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Transcript of Jeremy Nurse
Jeremy NurseConsulting Actuary
Mike WilliamsSenior Consultant
( United Kingdom )
Saturday, 4 September 2010
© 2010 Towers Watson. All rights reserved.
Cost containment in Health businessHydra conference 4 September 2010
Mike WilliamsJeremy Nurse
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Agenda
Focus on cost containment and developments
European health expenditure and performance
US cost containment in health plans
UK cost containment in health insurance / developments in the NHS
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
4
Europe - health expenditure and performance
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Europe - health expenditure and performance
What we’ll cover Health spending – public and private
Health performance
Drivers of cost
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Public and private health expenditure vary significantly across Europe
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Source: OECD, WHO
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Public
Private
Pu
blic
% G
DP
Priv
ate
% G
DP
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Public and private health expenditure as % GDPalso varies significantly
0
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6
8
10
12
Fra
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Sw
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Ger
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Public Private
Source: WHO, European Health For All Database (2008 data updated July 2010)
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
0%
10%
20%
30%
40%
50%
60%
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80%
90%
100%
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Private contribution % healthcare spend
Public contribution % healthcare spend
Higher or lower private spend does not correlate with overall spend
Source: OECD, WHO
Public
Private
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
While health expenditure varies widely, but appears to be influenced by GDP
Source: WHO
0
1,000
2,000
3,000
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10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
GD
P/c
apita
(U
S$)
Health expenditure, PPP$ per capita
GDP PPP$, per capita
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Healthcare performance – the Netherlands leads the way
Source: Health consumer powerhouse, Euro Health Consumer Index 2010
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Tot
al s
core
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
0
100
200
300
400
500
600
700
800
900
Net
herla
nds
Ger
man
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Fra
nce
Sw
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$PP
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Total Score Health $PPP
Source: Health consumer powerhouse, Euro Health Consumer Index 2010, WHO
Performance and total health spending are related – to a degree
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
0
100
200
300
400
500
600
700
800
900
Net
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Total Score Health $PPP
Linear (Total Score) Linear (Health $PPP)
Source: Health consumer powerhouse, Euro Health Consumer Index 2010, WHO
Performance and total health spending are related – to a degree
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Drivers of cost include:
Longevity
Growth in diseases
Medical advances
Higher expectations
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Drivers of cost - longer life and disease growth
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80
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Life
Exp
ecta
ncy
at b
irth
(yea
rs)
Source: WHO
European Union life expectancy
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Num
ber
of n
ew c
ance
r ca
ses
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Germany (RH scale)SwedenNetherlandsBelgium
Selected countries - new cancer cases
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Total health expenditure per capita and life expectancy
Source: WHO
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1995
1997
1999
2001
2003
2005
2007
1996
1998
2000
2002
2004
2006
2008
1995
1997
1999
2001
2003
2005
2007
1996
1998
2000
2002
2004
2006
2008
Hea
lth e
xpen
ditu
re p
er c
apita
(U
S$P
PP
)
15
16
17
18
19
20
21
22
Life
exp
acta
ncy
at 6
5, in
yea
rs
Health Expenditure $PPP per capita
Life Expectancy at 65 years, in years
France Germany Spain UK
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What does this mean?
There is a broad correlation between health spending and performance
The best performers do generate efficiencies against the general trend
Public/private split doesn’t seem to directly influence performance
Many drivers of cost are unavoidable
But health is a complex business…
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17
US - cost containment in health plans
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
US - cost containment in health plans
What we’ll cover Consistent performers and their attributes
Consumer-driven health plans
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Public and private health expenditure as % of the GDP
0
2
4
6
8
10
12
14
16
18
US
A
Fra
nce
Sw
itzer
land
Ger
man
y
Bos
-Her
z
Aus
tria
Por
tuga
l
Den
mar
k
Bel
gium
Gre
ece
Sw
eden UK
Ital
y
Net
herla
nds
Irel
and
Spa
in
Nor
way
Fin
land
Cro
atia
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vaki
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a
Mal
ta
Hun
gary
Bul
garia
Luxe
mbo
urg
Cze
ch R
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Cyp
rus
Pol
and
Latv
ia
Lith
uani
a
Est
onia
Rus
sia
Tur
key
Rom
ania
Public Private
Source: WHO, European Health For All Database (2008 data updated July 2010); *USA data for 2007, from WHO Global Health Observatory.
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US experience
The Keys to Continued Success: Lessons Learned From Consistent Performers 15th Annual National Business Group on Health/Towers Watson Employer
Health Care Survey
Consumer control gaining momentum High deductibles – consumer appreciation of costs
Savings accounts – act as an incentive towards more healthy lifestyle
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US – jargon-buster!
CDHP - Consumer-driven health plan
ABHP – Account-based heath plan
HSA – Health savings account
HRA – Health reimbursement arrangement
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Companies show dramatic differences in their ability to reduce health care cost trends
Median two-year cost trend for calendar years 2008 and 2009 is 6.5%. Best-performers report significantly lower cost trends at 0.3%.
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Consistent performers have outpaced other companies in containing costs over the last four years…
Consistent performers experienced median annual costs increase 2.5% in 2009, versus median increase for all companies of 7.0%.
41 consistent performers in this year’s analysis
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Key drivers of performance; extent to which consistent and best performers implement programs relative to poor
Maximizing health and productivity
Effective information delivery
Appropriate financial incentives
Metrics and evidence
Quality care delivered efficiently
21%
20%
18%
17%
16%
10%
9%
9%
8%
5%
Consistent Performers (relative to Poor Performers)
Best Performers (relative to Poor Performers)
…and have exceeded all other companies in five key areas
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More employers increasing point-of-care cost sharing and making changes to plan design
2009 2010 2011*
PERCENTAGE POINT
CHANGE FROM 2009 TO 2011
Increase the share of total health care costs paid by employees
34% 43% 56% 22%
Significantly increase employee premium contributions
23% 30% 37% 14%
Significantly increase deductibles in all/most plan options
18% 28% 38% 20%
Significantly increase pharmacy copays, deductibles or coinsurance
17% 23% 28% 11%
Significantly increase employee medical copays or coinsurance
16% 21% 27% 11%
Change plan options 25% 27% 52% 27%
Restrict eligibility 16% 19% 23% 7%
Use spousal waivers or surcharges 18% 21% 28% 10%
(*) Planned for 2011.
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Employers support account-based health reform initiatives
VERY SUPPORTIVE
SOMEWHAT SUPPORTIVE
NOT VERY SUPPORTIVE
NOT SUPPORTIVE
AT ALL
Account-based plans 34% 34% 17% 15%
Status quo 7% 38% 36% 19%
Private insurance 9% 34% 28% 27%
Individual mandate 8% 29% 33% 30%
Pay-or-play mandate 7% 29% 34% 30%
ERISA pre-emption 8% 16% 29% 47%
Tax policy/refund credits 3% 9% 35% 53%
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Continued growth in CDHPs
Today, 54% of companies have a CDHP in place—a 6% increase over last year.
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Lower health care costs for companies with higher CDHP enrollment in 2009
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What does this mean?
US experience shows that it’s possible to stabilise health care spending, and consistent performers are leading the way
Appropriate use of tactics in five areas drives best performance Effective use of financial incentives Effective information delivery Emphasis on high-quality care Use of data and evidence Maximising health improvement
Many best-performing companies have adopted CDHPs, but for most, this is just one component of a larger consumer-oriented model
Increasing CDHP enrollment is key to moderating cost trends
CDHPs continue to grow in adoption and acceptance. All data show that aggressive promotion of CDHP gets results.
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30
UK - cost containment in health insurance / developments in the NHS
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What we’ll cover
UK perspectives on cost containment Insurance
Role of Public Private Partnerships
NHS and the private sector
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UK medical insurance - cost containment
A mixed picture
Insurers working hard to remain competitive Claims management
Efficiency
Hospital negotiation
Networks
Care guidelines
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UK medical insurance - cost containment
Employers have other priorities
Medical insurance is relatively low cost
Employees
Still a benefit – interventions limited
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The NHS and PPPs
Two main public private partnerships used by Department of Health:
The Private Finance Initiative (PFI)
NHS Local Improvements Finance Trust (NHS LIFT)
Provision of infrastructure and services
Little interaction with insurers
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Bringing together public and private care
March 2009
Followed Professor Mike Richards report
‘NHS organisations should not withdraw NHS care simply because a patient chooses to buy additional private care.’
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Personal health budgets
Source: Department of Health
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‘Liberating the NHS’ 2010
Published 12 July 2010
Putting patients and public first
Improving healthcare outcomes
Autonomy, accountability and democratic legitimacy
Cutting bureaucracy and improving efficiency
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What does this mean?
Cost containment among insurers primarily aimed at competiveness
For employers it’s primarily an employee benefit
NHS changes point towards prospects for ‘softer’ divisions
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39
Conclusions
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Conclusions
Costs should be contained and efficiencies realised
The role and contribution of the private sector varies
The US and UK provide insights
Consumer direction is growing
The private sector plays an important role
towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Cost containment in Health businessHydra conference 4 September 2010
Mike WilliamsJeremy Nurse