right questions sustainability 100813
DESCRIPTION
TRANSCRIPT
Asking the right question:
What to do about health spending
growth?
Stephen Duckett
Presentation Deakin Public Health Policy seminar
Melbourne, September 2013
2
Close to an important anniversary
I had an interview with the
Board of Guardians of St
James's parish, on the evening
of the 7th inst [Sept 7 1854],
and represented the above
circumstances to them. In
consequence of what I said, the
handle of the pump was
removed on the following day.
—John Snow, letter to the editor
of the Medical Times and
Gazette
Replica pump
3
Agenda
• Policy memes
• Some facts about costs and health status
• Some non-solutions
• Some (possibly uncomfortable) solutions
4
The problem
• ‘Health spending is unsustainable’
• ‘Health costs are out of control’
• Or are they?
Cost per Head
above international average
Potential years of life lost
above international average (more PYLL=worse)
International average
Best performing quadrant
Worst performing quadrant
6 6
Australia is in the good quadrant
OECD average
Canada
Australia
Don’t forget this is
an average: there is
considerable within
country variation
7
0%
5%
10%
15%
20%
25%
30%
35%
Skipped a test ortreatment due to cost
Skipped a consult due tocost
Skipped medication due tocost
Felt "not at all confident"you could afford care
Had problems paying (orcouldn't pay) medical bills
Major city Inner regional
Outer regional Remote or very remote
Proportion of people who reported access barriers due to cost in
the last year, by remoteness, 2010
Access variability
8 8
Initially stable, health care now increasing as
GDP share
9
0
50
100
150
200
250
300
2000 2005 2010 2015 2020 2025 2030
Projection Actual
$ Billion
10
Health major component of government
spending (and spending growth)
per cent change above CPI, 2002-03 to 2012-13
11
Hospitals major component of public
health spending (and spending growth)
per cent change above CPI, 2002-03 to 2012-13
0
10
20
30
40
50
60
70
80
90
100
0 10 20 30 40 50
HospitalsOther
Private health
insurance
PharmaceuticalsPrimary care and
medical services
$bn spent in 2002-03, in $2012
NFS
GDP
12
Shift in state budget shares 2002-03 state spending
Hospitals Primary care and medical
services
Health - other
Schools
Skills
Higher ed
Early childhood
Education - NFS
Infrastructure, transport and
planning
Economy and finance
Criminal justice
Government operations
Community services
Housing
Industry
Disability services
Climate change and environmen
t Legal
Arts and sport Emergency
services
Debt management Superannuatio
n
Education
23%
Everything
else 41%
Health
22%
Infrastructure,
transport &
planning 14%
Hospitals
Health - other
Primary care and medical
services
Health -
NFS
Schools
Skills
Early childhood
Higher education
Education - NFS
Research
Infrastructure, transport and
planning
Criminal justice
Economy and finance
Government operations
Disability services
Community Services
Industry
Superannuation
Debt management
Climate change and environmen
t Legal
Housing
Emergency services
Arts and sport Other
Education
21%
Everything
else 38%
Health
25%
Infrastructure,
transport &
planning 16%
13
In the past 10 years separations have increased, particularly
among older age groups
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0-4 5–14 15–24 25–34 35–44 45–54 55–64 65–74 75–84 85+
Separations per 1,000 people
2001-02 Female
2001-02 Male
2011-12 Male
2011-12 Female
Age groups
Sources: AIHW Hospital Statistics (both 2001-02 and 2011-12); ABS Cat 3101.0
14
Almost 2/3rds of real health spending increases came from
factors other than population growth, ageing, and inflation
-$2,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Publichospitals
Medicalservices
Medication Privatehospitals
Research Communityhealth
Dental Other
Other
Health inflation (beyond CPI)
Ageing
Population growth
Breakdown of total real spending growth in health (2003-4 to 2010-11)
Millions of 2010-11 dollars
Sources: AIHW; ABS; DOHA
15
Alternative discourse
• Population over 85 more
than doubles!!!!!
• But let us assume people
over 85 have 25% less
morbidity compared to
today (compression of
morbidity hypothesis)
• Utilization projected to
increase two thirds!!!
• Utilization projected to
increase 2% per annum
16
Voodoo (apocalyptic) demographics
• Demeaning to elderly
• Ignores past contributions
• Ignores current contributions
• Assumes no ‘intergenerational interlinkages’
• Neglects effect of increased life expectancy
on Gross Domestic Product
17
Almost 2/3rds of real health spending increases came from
factors other than population growth, ageing, and inflation
-$2,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Publichospitals
Medicalservices
Medication Privatehospitals
Research Communityhealth
Dental Other
Other
Health inflation (beyond CPI)
Ageing
Population growth
Breakdown of total real spending growth in health (2003-4 to 2010-11)
Millions of 2010-11 dollars
Sources: AIHW; ABS; DOHA
18 18
Death rate for conditions amenable to health
interventions is going down
0
50
100
150
200
250
1987 1992 1997 2002 2007
Amenable mortality per 100,000
19 19
Self reported health status is improving
Per cent of population reporting fair or poor health status
0
2
4
6
8
10
12
14
16
18
20
2001 2004 2007 2011
20
Sustainability panic
• Is a distraction, avoiding dealing with the
inevitable
• Often leads to ‘panic type solutions’
21
The story so far
• Health spending is increasing as share of
both GDP and government budgets
• We are getting something in return
• Should we do something or nothing?
• The glacier analogy is important: careful
changes are what is needed not big bang
shifts
22
Some non solutions
• Shift costs to consumers
• Privatise or perish
• Reduce services
23 23
Australia is already at the high end in terms of
out-of-pocket share
0%
20%
40%
60%
80%
100%N
eth
erl
an
ds
De
nm
ark
Lu
xem
bo
urg
Unite
d K
ing
do
m
New
Ze
ala
nd
Sw
ed
en
Ita
ly
Fra
nce
Ge
rma
ny
Aust
ria
We
st E
uro
pe
ave
rag
e
Be
lgiu
m
Sp
ain
Ire
lan
d
Can
ad
a
Au
stra
lia
Po
rtu
ga
l
Sw
itzerl
an
d
Gre
ece
Un
ited
Sta
tes
Per cent health expenditure
Public
Other
private (including private
health insurance)
Out of
pockets
24 24
Low income households spend a higher proportion of
income on health than high income households
$
25
Risk transfer: the name of the game
KPMG report on Sunshine Coast University Hospital
26
Privatise or perish
• Does it transfer risk?
• What about democratic accountability?
can extend for periods in excess of the life of a particular
Parliament and, on the basis of historical experience, the
Government of the day. Some contracts that have been entered
into by government have inter-generational consequences and
involve a commitment to pay public funds in advance of, or
independently of, the appropriation of those funds by the
Parliament. Some contracts also have the potential to fetter the
Executive flexibility of successor governments.
(South Australian Auditor General)
27
Contracting risks
• Need to describe product • If not, risk gaming
• Asset specificity • Risk of capture
• Risk of failure • Robina
• Modbury
• La Trobe Regional Hospital
• Port Macquarie
• Private sector not necessarily more
efficient
Williamson, O. E.
(1975) Markets
and hierarchies:
Analysis and
antitrust
Implications, The
Free Press
28
National ‘Activity Based Funding’
• Inpatients, Outpatients and ED activity priced
• No change in Commonwealth funds to states
2012/13
Transition year 1
• More activities have prices (e.g. sub-acute)
• No change in Commonwealth fund flow to states
2013/14
Transition year 2
Base year
• Commonwealth provides additional funds to states based on growth in activity (45% of National Efficient Price, 50% in 2017)
2014/15
1st change year
All this applies to ‘Public hospital services’
29
If not that, what? Sensible solutions
• Reorienting the system
• Focussing on efficiency (which isn’t the
same as budget cuts, especially in the
context of unmet demand)
• Eliminating waste
30
31 31
There is a significant difference in
revision rates for different prostheses
Data source: Australian Orthopaedic Association. National Joint Replacement Registry
http://www.dmac.adelaide.edu.au/aoanjrr/publications.jsp
32
Simple benchmarking suggests cost variations could be
large
Deviation in cost per separation
(weighted by DRG)
-$6,000
-$4,000
-$2,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
Lowest-cost hospital
($4000 per weighted
sep cheaper than
average)
33
Benchmarking hip replacements 1: state comparisons
Note: Graph truncated at $60,000. The proportion of I03B separations costing more than $60,000 is 1.03% in WA, and less than 0.65% in all other
states; whiskers extend a distance of 4 times the IQ range;
A
B
C
D
E
F
STATE
>$10,000 difference between average cost in
best and worst performing State
$/separation
COST for hip replacements by state
(boxplots are at patient level, 2011)
34
Benchmarking hip replacements 2:
comparing hospitals that have high volumes of hip replacements
a
b
c
d
e
f
HOSPITAL
g
Note: Whiskers extend a distance of 4 times the IQ range
$/separation
COST for hip replacements in hospitals with highest volumes
(boxplots are at patient level, 2011)
Scale does not seem to be driving results
35
Early work suggests that in low cost hospitals have
consistently good performance across clinical groups.
In high cost hospitals, performance varies
0
1000
2000
3000
4000
5000
-$3,000 -$2,000 -$1,000 $0 $1,000 $2,000 $3,000 $4,000
ρ = 0.65
Variation across clinical groups
Hospital effect (variation in adjusted cost per admission)
High
Variation
across
SRGs
Low
Variation
Low cost High cost
36
The questions of the age
• Should you reward less efficient hospitals by paying them
more for treating patients than more efficient hospitals
• Should you reward poor quality by paying hospitals that have
higher rates of adverse events more than hospitals with lower
rates
• Should you reward less efficient hospitals by paying them
more for inefficient management of the whole patient pathway?
• Should hospitals be rewarded more or less if they don’t deliver
on their commitments to patients as part of informed consent?
37
Progress on Activity based funding
relies on alignment of three key factors
Technical feasibility
Management capacity
Political will
38
PBS prices are far higher than the comparators we
studied – often by more than an order of magnitude
Note: chart represents the 58 identical doses for which the benchmark model was cheaper than the PBS. Only 39 drugs
where the PBS cost is more than twice that of the comparator are displayed (average is for all 58 doses).
Source: Grattan Institute analysis
0
20
40
60
Average: 8.2
PBS prices as multiples of benchmark price (wholesale, 2011-12)
Drug-dose combinations
Source of lowest price
New Zealand
Unnamed state
Western Australia
39
One country, many prices
$ million
Estimated savings for generic and patented drugs
Source: Grattan Institute
0
200
400
600
800
1000
1200
1400
1600
1800
Western Australia Unnamed state New Zealand
Patented
Generic
40
Current efforts to reduce prices don’t go far enough
But benchmarking would save a lot more money
Source: Grattan Institute analysis. Note: “Amoxycillin +” is amoxycillin with clavulanic acid.
0
5
10
Ex-manufacturer price ($) Price in 2011-12
Price after April 2013 reduction
Benchmark price
41
Sneak preview 1
Upcoming report: Squandering Skills in Primary Care
‘Less complex’ GP visits
• Only one problem managed
• 1-2 medications prescribed
• No pathology or imaging
• No procedures (excluding
immunisations)
• No other clinical treatments
(excluding
advice/education)
Proportion of GP visits by complexity (%)
Source: Grattan Institute analysis of BEACH data
9%
10%
81%
Existing problem
New problem
Oral contraceptives
Allergic dermatitis
Sinusitis
Ear infections
Bronchitis
Immunisations
Colds
Proportion of ‘less complex’ visits
with relatively straightforward
problems managed
12%
8%
6%
3%
3%
3%
Approximately 1/3 of
‘less complex’ visits or
12 million visits a year
DRAFT – INTERIM RESULTS – FOR DISCUSSION PURPOSES ONLY
42
Respondents saw significant scope for change
For each of the following groups respondents were asked to estimate the percentage of workload that could
be done by a lower-cost group, without reducing quality of care
0%
10%
20%
30%
Registered Nurses Physiotherapists OccupationalTherapists
Medical Interns Enrolled Nurses Resident MedicalStaff
MedicalSpecialists
Round 2
Round 1
In round 2, respondents were provided with the average results from the previous round, which may have
contributed to rising and converging estimates
For each workforce group atleast 94% of respondents suggested that some substitution was possible
43
There was very strong agreement with a wide range of substitution
options
Respondents were asked to what extent they agreed that the following shifts of workload would reduce the
cost without reducing quality and safety
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
RNs to ENs
RNs to Personal Care Assistance
RNs to Clerical Workers
ENs to Personal Care Assistants
ENs to Clerical Workers
ENs to Cleaners
Specialists to Physician Assistants
Specialists to Nurse Practitioners
Specialists to RNs
Residents to Physician Assistant
Resident to Nurse Practitioners
Resident to RN
Resident to clerical workers
Interns to Nurse Practitioners
Intern to RNs
Interns to ENs
Physiotherapists to Physio Assistants
OT to allied health assistants
Strongly agree Agree Neither Disagree Strongly disagree
44
There is great variation in GP services per capita
We propose focusing on the bottom quintile
0
20
40
60
80
100
120
Kim
be
rle
y-P
ilba
raB
entle
y-A
rmad
ale
Nort
he
rn T
err
itory
Cen
tra
l &
Nth
We
st
Qld
Go
ldfie
lds-M
idw
est
AC
TP
ert
h N
ort
h M
etr
oN
ew
En
gla
nd
So
uth
ern
NS
WS
outh
West
WA
Fre
ma
ntle
Pe
rth S
ou
th C
oa
sta
lF
ranksto
n-M
orn
ingto
n P
en
.E
aste
rn M
elb
ourn
eH
um
eC
ou
ntr
y S
ou
th S
AN
ort
he
rn S
yd
ney
So
uth
Weste
rn M
elb
ou
rne
Pe
rth C
en
tra
l &
East M
etr
oT
ow
nsvill
e-M
acka
yC
en
tra
l Q
uee
nsla
nd
Ta
sm
an
iaS
ydn
ey N
ort
h S
ho
reB
arw
on
Mu
rru
mb
idg
ee
Gra
mp
ians
Lod
do
n-M
alle
e-M
urr
ay
Gre
at S
ou
th C
oa
st
Darl
ing
Dow
ns-S
th W
est
Qld
Fa
r N
ort
h Q
uee
nsla
nd
Gre
ate
r M
etr
o S
th B
risb
ane
Inne
r E
ast
Me
lbo
urn
eW
este
rn N
SW
Cou
ntr
y N
ort
h S
AS
outh
ern
Ad
ela
ide
Nort
he
rn A
de
laid
eG
ippsla
nd
Me
tro
Nort
h B
risb
an
eH
un
ter
We
st
Mo
reto
n-O
xle
yL
ow
er
Murr
ay
Ba
ysid
eN
ort
he
rn M
elb
ou
rne
So
uth
Ea
ste
rn S
ydn
ey
Cen
tra
l C
oa
st N
SW
Wid
e B
ay
Ma
ced
on
Ran
ges
Go
ulb
urn
Va
lley
So
uth
Ea
ste
rn M
elb
ou
rne
Nep
ea
n-B
lue
Mo
unta
ins
Inne
r W
est S
yd
ne
yN
ort
h C
oa
st
NS
WF
ar
We
st
NS
WC
en
tra
l A
de
laid
e &
Hill
sIlla
warr
a-S
ho
alh
ave
nG
old
Co
ast
Inne
r N
ort
h W
est
Me
lb.
Ea
ste
rn S
yd
ne
yW
este
rn S
ydn
ey
So
uth
Weste
rn S
yd
ne
yS
unsh
ine
Coa
st
Bottom fifth
Proposed
service
increase
Current services
FWE GPs per 100,000 residents (2011-12)
Medicare Local areas
INTERIM RESULTS ONLY - SUBJECT TO CHANGE
45
So where to from here?
• Sustainability panic vs hard yards: where
you start might determine where you end up
• Australia has a good health system in
international terms
• That doesn’t mean that we can’t improve it
• ‘Improvement’ means just that
•sensible change
•sensibly implemented
