Types of health care systems

Entrepreneurial/libertarian – for profit, individuals choosewhat they want in free market

Welfare oriented – Gov. mandates health insurancebut needn’t provide services itself

Comprehensive - Gov. provides health care for all, funded via taxes; may compete w/private system

Socialistic – Gov. sole provider

Some intermediates – e.g. free market w/ safety netfor poor

What countries have each type?

Competing goals in health systems:high quality, low cost, fair distribution

Should “basic” health care be a right,to extent a country can afford it?

What would Bentham, Kant, Rawls say?

Your opinion?

How much should we spend?

in USA

From 1990 to 2005 median US household income rose ~5%, while medical costs nearly doubled

in USA

A general trend in wealthy countries, perhaps more so in the USWhy might growth rate and fraction of GDP be higher in the US?

Is high growth rate and amt. spent on health as fraction of GDP a problem?

Crowds out other spendingCauses financial hardship – ~60% of personal

bankruptcies in US due to medical bills(Am J Med 142, 721 (2009))

Do consumers make free, informed choices of howmuch to spend on health care?

How might their decisions be distorted?

Factors distorting markets in health care

Knowledge asymmetry - providers know more than consum.can be a problem if they have different interests

Conflicts of interest (“agent” problem) – physicians,hospitals, insurers, pts. don’t have same interests(e.g. why do physicians charge uninsured ~2-5x more

than insured patients)

Adverse selection (“cherry picking”) - insurers try to select healthier pts., don’t cover pre-existing conditions

Moral Hazard – insureds over-consume because someone else pays

Consumers often not in position to make free decisione.g. shooting victims in Arizonapt. w/ chest pain advised to have emergency

cath. or bypasspt. w/ breast lump

These problems are not unique to health care – howare they dealt with in other markets?

Knowledge asymmetry – educate consumersConflicts of interest – publicize themAdverse selection – make it illegal, subsidize high risk pts.Moral hazard – insurance adjustorsWeak consumer – get stronger advocate (cons. prot. ag.)

Arnold S. Relman, MD, long-time editor-in-chief of NEJM (1992):

"In short, our health-care system, formerly a social service that was the responsibility of dedicated professionals and not-for-profit facilities, has become a vast, profit-oriented industry. [Were the good old days really that good?] The revenue of this industry constitutes the country's health-care costs. As in any other industry, providers constantly strive to increase their profitable sales, but unlike other industries, consumers exercise little control over their consumption of products and services. It should not be surprising that such a system is afflicted not only with relentless inflation but also with neglect of the needs of the uninsured and with failure to promote the use of valuable but unprofitable health services.“

Why are health care costs increasing?

What is main cause of increasing costs, acc. to CBO?

New technology

(i.e. stuff you may work on as biomed. engineers)

Does incr. spending -> health gains? Yes, by some measures

death rate from cor.dis. has declined ~30% in 15 years acc. to AHA

dialysis pts. die without it

how much disabilityis relieved by surg.,at what cost; how much could be elim.with weight loss?

Does increased spending -> health gains?

No, by other measures

compare health outcomes in countries thatspend different amounts on health

Infant mortality (deaths in 1st year US UK Japan per 1000 live births) 7 5 3% of GDP spent on health (2005) 15 8 8

Life expectancyJapan vs US

Average =? quality measure

Variance =? fairness measure

These comparisonsare affected bycultural/environ-mental differences,e.g. diet, but is this reason to discount the results?

8 % of GDP spent on health

15 % of GDP spent on health

While it is unambiguously preferable to have better health or a higher level of responsiveness [to people’s needs], it is not always better to spend more on health because at high levels of expenditure there may be little additional health gain from more resources. WHO report on Health Systems 2000

http://www.who.int/whr/2000/en/whr00_en.pdf

More difficult question is whether we get adequatevalue for extra money spent on health

How can we answer “cost-effectiveness” questions?Funding for cost-effectiveness studies is part of health

care reform act of 2010

What is a“quality-adjustedlife year” saved?

Is the qualityadjustmentproblemmatic? Does this matterif diff. are large?

Richards-Kortum,ch. 5

Examples of cost-effectiveness estimates

How might providers/consumers be incentivized touse cost-effectiveness information?

• Government pays (Medicare, Medicaid) only for most cost-eff. therapy; private insurers might piggy-backon gov. recommendations to limit coverage

• Government pays cost of most cost-eff. therapy; ifother therapy is chosen, extra cost borne by others

• Patient co-pay higher for not-most-cost.-eff. therapy

See perspective by Orszag, NEJM 357:19 (2007)

Is this wishful thinking? This will be our next topic…

Often new technologies are touted to save money ( but freq. fora particular party, e.g. insurers, not necessarily for society-at-large)

In any case, be skeptical …

CBO report:“Can New Technology Reduce Spending? … examples of new treatments for which long-term savings have been clearly demonstrated are few…Future advances—in molecular biology and genetics, in particular—may one day offer the possibility ofsavings if they make curative therapies available. Continued advances in understanding the genetic origins of disease offer the credible possibility that future providers will accurately predict the health risks faced by individual patients and design therapiestailored specifically to them.”

Main points

Health care spending is rising dramatically

This causes ethical, legal, social problems – e.g. bankruptcy from inability to pay medical billsunequal distribution of benefits

Main cause of increased cost is new technology

Evaluating if new technology is worthwhile (?cost-effective) is major problem of our time

Homework: read CBO report on Technology and Health Care Spending

read/watch one other item on Blackboard for class 2share in class something you learned or write ashort paragraph (bullets ok) describing somethingyou found interesting, disagreed with, or were skeptical of

Think about:

Who should evaluate value of new technologies – government, insurers, academics, “the market”? Should their introduction be regulated?May they be of different value to different parties?Who speaks for “society’s” interest?