OVERVIEW OF US HEALTH SERVICES

Introduction to Health Services Delivery HSML 202 FALL 11 August 29, 2011

Overview of US Health Services

Agenda

Health services are different

Major parties in health services Major issues in health services Sources and uses of health services funds History of health services: 3 eras

Recent history of health cost increases

Uninsured in US
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Health Services are Different

Five Key Factors

1. Pain, disability and death: important to patients and family

2. Health services are effective

3. Physicians and professionals manage care

4. Health insurance pays for care

5. Constant development of new technology and services

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Four Major Parties

In Health Services System 1. Patients 2. Providers
Hospitals, physicians, Rx drugs

3. Health insurers
Employment based insurance including Blue Cross and United HealthCare, Medicaid, Medicare

4. Source of revenues
Employers, Federal government, state governments, personal out-of-pocket
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Sources and Uses of Health Spending

Total Health Spending 2011 is $2.7 trillion Major sources

Private health insurance Medicare Medicaid Out-of-pocket

$850 b $556 b $428 b $321 b

31% 21% 16% 12%

Major uses
Hospitals Physicians & clinical Rx drugs Nursing home/home hlth Hlth insurance admin $831 b $538 b $244 b $213 b $178 b 31% 20% 10% 8% 5 6%

Key Figures in Health Spending

2011 Total health spending $2.7 trillion

Per capita health spending

Annual increase health spending 2015-20 Annual increase in US GDP 2015-20 Excess increase in health spending/year

$8,650
6.2% 4.7% 1.5%

Health expenditures as % of GDP 2000

Health expenditures as % GDP 2011 Health expenditures as % GDP 2020

13.8%
17.7%
6 19.8%

Major Issues in Health Services

Three Key Issues

1. Uninsured
50 m and increasing 18 m with health care reform in 2014

2. Costs increases
17.7% of economy and increasing Projected to reach 20% in 2020

3. Quality of care
Misuse/medical errors, overuse, underuse of care
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History of Health Services

Characteristics of Eras

Type of disease and medical conditions in population

Prevalent type of health and health services

New services and technology introduced

History of Health Services

Three Eras 19th century to 1900
Epidemics of infectious disease Development of public health

20th century to WWII/1945

Individual infections and trauma to individuals Initial effective medical care

Current era since 1945

Chronic diseases Biomedical science based technological care
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History of Health Services

19th Century to 1900

Type of disease: Epidemics of infectious disease

Cholera, typhoid, smallpox

Type of health and health services: Development of public health measures

Clean water, clean food, better housing and heating

New services and technology

Anesthesia, aseptic surgery, aseptic child delivery
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History of Health Services

20th Century to WW II/1945

Type of disease: Individual acute disease

Infections and trauma to individuals

Type of health services: Beginning of scientifically trained physicians

Flexner report 1910 prompting scientific based medical schools

New services and technology

Radiology, EKGs, earliest antibiotics/sulfa drugs
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History of Health Services

WW II to Present Type of disease: Chronic diseases
Cardiac/circulatory 40%, cancer 23% of deaths

Type of health services: Hospitals and ever increasing specialty services; growth of health insurance
Development of hospitals: Hill-Burton program in late 40s and 50s Expansion of employer health insurance post WW II and establishment of Medicare and Medicaid in 1966

New services and technology

Penicillin, antibiotics and other new drugs: blood plasma, radiology and imaging Continued new products and procedures from NIH funded and Rx drug firm research

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History of Health Care Cost Increases

Annual Increase in Health Insurance Premiums Paid by Employers

15% 12% 9% 6% 4.8% 3% 0% 1988 1993 1996 0.8% 1999 2000 2001 12.0% 10.5% 8.5% 8.3%

SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 1999, 2000; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996.

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History of Cost Increases Over 40 Years

Factors in Cost Increases

1. Price
2. Quantity 3. Intensity/new technology

Costs = Price x quantity x intensity

C=pxqxi
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History of Cost Increases Over 40 Years

Cost Increases in 1970s Led to Regulation
High costs for employers and government in 1960s and early 70s led to regulatory efforts in health care
Regulatory efforts to limit price/increase in price paid for care included state hospital rate setting Efforts to limit new technologies include health planning with State approval of new building and equipment thru State Certificate of Need approval and technology assessment Efforts to limit growth of use of new technologies included proposals to train a greater share of physicians in primary care rather than specialties

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History of Cost Increases over 40 Years

End of Regulation in 80s and Cost Increases Led to Growth of Managed Care in 90s Regulatory efforts were largely discarded in early to mid 1980s due to national policies favoring limited role for government

Costs increases for employers in late 80s and early 90s led to growth of managed care and managed competition
Growth of managed care plans: group/staff plans like KaiserPermanente, more loosely organized IPA/network plans Theory of managed competition: competition among tightly organized plans
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History of Cost Increases Over 40 Years

Failure of Managed Care in Late 90s Led to Cost Increases in 2000s
Managed care plans control health care costs by limiting increases in price, quantity, and intensity of care in early 90s
Providers learned to dislike and then push-back against managed care plans efforts to limit medical services in late 90s Patients dislike of plan efforts that limit care led to patient rights legislation at state and national levels in late 90s Employees complaints about accessibility of care and of plan efforts to limit care led employers in a robust economy to push plans to loosen efforts to limit costs of care Plans added more physicians to networks and reduce utilization review based efforts to limit care Increases in health care costs reached double digit levels in early 2000s
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Impact of the

Status of Economy on Health Care Costs

Robust economy/growing Gross Domestic Product (GDP)
Accommodates increase in health care costs
Provides funds to pay for increased costs of health insurance by employers, State governments

Recession/declining GDP
Spending for health care continues to increase rather than decrease with most sectors of economy the health care sector is largely recession proof Leads to increase in share of economy in health care because denominator/GDP declines
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High Costs and Cost Increases

Lead to Increase in the Number of Uninsured

High costs for payers: employers and state governments Small, low-wage firms cant afford to pay for health insurance at monthly costs of >$14,000/family and $5,000/individual
Minimum wage is $7.25/hour or $15,000 per year

States cant afford to cover low-income with Medicaid and other programs
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Lack of Health Insurance in the US 50 m Americans are Uninsured

50 million uninsured in 2009
This number will increase when numbers for 2010 are released by US Census this September

Mostly low-income employees and family members

Uninsured have
Reduced access to care Reduced health status
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Sources and Uses of Health Spending

Total Health Spending 2011 is $2.7 trillion Major sources

Private health insurance Medicare Medicaid Out-of-pocket

$850 b $556 b $428 b $321 b

31% 21% 16% 12%

Major uses
Hospitals Physicians & clinical Rx drugs Nursing home/home hlth Hlth insurance admin $831 b $538 b $244 b $213 b $178 b 31% 20% 10% 8% 21 6%