Getting Real about Real Savings: Cost Containment in California

1. Getting Real about Real Savings:Cost Containment in California Micah Weinberg Senior Research Fellow, California Program

2. Why Real Cost Containment Matters

3. Cost Containment: The Basics • Why are our healthcare costs so high? • Why are they rising so rapidly? • What can we do about it (quickly)? • What can California do on its own?

4. Why are our healthcare costs so high? Source: McKinsey Global Institute

5. Why are they growing so rapidly? • Not (primarily) • Aging population • Less healthy population • Growing number of admissions or office visits • Provision of higher quality care • Primary factor is increasing cost per episode of equivalent care • Not simply issue of fee-for-service

6. What can we do about it (quickly)? Source: Business Week (OECD Statistics)

7. What can California do on its own? • California Task Force on Affordable Care Group of CA-based stakeholders seeking best way to lower costs, raise value (~$400 B, 10 yrs) • Align incentives to reduce clinical waste • Reduce administrative waste • Promote value-based consumer choice • Redress social determinants of poor health outcomes

8. Aligning Incentives in California

9. Aligning Incentives in California

10. Aligning Incentives in California

11. Reduce administrative waste • Though smaller in scale, savings not insubstantial • Physician offices spend over 27 percent on administration and 14 percent on billing • Hospitals weigh in at 24 percent and 11 percent respectively (Kahn et al, 2005) • Develop common standards and systems for: • Eligibility • Claims processing • General contracting • But not just technological issue (e.g., One-E-App)

12. Insurance Exchanges

13. Insurance Exchanges • The role of brokers • The problem of “churn” • The example of Stanford • One time vs. ongoing cost control

14. Social Determinants of Poor Health Source: Bay Area Regional Health Inequities Initiative

15. Thank you Micah Weinberg weinberg@newamerica.net (916) 706-2664