The Economics of Health Care Delivery and Reform
Sanjay Yadla, MDDepartment of Neurological SurgeryGrand RoundsOctober 30, 2009
Economics of Health Care in the U.S.
OverviewWhat are the problems?What are the proposed solutions?Health Care ReformWhere should neurosurgeons stand?
Health Care in the U.S.
Primarily owned and operated by the private sectorHealth insurance is primarily provided by the private sector15% of the population is completely uninsured
Health Care in the U.S.
Access to Care is UnequalPoor Access is Linked to Poor QualityCare Delivery is InefficientA fragmented Health Insurance SystemInefficient Financing for Uninsured and UnderinsuredLack of positive incentives in benefit design and provider reimbursement
Health Insurance Status of Individuals <65 years, 2007
Percent of Americans Uninsured by Age
% of Uninsured is getting Worse (20% of those <65 years)
Jefferson Health System
4.8 Billion in Total Assets as of June ’08$614 million endowment (Villanova $330M, UPenn $5.3B, Harvard $26B)Medicare - 28.1% of net patient revenueIndependence Blue Cross – 27.3%, the largest commercial insurance carrier
Jefferson Health System
Founded in 1995: Main Line Health System and TJUH IncNonprofit entity under one corporate parentAlbert Einstein Healthcare Network, Frankford Health Care System, Magee Rehabilitation Hospital
Joseph T.Sebastianelli, President and CEO of JHS
Most Profitable Medical Equipment Companies
ProductsNet Income ’07 ($millions)
Company
LensCrafters and Pearle Vision,
Oakley, Ray-Ban
$775Luxottica Group
needles, syringes, surgical blades &
scalpels
$856Becton, Dickinson and Co.
Orthopedic Implants $987Stryker
ADVATE rAHF-PFM $1,707Baxter Int’l
world’s leading supplier of PPMs
$2,231Medtronic
Most Profitable Biotechnology and Drug Companies ‘07
Lipitor, Norvasc$8,209Pfizer
ProductsNet Income ’07 ($millions)
Company
Diovan, Lotrel$6,516Novartis AG
Lovenox, Plavix, Ambien
$8,288Sanofi-Aventis
Advair, Lamictal, Vaccines
$10,384GlaxoSmithKline
Remicade, Topamax,
Procrit, DePuy, Cordis
$10,576Johnson & Johnson
Where does Pharmaceutical Revenue Go?
Are We Getting Our Money’s Worth?
USA is 42nd in the world in life expectancyWHO: US Health Care system 37th in overall performanceWHO: US Health Care system 72nd in overall level of health (of 191)
National Health Expenditures as a Share of GDP, 1980-2040
Health Care Spending as a % of GDP
Out of Pocket Spending
Health Insurance Premiums vsOther Economic Indicators
Total Spending on Medicare/ Medicaid as a Share of GDP
Are We Getting Our Money’s Worth?
Are We Getting Our Money’s Worth?
On the other hand…
US is the leader in medical innovation by revenue, # of new drugs and devices introducedIn 2006, 82% of world R&D spending in biotechnologyWhat does GDP vs Life Expectancy mean?
Life Expectancy
Health care and institutionsAlso reflects personal behaviors:
DietExerciseSmokingCompliance with medical protocols
Low life expectancy primarily due to high mortality rates above age 50Cancer and CV disease responsible for 61% of deaths at age 45+Breast and Prostate Cancer - screening available, behavioral factors not dominant Outcome: death avoidance
Health Care in the U.S.
Primarily owned and operated by the private sectorHealth insurance is primarily provided by the private sector15% of the population incompletely uninsured
Administration Costs
Patients Needing Costly Services
10% of patients account for 70% of health care expendituresMultiple chronic conditions, many medications, frequent hospitalizationsMedicare beneficiaries with >5 chronic conditions = 76% of expenditures17x spending for those with no chronic conditions
Follow the Money — Controlling Expenditures by Improving Care for Patients Needing Costly ServicesPosted by NEJM • September 30th, 2009
Thomas Bodenheimer, M.D., M.P.H., and Rachel Berry-Millett, B.A.
Cost effectiveness of preventive medicine50 year-old female smoker, total cholesterol >240 (“high”), HDL<40 (“low”), untreated moderate hypertension11 percent chance of MI over 10 yrs$240,000 for every year of life saved (QALY)
All patients diagnosed with appendicitis from 2001 to 2005CIHI database and US NISPatients categorized by age, gender, insurance status, race, and socioeconomic statusOdds of perforation determined
Appendicitis:Consistent natural historySingle definitive treatment (appendectomy)Distinct negative outcome (perforation)No known biological predispositionStrong association between treatment delay and adverse outcome (perforation)
Access Problems because of Costs, 2004
Health Care in the U.S.
Access to Care is UnequalPoor Access is Linked to Poor QualityCare Delivery is InefficientA fragmented Health Insurance SystemInefficient Financing for Uninsured and UnderinsuredLack of positive incentives in benefit design and provider reimbursement
Health Care Reform
Health Care Reform Principles
Improved AccessImproved QualityGreater EquityGreater EfficiencyControl Costs
From Health Care Bill to Law
www.cbs.com
Senate Finance Committee “Baucus” Bill
America’s Healthy Future Act of ’09Does not include “public option”Does specify creation of healthcare cooperatives (non-profit, member-controlled)Creates individual mandate:
Penalty of up to $950/person, $3800/familySubsidies for low income families/individuals
Senate Finance Committee “Baucus” Bill
Individuals can buy insurance from an exchange in their statePremiums capped at 13% of incomeBasic services: hospitalization, maternity, newborn, chemotx, pediatric
Senate Finance Committee “Baucus” Bill
Forbids insurance restriction based on “pre-existing conditions”Tobacco use, age, family size, geography can influence premiumsExcise tax on “Cadillac” health plans$829 Billion over the next ten yearsBy 2019, <65 yrs, 83%->94% covered
AANS/CNS Response
Tippett (AANS)/Adelson (CNS)press release September 22‘seriously misses the mark’‘express disappointment in the process’
AANS/CNS Response
No protections to ensure patient choiceNo options for medical liability reformThe alternative co-op proposal may lead to a government-run planIgnores looming workforce shortages
Top Ten Baucus Campaign Contributors from 2005
Courtesy of the Philadelphia Historical Digital Image Library
For every thousand hacking at the leaves of evil, there is one striking at the root. – Henry David Thoreau
Innovations in Care: Care Management
Activities designed to assist patients and their support systems Manage medical conditions and related psychosocial problems more effectivelyEnhance the coordination of care, eliminate the duplication of services, and reducing the need for expensive medical services.Generally provided by a registered-nurse care manager, often working with a multidisciplinary team.
Care Management
Working with the patient,family, and the primary care physician to prepare a care plan Teaching patients and families about diseases and medicationsCoaching patients and families on how to respond to worsening symptoms in order to avoid ED visits and hospital admissions Tracking patients’ status over time Revising care plans as needed
Cost-Effectiveness of Certain Preventive Measures
8%100%606.6Total
19% 3% 15.4 Canada
13% 3% 20.9 Middle East, Africa
21% 5% 29.4 Latin Amer
14% 7% 43.1 Asia Pacific
-3% 10% 57.9 Japan
7%3%19.4Italy
3%3%20.0UK
3%5%30.7Germany
4%5%32.6France
6% 28% 171.7 Europe
9% 44% 268.3 USA
Growthvs
2005 % ofTotal
Value($Bn)
Pharmaceuticals World Market Share by Region (2006)
Public Health Care
MedicareMedicaidMilitary Health System / TRICAREState Children’s Health Insurance ProgramVeterans Health AdministrationIndian Health ServiceFederal Employees Health Benefits