High Value Care:
Health Care Costs & Payment
Models
Bindu Swaroop, MD
Hospitalist Program
Department of Medicine
University of California, Irvine
September 2014
Learning Objectives
• Explain the basics of health insurance and
coverage
• Understand the impact of insurance coverage on
ability to adhere to treatment
• Explore how provider reimbursement models
can affect delivery of high value care
An uninsured patient’s perspective
Mr. M:
• 28-year-old man with severe abdominal pain,
diagnosed in the ED with ruptured appendicitis,
treated with IV antibiotics for 4 days, followed
by surgery
• Patient: “I grew up in a family without health
insurance my whole life, and our policy was
basically ‘Give it a couple of weeks’… so I didn't
want to call 911 or go to an emergency room”
An Uninsured Patient’s Perspective
• Julian McCullough, comedian
• Recorded at “Told,” a storytelling show
in New York City
• As heard on This American Life (NPR)
(#439)
• “How much? No health insurance, 7 days
in the hospital, … appendectomy:”
$45,000
1
Sources of Health Insurance
Uninsured
• Employer doesn’t offer
• Part-time work
• Unemployment
Uninsured
14%
Military
3%
Individual
private
insurance
9%
Employment
based
47%
Medicare
13%
Medicaid
14%
Source: U.S. Census Bureau
And do NOT qualify for
Medicare/Medicaid
Why do you think that
government financing
accounts for nearly 50% of the
expenditures when it covers
only 27% of population?
Individual Private Insurance
• Individual policies involve an individual
person paying a premium directly to a
“health plan” or insurance company,
which reimburses providers.
• Individual policies provide health
insurance for approximately 5% of U.S.
population.
Employment-Based Private Insurance
•
Employers usually pay all or part of the premium that purchases
health insurance for their employees.
•
This is a tax-deductible business expense and the government does
not treat the health insurance fringe benefit as taxable income to
the employee.
•
Therefore, the government is in essence subsidizing employersponsored health insurance (This subsidy was estimated at
$200B/year in 2006).
Government-Financed Insurance
• In the late 1950s, less than
15% of elderly had health
insurance
• In 1965, Medicare (for the
elderly) and Medicaid (for the
poor) was enacted
• First tax-financed govt.
insurance
Government-Financed Insurance
Medicare Part A
• Hospital insurance plan for
the elderly
• Financed through social security
taxes
• At age 65, pts who have paid
>10 years into SSI
automatically enrolled
• Those <65 totally and
permanently disabled may
enroll after 24 months of
disability
• Those with ESRD on HD usually
enrolled without wait period
3
Medicare Part B
• Insures the elderly for
physicians’ services
• Financed by federal taxes and
monthly premiums from
beneficiaries
• Available to those eligible for
Medicare Part A who elect to
pay the Medicare Part B
premium of $104.90/month
(2014)
Government Financed Insurance
4
Medicaid
• Federal program administered by the states, with the federal
government paying between 50% and 76% of total Medicaid
costs
• The federal government requires that a broad set of services
be covered under Medicaid, including hospital, physician,
laboratory, x-ray, prenatal, preventive, nursing home and
home health services
Patient Protection & Affordable Care Act (PPACA=
“Obamacare”)
• Beginning Jan 1 2014, sets the Medicaid minimum income
eligibility across the US to <133% of the federal poverty level
• For the first time, low income adults without children are
guaranteed coverage without needing a waiver
Medicaid- California
• The nation’s largest Medicaid program, with nearly 2.5 million more
enrollees
• A source of health care coverage for:
More than 1 in 5 Californians under age 65
1 in 3 of the state’s children
The majority of people living with AIDS
• Pays for:
46% of all births in the state
2/3 of all nursing home residents
60% of all net patient revenues in California’s public hospitals
• Will bring in $37 billion in federal funds in FY2012–13
Access to Healthcare
Does Health Insurance Make a Difference?2
Uninsured
• Fewer regular medical visits and preventive health
screening
▫ Higher rates of undiagnosed and uncontrolled HTN,
diabetes and hypercholesterolemia
▫ Lower survival rates for breast and colorectal cancer
• Increased mortality (likely owing to greater
morbidity from chronic medical conditions like
diabetes, HTN, and cardiovascular disease)
• Less care during hospitalization
▫ Less likely to receive a costly test or procedure
▫ Higher in-hospital mortality rates
Clinical Case #2 :
Soccer Injury
• A 17 y/o male is seen in the
office by an orthopedist after
a soccer injury to his anterior
chest; he gets an x-ray that
shows a clavicular fracture
• Patient is the son of two
doctors and has health
insurance; he did not utilize
the emergency department
• Rx: sling, NSAIDS, rest,
follow up in 6 weeks for
office visit and x-ray
Office Visit
Charges
Reimbursement
Out of Pocket
Cost
(HMO)
Out of Pocket
Cost (High
deductible plan
or health
savings
account)
X-ray
Clinical Case #2 :
Soccer Injury
Think About:
How much would this patient
would have to pay:
• If the patient is enrolled in an
HMO/PPO with co-pays?
• If the patient is enrolled in a
high deductible health plan?
• If the patient is uninsured?
How might this affect
adherence to the treatment
plan?
Office Visit
X-ray
Charges
$250
$125
Reimbursement
$100
$50
Out of Pocket
Cost
(HMO)
$25
$15
Out of Pocket
$250
Cost (High
deductible plan
or health
savings account)
$125
Methods of Payment
(Health Provider Reimbursement Models)
Diagnosis-related groups (DRGs)
Physician or hospital is paid one sum for all services delivered
during one illness; there is a different set case-price for each of
approximately 750 distinct DRGs (Medicare)
Per Diem
The hospital is paid for all services delivered to a patient during
one day (private insurance, PPOs/HMOs)
Fee-For-Service
The physician or hospital is paid a fee for each service (e.g.,
medication, IV fluids, EKG, surgical procedure) provided
(uninsured, some private insurance)
Capitation
One payment is made for each patient’s treatment during a
month or year (has now virtually disappeared, previously largely
by HMOs)
Medi-Cal
Expenditures
(FY2011)
Managed Care
26%
FFS
74%
Methods of payment: ACOs
Accountable Care Organizations (ACOs)
• Realign value with payment incentives (“pay-forperformance”)
• In 2010, a portion of the ACA authorized CMS to
create an ACO program to service CMS users
(Medicare and Medicaid)
• Shared savings approach that sets aside a financial
reward to groups of providers or large healthcare
organizations who come in under a yearly
‘benchmark’ spending goal and meet pre-defined
quality standards
Clinical case #3
• 55-year-old woman admitted with a methicillinsensitive Staphylococcus aureus and Pseudomonas
aeruginosa osteomyelitis. Her wound is debrided
and she is started on IV piperacillin/tazobactam. A
PICC line is placed.
• She lives at home with her husband who is healthy
and her 32-year-old daughter
• On hospital day #4 she is improved and you think
she is medically ready to leave the hospital. She will
need 6 weeks of IV antibiotics to clear the infection.
Clinical Case #3
3 Scenarios:
• #1: The patient has Blue Cross health insurance and
a PCP
• #2: The patient is recently unemployed and has no
health insurance and doesn’t qualify for public
assistance. She has a PCP she saw over one year ago
whom she would like to follow up with.
• #3: The patient is now 65 and has Medicare Part A
but has not purchased Medicare Part B. She does
not have a PCP
Clinical Case #3
Answer two questions about each scenario:
1. Can you safely discharge this patient home?
2. If not, what alternatives do you have?
Clinical Case #3
• #1: Blue Cross Insurance- the easiest discharge
▫ This patient can go home almost immediately with a
visiting nurse.
• #2: Uninsured- this is the most difficult
▫
▫
▫
This patient will most likely have to stay in the
hospital to complete her antibiotic course
She will likely receive a huge hospital bill that she
will be unable to pay.
Without insurance, it is unlikely that she would be
accepted to a skilled nursing facility or receive
visiting nursing services.
• #3: Medicare Part A, but not Part B
▫
Need to review services covered by Part A
Clinical Case #3
What services are covered under Medicare Part A?
Services
Benefit
Medicare Pays
Hospital
First 60 days
61st to 90th day
91st to 150th day
Beyond 90 days if lifetime reserve days
are used
All but a $1216 deductible per illness
All but $304 per day
All but $608 per day
Nothing
Unskilled
Nursing at
Home
Care that is primarily custodial is not
covered
Nothing
Skilled
Nursing
Center
First 20 days
21st to 100th day
Beyond 100 days
All
All but $152 per day
Nothing
Home
health
Care
100 visits per illness
100% for skilled care as per Medicare rules
Hospice
As long as physician certifies the
patient suffers from terminal condition
100% for most services, co pays for outpatient
pharmaceuticals and coinsurance for inpatient respite
care
Steps Toward High Value,
Cost-Conscious Care5
• Step one: Understand the benefits, harms, and relative costs of the
interventions that you are considering
• Step two: Decrease or eliminate the use of interventions that
provide no benefits and/or may be harmful
• Step three: Choose interventions and care settings that maximize
benefits, minimize harms, and reduce costs (using comparativeeffectiveness and cost-effectiveness data)
• Step four: Customize a care plan with the patient that incorporates
their values and addresses their concerns
• Step five: Identify system level opportunities to improve outcomes,
minimize harms, and reduce healthcare waste
Steps Toward High Value,
Cost-Conscious Care5
• Step one: Understand the benefits, harms, and relative costs of the
interventions that you are considering
• Step two: Decrease or eliminate the use of interventions that
provide no benefits and/or may be harmful
• Step three: Choose interventions and care settings that maximize
benefits, minimize harms, and reduce costs (using comparativeeffectiveness and cost-effectiveness data)
• Step four: Customize a care plan with the patient that
incorporates their values and addresses their concerns
• Step five: Identify system level opportunities to improve outcomes,
minimize harms, and reduce healthcare waste
Summary
• Insurance status and type of
coverage (public, private,
HMO/PPO or high-deductible
plan) affects adherence to
recommended treatment plans
• Given large differences in
coverage/affordability, we must
all seek to individualize patient
care to improve quality and safety
and decrease unnecessary costs
References
1. Clip courtesy of This American Life from WBEZ Chicago
2.J Michael McWilliams. Health Consequences of
Uninsurance among Adults in the United States: Recent
Evidence and Implications. Milbank Q. 2009 June; 87
(2): 443-494:
3.Department of Health and Human Services.
www.medicare.gov (accessed 7/9/2013)
4.Department of Health and Human Services.
www.medicaid.gov (accessed 7/15/2013)
5.Adapted from Owens, D. Ann Intern Med. 2011;154:174180