HCMG Midterm

Steps to identify CEA

1. identify who is paying because depending on who is paying they may value different things 2. identify alternatives so like competition etc 3. measure relative cost in $ 4. measure health outcome in relative units 5. discount accordingly 6. calculate the ratio (cost/outcome) 7. sensitivity analysis of how certain you are 8. report results with caveats and comments

2 reasons why it was important hospitals had more indepedence post thatcher

1. staffing! able to decide how much budget to allocate and the people to hire, makes it hard to run an organization if you cant control the staff 2. financial! before the government decided the annual budget but now they were incentivized to do better because the money follows the patient also the physicians were incentivized to organize into general practictior groups because paid in capitation for patients so they were the ones deciding where to send the patients and whatever leftover money they got to keep so incentivized to be cost conscious

Post thatcher switch to contractors for hospitals when privatize

50% switch to contractors which are basically just managed care vibe makes it feel more competitive

Flaws of CEA- static prices

CEA considers prices as set but they change all the time as new patents come out, etc prices generally are moving downward because generics

Price Discrimination

Different prices for different people External inhibit external referencing because set - when you have price discrimination you extend the market but cant do this in external because its a set price Monopoly distorts price discrimination because they can set the price to whatever they want

US Main health insurance

ESHI companies that provide health insurance, exchanges, medicare and medicaid

Blair: Pharmaceutical Prescribing Incentives and Controls

GPs have prescribing budgets based on number of patients thats more of a reference but definitely trying to save money because then able to reallocate the saved money elsewhere some PCT will you formularies for discounts

Medicare and Medicaid in short

Medicare is heavily subsidized by the federal government, for people 65+ with different parts medicaid is subsidized by federal and state, low income used to be more specific but its since been expanded to cover 138% below poverty line

Countries with dedicated cost effectiveness analysis institutions

UK - NICE canada, australia, france, germany

Market share of colon cancer regimens example

UK has relatively equal market shares of lower life extending drugs while US has more different and smaller firms that have longer life extending drugs why? in the UK the gov picks for you and so they probably dont want to pay for so many different types/more expensive ones for only margin more life in the US able to pay for what you want and we do get marginally better cancer outcomes in the US so at least getting what you pay for but at what cost

Healthcare spending around the world - US

US is the highest spender, pxq but not a quantity issue rather much higher prices in the US

Generic Pricing in US

US pays lower then any other country for generics! more competition because lower barrier to entry, also low profits because if you try to make too much profit then others will come in to take them away but for the first 6 months you have a monopoly biqeuivalency - when you have an innovative drug people get used to it and hard to have them switch over to the generic so need to convince them its worth it, then the market becomes homeogenous market for generics is pharmacy driven so pharmacist will substitute generic if possible

Issues with medicare and people picking plans well

adverse selection! if people are choosing wisely you end up with self selection

US health care insurance origin

after WW inflation so had to fix prices, what attracted people with benefits like health insurance some of the benefit you got was wages and some you get as money in the health insurance more demand side controls, using copays/deductibles/premiums to have people

Reclassification Risk - Issues Community Rating solved

always run the risk with someone within the pool becomes sicker by chance and this would happen to some people randomly but now community rating protects that person from their premiums increases and then now insurance fixes this by changing and reclassifying their pools year to year

How do countries deal with these issues in people being unhappy with their healthcare? - background on issues countries face

answer is it depends because all countries are different some are more rural like rwanda and need to use drones and tertiary hospitals some are more elderly like Japan and need to deal with end of life care also burden of disease is very different

Flaws of CEA- option values

are we missing a benefit or could a new one come out in 2 years that we dont know about

ACA with community rating being unstable

because its unstable and you dont want to unhealthy people to drop out the ACA made it mandatory that people have to have health insurance and will be tax penalized if they dont -- found this unconstitutional and repealed the tax but didnt really do much because the penalty was already low ACA expanding medicaid was mostly what make people more insured also introduce some sort of risk adjustment/ compensation so the firms dont just cherry pick healthy patients with some risk adjustments like smokers to get more money --> worry that people will make their pool look sicker to get more money/upcode

How to pick medicare part D

biggest choice with medicare, a lot of people do it which is interesting and tells you that a lot of people are rational able to see whats available and what drugs you take to pick one that minimizes your cost

Blair: reducing admin costs and fewer/longer contracts

caps on management costs annual contracts were replaced by 3+ year contracts to make more stability, but reduces competition

External Referencing Pricing

come up with a list of countries relevant to the drug, compute some stat of drug within the market, and then price the new drug as an average UK does this as a supply side control pro: very simple, just a statistic con: hard to do because different countries have different markets that change the value, try to choose countries strategically, innovations make it to higher paying markets first (because you know youll get the most money), no price discrimination (because setting a price)

Internal Referencing Pricing

compare to existing drugs within your market and see what prices are pro: probably generally better because it takes efficacy into account and at least gets at value/existing value but hard because (because comparing drug A to other drugs that are here, if A is that much better then you would price it higher) con: nice is not so nice! uniform value for people who aren't uniform

Flaws of CEA- social value

does one drug make you more functional/able to return to work than another one, how do you take that into account

Trend of wages and health insurance

employee contribution has been growing larger firms offering health insurance issue because firms just keep covering more and more which raises their premiums (introduces HDHP to combat this)

Medicare how to fill in the gaps

employers can help employees that retired (this is generally decreasing over time especially with drug coverage now that there is Part D) medicaid can help low income MA for hearing aids, etc Medigap!

What statement about your health system do you most agree with?

for all countries people who want to fundamentally change is half! all criticize their health system US espically - 27% believe should be totally repealed

demand-side strategies

formularies, cost sharing, prescribing guidelines

Uninsured rate among non elderly

goes down and is now going a little up

UK main health insurance

government run system, very centralized, some market reforms and also some private insurance deals with supply side controls mostly because national system

Blair: Primary Care Trusts

groups of PCPs in the UK based in a specific geographic area, contract with specialists and hospitals, paid per capita per enrollee by gov't, take over all contracting from health authorities patients cant pick their PCT because geographic, but can pick their GP (physician) and hospital Physicians were providing care to patients so In some sense the supply, but also the demand because they got budgets to purchase care (capped on budgets in hospitals) - could buy specialists services using money that the PCT got fro the NHS —> have a situation where supply and demand (why were back to DHA)

HMOs

had a substantial presence in the market in the beginning, but steadily decreasing because very restrictive and only let you go in net work liked by healthy people because doesnt matter if you can only go in network if you dont use it that much allows PPOs and HDHPs to go on the come up because then smaller premiums which people liked

UK healthcare system post thatcher

had the demand coming from the district health authority, the general practitioners, and private patients had the supply coming from hospitals, hospital trusts, DHA run hospitals, and private hospitals so demand demand and supply are split!

Medicare program explained

harry truman was first enrolled fun fact parts of medicare in order introduced: 1.A+B but no drug coverage, medicare part A covers hospital and medicare part B covers outpatient 2. medicare part c that introduces managed care/ Medicare Advantage --> idea is that to have private groups come in under managed care will lower costs and allow competition, didnt really work how expected but did lower costs because able to cherry pick patients 3. medicare part D for pharmaceuticals

Germany with reimbursement pricing

have a specfic reference point, below RP its cheap and above they pay out of pocket because price above is reactive and below is inelastic, reimbursement price is going to be around the reference point

Health Expenditures in US

health expenditures are increasing! p and q issue different things year to year included but does seem to be increasing

Medigap

health insurance plans that help pay expenses not covered by Medicare Covers co pays, hospital days beyond 60 days, deductibles, this is all covered under medigap Used to help with part D but then when part D was introduced you couldn't have concentrated market

HDHP

high deductible healthcare plans usually offered by ESHI and are paired with a health savings account that gives you a triple tax break HSA is pretax money you put in, interest isnt taxed, and can take it out tax free (sometimes seen as unfair because rich people can buy more expensive and more generous plans) becoming more popular because if healthy low premium

Why do higher GDP countries spend more on healthcare

higher income = higher quality of life = wanting more years so enjoy invest more in their healthcare margin of utility of function increases much faster than health

Why are US prices so high - compared to europe

higher prices! less regulations, not universal providers, have market power (prices can be higher bc need to pay for R+D, etc), suppliers also have market power (monopoly on drugs) To compare, Europe national insurance w a lot of market power to negotiate price bc they have a monopsiny or one buyer

Price Changes and Quality Adjustments

hospitals are so expensive! but they arent adjusted if you see a 200% price increase does this equal a 200% quality increase?

Idea behind Community Rating

idea is that it transfers the risk and benefit by not charge one demographic more or less issues because what if rich and sick or healthy but poor

What CEA does/ how it measures

if all interventons have the same outcome then leave it at that, if not quality adjust put all the benefits and costs in money terms and makes an analysis to see the benefit what if we dont value someones life as much....

US vs Avg health expenditure and why US is growing faster

in US vs avg see that the gap between is group because US is growing faster than the average --> why? innovation! not a story really about wasteful spending but its a story about the innovation that drives the prices higher two considerations - monopoly pricing is inefficient but theres also a dynamic efficiency that allows the companies to make a profit to fund further innovation

What is health insurance?

increases access and lowers individual risk pay for the unhealthy people through everyone elses contribution premium for healthy people is cheaper because less risk because less likely to get sick, premium for sick people is higher because higher risk since more likely to get sick health insurance recognizes different risk and thus charges differently! ability to transfer risk from unhealthy to healthy people and price transferring from healthy to unhealthy

Blair Reforms solutions

integrate care!! make a national standard of care by focusing on defining measures of performance through benchmarks (although this created distortions as physicians started to get good at hitting what their measuring and forgetting about everything else) red tape - idea that they want to save money on regulations/administration and spend it on patients

Issues with Health Insurance (pre existing conditions) pre ACA --> adverse selection in action

issue of pre existing conditions - used to put everyone in a pool and make them pay the same (even sick and healthy!) this makes price increase because unhealthy people are expensive, but then the healthy people drop out since expensive and then have to charge sick people more and more... eventually the pool collapses when its just unhealthy people so what do countries do... community rating! (price discrimination)

60s health insurance expansion

issue of what happens when you expand - medicare and medicaid! allows poor people and old people to be covered

Flaws of CEA- measuring value

issues of value for whom? everyone values different things! not one uniform rule! heterogeneity matters!

Flaws of CEA- price control issues

know what you need to charge for a drug to be cost effective because you know the price that you need to set patents confound this and cause it to be not so cost effective when theres a monopoly

Common arguments for why people cant pick medicare plans and why theyre not true

lack consumer skills, too many choices is immobilizing, decision making process is hard for older people not true!!! role of children/advisors plays a larger part, people listen to caregivers that give them advice and help them navigate the market

Gap is medicare

long term care! medicaid covers nursing homes but that means u need to be poor children maybe pay/help out for their parents long term care which is an explanation for why medicare didnt include it other gaps: premium for high income can be really high, high cost sharing can also make it rough, donut hole in part D coverage

Medicare - can people navigate the market?

look at when it was introduced in 2006 to 2007, see in 2006 a lot of people in the center paying a lot out of pocket and then in 2007 learn and shift left because people realizing they are paying a lot out of pocket clearly yes they can navigate the market!! and when they switch theyre switching to a cheaper plan closer to the negative cost and learn how to pick a plan that minimizes costs for them!

Medicaid in long

low income people, funded by fed gov and states main gap of medicare that medicaid covers is long term care states decided whether they want to expand more generous coverage and incentivized with federal government with covering all of medicaid for the first year and slowly decreasing coverage

Blair: NHS Connecting for health

make an intranet to connect all hospitals and physician offices make electronic medical records, in centralized system just a uniform system and if more fragmented can make a flashdrive for the patient to bring to their appointments making e prescribing

Generics Pricing other countries

market driven by physicians so whatever they write goes, end up with branded companies lobbying to physicians to use their "branded generic" UK pharmacy driven market Chile also physician driven market so more competitive generic/branded generic market (also no measure of bioequivalency)

Thatcher Reforms

market oriented reforms that moved the hospitals toward privatization importantly put a break in the paying and the providing within the NHS system (with the district health authority), idea that money follows the patient so now hospitals only get paid for the care they provide and not the annual historic budget hospitals were not run more independently with trusts and managed by physicians so they could have more independence and became supply DHA is now just demand because paying for hospitals/physicians

Adverse Selection

misinformation issue, insurance doesnt price their insurance correctly causing the healthy individuals to drop out so now the pool is jsut sick people

UK health insurance original layout

nationalized health, contributions from tax payer tax payer/the patient pays the government which pays district health authorities who pay the hospitals and physicians --> called a beveridge health system NHS is competing for funding with other public programs forumlaries that decide which drugs are CEA to give

Why ESHI is so good

no adverse selection! relativity asymmetric pool because its working people

UK health insurance original main issue

original issue is can we afford it, a lot of resources to provide it free for everyone made it so there were really long wait times! and it was very inefficient the district health authority was the supply (because running the hospital) and demand (because paying the hospital) also issue because the budget was an annual budget based on years previously so not incentivizing outcomes, not every patient has the same cost so there is no incentive to provide more costly procedures since they dont add revenue

Medicare Parts funding

part A - what comes out of pay slips part B - general taxes part C- managed care, what you pay for part D- combo of general revenue and premiums

Medicare parts what you pay

part A: usually nothing, if you worked 40 quaters which most people have then no premium, automatic enrollment part B and D: premium varies by income

Payers are interested in value, but how do they measure it?

payers obviously have limited budgets so choice have to be made between what we chose no one wants to compromise so in the UK move to cost effective analysis measures to maximize health gain from the budget (cost/outcome) in the US moving toward value and VBID but its just the inverse (outcomes/cost) so same flaws each are incomplete, when you measure cost you lost value and when you measure value you lose cost

Blair: NHS Direct

people are able to call in, expensive to run but people like to feel more connected/ have help 24/7

Blair: Hospitals - per case payment, increased autonomy, and foundation trust

per case payments are similar to DRGs in the US so makes them be more cost conscious because getting an amount of money based on national best practice or avg cost foundational trust that allows hospitals to have more financial autonomy

Pros and cons of thatcher

personnel - people in hospitals hired and fired with a large change across categories, so like a large increase people hired like nurses/doctors and a large decrease in cleaning people (it got outsourced) output- increased! large increase meaning hospitals were providing more care! waiting times- large reduction! people started to get care faster drug spending - decreased! incentives to provide care at lower costs for GP fundholders because money left over they could reinvest, so prescribed generics! increasingly becoming pharmacy driven

Life expectancy as a poor measure of spending

premature babies survive in US bc we have a very intensive medical system and we try really hard to save people also behaviors like obesity, drug abuse, etc thats unrealted to healthcare that healthcare tries to fix but really hard to change habits better to look at the opportunity cost!

Chile hospital system

previously no incentive from doctors to provide care and a lot of idle capacity in hospitals, doctors switch from working in the public hospitals during the day to working in the private hospitals in the afternoon switched so now money follows the patient (similar to UK) so now hospitals want to hire specialists that will pay them similar rates to private

Price Indices

price index is the area under the curve and represents the avg willingness to pay for healthcare, so when drugs increase price you would expect it to give you more so quality adjusting does matter heterogeneity matters so the line of the price index changes based on the perceived benefit of the drug -- if your really sick then going to have a lower price index because your sicker and so any drug to give you more life is more valuable, if ur healthier then the price index is going to be higher because it gives you less value

Flaws of CEA- are patients helped or hurt?

price of health is decreased when a new drug is discovered because the price goes from priceless to a finite number also the idea that the money made is going to make new innovations to help future patients

Price of health vs price of healthcare

price of health is infinite! being healthy cant have a price thus as new things are discovered the price of health is constantly decreasing because as a cure is found thats better than dying but price of healthcare is increasing as tech and new innovation drives prices higher

supply-side strategies

price regulation, reimbursement limits, CEA, internal/external referencing pricing mostly UK

Blair reform vision: cooperation replaces competition

primary care trusts (centralized powers that purchase care in geographic areas) replace the GP fundholding --> sounding like DHA fewer and longer contracts and caps on administrative spending to put money back into the patient implement a pay for performance but hard to do because paying for inputs not outputs put systems in place to connect all hospitals and GP so sharing info and allowing people to have more access to NHS (when NICE was introduced!)

South Africa main health insurance

private system only thats community rated but no risk compensation so lots of cherry picking

Medicare putting pressure on federal budget

projected to take over a large part of the budget either need to increase revenue or decrease cost

Chile main health insurance

public system and parallel private

Change in Insured post medicaid

see a lot of change post medicaid with people becoming insured because of it (7% change), dont see a lot with the new exchanges under ACA most still jsut get insurance through their employer most uninsured are young people working at startups

Distribution of Healthcare Spending

skewed! top 20% of spending is in the top 1% unhealthy distorting the market that could work efficiently to help only 1% of people...

Generic Trends in US

smaller share of branded drugs over time, smaller branded drugs, larger generic drus

Performance monitoring and benchmarking issues

so much benchmarking that you end up with a lot of target fatigue

Japan main health insurance

social insurance because population is older and no choice of plans because issue with long term care

Flaws of CEA- static vs dynamic efficiency

static efficiency happens when patent suppliers have market power and in which case you should bring price to cost, assuming no other drugs coming out dynamic efficiency looks at what will be the speed of the innovation if the reward for innovation is decreased, assuming that other drugs will come out potentially from the same company, dont want to decrease innovation by not rewarding it

Variance in health expenditures creating financial risk

the variance in concentration of healthcare spending creates risk!!! spending is so skewed!!! top 1% spend more than 20% of total spending

Blair: GP Contract - professional incentives and performance based rewards

to increase supply of GPs, increased government funding for training and pay because at the end of the day medical schools decide how many new doctors there are GP capitation got better risk adjustment for patient demographics GP quality and outcome framework gave them some income (25%) but then self reported... end up neglecting the stuff that isnt being reported/measured

Blair Reforms what the perceived problems were with thatcher

too fragmented system, hospitals were competing but they should be cooperating and are lacking coordination because theyre competing some patients were disadvantaged because some physicians would cherry pick patients issue becayse local treatment variations - "postcode prescribing" - richer neighborhoods got better care

CEA flaws with two treatment example

treatment A gives you more life so more efficient but its more expensive: treatment B is more affordable but gives you less life CEA would most likely go with treatment B, but what if you wanted treatment A! flaw! also the idea that you need to consider differences in income, next generation, your quality of life in the years youre given, social value, etc and your choice of treatment is going to be subjective and dependent - wouldnt want someone to pick for you but thats what happens with CEA therefore CEA should be used as support but not the rule!

Medicare Advantage enrollment trends

very concentrated, United and Humana are 44%, Blue Cross Blue Shield is 15%, CVS is 11% also increasing over time especially post 2020!!

Medicare Part D structure

weird structure with a cover-gap-cover idea need to cover the super expensive because that insurance but also have a budget initial coverage attracts people to sign up (especially healthy people!) donut hole was also political because initial coverage is more favorable because this appeals to more people