Introduction to Healthcare and Public Health in the US: Financing Healthcare (Part 2)

Introduction to Healthcare and Public Health in the US: Financing Healthcare (Par t 2)

Audio Transcript

Welcome to Introduction to Healthcare and Public Health in the US, Financing He althcare (Part 2). This is Lecture (b). The component Introduction to Healthcare and Public Health in the US, is a survey of how healthcare and public health are organized and services delivered in the US.

The objectives for Financing Healthcare (Part 2) are to:  Describe the revenue cycle and the billing process undertaken by different healthcare enterprises.  Understand the billing and coding processes, and standard code sets used in the claims process.  Identify different fee-for-service and episode-of-care reimbursement methodologies used by insurers and healthcare organizations in the claims process.  Review factors responsible for escalating healthcare expenditures in the US.  Discuss methods of controlling rising medical costs.

This lecture discusses the high cost of healthcare services in the US, including US healt hcare expenditures and medical inflation, and the factors that contribute to the increasin g healthcare expenditures in the US. It also describes the Emergency Medical Treatme nt and Active Labor (EMTALA [ehm-tall-uh]) Act, its provisions for care for the uninsure d, and its potential contribution to increasing medical costs and details the cost of care f or the uninsured.

In 2009, total US healthcare expenditures exceeded two-point-four trillion dollars. Durin g the last ten years, there has been an 3.8% increase in total spending as a share of gr oss domestic product with national health expenditures growing from 13.8% of gross domestic product (GDP) in 2000 and reaching 17.6% of GDP in 2009. This rate of incre ase has not been seen since the 1980s. In 2009, more than one out of every six dollars spent in the US was for a healthcare exp enditure.

Health IT Workforce Curriculum Introduction to Healthcare and Public Health in the US 1 Version 3.0 / Spring 2012 Financing Healthcare (Part 2) Lecture b

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015. Slide 5 Additionally, since 1960, the average cost of healthcare per person has risen. Total nati onal healthcare expenditures per capita reached almost $8100 in 2009 with healthcare expenditures outpacing the consumer price index each year.

The figure on this slide compares healthcare expenditures in the US to other countries u sing data from the Organisation for Economic Co-operation and Development. As illustr ated, the US spends fifty percent more than the next closest industrialized country, Nor way, and almost twice the average expenditure of other industrialized countries.

This figure shows that nearly fifty percent of healthcare spending in the US pays for serv ices provided to five percent of the population, with one percent of the population accou nting for approximately twenty-three percent of all healthcare expenditures. As seen in the last column, fifty percent of the population in the US accounts for just thr ee percent of all healthcare in the US. What factors account for seventy-five percent of the healthcare expenditures in the US being used by only fifteen percent of the population?

The factors that contribute to higher healthcare expenditures include technology, increa sed demand and utilization due to chronic disease, and the aging population. This resul ts in rising hospital and physician costs, as well as increased pharmaceutical demand a nd cost. In addition, administrative costs account for approximately seven percent of he althcare expenditures in the US, twice the average of other industrialized countries.

The Congressional Budget Office (CBO) estimates that almost one-half of the healthcar e expenditures in the US are due to the cost of technology. The CBO refers to technolo gy in healthcare as the procedures, equipment, and processes used in the delivery of h ealthcare services.

Over the years, technology has led to advances in medicine that have prolonged the life expectancy of the average person. Previously untreatable conditions along with new m edical and surgical procedures have permitted individuals to survive conditions that, if n ot fatal, were debilitating. For example, arthritis in hips and knees, which created mobility issues for people, can n ow be treated with hip and knee replacements that allow individuals to continue an activ

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015. e lifestyle for many years. Artery blockages in the heart can now be treated with angiopl asty, resulting in increased survival rates in illnesses that previously proved fatal. At the same time that technology permits individuals to live longer, the improved surviva l rates place additional pressure on the healthcare system through increased demand a nd utilization of services.

Medical imaging equipment such as CT scanners and magnetic resonance imaging equ ipment permits physicians to look inside the body and create a picture of the processes resulting from an injury or illness. Despite the high cost of purchase and operation, eas y availability of these devices increases utilization. Medical devices such as implantable defibrillators permit survival and treatment of life threatening heart rhythms. In the next few years, the government will invest billions of dollars in health information t echnology to aid in the delivery of quality cost-efficient care and the sharing of informati on among providers. Telemedicine will become ubiquitous. Already, an x-ray taken digi tally at a hospital or a remote clinic can be transmitted to a radiologist in another state or country for interpretation.

New technology has permitted the pharmaceutical industry to develop new medications for the treatment of disease. Pharmaceutical costs are estimated to be approximately te n percent of the total healthcare expenditures annually. These costs have increased si x-fold since 1990. During the last decade, pharmaceutical costs have increased annuall y by an average of eleven percent per year, far exceeding the consumer price index and inflation in other healthcare sectors. Part of these costs relates to increased utilization a nd demand for medications to treat terminal or chronic disease. For example, medications to treat illnesses and conditions such as diabetes, HIV, and el evated cholesterol, have increased survival. Yet, at the same time, this may lead to incr eased utilization of healthcare services and newer more expensive medications, which will ultimately driveup healthcare costs. Another example involves the demand for new drugs, such as cancer chemotherapy, that may increase survival by only a few months, but may cost many times more than established treatments.

Administration costs are estimated to contribute to approximately seven percent of the t otal healthcare expenditures in the US. A study by the McKinsey Global Institute found that administrative costs account for more than twice the average spent by other industri alized nations, and contribute ninety-one billion dollars annually in excess healthcare ex penditures in the US.

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015. Slide 14 Along with new technology, increased demand and utilization also contributes to increas ed hospital and physician costs.. Hospitals may wish to improve their competitive standi ng and enhance the reputation of their facility in the community by purchasing the latest equipment and offering related services. In addition, there may be increased demand fo r specific devices or services by both providers and patients. Some examples include i maging techniques such as positron emission tomography, referred to as the PET [peht] scan, magnetic resonance imaging or MRI, and daVinci robotic surgery. It has been argued that although these technologies are expensive, increased utilization of these devices and techniques can improve quality and reduce costs through their ad vanced diagnostic capabilities, or by reducing complications and shortening length of st ay. However, the increase in demand for both hospital and physician services and the c oncomitant increase in costs may offset any savings.

Care and treatment of individuals with chronic disease constitutes a large portion of the expenditures on healthcare in the US. Chronic diseases are ongoing, generally incurabl e illnesses or conditions, such as heart disease, asthma, cancer, and diabetes. These diseases are often preventable, and frequently manageable through early detection, imp roved diet, exercise, and medical treatment. The Centers for Disease Control and Prevention (CDC) estimated in 2005 that approxim ately one out of two adults had at least one chronic disease and that seven out of ten de aths were due to chronic disease. The CDC estimates that one of every four individuals has limitations in daily activities as a result of their chronic disease. The CDC also point s out that obesity is a contributor to chronic disease, and is rapidly becoming a major he alth concern and source of increased healthcare expenditures.

The CDC identifies four health risk behaviors that contribute to the development and inc rease of chronic disease including the lack of physical activity, poor nutrition and obesity, tobacco use, and excessive alcohol consumption. Many of these activities have been li nked to other illnesses, such as alcohol consumption and smoking with various types of cancer, and poor nutrition and obesity with diabetes, heart disease, and high blood pres sure.

This slide lists the most prevalent chronic diseases in the US, many of which are preven table and/or manageable. Other than mood disorders and senility, obesity and smoking are major contributors in the development of seven of the nine chronic illnesses listed, a nd considered preventable.

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015. Slide 18 Care for chronic illness requires increased utilization of healthcare services and resourc es. Management of chronic illness attempts to prevent further deterioration of the condit ion, maintain a satisfactory state of health and well-being, and decrease the risk of deve loping complications. For example, aggressive control of blood sugar can avoid damag e to small blood vessels that could lead to heart disease, kidney failure, or blindness. In addition, early intervention with at-risk groups, such as smokers or the obese, may incre ase spending and utilization, but have the potential to result in lower long-term costs.

Additional resources are spent in the early detection and prevention of illness, for exam ple, using screening mammograms to detect breast cancer, or immunizations to prevent infectious disease.

The table on this slide illustrates how the cost of healthcare service utilization increases with age. Using data from the Agency for Healthcare Research and Quality, Medical Ex penditure Panel Survey (MEPS) for 2008, there is a significant increase in annual expen ditures for individuals between the age of 45 and 64 and again for individuals age 65 an d older compared to other age groups. The data includes individuals without any spending in 2008 and direct payments for car e provided, including out-of-pocket payments and payment by private insurance, Medica re, Medicaid, and other sources. It does not include payment for health insurance premi ums, over-the-counter drugs, or indirect payments not related to specific medical services.

The increase in the incidence of chronic disease associated with aging of the population and the subsequent demand for medical services is expected to contribute significantly t o the increase in healthcare expenditures in the US in the coming years. As shown in th e previous slide, there is increased cost after age 64. Sixty-six million children were bor n between 1946 and 1964, a group called baby boomers, and the oldest of the group be came eligible for Medicare beginning in 2011. Projected national healthcare expenditur es per capita is expected to rise above thirteen thousand dollars with much of the burde n due to Medicare costs associated with the baby boomers’ increased utilization of healt hcare services.

In 2009, the number of uninsured rose to approximately 50 million people or one-sixth of the population. In general, the uninsured receive less preventive care, are diagnosed at a more advanced disease state because of delay in seeking treatment, receive less ther

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015. apeutic care due to high costs of treatment after being diagnosed with an illness or chro nic disease, and have higher mortality rates. The cost for care at a more advanced dise ase state is twice as much for the uninsured compared to an insured individual with the same disease.

According to the Kaiser Commission on Medicaid and the Uninsured 2010, approximate ly seventeen percent of the population or fifty million people are uninsured in the US. In 2004, the estimated cost of care for the uninsured totaled one-hundred and twenty-five billion dollars, of which approximately forty-one billion dollars was uncompensated. In 2 008, the cost of care for the uninsured totaled approximately eighty-seven billion dollars, and approximately fifty-seven billion dollars was uncompensated. (The drop in total spe nding may be attributed to the Children’s Health Insurance Program and different reporti ng methods.)

The figure on this slide illustrates the steep rise in the number of uninsured Americans s ince 2004. In 2004, there were an estimated 43 million uninsured. By 2008 this number had increased over 6% to 45.7 million. It increased another 9.5% in one year from 2008 to 2009 to an estimated 50 million by the end of 2009. Much of the increase in 2009 w as due to economic conditions in the US as shown in the next slide.

The figure on this slide illustrates the effects of the current recession on the uninsured. From December 2008 to November 2009 there was an increase in unemployment from 7.2% to 10%. This resulted in a decrease of 6.9 million in the number of people covere d by employer sponsored health insurance. This put a strain on Medicaid and CHIP wit h an enrollment increase of 2.8 million and an increase in the number of uninsured by 3 million.

The uninsured spend less than half of what the insured spend on healthcare, but pay for a larger portion of their care out-of-pocket. In 2008, the average person who was unins ured for a full-year incurred $1,686 in total healthcare costs compared to $4,463 for the nonelderly with coverage. The uninsured paid for about a third of this care out-of-pocket, totaling approximately $30 billion in 2008. This included the healthcare costs for those uninsured all year and the costs incurred during the months the part-year uninsured hav e no health coverage. The remaining costs of their care, the uncompensated costs, amo unted to about $57 billion in 2008. About 75% of this total ($42.9 billion) was paid by fe deral, state, and local funds appropriated for care of the uninsured. Nearly half of all fun ds for uncompensated care come from the federal government, with the majority of fede ral dollars flowing through Medicare and Medicaid.

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015. Slide 27 The Emergency Medical Treatment and Active Labor Act, or EMTALA [ehm-tall-uh], is a federal law that requires hospitals to provide emergency medical care to patients, regar dless of their ability to pay. Anyone presenting to an emergency room requesting evalu ation for an illness must be examined to determine if there is an emergency, treated unti l stabilized if there is one, and discharged to self-care or continuing care. If the hospital is unable to provide the care at its facility, then the patient must be transferred to a facilit y able to provide the care.

It is often believed that the uninsured account for overcrowding and an excessive amou nt of services through the emergency department (ED [E-D]) under the EMTALA [ehm-t all-uh] Act. Weber, in 2008, published a retrospective study and found that the percenta ge of uninsured using the emergency department did not change over ten years. The re search found that most of the increase was due to non-poor insured with a primary care physician as their usual source of care, using the ED [E-D] for non-urgent care.

A 2009 Robert Wood Johnson study found that the lack of key ED staff is the primary ca use of overcrowding, and not overuse by the uninsured or for treatment for non-urgent c onditions. This overcrowding is associated with a decrease in quality of care, longer waiting periods for care in the ED, and patient safety.

This concludes Lecture (b) of Financing Healthcare (Part 2). In summary, the US has the highest per capita national healthcare expenditures and the highest national healthc are expenditures as a percentage of GDP in the world. Factors driving costs include inc reased demand and utilization due to aging and chronic disease, technology, pharmace utical costs, and high administration costs.

Contrary to popular perception, the EMTALA Act has not increased utilization of the em ergency department by the uninsured. Information from a study published in 2008 sugg ests that the percentage of uninsured using the emergency department (ED) did not incr ease significantly over a ten year period. Rather there was an increase in utilization of t he ED by insured individuals with a normal source of primary care. The total cost of care for the uninsured is approximately seven percent of all healthcare expenditures. In general, the uninsured receive less care and treatment for chronic dise ase and acute illness, are sicker when they seek care, and have a higher mortality rate. The challenge of the healthcare delivery system is to reduce or slow costs, maintain qua lity of care, and improve outcomes and accessibility to care. Health IT Workforce Curriculum Introduction to Healthcare and Public Health in the US 7 Version 3.0 / Spring 2012 Financing Healthcare (Part 2) Lecture b

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015. Slide 32 Reference slide. No audio.

Reference slide. No audio.

This material (Comp1_Unit5b) was developed by Oregon Health and Science University funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015.