Is health care expenditure susceptible to health policy?

1. Is health care expenditure susceptible to health policy? An econometric evaluation of determinants of Austrian health care expenditure Maria M. Hofmarcher, M. Riedel, G. Röhrling Institute for Advanced Studies - Vienna, IHS HealthEcon

2. Overview • What do cross country estimations tell us about the determinants of health care expenditure in the past? • What do single country studies add? • How can we translate this into forecasts for health care expenditure? IHS HealthEcon

3. Driving Forces for Health Expenditure in the Past – Methods Used • Cross-section studies – first generation • Bivariate regressions • Multivariate regressions • Cross-section studies – 2nd generation • Panel-data analyses • Single-country studies IHS HealthEcon

4. Driving Forces - Results from the Past • Is health care a luxury good? • Demographic variables • Ageing, death costs, morbidity, education… • Institutional variables • Supply side factors • Doctors, beds • Price measurement IHS HealthEcon

5. What did we learn for forecasts of health expenditure? • Demographic component might gain importance – see population forecasts IHS HealthEcon

6. Today, we have one youth for each person older than 65... ...but in 2030, we will have almost two elderly for each youth. IHS HealthEcon

7. What did we learn for forecasts of health expenditure? • Demographic component might gain importance – see population forecasts • Are simple forecasts exaggerated by ‚Death Costs‘? IHS HealthEcon

8. Death costs do not change expenditure forecasts too much... IHS HealthEcon

9. What did we learn for forecasts of health expenditure? • Demographic component might gain importance – see population forecasts • Are simple forecasts exaggerated by ‚Death Costs‘? – yes, but not too much • Does compression of morbidity ease the burden? IHS HealthEcon

10. Compression of morbidity(Very) good health status according to age groups in percent, Austria Source: Doblhammer, Kytir 2001 women men IHS HealthEcon

11. What did we learn for forecasts of health expenditure? • Demographic component might gain importance – see population forecasts • ‚Death Costs‘ exaggerate somewhat • Does compression of morbidity ease the burden? – probably yes • Partly by increased education levels? IHS HealthEcon

12. Education and health • Many studies observe better health in better educated population groups • Causality unclear: • better use of health resources (Grossman 1972) • Unobserved causes for both, health and education (Fuchs 1982) • Incorporation into forecasts is scarce, but suggests beneficial effect IHS HealthEcon

13. What did we learn for forecasts of health expenditure? • Demographic component might gain importance – see population forecasts • ‚Death Costs‘ exaggerate somewhat • Compression of morbidity probably eases the burden • Partly by increased education levels • Macroeconomic framework IHS HealthEcon

14. Macroeconomic framework • Demography related • Participation rates • Unemployment • Productivity • Overall economy • Health sector IHS HealthEcon

15. What did we learn for forecasts of health expenditure? • Demographic component might gain importance – see population forecasts • ‚Death Costs‘ exaggerate somewhat • Compression of morbidity probably eases the burden • Increased education levels as well • Macroeconomic framework • Technical Progress – next session IHS HealthEcon

16. Part II: • What do cross country estimations tell us about the determinants of health care expenditure in the past? • What do single country studies add? • How can we translate this into forecasts for health care expenditure in Austria? IHS HealthEcon

17. Our approach • Time series model: 1960 to 2000 • Endogenous: growth rate of total per-capita health expenditure, in constant 1995 prices. IHS HealthEcon

18. Determinants of Austrian Health Care Expenditure • Demand factors • An increasing share of people 65+ increases health expenditure noticeably. • A higher number of deaths increases health expenditure slightly. • An increasing life expectancy of the elderly is reducing health expenditure (compression of morbidity). • Supply and Policy factors • An increase in the number of radiologists increases health expenditure somewhat (supplier induced demand). • The rise in acute-care beds leads also to rising health care expenditure. • A high level of health expenditure leads to lower growth rates of health expenditure. IHS HealthEcon

19. „Resistant policy“ leads to a noticeably higher GDP share spent on health Forecast of health care expenditure in percent of GDP, 2000 to 2020 Source: IHS HealthEcon 2002 IHS HealthEcon

20. How do/did each supply and demand factor contribute to expenditure growth?Scenario „neutral“, growth rates in percent IHS HealthEcon 2002 IHS HealthEcon

21. ... and finally We demand more efforts on the theory of the macroeconomic analysis of health expenditure, which is underdeveloped at least relative to the macroeconometrics of health expenditure Gerdtham / Jönsson: International Comparisons of Health Expenditure, Handbook of Health Economics 2000 IHS HealthEcon

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24. Age or Death related costs? • Health expenditure for persons in their last year of life • USA: 20-30% (Scitovsky, Capron 1986) • UK: 29% of hospital costs (Seshamani, Gray 2003) • A: 10-18% of public hospital costs (Riedel et al 2002) IHS HealthEcon

25. Pros and Cons for futurecompression of health expenditure • PRO: Increasing life expectancy also in high LE (= rich) countries and high LE population groups (Wilkinson 1996) • CON: We do not observe any tendency that the prevalence of highly resource consuming diseases like Dementia and Alzheimer declines like prevalence of ‚physical‘ diseases (Wancata et al 2001) • CON: pop share of disabled increasing recently • Upshot: Better health could reduce growth of acute expenditure to 2/3 of the unadjusted growth rates. IHS HealthEcon

26. Education reduces bad health Population share in less-than-good-health Source: Joung et al (2000) IHS HealthEcon

27. Scenarios Acute care bed densities Radiologist densities Neutral decreases as observed between 1960 and 2000 increases as observed between 1990 and 2000 Resistant constant on level of 2000 increases twice as fast as observed between 1990 and 2000 Pro-gressive decreases more quickly than before and levels off in 2020 increases slower than in the past Policy Scenarios for 2000-2020 Source: IHS HealthEcon 2002 IHS HealthEcon

28. Future research questions • To which extent do relative prices influence health expenditure development? • How do various productivity assumptions translate into expenditure growth? • Is the compression of morbidity sufficiently strong to counterbalance the rising share of the elderly? IHS HealthEcon

29. Ergebnisse der Zeitreihenanalyse: Parameterschätzungen (t-Werte) für die WR gesamten Gesundheitsausgaben IHS HealthEcon 2002 IHS HealthEcon