HMOs , the PCP Members…

1. HMOs , the PCP Members… AND THE PCP NATIONAL ORGANIZATION Insights & Compilation of Data on Health Care Financing by Eugenio Jose F. Ramos, M.D. Regent Coordinator, Committee on HMOs & Philhealth

2. Objectives • To broaden the scope of every PCP member’s appreciation of the many other issues affecting health care delivery in the Philippines • To initiate a wider and deeper discussion on the HMO issues affecting medical practice • To acquire a better capture of the bigger – national – role of the PCP in leading or adapting to changes in access to health care and health care delivery; to formulate a national stand from a leadership point of view in order to catalyze health policy changes • To give every member, PCP chapter and component society the tools that can empower and encourage them to be health leaders in their own regions and communities.

3. The PCP towards making a stand • PCP doctors are specialists whose expertise provides real benefits to the public. To prepare them adequately for discussions with a broad slice of Philippine society involved in health care financing ( HMOs, policy-makers, politicians), they should fully understand and appreciate the “big picture’ of Philippine healthcare and not just HMOs and their professional fees. • The PCP is not against HMOs , but is against what HMOs are doing that are detrimental to and not conducive to patients’ and doctors’ welfare. • The PCP, when it makes its official stand on HMOs, must necessarily wear the hat of a broad healthcare leader and opinion-molder, cognizant of and sensitive to the current sociopolitical and economic issues and the impact / implications of its stand to both society and the medical profession, and aptly prepared to take on the repercussions of the changes it seeks to lead. • However, if and when PCP comes up with a stand, it must have ‘teeth’ in imposing compliance from members. It must be ready to execute the changes it seeks to lead. It must prepare for the challenges to effective execution given that more than 60% of PCP members are just affiliate members who may be vulnerable to the offers of the HMOs. • PCP’s stand will focus on patients’ benefits and fair compensation for the level and quality of medical expertise rendered.

4. Relationship of Health & Economics Improvement in health status ! Improvement in worker productivity More resources allocated for health ? Contributes to a better economy

5. Perspectives of Analysis that the PCP must fully grasp • The Philippine Society • Cultural nuances & sensitivities • Media & politics • The Filipino Patient • Beliefs & practices • The health Care Financier (Payor) • Out-of-pocket • 3rd party payors ( employers) • Managed Care ( HMOs, Insurance) • The health Care Provider • The credentialed specialists • The generalists • Alternative Medicine & Folk Medicine

6. The Elements in Managed Care Issues • 1. Government & governance • 2. HMOs ( healthcare delivery systems) • 3. Healthcare recipients ( the patients) • 4. Healthcare providers ( the doctors)

7. 1. Government & governance • Majority of Filipinos do not have healthcare coverage/ insurance • Aim is to provide/improve access to healthcare of more Filipinos • The gov’t does not have the resources to provide access to all Filipinos • Access of majority of Filipinos to healthcare services is either inadequate or substandard

8. 2. The HMOs • Are a business enterprise • Must control resource utilization • Diagnostic tests • Medications • Professional fees • Scope of coverage • Must regulate doctors’ behaviors • Must select ‘ inexpensive’ doctors

9. 3. The HMO patient • Feels secure that he has medical coverage in times of need • Benefits from ‘economies of scale’ that Managed Care provides • Oftentimes misses the point about the nature of his coverage for the fee that he pays, e.g., makes demands like a private patient, complains of the requisite processes and procedures

10. 4. The medical doctor • Finds being a part of an HMO useful at the start • Will need to gain perspective on health economics and the concept of managed care; otherwise, encounter difficulties adjusting • May start complaining later when private practice picks up • May be inclined or be perceived to be partial to private patients – who provide less inconvenience and more income.

11. “Can be broadly defined as the application of the theories, concepts and techniques of economics to the healthcare sector.” Allocation of resources between various health promoting activities. Determination of the quantity of resources used in healthcare delivery to improve health. Organization and funding of health organizations. Efficiency of the allocation and use of resources for health Assessing the effects of preventive, curative, rehabilitative health services on individuals and society Definition of Health Economics

12. Economics and Health Buying Capacity In 2003 • Per capita spending for health:P1,662 per Filipino per year – about 40-45% is spent for drugs • Per capita spending for drugs:Php 770 per capita per year or Php 4,262 per household per year or Php 355/month • Threshold household income :Php 352,500/year or Php 29,375/month

13. WHOrecommends 5.0%

14. Food Economic Base/Livelihood Water Medical Services Education Clothing Power/Energy 8. Shelter 9. Ecological Balance 10. Mobility 11. Sports Filipino Household Ranking Eleven Basic Needs National Health Survey 1991

15. Health Finance & Managed Care (Who foots the bill?) Philippine Health Expenditures Uses of Health Expenditures Sources of Expenditures Alternative Modes of Financing Healthcare

16. PERCENT SHARE OF HEALTH EXPENDITURES BY USE OF FUNDS 76.26 71.82 16.13 14.66 13.51 7.61

17. DETAILS OF PRIVATE SOURCES HEALTH EXPENDITURES 46.3

18. HEALTH EXPENDITURE BY SOURCE OF FUNDS

19. National Statistical Coordination Board : 2003

20. How does a family produce health? A household’s ability to afford costs of health goods and activities depends on: • The household’s income and wealth • Access to credit and other resources outside the household • Alternative demands on and uses of family members time Household production of health: a micro-economic perspective of health transitions. DaVanzo & Gertler

21. 1988 1997 Food 50.8 43.9 Housing 12.7 15.4 Fuel/Light/Water 5.5 5.3 Transpo./Communication 4.7 5.6 Clothing 4.2 3.3 Personal care 3.3 3.2 Education 2.9 3.7 Other Expenditures 2.9 3.1 9. Household Operations 2.5 2.3 Special Occasions 2.3 2.4 11. Furnishings 2.2 3.3 12. Tobacco 2.1 1.3 Medical Care 1.7 2.2 14. Alcohol Beverages 1.2 0.8 15. Taxes 1.1 2.7 16. Gifts 0.9 1.0 17. Recreation 0.5 0.4 1988/97 Distribution of Expenditures of Families by Major Expenditure ItemIn Percent (%) 1988/97 Family Incomes & Expenditures Survey

22. In 1997 Average Filipino household income estimates: 120,000/yr Filipinos allocated only2.0% for medical care! This represents only about P2,500 per household/yr National Household Income Survery * Philiippine National Health Accounts 1991-2000 In 2000 *Total healthcare expenditures: P 113B Total population: 77M Filipinos This represents only P1,486 per Filipino per year Household Level Health Spending Estimates

23. Universal Coverage and the Phil. National Health Insurance Corporation • Only 60% of Filipinos have some form of health insurance coverage. 50 % of the population die without seeing a doctor. • Financing of healthcare is mainly out-of-pocket. • The Phil. National Health Insurance Law of 1988(?) was passed with the objective of achieving universal coverage within (15?) years . This led to the creation the Phil. National Health Insurance Corporation. • The challenge has always been where to get the funds to move forward and keep the corporation running. Part of the initial move was the integration of Medicare into Philhealth. • Major thrust has been towards streamlining the processes, ensuring the integrity of the system, and weeding out inefficiencies and corruption. • Another option was to tap the various HMOs to broaden the reach of health coverage to more Filipinos. • With broader Philhealth coverage, more Filipinos enrolled with HMOs, the percentage of the population without health insurance coverage would be expected to diminish.

24. PhilHealth: Benefit Payments

25. Standard and adequate healthcare services entail out-of-pocket expenses • Only a minority of Filipinos can pay for adequate healthcare • Even substandard/inadequate healthcare services entail out-of-pocket expenses • Something needs to be done to improve both access to and quality of healthcare services • Managed-Care is an attempt to provide better access to better healthcare services to more Filipinos

26. Health Finance: Out-of-Pocket An individual pays a health provider or facility, from his pocket, each time he avails of medical services. Adv: Individual spends money only when he avails & doesn’t spend anything if not. Disadv: Individual develops problems in securing money, or suffers from financial distress when seriously sick (ex. IHD- CABG).

27. Health Finance: Insurance An individual pays a premium which will cover his hospital expenses up to a certain limit, for a period of one year. Adv: the individual pays a relatively small amount of money which will assure him of a big hospitalization coverage for 1 year. Disadv: the individual who does not get seriously sick requiring hospitalization within the coverage period is not able to utilize services.

28. Insurance: Risks • Risk on the Individual Not to be able to use the coverage w/in period. Premiums may not be refunded. • Risk on the Insurance Company Over-utilization of coverage: “Hazards” Increases in the prices of hospital / surgical care.

30. Insurance: Hazards • Consumer-Initiated Moral Hazard:The tendency for members to use inappropriate and expensive health services given that a 3rd party shoulders part or the whole of expenses. • Provider-Initiated Moral Hazard:The tendency for providers to charge prices beyond what might be considered as fair compensation for services rendered, given that those insured become less sensitive to prices. • Adverse Selection: The tendency for members who are less likely to use the program benefits not to enroll and remit contributions leaving a pool of high risk member population.

31. Health Finance: Health Maintenance Organizations (HMOs) The consumer pays a premium which will give him a comprehensive health care program through a “package of benefits”. This is not a a merely hospitalization coverage but a complete preventive, curative, and rehabilitative package.

32. HMOs & Managed Care • Managed Care fundamentally aims for optimal and efficient use of limited health care resources to achieve the greatest good for the greatest number. • This utilitarian principle aims to distribute health care benefits equitably to as many as possible. • HMOs are business organizations that derive its growth and profits thru the principles of managed care. Necessarily, it is essential that they meet the critical volume of enrollees ( cardmembers) and rationalize the utilization of resources to limit expenditures and maximize revenues. • By the nature of the business, HMOs must have the expertise in actuarial science and must drive efficient and evidence-based medical practice.

33. Managed Care, like a cooperative, requires efficient/effective management of health resources • Provide the greatest good to the greatest number at the lowest cost. • Managed Care, therefore, requires compliance with guidelines and regulations, and avoidance of practices and behaviors that are not cost-efficient or cost-effective • Since the gov’t doesn’t have the adequate means to comprehensively address the healthcare needs of the nation, the HMOs in the private sector are an arm that can fill the gap.

34. HMO & Private Insurance Contribution

37. Annual Physical Examination Out-Patient Benefits Preventive Health Care (immunization, nutrition education, etc. In-Patient Coverage (including Surgery) Emergency Coverage Dental Benefits Maternal Benefits Optical Benefits Executive Checkup Insurance Benefits HMO Package of Benefits

38. TASKS TO ACCOMPLISH August to October 2006 ( Before the Mid-Year Convention)

39. Timetable for PCP Chapters & Component Societiesbetween August and September 2006 • Mobilize the leaders of the chapters & component societies to stimulate discussion on the ‘big picture’ in their respective areas of jurisdiction using this Powerpoint as springboard. • Expand the discussion to a broader base per component society and chapters. • Give them targets in terms of discussion , decision points, timelines • Capacitate them to analyze their respective circumstances and to come up with their own modus vivendi and operandi with the HMOs in their respective regions. • Consider rates being defined and stratified according to region • Propose rates. For example, P350 for subspecialist; P300 internist, P250 family physician; P200 GP • Come up with scenarios: Can HMO members choose to personally pay for their non-HMO doctors, but still be covered by HMOs for hospitalization. • Share outputs of discussions to PCP secretariat for dissemination to other chapters and component societies. Be guided by the “ NEXT STEPS” in the next slides.

40. NEXT STEPS after carefully studying the “ Big Picture” • Acknowledge as GIVEN: The HMOs are here to stay regardless of whether we make a stand one way or the other. • Work towards a consensus among chapter / component society members • Resolve: A clear majority of PCP members in the chapter / component society are determined and willing to fully support the stand of the chapter and the consequences of such stand. • Establish the boundaries and details of the stand ( including but not limited to ff:) • A. Rates: • What is a reasonable rate? What is an unreasonable rate? • What is timely payment of fees? What is unacceptably late? • What is level of priority of payment of doctors’ fees versus (other) hospital fees?

41. NEXT STEPS after carefully studying the “ Big Picture” • B. Patients’ issues • choice limited to doctors in the HMO list? • How patients are treated by HMOs and how HMOs affect the relationship of HMO patients and their doctors • How are the HMO patients’ rights and welfare protected? • Are HMOs a major player in health care delivery in your chapter? • C. Doctors’ issues • What are the non-negotiables as far as the doctors are concerned? • What are the doctors willing to offer to support universal health insurance coverage and good governance in health care? • What doctors’ behaviors must be stopped, changed, improved? • D. HMO Management issues • What are HMO practices that need to be changed, stopped, improved? • How can the HMOs best collaborate with the PCP chapter to improve access to health care by more Filipinos? • After integrating and consolidating all of your positions to all of the foregoing questions, what now, finally, is the stand of your chapter / component society regarding the HMOs ? Please define your stand clearly by drilling down to 5-10 key points.

42. PCP Board Action ( Sept - Oct) • Collate outputs of component societies and chapters • Distinguish local from national issues; Distinguish issues that are strategic to the role and position of PCP as a national organization from issues that are operational in nature. • Meet with Dr. Benito Reverente (for further probing) • Firm up PCP Board position for a national strategy • that requires local execution (engagement at the chapter level) • That requires execution at the national level ( level of policy and national stand) • Meet with AHMOPI excom • Explore ways to help HMOs cut down cost in health care delivery thru practice guidelines and formularies • Check on practices of HMOs that, by trying to cut costs in the short term actually cause higher costs in the long term, e.g., delay in referral to specialists • Determine factors that cause delay in timely payment of fees, low rates for specialized services • Firm up PCP Board position prior to Oct mid-year convention. • Prepare draft for Iloilo presentation