Health Economics Part 2

Cost containment requires PAINFUL choices that affect the health of the population.

A little pain, necessary as it may be, is not the same as no pain....

Overall, the US health care system currently operates somewhere along the FLATTER portion of the curve.

Cost containment: Not being able to advance from A to B (sacrifice improving health of enrollees)

*prioritization and analysis of cost effectiveness* Redistribution of resources from services with some benefit to services with greater benefit relative to cost

..... Ex: maximize resources for smoking cessation BEFORE investing in cholesterol screening and treatment

more 'bang' for health care 'buck' model: 1. Notion that relevant outcome of interest is overall health of a population rather than of any ONE individual pt. Rather tan focusing on any one particular intervention or patient, the curve attempts to represent the overall functioning of a health care system in aggregate for population under its care.

2. Model assumes that it is possible to quantify health at a population level. (small country vs poor) 3. health outcomes y axis-evaluating those aspects of health status directly under the influence of health care

*Eliminating ineffective and inappropriate care* Physicians in the US perform a large # of inappropriate procedures and physicians may inappropriately and harmfully accept new technologies as a result of industry influence rather than proven efficacy. Changes the 'Q'. Residents of areas with a greater per capita supply of hospital beds are up to 30% more likely to be hospitalized than those in areas with fewer beds.

As for the value of this spending, quality of care and health outcomes are, if anything, WORSE in the highest spending regions than in areas with LESS intensive use of services These findings suggest that a great deal of unnecessary care is taking place in the high cost areas The slope of the cost benefit curve would become more favorable if a system could eliminate those components of rising expenditures that have flat slopes (no medical benefit) or negative slopes (harm exceeding benefit, as in the case of inappropriate surgical procedures or prolonged bed rest after stroke)

**Table 8-1 Examples of PAINLESS cost control (6)**

Controlling fees and provider incomes Cutting the price of pharmaceuticals and other supplies Reducing administrative waste Eliminating medical interventions of no benefit Substituting less costly technologies that are equally effective Increasing provision of those preventive services that cost less than the illnesses they prevent

Relationship between health care resource input and health outcomes **Initially, as health care resources increase, these outcomes improve, but above a certain level, the slope of the curve diminishes, signifying that increasing investments in health care yield more marginal benefits.

Different medical interventions lie on steeper (childhood immunizations) or on flatter (the costly prolongation of life for an anencephalic infant) portion of the curve) ...no matter where we sit on the curve, it will always be true that if we spent more we could do a little better....

*Administrative Waste* HMO's TV and radio advertising budget (not all quantities in health care cost equation are clinical in nature) 31 cents of every dollar of US health care spending goes for such quantities of administrative services as insurance marketing, billing and claims processing, and utilization review, rather than for actual clinical services. US administrative costs are over twice as high proportionately as those in nations such as Canada and have been rising.

Eliminating purely wasteful quantities of health care services, be they ineffective clinical services or unnecessary administrative activities, is a relatively straightforward approach to painless cost control. Motto: stop doing things of no clinical benefit

Concerns about the rise of health care costs dominate the health policy agenda in US. Another pressing concern: lack of adequate insurance and access to care for tens of millions of people, is in part attributable to the problem of rising costs. Health care inflation has made health insurance and health services unaffordable to many families and employers.

GDP increasing

*Innovation and cost savings* Search for less costly ways of producing the same or better health outcomes Ex: new drug is developed that is less expensive but equally efficacious and well tolerated as a conventional medication; services provided by highly paid physicians can often be delivered with same quality by nurses, NPs, PAs

Gallbladder surgery Laparoscopic - shorter stay, lower costs, improved outcomes due to less postop pain and disability Necessity of gallbladder surgery is not clear cut - rates increasing - pts with milder symptoms undergoing surgery

Painless cost control is theoretically possible. Cost = price X quantity

Price: hospital daily room charge or physician fee for routine office visit Quantity: volume and intensity of health service use (length of stay in ICU, # and types of diagnostics tests performed during hospitalization)

Conclusions The cost benefit curve has a diminishing slope as increasing investment of resources yields more marginal improvements in the health of the population. The ideal cost containment method is one that achieves progress in overall health outcomes through the 'painless' routes of making more efficient use of an existing level of resources

Putting painless cost control into practice may be impeded by political, organizational, and technical obstacles Making better use of resources must be the priority of cost control strategies in the US

The move to point C requires a shifting of the curve, signifying a new, more efficient (or productive) relationship between costs and health outcomes. There are numerous possible routes to greater efficiency. For example: diagnostic radiographic imaging services are a rapidly inflating expenditure in the US

Research concludes that 20-40% of imaging studies are not clinically necessary, and that radiation exposure from diagnostic x rays carries risk of cancer Eliminating unnecessary diagnostic radiographic procedures, such as head CT scans for pts with uncomplicated tension headaches, could decrease health care costs and improve health. [Point C represents achievement of better health outcome without increased cost]

*ounces of prevention* Ex: childhood vaccines cost less than caring for children with infections Catch: cost of implementing a widespread prevention program may exceed cost of caring for the illness it aims to prevent (screening general pop for high BP and providing long term tx for those with mild to mod HTN to prevent strokes and other CVS complications has been found to cost MORE than the expense of treating the eventual complications themselves).

This is the case bc the complications are rapidly and inexpensively fatal, while successful prevention leads to a long life with high medical costs. Routine mammography screening and biopsy following abnormal test results costs more than it saves by detecting breast cancer in early stages. BP and breast cancer screening programs result in the improved health of the population but require a net investment in additional resources.