Technology Growth and Expenditure Growth in U.S. Health Care
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Technology Growth and Expenditure Growth in U.S. Health Care Amitabh Chandra Kennedy School of Government, Harvard University Jonathan Skinner Department of Economics, Dartmouth College The Dartmouth Institute for Health Policy & Clinical Practice Funding from the National Institute on Aging and the Robert Wood Johnson Foundation
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Technology Growth and Expenditure Growth in U.S. Health Care. Amitabh Chandra Kennedy School of Government, Harvard University Jonathan Skinner Department of Economics, Dartmouth College The Dartmouth Institute for Health Policy & Clinical Practice. Funding from the National Institute on - PowerPoint PPT Presentation
Transcript of Technology Growth and Expenditure Growth in U.S. Health Care
Technology Growth and Expenditure Growth in U.S.
Health Care
Amitabh ChandraKennedy School of Government, Harvard University
Jonathan SkinnerDepartment of Economics, Dartmouth College
The Dartmouth Institute for Health Policy & Clinical Practice
Funding from the National Institute on Aging and the Robert Wood Johnson Foundation
A Typical Working Day at Dartmouth
Journal of Economic Literature, June 1991
Source: CBO
Hall and Jones (QJE 2007): Health Care Spending Should Rise Over Time
Health Care Expenditures as a Fraction of GDP: Selected Countries
0.0
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8.0
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16.0
Per
cen
t of G
DP
Sp
ent o
n H
ealth
care
Canada
France
Germany
Japan
United Kingdom
United States
Growth in Health Care Costs (as % of GDP), Selected Countries: 1980-2006
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SW DE NE Ger UK CA FR Port. US
Variations in Regional Growth Rates…
Fisher, EF, J Bynum, JS Skinner, New Engl J Med, 2009.
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QC
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Stent Rates by Province, 1994-2005
Source: Therese Stukel, ISIS.
Per 100,000 age 20+. Age/sex adjustedExcept QC which is to 2004
The Supply Side: What Do Health Care Providers Maximize?
•Health care providers maximize the perceived health of their patients given financial constraints or incentives, but may be constrained by resource capacity, ethical judgments, and patient demand
The Physician’s Optimization Problem
Saving Lives:Good for Society
Physician income Capacityconstraint
Patient must be better off
Which implies….
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Dynamics of the model
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Productivity Change
Health Gains minus Costs
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Productivity Change
Cost-effectiveness of the kth input
Three Categories of Health Care Treatments
1. The diffusion of highly productive innovations
Highly Cost-Effective: Aspirin Post-MI
Source: Swartz, MN, NEJM Oct 28, 2004
More Expensive, But Still Valuable
Cost-Effective Treatment (-s” Large in Magnitude)
x
Dollar value of treatment (at $100K per life year)
x*
Cost per patient
Average Productivity is High Too
x
Dollar value of treatment (at $100K per life year)
x*
Cost per patient
Total Cost
Three Categories of Health Care Treatments
1. The diffusion of highly productive innovations
2. Potentially cost-effective but with heterogeneous benefits across patients
PCI (Angioplasty and Stents)
For Some, Highly Cost-Effective
Primary PCI
Stable Angina
Value of Quality-Adjusted Life Years ($100K/yr)
# Patients
Occusion post MI/no angina
Ψ s’(x)
Cost per PCI
Average Productivity of Stents: Less Impressive!
Value of Quality-Adjusted Life Years ($100K/yr)
# Patients
Ψ s’(x)
Cost per PCI
Total Cost
X’
Three Categories of Health Care Treatments
1. The diffusion of highly productive innovations
2. Potentially cost-effective but with heterogeneous benefits across patients
3. Technologies with uncertain or low benefits
Rewards in This World for CT Scan Volume
Percent of Deaths Associated with ICU Stays
and Medicare Expenditures
Corr. Coeff = .80510
1520
2530
De
ath
Ass
ocia
ted
with
ICU
Sta
y
4000 6000 8000 10000 12000Medicare Expenditures
How to Think About Health Care Cost and Aggregate Productivity
GrowthImproved
HealthIncreased
Costs
Category I(Cost-Effective)
Category II(Heterogeneous)
Category III(Unknown or small)
Hypothetical Provider-Specific Measures of Quality & Spending
Is it a positive or negative correlation?
Spending
Survival/Quality
Do We See This Pattern in Comparing Country Growth Rates?
Health Care Costs in the U.S. Growing Relatively Faster
Source: Garber and Skinner, JEP, 2008
But Survival Gains in the U.S. Falling Behind
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Year
Lif
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xp
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(B
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Peer Countries United States
Source: Garber and Skinner, JEP 2008
Weisbrod’s Prediction: Too Soon? Thus, under a prospective payment finance
mechanism, the health care delivery system sends a vastly different signal to R & D sector, with priorities the reverse of those under retrospective payment. The new signal is as follows: Develop new technologies that reduce costs, provided that quality does not suffer “too much.” (p. 537, italics in text.)
Can U.S. Health Care Reform Work?
• Hospital/physician networks• Rewarded for providing high-quality low-cost care• Key component – incentives to adapt cost-saving
technologies that reduce fragmentation and poorly coordinated care
Health Affairs, 2009
Summing Up
• Enormous degree of heterogeneity in cost-effectiveness of health care
• Big potential for cost-saving technologies – in all countries!
• Rising taxes – ultimate brake on health care spending
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(%
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P) U.S.
Ireland
Sweden
Denmark
Portugal
Canada
France
Health Care Growth: Limited by Tax Burden
Tax/GDP (1985) and Change in Health Expenditures 1980-2007
ρ2 = -0.47
