The Future of Consumer Driven Healthcare

Ronald E. Bachman FSA, MAAAPresident & CEOHealthcare Visions404-697-7376

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Washington, D.C.February 16, 2010 Washington, D.C.February 16, 2010

Healthcare Consumerism the Key to Cost Control

“Only Consumers Can Bend the Cost Curve” - CAHI

Have we Lost the American Character of

Personal Responsibility?

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Creating a Healthcare Strategy Starts with a Clear Vision

Desire for Change

Desire for Change

+A Common

Vision+

Process for Change

=POSITIVECHANGE

+Vision

+Process for Change

=Expensive False Starts

The Missing LinkThe Missing Link Future StateFuture State

A Vision for Transformation

NOT Cost Shifting, Tweaking, or Reform

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Your Choice:Supply Controls or Demand Controls?

Plan Sponsors and Members have two basic choices to control costs:

1. Managed care & HMOs - The “supply of care” is limited by a third party who controls the access to medical services (e.g. utilization reviews, medical necessity, gatekeepers, formularies, scheduling, types of services allowed), or

2. Consumerism - The member controls their “demand for care” because of a direct and significant financial involvement in the cost of care, rewards for compliance, and the information to make wise health and healthcare value driven decisions.

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Mega Trends Creating Demand Control Initiatives

1. Personal Responsibility

2. Self-Help, Self-Care, Self Reliance

3. Individual Ownership

4. Portability

5. Transparency (the Right to Know)

6. Consumerism (Empowerment)

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Healthcare Consumerism

Healthcare Consumerism is about transforming a health benefit plan into one that puts economic purchasing power—and decision-making—in the hands of participants.

It’s about supplying the information and decision support tools they need, along with financial incentives, rewards, and other benefits that encourage personal involvement in altering health and healthcare purchasing behaviors.

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The Core of Consumerism

The Unifying Themes For

Healthcare Consumerism is:

Personal Responsibility & Personal Responsibility & Behavioral ChangeBehavioral Change

“Implement only if it supports behavioral change consistent with the

strategy”

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The Evolution of Healthcare Consumerism

Future Generations of Consumerism

Behavioral Change and Cost Management Potential

Low Impact ---- ---- ---- ---- ---- ---- ---- ---- ---- High Impact

Traditional

Planswith

ConsumerInformation

2nd Generation Consumerism

Focus onBehaviorChanges

TraditionalPlans

3rd Generation Consumerism

IntegratedHealth &

Performance

1st Generation Consumerism

Focus on Discretionary

Spending

4th Generation Consumerism

Personalized Health & Healthcare

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The Promises of Consumerism

Personal CarePersonal CareAccountsAccounts

Incentives & Incentives & RewardsRewards

Wellness/PreventionWellness/Prevention

Early InterventionEarly Intervention

Disease and Case Disease and Case ManagementManagement

InformationInformation

Decision SupportDecision Support

The Promise of Demand Control & Savings

The Promise of Wellness

The Promise of Shared Savings

The Promise of Transparency

The Promise of Health

It is the creative development,

efficient delivery, efficacy, and successful

integration of these elements that will

prove the success or failure of

consumerism.

Major Building Blocks of Consumerism

2nd Generation Consumerism

Focus onBehaviorChanges

3rd Generation Consumerism

IntegratedHealth &

Performance

1st Generation Consumerism

Focus on Discretionary

Spending

4th Generation Consumerism

Personalized Health & Healthcare

Personal Care Personal Care AccountsAccounts

Incentives & Incentives & RewardsRewards

Wellness/PreventionWellness/Prevention

Early InterventionEarly Intervention

Disease and Case Disease and Case ManagementManagement

InformationInformation

Decision SupportDecision Support

Initial Account Only

Activity & Compliance

Rewards

Indiv. & Group Corporate Metric

Rewards

Specialized Accts,Matching HRAs,Expanded QME

100% Basic Preventive Care

Web-based behavior change

support programs

Worksite wellness,safety, stress & error

reduction

Genomics, predictive modeling

push technology

Information, health coach

Compliance Awards, disease

specific allowances

Population Mgmt, Integrated Hlth Mgmt,

Integrated Back-to-Work

Wireless cyber –support, cultural DM, Holistic care

Passive Info Discretionary

Expenses

Personal health mgmt, info with

incentives to access

Health & performance info, integrated health

work data

Arrive in time info, info therapy, social

networks

Cash, tickets, Trinkets

Health Incentive Accounts, activity based incentives

Non-health corporate metric driven

incentives

Personal dev. plan incentives, health

status related

The Consumerism

Grid

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Acute Case Mgmt

Utilization and Case Management

NETWORK A / TPA A NETWORK B / TPA B

Wellness

Prevention

Demand Management

Disease Mgmt Programs

Integrated Absence Mgmt

The secret is cooperation and synergy between

components supporting the corporate strategies

Integrated Health Management ProgramAn Implementation Option for Multiple Generations

General Manager

Personal Care Accts.

FSAs, HRAs, HSAs

Process Integration &

Disciplined Im

provement

Com

pany

Dat

a W

areh

ouse

& M

etri

cs

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Potential Savings from Full Implementation of ConsumerismAchievement of savings and improved outcomes is dependent upon both

the Type and Effectiveness of the programs implemented.

 

Gross* Savings as % of Total Plan Costs(Programs Applicable to All Members)

 

EffectivePrograms

Implemented

Traditional plans  

Consumerism Plans

Passive 1st Generation 2nd Generation 3rd Gen & Future

Basic 2% 3% 7% 10%

Expanded 3-4% 5-8% 12-15.0% 20.0+%

Complete 4% 7% 17% 25%

Comprehensive (Future) 5% 10% 20% 30%

*Excludes Carry-over HRAs/HSAs and any added Administrative Costs of Specialized Programs

American Academy of Actuaries 2009 Non-partisan CDH Consumerism Studies

•1st Year Savings: The total savings generated could be as much as 12 percent to 20 percent in the first year.

– All studies showed a drop in costs in the first year of a CDH plan from -4 percent to -15 percent. A control population of traditional plans experienced increases of +8 percent to +9 percent.

•2+ Year Savings: At least two of the studies indicate trend rates lower than traditional PPO plans by approximately 3 percent to 5 percent.

– If these lower trends can be further validated, it will represent a substantial cost-reduction strategy for employers and employees.

•Cost Shifting: The studies indicated that while the possibility for employer cost-shifting exists with CDH plans, (as it does with traditional plans) most employers are not doing so, and might even be reducing employee cost-sharing under certain circumstances.

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AAA Consumerism Study – Quality of Care

•Preventive Care: All of the studies reviewed reported a significant increase in preventive services for CDH participants.

•Chronic Care: Three of the studies found that CDH plan participants received recommended care for chronic conditions at the same or higher level than traditional (non-CDH) plan participants.

•Physician Treatments: Two studies reported a higher incidence of physicians following evidence-based care protocols.

•Care Avoidance: All of the studies indicated that cost savings did not result from avoidance of inappropriate care and that necessary care was received in equal or greater degrees relative to traditional plans.

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Circle of LifeHow Long Do We Have?

1. From bondage to spiritual faith; 2. From spiritual faith to great courage; 3. From courage to liberty; 4. From liberty to abundance;               5. From abundance to complacency; 6. From complacency to apathy;  7. From apathy to dependence; 8. From dependence back into bondage

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