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Health Group Strategies Pty. Limited (INC. IN NSW) ABN: 16 003 974 507
AND
INSTITUTE OF HEALTH ECONOMICS AND TECHNOLOGY ASSESSMENT
ST CHRISTOPHE EN BRIONNAIS, SAONE ET LOIRE 71800, FRANCE
PO BOX 4232 BALGOWLAH HEIGHTS NSW 2093 AUSTRALIA PHONE 61 2 9949 6395 Email: [email protected]
VERSION: 27 July 2015 New PHI and Medicare payment reform can bend the cost curve: sustained muddle-headedness will not
Paul Gross PhD Director, Health Group Strategies Pty Ltd
Australia and Greater China
Invited keynote address, 14th Annual Health Insurance Summit, Swissotel Sydney, 28 July 2015
2
TABLE OF CONTENTS
1. INTRODUCTION .................................................................................................. 3 1.1 Darts and political muddle-headedness .............................................................. 3 1.2 Unresolved issues outside public hospitals ......................................................... 4 1.3 Objectives of this presentation ............................................................................ 6
2. WHAT DO POLITICIANS NEED TO KNOW ABOUT HEALTHCARE REFORM? ..................................................................................................................... 7
2.1 Engaging the medical profession on payment reform ...................................... 7 2.2 Efficiency losses in healthcare are not trivial ..................................................... 9 2.3 Very expensive and effective new medical technologies are coming: who pays?.................................................................................................................................. 14 2.4 Summary ........................................................................................................... 17
3. NEW PRIVATE HEALTH INSURANCE FOR AUSTRALIA IN AN ERA OF CONSUMER EMPOWERMENT: SIX MODELS ..................................................... 18
3.1. PHI that reduces current financial barriers to needed care ............................... 19 3.2. PHI design that bends the cost curve to half the current growth rate ............... 21 3.3 PHI for innovations with payment based on conventional value and insurance value ......................................................................................................................... 25 3.4 PHI that enhances transparency in the pricing and quality of healthcare ......... 27 3.5 PHI that embeds incentives for lifestyle changes ............................................ 30 3.6 PHI that creates incentives for health savings accounts and new types of health insurance .................................................................................................................. 32
4. CONCLUSION ..................................................................................................... 35
3
1. INTRODUCTION
1.1 Darts and political muddle-‐headedness
Looking for any semblance of logic in health policies announced by the last
five governments is like walking into a room where many government advisers
are throwing darts at four blank walls. You ask them what is their target, and
they chant in unison: it’s where my dart lands.
The GP copayment debacle and the subsequent announcement by the new
health minister of two inquiries into primary care and low-value items on the
Medicare Benefits Schedule were followed by the thought-bubbles emerging
before and after the COAG retreat last week. Dart-throwing is fashionable.
Our healthcare system is wilting visibly from what a prolonged manifestation
of what Alfred North Whitehead called our capacity for sustained muddle-
headedness.
“Wilting visibly” is a charitable assessment. The Productivity Commission, in
its April 2015 report, concluded that the Australian healthcare system
“produces good outcomes by international standards” [BUT] parts are not
performing as efficiently as they could be [AND] this manifests in wasteful
spending, reduced access to health care and substandard quality and safety
outcomes”. 1
1 Productivity Commission 2015, Efficiency in Health, Commission Research Paper, Canberra. Executive Summary.
4
Medibank Private’s CEO concluded one month earlier that “… despite its
good reputation, our health system has too many discontinuities”.2
Last week at the COAG “Retreat”, the state premiers sought new revenue to
fund their public hospitals, disagreeing visibly as to whether a higher Medicare
levy of 4% or an increase in the GST to 15% was the preferred route.3 The
Retreat concluded with a vague call for efficiency gains via Activity-Based
Funding using “National Efficient Cost”, 4 a concept implemented by the
Independent Hospital Pricing Authority, which, until the Retreat communiqué,
was threatened with extinction by the federal government’s plan to withdraw
Activity Based Funding in three years time.
1.2 Unresolved issues outside public hospitals
Public hospital funding under federalism is not the only cause of political
dissent. FIGURE 1 below summarises a range of recent opinions on
“solutions” to the health system funding gaps as well as some opinions on the
role of private health insurance (PHI).
Appalled by the simplistic notions advanced before and after the “Retreat”, I
superimpose five questions in FIGURE 1, hoping that some politicians might
2 G Savvides. IMPROVING AUSTRALIA’S HEALTHCARE SYSTEM PERFORMANCE. Presentation at CEDA, 19 March 2015 3 A systematic attack on the efficiency losses identified ad nauseam in many reports since 2009 has never eventuated in COAG, leaving DVA and some private health insurers to negotiate with hospitals and doctors on how best to remove particular inefficiencies (e.g., adverse event rates in hospitals, potentially preventable hospital admissions and readmissions, and gaps in the coordination of care) 4 One recent opinion that Activity=Based Funding had caused a bending of the cost curve seems fanciful. The ABF sets an efficient price for public hospitals, particularly prices charged for inpatient stays. The growth in expenditures on sub-acute care not covered by the ABF, and the increase in charges and admissions in private hospitals suggest that the ABF has not bent the total costs of the healthcare system. The ABF might affect a unit price; it has no influence on the volumes of admissions.
5
one day become aware that there is a large health system outside public
hospitals that needs immediate attention.
FIGURE 1: Current opinions on healthcare funding and the government role
Those five questions lead me to assert that in 2015,
• two of the three major financing sources (Medicare and private health
insurance) have flaws in their subsidies, financing, provider payments
and data collections,
• these flaws underpin many of the weaknesses noted in the PC report
and the Prime Minister’s new Green Paper, and
• the preoccupation with the overlapping roles of two levels of
government ignores these flaws, the critical role of private health
Slide 4
1. Is this a health policy debate? NO 2. Is this a health financing debate? NO 3. Is today’s Medicare relevant ? NO 4. Is today’s PHI relevant? NO 5. Any consensus on priorities? NO
“It is clear most of us are capable of making a modest contribution to our own health care”3
PHI should not undermine the role
of the Commonwealth as
major insurer
“Bush healthcare divide exposed”7
“Primary buys private health
insurer for $18m”11
“Premier urges Medicare levy jump
over GST rise”6
“Universality of free services is not an affordable way to
deliver equity”4
“The funds for older people‘s home care
packages are given to aged care service providers rather than the older person.. This will change from Feb 2017”12
“Yes, there’s more we can do, but efficiencies
alone cannot be the answer.”9
Abolish the Extended Medicare Safety Net. Remove 30% PHI rebate. Reduce subsidies for out of patent PBS meds10
“GST: HST would be a healthy way to sell a tax increase”5
“Dual funding of healthcare needs
examination”2
“Medibank digs in on Calvary “mistakes”11
“Time to implement national mental health
reform”8
“Government should spend
less, not increase taxes”1
6
insurance is sidelined in the five alternative models of government
roles mentioned in the Green Paper, with the sixth model of a new form
of social health insurance, similar to the NHHRC Medicare Select
option5 dumped in the too-hard basket in a few paragraphs.6
1.3 Objectives of this presentation My presentation has three limited objectives. First, in a shortened checklist of
issues that politicians should understand about reform priorities, I discuss why
potential efficiency losses must be addressed when we are about to see a
diffusion of new medical technologies that seem likely to increase Medicare
and PHI outlays.
Second, I present some arguments on the potential role of six new types of
PHI7 that
• reduce the cost barriers to needed care,
• bend the cost curve via information technology and GP connectivity,
• reduce both health outcome risk and health spending risk by creating
access to innovative medical technology,
• lead to transparent prices and quality of care in both Medicare and PHI,
• create new incentives for lifestyle change, and
• create new savings for healthcare in retirement.
5 I remain unconvinced that this option will not emerge in Australia if politicians know that the Dutch version of this model is not travelling well in the Netherlands. 6 Prime Minister and Cabinet. Reform of the Federation Discussion Paper 2015 (Chapter 4). 7 The six models are not necessarily mutually exclusive. I do not see these six outcomes emanating quickly in a government-run social health insurance scheme such as Medicare
7
2. WHAT DO POLITICIANS NEED TO KNOW ABOUT HEALTHCARE REFORM?
2.1 Engaging the medical profession on payment reform
FIGURE 2 below summarises my basic premise that
• nothing much will happen to the cost spiral in healthcare until we have
provider payment reform that uses incentives to modify the sites,
prices, volumes, efficiency and quality of healthcare; and
• the Minister’s two inquiries will not generate provider payment reform
unless both inquiries are instructed to present options that improve the
transparency of the prices and charges of doctors, hospitals, drugs and
medical devices.
8
FIGURE 2: the challenges of healthcare reform in 2015
We need to re-engage the medical profession in a reform agenda that
extends far beyond the Minister’s new inquiries on how doctors should be
paid, or how some items can be trimmed from the MBS. Neither inquiry has
the tools or the collaboration to bend the cost curve. They will not accelerate
the types of innovation on healthcare that can bring about some of the
efficiency gains identified below.
Slide 5
Reality tests for health reform 2015
CHALLENGE
IGR + PC tell us that
healthcare delivery reform
is needed
REALITY 1
Healthcare providers in
Australia are mostly negatively
resilient
REALITY 3
We have lapsed back to the
status quo = two more inquiries
and a COAG talkfest
REALITY 2
Recent government reviews have led to policy
fatigue
OUTCOMES
1. IGR predictions of unsustainability will be self-fulfilling if we rely on today’s healthcare models and financing AND if there is no payment reform
2. The medical profession will still lack any incentive to lead payment reform or patient empowerment via transparency of prices and quality
9
Politicians need to know the extent of inefficiencies in our healthcare system
needing actions, rather than be assailed with aspirational generalities about
“exchanging ideas”.8
2.2 Efficiency losses in healthcare are not trivial I estimate that national health expenditures will be about $166 billion in
2015/16 and that at least 12% of that total represents potentially reducible
inefficiencies, some of which are summarised in FIGURE 3 below.
FIGURE 3: Inefficiencies not touched by Medicare or private health insurance reform:
Gross 2015
8 See for example: J Westacott. Policy debate will benefit from exchange of ideas. The Weekend Australian 25-26 July 2015. 22.
SAC of 40% of the elderly occupying
acute beds 33%
Reduced PPAs of chronically ill,non-‐aged
1% Reduction in adverse events by
50% 13%
Reductions in HAIs by 80%
8%
Reduced burden of govt regulation
by 50% 24%
Increase EOL care in hospice/
palliative care 1%
Reduced defensive
medicine via tort reform 5%
Reductions in Medicare/PHI
fraud 2%
Reduction in PPAs 13%
Potential ef+iciency gains 2015: share
10
Apart from DVA’s commendable initiatives in the past eight years to engage
providers of care, there is seemingly no urgency in government of PHI in
Australia to initiate payment reform to reduce some of these inefficiencies. In
its recent report titled “Efficiency in health”, 9 the Productivity Commission
summarised its four payment models for healthcare providers shown in
FIGURE 4 below.
FIGURE 4: Productivity Commission view of payment reform 2015
Apart from the unusually dismal tone of the “disadvantages” column, this
report hardly represents either contemporary real world best practice payment
reform that could reduce many of the inefficiencies listed in FIGURE 3.
9 Productivity Commission. Efficiency in health. Melbourne, Productivity Commission, April 2015, 116 pages
11
The PC analysis mentions bundled payments just three times, with Box 2.11
noting that “… calculating how much should be paid for each patient is
complex, as is monitoring provider behaviour”.
That decidedly pessimistic view is at odds with a recent assessment of a top-
down attempt by the UK government to squeeze efficiency gains by reducing
low value surgical procedures, and the conclusions of an independent
evaluator shown in the right hand column of FIGURE 5 below.
FIGURE 5: UK NHS conclusions about top-down mandates to hospitals and doctors
There was a decline in three surgical procedures, the top-down directive did
not work smoothly even with clinical guidelines in place, and the conclusion in
the last column tells me that bundled payments for some types of care (NOT
Slide 13
Removing low-value procedures from MBS: UKNHS experience 2011-2014
1. Decline in 3 Pxs - myringotomy 11% - cataracts 5% - hysterectomy 11% 2. Lack of consensus on targeted Pxs
for disinvestment (even with central NHS imperative)
2. NICE recommendations mostly focus on specific technologies, not well publicised, remain discretionary
4. No pattern of inequitable access across commissioning orgs
5. April 2013: 151 orgs replaced by 211 smaller “clinical commissioning groups.”
Major Findings 2011-2014 Lessons
Top down NHS imperative + local
commissioning not as effective as
US combinations of bundled payments
+ Choosing Wisely linking
doctors to patients
12
all care) and informed doctors and patients might be a starting point for
minimal efficiency gains in Australia.
A more telling rebuttal of the PC dismal views on bundled payment is the US
CALPERS initiative. FIGURE 6 below summarises the impact when
CALPERS set an efficient bundled price (aka reference-based benefits) for
orthopaedic and cataract procedures.
FIGURE 6: PHI coverage using reference pricing of hospitals
This reference-based benefits price led to competition between all hospitals, a
34% drop in hospital charges for hip and joint replacement procedures and a
10% decline in total benefits paid for cataract surgery. Volumes of patients
increased in the lower cost hospitals.
Slide 9
PHI transparency using reference-based benefits and prices for elective surgical Pxs
Pre 2009 RBB Hips and knee replacement Px Prices US$20,000-$120,000
RBB limit US$30,000
CALPERS information to all enrollees on hospitals
charging above $30K
PLUS Info on acceptable quality and access conditions
Outcome on hospitals after 1 year
Share of lower cost hospitals rose 21% Higher priced hospitals reduced their prices 34%
Pre 2009 Cataract Px Hospital price: US$1,218-14,099 ASC: US$1,009-8,658
2012 RBB for all ASCs
Set same price in hospitals and ASCs at ASC price:US$2,000
Copays Consumers selecting ASC: no copay Consumers selecting hospital-based surgery: Copay=difference between ASC and hospital charge
Outcome on cataract prices
after 1 year Price paid by CALPERS declined by 10%
13
The PC report ignores other payment models that tie fee-for-service to quality,
safety and efficiency, to create a value-based payment for doctors. For
example, FIGURE 7 below summarises the January 2015 reforms of the US
Government that also includes the two “next steps” that Australia has not yet
taken. 10
FIGURE 7: Fee for service can be tied to other measures
By contrast the PC report, perhaps wary of the PMC Green Paper overview of
five models of government cooperation, suggests that payment reform is too
hard and must await agreements on the responsibilities of government and
private health insurance, FIGURE 8 summarises the PC rationale for yet
another review.
10 Lewis G. Sandy. Health Care Transformation and the Learning Health System: Where Are We, and What’s Next? ISPOR Plenary Session May 18, 2015
14
FIGURE 8: PC answer to efficiency losses: new payment models are “challenging”
Such inaction is indefensible in 2015. My plea to the private health insurance
industry is to take the leadership on payment reform and transparency and to
think about new types of insurance that create value for consumers.
2.3 Very expensive and effective new medical technologies are coming: who pays? Those efficiency reforms must be accelerated because the healthcare system
is about to get far more expensive because of the influx of innovative
treatments.
Slide 15
PC “solution” April 2015: another inquiry
! “Implementing new payment models on a broader scale (including across all primary care, or over both primary and hospital care) would be more challenging, and would likely require larger-scale changes to the funding responsibilities of each level of government and private health insurers.
! SOLUTION: A comprehensive review of the Australian health care system could assess the potential benefits and costs of alternative payment models, draw lessons from past trials and international experience, and consult with relevant stakeholders.”
15
In 2015 a report by ECRI for the US government11 summarised its horizon
scan of new medical technologies, estimating their gross annual costs to US
payers under specific assumptions of disease prevalence, current level of
under-treatment, take-up rate, level of replacement of existing treatments and
cost per treated patient. 12 They are mostly drugs but there are some medical
devices.
In the next two figures, the large estimates of annual payments would need to
be scaled down to reflect Australian estimates of these variables. My intent
here is to emphasise that the listed technologies cover many disorders, the
unit cost per patient often exceeds US$50,000, and some of the gross
outlays13 are likely to be close to $1 billion in Australia (e.g., the promising
new HCV treatment reviewed at the July 2015 PBAC meeting).14
FIGURE 9 summarises the ECRI estimates for 36 new treatments with an
estimated total annual cost of up to US$ 1 billion.
11 ECRI. Horizon Scanning – Identifying And Estimating Future Impact Of Emerging Innovations On U.S. Healthcare. AHRQ Healthcare Horizon Scanning System. ISPOR, Philadelphia May 20, 2015 12 I will not have time to address questions that healthcare technology assessment agencies, hospital pricing authorities and payers should now be asking, such as
• Who will these treatments affect? • Can these new treatments be grafted into existing government and private healthcare, or do
some of them require payment reforms that make them accessible in lower cost sites than hospitals?
• How will we afford them all if they all benefit someone, and how should we measure their value and pay for them?
• What new types of social insurance (via Medicare) or private health insurance are needed to allow access to some of the higher cost technologies?
13 The ECRI estimates are gross outlays with no attempt to estimate savings in the healthcare system and the resultant net incremental cost. 14 Some of the cost implications are discussed in the House of Representative Standing Committee of Health hearings on Hepatitis C on 22 January 2015 (pages 11-23) and 20 March 2015 (pages 5-6).
16
FIGURE 9: Estimated US costs for new treatments costing up to US$ 1 billion: ECRI 2015
FIGURE 10 lists the ECRI estimates for 11 treatments likely to cost over
US$1 billion per year.
FIGURE 10: Estimated US costs for new treatments costing over US$ 1 billion: ECRI 2015
17
Assuming that most of these 47 new treatments become available here,
Australian patients with cancer, heart disease, diabetes, depression, obesity,
arthritis, cystic fibrosis, stroke and Alzheimer’s disease will seek and obtain
access to them. For many patients with no geographical access (e.g., remote
or socially disadvantaged patients with HCV), the existence of a new
treatment will be of no use if specialist clinics or outreach services are not in
place. For others, the level of government subsidy via the PBS or PHI rebate
will determine their financial access.
2.4 Summary
The role of PHI in financing innovative care is beyond the scope of this paper,
but I briefly summarise one possible model in the next section of this paper.
New PHI is not the only reform that we need. FIGURE 12 below identifies
three interventions needed to sustain pay-as-you-go financing of healthcare in
the face of technological diffusion.
18
FIGURE 12: Sustaining PAYG financing of healthcare
3. NEW PRIVATE HEALTH INSURANCE FOR AUSTRALIA IN AN ERA OF CONSUMER EMPOWERMENT: SIX MODELS
We have just completed an international review of over 20 innovations in
health insurance and health savings accounts. Compared with Australia, the
rest of the world is taking action to increase access, improve efficiency and
quality, and increase patient participation in both prevention and decisions on
the use of healthcare.
My assertion in this brief paper is that the PHI rebate would be a more
defensible government subsidy if the private health insurance industry
developed new products that
Slide 14
PAYG healthcare financing is illusionary without three changes before 2020
Medicare PHI
PAYG
Current revenues pay
for current spending
Population ageing & more chronic conditions
Workforce/tax-payer ratio falling
More medical technology
Higher per capita spending unless the sites of care change = bending the cost curve Future revenue drops unless taxes increased, new PHI cover or pre-funded healthcare financing = new PHI + HSA Prices rising faster than PHI Volumes rising without HTCA, CPGs = transparent prices/quality
Current revenue is less than current spending, without new financing incentives
2015 2020
19
• reduced the current financial barriers to needed care; • bent the cost curve via information technology and GP connectivity; • reduced the variance in both outcome risk and spending risk by
creating access to innovative technology; • lead to transparent prices and quality of care; • created new incentives for lifestyle changes that reduce future
expenditures on care; and • created new health savings accounts that can fund access to high-cost
innovative care and long-term care in retirement.
To different degrees all six models can achieve transparently better care
outcomes, patient experience, safety and quality, and as a result they will lead
to more efficient use of scarce public and private resources.
3.1. PHI that reduces current financial barriers to needed care
ABS produced a report that tells us that Australians are dodging different
types of care because of financial barriers. FIGURE 12 below summarises the
differences in access that occur with and without private health insurance.15
15 Source: Anna Greenwood. Consumer Needs Analysis: Where should we invest in the health system? PHI Summit, Sydney, July 2012
20
FIGURE 13: Differences in use of care by the insured and uninsured
The differentials are starkest in dental, medicines and specialist care. What
types of new insurance cover would reduce these gaps? Health insurers do
not yet have the mandate or data needed to design lower cost coverage to fill
some of these gaps because they have restricted access to the MBS and
PBS data that are needed to design coverage for prevention and efficient care
management, and without such data they cannot begin to think about how to
engage providers and patients in a discussion of insurance for alternative
sites of care that are cheaper and accessible.
Two models for Australian health insurers to fill some gaps in access listed in
FIGURE 12 might be the US Medicaid program and the US Veterans Health
system. Both rely on beneficiary access to both public and private providers of
Slide 18
1. PHI that reduces these cost barriers
21
care, agreed care protocols, integrated case management and informed
patients, with transparency of prices and quality of care.
3.2. PHI design that bends the cost curve to half the current growth rate
PHI premiums rising at 6.2%16 this year are unsustainable, so we must
assume that the PHI industry would want to bend the cost curve. They see
States governments charging privately insured patients admitted through a
public hospital ER department. Is there any rationale for the PHI rebate when
such patients end up in a public hospital? The State governments facing their
own budget shortfalls will surely entertain the possibility of purchasing many
services, not just inpatient care for high-cost patients, via competitive tenders
with the private health sector.17
FIGURE 14 below is my summary of some of the levers that need to be used
to bend the cost curve.
16 The actual percentage would be much higher if we took into account bracket creep and other factors that affect taxable income. 17 I illustrate below one version of this model for patients with metastatic melanoma.
22
FIGURE 14: Tools needed to bend the healthcare cost curve: PHI role
The four green boxes suggest four levers that need to be in place. The PHI
industry needs to think about the political challenges ahead to get their hands
on some of these levers.
• These levers assume politicians are willing to look for insights beyond
a three-year term of office and the two current inquiries. We do not
need a third inquiry into the private health sector’s potential role in
bending the cost curve.
• We need the PHI industry on the front foot laying out its vision for
affordable innovation via new products such as insurance for new
social care in the home and community, technology-driven care and
wellness incentives.
Slide 19
PHI pays for quality and
safety gains, leading to
higher efficiencies
PHI benefits for
coordinated care
PHI benefits for those with
long-term conditions
PHI benefits for
alternatives to an acute
hospital admission
Payment currency
reform
Change the skill mix
1. Restructured service linkages 2. Integrated care 3. Investment in social care 4. Use of assistive technologies
(telehealth, telecare) 5. Incentives for wellness,self-care
2. PHI design that bends the cost curve to half the current growth rate
23
Those innovative products would include incentives for GPs to use e-health
technology that had a demonstrable effect on hospital outlays.
Many innovations in PHI depend on doctors having access to data not now
accessible. Because of the current PHI regulatory regime and the reinsurance
pool incentives, the number of Australian health insurers investing heavily in
disease management programs is withering. Why? The reinsurance pool
penalises the DMP innovator and the lack of access to timely MBS and PBS
data prevents actuarial modelling of alternative care and payment models.
Unlike the DVA linkages with participating GPs, health insurers have no
formal linkages that would enable a GP to see that his/her patient had recent
admissions through emergency departments showing adverse drug reactions
or a diagnosis of a fall at home that might have been prevented by a GP
phone call to a pharmacist or a homecare nurse.
Notwithstanding my concern that hackers can seemingly attack most data
sources if we are not vigilant, GP and specialist access to such data could be
enhanced by a national data exchange of health insurance claims data, MBS
data and PBS data, accessible only by treating doctors with the approval of
their patients. Those arguing that such an exchange, operated as an
independent quasi-public entity, would breach privacy and be at risk to
security breaches would need to have these arguments juxtaposed against
recent evidence of the impact of healthcare data exchanges and information
feedback to doctors.
24
• One retrospective study18 of a health information exchange found that
if participating doctors accessed the exchange within 30 days of a
hospital discharge, there was a 57% reduction in same-cause
readmissions of their patients to hospital.
• A review19 of the Geisinger ProvenCare system found that over the
period 2006-2013, GPs with electronic health records and analyses of
claims data, as well as automated evidence-based guidelines, were
able to improve care of the chronically ill. The Geisinger health
insurance plan saw the mean total cost per insured life per month fall
by 8%, a stark contrast with the average 6.2% increase per year for
Australian health insurers lacking any access to linked data.
The rapid evolution of m-health technology has created many partnerships
that Australian insurers are no doubt considering, including partnerships of
drug and device manufacturers and m-empowered patients to generate data
to demonstrate the conventional value and the insurance value of new
medical technologies mentioned earlier.
The PHI industry has no visible presence in the prevention of adverse drug
events or improved medication adherence by insurees with complex chronic
conditions. Without such a presence, it continues to pay hospital benefits for
readmissions of patients with ADEs and poor medication adherence.
18 JR Vest, LM Kern, MD Silver, R Kaushal. The potential for community-based health information exchange systems to reduce hospital admissions. J. Am Med Inform Assoc 2015, 22: 435-442. The retrospective claims data were from the period 2009-2010, and the HIE was a web-based portal. 19 Source: Coleen Kivlahan. Clinical redesign. National Bundled Payment Summit 2014, June 18, 2014
25
A new industry vision for a new role in complex care management might
include the type of PHI coverage depicted in FIGURE 14 below.
FIGURE 14: New PHI for innovation in chronic care management
3.3 PHI for innovations with payment based on conventional value and insurance value
Most health insurance actuaries can tell you about how to measure the
variance in health expenditures by insured lives at different ages. Few if any
are asked to design policies that assess what types of care design might
reduce the variance in the risk of poor health outcomes and reduction in the
variance of total PHI and Medicare payments.
Slide 22
PHI for m-Health support for chronic conditions and polypharmacy: going beyond a pill
CURRENT PHI ROLE
Cannot measure CC
Have no Rx data
Have no data Pay for consequences
Health system problem Multiple
comorbidity Polypharmacy
Medication adherence
Adverse drug reactions
Hospital ER and admits
Gaps
m-Health solution
NEW PHI OPTION
Tracking Rx use Managing lifestyles Monitoring changes in patient condition
Understanding patient and carer needs Understanding patient preferences Information and education Responding to emergency needs (e.g. COPD)
New benefit packages with incentives to use m-Health solutions for CIs (e.g.Exco InTouch, Tictrac+Google, Track Your Health, PatientsLikeMe)
26
Any gains in efficiency in Australian healthcare will, at some time, require
actuaries and health economists to join with clinicians and technology
innovators to shift care to lower cost, more patient-friendly sites. Cancer
therapy is a case in point, and metastatic melanoma a current bellwether for
reform.
FIGURE 15 below summarises my case for an innovation in payment reform,
the measurement of value, shifts in the site of care, support of clinicians and
data collections to enable value-based PHI design or more astute contracting
by State governments for innovative cancer care.
27
FIGURE 15: PHI that might create innovation in payment and treatment: metastatic melanoma
3.4 PHI that enhances transparency in the pricing and quality of healthcare
The recent stoush of one health insurer in its contracting with one private
hospital has pushed the issue of transparency of prices and quality into the
public domain.
• Unlike the DVA in its contracting for better care of veterans over many
years, the PHI industry has not yet defined a rationale or a policy on
transparency in the prices, quality and efficiency of the healthcare
reimbursed by PHI.
Slide 23
PHI leading to innovative treatment of metastatic melanoma
Reform topic
Regulatory barriers
Gap causing
sub-optimal treatment
New care types that
meet a need Data sets
Prospective sites for
cost-effective
care models
Type of decision
support for doctors and
patients Payment reforms
Access to new drug therapy
PBS approval mandates restrict drug treatment sequences in metastatic melanoma1
PBS require-ments for formal long-term RCTs for treatment sequences
Community clinics using care process that includes team-based care, m- health apps, improved decision support and new data collections on new therapeutic pathways2
Linkage of PBS, MBS, hospital and community nursing data sets Big data analytics and predictive models
Competitive bidding by teams of expert oncologists and clinics
1. New m-health apps 2. EHR 3. Patient registries
New MBS item numbers Incentives for care using mobile technology3 New PHI for mobile technology as part of defined pathways4
28
• The PHI industry is hamstrung in any such attempt by competition law,
privacy laws and lack of access to data. DVA does not have the last
constraint.
• The public’s ability to see the value case for PHI is constrained by the
factors summarised in FIGURE 16 below.
FIGURE 16: Hiding the value case for PHI rebates
The PHI industry will continue to be the bad guy for as long as the medical
profession is not full engaged in the search for affordable health insurance
that supports innovations in care.
Slide 30
4.PHI value case without transparency
PHI coverage Private hospital stay Specialist 25% gap Copayments
Gaps in transparency of prices and quality of care
Price variations Adverse events unreported Price variations No gap contracts Highly visible Destroy value case for PHI
Outcome Patients have no tools to measure value for money of PHI
29
The medical profession has a healthy fear that any transparency means
scrutiny of charges, numbers of services, clinical quality and patient safety.
What arguments on transparency do politicians and doctors need to hear?
First, all taxpayers and PHI members have the right to full information on
differences in charges, quality and efficiency. The CALPERS reference-based
payment reform mentioned earlier20 shows what happens to the charges for
hospital procedures if the wide variances in hospital charges are visible to
patients and their referring doctors.
Second, to produce reference-based benefits in Australia and to allow
insurers to feed data back to clinicians, hospitals and patients, we need the
tools summarised in the right-hand column of FIGURE 17 below.
20 Source: JC Robinson, T Brown, C Whaley. Reference-based benefit design changes consumers’ choice and employers’ payments for ambulatory surgery. Health Affairs 2015; 34(3): 415-422
30
FIGURE 17: Tools needed to support reference-based benefits in PHI in Australia
3.5 PHI that embeds incentives for lifestyle changes There is an ongoing debate about the role of personal financial incentives in
changing unhealthy behaviour. I cannot summarise the large literature in this
brief paper, so I summarise new evidence that point the way to the types of
PHI product that have either an evidence base or are justified by commercial
endorsements of their impact.
A 2012 study21 of the impact of PFI on weight loss and healthy behaviours
concluded that “ available evidence indicates that financial incentives help
promote short-term change, but there is a dearth of evidence on longer-term 21 NM Ries. Financial incentives for weight loss and healthy behaviours. Health Policy 2012; 7 (3): 23-28.
Slide 26
PHI feedback requires linked data PHI data in many silos What is needed to achieve
data linkage equal to DVA? REFORMS
1. Allow PHI funds to have access to all other non-DVA data silos
2. Recognise patient right of access to data on prices/quality
3. Allow designated intermediaries to collect/distribute relevant data
4. Allow designated providers to have access to all data deemed essential to patient outcomes
5. Bring States/others to the table to enforce data security
6. National roadmap to achieve inter-operable health IT
7. National roadmap for value-based payments and innovation
PHI hospital + gap claims data
MBS/PBS data
LTC data
State government
data
Copayment data
What reforms can create data linkages equal to DVA data?
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programs and outcomes. Targeted incentives for specific risk groups have
shown more success. With creative design, targeted use and evaluation,
financial incentives for weight loss and healthy behaviour [my note:
particularly smoking cessation] may be a useful addition to the health policy
toolkit”.
A new meta-analysis22 of the evidence on PFIs reaches a similar conclusion
but also puts to rest one shibboleth that PFI’s might widen disparities in
access viz.,
“Personal financial incentives can change habitual health-related behaviors and help reduce inequalities.”
Other studies presented at the June 2015 Academy Health Annual Research
Meeting offer strong evidence (based on RCT’s) on the impact of PFI’s on
physical activity and weightloss. 23
The recent take-up of PFI’s suggests that this new evidence has been
accepted by many employers and insurers. First, across large US employers
a 2014 survey revealed that
• 12% of respondents believe that the best intervention to control
healthcare costs was wellness incentives to improve employee health,
22 E Mantzari, F Vogt, I Shemilt et al., Personal financial incentives for changing habitual health-related behaviors: a systematic review and meta-analysis. Preventive Medicine 2015; 75: 75-85 23 M Patel et al., Workplace wellness incentives for physical activity: a randomized controlled trial. Minneapolis, AcademyHealth ARM, 16 June 2015 ; and M Patel et al., Workplace wellness incentives for weight loss: a randomized controlled trial. Minneapolis, AcademyHealth ARM, 14 June 2015.
32
21% believe it is the second best tool and 25% believe it is the third
best tool.
• The combined figure of nearly 60% exceeds every other intervention,
but the intervention that had the highest ranking as the best
intervention (36% of respondents) was a consumer-directed health
plan with or without a linked health savings account.
As a model for Australia, and noting my earlier comment on the inroads of m-
health technology, I note that on 8 April 2015, US life insurance insurer John
Hancock announced a partnership with a global wellness company (Vitality) to
embed discounts in life insurance products for customers who are willing to
wear a Fitbit and share information about workouts, physical exams, and even
their mood. 24
3.6 PHI that creates incentives for health savings accounts and new types of health insurance
That last statistic leads me to my final suggestion that traditional PHI is not a
substitute for products that change the incentives faced by consumers and
providers in their choices of care demanded and supplied. The notion that
Australia should have a closer look at the healthcare financing mechanisms of
Singapore is not new.25
The theoretical benefits of consumer-directed health plans with savings
accounts are sketched in FIGURE 18 below.
24 Source: Mary K. Caffrey. Tying Financial Incentives to Healthy Behavior Isn’t So Easy. AJMC April 9, 2015 [downloaded 10 April 2015 from: htttp://www.ajmc.com/focus-of-the-week/0415/Tying-Financial-Incentives-to-Healthy-Behavior-Isnt-So Easy 25 PF Gross. Singapore’s health system: a model for Australia. Med J Aust 2014; 200 (9) : 512-513
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FIGURE 18: Incentives embedded in health savings accounts and associated PHI
Until this year, evidence of the impact of health savings accounts linked to
high front-end deductible insurance offered inconsistent conclusions about the
outcomes noted in the last two columns above, particularly the impact of
HSA’s on the use rates and cost of inpatient, outpatient and ancillary care.
There is more certainty in a new study released last month.26 Its findings are
worthy of review by politicians and the PHI industry. I summarise its key
findings in FIGURE 19 below.
26 AM Haviland, MD Eisenberg, A Mchrotra et al. Do “consumer respected health plans bend the cost curve over time? NBER Working Paper 21031, March 2015.
Slide 37
6. PHI incentives: health savings account
Type of HSA and tax
protection
Government contribution
Strong incentive to save
Size of the deductible
Available for use in retirement
Transparency of prices/
quality
Price elasticity of demand
What happens to use of
preventive care, necessary
care or medicines?
Enrollee’s exposure to
increased cost sharing
Price shopping Switch to higher
value care Reduced low Q care
Strong incentives for VB care
What happens to HSA
balances after 3-4 years?
Funds can be withdrawn at any
time for other uses, with tax penalties
CDHP Design Features Incentives Outcomes Policy issue
Individual data
Income level
Education level
Age
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FIGURE 19: New estimates of the impact of CDHPs and HSAs
Three conclusions of this study of a very large number of health plans and
employers and 1 million insured lives are relevant here as we think about how
to reform superannuation, tax breaks, access to aged pensions and consumer
involvement in healthcare.
• The estimate of a 5% reduction in total healthcare expenditures each
year for 3 years should be juxtaposed against the 6.2% increase in PHI
premiums in Australia last year.
• Most of the savings at three years were in medicines27 and outpatient
specialist care, but the bulk of all savings is in inpatient care.
27 I have not yet studied data from this study that would tell me whether the reductions in drug expenditures were due to reduced volumes (a concern) or reduced prices.
Slide 28
New evidence: impact of CDHP/HSA
Measure of impact
Years of
observ-ation
Study Comparison Impact Weakness
Healthcare spending over multiple years by large numbers of enrollees
3 Haviland et al, 2015
54 large firms, 1 million enrollees
2003-2007
5% reduction in total HC spending in each of three years At 3 years, most reduction in pharma and OP care Impact greatest when CDHP paired with HSA
Strong statistical design (boosted regression) Large sample
35
• The largest savings were in combined consumer-directed plans linked
to savings accounts.
4. CONCLUSION I offer three bits of gratuitous advice to the new health minister. First, you
were right to suggest that your two new inquiries were not intended to
produce cost savings. They cannot do so.
n GPs will not embrace alternatives to fee for service without add-on
incentives, given that the innovative new RACGP vision is basically
adding new performance and payments to the current MBS fee-for-
service outlays.
n MBS savings by removing “low value items” are unlikely to exceed 2%
of government spending, even if different specialties agree on what
constitutes ”low-value” Dx, Px and visits. There are more effective
ways to persuade doctors to use high value interventions, including the
bundled payments for some procedures noted earlier.
Second, meaningful reform will come when reformers accept Francois de
Brantes’s advice: “It's a lot easier to get doctors and maybe hospitals
engaged in transformation when it's done at the locus of their control.”
Payment reform to achieve potential efficiency gains in the coordination of
care for the chronically ill starts with the types of voluntary collaboration
recently undertaken by DVA and innovative hospital company Healthe Care to
improve post-hospital discharge for veterans.
36
Third, expand your advisory structure on health policy reform. You need all
parties at a table that advises you what we can afford in the public and private
health sectors and how we ought to be paying for the wide range of services
that we need inside and outside the hospital walls.
You need the German model of collaboration to drive healthcare reform, with
Australian-equivalent members as illustrated in FIGURE 20 below.
FIGURE 20: Germany’s peak health policy advisory structure
Slide 31
Memo 3 to new health minister: widen your policy advisory table
Sauerland 2012
