Chronic Illness in a Complex Health Economy: The Perils & Promises of Downstream & Upstream Reforms

Jack Homer, Gary Hirsch, and Bobby Milstein

International System Dynamics ConferenceBoston, Massachusetts

July 29 – August 2, 2007

The U.S. Health Care Quandary• A puzzle:

– U.S. has world’s highest healthcare costs

– But our health and longevity are only mediocre for a developed country

– How did this happen?

• Some preliminary thinking (causal loops) – CDC’s Health Systems Workgroup 2003

– SD Society’s Health Policy Special Interest Group 2005

• To build a solid theory, need to look at data series– Healthcare spending & price inflation

– Disease & risk prevalence and deaths

– Health insurance coverage

– Health care assets & investments

Data sources

Source Data Topics

National Health Expenditures Audit(NHEA), 1960-2004

- Health care spending by type- Investments in structures & equipment - Public health spending

US Census- Population growth (1960-2010)- Health insurance coverage (1987-2005)

Bureau of Labor Statistics (BLS), 1960-2005

- Overall & medical consumer price index- GDP and GDP deflator

National Health Interview Survey (NHIS), 1982-2004

- Self-reported health status

Behavioral Risk Factor Surveillance System (BRFSS), 1991-1999

- Prevalence of cardiovascular risk factors

National Vital Statistics Records (NVSR), 1960-2003

- Deaths

Nat’l Institute for Health Care Mgmt (NIHCM) & proprietary sources

- Spending on drugs for hypertension (1980-2004) and cholesterol (1987-2004)

Health Care Spending and Self-reported Prevalence of Impaired Health 1982-2004

(National Health Expenditure Accounts, National Health Interview Survey)

0%

10%

20%

30%

40%

50%

60%

200420022000199819961994199219901988198619841982

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Self-reported health (NHIS) good, fair, or poor (not excellent or very good)

Health consumption (NHEA) per capita in year 2000 dollars

Sources: National Health Expenditure Accounts (NHEA), US Census; National Health Interview Survey (NHIS), CDC

Health Population Stocks and Flows

Populationwith disease

Population atrisk

RiskmanagementAdverse behaviors &

living conditions

Disease cureand recovery

Diseaseincidence

Populationnot at risk

Risk onset

Risk reduction

Populationnet inflow

Disease relateddeaths

Injury & violencedeath rate

Complications(urgent episodes)

Diseasemanagement

Urgent care

Disease Care (Downstream) Loops

Diseaseprevalence

Healthcareassets

Insurancecoverage

Extent ofdisease care

Complications& Deaths

-

-

Diseaseincidence

Personalhealthcarespending Reimbursement and

coverage restrictions

-

Investment innew assets -

Healthcareprices

R1

B1

R2

B2

B3

Provideradaptation

R3

(Disease management,Urgent care)

R1. Revenues reinvested

B1. Dis Mgmt reducescomplications

R2. Care prolongslife, increases demand

B2. High costs lead to less reimbursement, inhibiting investment

B3. High costs lead to less insurance,inhibiting disease mgmt

R3. “Tug of war” leading toprice inflation

Downstream What-Ifs (1960-2010)

• What if employers didn’t cut insurance? Extent of care improved, but health care costs increased.

• What if providers didn’t raise their fees? Costs reduced, insurance increased, so greater extent of care.

– However, a fixed-price policy threatens provider autonomy, and may trigger a decline in supply of providers

• What if payers didn’t restrict reimbursements? Investments and assets increased, so greater extent of care. Also, providers don’t feel need to raise their fees, so costs reduced and insurance increased, so even greater extent of care.

– However, private payers may not trust providers to “play fair”, and will fear an explosion in wasteful spending and investment

• Conclusion: In U.S. system, hard to find a politically acceptable way to limit costs but also encourage beneficial investments.

Risk & Disease Prevention (Upstream) Loops

Diseaseprevalence

Healthcareassets

Insurancecoverage

Extent ofdisease care

Complications& Deaths

-

-

Riskprevalence

Diseaseincidence

Riskmanagement

-

Health protectionfunding andorganizing-

Personalhealthcarespending

Reimbursement andcoverage restrictions

-

Investment innew assets -

Healthcareprices

R1

B1

R2

B2

B3

B4

B5

Provideradaptation

R3

Adverse behaviors& living conditions

B6

(Disease management,Urgent care)

B4. Risk mgmt $ linked to downstream $

B5. Health protection $ linked to downstream $

B6. Health protection $ linked to risk prevalence (“sin taxes”)

Upstream What-Ifs (1960-2010)

• What if the risk management portion of non-urgent care were doubled? Less onset of disease and lower downstream costs, with a payback time of 15 years.

• What if (starting 1980) $5 were spent on health protection for every $100 of downstream spending? Even greater reduction in disease onset and downstream costs, but with a payback time of 22 years.

– A longer payback time because health protection acts further upstream than risk management

– But cost data reflect only direct costs of care, not productivity losses; Whatcom County models (SDR 2004) show payback time much shorter when productivity losses taken into account

• Conclusion: Even in the dysfunctional U.S. system, progress to reduce costs and improve health through upstream measures is possible…but will require commitment and political will.

ADDITIONAL SLIDES

Source: Centers for Disease Control and Prevention. Health-related quality of life: prevalence data. National Center for Chronic Disease Prevention and Health Promotion, 2003. Accessed March 21 at <http://apps.nccd.cdc.gov/HRQOL/>.

But health-related quality of life has worsened

14% increase

Upstream work is a very small fraction of health spending

Upstream Prevention and Protection-----------------------------------Total 3%

Downstream Care and Management--------------------------------Total 97%

Brown R, Elixhauser A, Corea J, Luce B, Sheingod S. National expenditures for health promotion and disease prevention activities in the United States. Washington, DC: Battelle; Medical Technology Assessment and Policy Research Center; 1991. Report No.: BHARC-013/91-019.

Upstream and Downstream in the Health System

GeneralPopulation

Becomingvulnerable

Becoming no longervulnerable

VulnerablePopulation

BecomingAfflicted

Afflictedwithout

Complications DevelopingComplications

Afflicted withComplications

Dying fromComplications

CENTERS FOR DISEASE CONTROL & PREVENTION

Gerberding JL. Protecting health—the new research imperative. JAMA 2005; 294(11): 1403-1406.

Levins R, Lopez C. Toward an ecosocial view of health. Intl J Health Svcs 1999; 29(2):261-293.

SAFER • HEALTHIER • PEOPLE ™

Health Policy Reform Loops (ISDC 2005)

Containingcosts

Improving insurancecoverage & distribution

of care

Improvingquality

Protectinghealth

Safer,HealthierPeople

People atRisk

People withDiseaseBecoming

at riskDeveloping

diseaseDying from

disease

Adverse livingconditions

Insurance coverage &Reimbursement rates

-

Acute cases

High-tech acute carecapacity & utilization

Health carecosts

Funds available forimproving living

conditions

-

-

Costs of managingrisk and disease

Costs of acute care

Recovering orgetting cured

Becoming safer,healthier

-

Administrativeoverhead of

providers

Efforts to improveliving conditions

-

-

-

Adequacy of providers inless wealthy & more

remote areas

Effectively managedrisk and disease

Effective acute care

People withdisease and at

risk

High-tech risk &disease mgmt capacity

& utilization

-

Variety of payer feeschedules andarrangements

-

-

-

Inappropriate anddefensive use of

high-tech acute care-

Costs of regulationand qualityassurance

0%

20%

40%

60%

80%

200019981996199419921990

>1

>2

Risk factors include high blood pressure, high cholesterol, diabetes, obesity, smoking

Fraction with specified # of risk factors (source: NHIS)

Prevalence of cardiovascular risk factors 1991-1999

(National Health Interview Survey)

60%

65%

70%

75%

80%

85%

90%

200420022000199819961994199219901988

0%

5%

10%

15%

20%

25%

30%

Total insured

Private insured

Gov't-only

Medicaid

Health insurance coverage 1987-2004(US Census)

$0

$200

$400

$600

$800

200420001996199219881984198019761972196819641960

$0

$1,000

$2,000

$3,000

$4,000

Estimation of structure & equipment (S&E) assets assumes depreciation rate of 5%/year, and assets initially equal to 12 years of investment. The average age of S&E assets remains in the 8-12 year range, settling around 11 years by the 1990s.

S&E investment per capita in year 2000 dollars per year

S&E assets per capita in year 2000 dollars

Healthcare structures & equipment investment and estimated asset value

1960-2004 (in year 2000 dollars per capita)

0

200

400

600

800

2004200019961992198819841980

Thousands of MDs (source: AMA)

Total active

Office-based

Primary care

Medical doctors 1980-2004 (in thousands)

Healthcare assets also include human capital, in the form of doctors, nurses, and other trained personnel. The number of MDs grew somewhat more slowly than did S&E assets, helping to explain why a shortage of medical personnel has developed.

$0

$20

$40

$60

$80

$100

2004200019961992198819841980

Anti-hypertensive

Anti-cholesterol

Anti-hyp + Anti-chol

Spending per capita in year 2000 dollars (sources: various)

Anti-hypertensive & anti-cholesterol drug spending per capita 1980-2004

Population death rate from coronary heart disease, 1950–1998

0.6%

0.5%

0.4%

0.2%

0.1%

0%1950 1960 1970 1980 1990 2000

Age-a

dju

sted D

eath

Rate

0.3%

Year

Marks JS. The burden of chronic disease and the future of public health. CDC Information Sharing Meeting. Atlanta, GA: National Center for Chronic Disease Prevention and Health Promotion; 2003.

1950

0

4

8

12

16

200420001996199219881984198019761972196819641960

Consumer price index (CPI-U) relative to 1960

Total economy

Healthcare

Consumer Price Indices for Health Care andthe General Economy 1960-2004 (1960=1)

Key Calibration Assumptions Allowing a Good Fit to History (1960-2004)

• Revenue reinvestment rate started at 13-14% in the 1960s, but in reaction to higher costs declined to 10% in 1980, and 6% by 2004.

• Government-insured fraction of those not privately insured rose from 18% in 1960, to 37% in 1970, to 45% in 1975, to 48% in 1990, to 50% in 2000.

• Reduction in care due to no insurance coverage is 60% for urgent/rehab care and 85% for disease management.

• Risk onset rate due to adverse behaviors and living conditions increased by 30% from 1980 to 1995, and by another 5% through 2005.

– This pattern corresponds well to apparent pattern of caloric intake driving the rise in U.S. obesity since late 1970s. See Homer/CDC obesity model presented at ISDC 2006.

Insured fraction of population

1

0.9

0.8

0.7

0.6

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Healthcare consumption fraction of GDP

0.2

0.15

0.1

0.05

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Healthcare price index vs general economy (1960=1)

3

2

1

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Healthcare consumption and investments per capita ($/yr)

6,000 1,200

4,000 800

2,000 400

0 0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Simulation versus Historical Data (1)

Consumption-sim

Consumption-data (1)

Investment-sim

Investment-data (2)

Total-sim

Total-data (5)

Private-sim

Private-data (6)

Sim

Data (3)

Sim

Data (4)

Deaths per population per year

0.01

0.009

0.008

0.007

0.006

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Fraction of population with disease or at-risk

0.8

0.6

0.4

0.2

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Simulation versus Historical Data (2)

Sim

Data (9)Risk-sim

Risk-data (7)

Disease-sim

Disease-data (8)

Data sources:

(1 & 3) Consumption: NHEA personal health care spending, 1960-2004 annual, divided by pop and by GDP deflator (2000=1);

(2) Investment: NHEA investments in structures and equipment, 1960-2004 annual, divided by pop and by GDP deflator;

(4) Price: BLS medical care CPI (1960=1) divided by general economy CPI (1960=1), 1960-2005 annual;

(5 & 6) Insured: Census fraction of pop all ages covered by private or govt health insurance, 1987-2005 annual;

(7) Risk prevalence: BRFSS fraction adults report at least one of five cardiovascular risk factors, 1991-1999 odd years;

(8) Disease prevalence: NHIS fraction pop all ages report health as good, fair, or poor (i.e., not excellent or very good), 1982-2004 annual;

(9) Deaths: NVSR total deaths per year divided by pop, 1960-1980 every 5 years, 1980-2003 annual.

Test Results for Downstream What-ifs

Base

No price up

No reimburse down

No coverage down

Base

No price up

No reimburse down

No coverage down

Base

No price up

No reimburse down

No coverage down

Base

No price up

No reimb. down

Healthcare assets per capita

6,000

4,500

3,000

1,500

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Insured fraction of popn

1

0.95

0.9

0.85

0.8

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Healthcare costs per capita

8,000

6,000

4,000

2,000

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Urgent episodes per capita

0.18

0.16

0.14

0.12

0.1

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

No cover down

Test Results for Upstream What-Ifs

More risk mgmt

Base

More health protection

No obesity up

Base

More risk mgmt

More health protection

No obesity up

Base

More risk mgmt

More health protection

No obesity up

Base

More risk mgmt

More health protection

No obesity up

Upstream spending per capita

400

300

200

100

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Fraction of popn with disease

0.4

0.35

0.3

0.25

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Healthcare costs per capita

8,000

6,000

4,000

2,000

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Urgent episodes per capita

0.18

0.16

0.14

0.12

0.1

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)