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The Value of Healthcare Setting the Stage: Looking to the Future

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The Value of Healthcare Setting the Stage: Looking to the Future

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    1. The Value of Healthcare Setting the Stage: Looking to the Future Ian Morrison

    3. The Emerging Value Context Rising costs Rising cost shifting to consumers The Fat Trapper, Bariatric Surgery and the “Swaning of America” Infatuation with Technology based care Evidence that Innovation makes a difference Expect more Innovation in long term although gaps in the short run Potential Paradigm Emerging High cost, High efficacy, High Customization but unaffordable The Concorde Syndrome The Quest for Value IOM: Balancing cost, quality, access and equity Evidence based medicine and evidence based benefit design Pay for Performance Value Purchasing

    4. Attitudes toward Value Strong argument that American healthcare is a poor value The International Story The Dartmouth Story Americans love high technology medicine and think we as a society should spend more on it…..but, OPM (Other People’s Money) Healthcare is a superior good, as we grow economically we will spend more, but it has to flow from…… Government Employers Households Value is in the eye of the beholder …..and the payer Value is being redefined as we move to engage the consumer as payer and decision-maker What is value to the millions left behind?

    5. Value and the Transformation of the National Debate It’s not just about cost containment It’s not just about affordability It’s not just about prices It’s not just about life expectancy It’s not just about societal level value It’s not just about the best, no matter how much it costs It’s not just about healthcare as the last industry to go offshore to China or India

    6. Innovation Imperatives Consumers love new technology Innovation is the pharmaceutical industry’s ace in price control debates But if you don’t truly innovate in a way consumers appreciate and pay for……. The new environment shifts responsibility for payment increasingly and transparency of pricing to consumers for all aspects of healthcare not just drugs Delivering innovation to an end user consumer that has value they are willing to pay their own money for Do not overestimate (even) Americans willingness to trade up Are we comfortable with overt tiering?

    7. How Consumers Rate Industries Attitudes toward hospitals have remained mostly stable and positive over the last few years. Pharmaceutical companies are being demonized in public debate. Drug companies have seen a dramatic decline in good will since 1997, including a large drop in the last year. Attitudes toward hospitals have remained mostly stable and positive over the last few years. Pharmaceutical companies are being demonized in public debate. Drug companies have seen a dramatic decline in good will since 1997, including a large drop in the last year.

    8. Health Care Tops List of Industries Public Wants to See More Regulated

    9. The Value of Health Care

    10. The Argument For Consumer Responsibility for Payment Consumers have been progressively insulated from the cost of care for the last 40 years If they only knew how much healthcare cost and had to pay they would use it less If they were responsible for paying they would also take more responsibility to become healthy and cost the system less Consumers should have the right to choose and to trade up to better quality with their own money When they are make rational consumer choices the market will be working and whatever is spent will be appropriate like any other market or sector of the economy

    11. The Argument Against Consumer Responsibility for Payment The 5/50 Problem: Most consumers that are heavy users have significant co-morbidity or serious illness like cancer, they didn’t choose this health status One day in an American hospital and they are over their maximum deductible, so…… Catastrophic coverage is a green light for excessive care by hospitals and procedure-oriented specialists While skin in the game can clearly move people around does it save money overall? The equity problems: A de facto reallocation of resources from poor to rich (my access to the collective social capital of health insurance is better because I can come up with the economic down payment for physician visits and tests) Poor people with chronic illnesses will be disproportionately affected by consumer responsibility for payment

    12. Consumer Exposure to Health Care Costs is About to Increase As health insurance became more comprehensive, OOP costs declined through the 1980s and leveled off beginning in the 1990s. As health insurance became more comprehensive, OOP costs declined through the 1980s and leveled off beginning in the 1990s.

    13. The Case of Pharmaceuticals Coverage and Value Tiering and consumer strategies How do consumers behave? What are the challenges?

    14. Who Pays for Drugs?

    15. The Five-Tier Formulary In June, Express Scripts unveiled a five-tier prescription drug benefit plan. The tiers range from $3 at the bottom to $50 at the top. This development may mean that in the future, consumers will have coverage for all drugs, regardless of their “preferred” status. However, the copay range will continue to expand. Therefore, pharmaceutical companies will have to make important decisions regarding where in the formulary each of their drugs should be placed. There will also be battles over what qualifies as a “look good/feel good” medication. Should drugs that relieve symptoms but do not extend life (e.g., non-sedating antihistamines) be placed in the fifth tier or do they belong in tiers 3 or 4?In June, Express Scripts unveiled a five-tier prescription drug benefit plan. The tiers range from $3 at the bottom to $50 at the top. This development may mean that in the future, consumers will have coverage for all drugs, regardless of their “preferred” status. However, the copay range will continue to expand. Therefore, pharmaceutical companies will have to make important decisions regarding where in the formulary each of their drugs should be placed. There will also be battles over what qualifies as a “look good/feel good” medication. Should drugs that relieve symptoms but do not extend life (e.g., non-sedating antihistamines) be placed in the fifth tier or do they belong in tiers 3 or 4?

    16. James Brown and Fernando Lamas Effect

    17. “Skin in the Game” Matters Trading down twice as often as trading up Rapid increase in generic and therapeutic substitution Poor, chronically ill most effected Starting to lead to adverse health outcomes like the uninsured Simple cost shifting without sophisticated disease management is not the right answer in the long-term

    18. Big Increase in Trading Down on Drugs

    19. Rx co-pay increase: More bargain-hunting since 2002. Low- and middle-income equally likely to “trade-down” What people did in response to increases in Rx cost-sharing varies considerably by income and tiered prescription drug coverage insurance.What people did in response to increases in Rx cost-sharing varies considerably by income and tiered prescription drug coverage insurance.

    20. The Transformation of Pharmaceuticals Discover a unique white powder Search for a therapeutic action Establish safety and efficacy Make sure it’s better than available alternatives Promote to the profession Get a passive payer to pay for it Design a white powder with a predictable therapeutic action Establish safety, efficacy and cost-effectiveness Make sure it meets a previously unmet medical need or has an effect that is detectable to human beings Promote to all the Ps (patient, physician, PBM, payer, pharmacist, politician, press) Get an active payer to pay for it

    21. Traditional Pharmaceuticals vs. Advanced Therapeutics

    22. Happy Biotechnologist Scenario We have the best stuff Sure it’s expensive, but it works Because it works there are savings elsewhere This is complex – do not try this stuff at home As generic competition makes costs go down for some technologies, there will be more gross margin left for us Catastrophic drug coverage insulates consumers from caring about price

    23. Biotechnologist’s Nightmare Scenario Public, physicians, policymakers could care less about large molecules; we don’t buy drugs by the atom It’s complex brewing not chemistry, but how hard could it be? Big ugly buyers and providers incensed about price of technology High efficacy focused on small sliver of needy, desperate patients Payers/purchasers Medicare inpatients – the stent effect Medicare hospital outpatient – the value case Administering Physicians e.g. oncologists zero-sum game on incomes “Plop, plop” vs clinical efficacy Consumers Co-insurance on top tier All drugs in CDHP Can you pass the NICE/Kaiser Test?

    24. Demonstrating “Value” What is value? Benefit / Cost? Quality/Cost? Access/Cost? Benefit to whom? Patient, physician, payer, insurer, employer, government, public(?), politician? Cost to whom? Patient, physician, payer, insurer, government, public (taxpayer)? Is “value” (for money) the same as cost-effectiveness? Remember if you cut the price in half, you double the value

    25. A review of scenarios first presented at the SHP Annual Luncheon in March.A review of scenarios first presented at the SHP Annual Luncheon in March.

    26. Scenario 1: Tiers R’ Us The SUVing of American Healthcare We pay more for choice and control WIPDBS brings the market to Medicare Chronically ill, low income beware Catastrophic coverage for the very sick The benefits of benefit design: save employers money Trading down more often than trading up A world of opportunity and risk Private sector celebrated

    27. Scenario 2: Bigger Government Major backlash against cost shifting to consumers 2008 election run on the retirement and health security issues of the middle class Protect the baby-boom at all costs Medicare Advantage for All or Pay or Play or Expanded Medicare and FICA tax or Fill the donut holes, stick it to pharma, shore up the entitlement Live with the consequences Politicization of healthcare spending Rationing and restriction Lower Innovation Lower profits Equity over efficiency Rising costs and taxes

    28. Scenario 3: Market Nirvana Break the Culture of Entitlement Consumers learn to discriminate and pay We buy care not cars Incentives for health and personal responsibility Catastrophic coverage and retail medicine for all Utilization based on ability to pay The rise of cheapo plans and delivery systems Reaching high end retail customers is key Delivery reform is market-based not evidence-based Opportunities abound for the entrepreneurial America’s economic base as private sector healthcare High quality, high service, low equity

    29. Scenario 4: National Rational Healthcare Universality and Delivery System Redesign Evidence-based floors and ceilings Pay for Performance Reference-pricing and cost-effectiveness criteria for new technology Financial rewards for clinical redesign Universal Mandated Coverage Employer and individual mandates or Expanded Medicare Advantage or Expanded Safety Net Delivery Floor Expanded Access and Rational Design Delivery System Innovation rewarded All enabled by a 21st century IT and bioscience infrastructure

    30. Implications for Value No matter what, we will need better value measures and more transparency of measures Value based purchasing will become more prevalent and have a powerful influence on providers and vendors Consumers will become more engaged in value decisions but we cannot rely on them absolutely The systems of healthcare need to be continuously improved to deliver greater value

    31. Towards an Action Agenda The Need for Leadership Stakeholder Dialogue Not just IOM or NHI Conversation for Action Not about figure pointing Constructive Engagement about Value Improvement in Healthcare Redesign of the systems of healthcare Generate Enthusiasm Cultivate Broad Community Dialogue Identify Quick Victories

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