U.S. companies continue to face significant health care cost increases, but 2005�s is the lowest rate increase in six years, according to global human resources services firm Hewitt Associates (NYSE: HEW). For 2006, Hewitt is projecting a 9.9 percent average increase for employers, following 2005�s 9.2 percent increase.
Employees� contributions for health care have steadily increased, nearly doubling since 2002. Hewitt projects that the average employee contribution1 for 2006 will be $1,612, representing 20 percent of the overall health care premium, and up from $1,444 in 2005.
In addition to significant employee contribution increases, employees also have experienced increased out-of-pocket costs, such as copayments, coinsurance and deductibles. The average employee out-of-pocket costs are expected to increase from $1,366 in 2005 to $1,524 in 2006. Overall, employees� total health care costs -- including employee contribution and out-of-pocket costs -- are projected to be $3,136 in 2006, up 12 percent from $2,810 in 2005.
With relatively flat pay increases -- Hewitt projects salaried exempt employees can expect a base salary increase of 3.6 percent2 in 2006 -- rising health care costs are offsetting salary gains for many workers. For example, an employee making $40,000 today who receives the average salary increase ($1,440) will use 23 percent of that increase to pay for the increase in health care costs next year.
�While it is encouraging to see cost increases stabilizing, the rate of growth remains unsustainable and the magnitude of health care costs continue to be a major concern for employers� bottom lines and employees� wallets,� said Craig Dolezal, national health care practice leader at Hewitt Associates. �These slightly lower cost increases are due to a variety of factors, including increased consumer awareness and financial responsibility, continued consolidation of health plans and providers, and lower overall inflationary demands. However, health care is still growing almost three times faster than wages and general inflation.�
Cost Increases by Major Metropolitan Area
While Hewitt�s data shows a moderation in costs, a few major U.S. markets continued to experience double-digit increases. Hewitt�s 2005 data reveals that the following markets recorded the highest rate increases: Cleveland/Akron (12.2 percent), Boston (11.1 percent), Atlanta (11.1 percent), Houston (10.6 percent), Orlando (10.4 percent), Kansas City (10.4 percent), Orange County (10.4 percent), Sacramento (10.4 percent) and Tampa Bay Area (10.3 percent).
�Health care remains a very local issue driven by demographics, regional health issues, and the market dynamics of the providers and health plans competing for patients and members. The current efforts for more consistent treatment protocols, better health risk management, and price and quality transparency will narrow, not eliminate, these regional differences over time,� said Dolezal.
2006 Cost Increases by Plan Type
On average, Hewitt forecasts that companies will experience 2006 cost increases of 9.5 percent for preferred provider organizations (PPOs), 10 percent for health maintenance organization plans (HMOs), and 10.5 percent for both traditional indemnity and point-of-service (POS) plans.
That means, from 2005 to 2006, the average cost per person for major companies will increase from $7,048 to $7,752 for HMOs; $7,374 to $8,075 for PPOs; $7,322 to $8,091 for indemnity plans; and $7,849 to $8,673 for POS plans.
Employer Reaction to Rate Increases
Companies continue to evaluate and implement substantial changes -- both traditional and leading-edge strategies -- to manage increasing health care costs. Hewitt Associates is currently working with many large employers to develop new strategies to reduce costs and assist employees with managing their heath care decisions and financial responsibilities, including:
* Offering consumer-directed health plans. Hewitt has found that companies with significant enrollment in consumer-directed health plans, such as account based plans and customized �build-your-own� designs that allow employees to tailor a plan based on their individual health and financial needs, are experiencing rate increases well below the national trend or, in some cases, even decreased costs. �To date, Hewitt has helped more than 100 organizations introduce consumer-directed plans and we�re starting to see positive results,� said Dolezal. �We�re continuing to see a lot of interest in these plans and expect even more companies will offer them in the next few years, maybe as many as 25 to 30 percent of all large employers.�
* Contracting with plans that offer specialized or health risk management programs and focus on wellness and prevention. In an effort to enhance or maintain the health of their workforce, more employers are offering specialized or health risk management programs that can help manage employees� chronic health conditions. More companies are offering wellness and health promotion programs, as well as providing financial incentives for employees to participate in these programs. �In the end, we need to continue to help people better manage their health risks and the care they receive if we have any real hope of reducing health care cost increases,� said Dolezal.
* Requiring more quality data and price transparency. Employers have increased their focus on quality. Many are choosing to work only with plans and hospitals that have solid track records in terms of efficiency, quality, outcomes and cost. Quality information is becoming more detailed and widely available, and employers have begun to require greater cost transparency, especially in the area of prescription drugs.
* Changing prescription drug coverage. Prescription drug costs continue to be a major driver behind insurance hikes, and employers are actively evaluating new strategies to contain these costs. For next year, companies are implementing higher copayments and coinsurance models, mandating low-cost substitution provisions and mail-order for certain therapeutic drug classes, and offering generous generic programs and designs.
�The American public will continue to demand the highest level of health care in the world, and the health care industry will continue to strive to deliver that level of service. Our challenge and obligation then is to satisfy those demands in the most efficient manner possible by identifying and promoting consistent quality care at affordable costs for both employers and patients,� said Dolezal.
About Hewitt's Data
Hewitt�s health care cost data is derived from the Hewitt Health Value Initiative, a cost and performance analysis database of more than 2,000 health plans throughout the U.S., including 400 major employers and more than 18 million health plan participants.
Despite spending more per capita on health care than any other country, the U.S. health system is fraught with waste and inefficiency, according to a new chartbook released today by the Commonwealth Fund Commission on a High Performance Health System. The chartbook, discussed at a Capitol Hill briefing sponsored by the Fund and the Alliance for Health Reform, paints a stark picture of a fragmented system beset by widespread disparities in access to and quality of care.
A Need to Transform the U.S. Health Care System: Improving Access, Quality, and Efficiency also points to promising opportunities for reforming the health system. These include management of high-cost care, enhancements in care coordination, disease management, and developing networks of high performing providers under Medicare, Medicaid, and private insurance. The Commission on a High Performance Health System will be exploring such opportunities as part of its mission to move the nation toward a health care system providing better access, quality, and efficiency.
Commission chair James J. Mongan, M.D., president and CEO of Partners HealthCare, in his remarks at the Alliance briefing, noted that "the disconnect between people wanting the new things that medical science can produce, yet not being sure that they are willing or able to pay for them." In his presentation, A Tale of Two Health Systems Mongan said this disconnect "will lead to more of a focus on the value equation in health care, and to more of a focus on a high-performing health system."
The commission's goals are outlined in an essay by Fund president Karen Davis, Ph.D., Toward a High Performance Health System: New Commonwealth Fund Commission, which was published last month in Health Affairs.
A webcast of the commission event, provided by kaisernetwork.org, will be available Tuesday, October 4, on the Alliance for Health Reform Web site.
Reportedly, Senator Dick Durbin (D. Ill.) has removed a block that has stalled legislation in the Senate intended to help fund state high risk medical insurance pools. Durbin had cited that legislation's favoring small states over large states as reason for his block. Apparently, the legislation now has been modified to treat large states equally.
According to the 2006 Towers Perrin Health Care Cost Survey, U.S. employers are facing an 8% increase in their 2006 health care costs. Moreover, the cumulative effect of years of double-digit increases has produced a record high for employer-sponsored health care costs in America. In flat dollar terms, next year�s gross health care expenditure is expected to rise by an average of $597 per employee, to an average total cost of $8,424 -- representing a 140% increase over the last 10 years.
Employers continue to shoulder the majority of the burden. Employees on average will pay $155 more in 2006, representing a 10% increase from the year before. Employers, on the other hand, will see an increase of $442 per employee, absorbing 74% of the total cost increase. Overall, employers will pay 80% of premium costs and employees will pay 20%.
Notably, while the average cost of health care coverage will increase by $597 per employee in 2006, this figure would have been close to $750 were it not for employer efforts to aggressively manage program performance through vendor selection and performance management, prescription drug expenditures, care management, employee engagement and other initiatives.
These observations are drawn from top-line results of the annual survey, now in its 17th year, conducted by Towers Perrin�s HR Services Business. This year�s survey includes data on the health benefit programs provided by more than 200 of the nation�s largest employers, covering over five million U.S. employees, retirees and dependents.
�The health care cost crisis has become a chronic problem for U.S. employers and employees alike,� said David Guilmette, Managing Director of Health and Welfare for Towers Perrin. �There is a fundamental tension between managing costs and managing people that constrains how much of the cost can be shifted to employees. Given the huge cost base built up over the years and continuing inflation at rates well above CPI, employers simply have to take a longer-term view. With this perspective as a platform, some employers are moving toward a model that increases employees� responsibility and accountability -- engaging them in a long-term solution to a problem that is not going away. And these companies are beginning to see positive outcomes and a significant difference in program performance.�
A Crisis Turns Chronic
A historical view highlights the magnitude of the health care cost problem and why cost inflation -- whether at single- or double-digit rates -- now produces significant additional burdens for both employers and employees. Employees are paying 64% more in health care costs today than they spent five years ago. Employers, meanwhile, are paying 78% more in health care costs today than five years ago.
Employers continue to bear the lion�s share of the cost, and although cost-shifting in past years has increased employees� relative share, the 2006 survey suggests that employers recognize the need to look beyond stopgap �fixes� that simply shift costs and may have negative consequences for effective workforce management over the longer term.
For example, this year�s survey shows that the average employee share of premium costs will increase 10% in 2006, while the employer share will increase by 7%. In the 2005 survey, the cost increases experienced by employees and employers were 12% and 8%, respectively. In the 2006 survey, the bulk of the increase in the dollar amounts contributed by employees is due to inflation on their share of the premium, with less impact coming from cost shifting (increasing the employees� percentage of the cost).
Active Employee and Retiree Medical Costs Continue to Climb
The average reported 2006 cost of medical coverage for all types of health plans combined is $355 per month ($4,260 annually) for active employee-only coverage; $715 per month ($8,580 annually) for employee-plus-one-dependent coverage and $1,033 per month ($12,396 annually) for family coverage.
The total cost for retirees under age 65 is the highest in our survey -- $562 per month for retiree-only coverage ($6,744 annually) and more for coverage that includes dependents. Notably, the rate of cost increase for this group is higher than for active employees -- 10% versus 8% for active employees -- a trend that has persisted in employer-sponsored plans since 1999. This is of particular concern for employers who have large postretirement medical obligations.
Meanwhile, the Medicare Modernization Act is changing the landscape for employer-sponsored retiree medical programs. With a 2006 effective date for Medicare Part D on the horizon, the vast majority (83%) of the survey respondents who offer retiree medical say they will provide prescription drug coverage at least as rich as Medicare�s new program and take the federal subsidy offered to employers who provide this benefit.
For many companies, however, the 2006 approach could be an interim step toward a new strategy for the longer term as the impact of rising costs, changing demographics and the new Medicare law combine. Notably, over half (53%) of responding companies offering retiree medical say the Medicare changes will prompt them to rethink their commitments to all retirement programs, including both medical and retirement income benefits.
Employees Have More at Stake
Despite what appears to be a slowdown in costshifting, the data suggest that the trend toward greater sharing of costs between employers and employees is still under way. And in flat dollar terms, the employee share represents a significant cost by any standard. Employees will contribute 18% of the premium cost for employee-only coverage and 21% for dependent coverage (20% overall) -- an average of $63 a month ($756 annually) for employee-only coverage and $217 a month ($2,604 annually) for family coverage in 2006.
Retirees, meanwhile, will contribute approximately 43% of the total cost of their coverage. Retirees under 65 will pay an average of $244 a month ($2,928 annually) for retiree-only coverage, while retirees age 65 and older will pay an average of $108 a month ($1,296 annually) for retiree-only coverage.
�As health care costs continue to rise faster than the rate of general inflation, it�s more important than ever for employees to actively participate in controlling the overall spend and realize that increasing costs will affect them in both direct and indirect ways,� said Guilmette. �Clearly, as the company�s health care costs increase, the employee�s cost goes up as well. Continuing high inflation rates mean that employees� out-of-pocket health care expenses will also rise. And, at the end of the day, employees need to recognize that a larger piece of the total compensation pie is being taken up by health care costs.�
�The money has to come from somewhere, and increasingly we�re seeing it come from resources set aside to reward employee performance,� adds Ron Fontanetta, Principal in the Towers Perrin Health and Welfare practice. �Health care has become a tremendous financial burden on employers, and unless health care cost increases moderate, the funds available for compensation and rewards will be reduced. Moreover, as employees plan for retirement, they need to factor in health care premium costs because future retirees will often have to pay the entire amount.�
Beyond the Averages: Creative Actions Can Drive Positive Results
The survey data overall tell a sobering story, but the averages don�t give the complete picture -- i.e., the data also show significant variations in both the flat dollar and percentage cost increases experienced by U.S. companies and their employees. And the survey results suggest that companies with lower-than-average costs are doing some creative things -- notably, taking a comprehensive, longer-term approach to cost management and actively engaging employees in the process.
To better understand the factors that contribute to lower costs, the Towers Perrin analysis divides the survey group into three categories -- low-cost companies (companies in the lower third, with the lowest premium level per employee), average cost (the middle third) and high cost (the upper third, experiencing the highest cost per employee).
The cost variation across these groups is significant, with companies in the upper third facing a total cost of $10,022 per employee in 2006, against a $6,866 per employee cost for companies in the lower third. The rate of cost increases for the two groups -- 9% versus 6%, respectively -- is also notable. �While some variations in health care costs can be explained by differences in geography or employee demographics, many companies are experiencing better cost containment as a direct result of proactive steps they have taken,� said Guilmette.
Looking more closely at what distinguishes these groups, a number of key findings come to light. First, the low-cost companies seem to be looking at all aspects of their vendor relationships for quality of care, efficiency and cost-saving opportunities. For example, these companies are more likely than their high-cost counterparts to have consolidated vendors or implemented enhanced vendor performance standards/service levels. They are also much more likely to have implemented processes to monitor the results of their care management initiatives.
Aggressive vendor management does appear to yield results that go beyond the impact of geographic and demographic differences. And, while the average increase for HMOs in this year�s survey is 9% (compared with 7% for other plans overall), for the �low cost� companies, the average HMO increase is only 7%. �Smart employers are managing their HMOs using tactics that have been successful with PPOs, such as terminating poor-performing vendors and using self-insured arrangements,� noted Fontanetta.
�The gains achieved through aggressive program management allow these employers to minimize any cost shift to employees, as shown in the contrast between the rate of cost increases for employees at high-cost versus low-cost companies,� added Fontanetta.
Relief from cost shifting does not mean, however, reduced responsibility for employees at the low-cost companies. In fact, companies with the lowest health care costs are more likely to be sharing more of the costs as a percentage of the total with employees -- i.e., employees at low-cost companies pay on average 22% of the total, while employees at high-cost companies pay 17%.
The companies with lower costs are also more likely to have put other cost-sharing elements into place that encourage employees to take responsibility for their decisions at the point of care. For example, the differential between the copay amount for brand-name drugs compared with that for generic drugs is greater for employees at low-cost companies than for those at high-cost companies, creating a stronger incentive to use the less expensive alternative. Other incentives aimed at increasing employee accountability include meaningful differentials between primary care and specialist copays, along with a move away from copays altogether to coinsurance -- a trend much more prevalent among the low-cost companies.
Perhaps most important, companies with the lowest costs are not only requiring employees to take more responsibility for their health care decisions, but are also equipping them to do just that by communicating more effectively about health care costs, providing decision support tools and encouraging them to understand and manage their health risks.
�Most of the companies in the survey say they see their role and responsibility as employers continuing as it is or even growing over the next five years,� said Guilmette. �In other words, they see themselves in the game for the foreseeable future. But it�s interesting to note that companies with lower costs also seem to have more of a long-term philosophy and are taking actions that minimize the need to shift costs to employees.
�For employees who work at these more proactive companies, there is a quid pro quo. They must actively share responsibility, understand and accept the financial consequences of their decisions, and protect and invest in their own health,� added Guilmette. �Overall, we call this a culture of health -- employers and employees together managing the money, managing the vendors and providers, and sharing a commitment to the value of employee health.�
About the Survey
The Towers Perrin 2006 Health Care Cost Survey was conducted during August and September 2005. Participants were asked to report their 2006 per capita premium costs for insured health and dental plans, and premium equivalents (i.e., estimated benefit and administrative costs) for self-insured plans. Survey respondents represent primarily Fortune 1000 companies with operations in numerous locations nationwide. Health benefits for the 204 participating companies cost more than $24 billion annually.
America�s hospital emergency departments are under-funded, over-crowded, and suffer from staffing challenges caused by rising costs of medical liability insurance, according to a report released today by the American College of Emergency Physicians.
More than 3,500 emergency physicians and nurses came to the steps of the U.S. Capitol, urging Congress to �save emergency care� and to make sure their patients continue to have access to lifesaving emergency medicine. The emergency medicine professionals lauded the Access to Emergency Medical Services Act of 2005 (H.R. 3875), introduced last week by Rep. Bart Gordon (D-TN) and Rep. Pete Sessions (R-TX) and urged Congress to pass it quickly.
�The U.S. health care system is collapsing, and nowhere is that more apparent than in our nation�s emergency departments,� said Frederick C. Blum, MD, FACEP, president of the American College of Emergency Physicians. �Hurricane Katrina also made it clear � we must expand the �surge� capacity of our nation�s hospitals.
�Soaring health care costs, reduced hospital budgets, and an increasing dependence on emergency care mean that patients line the halls, waiting hours � sometimes days � to be transferred to inpatient hospital beds. This is a daily occurrence in many hospitals, and our patients can�t wait any longer for Congress to act. That�s why we applaud Rep. Sessions and Rep. Gordon for taking action and introducing much-needed legislation.�
The Emergency Nurses Association added their voices and concern. �We are here on behalf of emergency nurses across the country who fight daily to provide optimal care in emergency departments that are overflowing with patients,� said ENA President Patricia Kunz Howard, PhD, RN, CEN. �Today, we are moving to protect the rights of our patients and colleagues by urging our legislators to partner with us to secure the future of emergency patient care by endorsing initiatives that alleviate crowding and support emergency care as an essential public service.�
�For the 14 million readers of Ladies' Home Journal, who are the gatekeepers of their family's health, few safety issues are as urgent as the need to keep their community emergency rooms open, functioning and vital," says Diane Salvatore, Editor in Chief. �Our readers are a powerful force in advocating for positive public health changes, and we know they will put the full weight of their support behind this initiative to help save America's endangered ERs.�
A report released today by ACEP � State of Emergency: America�s Emergency Departments in Critical Condition � shows the number of patients seeking emergency care increased 27 percent in the past decade, while the number of emergency departments decreased by 15 percent, resulting in dramatic increases in patient volumes and waiting times at the remaining facilities. The majority of the nation�s 4,000 hospital emergency departments report that they are operating �at� or �over� critical capacity.
Thousands of physicians, nurses, and other health professionals assembled on Capitol Hill today to express their support for the bipartisan Access to Emergency Medical Services Act, which recognizes emergency medical care as providing essential public services that should receive public funding, just as police and fire departments do. Specifically, the Act would:
* Recognize hospital emergency departments as the backbone of our nation�s health care safety net.
* Provide hospitals with incentives to end boarding of admitted patients in emergency departments � to help end gridlock and save lives during natural disasters and acts of terrorism.
* Extend liability protection to on-call specialists and emergency physicians who provide EMTALA-mandated care.
ACEP also supports legislation that would provide limitations on non-economic damages awarded in medical liability lawsuits, which are driving record increases in insurance rates and forcing good doctors out of practice in many states.
�When you need the emergency room, you don�t want to worry about it being crowded or under-funded or not having the staff it needs, but sadly, the challenges facing emergency departments mean that all of us might not be able to receive the care we need when we need it,� said Rep. Bart Gordon (D-TN- 6th District). �ER doctors are the heroes in America�s hospitals, working under incredibly difficult conditions on patients who need critical attention Congress needs to step up and take action.�
�More patients are seeking emergency care than ever before, but fewer emergency department resources are available,� said Pete Sessions (R-TX, 32nd District). �A national investment is urgently needed to ensure that emergency departments can meet increasing demands. I think this legislation goes a long way toward that goal.�
Joining congressional representatives and health care professionals at the event is Emmy nominated actress Maura Tierney, who stars as emergency physician Abby Lockhart in the award-winning television series �ER.�
�For six years I have played a character who treats patients in a busy emergency room,� said Tierney. �If lending my voice today gets one more person to listen up and support America�s emergency departments, then I am proud to do it. I may not be a real doctor, but I can tell you that no matter how real we strive to depict emergency medicine on ER, it does not compare to what these doctors and nurses do every day. They�re heroes to millions of Americans.�
More information about the report on emergency care, the Access to Emergency Care Act, and the Capitol Hill rally is available at www.acep.org
Rising costs and increasing job pressures are driving family doctors, who provide the broadest and most basic health care, from the field, according to the Detroit News.
What impact will advances in biomedicine and technology have on health and spending for the elderly in the future? New data, released today by the journal Health Affairs, reveal that many of the most promising medical innovations will result in better health and longer life, but they will increase, not decrease, Medicare spending. Researchers also predict that curing any one particular disease won�t save Medicare much money, with one important exception: Eliminating obesity could potentially lower costs.
�Curing any one disease will make the elderly live longer and in better health�and this has great value to society�but it also means they accumulate more health care spending over a lifetime. That offsets the savings of being healthier,� said Dana P. Goldman, PhD, corporate chair and director of health economics at RAND in Santa Monica, California.
Under current projections, Medicare spending will rise from 2.6 percent of gross domestic product (GDP) today to 9.2 percent in 2050. Demographics will have a large impact as the first wave of baby boomers turns 65 in 2010. Goldman led a team of economists and physicians from RAND, Stanford University, and the VA [Department of Veterans Affairs] Greater Los Angeles Healthcare System to explore beyond the established, current projections, and to see how changes in medical technology, disease, and disability would affect future health spending for the elderly. The researchers developed the Future Elderly Model (FEM), a demographic and economic simulation model, to help them predict future costs and health status for the elderly. The data were published today in a series of six articles and seven accompanying Perspectives in a Health Affairs Web Exclusive.
�The challenge for policymakers is to understand and manage future Medicare spending. This in-depth analysis will help them chart direction for the future,� said John K. Iglehart, founding editor of Health Affairs.
In the lead article, �Consequences of Health Trends and Medical Innovation for the Future Elderly,� Goldman and colleagues looked at advances in cardiovascular disease, cancer and the biology of aging, and neurological disease to assess how innovations affected spending and life years saved over the period 2002�2030. Some technologies would be extremely expensive. For example, expanding the use of implantable cardioverter defibrillators (ICDs) to half of elderly patients with new cases of heart failure or heart attack would result in approximately 550,000 procedures annually in 2030, with total treatment costs of $27 billion measured in 2005 dollars.
Other technologies could have modest costs per additional life year, but could increase health care spending substantially. For example, the biomedical research community is actively seeking anti-aging compounds. Such a compound would increase health care spending by 14 percent in 2030 because, if the compound had been taken by healthy beneficiaries starting in 2002, there would be 13 million more Medicare beneficiaries in 2030.
However, researchers argue, the cost per additional year of life is well worth it�only $11,000 in 2005 dollars. And if the compound keeps people alive in very poor states of health, total health care spending in 2030 would be 70 percent higher, because there would be more elderly people in poor health, according to Goldman and colleagues. Yet even in this case, the cost per additional life year of $38,000 is still relatively modest.
In an accompanying Perspective, Harvard University�s David M. Cutler takes a more optimistic view for Medicare�s future. Taking into account information technology and other health improvement advances not included in the researchers� analysis, Cutler writes: �My forecast about medical spending is rosier than the FEM model suggests. The technological changes that the RAND authors consider will likely come to pass, and they will drive up Medicare spending (often with good value). But there is enormous potential for cost savings as well, which we have the capacity to realize. One can be an optimist even when the storm clouds are gathering.�
In the article �The Lifetime Burden of Chronic Disease among the Elderly,� economist Geoffrey F. Joyce and colleagues studied seven chronic conditions: stroke, chronic obstructive pulmonary disease (COPD), hypertension, coronary heart disease, cancer, diabetes, and acute myocardial infarction. Cumulative health care spending is only modestly higher for those with chronic diseases at age 65, ranging from about $5,000 to $18,000 (2005 dollars), because the chronically ill live fewer years. Annual Medicare expenses increase by about $750 to $2,000 for people with a serious chronic illness at age 65, while cumulative Medicare expenses increase by $2,500 to $15,000 across the seven chronic conditions studied.
Curing Obesity Could Translate Into Significant Savings For Medicare
Obesity could prove to play a large role in Medicare spending in the future, according to economist Darius N. Lakdawalla and colleagues in the article �The Health and Cost Consequences of Obesity among the Future Elderly.� Using the FEM, the authors contend that if obesity is shown to be responsible for the health differences between those who are obese and those who are not, preventing or curing obesity in any one person would return that person�s health care spending level to that of a person of normal weight. Given the growing number of obese Americans, the resulting savings to Medicare could be substantial.
How different are the costs of treating the obese elderly versus the nonobese? An obese 70-year-old incurs $38,000 in additional medical costs in old age compared with costs for a nonobese peer. And although obese 70-year-olds will live as long as those of normal weight, they will spend 40 percent more time disabled than their nonobese counterparts. Lakdawalla and his colleagues argue that the effects of disability from obesity, rather than increased spending, might be the more important component of the social burden of obesity.
Medicare will also spend about 34 percent more on an obese person than on someone of normal weight, and obesity may cost Medicare more to treat than other diseases, because higher costs are not offset by reduced longevity, according to the study. Beginning at age 70, an obese person will cost Medicare about $149,000, the highest level of any group. In addition, Medicare spending on an obese person is 20 percent higher than for the next closest group, the overweight, and 35 percent higher than spending on a person of normal weight. Medicare could experience considerable financial burden from the increase in obesity nationwide, spending about $38,000 more over the lifetime of an obese 70-year-old than it will spend on a beneficiary of similar age and normal weight.
Three additional articles, in which researchers used the FEM for all or some of their research, round out the Health Affairs Web Exclusive collection. In �Disability and Health Care Spending among Medicare Beneficiaries,� lead author Michael E. Chernew of the University of Michigan School of Public Health projects that the cost savings associated with improved disability rates will not dramatically slow Medicare spending in the long run.
In �Technological Advances in Cancer and Future Spending by the Elderly,� lead author Jayanta Bhattacharya of Stanford University finds that no scenario holds major promise for guaranteeing the future financial health of Medicare. And in �Identifying Potential Health Care Innovations for the Future Elderly,� lead author Paul G. Shekelle evaluated innovations in cardiovascular disease, cancer, the biology of aging, and neurological disease and found that many innovations have the potential to greatly affect the costs and outcomes of health care.
This series of articles was funded in part by the National Institute on Aging and the John A. Hartford Foundation.
The articles can be read here.
New medical technology is likely to further inflate future Medicare costs, posing great financial risk to the program, according to a RAND Corporation study issued today.
Emerging treatments such as implantable defibrillators for heart ailments or drugs to prevent Alzheimer's disease could boost spending significantly, with single treatments potentially increasing costs by as much as 70 percent, according to a series of RAND Health reports published online by the journal Health Affairs.
�An array of new medical technology on the horizon could greatly inflate elderly health care spending,� said Dana Goldman, director of health economics at RAND Health and leader of the research. �This technology is valuable because it will improve health and extend lives. But we need to begin thinking about how to pay for it.�
Some savings may be expected if disability rates among the elderly continue to drop. But those savings probably will be overshadowed by increased spending on healthy elderly recipients who will live longer, according to one of the RAND papers.
Some cost savings may be possible if the nation can reduce the number of Americans who are obese. Medicare costs among obese seniors are significantly higher and the number of obese Medicare recipients is rising, according to the studies.
The elderly currently spend more than $300 billion on health care annually. Most of this is paid for by Medicare, which provides health insurance to Americans age 65 and older.
The warnings about a potential sharp rise in elderly spending are from a series of studies using a detailed model of Medicare spending created by Goldman and other researchers from RAND Health, Stanford University and the Greater Los Angeles VA Healthcare System.
Researchers examined the spending increases that might face the elderly through 2030 under a number of different scenarios, including potential cost spikes caused by 10 new medical technologies that a panel of experts said are likely to emerge during the period.
Some of the technologies would have small impacts, including cancer vaccines and better treatments for acute stroke, each of which is predicted to increase elderly health care spending by less than 1 percent.
But other technologies could trigger major cost increases. For example, researchers estimated what the cost might be of expanding use of implantable defibrillators, which are devices implanted in patients' chests to treat life-threatening heart beat problems. The devices show promise in treating other cardiac ailments, including heart attacks and heart failure.
If half of the patients with new cases of heart failure or heart attacks received the devices, elderly health care spending would rise by $14 billion in 2015 and by $21 billion in 2030, according to researchers. The increase would amount to almost 4 percent of total spending.
Other new technologies could cost even more. A preventive treatment for Alzheimer's disease or new cancer-fighting drugs could each increase elderly spending 8 percent, and anti-aging compounds � an area of active research in biomedicine � could drive up costs from 14 to 70 percent, according to the studies.
�Would you rather have today's health care at today's cost, or 1980s health care at 1980s cost?� Goldman said. �I think all of us want today's technology and the technology that will be developed in the future. But improved technology will cost us even more in the future.�
Another report authored by RAND economist Geoffrey F. Joyce determined that even if the incidence of chronic diseases among the elderly can be reduced, Medicare is not likely to see much savings.
Examining seven different chronic diseases such as diabetes and heart disease, researchers found that the long-term costs to Medicare for treating these ailments was relatively low, in large part because patients with chronic diseases die several years earlier than others.
If chronic diseases are eliminated in younger Medicare recipients, cumulative costs for each recipient will remain similar as people live longer. In addition, many people will develop the same diseases as they live longer, negating cost savings, according to the study.
One disease-prevention program that might help trim Medicare costs would be an effort to target obesity, according to a third paper authored by RAND economist Darius Lakdawalla.
While obese elderly people live about as long as those of normal weight, they are also much more likely to be disabled, according to the RAND study. A 70-year-old obese person can expect four years of disability-free life, while a normal-weight 70-year-old can expect seven years.
The average medical expenses of an obese 70-year-old will be about $38,000 more over his or her lifetime than a normal-weight person, according to the RAND study. These findings suggest that a less-obese population may cost Medicare significantly less.
The computer model used in the RAND studies was assembled using a representative sample of about 100,000 Medicare beneficiaries from the Medicare Current Beneficiary Survey, a national effort that asks Medicare beneficiaries about chronic conditions, use of health care services, medical care spending, and health insurance coverage. Each beneficiary in the sample is linked to Medicare claims records to track actual medical care use and costs over time.
The RAND model also incorporates information about younger people into the model, allowing researchers to gauge the impact of future Medicare recipients as well as current recipients. Those cases were selected from the National Health Interview Study.
Funding for the studies was provided by the federal Centers for Medicare and Medicaid Services and the National Institute on Aging, through its support of the RAND Roybal Center for Health Policy Simulation, the RAND Center for the Study of Aging, and the Stanford Center for Demography and Economics of Health and Aging. Funding also was provided by the UCLA Claude D. Pepper Older Americans Independence Center.
Other authors of the RAND studies are: Baoping Shang, Michael Hurd and Emmett B. Keeler of RAND; Alan M. Garber and Jayanta Bhattacharya of Stanford University; Constantijn Panis of Deloitte and Touche; and Paul Shekelle of RAND and the Greater Los Angeles VA Healthcare System.
RAND Health is the nation's largest independent health policy research program, with a broad research portfolio that focuses on health care quality, costs, and delivery, among other topics.
Oncologists practicing in urban/metropolitan areas are significantly more satisfied than their counterparts in suburban and rural areas when evaluating their access to information, technology, new drugs, clinical trials and thought leaders, according to survey results released today by Oncology World Congress.
� 57% of urban oncologists are �very� or �completely satisfied� with their level of patient access to clinical trials vs. 30% of oncologists in suburban and rural areas.
� 57% of urban oncologists are �very� or �completely satisfied� with their level of access to new technologies vs. 33% of oncologists in suburban and rural areas.
� 67% of urban oncologists are �very� or �completely satisfied� with their level of access to new research vs. 48% of oncologists in suburban and rural areas.
Close to 50% of oncologists practicing in urban areas categorize their place of work (private practice, hospital or cancer center) as an �innovator� on the cutting edge of finding new cancer treatments, compared to only 14% of rural/suburban oncologists. More than 10% of the latter group classify their place of work as a �late adopter� of new treatments and technologies, compared to only 2% of urban oncologists.
�Filling the information gap between local community practitioners and urban oncologists working at or near major cancer research centers is critical to achieving more effective therapeutic outcomes for patients,� said Dr. Waun Ki Hong, Oncology World Congress Chair and head of the Division of Cancer Medicine at The University of Texas M. D. Anderson Cancer Center. �With an estimated 90% of U.S. oncology care performed outside of academic cancer centers, community oncologists are in crucial need of timely information on research advances and emerging technologies, as well as greater access to clinical trials and new therapies.� Dr. Hong and 170 colleagues will be working to address these issues and bridge the current gaps in treatment information and patient care at the upcoming Oncology World Congress meeting scheduled to take place in New Yorkon November 16-19, 2005.
Eighty percent of the oncologists polled cite accessibility to clinical trials as �very� and �extremely important� for effective patient treatment. According to the President�s Cancer Panel 2004-2005 annual report, approximately 20% of oncology patients are medically eligible for clinical trials, yet only 3% of adults with cancer are currently enrolled. Access to trials is typically concentrated around academic medical centers, with many community physicians outside of these centers unable to arrange for their patients to participate.
Response across both groups (urban and rural) reflect a wide gap between attributed level of importance to and satisfaction with access to information, technology, new drugs, clinical trials and thought leaders.
� 85% feel access to new technologies is �very or extremely important,� yet only 49% are �very� or �completely satisfied� with the access they currently have.
� 89% feel access to the latest cancer treatment drugs is �very or extremely important,� yet only 54% are �very� or �completely satisfied� with the access they currently have.
� 80% feel patient access to clinical trials is �very or extremely important,� yet only 49% are �very� or �completely satisfied� with the access they currently have.
According to the survey, administrative issues such as cost of care and staffing have a significant impact on patient treatment for oncologists in both urban and rural settings. Forty-one percent of the physicians polled claim standard health coverage and Medicare pose the greatest limitations on their ability to treat patients effectively.
Oncology World Congress conducted the survey to get a current pulse on U.S.oncology practice, as well as anecdotal thoughts about obstacles that practitioners face. Results include responses from 292 oncologists across a variety of disciplines and have a margin of error of 6%.
Oncology World Congress faculty is comprised of researchers, educators and practice guideline authors committed to helping community oncologists effectively incorporate emerging medical treatments within their practices and to expediting the translation of clinical research and technological innovations to patient care. The Congress also works to focus on the day-to-day challenges of running an oncology practice, including improving reimbursement and overcoming a lack of resources. The first annual meeting, chaired by Dr. Hong, will take place at the New York Marriott Marquis on November 16-19, 2005. Institutional partners include MemorialSloan-KetteringCancerCenter, The University of Texas M. D. Anderson Cancer Center, RoswellPark Cancer Institute and FoxChaseCancerCenter.
To obtain a copy of the survey results and additional information on Oncology World Congress, visit www.oncologycongress.com/survey
Recent initiatives appear to have created renewed interest for young physicians to pursue research careers, according to a study in the September 21 issue of JAMA, a theme issue on medical research.
Results of the study were presented today at a JAMA media briefing on medical research.
Physician-scientists, defined as individuals with a medical degree who perform medical research as their primary professional activity, have contributed much to the preeminent position of the U.S. in medical science, according to background information in the article. The unique perspective that physician-scientists bring to the medical research workforce is that their scientific questions arise at the bedside and in the clinic. Despite this perspective, the pipeline of physician-scientists has had a serious problem, first described more than a generation ago: the physician-scientist population in the U.S. is smaller and older than it was 25 years ago. These and other trends have led some observers to conclude that the physician-scientist is a threatened species. A variety of factors were thought to contribute to this problem, including increasing indebtedness of medical school graduates caused by rapidly rising medical school tuition costs.
Several National Institutes of Health (NIH)-sponsored groups, private foundations, and national organizations called for new initiatives and award programs aimed at revitalizing the physician-scientist career path. These initiatives were begun between 1998 and 2002.
These initiatives included NIH career development awards for young physicians being trained to carry out clinical research, awards for established clinical investigators, awards for academic institutions with programs supporting clinical research training and infrastructure, and a series of competitive loan repayment programs (LRPs) for young physician-scientists with significant debt.
The private not-for-profit sector created new awards for young and established physician-scientists and an increasing number of research-intensive medical schools and hospitals (where most physician-scientists work) have constructed multifaceted programs aimed at encouraging medical students to become involved with research before and after receiving their M.D. degree and at protecting the research time of young physician-scientists during their junior faculty appointments.
Timothy J. Ley, M.D., of the Washington University School of Medicine, St Louis, and Leon E. Rosenberg, M.D., of Princeton University, Princeton, N.J., conducted a study to attempt to define the effects that these budgetary and institutional initiatives have had on the physician-scientist career path. The authors determined trends using data obtained from the NIH, the American Medical Association, the Association of American Medical Colleges, and other sources.
The researchers found that the number of physician-scientists in the United States has been in a steady state for the past decade, but funded physician-scientists are significantly older than they were 2 decades ago. "However, the study of early career markers over the past 7 to 10 years has demonstrated increasing interest in research careers by medical students, steady growth of the M.D.-Ph.D. pool, and a new burst of activity in the 'late bloomer' pool of M.D.s (individuals who choose research careers in medical school or in residency training), fueled by loan repayment programs that were created by the NIH in 2002. Several recent trends for more established physician-scientists have also suggested improvement."
Concerning applications for NIH research project grants (RPGs), first-time M.D. applicants, whose numbers hovered at 750 to 800 between 1995 and 1999, have slowly increased recently, reaching a total of 995 in 2003. First-time RPG applicants with M.D.-Ph.D. degrees have steadily increased, from 133 in 1970 to 600 in 2003.
"New programs recently initiated by the NIH and private foundations are beginning to have a positive impact on the decisions of young physicians to pursue research careers. To maintain this trend, strong funding commitments will be required beyond the entry level. If these commitments are sustained, we are cautiously optimistic that they will result in an increase in the population of physician-scientists in the United States in the near future," the authors conclude.
|PREV page||NEXT page|