prof anthony harris - centre for health economics - future of public healthcare

Centre for Health Economics

Myths in the funding of health

care and the future of Medicare

Anthony Harris


Economic or Political Sustainability

• It is a myth that the ageing of the population means the future path of total or public health expenditure is not sustainable

• The greying baby boomers motivate us to consider how we deliver services to a larger number of wealthier independent elderly living with different expectations at home


Government expenditure on health and

tax revenue

0%

5%

10%

15%

20%

25%

30%

2001–02

2002–03

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

Expenditure to revenue ratio


The real significance of ageing

• The real significance of ageing is that it accentuates the fracture lines between the major service sectors used by the elderly – primary and acute care and nursing home accommodation.

• Efficient substitution between these is of enormous significance for efficiency, ie for community costs and the quality of life of the elderly


Main challenges facing the health and

care system

1. The demands created by the ageing population and the increased prevalence of long-term conditions;

2. The relative neglect of prevention and the threat posed by risk factors such as obesity;

3. Continued wide variations in the quality of care across populations

4. Fragmentation between services; and an overreliance on hospitals and care with under-development of primary care and community services;

5. A perception that the principles of a universal health care system have been eroded.


Principles of a modern health care

system

• We want the poor to have the same high-

quality care and attention as the rich,

paid for in a fair way

• Health system should improve health at

a cost that is acceptable

• Responsive to patients -timely,

personalised and seamless care


Implications for funding

• The poor have the same risks as the rich so purely private insurance markets cannot deliver

• Private payments are inefficient in delivering equal care for equal need compared to tax funded

• The finance system should encourage or at least not discourage) low cost high quality services


How do we improve the health system to

meet these challenges

• There are ways to improve efficiency

– Avoidable admissions ($30bn);

– low value care ($20bn);

– PHI and rebate>$5bn;

– Generic drug pricing>$4bn

• Paying by results improves efficiency and quality in health care – myth or truth?

• Implementation in the Australian system is not simple


Integration

Fee for individual service/case mix

funding

Capitation payment per enrolee

Payment conditional on achieving

individual target (waiting time for hip,

rate of revision)

Payment for pathway compliance

(year of bundle of care)

Paym

en

t by

Resu

lts


Evidence on pay for performance

• Evidence of effectiveness is mixed

• Design matters

– Bonuses vs fines for target

– How large the bonus/fine is in relation to budget

– How the payment is targeted

– Whether the standard/target is accepted as

reasonable/effective

– performance standard measurement accuracy


Beyond casemix : from bundled pathway

payments to risk adjusted capitation

• Countries are looking for payment methods

that

– encourage patient care in the most appropriate,

cost-effective settings and to facilitate co-

ordination or integration along patient pathways.

– place greater emphasis on whole-system

efficiency(rather than hospital efficiency), cost

containment and care co-ordination for

individual


Pay for performance summary

• Pay for performance has enormous face validity and ideological support even if success to date has been modest and the optimal program configuration is unclear.

• Concerns about unintended consequences posited since the adoption of pay for performance have largely failed to be substantiated


Integration of health and social care:

experiments

• Canterbury New Zealand 2007-

– http://www.kingsfund.org.uk/publications/qu

est-integrated-health-and-social-care • Those wishing to create a system of truly integrated health and social

care must have a clear vision.

• In the case of Canterbury, the mantra 'one system, one budget' is firmly

held and articulated.

• Sustained investment is needed to provide staff and contractors with

the skills needed to innovate and to support them when they do.

• New forms of contracting may be needed. In Canterbury, this meant the

price/volume schedule for hospitals was scrapped and replaced by new

contracts

http://www.kingsfund.org.uk/publications/quest-integrated-health-and-social-care













Paying for integration not the only

answer • The drivers of expenditure growth are still there –

technology, income growth and demographics

• We do need to make fundamental social decisions on how much we are going to spend on the health system, the balance between prevention and treatment and;

• How we are going to raise the money to pay for it;

• Efficiency requires a seamless transition between all of the services provided for chronic care;

• A necessary (but not sufficient condition) for achieving this is the creation of a single fund holder responsible for all of the services provided to a patient.

prof anthony harris - centre for health economics - future of public healthcare

Government & Nonprofit

health care myth

funding of health care

health economicsintegrationfee

health economicsprinciples

health economicseconomic

health economicsmyths

health economicsevidence

health economicspaying