Questions Policy Makers Are Failing to Ask About Healthcare Costs

1. Questions Policy Makers Are Failing to Ask About Healthcare Costs Health Policy Seminar on Sunday, April 19th, 2009Washington, D.C. Shannon Brownlee Visiting Scholar, NIH Clinical Center Dept. of Bioethics Schwartz Senior Fellow, New America Foundation Overtreated: Why Too Much Medicine is Making Us Sicker and Poorer

2. DISCLAIMER These views are mine alone, not the NIH’s No financial conflicts of interest

3. Answers we already have Covering everybody is the right thing to do. Rising healthcare costs hurt the economy. We getting poor value for the dollar.

4. Poor Value for the Dollar Source: WHO

7. Source: CBO

8. Source: CBO

9. Busting state budgets

10. Unasked Questions Why do spending and quality vary so much in different parts of the country? Why don’t we get better outcomes where we spend more? Can looking at variation help us improve quality and outcomes without spending even more?

11. Medicare Spending per Beneficiary, 2005 $8,600 – 14,300 $7,800 – 8,600 $7,200 – 7,800 $6,600 – 7,200 $5,280 – 6,600 Not populated $8,600 – 14,300 $7,800 – 8,600 $7,200 – 7,800 $6,600 – 7,200 $5,280 – 6,600 Not populated Source: Dartmouth Atlas

12. The Three Categories of Care That Show Unwarranted Variation in the U.S. Effective Care: Evidence-based care that all with need should receive Preference-Sensitive Care: Elective procedures and tests whose use should depend upon the patient’s choice Supply-Sensitive Care: Discretionary hospitalizations, visits, and procedures

13. Proportion of Medicare Spending Attributed to Each Category of Unwarranted Variation Effective Care Supply Sensitive Care Preference Sensitive Care Source: John E. Wennberg and Dartmouth Atlas

14. DARTMOUTH DATA Wennberg has conducted pioneering research on variation in the delivery of healthcare services. Named the most influential health policy researcher of the past 25 years by Health Affairs in 2007 John Wennberg, MD, MPH., Founder, Center for Evaluative Clinical Sciences at Dartmouth Medical School

15. Medicare Spending per Beneficiary, 2005 $8,600 – 14,300 $7,800 – 8,600 $7,200 – 7,800 $6,600 – 7,200 $5,280 – 6,600 Not populated $8,600 – 14,300 $7,800 – 8,600 $7,200 – 7,800 $6,600 – 7,200 $5,280 – 6,600 Not populated Source: Dartmouth Atlas

16. “Our patients are sicker.”

17. Relationship Between Prevalence of Severe Chronic Illness and Medicare Parts A and B Reimbursements per Enrollee (2000-01) Source: 2006 Dartmouth Atlas Note: Each dot represents Medicare spending in a single hospital referral region.

18. UTILIZATION DRIVES SPENDING

19. WHAT DRIVES UTILIZATION?

21. WHAT DRIVES over- UTILIZATION? Defensive medicine -- 15 % of variation Patient demand Tech arms race Local practice patterns LOCAL CAPACITY

22. The Association Between Hospital Beds per 1,000 Residents (1996) and Discharges per 1,000 Medicare Enrollees (1995-96)

23. The Association Between the Supply of Cardiologists per 100,000 Residents and Visits to Cardiologists per 1,000 Medicare Enrollees (1996)

24. IS MORE CARE BETTER? In other words: Do higher spending (and higher utilization) buy better outcomes?

26. The Paradox of Plenty: More Spending Buys Worse Care Lower quality More hospitalizations, tests, drugs, procedures; same volume of elective surgery Worse communication between physicians Worse coordination of care Worse access to care; longer waiting times Lower patient satisfaction Higher mortality Source: 2008 Dartmouth Atlas of Chronic Care

27. Fisher et al (2003) Annals of Int. Med. Vol. 138 no. 4

29. Supply-Sensitive Care The frequency of use is governed by the assumption that resources should be fully utilized, i.e. that more is better Specific medical theories and medical evidence play little role in governing frequency of use In the absence of evidence and under the assumption that more is better, available supply governs frequency of use

30. Annual Growth Rates of per Capita Medicare Spending in Five U.S. Hospital-Referral Regions, 1992-2006 Fisher E et al. N Engl J Med 2009;360:849-852

31. IMPLICATIONS THE BAD $600 – 800 billion of unnecessary and potentially harmful care THE GOOD $600 B on useless care -- We can cut costs without rationing.

32. Grab-bag Solutions Being Proposed $19 Billion in health IT Comparative effectiveness research Slash Medicare Advantage Bundled payment for surgical procedures Pay four Performance: Non-payment for never events Non-payment for rehospitalization Bonus for evidence based care Outcomes reporting

33. Why they aren’t sufficient $19 BILLION to automate bad practices -- sand down a rat hole Comparative effectiveness research is too narrow and too slow to make a dent in supply sensitive spending (62 % of Medicare) Bundled payments equal price control Non-payment leads to gaming the rules Medicare advantage could be helping

34. Sucking Sound of $$ going from low spending to high spending regions $8,600 – 14,300 $7,800 – 8,600 $7,200 – 7,800 $6,600 – 7,200 $5,280 – 6,600 Not populated $8,600 – 14,300 $7,800 – 8,600 $7,200 – 7,800 $6,600 – 7,200 $5,280 – 6,600 Not populated Source: Dartmouth Atlas

35. Solutions MEDICARE Contain payments to high-spending hospitals Do NOT increase physician workforce Encourage more primary care

36. Solutions EMPLOYERS HSAs that encourage primary care Give employees benefit of choosing cheaper options like Kaiser Encourage EFFICIENT organized group practices (like Kaiser) Offer Patient Decision Aids

37. The Most Important Question of All HOW DO WE RE-DESIGN THE DELIVERY SYSTEM? (It’s the delivery system, stupid)

38. THE HEALTH CARE TRAIN WRECK