Note: This is an unedited transcript. For direct quotes, please see video: http://allh.us/tVWY
MARY ELLA PAYNE: Good afternoon, everyone. Thank you for joining us here today for our Congressional Briefing on Healthcare Costs in America. My name is Mary Ella Payne, and I’m the acting president and CEO of the Alliance for Health Policy. Many of you probably expected to see Sarah Dash here. She’ll be back here in a couple of weeks. She’s on maternity leave right now, but she’ll be back very soon. So for those of you who are not familiar with the Alliance, we are a nonpartisan organization dedicated to advancing knowledge and understanding of health policy issues. We will be live tweeting at hashtag AllHealthLive, right up there. For those in the audience, please feel free to join the conversation there as well.
This is our second event in our 2018 Opportunities for Progress Signature Series. We created this series to highlight progress on persistent health policy issues. I think healthcare costs definitely qualifies as a persistent health policy issue. But more important, we’d like to examine prospects for moving forward. This year, we are exploring two critical health topics, healthcare costs and aging. As you are all finding your seats, you may have seen the save the dates for part two of our series that will look at aging in America, and we hope to see you at those events in the fall. You can also find those references on our website.
We have a panel of excellent speakers today that we will get to in a moment. But first, I want to thank our Signature Series sponsors, and invite some of them up to give some opening remarks. We would not be able to do this event today, and the previous event that we did earlier in the end of May, without the support of our sponsors. So we really are very grateful for their support. Our Signature sponsor is Bristol-Myers Squibb. Our champion-level sponsors are Aetna, Anthem, Ascension. Blue Cross Blue Shield Association, Cambia Health Foundation, GlaxoSmithKline and InnovAge. And our visionary-level sponsor is Health is Primary and Pharma. We are very grateful that two representatives from Health is Primary and Pharma are here today to give us some of their brief thoughts, but important, on why this issue is so important to them. So first, I’m going to introduce Lori Reilly who is the Executive Vice President of Policy Research and Membership at Pharmaceutical Research and Manufacturers of America, and Lori is going to go first.
LORI REILLY: Thank you, Mary Ella and thank you all for being here, particularly given it is the Friday before Fourth of July recess. It’s amazing how many people were able to join us today. Again, I’m Lori Reilly and I’m with the Pharmaceutical Research and Manufacturers of America. A conversation on healthcare costs in America, we believe is an important one, and one our industry is anxious to have. It’s hard to have a conversation about healthcare costs in this country, though, without talking about one of the primary drivers of all healthcare costs, and that’s the cost of chronic disease, which is responsible for about 90% of all healthcare costs in this country.
If you look at just one condition alone, diabetes for example, the annual cost burden associated with diabetes is about $175 billion annually. Today, we have an array of treatments for diabetes. We have consensus guidelines on how best to treat diabetes, but yet only one in three patients today is successfully controlling their diabetes. If we better used medicines, particularly just in the commercial market alone, we’d save about $19 billion a year with successful treatment. Despite the array of treatments that exist today, our industry isn’t done searching for new cures and treatments for patients. In fact, our industry is working on things like smart insulin, where a patient can take either a pill or an injection in the future, and the body will know when to dispense the insulin to them. Obviously, it’s great for the patient, because it improves their quality of life. But it’s also good for the healthcare system, because hopefully in the future, will avoid those trips to the emergency room, ambulance visits, and other complications associated with diabetes.
That’s the promise of the innovation, the new era medicine holds for us, and our job quite honestly isn’t done until patients can get those medicines and get them at an affordable price. In the midst of the incredible scientific progress, obviously a discussion about cost and price is important. Last year, if you look at the prescription drug sector and data released by IQVIA, prescription drug cost growth increased at .6%. That was extremely low. And just so you don’t think I’m cherry-picking one year, if you look back at the last ten years, prescription drug cost growth was below national health spending growth in seven of the ten years. Price growth was at 1.9%. When you take into account, the over $130 billion of discounts and rebates offered, and both of those, cost growth and price growth were below the rates of inflation for prescription medicines last year.
You might assume, though, if drug cost growth were slowing and drug price growth was slowing, that patient access and patient affordability was slowing, too. But unfortunately, that hasn’t been the case. We’ve seen deductibles increase by 300% since 2006. And more and more patients now pay co-insurance, a percent of the price of their medicine or co-pays. When we hear lawmakers in the Administration say the system needs to change, we agree. We don’t think the status quo is sustainable, and we want to be part of the solution in order to address growing healthcare costs. One of the solutions we’ve been talking about is ensuring those rebates and discounts that I mentioned before, flow back to patients.
A study that was released just a month ago, which looked at diabetes and Medicare Part D, and found that if just 80% of the rebates and discounts in diabetes were passed back to the patient, average patients would save over $365 per year. Our healthcare system would be spending, on average, $1350 less per beneficiary with diabetes from just that one action, and our government would save $20 billion over the next 20 years. Those are the kind of reforms we’re interested in talking about. And again, we’re proud to be a sponsor of the panel today, and look forward to the discussion. Thank you so much. [Applause]
MARY ELLA PAYNE: Thank you, Lori. And next, we’re going to have Shawn Martin. Shawn is the Senior Vice President of Advocacy, Practice Advancement and Policy at the American Academy of Family Physicians. He is here today on behalf of Health is Primary. And so, Shawn is going to go next. Thanks.
SHAWN MARTIN: Thank you so much. As stated, I’m Shawn Martin with the Academy of Family Physicians, but today, I’m here on behalf of Health is Primary. Four years ago, the AAFP and seven other family medicine organizations came together to launch Health is Primary, as an initiative to raise awareness about primary care, and demonstrate the overall value of primary care and family medicine to our healthcare system. We have all heard this before, but it bears repeating, that the U.S. spends roughly twice as much as any other nation on healthcare, and our outcomes don’t reflect the investment in healthcare as compared to other countries. In fact, the U.S. had the lowest health-adjusted life expectancy, or the average length a person lives in good health at 69 years, as compared to 72 years of other countries despite this overall investment in healthcare. We do know there’s a few solutions. One of them is good primary care. As Lori said, the prevalence of chronic conditions in our healthcare system has both decreasing the quality of life, but it’s also increasing the overall expenditures on healthcare in our country.
The U.S. today spends about four to seven percent of our overall healthcare dollars on primary and preventive care. Recent research from Oregon, and Dr. Rodriguez is here to talk about that, shows that for every dollar invested in the State of Oregon in primary care resulted in $13 of savings from upstream healthcare costs. That is one state that made an investment in their primary care system, and saw pretty dramatic decreases in overall healthcare costs as a result. Other states are beginning to follow suit. Just yesterday, Delaware passed a law to increase their investment in primary care as well. One thing we know for certain, in healthcare, is that you don’t invest some prevention in primary care on the front end; you’ll pay a lot more on the back end. And I’m looking forward to the panel today exploring these opportunities that exist to lower healthcare costs. Mary Ella, thank you so much. [Applause]
MARY ELLA PAYNE: Thanks. So now, we’re going to get to our panel. I’m just going to briefly introduce our moderator for the day. We are thrilled that Elisabeth Rosenthal, who is currently Editor-in-Chief of Kaiser Health News, and has been a healthcare journalist for over 20 years is going to be our moderator today. Among her large volume of work, she has written an award-winning series for the New York Times, as well as a critically-acclaimed book about the cost of healthcare in the United States. So, no one is more qualified than she is, to lead us today in our discussion on healthcare costs. So I’m going to now turn it over to Elisabeth. Thank you.
ELISABETH ROSENTHAL: Thanks very much. I’m thrilled to be here moderating a panel on my obsession of many years, healthcare costs and prices, and I hope we will solve this problem by the end of the hour-and-a-half. Anyway, I just want to briefly introduce our panelists. I’m just going to give you a quick intro to each of them, because you can read their full intro’s in the program, and then we’ll kick off the program. They’ll each talk for about six minutes, and then I have some questions. I’m sure you all have questions, and we’ll open it up after they’re done. So quickly, to go through our panelists. First, we have Gerard F. Anderson. He’s a professor at Johns Hopkins Bloomberg School of Public Health. And he’s been talking about prices and costs for many, many years, having written a paper that has been kind of a mantra in my mind for many years, “It’s The Prices, Stupid.” So, he’ll be first.
Then, Joanna Hiatt Kim, Vice President, Payment Policy, the American Hospital Association will tell us about the hospital perspective next. Following that, we have Dan Leonard from the National Pharmaceutical Council. And going down the line, we have Damon Francis, who is Chief Medical Officer of Health Leads to talk about the social determinants of health. And finally, Glenn Rodriguez from CareOregon, who will talk a little bit about the experiment in Oregon that they’re doing with enhancing primary front line care. It’s going to be a great discussion, and I hope we all come away with some new ideas about how we can work together to solve this problem. So Gerry, do you want to kick it off?
GERARD F. ANDERSON: Well, thank you. And everybody should buy Elisabeth’s book. I wasn’t going to plug, but if you haven’t read it, you should definitely read the book, and it definitely explains most of the issues, and in a very accessible way. This is the second time, right before a holiday, the Alliance has asked me to come. This is a much bigger turnout than the last time, when we focused on pharmaceutical prices. So, we’re number one. We might not have made the World Cup, but we have made it in terms of number one for the last 40 years in terms of healthcare spending. I arrived over 40 years ago into Washington, D.C. and have focused a lot of my attention on controlling healthcare prices. And see, I haven’t done very well. Normally, it’s good to be number one. In this case, we’re not.
We’ve heard these numbers repeatedly. They’ve just gotten worse. So right now, we’re 17.2% of the gross domestic product in the United States. The next closest to us of the industrialized countries is Switzerland at 12.4%. And from an economist’s point of view, this is what you look at is the percent of the gross domestic product spent on healthcare, because it says, we’re not spending it on education or national defense or something else. We’re spending it on healthcare. And you know, just doing a little back of the envelope calculations, if we were to spend the same percentage on healthcare as Switzerland, we would spend $630 billion less. Putting it in context, that’s about the equivalent of the trade deficit that we have with the rest of the world. It’s a big, big number.
Now, what’s interesting to me is for all this money, we actually get less service. So, we took a look at how many beds in the United States, and compared it to how many beds there are in the typical industrialized countries, the median OECD country. We have three beds. They have 4.4. Our occupancy rate is 63%. Theirs is 75%. Our length of stay is shorter, 5.8 days versus 6.2 days. The number of doctors that we have is fewer. The number of graduates from medical school is fewer. The number of nurses that we have are fewer. So we are investing fewer real resources in healthcare, and yet we’re spending a lot more. And as was said in the introduction, the outcomes are worse.
So then, I wanted to figure out, well, what’s going on here? Well, and a number of people have suggested a variety of reasons why we spend more. Defensive medicine, malpractice. So we looked at that, and we basically saw that if you get sued in the United States compared to Canada or the UK, you’re actually going to pay less. Not more, as somebody who gets sued. I’ve been teaching the medical students at Johns Hopkins for over 20 years and I know how much debt they have. It’s on averages of $190,000. They could pay off that debt and still have money left over, compared to be practicing in the UK or any other industrialized country. We’ve heard about the aging of the population. I’m now part of that. And I don’t feel good about it, but I am part of that. And yet, we’re younger than most of the other industrialized countries. The administrative burden is substantially higher. $737 in the United States, versus the next highest, Switzerland, at $280. The OECD median, $94. So yes, we have a bigger regulatory burden. I want to try to understand, do we have a bigger regulatory burden than other industrialized countries? I don’t exactly know how to do that study. But my guess is, we don’t have a bigger regulatory burden. We’re going to hear about the fact that we spend less on social care in a moment, and we’re going to hear that because of the social economic determinants of health, we may be sicker. Although again, I don’t know how to exactly measure that.
So 15 years ago, we wrote a paper, “It’s The Prices, Stupid,” with Uwe Reinhardt and two of my doctoral students. We’ve now redone that. And essentially, trying to figure out, has anything changed? And to a large extent, no. What’s interesting about this is the percent of private spending in the United States, we are number one in private spending. We spend more than half of the dollars are from the private sector, from large insurers. Large insurers pay 50% more on average than public insurers. Ten years, 15 years ago, the differential was quite small. So, the issue is what’s going on in the private sector, as much as what’s going on in the public sector. International rates paid by the Medicare and Medicaid programs are not all that different. The rates paid by the United States are not all that different than paid internationally. It’s the private insurers that are paying a lot more.
Now, one of the issues you hear is cost shifting. Because Medicare doesn’t pay enough, we have to shift the cost. As a provider, I will spend every dollar you give me. As an academic, I will spend every dollar. So if public insurers pay $100, and private insurers pay $150, and it’s basically 50% Medicare and 50% private insurers, the costs are going to be 125 bucks. Well, the private insurer is paying way more than cost. The public insurer is paying less than cost. And therefore, it makes sense that you’re going to hear about cost shifting. So, what do you do here? Well essentially, what you’ve got to work with is private America. Why are they paying so much more than what Medicare is paying for these things? The large insurers, they’re all self-insured. They determine the rates. And so, the question that I have is, what can we do to help the private insurers pay less?
JOANNA HIATT KIM: Great, thanks. So, the AHA is tackling the issue of affordability in healthcare from many different angles. And today, I’m going to share with you three of our biggest and most important initiatives, as well as the policy solutions that we’re working on with them. Specifically, I’m going to talk about regulatory and administrative burden, price transparency, and drug pricing. With respect to regulatory burden, we did a study last year that found that hospitals, health systems, and post-acute care providers spent $39 billion a year on regulatory compliance. And as hard as it might be to believe, that’s actually an underestimation. Because we looked at the regulatory burden from just four federal agencies: CMS, the HHS OIG, Office of Civil Rights, and ONC. So we didn’t look at the cost from all the other federal and state regulatory agencies, or the 1,300 other additional insurers that hospitals contract with nationwide.
Now, what does this translate into for your average-size hospital? It translates into almost $8 million every year that the average 162-bed hospital spends on regulatory compliance. That goes up to $9 million, if they have post-acute care. For every admission that a hospital makes, there is a $1,200 cost for regulation attached to that. What that means is that you walk into a hospital, before you receive any patient care, before you talk to anybody, there is a $1,200 cost for the work that that hospital does on regulation related to your stay. And even more of a concern for us, is that this is starting to pull clinicians away from patient care and put them on paperwork. We found that 59 FTEs are what it takes at the average-size hospital to comply with regulatory requirements. And over a quarter of them, 15, are doctors, nurses, and other clinicians. So they’re being pulled away from their patient-care duties and put on paperwork.
Where do we go from here, though? The AHA has comprehensive sets of policy recommendations around many of the most problematic areas of regulation, and I’ll give you a couple examples. First, fraud and abuse. We feel that those laws need to be modernized, and put in line with how care is provided today. So we have a set of recommendations around how that can be done. We have an initiative that we call Measures that Matter, that looks at quality measurement across the spectrum within Medicare, but also across private insurers, and would seek to streamline and simplify and standardize the quality measurement process. We also have taken a hard look, for example, at prior authorization and would like to do the same things. Streamline, simplify, and standardize, so that it’s not a different process for every insurer that we deal with.
I also wanted to talk about price transparency. This is something that the AHA is committed to. We think that patients have a right to know what their healthcare is going to cost them. They want to be able to budget. They want to be able to compare among facilities and providers to decide who to go to. They also want to avoid a surprise or unexpected bill at the conclusion of their care. But the most meaningful data to a patient, the most meaningful information for them on prices is really what they’re going to pay on an out-of-pocket basis. And putting together an out-of-pocket estimate requires putting together data from a couple different sources. The providers have information on what the expected course of treatment is going to be. But the insurers have information, obviously, on where the patient is in their deductible, what their out-of-pocket costs are, what their benefits are.
So if you put those two together, we think you can get to a pretty meaningful estimate of out-of-pocket costs for a patient, but we don’t want to provide that information to a patient in a vacuum. We think it’s important that quality information accompany that, so that a patient can do a cost-benefit analysis themselves, if appropriate. We also really think it’s important that it be paired with information on financial assistance. Because really, the absolute last thing that we want to do, in giving patients information about what their care is going to cost, is to have them make the decision to then forego that care. Because ensuring that patients get the care they need is and always will be our top priority.
I also wanted to talk about prescription drugs. We have a prescription drug-spending crisis in this country. There are a lot of different data points I could give you to convince you of that. I’ll start with this one. That between 2008 and 2016, the prices of brand-name prescription drugs doubled. We see that trend continuing in 2018. We’re almost exactly halfway through, and so far, we’ve seen price hikes – staggering numbers of price hikes. Pfizer 116. Allergan 75. Novartis, another 75. And AstraZeneca 18. In fact, AbbVie’s almost 10% price hike to Humira is expected to increase healthcare costs in this nation by a billion dollars in 2018 alone.
The AHA has also done research on drug pricing. What we focused on is drug prices in the inpatient setting. Insurers don’t typically reimburse for drugs distinctly or directly in the inpatient side. It’s all wrapped up into the DRG payment. But we looked at what hospitals are paying for drugs on that side, and we found that the trend continues. There was almost a 40% increase, per admission, on inpatient drug spending between 2013 and 2015. 40% in just two years. So yes, absolutely, the healthcare system is experiencing a crisis in prescription drug spending, and it is fueled by increases to the prices of drugs. So AHA recognizes the challenges of affordability in healthcare, and we’re working hard to hold costs down. We have made progress. In 2017, National Health Expenditures on hospital services went up 1.9%, which is the lowest that it’s been since 2011. And we are committed to continuing to work to hold that cost-curve down, so that we can best serve our patients and our communities.
DAN LEONARD: Thank you very much, and a pleasure to be here today. This is wonderful attendance, so hats off to the Alliance for putting this together. This is just another way of looking at, essentially, what Professor Anderson was speaking to a few minutes ago, the percentage of healthcare costs as it relates to gross domestic product. And I put this up here to show you that this is not the first conversation, and probably won’t be the last conversation on the topic, but it goes back decades. Just clipping a few headlines here. From 1969, is the first one that we show on this particular slide about medical care costs, when healthcare was at 6% of overall GDP.
The next headline is from the very first edition of “Health Affairs,” the journal, and that was a commentary by then Secretary of Health, Education and Welfare, Caspar Weinberger, and then it goes on and on and on. We’re now close to 18% of overall healthcare as a percentage of GDP. So it’s been rising quite regularly. The National Health Expenditure data which that is driven from, that CMS issues every year, even when this most recent publication of that data that was not necessarily consensus on what it meant, you see again two competing headlines here. One saying from “Health Affairs,” that the expenditures show that we have not solved the cost problem, but AMA saying that we have reduced the growth. So there has been a slight reduction in the growth over the first half of this decade, but it’s still an issue for sure.
I’m very pleased that the Alliance is having this session, and that we’re talking about overall healthcare spending, because there are many, many inputs that drive healthcare costs. It’s not one sector that’s driving the entire trajectory of healthcare costs. There are many. This is, again, the National Health Expenditure’s data, and you see within the prescription-drug piece of the pie there, about 10% is what CMS pegs it at. Other studies have it higher, but it’s somewhere probably between 10 and 15% of the overall healthcare spend. And of that, generic medicines are 88% of that market, probably half of the cost, and generics are seen as a high value in most cases, for sure. So what you’re talking about and what the Administration is talking about, and what’s happening here on Capitol Hill right now is the focus on prescription drug pricing. Just to level set everybody, is about half of that 10% slice of the pie. So we’re talking about five to eight percent of the overall spend in prescription drugs.
Lori Reilly had some similar data that she cited in her opening remarks. This is data from Express Scripts, which is the largest pharmacy benefit manager. And their year over year increase in drug pricing was the lowest in 24 years, at one point, five percent. So the question is, if we’re looking at drug pricing and trying to regulate that, or adjust for that with the Administration’s attempts and here on Capitol Hill, what’s success look like? If success is reducing the cost to the patient – because we are certainly seeing higher co-pays, much higher deductibles – so if we’re trying to get at reducing that cost and the pain at the counter to the patient, that is certainly a worthy endeavor. If people think that by focusing on prescription drugs, we’re going to bend this cost-curve that we’re talking about up here today, and we’re going to turn that curve in the other direction, I would say we’re probably going to be here next year, and in years to come, having the same conversation.
Two places that are worthy of looking at, and certainly in our sector, and in pharmaceuticals, the drug supply chain. You’ve heard a lot about that. It has been growing significantly. This is essentially what happens between the list price of a medicine and the net price of a medicine has been going up significantly. Over the last five years, 107% increase. Just year to year, from 2016 to 2017, it went up 10%. But the net price of the new drugs was at a 1.5 to 1.9%. So there’s a lot going on in that supply chain, and this is certainly worthy of looking into and understanding further. Another area, and we’ve done quite a bit of work in this space – and I’ll bring it up here because it’s, I think, one of the potential success stories, or a place that we can look to for potential solutions – and this is with value-based contracting. And this is essentially where pharmaceutical manufacturers and health plans come together, and put forward a performance guarantee, if you will, and set the price of the product based on the value to the patient.
So there are more and more of these taking place. You hear about some. We did some research and found out that the value-based agreements that you read about in the press, or you know about is only about a third of the number of contracts that are actually out there. There are many more. This is from work that we did with Duke-Margolis Center. But there are lots of places where these types of agreements don’t succeed, or where they fall off after the initial conversation, before they go to contract. We wanted to know, what are some of the barriers? What are some of the hurdles that prevent these contracts from taking place? So, this is a recent publication. From the governmental side, FDA recently issued guidance on pre-approval communication. This is helping manufacturers and health plans talk about evidence, and talk about the data that they were previously prohibited from speaking about. So, that’s actually very helpful.
But there are still some barriers when it comes to Medicaid and Medicaid best-price, and anti-kickback safe harbors that are necessary to have to get more of these types of agreements in place. But even if you solve for the government issues, which we hope we can, not every medicine is going to be right for one of these types of contracts. The manufacturers, the pairs have to come to agreement. These are just a set, in rank order, of what they’re looking for when they are trying to come toward an agreement. And so, you can see some commonality, the terms that are in bold, measureable outcomes clearly tied to the use of the product, target patient populations, et cetera. So that’s another area I think that is right for study and potentially moving forward.
Just quickly as I wrap up, there’s a desire for innovation. I think I can say that safely. There’s certainly a desire for innovation. There’s a lot of amazing new science and technology that’s coming our way, gene therapy, new cancer treatments. But many of them have high price tags, so how are we going to reconcile this? Many of them are for small rare diseases. But we also have the chronic conditions, again that Lori referenced, like diabetes, which are affecting more and more Americans. Again, it’s a conversation we’ve had for many years. I’m very pleased that we’re having it today.
The National Pharmaceutical Council, we’re starting a new initiative, a new health spending dialogue, where we have partnered with “Health Affairs” on a regular conversation that will take place in their journal. They’re going to have an exciting announcement that will probably come out next week, or maybe pushed a couple days by the holiday, but there will be something that you’ll see shortly. We’re also putting together a coalition of stakeholders from across the healthcare ecosystem to have this conversation, to get around a table, and to hopefully not point fingers, but have a dialogue that can identify the questions and some potential answers. So, more on that can be found at Going Below the Surface dot org, which is the name of this organization, this entity that we’re working on right now. So, I appreciate the opportunity.
DAMON FRANCIS: Thanks a lot. This has been really educational so far. So, I’m hoping to continue that. And I’m, of course, having trouble advancing the slides. There we go. So, I was asked to comment really on how social determinants of health relate to healthcare spending, in the context really of this recent finding, that social spending appears to be similar to that in high-income OECD countries. And then this question, the finding calls into question the belief that higher healthcare spending is due to a lack of investment in social determinants. And so, I definitely want to question that belief. But before I do, I really want to frame the conversation, I think the way that Americans are framing the conversation, which is how do we maximize our investments as a society in the health of Americans? Costs are a measure. They’re not really an aim. The aim that we’re talking about here is the health of Americans. And so, we need to embed the conversation about costs in the context of that purpose and that aim.
So, one of my friends says, academics are haters with really precise language. So, just bear with me. I think this is really critical, though, actually. The finding was about social services and social services spending, and then the question was about social determinants. And I actually want to really unpack the difference between these two things. So, the WHO definition is the social determinants of health are the conditions in which people are born, grow, live, work, and age. These circumstances are shaped by the distribution of money, power, and resources at global, national, and local levels. Okay, so there are some social determinants of health. I’ve traveled a lot in East Africa. The roads are a social determinant of health. They have nothing to do with social spending.
That will be completely absent from analysis of social spending, but they’re a very important determinant of health. But then even social determinants that are related to social spending, for example, child care, a spending analysis doesn’t really provide the information we need to understand what the availability of child care looks like in a society. So child care, I might get child care from a family member or from a community member without any change of money. No money changes hands at all. It’s just a familial or a community relationship. So, the availability of child care can relate very much to these communal resources, this communal power, and how that’s distributed. Also, I can get child care by a government program, or by purchasing it myself. So in that context, it’s really hard to think about how spending on social services is a good proxy measure for the availability of child care services. And something that some economists have used is the ratio of private spending to public spending. Because if I’m happy with the options I have for child care by my cousin, or child care by a government program, I’m not likely to spend my disposable income on child care in the private market. I’m likely to just accept what’s there.
So if we think about that as a proxy measure for social determinants of health, and we actually look at – I’m sorry. These numbers are probably kind of small for you all, too – and we look at, where does the United States fit on this as a proxy for investment in social determinants? The United States, 63% of our social spending is public spending, whereas the least amount in any of the other OECD nations analyzed in that JAMA article is 73%. So, this is the place where the United States is a clear outlier, and it ties to that broader question of, are we maximizing our investments for health? If we’re not maximizing our investments for health, and we’re struggling as private entities, as employers, as private citizens to purchase health on this private market, with asymmetric information as you just heard about, that’s the recipe for the prices to go up.
We’ve talked about it’s not the utilization, it’s the prices. Well, where does the price increase come from? Just to zoom out, let’s remember social spending versus healthcare spending has been tied in these same OECD countries to better health outcomes, the other side of the value equation. And government spending up to about 8% of GDP in these OECD countries has also been tied to health outcomes, that side of the value equation. So we know very well that social services spending, as a part of the picture of social determinants of health, is very much related to health outcomes and to this value proposition. And I would posit that the 17.2% is crowding out these types of investments in the United States.
The other thing that’s really important to think about – beyond are we spending on the right things? Are we spending on social determinants relative to healthcare in the right ways – is are we spending at the right time and in the right places? So this, on the left, is a map of the county that I live in, Alameda County. The light shaded areas are areas where the level of insurance coverage is very high, and typically Medicare and private insurance coverage. The areas that are more darkly shaded are areas where more people are uninsured. Or in those areas, I’ll also tell you, many of those folks are insured via Medicaid, which pays much less than Medicare or private insurance. So, you have to guess where the unhealthy people live. Do they live where we’re spending a lot of money, or where we’re not spending a lot of money? The unhealthy people live in the redlined areas, in the areas where there’s been [disadvancement] for generations in the social determinants of health. And yet, the spending in our system is going in other areas.
That’s not a very efficient way to spend on the health of a population. The graph on the right looks at the spending over time, over the life course. And you can see the United States is that red line on top. We’re an outlier. We spend much, much more in the last decades of life, relative to the other countries. Could we take that money and invest it in the social determinants for children, and get much better, much more efficient outcomes for the entire population? I would say, probably we can. So I’m hoping that, as part of the panel, we can wrestle with some questions actually that are around value more broadly, and around social determinants, even though I think there’s a lot here also in the cost and price conversation. I think this frame of social determinants really helps us make sense of the price and cost conversation in a really important way.
One thing is, it’s really critical to wrestle with these off-the-books activities – family care giving, I know aging is another focus of the Alliance’s work – is a really critical thing that’s happening, that we’re not looking at, if we’re just looking at spending numbers. Also, as we ask the health system, the traditional healthcare system to think about social determinants of health, we really do have to think about this issue of administrative costs, and how we’re able to consider things more holistically without adding too much to the complexity and the costs embedded in measurement and admin challenges. And then, we just need more examples. We really need to be talking about where have we seen communities, where have we seen states shift toward smarter investments in social determinants that are actually helping us save money? What have been the contracting mechanisms? What have been the collaborative mechanisms that bring stakeholders together? What have been the measures that people are using in order to enable these new kinds of systems to work? So, really looking forward to the discussion.
GLENN RODRIGUEZ: Good afternoon. It’s really a pleasure to be with you this afternoon. My job is – my job is to turn on the microphone. Thank you very much, Dr. Francis. Good afternoon. Great to be with you. My job is to bring a front line perspective. I just retired from a 40-year career in family medicine as a clinician, educator, physician executive. The good thing about the just retired is that – well, there’s a lot of good things about it – but one of them about my role today is I can be provocative, so that’s what I hope to be. Now, I woke up 3:00 in the morning Thursday, thinking about this presentation, and I realized it really wasn’t anxiety about speaking here. It was about how passionately I feel about these issues, and how deeply saddened I am that our generation has failed to create a just healthcare system. The pain of this is real and it’s borne by individuals across this country. Far too many Americans feel overcharged, marginalized, or in some cases completely abandoned by the current healthcare system, and we must do better.
So first, I want to start with a picture, and reference a study. I’d really encourage you to go to the website. The reference is there at the bottom. But this slide says, “Dr. Anderson was right.” It’s also a visual picture of my career and the emotional experience of the last 20 years of my career. So, let me explain this to you. This comes from the work of Dr. Dieleman and colleagues at the University of Washington Institute for Health Metrics and Evaluation. It’s a study of healthcare costs from 1996, when we spent $1.2 trillion on healthcare, to 2013 when we spent $2.1 trillion – trillion with a T – on healthcare. That’s an increase of $960 billion over 18 years. And this looks at what drove those increases over the period of time. They looked at five fundamental drivers that are different colors on this slide. Population increase is blue. Population aging is orange. Disease incidence and prevalence is dark green. Utilization is light green. And price increase is red.
Why is this an emotional description of my experience? Because I’ve worked hard at things like decreasing utilization. If you look at the second row, hospital costs there, we’ve actually made progress in saving money, collectively, almost $230 billion in decreased costs in decreased hospital utilization, and decreased disease incidence led by decreased coronary artery disease. Over this 18 years, it was completely overwhelmed by price increases, and that’s what it feels like at the front lines. You could do a lot of good work, and the price increases overwhelm everything else. So what can we do? I don’t give up. I can’t give up, despite the discouraging steps. So I wanted to share – I appreciate Dr. Francis’ challenge to learn from each other – because I wanted to share a little bit about the Oregon health care reform journey. I really want to focus on our primary care work, but I want to put it in a little context.
So, our original waiver back in 1994, some of you might remember the national debate then. We achieved some infamy for our efforts to prioritize health services. We were accused of rationing. But that original effort also included efforts to strengthen primary care and established managed care organizations for our Oregon health plan, Medicaid in Oregon. That waiver has been regularly updated. In 2009, the legislature passed legislation that established the Oregon Patient-Centered Primary Care Home Program that I want to talk about in more detail next. And in 2012, our waiver was updated to include a model of care that we called coordinated care organizations, basically a model of regional accountable healthcare agencies that were given global-budget responsibility for physical, mental, and oral healthcare. Also challenged, incorporate work on social determinants of health. And in cutting this deal with the federal government, we committed to a global budget cap at 3.4% per year. So, committed to holding cost increases under 3.4% per year.
Now, my point here is that – and the reason I start with a price increase is that the prices and the financing system is really important, and you’ve got to have ways to deal with that. In Oregon, the global budget approach has been helpful, but you also have to work on changing the underlying health system. A recent evaluation referenced in your study shows that we’ve made progress both in improving quality and lowering cost. Now, the Patient-Centered Primary Care Home Program that was established in 2009, we set a set of standards and a vision. It was really a vision for what primary care could become and should be in Oregon. We, based on the work of Dr. Barbara Starfield at Johns Hopkins, set about doing this. This slide shows our six core attributes written as promises to our patients. Now, this model, and it was matched with efforts to establish systems for knowledge sharing, collaborative learning. So it wasn’t only a certification. It was a learning and development system, too.
We’ve had some success in adoption and spread. If you know the geography of Oregon, you can see that this scatter plot follows the population of the state. In the far Northeastern corner of the state, the Winding Waters Clinic out in Enterprise, Oregon. Wallowa County, Oregon, only about 10,000 residents in the whole county is maybe one of the highest functioning examples of this model of care in the entire state. So the real question, did this work on infrastructure and real effort to invest in primary care work? And also referenced in your materials is a study by Dr. Gelmon and Wallace at Portland State University studying the program from 2011 to ’14. It was a qualitative study looking at, what are the stories here that really uncovered team-based care, co-located behavioral health, and expanded primary care team members.
For us, that was care coordinators and health resilience workers. Those themes were really important elements of this work. The quantitative work looked at 600,000 Oregonians in a usual care and in the PCPCH model of care. And we did achieve substantial savings: 240 million in aggregated over the three years, on average about $13 per member, per month, for folks in the PCPCH model. And importantly also, those clinics that had adopted this model for the entire three years did even better, achieving about $28 PMPM.
Now, I’ve already gone over my time. I hope that I can interest you, in a little bit, I’d be happy to answer questions and more details about it. One thing I failed to include in your materials is a reference to this book, “Health Reform Policy to Practice,” by my good friends Dr. Ron Stock and Bruce Goldberg, Editors. It tells the whole story in detail, and it’s really very well done, and has a lot of detailed information about our efforts. Thank you.
ELISABETH ROSENTHAL: Well, thank you, all of the panelists for giving your perspective. Just before we start off, we have about 45 minutes for questions. There are green cards where you can write your questions. And I believe there are mics in the room if you want to come to them. I see them in the aisles, I think, and you can take your turn there. I’m just going to start us off. I’m a journalist, and I feel like with all of this discussion, I speak for patients because those are the people I hear from. And what I hear so often is that the policies we see in Washington and the economic theory, how does that play out on patients on the ground? And I want to refer you all, before we start, to a series we’re doing with NPR called “Bill of the Month,” where we ask patients to send in their bills, and we try and understand why they ended up with such high charges.
As it happens, our most recent bill-of-the-month is this morning on NPR and on our site, and this is a challenge to everyone on the panel. It’s about a guy named Angel Lopez, who is a screen writer in LA. He needed occupational therapy after a bad hand injury. His insurer said each session was worth $60. The hospital said each session was worth about $550. So, about a $500 gap. They couldn’t agree, and guess what happened? Mr. Lopez ended up paying about $10,000 out of pocket. And this is more and more what I see, when we hear, “Oh, healthcare costs are only going up 1.9% or drugs are only 10%.” Well for patients, who are after all the point of this healthcare system, with high deductibles, with increasing co-pays, with in-network and out of network surprise bills, patient costs are going up way more than one percent.
So not only do we have healthcare costs are still increasing in our country, but the burden to patients, your constituents are increasing dramatically in that context. And I think we have to be cognizant of that. You know, we spend anywhere between 17.5 and 19% of our GDP on healthcare now. We will pat ourselves on the back if it’s only growing, you know, one percent or three percent. And we say, “Well, the growth of the growth is not as big as it once was.” That’s like saying, “We weigh 500 pounds and we need to go on a diet, and we’re only gaining five pounds.” We need to do something to reverse this. We may never get to 12% as other countries are, but I would be really happy just to see this ship turn around and find something, where we get moving and take this burden off of patients. I mean now, we hear from diabetics.
There have been some stories recently about diabetics not taking their medicine and some dying, because insulin prices have gone up so much in this country. And I think one of the issues that we all have to tackle with, that I’d like the panel to tackle with, and here’s my question is in this country, pretty much alone in the world, we have this incredible gap between the billed price, which is often through the roof, and the paid price which is often a tiny fraction of that. So how can we expect consumers or companies or anyone to be – how can we expect a market to work when there essentially is no price for anything? How are we going to tackle that problem?
GERARD F. ANDERSON: So, I think you’re correct. There is no price for anything, or no one is saying, “That is an unreasonable price.” We have people negotiating prices for us, basically the large insurers. And so, if you are in network, and that’s a covered service, the price is still quite high but it’s reasonable, at least in U.S. standards. However, if you’re out of network, and he was essentially out of network, then you can charge whatever you’d like, because you have no negotiating power. And so, we’ve taken a look at, what are the hospitals that have these high markups? What are the physician groups that have these high markups? And it’s essentially, when you’re not actually choosing that provider in many cases, the markups are highest. So even the physician community, for example, the highest markups are for anesthesiologists, because you never choose your anesthesiologist.
I went and had a colonoscopy recently, and I could choose my hospital, Johns Hopkins. I could choose my physician, who was going to do the colonoscopy. But they wouldn’t be able to tell me who the person was that was going to do the anesthesia. I’d already done all my prep. If anybody has had that opportunity, it’s really fun. And it’s 7:00 in the morning, and she walks in and she says, “Hi, I’m your anesthesiologist.” This is not the time to ask her if she’s in network or not in network. I mean, that is the problem that we have right now. If you get hurt in an auto accident, you’re going to pay full charges, or your insurer will pay full charges. If you have workers’ comp, you will pay full charges. So there’s a whole set of things out there, and those amounts are two to three times, and that’s where the real price increases are going. For prescription drugs, yes, Express Scripts might be able to get a very good deal. But you, as the patient, are not getting that same deal, because the list price for that drug keeps going up. And most of the time, the cost sharing is based upon your list price, not the price that Express Scripts gets for you. So you, as a patient, are the big loser.
JOANNA HIATT KIM: Gerry is getting at a really important issue here of the surprise bill, and that’s a very, very difficult situation for patients. It’s a part of the price transparency issue. And what we’ve done there, because it’s a huge concern of ours, is we’re working with the National Association for Insurance Commissioners. They have come up with – with our input, as well as many others – kind of a model piece of legislation that could be implemented at a state level. That for those physicians, who are out of network, it takes them, it takes the insurer, and it puts them together to work out the issues. It keeps the patient out of it. So when you’re getting your colonoscopy, and your anesthesiologist turns out to be out of network, you as a patient don’t end up holding the bag for that. It puts the physician and the insurer together to work that out.
There have been a few states that have implemented this. And interestingly enough, you actually don’t see a lot of mediation happening. What ends up happening is that it just never gets to that point. The physician ends up accepting a lower rate from the insurer, and there’s no official process. It’s kind of not worth the hassle. And so, you avoid the issue altogether. So we think that’s a great solution. It’s something we’re really pushing for, because again, it keeps the patient out of the middle.
ELISABETH ROSENTHAL: Can I ask why, though, hospitals and pharmaceutical companies, and all parts of the industry, aren’t – you know, technology should allow for better price estimates than we have now. I go to a hospital – Gerry just talked about the colonoscopy – my son needs anesthesia, right? And I say, “Is the anesthesiologist going to be in network?” They go, we don’t know. And I’m like, “Really? Because you know which of your anesthesiologists take Cigna.” I don’t, and I don’t assign that anesthesiologist. Why isn’t there more of an effort to kind of really insulate the patient? I think these Surprise Billing Laws are good. I live in New York, or I lived in New York, and have taken advantage of one. But to use a Surprise Billing Law – and this is to all the legislators out there – you have to know they exist, right? Most of the time, people get these bills and don’t even know that they’re protected from this. They just know, “Hey, there’s a bill from an anesthesiologist that’s out of network, and it says I have to pay.” And 30 days later, there’s a collection notice.
So, why don’t we protect consumers in health care, the way we protect consumers in other sectors of life? I’m asking this to everyone. This particular example happens to be a hospital example. But I should point out that with the “Bill of the Month,” the guy with the occupational therapy that wasn’t paid for, that was not an out-of-network issue. That was because his insurer had reclassified OT and PT as akin to acupuncture, rather than a medical intervention. So, the games are played on all sides, in terms of avoiding responsibility that ultimately leaves the patient holding the bag, and that’s the person I care about.
JOANNA HIATT KIM: Could we do more here, as hospitals? Absolutely. And that is why we’re committed to price transparency, to looking at some good, meaningful policies that will get patients those solid out-of-pocket cost estimates. That then, they can make an informed decision about where to go, what to get. It would, as I said, involve information from the insurer. In this case, what is OT classified as? That’s why there needs to be a partnership here, because patients come often to their provider, but it obviously involves information from the insurer, too. And we’re committed to that patient, to making sure they have the right information, that they don’t forego the care, and that they don’t get a surprise bill.
DAN LEONARD: I’ll jump in on that. Another form of surprise bill is often, and certainly in pharmaceuticals, is at the beginning of the year, when you go in for your prescription that you’ve been getting as a maintenance drug for some time, and the bill in January is astronomical. And this is because of the deductibles which have been going way up and way up, and they’re increasingly onerous on the patient. So, that’s often a surprise, because it comes early in the year. And once your deductible is paid, you’re leveled back down. But that’s, I think, another surprise bill that would fit into that category. Going back to the earlier question, and I think one of the themes here today, I would say that price is not cost, and cost is not always price, and we tend to use those two terms interchangeably. But as we just heard in Elisabeth’s example, what was the price of that procedure, $50, $500? Or was it $10,000, because that’s what he ultimately paid? So, if you were studying the cost of this intervention across the system, what are you going to measure? What are you going to look for, and what is the data point you’re going to look at? 50 bucks, or 10,000 bucks? And that’s a huge variation.
ELISABETH ROSENTHAL: Well, 10,000 was for a whole bunch of sessions. But I think we, as a country – and again, to the whole panel and Glenn, you all have something to say about this – why can’t we define like even a reasonable range for a single service? When you look at the International Federation of Health Plans for other countries, an MRI costs kind of about the same, even in countries that aren’t single payer, where there are private markets. Here, we see it could cost $100 at one place, and $10,000 at another a few blocks away. How do we narrow that gap? I mean, that’s a huge problem.
GLENN RODRIGUEZ: Well, I think we could. If we had the will, we could. But I’d like to make a high-level observation, which is in America, bills, price, cost – you know, price is not cost – you even get those EOBs from insurance companies that say, “This is not a bill.” So, a bill is not a bill either in our system. This system is set up to obfuscate, and I’m absolutely serious about that. It’s like the curtain for the “Wizard of Oz.” This is to keep it impossible for people to make informed decisions in health care. That’s the way this system is designed. It brings to mind, for me, the affirmism from the Institute for Healthcare Improvement that every system gets the results it’s designed to get.
And American healthcare is designed to extract resources from the American society. That’s what it’s designed to do, and that’s tragic. And we could change it, if we had the will to do that. I think the other way to think about it is, we buy into this fee-for-service system. Well, why a fee-for-service system? There are parts of the system, like my world, primary care, fee-for-service makes no sense. You want to have people to have access, and you want them to use it. So, why not alternative ways of purchasing those services? We were talking earlier about the next [step] model. So why not subscription models for services that simplify costs and billing and access and care? We can do those things. And we are working, as part of our Primary Care Reform in Oregon, around a single payment, proposal of the payment model. And if there’s interest, I could talk more about that.
DAMON FRANCIS: Can I just also zoom a level up like Glenn did?
ELISABETH ROSENTHAL: Yeah.
DAMON FRANCIS: I don’t think that transparency to the individual is like a major part of the solution. So, even if Mr. Lopez knew what was going on behind the scenes – it wasn’t clear up front, you know, what the cost is, to which party to pay – what negotiating power would he have with that information? And I think Dr. Anderson rightfully emphasized the negotiating power there. It’s going to take partnerships of private payers to set prices in the way you’re talking about, or set costs to whom in the way you’re talking about, or it’s going to take the government to do it. I don’t think we can rely on ourselves, as a bunch of individuals, with really high quality EOBs, fighting with these entities to figure out how we get our costs down to ourselves.
ELISABETH ROSENTHAL: No. And I think the question is not that transparency is an answer for individuals, but that it’s good in the system generally, because the doctor who prescribes the physical therapy could understand what the impacts would be. And I think, you know, it is never transparent in our system. And I’ll lead into another question with the audience, but I know some of you have more to say.
GERARD F. ANDERSON: So, the question is about prices. And many of us don’t pay the prices, because we have insurance. But still, the prices are going up dramatically. And right now in the hospital sector, the price that is charged and the amount that you expect to get as a hospital is about a four-to-one differential. In many of the pharmaceuticals, it’s a very similar differential. So we have a price that has no relationship, in many cases, to the amount that you actually expect to collect. And what’s increasing the fastest is the price. And if you happen to be uninsured, if you happen to be out of network, if you happen to have a variety of other circumstances, those prices actually do matter. What can the hospital do to raise revenue? It can raise prices. What can the drug company do to raise revenue? It can raise prices. Is there anybody telling them, you can’t raise prices? In Maryland, yes, for hospitals. In other places, no. Is there anybody telling the pharmaceutical industry, you know, say Martin Shkreli, “You know, it used to be a $7 drug. Now, it’s a $500 drug.” Is there anybody there to tell Martin Shkreli he can’t do that? Nobody is there.
ELISABETH ROSENTHAL: Okay. I want to ask a question from the audience that’s come in that I think addresses this question. There’s a question that says, “How can policymakers marry government-run healthcare with private healthcare?” We’ve seen that Medicare has done a pretty good job of not raising prices. There’s a really interesting experiment going on in Montana right now that we’ve written about, where the public employee state union, as well as a number of companies, are basically saying to all the hospitals, we’re going to pay something like 220% of Medicare for hospitalizations. My first reaction to that was, “Wow, that’s a great price. That’s a lot of money.” They said, “Actually, we’re saving a lot of money on that, because so many people are charging more than that.” Why don’t we kind of piggyback on Medicare to try and figure out, what price should be, and take it from there?
JOANNA HIATT KIM: I would be concerned about using Medicare as a model from a regulatory burden perspective. $39 billion a year, and every year for hospitals and health systems is not a goal that we should be after. Now, we did not look at the private insurer regulatory burden, so I can’t be certain, of course, that it is lower. But I would guess that it is, at least. And we have some recommendations for what the private insurers can do to streamline and simplify as well. In fact, I think across all insurers, there are a lot of things that could be done to standardize, so that hospitals and other providers don’t do things 1,300 different ways every time they need to get a prior authorization, every time they need to submit a quality measure. So I think a lot can be done to focus on the regulatory burden as a way to getting costs out of the system.
ELISABETH ROSENTHAL: I just want to be clear, though. The program in Montana isn’t about putting people into Medicare. It’s just using Medicare as a yardstick to help figure out a reasonable price, rather than having 100-page hospital bills and this individual negotiation go on. Why don’t we try and think of some way to do that on a larger level?
GERARD F. ANDERSON: So, I’ve had the opportunity to testify in a whole variety of federal and state courts on this particular issue, and proposed a number of different thresholds to use. And I also testified a while ago in Congress on this particular issue. And I think, Elisabeth, Medicare is a reasonable standard to use. It’s not something that you’d say, you should pay the Medicare rate. I would say probably 220% of Medicare is probably a bit high in my view, but if that’s the best deal that they could get in Montana, that’s the best deal they could get in Montana. As I said, nationally, it’s about 50% higher than Medicare. Those are the kind of standards that I think ultimately we’re going to have to have, because it doesn’t seem to me that the private sector is very good at negotiating price. And certainly you and I, as consumers, can’t compete against what’s going on for a drug, for a physician visit, for a hospital visit. Even somebody like me, who’s been doing it 40 years, doesn’t have that expertise.
DAN LEONARD: If I could jump in here. The question is, are there ways to marry government programs with the private sector? Well, I’d say in the pharmaceutical space that we have some examples, where that is actually working pretty well. And I’ll point to the Part D Program and the Medicare Advantage Program specifically, where they are run more efficiently than in traditional Medicare, and the satisfaction among the patients in those programs is very high. It’s significantly higher than there is in traditional. And in those models, it’s a government program. But you have private sector entities, who are often in that region, in that market, and they’re working and developing programs that fit the patients and the citizenry in that marketplace. So those are two, I think, strong examples that Congress and others could look to, and perhaps there’s ways to extrapolate those programs, or use those programs as models across the system.
GLENN RODRIGUEZ: And I’d also like to highlight another existing program of collaboration, so we really are pushing in Oregon. We’re one of the regions doing the CMS, Comprehensive Primary Care Plus. And in Oregon, that includes seven commercial players, all of the 16 CCOs in the state, as well as Medicare in a pilot to pay for primary care differently in a value-based basis. So, it’s an example of real-world collaboration between public and private payers. And I just want to point out that – this theme has come up before – from the provider point of view, one of the really expensive things is responding to so many different ways of doing things. The average family medicine office in Oregon has 11 payers they’re responding to. So we’re really trying to get, and CPC Plus has been an example of the collaboration, to get to a single way of paying, a single set of rules and a single way of paying, because the administrative load on the provider side is so expensive and huge as well.
DAMON FRANCIS: And just to piggyback on that, we’re supporting some of the CPC Plus Initiative. I think it’s a really good place to learn how to partner, because it’s offering something that pretty much everyone in the region wants, and they’re working through the contracts and the challenging mechanisms. And starting with that lower-hanging fruit, I think is the platform then to get to hospitals and get to some of the more challenging and thorny issues.
ELISABETH ROSENTHAL: Can you say a little bit more about how those partnerships work? Because often as a journalist, reporting on this issue often feels like a circular firing squad. Where everyone says, “Why are you looking at the doctors? It’s pharma.” Pharma says, “Why are you looking at us? We’re only 10%. It’s the hospitals.” How do you get the kind of collaboration that patients want, medical care needs?
DAMON FRANCIS: I would probably let Glenn answer around the CPC Plus example, because I think it’s a really good one, and I think that started with CMS putting the money down. And saying, “We’re going to offer an incentive for care management that happens outside of the context of a visit,” which is something the patients want and something that providers want. And then, that incentive brings a lot of people to the table. And I think you could talk about what the mechanics of it look like, in terms of standardizing the contract, so that the 11 different payers work with the [family practitioner] in the same way.
GLENN RODRIGUEZ: So, a couple things I would highlight. And again, I look at this from the primary care perspective. That’s the domain that I know. But in the CPC Plus Initiative in our region, it also includes technical assistance and bringing folks together in collaborative learning and shared learning. That’s been very real. In the quarterly conferences, we’ve had participation. The last one I was at, there were over 300 folks there. And what I was really impressed was it wasn’t only the practice administrators-type people. It was front line docs that were at these places, too. So, it’s creating an environment for collaboration. But what it has done is also set up a common framework for payment. And in Oregon, we’re building off that. We have an official Oregon entity called the Oregon Primary Care Payment Reform Collaborative, which is a multi-stakeholder group, and we are literally proposing to the legislation a single payment methodology. And we’re not there yet in complete consensus. But we have a single payment methodology, and it’s very much off the model proposed by CMS. It’s in alignment with AAFP model of Advanced Primary Care Payment. And again, it’s an effort to simplify and standardize, and decrease administrative costs.
GERARD F. ANDERSON: For me, the question is, who do you trust? And I helped design the Medicare Prospective Payment System, and we decided that we trusted the hospitals, as the Medicare Program, to take care of everybody and not take the money and run. And sort of building on that, we have managed care and we essentially give them a capitated payment, and we can do that. We have bundled payments. So essentially for me, who do I trust the most? It’s the provider community, more than the insurance committee, or anybody else. And so, for me to give as much responsibility with the right amount of money, but not too much, to the provider community is where I would put my resources and my trust.
ELISABETH ROSENTHAL: There’s a question from the audience here.
AUDIENCE: Thank you, Elisabeth. But I wanted to go back to the topic you talked about before, and maybe bring some transparency, the lack of transparency that patients and people who buy insurance may find. The story you guys did on the person with his hand injury and his son’s hand injury, if I recall correctly, they were insured through the Writers Guild of America.
ELISABETH ROSENTHAL: Uh-huh.
AUDIENCE: So essentially, they didn’t have what we think of as regular insurance. I believe it was an association health plan, which has a history of [fighting] crap-tastically opaque and lower cost insurance. And the Department of Labor just finalized new regulations to dramatically expand those. So that’s not necessarily a sort of, what I would call normal insurance example, of somebody getting a surprise bill. Those plans are designed to have lower cost premiums, but sort of a strange benefit coverage mix that this person and his son unfortunately found out about. And I’d also like to note that there’s still the pending regulations for the short-term limited duration plans from HHS, which could make the association health plans look like a spit in the river, in terms of dismantling the transparency and the adequate coverage for the tens of millions of individuals like me, who buy individual insurance.
ELISABETH ROSENTHAL: Absolutely.
AUDIENCE: And I don’t know if anybody has any comments about those kinds of –
ELISABETH ROSENTHAL: Was there a question?
AUDIENCE: I just wanted to know if they have any comments about dismantling the ACA’s protections for surprise costs and coverage in the individual market, and how that spills over to employer plans, too? Thank you.
ELISABETH ROSENTHAL: Anyone?
JOANNA HIATT KIM: Yeah. We’ve had significant concerns with exactly the type of plans that you mentioned, the short-term limited duration and the association health plan. Because not only do we have concerns about the level of coverage that it is providing, in terms of not being adequate or coming with very high and perhaps unexpected out-of-pocket costs, but we are concerned that the type of people that would sign up for that plan tend to be the healthy people. And of course, they’re coming out of the marketplace risk pool, which makes that marketplace risk pool even more high than it has been. It could drive up premiums on that side. So, we’re seeing problems on both sides of the ledger with those kind of plans, and it’s something we’re very concerned about.
DAN LEONARD: I’ll take that as an opportunity to talk about some legislation, I know that’s up here right now. And when we’re talking about high-deductible health plans and HSAs, which have momentum. But there is, I believe, a great interest and need for the expansion of the program with regard to value-based insurance design, and making sure that preventive services are included in pre-deductible of the HSAs high-deductible health plan. So I know that a lot of work has been done around that, and the University of Michigan is leading the way. And so, I would just flag that for folks in this room. It could be a positive step.
ELISABETH ROSENTHAL: Going forward now, we’re hearing a lot of movement from some of the people running for election now, about Medicare for All, Medicare Opt-in, single payer. Do any of you have thoughts on that? Will we move there? Are prices getting to a point, where people are ready to accept or think about something really, really different in our system?
GERARD F. ANDERSON: So I think the answer is yes, until you look at the price tag. And we’ve seen this in Vermont. We’ve seen this in California. We’ve seen it in a variety of places. So in 1993, I was actually testifying on behalf of single-payer in the Congress. Now, I look at it and I see that basically, the private insurers spend a trillion dollars on health care every year. If we could raise taxes by a trillion dollars, I would be in favor of it, because it would be less expensive for all of us. But I think the likelihood of us having a trillion dollar tax increase is not even zero. And so therefore, it’s not something that I spend much of my energy on.
ELISABETH ROSENTHAL: Anyone else want to say something?
DAMON FRANCIS: Just in my perspective from California, where I think we had a really functional exchange after the Affordable Care Act, and continue to have one. But I’m worried about what the changes and regulations are doing is that, the managed Medicaid infrastructure is going to be really important at the state level for the collaborations, and seeing things like what we’re seeing in CPC Plus. I think just the collaborative infrastructure at the state level is where I expect to see more action, than transforming toward a Medicare for All perspective, as Dr. Anderson said.
GLENN RODRIGUEZ: And I’d really like to build on that comment to say that, I do think state-based reform is a really important venue, and there’s some important barriers to state-based reform, like the ERISA laws and rules. So one of the steps that could really facilitate more state-based experimentation in reform is really changing some of those rules. And I believe Dr. Jayapal in the 7th District in Washington has just introduced legislation, for instance, to do that. And I certainly am skeptical we’ll be able to agree as a whole nation on directions to go, but I do think state experimentation is possible. And we actually have a state legislative working group in Oregon commissioned a study from the RAND Corporation, and we are really trying to explore next steps in this direction. It’s not easy, but we’re committed to exploring and trying to get there. And one of the things we’re looking at, for instance, is carving out primary care and doing a single-payer system for primary care, a universally accessible public and funded primary care carve-out, sort of a primary care trust model, and we’re actively looking at those models. And those models would be funded by all payers, but paid through a single utility.
JOANNA HIATT KIM: Yeah, Elisabeth, I would really agree that a lot of the movement is stemming from frustration around the current system, and I think some of that does come from regulatory and administrative burden. For example, if you’re in your physician’s office and they spend a lot of time typing into their EHR, rather than talking to you, because they have to comply with all of the requirements around that. Or if you just switched insurance companies, and now, the new one wants you to go through your step therapy to get to your expensive drug again, that is a huge frustration, and people are tired of it. So I think some recommendations around simplifying and streamlining the regulatory burden would help.
I would also say, to kind of go to Damon’s area, that the social determinants are a really big deal. If you feel like you go to the hospital, you get discharged and sent home, and then you’re on your own, that’s not a great way to do things. If hospitals would be able to provide you, for example, with a prescription to go to their food pharmacy, their grocery store that they operate. We have a hospital that does that. Because if you’re discharged from the hospital with a heart attack, and you go home and there’s no grocery stores in your area, what are you going to do to not ingest salt, and end up right back in that hospital? If your hospital is able to do things like that, and give you a prescription to go to their own grocery store and pick up healthy food, where you can talk to a nutritionist, you can do that to keep yourself healthy. Then I think that would go a long way towards improving the current system.
ELISABETH ROSENTHAL: So is that kind of thing going to happen, because we’re going to like, the old way, which is to say “Oh now, we’re going to have a code for going to get food and a code for vegetables and a code for meat?” Or are we going to say, move to some kind of bundled payment or reference payment for interventions, including primary care, including management of diabetes?
JOANNA HIATT KIM: Yeah, I think we are absolutely good with a movement towards value-based arrangements, with taking on risk. What I would say is that there are providers that can’t necessarily do that. We have done a lot of work to focus on the smallest of the small, the very vulnerable rural hospitals, for example. What are you going to do to help them survive and provide access points to their communities? Because they will not necessarily be able to take on major amounts of risk. They’re simply too small for that. So we’ve looked at different ways that those hospitals can provide value and take costs out of the system. If you’re a hospital in an area, in which a full-service hospital simply isn’t sustainable, we’ve done work to look at whether you could choose to convert to an ED-only model. That way, you don’t have to sustain the kind of expensive inpatient infrastructure, when things have mostly moved in your community towards the outpatient side. But you could still maintain an access point for those patients, stabilize and treat them, and get them to an inpatient setting, if need be. So that’s a different way, too, of thinking about value, I think.
DAMON FRANCIS: I think you were asking – some of the question was about the social determinants of health, and whether we’re adding new codes, and if that’s going to be the way. I mean, there was a “Health Affairs” article that we spend about $40,000 per physician on measurement. And so, I think adding complexity to our measurement system is not something that we want to do. That was one of my questions at the end of my presentation. I think we need whole-person orientation toward the measurement approach. And really, a unit of health that we could, I think, structure our payment more around is the healing relationship. I think this is what we’re seeing in Oregon and with the AAFP-type models. How do we pay for the healing relationship overall? And then say, within that relationship, we want you to think about addressing social determinants. We want to think about you partnering. We want to invest in the collaborative infrastructure, too, for communities to address social needs. So, it’s not something that’s just happening inside of the clinical space. I think that’s where we’re seeing a lot of promise, CPC Plus, orientations toward whole-person payment, that aren’t about detailed billing for a new line of service related to social determinants.
GERARD F. ANDERSON: So who’s going to take the risk when, you know, you have a homeless patient, or somebody else who is not compliant or whatever, in these whole-person things? I mean, I think they make complete sense, except a lot of us don’t do it. Same thing with the readmissions’ issues that we have in hospitals. We’re saying hospitals are responsible for readmissions, yet the physician may not see the patient post-discharge. The patient may not comply. So you know, who do we ask to take this risk?
DAMON FRANCIS: State governors are already taking it. And Glenn, you told me a good example before we started the panel.
GLENN RODRIGUEZ: So I would say in Oregon, the coordinated care model, very explicitly, the regional CCO takes the risk. They carry the risk, the total risk. And the example Damon and I were talking about is in Portland, the local CCO has partnered with five of the major health systems to fund a major transitional housing unit with co-located chemical dependency treatment, mental health treatment, and physical treatment. It’s a 200-plus bed facility being built in East Portland to deal with exactly some of those transitional issues. So that is, for us, part of the purpose of creating the CCOs. They are the entity to take that global risk.
GERARD F. ANDERSON: And they are healthcare providers. And so the question is, do we want the healthcare providers to be the ones that take the risk and have that responsibility, or it should be some other entity? Like, when we look in other countries, it’s typically not the healthcare provider that has that responsibility.
GLENN RODRIGUEZ: And the honest answer is we’re being looked to, because we have all the money. That’s the honest answer. And I think there’s real danger in a healthcare medicalizing these services and making them more expensive. We can’t do that, but we can’t also take all the money. So if we’re going to take all the money, we’re going to have to provide some more of these services.
ELISABETH ROSENTHAL: Okay, and there’s an audience question.
AUDIENCE: Thank you. Tara Hayes from the American Action Forum. So I had a question about hospital prices. Joanna, in your presentation, you spent a third of your presentation talking about drug prices, and that certainly is getting a lot of attention in the media, and from Congress and the Administration. But we saw the pie chart breakdown of NHE, and hospitals account for 32% of our national health expenditures, whereas drugs are only 10 to 15%. And then, Mr. Rodriguez, I think it was his first slide, where he showed the various factors across the different sectors that account for all of the healthcare cost growth from 1996 to 2013. And that red bar of inpatient services swamped every other factor up there. And so, I’m wondering if you could explain how you see drug prices being such a strong driver, when hospital services account for so much more of our total spending, and have seen such greater cost growth?
ELISABETH ROSENTHAL: Okay, we’re running out of time. So I want to focus this a little. Thank you for that question, which is drug prices, yes, they’re only 10%. But let’s think about, how much were they in 1990? I assume quite small. So the growth has been quite large in drug prices. And drug prices are what, in polls, everyone says we need to do something about. So, how are we going to do that? I want to ask everyone. That it’s front and center for consumers. They often get those deductibles. The co-pay coupon runs out. So what are we going to do about that?
JOANNA HIATT KIM: Yeah, thanks. That’s a great question. We have about ten pages of policy solutions for how to hold down drug prices. They really focus on things like transparency, competition, and getting rid of anti-competitive behavior. So, staffing up the FDA, so they can approve all the generic backlog. That would help. Preventing evergreening arrangements. Those are when there’s –
ELISABETH ROSENTHAL: I’m sorry to interrupt with that. I mean, I think that’s interesting. But I don’t want the hospitals, who clearly have their own issues, to tell the pharmaceutical world, to say what they should do. I’m starting from a place that people need to tend to their own house, and what I see way too much of is each sector opining about what the other sector needs to do. So, I’m sorry to cut you off, but I think we know what the policy answers are. But I’d like to hear from people who – you know, we’re hearing about importation. We’re hearing about price setting. We’re hearing about more competition. What’s going to happen? We’re reaching a tipping point, where we can’t just keep going.
DAN LEONARD: Well, I’ll just jump in. And I mentioned at the very end of my presentation, the importance of coming together and not finger pointing. So I really try to sit up here and not point fingers. And so I think, Elisabeth, to your admonition, what can we do within our own sectors, and keeping our own house in order? And this goes to the coalition that we’re starting to work with. But just one example is that the growth in the drug supply chain, which is now up to $153 billion, and Secretary Azar was here before the Senate Finance three days ago, and I wrote down what he said – this is him speaking as a former pharmaceutical executive – “If you go into a negotiation with a payer and you decrease your list price, you’ll be harmed in your formulary positioning against your competitors.” And that’s something I hear from my membership as well, and there’s something that’s wrong there, and I believe does need to be addressed. So that’s one area that I think our sector is trying to work inside out, and I think that’s an area that should be looked at.
ELISABETH ROSENTHAL: And from some of the others. I mean, the states have both importation bills and bills that would review price increases. It’s clearly something that individual physicians have to deal with all the time.
DAMON FRANCIS: I mean, I think we’ve had a theme around, we need to increase the negotiating power of patients and providers through either collaborative infrastructures for private payers, and/or government infrastructures and public-private collaboration. So we need folks to come together the way that Glenn’s described some of these Oregon initiatives. To say, let’s get together and figure out – I’ve heard one example from a national pharmaceutical company around having a population health-based contracting mechanism, where it’s more predictable for the pharmaceutical company than how much money they’re going to get. They manage the risk on one side or the other. And then both entities are really interested in the health of that population, and how pharmaceuticals are used as a service, rather than as a particular tool that you can play pricing games with. I think those are the kinds of real-world solutions that we’re seeing and that we need more of.
GLENN RODRIGUEZ: I just wanted to point out one thing. That the data I shared was through 2013, and pharmaceutical prices have really exploded from 2013 to ’18, especially with the high cost of biologics. And I can say, from my role, where I look at what we pay for Medicaid services, prescription drug costs are now approaching our hospital costs as a percent of premium. That is stunning. And the drug costs went from being a PMPM more aligned with primary care five years ago, to up almost to hospital costs, and that is stunning. So it’s a rapidly changing picture, and the data I showed was a previous period.
GERARD F. ANDERSON: Let me tell you what gets me the most scared. And Alzheimer’s is the disease that scares me the most. But the price of Alzheimer’s drugs, if we ever had a treatment is the thing that scares me. There are five million elderly people that have some level of dementia. And we probably won’t have an Alzheimer’s drug that will cure Alzheimer’s. It will probably be a treatment that will slow the progression. And if I was a drug company, I would charge $100,000 for it. And I could probably justify it because it would keep me out of the nursing home and that costs $100,000. So if you do the multiplication, $100,000 times five million people is $500 billion.
ELISABETH ROSENTHAL: And can I – because I know we’re totally out of time here – but I just want to ask a quick yes or no question of everyone on the panel. Just looking what the rest of the world has done and tried, almost every other country has ended up with some sort of price setting. Do you think we’re going to do that? Are we going to be able to get it, you know, tweaking the competitive market, or are we going to end up with price setting in the end? Quick answers from everyone, because I know we’re out of time.
GERARD F. ANDERSON: So I think that we’re ultimately going to get some kind of price setting, mostly because the private sector, as I started out, doesn’t have that ability to negotiate very effectively.
JOANNA HIATT KIM: I think we can make a lot of progress taking the existing costs out of the system, the duplication, streamlining and simplifying things.
DAN LEONARD: I’m just going to say no.
ELISABETH ROSENTHAL: Okay.
DAMON FRANCIS: I think other countries have shown ways of doing that, that still preserve private markets, and we’re going to have something like that.
GLENN RODRIGUEZ: I think yes. And we have to have some kind of global budgeting mechanism in the end that helps us do that.
MARY ELLA PAYNE: Okay, thank you everyone. I’m sorry that we didn’t get to all the questions. There are a lot of good ones, but we were trying to focus on the ones that we could all participate in, so thanks. Yes, round of applause, please. [Applause] [Those] solved this problem. Thank you, Elisabeth and everyone. I loved, actually the diversity of the last round was pretty clear. So I hope everyone feels like they got a good sense of some of the conversations that a lot of people are having about healthcare costs. Before I say anything else though, before you leave, please fill out the blue evaluation form that you have in your packets. It’s really important to us. We take a close look at those, and it really helps us prepare and do better briefings the next time.
So I think we can all agree that this conversation was very thought provoking, and I hope it gave you some new perspectives to consider. We also hope that conversations on healthcare do not stop here. I don’t think they will. Anyway, I hope everyone has a great Fourth of July, and thank you for coming today. And I apologize for those who did not get a lunch. We were at capacity, but thank you for coming. Bye.