The Seven Deadly Sins: Chronic Care and the Future Of American Healthcare

Ian Morrison The Seven Deadly Sins:Chronic Care and the Future Of American Healthcare Contact@www.ianmorrison.com

The Seven Deadly Sins • Pride • Anger • Envy • Greed • Gluttony • Sloth • Lust

Seven Deadly Sins • Proud Republicans • Angry Democrats • Envy: The Uninsured and underinsured who are envious of people with access to health care that adds true value and protects the chronically ill • Greed: why healthcare is about incomes not outcomes (tax policy, provider reimbursement and return on investment) • Gluttony and Sloth: A powerful double act fueling the obesity epidemic, the depression epidemic, and the failure of the SF Giants • Lust: It’s all we have left

Republicans and Perotians are the Natural Majority of the United States Perot cost Bush the Elder in 1992 Nader cost Gore in 2000

Republicans Grow with Income Republican Vote by Family Income 63% of $200K Plus (2% of electorate) $50K Plus is 55% of electorate $75K Plus is 32%

Exit Poll Results: Most Important Issue

Exit Poll Results: Abortion

“Moral Values” versus Moral Values • “Moral Values” aka Divisive Social Issues that appeal to Christian Conservative Voters • Abortion • Gay Marriage • Stem Cell Research • Some Other Examples of Moral Values • Healthcare is a Right • Poverty is bad • Don’t pollute the environment • Don’t burden our children with a mountain of debt • Don’t Shoot Any Living Creature unless they are trying to shoot you

Exit Poll Results: Availability and Cost of Health Care Bush Wins the Unconcerned in a Landslide

What to Expect Under Bush 43 Release 2.0 • Tax policy as health policy • Make the tax cuts permanent • Large deficits • Pressure on Medicare reimbursement • Medicaid: no help • Health Insurance Market • Talk about the uninsured but remember the 7, 14, 28, 56 Rule • HDHPs: Shitty coverage for all • Medicare Policy • Pay for Performance • WIPDBS Implementation • Reimportation given the Drug Industry’s demonization • Private Sector Medicare PPOs: Say What? • HSAs • Malpractice Reform?

Continuing Backlash Against Health Care Industries * In 1997 “computer companies” were rated together (I.e. hardware and software companies were not measured separately ** Because airlines were not included in 1997, the trend for airlines is from 1998 - 2002

Health Care Tops List of Industries Public Wants to See More Regulated Should Be More Regulated Generally Honest & Trustworthy Managed Care Companies Health Insurance Companies Pharmaceutical Companies Hospitals

Medicare Drug Benefit 5% Catastrophic Coverage $5100* Out-of-Pocket Spending $2850 Gap No coverage Medicare Part D Benefit + ~$420 in annual premium $2250 Partial Coverage up to Limit 25% $250 Deductible Equivalent to $3,600 in out-of-pocket spending: $250 deductible + $500 (20% cost-sharing on $2000) + $2850 (100% cost sharing in the “gap”) Source: Kaiser Family Foundation

Medicare Bill The Ten Commandments • There shall be competition (Even if it is unpopular, doesn’t work and there are no willing HMOs or congressional districts willing to participate in it) • There shall be liberty for seniors to be confused by a myriad of private health plan and drug coverage offerings • There shall be skin in the game (consumer responsibility for payment through co-payments, deductibles and premium sharing) because it is good for consumers to pay at the point of care (it will stop them overusing the Medicare system for recreational purposes and it teaches seniors that they should look after themselves in their forties and fifties) • There shall be no supplementary coverage because supplementary coverage nullifies skin in the game • There shall be no new taxes for rich people, only raised premiums for all • There shall be privatization because private is better than public (don’t argue, this is a commandment) • There shall be unrestricted free choice of plans each of which has a restricted choice of doctors because choice is good • There shall be no Canadian drugs in the veins of Americans even if the drugs are made in America and purchased by Americans • There shall be big differences in coverage among seniors but thou shall not covet thy neighbor’s coverage • There shall be no senior left behind……….. in traditional Medicare

Obesity Trends* Among U.S. AdultsBRFSS, 1985 No Data <10% 10%-14% 15%-19% 20%-24% 25% (*BMI 30, or ~ 30 lbs overweight for 5’4” woman)

Obesity Trends* Among U.S. AdultsBRFSS, 1986 No Data <10% 10%-14% 15%-19% 20%-24% 25%

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

Lifestyle Changes that Promote Sedentary Behavior

Obesity Drivers • We are eating more (duh!) • We are eating out more (In 1970 34% of the food budget was consumed outside the home in late 1990s it was 47%) • Everything is supersized at home and at McDonalds • We stopped smoking • We are all working too much especially women • We don’t exercise enough because we are all working too much • The only people who are exercising and eating right are people who were thin in the first place or bulemic celebrities or rich people who don’t work or French

Supersize Everything Part 1 National Geographic August 2004

Supersize Everything Part 2 Source: Young and Nestle, Am J Public Health , 2002

Obesity: How Far Upstream Do You Go? • Metabolic medical management • Drugs • Surgery 140,00/year we could be doing 15 million • The Fat Trapper and Exercise in a Bottle • Wellness and health promotion • Public Health Style Prevention • Reinvigorate participation not competition in athletics • Financial incentives :Weighted Premiums or Tax BMI • Urban Design: RAND and IFTF • Tax Policy • Fat taxes not Flat taxes • Iowa corn farmers: from corn syrup to ethanol • Fast Food as Tobacco companies • No subsidy for cars, urban sprawl, commuting, drive thrus • Give all the money to Head Start and public school PE

What’s the National Game Plan for Financing Chronic Care? • Consumer Deflected Healthcare: Retail care and Catastrophic coverage • Discounted fee for service everywhere • Siloed delivery systems • No incentive for coordination • No IT infrastructure • All delivered through a pluralistic Gong Show of providers intent of maximizing their income under the perverse and toxic incentives they face • That should work pretty well, eh?

Consumer Responsibility for Payment • Defined Benefit to Defined Contribution: not necessarily in pure form • “Skin in the game” no matter what • The Ross Perot Effect • Transparency in Pricing: The End of the Hostellerie de Plaisance Model • Break the Culture of Entitlement • “Let Them Eat Choice” • The political and economic context is crucial • Tiering no matter what • Ability to pay shapes service, choice, network and technology • The backlash against coverage erosion

Chronic Care: A Long Way to Go Objective Source: Improving the Care of the Chronically Ill: Is it Good Business? Ed Wagner, MD, MPH. MacColl Institute for Health Innovation, Group Health Cooperative, 11/03 Source: Chronic Disease Management Through Quality Improvement – the Basics. Chris Rauscher, MD (Canada), 5/04

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

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

Consumer Exposure to Health Care Costs is About to Increase Per capita amount of personal health care expenditures paid out-of-pocket Percentage of total personal health care expenditures paid out-of-pocket Projected Source: Centers for Medicare and Medicaid Services

“Consumer-Directed Health Plan” Prototype • Employer funds only • Notional account • Section 105 Plan • Balance rolls over yr to yr • Employer controls growth % • Employer controls exit rules • Vesting • COBRA • Retiree medical • Coverage for alternative care Employer contributes to cost of catastrophic coverage Employee purchases catastrophic coverage INSURANCE • Participant responsibility • Can fund through Section 125 plan DEDUCTIBLE CORRIDOR • Ensures good health • Neutralizes “hoarding” PERSONAL HEALTH ACCOUNT • Consumer education • Chronic disease management • Health promotion • Online tools • Telephonic support PREVENTIVE CARE EDUCATION & DECISION-SUPPORT TOOLS

High Deductible Health Plans for Five Years • Consumer Directed Health Plans (CDHP) and HSAs are a subset of and a stalking horse for High Deductible Health Plans(HDHP) • HDHP will grow and CDHPs will grow fast BUT from a very small base. • The leading edge benefit design – CDHPs – will drag all plan designs toward higher deductibles. • 1973: Nixon passed HMO legislation and thought he’ll get Kaiser but instead he got PPOs. • 2003: Bush passed MMA thinking he’ll get tax-sheltered HSAs (CDHPs) but instead he will get high-deductible plans. • The ideology of consumer-driven health care has been implemented before the infrastructure to make it viable has been built.

HDHP Consumer Behavior • HDHP are not necessarily young immortals • Two populations: those that have a choice and those forced into HDHP • Not sophisticated or confident shoppers • Pay more out of pocket (duh!) • And have very significant compliance problems which are mitigated considerably by first dollar coverage of preventive services

Impacts of HDHP: Providers • Retail care: capture the high end and the desperate frequent fliers • Big impact on pediatrics, internal medicine • Scopers and gropers will be impacted by specific procedure deductibles but CDHP is a green light for the esoterica • Overuse by the rich and well, to-do; under-use by the poor, sick • Supplier-induced demand will explode among the well insured and well heeled • Not brilliant for the chronically ill

“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 • Dumb cost shifting without sophisticated chronic care management is not the right answer in the long-term

The Obesity Solution: Tiered Fast Food Formularies Sandwiches The All Lettuce Whopper Free The All Lettuce Whopper with Cheese $15 Real Whopper with Cheese $35 Drinks Water Free Diet Coke $0.99 Regular Coke $15 Supersized Regular Coke $35

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 • Count Value: Higher Value Options are identified • Make Value Count: Higher value options reinforced by the market • Capture Value Gain: Consumer Migration and Provider Re-engineering

A Market Approach to Costs “Employers believe that consumer pressure is a powerful, underutilized lever for improving quality and efficiency. They believe that higher quality and lower cost will result if consumers spend more of their own money for services they believe are high quality, and if providers respond by improving their performance. For this strategy to succeed, consumers will have to be activated to seek more efficient, higher quality care and physicians will have to be rewarded for delivering it.” Robert Galvin, Sounding Board NEJM, September 19, 2002 • Transparency • Incentives and Rewards • Focus on Quality and Efficiency

The Seven Deadly Sins: Chronic Care and the Future Of American Healthcare