MULTI-TIERED HEALTHCARE SERVICE (MTHS) 3-26-2012

1. MTHS

MTHS goal is to restructure US healthcare into two tiers of preventive and responsive services. MTHS emphasizes prevention as the first tier of medical services and strives to achieve maximum cost savings through best practices cost-effective preventive healthcare. The goal of MTHS is to develop overall MTHS preventive care and preventive care % healthcare rate savings in addition to maintenance healthcare and % healthcare rate savings. Typical costs for preventive and maintenance cost for chronic illnesses are gathered and empirical estimates of the ratios of chronic conditions within a population are used to determine final average cost structures.

Reference 1 on chronic medicine cites a 58% rate of Americans with one or more chronic illnesses and that this rate is expected to rise by 1% per year through 2030. Results in reference 2 indicate that 30% of American youth below the age of 18 experience one or more chronic illnesses. Reference3 indicate that 85% of the cost of Medicare is based on the 25% of enrollees with chronic illnesses. The conclusion is that the prevalence of healthcare expenditures associated with chronic illnesses increases with patient age and an MTHS strategy for cost-containment for curbing such expenditure growth would foster cost-containment and restructuring of NHE growth beyond GDP. These figures indicate if a twenty year goal is set for MTHS to achieve a quiescent cost structure of chronic illness expenditures at 20% of healthcare expenditures across the board, Medicare expenditures would be reduced by 65%. (It can be inferred that for all age groups above 65 –or future Medicare qualification age – such as for private insurance and Medicaid enrollees expenditures are similarly reduced.)

The goal translates to a more intransigent objective in the percentage rate of the population with chronic illnesses. However, the correlation between chronic illness levels and healthcare expenditures ensures that overall reduction rates of chronic illnesses in the general population will result in a reduction in healthcare expenditures. The goal of this research is 1) to determine the relationship between chronic care population rates and healthcare expenditures, and 2) determine overall changes in chronic care expenditures with age to enable temporal (20 year goal) restructuring of healthcare through cost containment of chronic illnesses.

The Milken Institute study in reference 4 projected a $5.66 trillion (2003 USD)savings in GDP by 2050 based on savings in cost-reductions of treating chronic illnesses and such incidentals as productivity losses (major contributor). MTHSApp analysis for NHE cost savings to 2050 shows a MTHS restructured NHE of $8.966 trillion as compared to a non-MTHS non restructured NHE of $11.98 trillion and GDP of $39.69 trillion. There is an additional $3 trillion in NHE savings and US purchasing power through MTHS healthcare restructuring in 2050. Note: these figures are based on the default initial settings of the MTHSApp and do not include the major productivity GDP gains the Milken Institute study.

Reference 5 allows factoring changes in GDP of the Milken Institute study into MTHS. The Milken estimate of the current course of real GDP is $32.229 trillion in 2003 USD by 2050. There is a multiplier factor of 1.200472 between this forecast in 2003 USD and the $39.69 trillion MTHSApp 2050 USD forecast. The reference shows a 2023 alternative expenditure path for chronic healthcare savings of $217.1 billion that also provides an additional productivity savings of $917.6 billion. For this ratio of added productivity cost expenditures to GDP, the MTHS NHE cost savings of $3 trillion would also add:

$(917.6 x 3) / (217.1 x 1.20047) trillion dollars or $10.5624 trillion 2003 USD ($12.679 trillion 2050 USD) to the GDP in productivity gains. Additionally, with the real Milken GDP of $32.229 trillion, MTHS productivity impact would increase GDP to $42.79414 trillion. ($51,373 trillion 2050 USD). Changes in NHE are not factored into GDP changes. The impact of the direct $3 trillion NHE savings on GDP is less certain. The effect of the personal expenditure component is expected to remain unchanged as monies once directed to healthcare are spent elsewhere in the economy. But most other direct NHE savings would produce GDP contractions.

Firstly, current governments' HE are mostly funded by deficit spending and NHE savings would not result in the same level of deficit spending to add to GDP. Secondly, insurers provide a payment to the insured co-payment that exceeds their co-payment. While the insured are able to continue using their freed-up co-payments in the economy, the NHE savings that reduce insurers' expenditures will reduce GDP in kind. Thirdly, it remains to be seen whether business savings from freed-up healthcare expenditures will be directed to an expansion of GDP equal to GDP contractions in the healthcare industry. Finally, not all NHE is collected debt. A considerable amount of healthcare services is written off by the uninsured visits to emergency rooms and the need to administer life saving cost-prohibitive care to those who will never be able to repay. NHE may record these expenditures as additions to GDP in current year accounting but they may eventually be written-off when services prove uncollectable. This is a major healthcare reform concern, as the costs of providing unpaid services in some communities contribute to runaway costs growth. The uncollected debt effect for reductions in NHE is a net gain to GDP that equals the amount of potential uncollected debt for the healthcare services saved.

2. STRATEGY

MTHS approach to NHE cost-reductions using preventive care treatment is to strategically introduce preventive and maintenance healthcare treatments for the restructuring of healthcare for a period of twenty years. Starting with reference 2, a goal of reducing chronic illness levels in the youth from 30% and rippling such reductions through all age groups in the general population. The strategy is to show that through continuous enrollment in MTHS preventive and maintenance healthcare programs, the costs of chronic illness in the general population will be significantly reduced through use of early intervention. Through early intervention, a ripple effect of more healthy citizens is carried through all age groups, and, as the population ages, the costs for the current 25% of Medicare chronic illness enrollees who account for 85% of its total costs, would be significantly reduced.

MTHS restructuring of healthcare is expected to produce greater cost savings for the older population groups than younger groups. This is the result of older citizens having greater healthcare expenditures. However, MTHS Client Asset Accounts (Healthcare Savings Accounts) allow transferring savings from lowered younger enrollees' healthcare costs, to supplement their Medicare and retirement savings as they age. The system rewards its members for maintaining healthy lifestyles because the fewer health expenditures incurred throughout their lives, the greater their CAA/HSA balances remain for discretionary and healthcare spending with age.

3. CHRONIC ILLNESSES

Six major US chronic illnesses are: diabetes, hypertension, arthritis, cancer, mental illness and pulmonary illnesses. MTHS goal is to curb chronic illnesses in youth so that by the age of Medicare, the 85% total cost of Medicare rate for treating Medicare chronic enrollees, is reduced significantly lower levels that can be managed through preventive and maintenance care plans. The strategy is to iteratively apply current best practices healthcare treatment plans and updating these plans with feedback data on treatment results.

The Milken Institute study in reference 4 on chronic illness prevention shows a $271 billion NHE chronic illness savings on $791 billion or a preventive care savings rate of 27.47%. MILKEN MTHSApp simulation results:

a. Medicare

27.47% of 85% Medicare chronic costs expenditures is a costs savings of overall 23% of Medicare costs savings by preventive care. The above is expected to be the highest rate of savings since younger clients have lesser chronic healthcare costs. MTHS 2050 NHE is $11.98 trillion and chronic care cost is approximately half this level. Therefore the 27.47% savings in chronic NHE is approximately a 13.74% savings of overall 2050 healthcare expenditures.

MTHSApp simulation results of Milken Institute data above show significant MTHS losses when preventive care savings are solely based on chronic care savings which only contribute to half of overall healthcare costs in 2050. A revised MTHS strategy that allows greater percentage of NHE savings rates through Client Asset Accounts (Healthcare Savings Accounts) and technological breakthroughs for the disproportionate cost of healthcare usage by few users Healthcare Users (reference 9) needs addressing. Effective restructuring would address cost reductions of the top 1% of users who consume 20% of resources and the other top 5% of users who consume 50% of resources. The bottom 50% of consumers who only consume 3% of medical services, are effectively receiving 340 times less return on their expenditures than the top 1% of users. The MTHS ripple effects of early preventive care intervention will provide insurers' savings through restructured healthcare that can encourage greater participation by the healthy through supplementary funding of CAAs / HSAs.

4. SUMMARY

Significant healthcare cost savings can be achieved through targeting expenditures on chronic illnesses. Reference 6 indicates that more than lifestyle choices and healthcare plans are needed to maintain the health of those with chronic conditions. Some conditions are persistent, non- responsive to the best of care and have to be lived and suffered with by the ill. The reference points out to higher out of pocket expenditures by the chronically ill for medications, which is a contributing factor to higher chronic costs due to medication non-compliance and resulting in-patient and out-patient care. MTHS follows the Milken Institute in believing that through preventive care of chronic illnesses, the runaway costs of healthcare can reduced. Early preventive care directed from the young and progressing to the aged is strategically used to reduce the increasing costs of healthcare as the population ages. As health improvement of the youth is achieved and sustained, a ripple effect of improved health moves throughout the general population.

MTHSD advocates a system of consumable preventive healthcare whereby patients are provided with a first-tier baseline level of preventive healthcare plans as the first line of healthcare defense. Beyond this level of preventive care, patients are moved into a maintenance care plan, with fewer provider interactions but sufficient level of monitoring to maintain a level of baseline health. If the monitoring of patients in the maintenance level of care results in levels below baseline health, patients are returned to preventive care service with greater care and monitoring of their health. These two services are basic healthcare, and do not include advance electives such as heart transplant. Such services are covered by the second tier responsive services part of MTHS. MTHS preventive care is meant to provide a maximum cost savings in healthcare expenditures through preventive care treatments, with minimum expenditures. Over and above the cost savings that can be achieved by the first tiered preventive services, are the responsive-care services of current conventional healthcare. MTHS goal is to restructure healthcare through changing the mix of responsive and preventive care. Currently, responsive care is the dominant focus in healthcare. MTHS division of healthcare into preventive and responsive care services gives (equal) greater focus to preventive care services than is given today.

REFERENCES

1 Chronic Medicine

2 Childhood Chronic Illness: Prevalence, Severity and Impact

3 Medicare Chronic Patients

4 An Unhealthy America: The Economic Burden of Chronic Disease

5 An Unhealthy America: Executive Summary

6 The Cost of Chronic Illness

7 Improving Primary Care For Patients with Chronic Illnesses

8 Improving Primary Care For Patients with Chronic Illnesses , The Chronic Care Model Part 2

9 Biggest Bucks in Healthcare Spent on The Very Few

10 NHE Fact sheet

11 What Health Systems Can Learn From Kaiser Permanente: An Interview with Hal Wolf, Jul 2009

12. Overhauling the US Healthcare Payment System, Jun 2007