The Seven Deadly Sins Chronic Care and the

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

The Seven Deadly Sins Pride Anger Envy Greed Gluttony Sloth Lust n n n n 2

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 n n n 3

Republicans and Perotians are the Natural Majority of the United States Perot cost Bush the Elder in 1992 4 Nader cost Gore in 2000

Republicans Grow with Income Republican Vote by Family Income 63% of $200 K Plus (2% of electorate) $50 K Plus is 55% of electorate $75 K Plus is 32% 5

Exit Poll Results: Most Important Issue (% of electorate naming as top issue) Moral values (22%) Economy/jobs (20%) Terrorism (19%) Iraq (15%) Health care (8%) Taxes (5%) Education (4%) 6 Kerry Bush % % 18% 80% 14% 73% 77% 43% 73% 80% 18% 86% 23% 57% 26%

Exit Poll Results: Abortion should be… Always legal (21%) Mostly legal (34%) Mostly illegal (26%) Always illegal (16%) 7 Kerry Bush % % Bush 2004 vs. 2000 73% 61% 26% 22% 25% 38% 73% 77% +4 +3

“Moral Values” versus Moral Values “Moral Values” aka Divisive Social Issues that appeal to Christian Conservative Voters n · Abortion · Gay Marriage · Stem Cell Research Some Other Examples of Moral Values n · · · 8 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 Kerry Bush % % Very concerned (70%) 58% 41% Somewhat concerned (23%) Not very concerned (5%) Not at all concerned (2%) 28% 15% 71% 84% 83% Percent concerned 9

What to Expect Under Bush 43 Release 2. 0 Tax policy as health policy n · · Make the tax cuts permanent Large deficits Pressure on Medicare reimbursement Medicaid: no help Health Insurance Market n · Talk about the uninsured but remember the 7, 14, 28, 56 Rule · HDHPs: Shitty coverage for all Medicare Policy n · · · Pay for Performance WIPDBS Implementation Reimportation given the Drug Industry’s demonization Private Sector Medicare PPOs: Say What? HSAs Malpractice Reform? n 10

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 11

Health Care Tops List of Industries Public Wants to See More Regulated Should Be More Regulated Managed Care Companies Health Insurance Companies Pharmaceutical Companies Hospitals 12 Generally Honest & Trustworthy

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% Deductible $250 Equivalent to $3, 600 in out-of-pocket spending: $250 deductible + $500 (20% cost-sharing on $2000) + $2850 (100% cost sharing in the “gap”) 13 Source: Kaiser Family Foundation

Medicare Bill The Ten Commandments n n n n n 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 copayments, 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 14

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

Obesity Trends* Among U. S. Adults BRFSS, 1986 No Data 16 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1987 No Data 17 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1988 No Data 18 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1989 No Data 19 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1990 No Data 20 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1991 No Data 21 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1992 No Data 22 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1993 No Data 23 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1994 No Data 24 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1995 No Data 25 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1996 No Data 26 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1997 No Data 27 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1998 No Data 28 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 1999 No Data 29 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 2000 No Data 30 <10% 10%-14% 15%-19% 20%-24% 25%

Obesity Trends* Among U. S. Adults BRFSS, 2001 (*BMI 30, or ~ 30 lbs overweight for 5’ 4” woman) No Data 31 <10% 10%-14% 15%-19% 20%-24% 25%

Lifestyle Changes that Promote Sedentary Behavior 32

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 1990 s it was 47%) Everything is supersized at home and at Mc. Donalds 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 n n n n 33

Supersize Everything Part 1 34 National Geographic August 2004

Supersize Everything Part 2 35 Source: Young and Nestle, Am J Public Health , 2002

Obesity: How Far Upstream Do You Go? Metabolic medical management n · 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 n n n · · · 36 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? n n n n 37

Consumer Responsibility for Payment n n n n n 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 38

Chronic Care: A Long Way to Go Objective Source: Chronic Disease Management Through Quality Improvement – the Basics. Chris Rauscher, MD (Canada), 5/04 39 Source: Improving the Care of the Chronically Ill: Is it Good Business? Ed Wagner, MD, MPH. Mac. Coll Institute for Health Innovation, Group Health Cooperative, 11/03

The Argument For Consumer Responsibility for Payment n n n 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 40

The Argument Against Consumer Responsibility for Payment n n n The 5/50 Problem: Most consumers that are heavy users have significant comorbidity 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 41

Consumer Exposure to Health Care Costs is About to Increase Per capita amount of personal health care expenditures paid out-of-pocket Source: Centers for Medicare and Medicaid Services 42 Percentage of total personal health care expenditures paid out-of-pocket Projected

“Consumer-Directed Health Plan” Prototype § § § INSURANCE Section 105 Plan § Employee purchases catastrophic coverage Notional account Balance rolls over yr to yr § Employer contributes to cost of catastrophic coverage Employer funds only Employer controls growth % § Employer controls exit rules § § § Participant responsibility Can fund through Section 125 plan § Ensures good health § DEDUCTIBLE CORRIDOR Neutralizes “hoarding” Vesting § COBRA § Retiree medical § Coverage for alternative care PERSONAL HEALTH ACCOUNT § § PREVENTIVE CARE Consumer education Chronic disease management Online tools § 43 Health promotion § EDUCATION & DECISION-SUPPORT TOOLS § Telephonic support

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. n n The leading edge benefit design – CDHPs – will drag all plan designs toward higher deductibles. n · 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. n 44

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 n n n 45

Impacts of HDHP: Providers § Retail care: capture the high end and the desperate frequent fliers n n n 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 46

“Skin in the Game” Matters n n n 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 47

The Obesity Solution: Tiered Fast Food Formularies Sandwiches The All Lettuce Whopper with Cheese Real Whopper with Cheese Free $15 $35 Drinks Water Diet Coke Regular Coke Supersized Regular Coke 48 Free $0. 99 $15 $35

The Emerging Value Context n n n n 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 · · n High cost, High efficacy, High Customization but unaffordable The Concorde Syndrome The Quest for Value · · 49 IOM: Balancing cost, quality, access and equity Evidence based medicine and evidence based benefit design Pay for Performance Value Purchasing n Count Value: Higher Value Options are identified n Make Value Count: Higher value options reinforced by the market n 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 v Transparency v Incentives and Rewards 50 v Focus on Quality and Efficiency

Quality and Efficiency Vary Widely By State Health Affairs April 7, 2004 51

Supply-Sensitive Care Can Be Measured for Specific Providers Physician Visits During the Last Six Months of Life 80. 0 NYU Medical Center 76. 2 Cedars-Sinai Medical Center 66. 2 Mount Sinai Hospital 53. 9 UCLA Medical Center NY Presbyterian Hospital Mass. General Hospital 43. 9 40. 3 38. 8 Brigham & Women's Hospital Boston Medical Center Beth Israel Deaconess UCSF Medical Center Stanford University Hospital 31. 9 31. 5 29. 2 27. 2 22. 6 70. 0 60. 0 50. 0 40. 0 30. 0 20. 0 10. 0 52

Six Purchasing Elements for Value Breakthrough in Health Care Plan, Provider & Vendor Accountability Count Value: Higher value options are identified and made available 1. Health Plans are routinely assessed on 6 IOM dimensions of performance*, starting with: risk & benefit-adjusted total cost PMPY, HEDIS and CAHPS; and implementation of breakthrough elements 2 -6 2. Individual Providers and Provider Organizations are routinely assessed on 6 IOM dimensions of performance, starting with (allocative) efficiency, effectiveness, and patient centeredness 3. Health & Disease Management Programs and Treatment Options are routinely assessed on 6 IOM dimensions of performance Make Value Count: Higher value options are reinforced by the market 4. Consumer Support enables consumers to recognize higher value plans, providers, health and disease management programs, and treatment options in a timely and individualized manner 5. Benefit Architecture encourages all consumers to select high value options 6. Provider Payment incents high performance today and re-engineering to enable higher performance tomorrow Capture Value Gains: Breakthroughs in health benefits value occur Today’s Gain: Migration Consumers migrate to more efficient, higher quality plans, providers, health and disease management programs, and treatment options (= an initial 515 net percentage point offset of future cost increases; and > 2 quality reliability) Tomorrow’s Gain: Re-engineering Sensing a much more performancesensitive market, health plans, providers, health and management programs, and biomedical researchers create stunning breakthroughs in efficiency and quality of health benefits (= further net percentage point offsets of future cost increases; and > 4 quality reliability) *6 Institute of Medicine performance dimensions: Safe, Effective, Patient-centered, Timely, Efficient, Equitable Source: Pacific Business Group on Health 53

What We Have Learned to Date Consumers don’t have the tools yet Consumers will discriminate but will likely forego, defer or trade down more than trade up Plan Level Story: n n n · Like choice and are slightly more likely to trade down when have to pay Provider Level Story n · Don’t see much difference in quality · Tiered Networks: West versus East · Haven’t paid to get a better doctor Therapy Level Story n · Trading down twice as often as trading up 54

Health Care Products & Services Rated on “Value For Money” 55

Americans Lack Knowledge of Health Care Costs Average Actual Cost Average Estimated Cost % Difference of Estimated from Actual % Estimating Too Little % Estimating Too Much Statins $109 $156 +43% 18% (<$50) 34% (>$150) High Blood Pressure Medication $93 $153 +39% 21% (<$50) 30% (>$150) Primary Care Visits $80 $97 +21% 24% (<$50) 11% (>$150) Trip to the Hospital in an Ambulance $550 $476 -13% 50% (<$300) 16% (>$750) Blood Chemistry Test $300 $143 -52% 73% (<$150) - Hip Replacement $25, 000 $10, 639 -57% 72% (<$10, 000) - Day/Night in Hospital $3, 600 $1, 058 -71% 83% ( <$1, 500) - Healthcare Service/Product Source: Wall Street Journal/Harris Interactive, June 24 -28, 2004 56

Pay for Performance Common metrics for quality measurement · Historic competition in the quality industry · Problems of data measures · Problems of electronic infrastructure Significant financial incentives for providers Penalty for poor performing providers Disproportionate allocation of premium increases to best performers Rewards could be based on objective historical measures (IHA), price/positioning (BHCAG), patient satisfaction (Wellpoint), medical group assessments (Pacificare), or redesign criteria (Leapfrog, PBGH) Still very little at risk for highly compensated people like doctors compared to private sector Need CMS to lead the charge Need Daughter of Capitation n n n n 57

Examples of Pay for Performance (Arnold Epstein et al, NEJM, Jan. 22, 2004) n n United Kingdom “has recently adopted a payment-for-performance initiative of unprecedented size and scope. Nearly a third of a G. P. ’s income will depend on practitioner’s performance as defined by 130 quality indicators. ” GE, Partners Healthcare, Tufts Health Plan, Lahey Clinic and other employers in Massachusetts “Bridges to Excellence” program: Maximum bonuses to physicians $55 per patient per year, with up to $100 for diabetes patients. Integrated Healthcare Association (IHA), a collaboration of 6 California health plans, which cover 8 million lives. Up to $100 million will be available for but specific formula not yet defined. Anthem Blue Cross & Blue Shield of New Hampshire reward physicians (very modestly) who provide certain preventive measures, based on HEDIS. 58

Value Purchasing: Conclusions Value purchasing is cost shifting in drag (unless we have information, build infrastructure, create institutions) Value purchasing will grow because employers and health plans will push it Because consumers don’t see big value differences this will mean n · Pay to stay (with my current doctors) · Trading down based on costs for commodities · Foregoing care or deferring care Lack of adequate infrastructure will fuel public discontent n · Cost shifting as a gotcha rather than informed consumerism Ideally it will move market but…. n · Will it save total costs? (International) · Do the value players have the capacity to absorb more patients (drugs it’s easy, hospitals and doctors it’s hard) · A triumph of ideology over infrastructure 59

How Can We Impact Costs? Catastrophic: • DSM • Pay for performance • IT (e. g. , CPOE, etc. ) Consumer Corridor Preventive Coverage 60

Who Pays More? Who Benefits? HC/GDP Business - Rx -61 Government + Hosps +- Households ++ MDs -O+ Others ?

HIT and Chronic Care HIT is good thing don’t get me wrong EMR is a PET It won’t save money quickly Expectations are too high, but …… n n · · You gotta spend to save You create a platform for improvement We do not have another idea Strong bi-partisan support conceptually …. . Show me the money The power of simple disease registries: what can you achieve on 3 x 5 cards and a telephone Enough conferences already, let’s get going What about the vast rabble of American doctors? n n n 62

Four Scenarios for Health Care 2004 -2010 Individual Minor Delivery System Reform Major Delivery System Reform 63 Tiers R’Us Market Nirvana Government Bigger Government National Rational Healthcare

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 n n n n n 64

Scenario 2: Bigger Government n n 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 65

Scenario 3: Market Nirvana n n n 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 66

Scenario 4: National Rational Healthcare n n n n n Universality and Delivery System Redesign Evidence-based floors and ceilings Pay for Performance Daughter of Capitation 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 21 st century IT and bioscience infrastructure 67

Floors and Ceilings: Not Universal Care n n Tiers no matter what, so pick your poison Tiered Insurance · No coverage for many · Shitty coverage for most · Great coverage for the rich and the lucky n Tiered delivery · Primary care clinics and adequately supported public hospitals · Community hospitals and economically restricted networks for the middle class · It’s good to be rich because you get the best healthcare in the world · Don’t be poor, don’t get sick. Don’t retire 68

A Closing Thought on Lust: Despite Bob Dole as Spokesman……. . Consumers who have talked to a doctor about a drug that is advertised (2000). Conclusion: Republicans would have more sex if it wasn’t for their allergies. 69