Future Directions for Health Care Reform in Vermont

1. Future Directions for Health Care Reform in Vermont Kenneth E. Thorpe, Ph.D. Robert W. Woodruff Professor and Chair Department of Health Policy and Management Rollins School of Public Health Emory University kthorpe@sph.emory.edu The Vermont Health Care Commission 2005

2. Overview • Crafting effective health reform solutions and providing universal access requires a clear understanding of what accounts for the growth in spending • Key “facts” from the US and Vermont context • 80% of total health care spending linked to chronically ill patients • Chronically ill receive approximately 50% of all clinically recommended medical care • Rise in “treated disease prevalence” accounts for nearly two-thirds of the growth in health care spending • Rise in obesity prevalence in US accounted for 27% of the growth in health spending over the past 20 years. The Vermont Health Care Commission 2005

3. Percent of Private Firms offering Health Insurance in Vermont, 2003 Only 55% of the 19, 236 Firms Currently Offer Health Insurance Source: MEPS-IC The Vermont Health Care Commission 2005

4. Per Capita Spending is Lower in Vermont Yet Private Insurance is More Expensive! Source: CMS The Vermont Health Care Commission 2005

5. Single Premiums, Vermont and US Totals, 1999 and 2003: Vermont is 3.3% Higher than National Average Source: MEPS-IC The Vermont Health Care Commission 2005

6. Family Health Insurance Premiums Are Higher in Vermont Compared to the National Average Source: MEPS-IC The Vermont Health Care Commission 2005

7. Where Does Vermont’s Health Care Dollar Go? More than 80% of Health Care Spending on Behalf of People with Chronic Conditions Source: MEPS The Vermont Health Care Commission 2005

8. Distribution of Medical Care Spending by Number of Chronic Health Care Conditions, 2001 Source: MEPS The Vermont Health Care Commission 2005

9. Issue: Level vs. Trends in Spending Level: US and Vermont Spends approximately 50% more per capita than European countries • Traced to higher clinical and administrative expenses, fragmented purchases, and ultimately higher prices Trends: Growth in spending in US and Vermont has risen faster that 19 of 23 OECD countries between 1980 and 2003. The Vermont Health Care Commission 2005

10. Why Does Real Per Capita Health Spending Rise Over Time? • Rise in Treated Disease Prevalence • Rise in Spending Per Treated Case • Both The Vermont Health Care Commission 2005

11. Obesity Has Doubled Among Adults in Vermont and US, 1990-2003 Source: BRFSS The Vermont Health Care Commission 2005

12. Increase in Treated Disease Prevalence in Vermont, Key Factor Driving the Growth in Health Care Spending Source: BRFSS The Vermont Health Care Commission 2005

13. What Accounts for The Rise in Treated Disease Prevalence? • Rise in Population Disease Prevalence – fueled by obesity and other risk factors • Changes in threshold for treating asymptomatic patients (hypertension, hyperlipidemia, the metabolic syndrome) • Innovation (SSRI, statins, medical devices) The Vermont Health Care Commission 2005

14. Rise in Treated Disease Prevalence Linked to the Rise in Obesity Key Single Largest Driver of Health Care Spending Over Time Source: Kenneth E. Thorpe, PhD The Vermont Health Care Commission 2005

15. Implications for Reform • Universal Coverage will need assurance that we have the ability to control spending- need policy options address both level and growth. • Policy options for reform need to attack the key drivers of cost—rising disease prevalence. Reforms need to result in better value care provided to all patients, but in particular to chronically ill patients. • Need options reducing excess clinical costs (i.e. additional costs linked to medical errors/events) and administrative costs. The Vermont Health Care Commission 2005

16. Implications for Reform Potential Options for Restructuring Care Change how plans are paid and compete. • Consider encouraging competition around specific chronic diseases that accounts for the most spending, most of the growth in spending. Ability to effectively treat multiple chronic conditions. • Develop captitated payment based on • Annual cost of providing all clinically recommended care for patients with single or multiple chronic illnesses (starting to occur in the market today—Medicare already has the methodology for risk adjusting payments. • Compete on value (quality of care per dollar spent) • Best clinical outcomes at lowest cost • No co-pays or deductibles for clinically recommended services. • Promote access to state-of-the-art care by most vulnerable patients. • Green Mountain Health. Universal health wellness, promotion, disease prevention benefits. What constitutes a best practice program? The Vermont Health Care Commission 2005

17. Implications – Slowing the Growth in Spending • Key Issues: Slow rise in treated disease prevalence through, • Slowing the rise in obesity prevalence • Policy Tools • School Based Interventions • New and effective health promotion, wellness, disease prevention programs available for all adults • Financial incentives to participate The Vermont Health Care Commission 2005

18. Summary • Changes outlined above requires fundamental restructuring of Vermont’s payment and delivery health care systems • Explore competition among health plans and provider groups around key chronic conditions • Develop state strategy for addressing rise in treated disease prevalence • Develop options for reducing the level of spending (lower clinical and administrative costs) • Devote resources to developing effective health promotion, wellness programs for use in schools, and the worksite. The Vermont Health Care Commission 2005

19. Options for Financing Health Care Expansions • Evaluate options for financing health care for all Vermont residents through the following approaches: • Savings in existing programs • Premium assessments on health plans • Innovative uses of global commitment • Others The Vermont Health Care Commission 2005

20. Summary/Workplan Workplan • What questions can we address by January 15th (i.e. financing, economic impact, etc.) • What approaches can be outlined/evaluated for the upcoming session (short-term changes)? • What approaches can be outlined/evaluated for the future—long term changes? The Vermont Health Care Commission 2005