Medicare Payments And Its Relationship To The U.S. Healthcare System Stuart H. Altman, Ph.D. Sol C. Chaikin Professor of National Health Policy Brandeis University
Should Medicare Focus Only on The Functioning of The Medicare Program, Or Should It Be Concerned About It s Impact on The Overall US Healthcare System?
Medicare Is Already A Major Payer For US Healthcare But Just Wait Until The Next Decade!
Percent Paid For Healthcare By Payer Source 2006 Medicare, 22% Other, 4% In Billions of Dollars- $1.76 Out-of-Pocket, 15% Medicaid, 17% Pvt. Insurance, 35% Out-of-Pocket Pvt. Insurance Medicare Medicaid Other
Even With No Change In Coverage Government Will Dominate Institutional Payments 100% 80% 60% 40% 20% 0% Proportion Of Hospital Expenses Attributed To Patients By Payer Source 54% 66% 37% 25% 6% 7% Gov. Pvt. Uncomp. Care Other 3% 2% 2000 2025
Do Hospitals Attempt To Charge Privately Insured Patients More For Medicare/Medicaid Underpayments, Or Do They Just Maximize Revenue From Each Source
Can Private Insurance Payments Continue To Pay For The Shortfall In Government Payments 180% 160% Hospital Payment-to-Cost Ratios (Government Ratios Maintained at Current Levels) 157.4% 140% 120% 122.3% 138.0% 100% 95.3% 80% 92.3% 60% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003..... 2025 Medicare Medicaid Private Payers Source: 2005 TrendWatch Chartbook, AHA and the Lewin Group.
Profit (Loss) By Payer 2004 100,000,000 Non-Govt 50,000,000 Other Govt 0 PEIA -50,000,000 Medicaid -100,000,000-150,000,000-200,000,000 Medicare
Both Medicare and Private Health Insurance Payments Are Being Driven By The Same Forces
Per Capita Growth In Health Expenditures Has Been Growing at 2% Above Inflation 3500 3000 For 40 Years ---Is This Inevitable? (adjusted for inflation) 2500 2000 1500 1000 500 y = 64.645x + 504.38 0 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Per Capita NHE in $
Medicare Expenditures 1967-2007 $450 IN Billions $432 $400 $350 $300 $275 $336 $374 $250 $217 $200 $150 $100 $50 $0 $4.7 $6.6 $33.7 $101 1967 1970 1980 1990 2000 2003 2005 2006 2007
The U.S. Has In The Past Tried To Control Health Spending--- BUT----With Limited Success and For a Limited Time Period
The Changing Growth Pattern of Per Capita National Health Expenditure 3500 3000 1966-2005 (adjusted for inflation) Y = 37.925x 73195 Managed Care Y = 107.95x 1025.3? 2500 2000 1500 1000 500 0 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Per Capita NHE in $ Y = 52.703x 102898 M&M Begins Y = 40.31x 78465 Gov t Reg. Y = 88.486x 173967 Little Reg./Little Mkt.
What Are The Forces That Keep Health Care Spending Growing? Lets See What We Can Learn From A Comparison With Other Countries
Correlation Between Per Capita Expenditure on Health Care and GDP, 2002-2003 7,000 per Capita Exp on Health ($US PPP) 6,000 5,000 4,000 3,000 2,000 1,000 0-1,000 China y = 0.1222x - 760.9342 R 2 = 0.8121 Korea Israel Germany Canada Japan U.K. Switzerland Australia 0 10,000 20,000 30,000 40,000 50,000 per Capita GDP ($US PPP) U.S. Norway $1,794 The figure for Japan is 2002 estimate; the figures for Australia, Austria, China, Hungary, Ireland, Israel, Poland, Sweden and United Kingdom are of 2002; the figures for Canada, France, Iceland, Norway and Switzerland are 2003 estimates. The rest are of 2003. Source: OECD Health Data 2005 and WHO.
Why Is Healthcare Spending Higher In U.S. Do We Use More Services or Just Spend More for The Services We Use?
In-Patient Acute Care Beds in Selected Countries 2005 Per 1,000 population 10 9 8 7 6 5 4 3 2 1 0 8.2 6.4 3.9 3.7 3.6 3.1 2.7 US France Australia UK Germany Japan OECD Av. Sources: OECD HEALTH DATA 2007
Hospital Discharge Rate in Selected Countries 2005 Discharges per 100,000 Pop 300 250 200 150 100 50 121 245 201 158 268 106 88 163 0 US UK Germany Australia France Japan Canada OECD Av. Source: OECD HEALTH DATA 2007
Average Length of Stay in Hospital in Selected Countries 2005 25.0 In-patient Acute Care Days In-Patient Acute Care Days 20.0 15.0 10.0 5.0 5.6 6.1 5.4 8.6 19.8 6.3 0.0 US Australia UK France Germany Japan OECD Av. Source: OECD HEALTH DATA 2005
Practicing Physicians in Selected Countries 2005 Physicians per 1,000 population 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.4 3.4 2.7 2.4 US Germany Australia UK France Canada Japan OECD Av. 3.4 2.3 2.0 3 Source: OECD HEALTH DATA 2007
Doctors Consultations Per Capita in Selected Countries 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2005 13.8 7 6.6 6.1 6.8 3.8 US Germany Japan France Australia OECD Av. Source: OECD HEALTH DATA 2007 Number of Consultations per Capita
What About The Availability of Expensive Medical Technology and Procedures?
45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 MRIs in Selected Countries 26.6 6.0 2005 (Units per million persons) 7.1 5.4 4.1 US Australia Germany UK France OECD Av. Sources: OECD HEALTH DATA 2007 9.8 40.1 Japan
Patients Using Renal Dialysis Treatment in Selected Countries 120 114.0 2005 Procedures Per 100,000 Population 100 80 60 40 20 42.0 61.0 77.0 35.0 37.0 44.0 0 US Australia Canada Germany UK Mexico NZ Patients With Dialysis Source: OECD HEALTH DATA 2007
Coronary Revascularization Procedures, in Selected Countries 2004 700 600 579 Coronary angioplasty Coronary bypass Per 1,000 population 500 400 300 200 388 236 169 196 229 249 100 0 US Germany Australia UK France Canada OECD Av. Source: OECD HEALTH DATA 2007
Liver Transplant Procedures in Selected Countries Procedure per 100,000 Population 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1.8 0.8 2002 1.2 0.9 1.2 0.9 US Australia Canada Germany UK Korea Liver Transplant Source: OECD HEALTH DATA 2005
Pharmaceutical Expenditures Per Capita- 2005 800 792 700 600 500 400 554 415 589 498 413 300 200 100 0 U.S France Australia Canada Germany OECD Av.
What About Income of Physicians?
10 9 8 General Practitioners (GPs) Remunerations Ratio To GDP Per Capita, 2005 Salaried Self-employed 7 6 5 4 3.8 4.4 3.8 3.7 3.3 3 2 2.1 1 0 US (2001) UK(2004) Germany Australia (2004) Canada (2004) Source: OECD HEALTH DATA 2007
10 Specialist Physicians Remunerations Ratio To GDP Per Capita, 2005 9 8 7 6.5 Salaried Self-employed 6 5 4 3 4.8 3.7 4.8 5.0 2.7 5.3 4.9 2 1 0 US (2001) UK(2004) Germany Australia (2004) Canada (2004) Source: OECD HEALTH DATA 2007
Is The US (Medicare) Growth Rate In Spending Sustainable? Or Are We Approaching a Meltdown In Our Healthcare System
Technology Is a Major Driver in Health Care Expenditure Growth.- --Is it Worth It? When costs and benefits are weighed together, technological advances have proved to be worth far more than their costs. David M. Cutler and Mark McClellan, Is Technological Change In Medicine Worth It? Health Affairs, September/ October 2001. Can be found at: http://www/laskerfoundation.org/reports/pdf/cutler_mcclellan_2001.pdf
But Is Every Technology That Has Some Medical Benefit Worth The Costs?
Alternative Levels of Healthcare Dollars Services And Improvements to Health Outcomes Maximum Impact Economic Optimum 0 Harmful Care #1 #2 #3 Inputs of Healthcare #4
In Other Countries They Control Spending By Limiting Use of High Cost Medical Procedures Closer To #2---Plus Pay Less for Those They Use We Can Start By Eliminating The Harmful Services in Category #4. But Also May Need To Move Toward #2 ---HOW?
Techniques The US (Medicare) Can Use To Limit Use of Expensive Medical Technology Market Mechanisms More Knowledge and Transparency of Value of Use of Individual Technologies Comparative Effectiveness Research More Aggressive Managing of Care Value Based Benefit Design Value Based Pricing More Aggressive Use of Patient Co-Payments Based on Value of Service Provided
Techniques for Limiting Use of Expensive Medical Technology Government Regulation Certificate-of-Need Restrictions Funds Obtained Privately Limits on How Technology Can Be Funded Must Use Government Funds Limits on Payments for Technology Services Require all Public and Private Technology Payments to Utilize Comparative Effectiveness Findings Using Cost Benefit Analysis ( Quality Adjusted Life Years )
Many Believe Medicare Must First Change The Way It Pays Providers Federal government can no longer just think about impact on Medicare beneficiaries and fiscal integrity of program Cannot assume that providers will continue to find other payers to balance its lower payments and therefore if Medicare needs to pay lower amounts it must: Restructure its payment system and move beyond feefor-service payments In addition Medicare Needs to: Review the amount it pays primary care physicians in relationship to specialists Assess whether hospital DRG payment system encourages the use of expensive and less valuable services Determine whether it could do more to encourage integrated care
So---What Will Happen?