Spending

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Technology’s effect of survival rates and health care spending

December 5, 2011 in Technology | 1 comment

How do new technologies affect longevity and health care cost? A working paper by Chandra and Skinner investigates just this question.

The authors categorize medical innovations into three broad categories.

  • Category I. These are the home run treatments. The treatments are highly cost effective for all patients with the disease. For instance, the development of antibiotics was highly effective in reducing pneumonia mortality.
  • Category II. These treatments are cost effective for some patients, but not others. Angioplasty, for instance, dramatically improves survival after a heart attack if administered within 24 hours, but yields no survival benefit and only modest functioning improvements for those with stable coronary disease.
  • Category III. These treatments have small or unproven benefits. Arthroscopic surgery for osteoarthritis of the knee, for instance, was found to have no medical value in an RCT compared to a “placebo surgery.” Nevertheless, 650,000 such surgeries were being performed annually at a cost of more than $5,000 each.

Using this taxonomy, the authors aim to determine how survival and cost change over time due to each type of innovation.

Using cardiovascular disease as an example, they note that 44 percent of the reduction in mortality from 1980 to 2000 was due to improved health behaviors. Another 22 percent of the decline was due to inexpensive Category I treatments such as aspirin and beta blockers, 12 percent was due to Category II treatments like angioplasty, and perhaps 10 percent was due to Category III treatments. On the cost side, the spread of Category I and II treatments appears to have contributed only modestly to cost growth, suggesting a larger role for Category III spending. Despite the rapid diffusion of “home run” technologies like beta blockers during this period, the average cost of saving an additional life-year tripled, to nearly $250,000.

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Is International Healthcare Spending Converging?

September 22, 2011 in International Health Care Systems | 5 comments

It is a well known fact that the U.S. spends more on health care per person than any other country.  But maybe healthcare spending is converging between countries?

At least for the years 2000-2008, there is mixed evidence.  U.S. healthcare spending per person grew by 3.4%.  This is slower than Spain (4.7%), the U.K. (4.6%), the Netherlands (4.3%), Belgium (4.2%), and Sweden (3.6%).  However, spending as a share of GDP grew fastest in the U.S. of any country over this time period.  The U.S. experienced a 2.6 percentage point gain in health care spending as a share of GDP.  The next closest country was Belgium with a 2.1 percentage point increase in healthcare spending as a share of GDP and the Netherlands with a 1.9 percentage point increase.

In 2008, the disparities in healthcare spending as a share of GDP were still immense.  The U.S. spent 16% of its economic production on health care.  The next closest countries are France (11.2%), Belgium (11.1%), Switzerland (10.7%), Germany (10.5%), Austria (10.5%), Canada (10.4%), and the Netherlands (9.9%).

Even if the U.S. doesn’t reduce it’s health spending level, if the current health care spending rate does not slow, this country could be bankrupt sooner rather than later.

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Is Medicare cost growth slowing?

August 20, 2011 in HC Statistics | No comments

Ezra Klein reports that this may in fact be the case according to S&P Healthcare Economics.

S&P Health Economics Index“This chart shows per-patient Medicare revenue falling to a 2.5 percent growth rate, the lowest since S&P Indices started tracking numbers six years ago. At the very top of the this chart you see the ‘commercial index’ — which is mostly private insurance companies — seeing some drop-off, too, but not nearly at the rate in Medicare.”

I would not read too much into this.  The decreasing per patient cost could be due to factors such as: a larger share Medicare beneficiaries are now baby boomers who are relatively healthier than Medicare population from previous years or the bad economy may make people less willing to pay the deductibles and co-payments required to receive medical services.  We will see if health spending growth will continue this slowing trend into the future.

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Share of Federal Budget Spent on Health Care Jumped in 2009

June 20, 2011 in HC Statistics | 1 comment

In 2008, 38 percent of the federal government’s revenue was spent on health care.  In 2009, however, this figure jumped to 54 percent of total revenues.  Although federal health spending only increased by 17.9%, a decline in revenues of a similar magnitude caused this large change.  Surprisingly, state and local spending on healthcare barely budged.  In 2008, state an local spending was 26 percent of total revenues, and this figure only inched up to 27 percent in 2009.  In 2009, households still contributed 6% of their income (just like in 2008) and business’s health care expense remained constant at 8 percent of cost in 2009.

Other highlights from the California Health Care Foundation’s 2011 edition of Healthcare 101 include:

  • Health spending grew 4.0% in 2009, an all-time low, and the smallest annual increase on record.
  • While health spending by private insurers only grew 1.3% in 2009, Medicare spending grew by 7.9% and Medicaid by 9.0%.
  • Households contribute the largest share to the financing of health care (28%) followed closely by the federal government (27%).
  • Spending on home health care (10.0%) grew the fastest, while spending on the capital-intensive category, structures and equipment, declined (– 2.7%).
  • In 2009, spending growth on prescription drugs rose for the first time since 2006, to 5.3%.
  • Hospital care (31%) and physician and clinical services (20%) account for slightly more than half of all health spending.

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    Regional Differences in Medicare Spending and Health Status

    April 4, 2011 in Medicaid/Medicare, Medicare, Public Policy | 1 comment

    Previous research by the team at Dartmouth Atlas found that there is significant regional variation in spending and disease diagnosis frequency, but this variation is not correlated with higher quality.  However, regional variation may be overstated.  According to Zuckerman et al. (2010):

    “Unadjusted Medicare spending per beneficiary was 52% higher in geographic regions in the highest spending quintile than in regions in the lowest quintile. After adjustment for demographic and baseline health characteristics and changes in health status, the difference in spending between the highest and lowest quintiles was reduced to 33%. Health status accounted for 29% of the unadjusted geographic difference in per-beneficiary spending; additional adjustment for area-level dif ferences in the supply of medical resources did not further reduce the observed differences between the top and bottom quintiles.”

    The authors used 2000-2002 data from the MCBS to draw these conclusions.  They controlled for age, sex, race, urban/rural, self-reported health status, smoking status, BMI, previous diagnoses of diabetes or hypertension, family income, supplementary insurance coverage, and area-level supply of medical resources.  The analysis was conducted at the HRR level.

    If regional variation is spending is mostly due to disease burden rather than practice patterns, efforts to change practice patterns at the region level may prove fruitless.

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    Is there really large differences in Medicare Spending across states?

    March 30, 2011 in Health Reform, Medicare, Supply of Medical Services | 2 comments

    Research by the Dartmouth Atlas team has indicated that Medicare spending is concentrated regionally.  States such as Florida spend much more per beneficiary than do doctors who treat similar patients in low cost states like Minnesota.

    A recent paper by Reschovsky and co-authors, however, has determined that variation in supply-induced demand is not a major driver in regional variation in health care costs once one controls for health status at the beneficiary level.  Read more to find out how the authors came to this conclusion.

    Read the rest of this entry »

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    Health Care Spending Distribution in 2008

    July 14, 2010 in HC Statistics | 1 comment

    National Health Expenditures reached $2.3 trillion, or $7,681 per person. This means that health care services made up 16.2% of the economy. Where did these dollars go? The CBO summarizes where America spends these funds.

    Source: CBO Long Term Budget Outlook, June 2010.

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    Does spending improve outcomes?

    March 12, 2010 in P4P, Public Policy, Quality | No comments

    From a paper by Weinstein and Skinner (NEJM 2010):

    “Moreover, there is considerable variation in health care expenditures and a weak or even negative association between spending and outcomes, such as mortality at the regional level and quality measures at the state level. This evidence has been interpreted to mean that cutting back on these putatively useless or harmful services would simultaneously reduce cost and improve health. In contrast, several cross-sectional studies that have shown positive associations between spending and outcomes have been interpreted to show that more spending leads to better outcomes.”

    “A recent study using chart-review data from the 1994–1995 Cooperative Cardiovascular Project categorized “…hospitals as either high-adopting facilities or low-adopting facilities, according to their rates of use of aspirin, beta-blockers, and coronary reperfusion in the treatment of acute myocardial infarction. The researchers found that the high-adopting hospitals had consistently better rates of risk-adjusted survival, at no additional cost to Medicare. But after stratification according to the hospitals’ adoption rates, there was a positive but diminishing effect of spending on the health outcome (12-month survival)…The cost-effectiveness ratios at the margin were $95,000 per life-year or more but with slightly better returns for the hospitals that were slower to adopt cost-effective practices…”

    “Another study showed that regions that had high rates of revascularization for patients with acute myocardial infarction received good health value for the expenditure on the intervention.  Despite this, there was essentially a zero association between spending and outcomes across regions. The explanation is that the high-revascularization areas were also less likely to use beta-blockers and aspirin for their patients.”

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    Health Care Spending

    February 11, 2009 in HC Statistics, International Health Care Systems | 2 comments

    The California HealthCare Foundation has a great document summarizing many useful Health Care Cost Statistics (see full text or fact sheet).  Some of the highlights:

    • Health Care spending as a percentage of GDP is projected to grow 16.0% of GDP in 2006 to 19.5% of GDP in 2017.
    • Average health care spending per capita was $7026 in 2006 and will grow to $7868 in 2008.
    • In 1962, Defense spending made up half of the federal budget, Social Security about 15% and Medicare had not yet been enacted.  By 2007, Defense spending is only 20% of the budget while Social Security makes up 21% and Medicare 16% and rising.
    • The U.S. has by far the highest health care spending as a percentage of GDP.  This table compares health care spending across different countries.
    • Hospitalization and Physician Services make up over 50% of health care spending.  This table gives the distribution of health care spending in the U.S. by type of service.
    • What are the drivers of the cost increases?  Price inflation and a change in the volume and mix of services provided.

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    High spending regions do not have better quality health care

    January 14, 2009 in Supply of Medical Services | 1 comment

    From the researchers at the Dartmouth Atlas of Health Care:

    “Regional differences in Medicare spending are largely explained by the more inpatient-based and specialist-oriented pattern of practice observed in high-spending regions. Neither quality of care nor access to care appear to be better for Medicare enrollees in higher-spending regions.”

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