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Minnesota Health Care Market Trends and Strategies for Cost Containment

Minnesota Health Care Market Trends and Strategies for Cost Containment. Health Care Transformation Task Force July 30, 2007 Julie Sonier Director, Health Economics Program Minnesota Department of Health. Overview of Presentation. Background

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Minnesota Health Care Market Trends and Strategies for Cost Containment

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  1. Minnesota Health Care Market Trends and Strategies for Cost Containment Health Care Transformation Task Force July 30, 2007 Julie Sonier Director, Health Economics Program Minnesota Department of Health

  2. Overview of Presentation • Background • Recent trends in health insurance coverage in Minnesota • Factors contributing to the decline in employer coverage • Cost trends: private markets and public programs • Drivers of health care cost increases • Cost containment strategies to date: • Private market • State government

  3. Background Health care cost growth is not a new problem Most health care spending is incurred for a small share of the population Minnesota health care spending

  4. Historical Perspective: Health Care Spending Growth is Not a New Problem Source: Centers for Medicare and Medicaid Services

  5. From: “The Sad History of Health Care Cost Containment as Told in One Chart,” Drew Altman and Larry Levitt, Health Affairs, Web Exclusive, January 23, 2002

  6. Health Care Spending as a Share of Gross Domestic Product *Projected. Source: Centers for Medicare and Medicaid Services. Spending estimates as of January 2007; projections as of February 2007.

  7. Health Spending is Highly Concentrated Among Relatively Few People Source: Berk and Monheit, “The Concentration of Health Care Expenditures, Revisited,” Health Affairs, March/April 2001. Expenditure estimates for civilian non-institutionalized population.

  8. Health Care Spending Trends: Minnnesota and U.S. Sources: MDH Health Economics Program, Centers for Medicare and Medicaid Services (spending for health services and supplies, a subset of total national health spending)

  9. Minnesota Health Care Spending by Source of Funds, 2005 Total Spending $29.4 Billion Source: MDH Health Economics Program

  10. Minnesota Health Care Spending by Type of Service, 2005 Total Spending $29.4 Billion Source: MDH Health Economics Program

  11. What Savings Are Needed to Achieve 20% Reduction in Health Care Spending by 2011?

  12. Recent Trends in Health Insurance Coverage

  13. Uninsurance Rate Trends in Minnesota *Indicates statistically significant difference (95% level) from prior survey year. Source: 1995, 1999, 2001, 2004 Minnesota Health Access Surveys

  14. Sources of Insurance in Minnesota, 2001 and 2004 Source: 2001 and 2004 Minnesota Health Access Surveys * Indicates a statistically significant difference from 2001.

  15. Factors Contributing to a Decline in Employer Coverage • Lower share of population employed in 2004 vs 2001 (72.3% vs 75.0%) • Changes in job characteristics. For example: • Increase in temporary/seasonal jobs • Smaller share of population working for very large employers, where employer-based coverage is more likely • Decline in employer coverage was largely the result of declining access, not take-up

  16. Access to Employer Coverage: Offer, Eligibility, and Take-up Rates, 2001 and 2004 *Indicates a statistically significant difference from 2001. Source: 2001 and 2004 Minnesota Health Access Surveys

  17. Private and Public Cost Pressures

  18. Private Health Insurance Premium and Spending Trends, 1995 to 2005 Source: MDH Health Economics Program. Fully-insured market only.

  19. Key Minnesota Health Care Cost and Economic Indicators, 1995 to 2005 Notes: health care cost is MN privately insured spending on health care services per person, and does not include enrollee out of pocket spending for deductibles, copayments/coinsurance, and services not covered by insurance.. Sources: Health care cost data from Minnesota Department of Health, Health Economics Program; per capita personal income from U.S. Department of Commerce, Bureau of Economic Analysis; inflation data from U.S. Bureau of Labor Statistics (consumer price index); workers’ wages from MN Department of Employment and Economic Development

  20. Total Cost Per Person and Health Plan/Enrollee Shares, 1997 to 2005 Source: MDH Health Economics Program.

  21. Medical Assistance Enrollment and Spending Growth Source: Minnesota Department of Human Services.

  22. MinnesotaCare Enrollment and Spending Growth Source: Minnesota Department of Human Services.

  23. GAMC Enrollment and Spending Growth Source: Minnesota Department of Human Services.

  24. Summary: Private and Public Cost Pressures • Erosion in private insurance coverage is likely linked to rising costs • Public programs face dual sources of cost pressure: • Rising enrollment • Rising cost per person • Despite recent slower cost growth, current trends not sustainable in the long run • Cost of private insurance still growing much faster than incomes, inflation

  25. Drivers of Health Care Cost Growth

  26. Drivers of Health Care Spending: Many Levels of Analysis $ Spent on Health Care Who pays (employers, consumers, govt, etc.)? What services are purchased (hospital, drugs, etc.)? What causes changes in spending for a particular category of service? Price Quantity Change in mix of services provided • Factors affecting quantity/type of services: • Prevalence of disease • -Demographics • -Lifestyle/behavior • -Genetics • -Environment • -Technology • -Consumer and provider incentives • - Other factors • Factors affecting price: • Market structure • Labor costs & other inputs • Technology • Economy/general inflation • Other factors

  27. Health Care Cost Drivers: Spending Growth and Shares of Total Growth by Service, 2003 to 2005 Growth Rate Share of Spending Growth Note: growth rates calculated as annual growth per enrollee over the 2-year period. “Other medical” includes skilled nursing facilities, home health care, emergency services, services of health professionals other than physicians and dentists, durable medical goods, and chemical dependency/mental health. Source: MDH Health Economics Program.

  28. How Is Minnesota’s Age Distribution Changing? Sources: U.S. Census Bureau and Minnesota State Demographic Center

  29. Projected Minnesota Population Growth,by Age Group Source: Minnesota State Demographic Center

  30. Variation in Health Care Spending by Age Source: Agency for HeatlhCare Research and Quality, Medical Expenditure Panel Survey, data for per capita spending by age group in the Midwest. Excludes spending for long-term care institutions.

  31. No Data <10% 10%–14% Obesity Trends* Among U.S. AdultsBRFSS, 1990 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  32. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1991 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  33. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1992 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  34. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1993 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  35. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1993 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  36. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1994 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  37. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1994 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  38. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1995 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  39. No Data <10% 10%–14% 15%–19% Obesity Trends* Among U.S. AdultsBRFSS, 1996 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  40. No Data <10% 10%–14% 15%–19% ≥20 Obesity Trends* Among U.S. AdultsBRFSS, 1997 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  41. No Data <10% 10%–14% 15%–19% ≥20 Obesity Trends* Among U.S. AdultsBRFSS, 1998 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  42. No Data <10% 10%–14% 15%–19% ≥20 Obesity Trends* Among U.S. AdultsBRFSS, 1999 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  43. No Data <10% 10%–14% 15%–19% ≥20 Obesity Trends* Among U.S. AdultsBRFSS, 2000 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

  44. Obesity Trends* Among U.S. AdultsBRFSS, 2001 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person) No Data <10% 10%–14% 15%–19% 20%–24% ≥25%

  45. Obesity Trends* Among U.S. AdultsBRFSS, 2002 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person) (*BMI 30, or ~ 30 lbs overweight for 5’4” person) No Data <10% 10%–14% 15%–19% 20%–24% ≥25%

  46. Obesity Trends* Among U.S. AdultsBRFSS, 2003 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person) No Data <10% 10%–14% 15%–19% 20%–24% ≥25%

  47. Obesity Trends* Among U.S. AdultsBRFSS, 2004 (*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person) No Data <10% 10%–14% 15%–19% 20%–24% ≥25%

  48. Impact of Rising Obesity on Health Care Costs (National study) • Increasing prevalence • Between 1987 and 2001, obesity prevalence increased 10.3 percentage points, while normal weight prevalence declined 13 percentage points • Widening gap between health care spending for obese vs normal weight population • Difference grew from 15% to 37% • As a result of both these factors, obesity-related health spending accounted for an estimated 27% of inflation-adjusted per capita health spending increases • 41% of the rise in heart disease spending • 38% of the rise in diabetes-related spending Source: Thorpe et al., “The Impact of Obesity on Rising Medical Spending,” Health Affairs, October 2004.

  49. Technology • Advances in technology can be reflected in: • Better diagnosis – more cases identified • Better treatment – more cases treatable • Higher (or lower) cost per treated case • Most economists agree that advances in technology have accounted for a majority of increases in health care spending over time • Recently, we have seen renewed policy concerns about a “medical arms race” • MDH report to the legislature on medical facilities highlighted distorted signals that current payment systems send to markets

  50. Technology • Cutler, “Your Money or Your Life”: • In general, technological advance has been “worth it” in terms of benefits that exceed costs • However, there are pervasive problems: • Opportunities to prevent the need for high-tech interventions are missed • Overuse, misuse, and underuse of care • “You get what you pay for”: The system we have pays well for intensive interventions and doesn’t pay well for care management and prevention David Cutler, “Your Money or Your Life,” Oxford University Press, 2004

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