Labor Markets and Cost- Growth in Healthcare. Amitabh Chandra HARVARD UNIVERSITY

Transcription

1 Labor Markets and Cost- Growth in Healthcare Amitabh Chandra HARVARD UNIVERSITY

2 Houston...we have a problem... Think of the United States government as a gigantic insurance company with a sideline business in national defense This particular insurance company has made promises to its policy holders that have a current value $20 trillion in excess of the revenues that it expects to receive.. It is an accident waiting to happen. Peter Fisher Undersecretary of the Treasury November 2002 Two thirds of the shortfall is due to federal health care programs

3 Sources of Medicare Cost Growth Since 1970 (Percentage of gross domestic product) Per Capita Growth in Excess of GDP Growth 1.0 Effects of Aging Population Source: Congressional Budget Office. Note: In 1970 (the base year for this figure), Medicare spending was 0.7 percent of GDP. Social Security is Grenada. Medicare is Vietnam. On average...it was worth it!

4 Health care cannot continually absorb more and more, unless it dramatically increases value.

5 What Happens in Medicare happens in the non-medicare Population

6 Percent of GDP Spent on Healthcare 16 Percent of GDP Spent on Healthcare Canada France Germany Japan United Kingdom United States Data for Germany refer to West Germany. Data for 2005 are estimates based on actual expenditures through 2004.

7 Cost-Growth in Healthcare Is more spending associated with productivity growth? What are the implications for labor markets? What are reform options?

8 Money matters in health care as it does in few other industries. Where we have spent a lot, we have received a lot in return + =

9 Exhibit A: One-Year Survival Following Heart Attack (AMI), Red Line: From Cutler and McClellan Percent Surviving After One Year

10 Modest Growth in AMI Expenditures

11 But Since the mid 1990s Red Line: From Cutler and McClellan Yellow Line: Skinner et al (2006) Percent Surviving After One Year

12 While Costs Have Continued to Climb

13 Use of Intensive Treatments after AMI Fraction of AMI Patients Receiving Intervention During First 30-days after AMI Cardiac Cath PCI PCI with Stent CABG

14 Some economics of heart-attack treatments Over , we paid $12,000 per life year. Over , we paid $21,000 per life year. Over , we paid $300,000 per life year. Implication: On average, it was worth it but marginal increases in intensity haven t done much.

15 Do we see the same patterns in the cross-section?

16 Construction of 306 Hospital Referral Regions (HRRs)

17 Construction of Hospital Referral Regions

18 Per Capita Medicare Expenditures By Hospital Referral Region (HRR): 2006 $7,000 to 11,352 (63) 6,500 to < 7,000 (53) 6,000 to < 6,500 (56) 5,500 to < 6,000 (64) 4,272 to < 5,500 (70) Not Populated

19 20 Year Difference in Medicare Expenditures: Los Angeles Vs. Minneapolis Ferrari Scaglietti: US $230,000

20 Regions with the most growth in expenditures were NOT more likely to experience improved survival Source: Skinner, Staiger and Fisher (2006)

21 Medicare Spending and the Quality of Care Source: Baicker and Chandra (2004)

22 In both the time-series and crosssection, more spending doesn t necessarily buy better outcomes. What does it buy?

23 The Annals of Internal Medicine Papers Large disparities in spending across U.S. regions Longstanding -- first noted in early 1970s Not due to differences in price or illness Largely due to differences in quantity of discretionary medicine.

24 Where does the money go? Spending on physician services by type of service Ratio of Quintile 5 to Quintile 1 in Each Category Evaluation & Management Diagnostic Tests Imaging Minor Procedures 1.45 Major Procedures 1.05

25 Cost-Growth in Healthcare Is more spending associated with productivity growth? What are the implications for labor markets? What are reform options?

26 What treatments improved survival after AMI ( )? Aspirin Beta Blocker Thrombolytics ACE Inhibitors Primary Angio. Attributed Causes of 30-Day Survival Gains Following Heart Attacks (Source: Heidenrich and McClellan, 2001)

27 Factors Accounting for Overall Decline in Cardiovascular Deaths: Intervention Good Behavior (Drop in smoking, blood pressure, cholesterol, inactivity) Number of Deaths Avoided/ Postponed 209,000 (61%) Bad Behavior (Rise in obesity, diabetes) -59,370 (-17%) Aspirin & beta blockers 46,920 (14%) Anti-Hypertension drugs 23,842 (7%) Statins, ACE inhibitors, thrombolytics 44,870 (13%) Angioplasty / stents / bypass 25,630 (7%) SOURCE: EARL FORD, ET. AL., N ENGL J MED, JUNE 7, 2007

28 Cost-Growth in Healthcare Is more spending associated with productivity growth? What are the implications for labor markets? What are reform options?

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31 Massachusetts Reform has an employer mandate that may increase job-loss for low-wage workers 16 million FT uninsured; 5 m are within $3 of the minimum wage

32 Employment Losses from Employer Health Insurance Mandates Source: Baicker and Levy (2007, NBER WP 13528)

33 Uneven geographic variation in cost-growth means uneven labor market effects

34 Uneven geographic variation in cost-growth means uneven labor market effects

35 Cost-Growth in Healthcare Is more spending associated with productivity growth? What are the implications for labor markets? What are reform options? Insuring the uninsured Prevention Cost-effectiveness analysis Patient Cost Sharing

36 Baicker and Chandra, Health Affairs October 2008

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39 Patients were randomly assigned to: (a) arthroscopy with debridement (b) arthroscopic lavage (c) placebo procedure on the knee. Measured pain and physical function over a 24-month period.

40 This is naive. Most services that are responsible for cost growth do not lend themselves to trials or evaluation.

41 Growth of hospital services isn t what s driving costs Per Capita Spending on Medicare Part A, by type of service

42 It s growth in services whose value is hard to measure Per Capita Spending on Medicare Part B, by type of service

43 Pathology Marginal increases in spending have not generated commensurate therapeutic improvements. Reimbursement policy encourages the adoption of technologies that can be used on everyone without creating harm. Coverage decisions by Medicare for these technologies spills-over into private HI.

44 Prognosis Insuring the uninsured, greater prevention, comparativeeffectiveness analysis and patient cost-sharing will not restrain the growth of medical spending. Cost-growth in healthcare will increase taxes, reduce wages, and increase use of part-time workers. Genuine reform involves: (1) insurance market reform (2) reimbursing on the basis of value and outcomes.