Healthcare EconomicsIs it all just dollars and cents?

19 April 2009

James S Eadie MD, FACEPCo-Chair, ACEP FGA CommitteeGSACEP, Immediate Past PresidentAcademic Faculty, Wilford Hall Medical Center,San Antonio, Texas

Overview

1. How much does the US spend on health care?

2. Where do the dollars go?

3. How fast are the costs growing?

4. What can be done to contain the costs?

5. Is the system really at a “crisis”?

Economics…..ouch

Why do we need to study economics?

I’d rather be herding cats….

Health Care Economics 101 Quiz

• How much did the US pay for health

care in 2007?

• What is the % GDP spent on health

care?

• What are the most expensive parts of

the health care system?

Health Care Spending – 2007

• >$2.2 Trillion dollars

• 16.2% of GDP, Switzerland next highest 11.4%

• $7,421 per living person

• Spending rose 6.1% (inflation 4.1%)

“Spending is driven by new medical treatments, rising prices and growing utilization.”

Smith et al. Health Affairs Jan 2006

US Healthcare = French Economy

Percent Health Care of GDP 2006

data from WHO http://www.who.int/en/

Expenditures per Capita 2006

data from WHO http://www.who.int/en/

Per Capita Health Spending in 2006

Source: McKinsey Global Institute and NEJM 2009

WHO Health Care Rankings

1. France

18. England

25. Germany

30. Canada

36. Costa Rica

37. United States

38. Slovenia

Health Comparisons

Health Care Spending - 2006

Hospital Care

– 31% of total health care expenditures

– $648.2 billion

Physician Payment

– 21% of total health care expenditures

– $447.6 billion

– Growth from inc. office visits and imaging

Health Care Spending - 2006

Prescription drugs– 10% of total expenditures

– Total: $216.7 billion *

• greater than nursing homes and home health care combined ($177.6 billion)

Health Insurance Admin Costs (private + Gov)

- $204.1 billion

Health Care Spending - 2006

Medicare– $401.3 billion

– 19% of national health expenditures

– Revenue

• 65% from payroll taxes and premiums

• 35% from general taxes

–Key: this competes with Gov. spending

Health Care Spending - 2006

Medicaid– $310.6 billion

– 15% of national health expenditures

– > 20% state budgets

SCHIP – $ 8 billion

Federal Government pays over 46% Health care bills

Federal Budget 2008

Federal Budget 2008 2.979 Trillion dollars

Social Security 612 billon

Medicare/Medicaid 682 billion

Defense 613 billion

Education 59 billion

Debt Interest 249 billion

Federal Spending FY 2008

Source: Congressional Budget Office

US Federal Spending

Federal Receipts – FY 2008

Source: Congressional Budget Office

Projected Growth

• Health Care Projected Growth Rates– 6.2% annually through 2018

– 16.2% GDP2007 to 20.3% GDP2018

• Public Payers– 2016 – will be largest source of funding

– 2018 – over half of all health care spending

• Why? – Baby Boomers – 76 M

Projected Growth

Health Care Reform – Is it Possible?

Health Care Timeline

1930s – 70sPhysicians /AMA Strong

Pre-1880Physicians limited

authority

Progressive Era1910 - 17

1880 – 1920 Industrial Revolution

Rise in prestige

1980s - PresentCorporations

Competing InterestsLoss of Political Influence

Germany1883

Social Security1935 Clinton

1994

Rapid Health Care Growth 1950s-70s

Medicare1965

Nixon1970s

Truman Plan1945

MedicareDrug Bill

2003

Health Care Reform Issues

• Uninsured and Underinsured

• Quality Initiatives

• Patient Centered Medical Home

• Health IT

• Physician Pay Reform

• Medical Liability

Health Care Costs

How Do You Share The Resources?

How Do You Slice The Pie?

• Who’s going to take the smaller piece? – Physicians?

– Hospitals?

– Drug Companies?

– Trial Lawyers?

Emergency Medicine’s Slice of Pie

• 119.2 million ED visits 2006

• $ 37.5 billion on emergency care– Only 1.8% of all health care expenditures

• Emergency Medicine is a small fish

• Fixing the “over-utilization” of emergency departments will NOT fix the problem

1 in 10 Jobs in US is Health Care Related

Are we in Crisis?

“US health care costs have been in “crisis” for roughly 40 years” Brown, NEJM 24 Jan 08

Imminent Collapse rests on 3 indicators

1. There are 47M uninsured – we must have universal coverage

2. Health care costs are extraordinarily high

3. US system is in fact not a system, but incoherent hodge-podge

Are we in Crisis?

1. The Safety Net for the Uninsured

• Community Health Centers

• Emergency Departments

• Public and voluntary hospitals

– Funds come from donations, Medicaid, grants, etc. “11th hour infusion of money”

– President Bush told everyone that they can always go to the emergency room

Are we in Crisis?

2. Health Care Costs are High

• Costs have been skyrocketing since 1965 when Medicare/Medicaid were signed into law

• US system has pushed technology

• Research hospitals, drugs, medicines

• Public health fell to the side

Are we in Crisis?

3. The non-system of US health care will ultimately drive reform

– Clearly deep interest on all parties to bring together the fragmented system, BUT:

– Business, insurance, and providers have different priorities, but all agree:• Big Government is NOT the answer

• Costs of reform should not fall on them

• Their agenda takes precedence

Law of Reform

“There is nothing more difficult to manage, more dubious of success… than to initiate a new order of things. The reformer has enemies in all those who profit from the old order and only lukewarm defenders in all those who would profit from the new order.”

Machiavelli 1513

What Glasses Are You Looking Through?

Every System is Perfectly Designed To

Produce The Results It Produces

Don Berwick, MD

The Institute for Healthcare Improvement

Here we go again….

1917, 1935, 1948, 1965, 1970, 1994

2009