California Coalition’s Report Calls for Overhaul to Rein in Health Care Costs

The Sacramento Bee –

February 26, 2013:

California’s health industry heavyweights, warning that insurance premiums will soon consume a third of people’s incomes, today threw their weight behind a plan to revamp the health care delivery system.

A dozen CEOs from health care providers and insurers spent the past year participating in an unprecedented, collaborative effort with public policymakers and health care researchers, dubbed the Berkeley Forum and based at UC Berkeley School of Public Health.

The result: a report that contains a variety of proposals for changing health care delivery and also stresses the need for Californians to take more responsibility for staying healthy.

“For the first time, the key actors who deliver and pay for our health care have come together to support a road map for fundamental change in how we buy and provide health care services,” Stephen Shortell, the forum’s chair and dean of the UC Berkeley School of Public Health, said in a prepared statement.

In the report, the forum participants committed to working together and with others to establish new regulations to revamp the health care system.

Without major change, the forum members warned, people who receive coverage through their employers could end up spending a third of their income on premiums within 10 years. Already, a typical Californian spends an average of $23 a day, every day, on health care, factoring in premiums and taxes and unreimbursed expenses, the report said.

One major change the group proposes: a shift from a traditional “fee-for-service” model, under which health providers bill for each test or procedure, to a model in which companies budget a certain amount of money to spend for each patient.

The idea is to eliminate the incentive to treat patients with more tests and procedures than they need, the report said.

“If the insurers spend more than their target, they are at risk for covering that added expense,” Shortell said. “That’s why we were surprised to the extent that these folks said: ‘Bring it on.’ ”

The report also emphasized the need for more integrated care, a seamless approach to health coverage in which access to primary care doctors and specialists is well coordinated. In California, such an approach is most fully used by Kaiser Permanente.

Together, those two major shifts could save California $110 billion – or $800 per household annually – over the coming 10 years, the report said.

Six added initiatives target populations and conditions that account for a disproportionate share of health care spending. A primary goal: Get Californians to be more active.

Cost-cutting is particularly important given that the Affordable Care Act in 2014 will cover about 2 million more uninsured Californians, adding an estimated 5 percent to the overall cost of providing health care.

“The Affordable Care Act is a tipping point toward this call to action,” said Richard Scheffler, vice chair of the Berkeley Forum and a professor at UC Berkeley. “When you add 2 million people, it puts a lot of pressure in the health care system.”

Overall, Californians use fewer health care resources than do people in the rest of the country. One reason for this may be the higher cost for an overnight stay in a California hospital – 30 percent more than the national average – as well as the higher general cost of living, which the report said is 34 percent more than the national average.

That higher cost of living, plus low supply of health care workers, accounts for increased costs such as higher wages for nurses, for example, which run about 36 percent more than those elsewhere in the country, the report said.

But if the majority of Californians took steps to take better care of themselves, the need for high-priced care could become less urgent. Taking personal responsibility for one’s own health is not far behind cost-cutting in the priorities of health care changes.

The top spenders in the health care system amount to only 5 percent of the population. But that 5 percent accounts for 53 percent of the state’s health care expenditures, the report found.

These patients are more likely to be older, to be obese, and to have chronic conditions such as high blood pressure, heart disease, high cholesterol, diabetes, joint pain and arthritis, the report said.

Simply put, participants said Californians should “collectively” create a health culture.

A critical part of this involves creating environments where people are eating healthier foods in smaller portions and getting exercise, especially walking.

“We need to reduce the burden of illness on the health care system,” said Shortell. “It’s important that we design communities and schools to increase and encourage physical activity.”

The participants stressed that the report does not favor any particular model of business, such as HMOs or PPOs. But it does note that California can be a leader for the rest of the nation, in part because the state has seen high enrollment in HMOs, which use budgets and emphasize prevention and wellness.

Source: John & Rusty Report via Choice Admin