Download Technology Diffusion and Managed Care

Bending the Cost Curve
Michael Chernew
May 20, 2010
Disclosures
Consulting
Grants
Pharma
Purchasers
Other
industry
Government
Pfizer
AHIP
Avalere
MedPAC
Genentech
BCBSA
Altarum
CBO Panel of
Health Advisors
Abbot
Anthem BCBS
(Maine)
HRET
CMS Office of
the Actuary
Lilly
Hewitt
Mass Medical
Society
Pfizer
Astra
Zeneca
PhRMA
Continued spending growth should scare you
Definitional issues matter
Do we mean:
– Cost per service [i.e. Price]?
– Spending per disease?
 Spending at the population (national) level?
Spending growth vs. level
Spending
High spending,
rapid growth
Low spending, rapid
growth
Low spending, slow
growth
Time
Our debt is unsustainable
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Debt /
GDP (%)
100
90
80
70
60
50
40
30
20
10
0
Source: President’s Budget: http://www.cbo.gov/ftpdocs/112xx/doc11231/03-05-apb.pdf
% GDP
Health care is a major driver of
debt
Source: Congressional Budget Office. The Long-Term Outlook for Health Care Spending.
http://www.cbo.gov/ftpdocs/87xx/doc8758/MainText.3.1.shtml
Tax rate implications
PROJECTIONS FOR 2050
SCENARIOS
Tax code is
indexed for
inflation and
growth in real
income.
Effect on
Economy
Effect on Taxes
1% Gap
Real GDP
reduced by
3% to 16%.
Highest Bracket
(35  60%)
2.5% Gap
Substantial
reductions in
real GDP.
Highest Bracket
(35  92%)
Source: CBO. Financing Projected Spending in the Long-Run. July 2007.
Message 1:
Health care spending GROWTH will slow
Slow is not the same as Fall
– Age adjusted, per beneficiary spending will still
rise
At the system level, the challenge is not
how to do more with less money, but how
to do more with ‘Less More’ money
Controlling Spending
Spending Accounting
Spending = PRICE x QUANTITY
Spending growth will not slow unless
PRICE and/or QUANTITY growth slows
Message 2:
As we slow spending we must preserve
value
Defining Value
Cost Saving Cost Effective
$0
Not Cost Effective
$100,000*
Cost effectiveness ratio ($/Quality adjusted life year)
 Always relative to next best alternative
* This should be higher ($250,000), but decline as overall spending rises
Who Will Slow Spending
What will slow spending growth
Payment
– Affects price, maybe quantity
Benefit design
– Affects quantity, maybe price
Organization of medical practice
– Affects quantity
Message 3:
Physicians, collectively, must shape the
future
– Develop care strategies
– Design (or collaborate to design) incentive
systems or they will be imposed upon you
(said as if physicians do not have enough to do)
Why Physicians
They think clinically
They control care decisions
They care about the patients
END