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European issues in Cost Containment – the Italian case How cost containment policy in healthcare thwarts patient choice and innovation Content • 1 What is the issue with healthcare? • 2 How does the Italian healthcare system operate in this respect? • 3 How to solve the problem? 1 What’s the Issue with Healthcare? • Healthcare expenditure has steadily increased over time •Cost containment: a major issue • No structural solutions • Major future concerns: – Demographic trends – Innovation – Unsustainability of the welfare state European Trend: increasing state involvement • Public arrangements for health insurance • From self-regulation to state involvement • Extending material and personal scope • Values: solidarity (risk, income) Cost Containment: the Major Issue • Charges and Co-Payments • Restrictions (on what is reimbursed by the insurer) • Budget Setting • Controls – NB! Italy has tried all cost containment tools! 2 The Italian Healthcare System: Overview • NHS complex network of public and private providers. • Financed mainly by public hand (71%) but covers only 45% of total healthcare expenditures. • Providers are either public, private, or subcontractors for the NHS. • NHS covers ‘all’ medical care but copayments are significant The Italian Healthcare System: Financing • General revenues (31%) • Regional taxes on manufacturing (Irap) 1998: Irap replaced by pay roll taxes • Pay-roll taxes (59,5%) • Specific regional contributions (5,5%) • Revenues of the healthcare sector (4,3%) – Thus: main source of income: regional taxes on manufacturing and payroll taxes! And still those debts! Cumulative deficits of Italy’s NHS, millions of euros, 1994–1998: Years Millions of euros Up to 1994 1 750 1995 1 170 1996 2 070 1997 5 090 1998 4 130 Cumulative deficit 14 210 Source: Corte dei Conti (Court of Auditors) (10). Consumption of healthcare (% GDP - OECD) 12 10 Germany France The Netherlands Belgium Italy Austria UK Spain 8 6 4 2 0 % Consumption of medicines (% GDP - OECD) 2 1,8 1,6 France Italy Belgium Germany Spain Sweden UK The Netherlands 1,4 1,2 1 0,8 0,6 0,4 0,2 0 % Consultations with prescription (% - OECD) 100 90 80 Italy Belgium Spain France Germany UK Sweden The Netherlands 70 60 50 40 30 20 10 0 % 1994: The Italian Reference Price •Redefined the Positive List •Clustering based on broad population/ indication: product form not important •Therapeutic added value for broad population against “golden standard” •Nationwide Drug expenditure Budget •“Free” pricing: based on costs estimates •Introducing generics Pharmaceuticals: the key to changing cost containment policy • Group A, B, C and H: criteria being ‘clinical efficacy’, the ‘risk-benefit balance’ of the therapy, ‘acceptability’ of the therapy to patients, and the costs of the therapy • Which causes: Long negotiations for Group A, and especially Group B, products (the ‘gate-keeping’ component’ of the system), causing: – No incentive for innovation in product form – No incentive for innovation for sub group – No incentive for incremental innovation Essential problems in healthcare, also in Italy: TPP and ‘one size fits all’ TPP = Any organization, public or private, that pays or insures health or medical expenses on behalf of beneficiaries or recipients. • Third-Party Payment leads to • Excess consumption, which leads to • Runaway costs, which leads to • Third-Party rationing, which leads to • Limited supply of services, which leads to • Consumer discontent, which leads to • Governmental interference: out of pocket spending disappears! Obstacles to Reform are thus: • ‘Protect the Hapless Patient’ –Tax code, serious problem for the sustainability of the welfare state –Insurance regulations –Provider regulations –Infrastructure, entrenched interests –Entitlement mentality!! 3 How to Solve the Problem? Moving from “one size fits all” and Third Party Payment…. Insurer ? Consumer Provider To two Party Contracts and Patient Choice! Provider Insurer Consumer Consumer Employer Shift in Paradigms: • See health care as investment and not as costs • See medicines as part of total health care • Value innovation in healthcare, also incremental and also in product form or sub group • Make market access fast and without unneeded administration • Most importantly: EMPOWER THE PATIENT/HEALTH CONSUMER! The New Paradigm: Empower the Patient! • Voluntary insurance: insurance has always been a risk sharing institution, so it should be voluntary to insure some risks • Restore Patient/Physician direct relationship • Agencies should be made accountable to the consumer • Patients should be able to merge resources: most importantly with Web-enabled information Milestones of Reform: • Governmental Actions should be to: – Roll-Back Regulations – Malpractice Reform – Enact Health Savings Accounts! facilitate & encourage HSA’s by: – Tax Credits/Deductions – Individual Market – Dismantle the reference price system and introduce patient-centred reimbursements! Milestones of Reform: • Private Sector Actions should be to: – Implement / Deliver HSAs and individual health plans – Make prices, such as hospital prices, transparent – Improve Individual Markets – Provide more Information and support Patients and Patients Groups! Consequences: the Healthcare ‘Utopia’ • Government: Spends budget on other issues • Patients: Keep money ‘in own pocket’; pay for themselves • Employers: Less paternalism, provide market and finance • Physicians: Cash practices, retainer medicine • Facilities: Price disclosure, fewer discounts (esp. Pharmacists) • Health Plans: Insurance versus medical management • Pharma Companies: Price pressure, generic competition, R&D Conclusion: A cost containment policy that acts on prices and budgets alone can have serious implications in terms of welfare! Patient choice and patients’ financial responsibily should replace ‘One size fits all regulations’. My favorite one-liner: “If you think healthcare is expensive, try disease” Eline van den Broek the European Independent Institute www.european-independent.org Noordeinde 10D 2514 GH Den Haag The Netherlands T +31 70 3925180 F +31 70 3651809 [email protected]