Managed Care is Dead….
Long Live Managed Care
A quick history and overview of
America’s private health
insurance plans
Jonathan P. Weiner, Dr. P.H.
Professor or Health Policy & Management
Johns Hopkins Bloomberg School of Public Health
(jweiner@jhsph.edu)
At lightning speed, this primer
session will:
• Provide a brief history and nuts-and-bolts
overview of health insurance and managed care
in the US.
• Highlight some reasons for and effects of the
recent “Managed Care Backlash.”
• Help provide a context for understanding health
care reform proposals presented at this
conference.
All slides copyright the Johns Hopkins University - 2008
2
Of course its all about the money -- US
health care spending: 1962-2008
2500
Dollars (billions)
2000
1500
1000
500
0
1962 1966 1970 1974 1978 1982 1986 1990 1995 1998 2000 2008
Source: HCFA, CMS
Year
3
Per capita health Spending ($PPP)*
Health spending vs GDP in OECD nations:
The US is the outlier
6500
6000
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
United
States
Belgium
Luxembourg
Australia
Norway
Switzerland
Austria
Iceland
Canada
France
Germany
Greece
Czech
Republic
New Zealand
Portugal
Netherlands
Ireland
Italy
Finland
Spain
Japan
Slovak
Republic
Denmark
Sweden
United Kingdom
Korea
Hungary
Poland
Mexico
Turkey
0
5 10 15 20 25 30 35 40 45 50 55 60 65 70
*Purchasing power parity
Source: OECD in Figures, 2006, 2007
Per capita GDP (thousands $PPP)*
4
Alternative approaches for financing /
organizing health care
• Government employed providers
• Government “social insurance”
– Mandatory buy-in
– Entitlement for special populations
• As “benefit” of employment
– Insurance
– Direct care or access to contract providers
•
•
•
•
Union/worker collectives
Privately purchased health insurance
Out of pocket / private pay
Charity care
5
Proportion of Americans with health
insurance: 1940-2008
100
90
70
60
50
40
30
20
10
20
08
20
00
19
95
19
90
19
80
19
75
19
70
19
65
19
60
19
55
19
50
19
45
0
19
40
% Insured
80
Year
6
US Health Insurance: Some Historical
Highlights
• 1930’s -- Blue-Cross/ Blue Shield and Hospital
Association.
• 1930’s – Prepaid-Group Practices (PGPs) and
Union/Employers
• 1950’s – Commercial insurers get into the act
• 1960’s -- Federal “great society” – Medicare and
Medicaid
• 1970’s - The “Health Maintenance Organization” (HMO)
Act (the unholy alliance of AMA sponsored IPAs and
union friendly PGPs)
7
Why Employers Got Involved In Health
Care in the US
• Healthy employees are productive employees
• European immigrant / union expectations
• Tax advantage
• Attracts good employees
• Employers filled the vacuum in the 1930-50’s,
(now “stuck” in this role).
8
Health Insurance Coverage in the U.S., 2006
Uninsured
16%
EmployerSponsored
Insurance
54%
Medicaid/
Other Public
12%
Medicare
14%
Total = 296.1 million
Private NonGroup
5%
SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of March 2007 CPS.
9
Most Americans get health insurance “privately,” but
the public sector bankrolls almost half of all care
(% Distribution of Personal Health Expenditures by Payer, 1980-2006)
70%
60%
Private Funds
59.9 60.8 61.1 59.5 58.2
57.0 55.6 55.2 55.1 55.6 57.0 57.4 57.3 56.3 56.1 56.0 55.6 55.3
54.7
50%
40%
30%
45.3
44.9 44.4
43.0 44.4 44.8
43.0 42.6 42.7 43.7 43.9 44.0 44.4 44.7
41.8
40.5
40.1 39.2 38.9
Public Funds
20%
10%
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
85
19
19
80
0%
.
Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National
Health Statistics Group,
10
The Most Important Chart in this Presentation:
(Private Health Insurance Premiums, Worker’s Earnings
and General Inflation, 1988-2007)
Health Insurance Premiums
20%
18%
Workers' Earnings
18.0%
Overall Inflation
16%
14%
13.9%
12.9%*
14.0%
12%
11.2%*
12.0%
10.9%*
10%
8.5%
8%
9.2%*
7.7%*
6.1%*
8.2%*
6%
5.3%*
4%
3.7%
2%
.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2007;
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
19
99
2.6%
98
19
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
97
0.8%
0%
11
The “Rise and Fall” of Managed Care is
Embodied in this Trend Line
In the late 1980’s the
bankrollers of the system said
enough was enough, and the
era of “managed care” was
born. HMOs and their
techniques served as the
model.
12
Managed Care Organization's Approximate
Share of the Health Insurance Market in 1988 &
2008
1988
2008
FFS 15%
MCO 25%
FFS 75%
FFS 75%
MCO 25%
MCO 85%
FFS 15%
MCO 85%
13
The US Health Insurance / “Managed Care”
Models (and approx market share in 2008)
• Traditional Fee-for Service (Unmanaged)
– 15% (Mainly Medicare)
• Preferred Provider Organization (PPO) and other
“loose” managed care plans
– 47% (includes “consumer defined health plans” /
“high deductible health plans”)
• Health Maintenance Organization (HMO)
– 38% (includes “point of service” “open-HMO”)
14
The Key “Ingredients” of Managed
Care
• Care “management”
– aka, utilization/disease management
• Vertical integration / coordination of
independent providers
• Financial risk sharing with providers and
consumers
15
Types of health plans have shifted over
the years (employer based plans)
1988
73%
1993
46%
1996
27%
1999
2000
16%
31%
10%
2001
*
2002
*
14%
24%
42%
24%
21%
46%
23%
4%
27%
52%
18%
2003
5%
24%
54%
17%
2004
5%
25%
2005 *3%
55%
21%
2006
3%
20%
2007
3%
21%
0%
15%
61%
15%
60%
13%
57%
20%
40%
13%
60%
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 19992007; KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The
Health Insurance Association of America (HIAA), 1988.
*
7%
39%
29%
7%
26%
28%
28%
8%
*
21%
11%
4%
5%
80%
Conventional
HMO
PPO
POS-HMO
CDHP/HDHP
100%
16
Private managed care plans care for the majority of
Medicaid / S-CHIP enrollees (Trends ‘90-’04)
Enrollment (in millions)
50
45
40
25.3
28.3
30.9
33.4
33.6
33.4
33.2
32.1
30.9
31.9
33.7
36.6
40.1
35
30
25
20
15
23.0
25.6
27.3
28.6
25.8
23.6
19.9
0
2.3
2.7
3.6
4.8
1990
1991
1992
1993
7.8
9.8
1994
1995
14.3
14.2
14.9
13.3
15.3
16.6
17.8
18.8
20.8
1996
1997
1998
1999
2000
2001
10
5
16.7
15.8
17.0
42.7
17.5
44.4
17.4
23.1
25.3
26.9
2002
2003
2004
Number Enrolled in Traditional Medicaid Programs
Number Enrolled in Medicaid Managed Care
Source: KFF
17
Medicare’s Private MCO (“Medicare Advantage”)
Enrollment has Waxed and Waned
35%
30%
% of Beneficiaries in MCOs
25%
20%
15%
10%
5%
0%
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: CMS
18
The managed care backlash
and public perceptions
19
US Consumer Perceptions
20
US Public’s Perception on
Regulation and Managed Care
21
Consumers Don’t Really Understand Why Health Care Costs are Rising
Percent who say each is a “one of the single biggest factors in rising health
care costs”:
50%
Drug/insurance companies making too much
money
Too many medical malpractice suits
37%
Fraud and waste in the health care system
37%
Doctors/hospitals making too much money
36%
Administrative costs in handling insurance claims
30%
People getting treatments they don’t really need
30%
People needing more care due to unhealthy lifestyles
29%
Use of expensive new drugs/treatments/technology
28%
The aging population
More people are getting better medical care
23%
12%
SOURCE: ABC News/KFF/USA Today Health Care in America Survey (conducted September 7-12, 2006)
22
The “backlash” has not had much impact on MD /
MCO financial relations (Trends in Physician Contracting and
Managed Care Revenue, 1996-2005)
1996-97 1998-99 2000-01 2004-05
Physicians with No Managed
Care Contracts
9.4%
8.6%
9.2%
11.5%*
Average Number of Managed
Care Contracts Among
Physicians with ≥1 Managed
Care Contract
12
13
13
13
Physicians with No Managed
Care Revenue
5.7%
5.2%
5.8%
8.6%*
Revenue from Managed Care
Among Physicians with ≥1%
Managed Care Revenue
(Mean)
42%
45%
45%
44%
*Change from 2000-2001 is statistically significant at p<.001.
Source: Center for Studying Health System Change, Community Tracking Study
23
24
25
The three decades of private health insurance: The
solutions must be here somewhere??
FFS
MCO
HMO
Provider
Dominance
Open
Access
MCO Product
Expansion
Costs out of
Control
Consumer
Driven HC
We gotta try
Something new
MC
Backlash
27