Trends in Healthcare CostsTrends in Healthcare Costsand the Concentration of Medical and the Concentration of Medical

Expenditures Expenditures

Steven Cohen, Ph.D. and David Meyers, M.D.Steven Cohen, Ph.D. and David Meyers, M.D.

National Advisory CouncilNational Advisory Council

July 13, 2012July 13, 2012

Significance of the IssueSignificance of the Issue

Health care expenditures:Health care expenditures: Over one-sixth of the U. S. GDP Over one-sixth of the U. S. GDP Rate of growth exceeds other sectors of the economyRate of growth exceeds other sectors of the economy Recent moderation in rate of growthRecent moderation in rate of growth Expenditure distribution is highly concentrated Expenditure distribution is highly concentrated Among the largest components of the Federal and states’ budgetsAmong the largest components of the Federal and states’ budgets Cost containment of continuing concern to private and public Cost containment of continuing concern to private and public

payerspayers

Most Recent Cost StatisticsMost Recent Cost Statistics

In 2010 total expenditures = $2.6 trillionIn 2010 total expenditures = $2.6 trillion– 17.9% of GDP17.9% of GDP– 3.9% increase over 20093.9% increase over 2009– growth remained slow growth remained slow – $8,402 per capita$8,402 per capita

Projected to be ~20% of GDP in next Projected to be ~20% of GDP in next decadedecade

Source: Anne B. Martin, David Lassman, Benjamin Washington, Aaron Catlin and the National Health Expenditure Accounts Team, Health Affairs, January 2012

Medical Expenditure Panel Medical Expenditure Panel Survey (MEPSSurvey (MEPS))

Data resources:Data resources:Annual Survey of 14,000 households: Annual Survey of 14,000 households: Provides national and Provides national and state estimates (most state estimates (most

populous)populous) of health care use, expenditures, of health care use, expenditures, insurance coverage, sources of payment, access to insurance coverage, sources of payment, access to care and health care qualitycare and health care quality

Permits studies of: Permits studies of: Distribution of expenditures and sources of paymentDistribution of expenditures and sources of payment Role of demographics, family structure, insuranceRole of demographics, family structure, insurance Expenditures for specific conditionsExpenditures for specific conditions Trends over timeTrends over time

Medical Provider Component Medical Provider Component

Targeted SampleTargeted Sample All associated hospitals and associated physiciansAll associated hospitals and associated physicians Sample of associated office-based physiciansSample of associated office-based physicians All associated home health agenciesAll associated home health agencies All associated pharmaciesAll associated pharmacies

Data CollectedData Collected Dates of visitDates of visit Diagnosis and procedure codesDiagnosis and procedure codes Charges (except Rx) and paymentsCharges (except Rx) and payments

MEPS Insurance Component MEPS Insurance Component

Annual survey of 40,000 establishmentsAnnual survey of 40,000 establishmentsNational and sNational and state Level estimates of employer tate Level estimates of employer

sponsored coveragesponsored coverage:: Availability of health insuranceAvailability of health insurance Access to health insuranceAccess to health insurance Cost of health insuranceCost of health insurance Benefit and payment provisions of private health Benefit and payment provisions of private health

insuranceinsurance

Trends in medical care costs, Trends in medical care costs, coverage and use coverage and use

Impact of economic and behavioral factors, payment Impact of economic and behavioral factors, payment and individual demand on health care service and individual demand on health care service utilization and expendituresutilization and expenditures

Distribution of expenditures, concentration and Distribution of expenditures, concentration and persistence of high levelspersistence of high levels

Expenditures for chronic conditions: Expenditures for chronic conditions: focus on focus on patients with multiple chronic conditionspatients with multiple chronic conditions

Who Uses MEPS Data?Who Uses MEPS Data? MEPS IC data are used by the MEPS IC data are used by the Bureau of Economic Bureau of Economic

AnalysisAnalysis in computing the nation’s GDP. in computing the nation’s GDP. White House, CBO, CRS, Congress and the Treasury: White House, CBO, CRS, Congress and the Treasury:

frequentfrequent requestsrequests for findings on health expenditures, for findings on health expenditures, insurance coverage and sources of payment.insurance coverage and sources of payment.

Used extensively by Used extensively by the GAO the GAO to determine trends in to determine trends in employee compensationemployee compensation

Used by Used by TreasuryTreasury to determine amount of the small to determine amount of the small employer health insurance tax credit as part of the employer health insurance tax credit as part of the Affordable Care ActAffordable Care Act

Assess Trends in Concentration of Healthcare $s Assess Trends in Concentration of Healthcare $s and Distributional Cost Estimates and Distributional Cost Estimates

27

38

55

70

97

28

39

56

70

97

28

38

56

69

97

20

30

47

64

97

0102030405060708090

100

Top 1% Top 2% Top 5% Top 10% Top 50%Population ranked by expenditures

1977 1987 1996 2008

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Source: National Medical Care Expenditure Survey, 1977; National Medical Expenditure Survey, 1987; Medical Expenditure Panel Survey, 1996 and 2008.

Characteristics that Influence High Characteristics that Influence High Levels of ExpendituresLevels of Expenditures

Chronic condition(s): heart disease, cancer, mental Chronic condition(s): heart disease, cancer, mental disorders, COPD, diabetesdisorders, COPD, diabetes

End of life careEnd of life care In-patient care, unnecessary re-admissionsIn-patient care, unnecessary re-admissions Medical errorsMedical errors Overuse of healthcare services Overuse of healthcare services ObesityObesity

12

Health Care Costs Concentrated in Sick FewHealth Care Costs Concentrated in Sick Few—Sickest 10% Account for 65% of Expenses—Sickest 10% Account for 65% of Expenses

Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey (2009)Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey (2009)

DistributionDistribution of health expenditures for the U.S. population, by magnitude of expenditure, 2009

1%5%

10%

50%50%

65%65%

22%22%

50%50%

97%97%

2009

Exp

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in b

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Total expenditures for the 5 most costly conditions Total expenditures for the 5 most costly conditions among the overall population and among the highest 5 percent among the overall population and among the highest 5 percent

based on their overall medical expenditures, 2009based on their overall medical expenditures, 2009

  Number of Treated Chronic Conditions

   0-1 2-3   4 or more

All adults (18 and over) Estimate SE Estimate SE Estimate SE

Average expenditures $ 2,367 62 $ 8,478 303 $  16,257  665

Age 18-44

Average expenditures $ 1,862 62 $ 8,165 744 $  14,746  2,308

Age 45-64

Average expenditures $ 2,721 117 $ 8,129 462      $  17,685  1,284

Age 65 and over

Average expenditures $ 4,878 401 $ 8,979 452 $  15,553  820

Medical Expenditures for Individuals with Chronic Conditions, 2009

Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey; excludes dental and OME $s

Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2008

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ank

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Persistence in the level of health care expenditures, U.S. civilian

noninstitutionalized population, 2008 to 2009

Percentile rank by health care expenditures, 2008

Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, HC-121, HC129, and HC-130 (Panel 13, 20082009)

Factors for Cost Projection ModelsFactors for Cost Projection Models Demographic/economic characteristicsDemographic/economic characteristics: Age; sex; race/ethnicity; marital status; region; : Age; sex; race/ethnicity; marital status; region;

MSA classification, family size, poverty status MSA classification, family size, poverty status Health status measuresHealth status measures: health status; activity limitations : health status; activity limitations Health insurance coverageHealth insurance coverage: full year insured; part year insured; uninsured: full year insured; part year insured; uninsured Health conditions: Health conditions: Diagnosis of arthritis; cancer; Diagnosis of arthritis; cancer; BMIBMI; cerebrovascular disease; diabetes; ; cerebrovascular disease; diabetes;

heart disease; high blood pressure; high cholesterol; mental health; back pain; pregnancy heart disease; high blood pressure; high cholesterol; mental health; back pain; pregnancy Accidental events: traumaAccidental events: trauma Utilization measuresUtilization measures: prior year inpatient events; ambulatory visits; number of prescribed : prior year inpatient events; ambulatory visits; number of prescribed

medicine purchasesmedicine purchases Expenditure measuresExpenditure measures: prior yr. total health care spending : prior yr. total health care spending

Profiles for ImprovementProfiles for Improvement

The Camden Coalition The Camden Coalition focused on thirty-six super-utilizers. They averaged 62 hospital and E.R. visits focused on thirty-six super-utilizers. They averaged 62 hospital and E.R. visits per month before joining the program and 37 visits after—per month before joining the program and 37 visits after—a 40% reduction.* a 40% reduction.*

Their hospital bills averaged $1.2 million per month before and just over $0.5 million after— Their hospital bills averaged $1.2 million per month before and just over $0.5 million after— a 58% a 58% reductionreduction. .

Finding the next “Hot Spot:” Can we lower medical costs by giving the neediest patients better care?Finding the next “Hot Spot:” Can we lower medical costs by giving the neediest patients better care?

Focused efforts on the role of prevention and care management, obesity control, patient safety, Focused efforts on the role of prevention and care management, obesity control, patient safety, accountable care organizations and reductions in medical errors.accountable care organizations and reductions in medical errors.

**Atul Gawande, Atul Gawande, The Hot SpottersThe Hot Spotters. The New Yorker, 1-24-11. The New Yorker, 1-24-11)

HHS Vision & Strategic Framework on HHS Vision & Strategic Framework on Multiple Chronic Conditions Multiple Chronic Conditions

Foster health care and public health system changes to improve the health of Foster health care and public health system changes to improve the health of individuals with multiple chronic conditions individuals with multiple chronic conditions

Maximize the use of proven self‐care management and other services by individuals Maximize the use of proven self‐care management and other services by individuals with multiple chronic conditions with multiple chronic conditions

Provide better tools and information to health care, public health, and social services Provide better tools and information to health care, public health, and social services workers who deliver care to individuals with multiple chronic conditions workers who deliver care to individuals with multiple chronic conditions

Facilitate research to fill knowledge gaps about, and interventions and systems to Facilitate research to fill knowledge gaps about, and interventions and systems to benefit, individuals with multiple chronic conditions benefit, individuals with multiple chronic conditions

U.S. Department of Health and Human Services. U.S. Department of Health and Human Services. Multiple Chronic Conditions—A Strategic Framework: Optimum Health and Quality of Life for Multiple Chronic Conditions—A Strategic Framework: Optimum Health and Quality of Life for Individuals with Multiple Chronic Conditions. Washington, DC. December 2010.Individuals with Multiple Chronic Conditions. Washington, DC. December 2010.

A Home for AHRQ’s Efforts A Home for AHRQ’s Efforts Around Multiple Chronic Conditions Around Multiple Chronic Conditions

(MCC)(MCC)

MCC is an organizing focus of AHRQ’s MCC is an organizing focus of AHRQ’s Prevention and Chronic Care PortfolioPrevention and Chronic Care Portfolio– Applying a comprehensive approach Applying a comprehensive approach

recognizing the need for primary, secondary, recognizing the need for primary, secondary, and tertiary prevention of MCCand tertiary prevention of MCC

Primary PreventionPrimary Prevention

Increasing access and appropriate utilization of Increasing access and appropriate utilization of clinical preventive services to prevent chronic clinical preventive services to prevent chronic conditions.conditions.– Centers for Excellence in Clinical Preventive ServicesCenters for Excellence in Clinical Preventive Services

– Support for the US Preventive Services Task ForceSupport for the US Preventive Services Task Force

– Developing composite measures for the receipt of Developing composite measures for the receipt of clinical preventive services among older adultsclinical preventive services among older adults

Bending the CurveBending the Curve

Transforming primary care to empower people to manage chronic Transforming primary care to empower people to manage chronic conditions and slow the rate of progression.conditions and slow the rate of progression.– PCMHPCMH

ResearchResearch EvaluationEvaluation ImplementationImplementation Convene Federal Collaborative on the PCMHConvene Federal Collaborative on the PCMH

– Care CoordinationCare Coordination– Team-based Care Team-based Care

Improving Care for People with MCCImproving Care for People with MCC

The aims of AHRQ’s MCC The aims of AHRQ’s MCC Research Network are to:Research Network are to:

– improve understanding about interventions improve understanding about interventions that provide the greatest benefit to MCC that provide the greatest benefit to MCC patients, patients,

– the safety and effectiveness of interventions the safety and effectiveness of interventions that may be affected by MCC, that may be affected by MCC,

– and interventions that may need to be and interventions that may need to be modified for specific patient populations. modified for specific patient populations.

AHRQ MCC Research NetworkAHRQ MCC Research Network

18 exploratory grants funded in 2008 with a focus on the use of 18 exploratory grants funded in 2008 with a focus on the use of preventive servicespreventive services

14 additional exploratory grants funded in 2010 under ARRA 14 additional exploratory grants funded in 2010 under ARRA focused on comparative effectivenessfocused on comparative effectiveness

13 infrastructure development grants funded in 2012 under 13 infrastructure development grants funded in 2012 under ARRA which will result in publicly available data setsARRA which will result in publicly available data sets

A Learning Network and Technical Assistance Center designed A Learning Network and Technical Assistance Center designed to support the overall effortto support the overall effort..

Early ResultsEarly Results

Dr. Cary GrossDr. Cary Gross and his team at Yale University were awarded and his team at Yale University were awarded a grant to develop a framework for determining which elderly a grant to develop a framework for determining which elderly patients are most likely to benefit from colonoscopy screening. patients are most likely to benefit from colonoscopy screening.

They found that a substantial number of Medicare They found that a substantial number of Medicare beneficiaries received screening even when potential harms beneficiaries received screening even when potential harms outweighed potential benefits. outweighed potential benefits.

They propose ways to improve screening for older adults with They propose ways to improve screening for older adults with and without multiple chronic conditions.and without multiple chronic conditions.

Issues for Further ConsiderationIssues for Further Consideration

Impact of trends: Impact of trends: The proportion of the population with multiple The proportion of the population with multiple chronic conditions is likely to continue as a consequence of the aging chronic conditions is likely to continue as a consequence of the aging of the population and rising obesity rates of the population and rising obesity rates

Related concerns:Related concerns: Attention to impact of high medical expenditures on Attention to impact of high medical expenditures on affordability and healthcare burdensaffordability and healthcare burdens

Effects on AHRQ Priority Populations: Effects on AHRQ Priority Populations: elderly, chronic disease(s), end elderly, chronic disease(s), end of life careof life care

Analytical needs: Analytical needs: Extended longitudinal profiles, research initiatives Extended longitudinal profiles, research initiatives and modeling efforts to identify strategies to improve health outcomes and modeling efforts to identify strategies to improve health outcomes and reduce expense for this populationand reduce expense for this population

What is AHRQ’s role?What is AHRQ’s role?

Where are the opportunities? Where are the opportunities?

Recommendations on data enhancements, research initiatives, Recommendations on data enhancements, research initiatives, modeling efforts?modeling efforts?

Questions for the Questions for the Advisory CouncilAdvisory Council