Medicare Prescription Drugs
Improvement and Modernization
Act of 2003:
What Do Employers Think?
Robert S. Galvin, MD
January 28, 2004
What The Bill Isn’t
Perfect
2
What The Bill Is
“The Triumph Of Experience Over Hope”
Apologies to Samuel Johnson
• Government Can Act on Health Care
• Employers Included in Dialogue
• Favors Competitive / Market Approach . . . But With
Safety Net
• Pushes Transparency / Quality Agenda
• Encourages Consumerism . . . Creates Possibility of
New Solutions
3
The Devil (And The Angel) Is In The Details
• Details of ‘Actuarial Equivalency’
• FASB Guidance
• HSA Design
• Rules for PBMs and Health Plans
Policy Community:
“Please Keep Employers Engaged in ’04”
4
Wall Street Journal
December 4, 2004
5
Quality Costs Less: One Example
CABG Performance
Innovation Performance Opportunity
Group
Group
Group
Wage and Severity-Adjusted
Average Cost
$16,043
$20,123
$26,321
Risk-Adjusted Inpatient Mortality
2.78%
2.92%
3.29%
Return to OR
0.62%
2.12%
2.43%
8.50
8.25
9.24
Severity-Adjusted Average
Length of Stay
Source: Premier Healthcare Informatics
6
Presentation To BRT Health Committee:
Where’s The Leverage in Better Purchasing?
(Gross Savings By Year 3, While Preserving or Improving Quality of Care)
18.0%
17.0%
Low Est.
16.3%
16.0%
Medium Est.
High Est.
14.0%
12.7%
12.2%
12.0%
10.0%
8.0%
7.3%
6.0%
6.5%
5.1%
5.0%
3.7%
4.0%
1.9%
2.0%
0.9%
0.0%
0.0%
More Efficient
Providers
More Efficient
More Efficient
Care Management Plan Administrator
Leaner Coverage
Level
Mercer Human Resource Consulting
7
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.”
Sounding Board
NEJM, September 19, 2002
 Transparency
 Incentives and Rewards
 Focus on Quality and Efficiency
8
Efficiency and Quality Create Value
Effectiveness (Actual v. Expected Complications)
Efficiency (Actual v. Expected Cost)
150%
100%
50%
0%
-50%
-100%
-150%
40%
Hospital
B
20% Hospital
A
15
58
0%
Hospital
26
C
-20%
Hospital
E
83
Hospital10
D
11
Hospital
F
6Hospital
G
-40%
What Policies Will Accelerate Us Getting To The
Right Lower Quadrant?
9
Final Thoughts
 Public and Private Sectors Are “In This Together” .
. . And Health Care Will Benefit When We Work
Together
 Improving What Happens Within the System Is
Key to How Many People Get Into the System
 Consumers Have the Right to Know . . . And
Payers Have the Obligation to Reward Quality
10