UniversalCoverage:ANobleGoal DemandsComplexandDifficultChoices

WilliamC.Hsiao,PhD,FSA
K.T.LiProfessorofEconomics HarvardSchoolofPublicHealth

Barcelona,Spain
May16,2012

Outline
UniversalCoverage:thedifficultchoices Efficiencygainsasanapproachto financeuniversalcoverage ThestrategyofUnitedStatestoachieve andsustainuniversalcoveragethrough efficiencygains.

Reliance of countries on Out-ofPocket Spending (OOP)

Source: WHO estimates for 2010, countries with population > 600,000

CostGrowthinEurope

Source:EuropeanCommission2010

WhatisUniversalCoverageandWhy?
UniversalCoverage(UC)isallpeoplehave
accesstoservicesanddonotsufferfinancial hardshippayingforthem.
WHO,WHA58.33,May,2005

WhyUC?
Promotingandprotectinghealthisessentialto humanwelfareandsustainedeconomicand socialdevelopment.
WHO.TheWorldHealthReport,2010

UniversalCoverage Universalcoverageisaneffective strategytoachievenoblegoals. Universalcoverageinvolves difficultchoicesandtradeoffs:

Breadth Scope Depth

PerformanceDimensionsofHealthSystems
HealthOutcomes FinancialRisk Protection Public Satisfaction

Level

Distribution

Source:Hsiao,1998

NeedFundtoMakeUCaREALITY

DifficultChoicesUnderFinancialConstraint

Tradeoffs:
Breadth:Expandpopulationcovered? Scope:Expandhealthservicescovered? Depth:Expandamountofcharges covered?Reducepatients outofpocket paymentsuchascopaymentorunderthe tablepaymentforcoveredservices.

HowtoFinanceUniversalCoverage?
Expandcoverageand/orsustainUC requirefunding HowtogeneratethefundingforUC? Additionalornewsourcesof financing Efficiencygains

AlternativeFinancingPathways
EfficiencyGains FinancingSources

PotentialEfficiencyGains
WHOWorldHealthReport2010:
Thisreportestimatesthatfrom 20%to40%ofallhealthspending iscurrentlywastedthroughinefficiency.

$1ofefficiencygain=$1ofnewfunding
FinancingsourcesforUC:Additionalfunds +EfficiencyGains.

TheCausesofInefficiency
Allocativeinefficiency Politicsandbureaucraticmanagement PoorGovernancestructure,patronage Poormanagement Corruption

PotentialEfficiencyGains:DrugPricing

Sources:Coma(Catalonia),Godman(Austria) ExpertRev.PharmacoeconomicsOutcomesRes.2009

AnIllustrationofDrugReferencePricinginAustria

Source:Godman,ExpertRev.PharmacoeconomicsOutcomesRes. 2009

PotentialEfficiencyGains:HospitalPayments

Sources:Farrar,BMJ,2009;Herwartz,Christian AlbrechtsUniversittKiel,2011;Biorn,Health CareManagementScience, 2003

Kyrgyzstan:ACaseStudyinEfficiencyGains ThroughComprehensiveReform

Sources:Balabanovaetal.LondonSchoolofHygeineandTropical Medicine,2011; Kutzin,etal.BulletinoftheWorldHealthOrganization,2009

Kyrgyzstan:HealthSystem Performance

Sources:Balabanovaetal.LondonSchoolofHygeineandTropical Medicine,2011; Kutzin,etal.BulletinoftheWorldHealthOrganization,2009

ProblemsConfrontingUSA
50millionAmericansuninsured;another50 70millioninadequatelyinsured. Howtoachieveuniversalcoverage? AffordableCareAct(ObamaCare). Howtofinanceandsustaincoverage EfficiencyGains:
Preventionandprimarycare Medicalhomes;AccountableCareOrganizations Paymentreform:Capitation,Payfor performance

TheIncreasingCostsofHealthCare SqueezeOut OtherPublicSpendingPriorities

MASSACHUSETTSSTATEBUDGET,FY2001VS.FY2011
STATESPENDING(BILLIONSOFDOLLARS) FY2001 FY2011

+$5.1B (+59%)

$4.0B (20%)

15%

13% 23% 38% 33% 50% 11%

HealthCareCoverage (StateEmployees/GIC; Medicaid/HealthReform)

SOURCE:

Public Health

Mental Health

Education Infrastructure/ Housing

Human Services

Local Aid

Public Safety

MassachusettsBudgetandPolicyCenterBudgetBrowser.

22

Massachusetts:AlternativeQualityContract

Sources:Song,etal.NEJM 2011;Mechanic,etal.HealthAffairs 2011; Chernew,etal.HealthAffairs 2011

PotentialEfficiencyGainsthroughMedicalHomes
MedicalHome Pilot
Interventions StaffIncreasesandExpanded VisitTimes SalaryPaymentforPhysicians andTimeAllottedforDesktop Medicine Results ImprovementsinPatient Satisfaction,Quality,and HospitalizationRates Estimatedsavingsof$10.30per memberpermonth

ProvenHealth Navigator
Interventions TransferofCaseandPopulation ManagementtoPrimaryCare Practice SharedsavingsIncentivesfor Physicians Results 18%reductioninhospital admissions 36%reductioninhospital readmissions

Sources:Reid,etal.HealthAffairs,2010; Gilfillan,etal.AmericanJournalofManagedCare,2010.

Summary
AchievingUCrequiresprioritysettinganddifficult tradeoffs.Alternativepathwaysare:
Breadth:populationcovered. Scope:essentialservicestobecovered. Depth:amountofpatientsstillhavetopay.

Efficiencygains+additionalfundingisthestrategy tomobilizenecessaryfinancingforUC. Assureadequatesupplyofeffectiveandefficient servicesrequirehealthsystemreformsin organization,payment,regulation,governanceand management