purchasing arrangements HealthPass NY pool risk Assoc Health Plans unregulated Do not address adverse selection risk 17

18 III. Strategies Targeting High-Risk People High-risk pools requires excellent predictions ex ante; pools are very small Assessments on insurers requires excellent predictions ex ante Government-sponsored reinsurance ex post determination of who has high costs 18

19 High-Risk Pools Exist in 34 states; fewer than 200,000 people enrolled (far less than 1% of pop) High premiums and state funding Require excellent predictions ex ante of who should be ceded to pools 19

20 Assessments of Insurers Means of sharing aggregate costs of high-cost people among everyone covered by policies Does not share with self-funded firms Does not reduce risk of adverse selection faced by insurers 20

21 Government Sponsored Reinsurance Directly targets risk of adverse selection with excess-of-loss design Ex post determination of high-cost people Aligns incentives to manage care of high-cost people 21

22 Efforts to Address Risk of High-Cost People and Health Care Spending All the strategies need funding Catch-22 of growth in health care spending high-risk people now cost more to treat Rate of growth not sustainable eat our seed-corn for future generations Need to slow rate of spending 22

23 States Have Different Levels of Spending for High-Cost People Some states have more high-cost people than others not clear why New York has high-spending areas (NYC, LI especially) Affects risk of high-cost people and states ability to fund strategies to manage risk and expand insurance 23

24 Variation in Health Care Spending 24

25 Can States Control Spending by Themselves? Massachusetts experience sobering Medicaid accounts for 16% of total health spending not enough to set norms for care Growth in Medicaid spending coming from increasing intensity of care provided during hospitalizations 25

26 What Can States Do to Slow Growth in Medical Spending? No magic bullet Need to address norms of care for conditions and symptoms work with physician and hospital groups Address physician-owned equipment Think outside the box 26

27 Think Outside the Box Analyze episodes of high spending to uncover sources of increased intensity of care Extend hours of physicians offices and pay more for medical home care avoid patients directed to EDs Alter Medicaid incentives for nursing home patients to go to a hospital 27

28 Think Outside the Box Increase use of Nurse Practitioners and RNs expand nursing schools Encourage greater use of NPs and RNs to visit people in their homes rather than hospital stays Increase geriatric training of MDs and RNs Create areas in EDs for older people Reallocation of Medicaid reimbursement rates 28

29 What Can New York Do? Analyze episodes of high-cost care; link a year s episodes what could be done differently? Increase reimbursement for managing care of people with chronic conditions Dual eligibles work with Medicare to reduce incentives to hospitalize Pursue old Rochester strategy reset norms of care 29

30 Conclusions and Implications Expanding access to insurance requires managing risk of high-costs Control of medical costs and spending needed states cannot do this alone Recession is increasing employers desires to limit spending on ESI opportunity to control spending Reset norms of care new guidelines 30