Making Care More Efficient: Promising Innovations and Policy Options

1. Making Care More Efficient: Promising Innovations and Policy Options Karen Davis President The Commonwealth Fund Bipartisan Health Policy Conference Miami, FL January 12-14, 2007

2. EFFICIENCY International Comparison of Spending on Health, 1980–2004 Average spending on healthper capita ($US PPP) Total expenditures on healthas percent of GDP Data: OECD Health Data 2005 and 2006. Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2006 2

3. Health Expenditure Growth 2000–2005for Selected Categories of Expenditures Average annual percent growth in health expenditures Source: A. Catlin et al., “National Health Spending in 2005: The Slowdown Continues,” Health Affairs, Jan./Feb. 2007 26(1):142-153.

4. EFFICIENCY Percentage of National Health Expenditures Spent on Health Administration and Insurance, 2003 Net costs of health administration and health insurance as percent of national health expenditures * c a b a 2002 b 1999 c 2001 * Includes claims administration, underwriting, marketing, profits, and other administrative costs; based on premiums minus claims expenses for private insurance. Data: OECD Health Data 2005. Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2006

5. Growth in National Health Expenditures (NHE) Under Various Scenarios NHE, in trillions of dollars Cumulative savings projections, 2007–2015: One-time savings: $1.31 trillion Slowing trend: $1.39 trillion $4.037 T $3.849 T $3.710 T $2.016 trillion in 2005 Source: Based on Borger et al., “Health Spending Projections Through 2015: Changes on the Horizon,” Health Affairs Web Exclusive, February 22, 2006.

6. Strategies for Achieving a More Efficient Health System • Increasing the effectiveness of markets • Better information on provider quality, prices and total costs for episode of care • Better information on the cost-effectiveness of health care technology and procedures • Providing payment incentives to promote efficient and effective care • Changing the health care system to promote patient-centered primary care • Investing in infrastructure such as health information technology and information exchange systems and technical assistance for quality and efficiency improvement • Reducing insurance administrative overhead and achieving more competitive prices • Investing strategically to improve access, affordability, and equity