Download Cost Growth In Medicare Cost Growth Facts

Cost Growth Facts
Cost Growth In Medicare
Consistently above real per capita GDP
growth
– By about 2%
– Cost growth exceeds real per capita GDP
growth for EVERY 10 year period since at
least 1945
Michael Chernew
Commonly attributed to medical
technology (new knowledge and stuff)
June 4, 2007
AcademyHealth
– Residual studies
– Affirmative studies
Cost growth can add value
– We can sustain some real cost growth
Types of Technology Changes
Costs of Technology
1951 - 1971 : little ticket items
Costs of technology
– lab tests
– X-Rays
– Relative to alternative
1971 - 1981 : big ticket items
Upstream/ down stream costs
– CABG
– C-section
radiation & chemotherapy for breast
cancer
– Better diagnosis leads to tx
– Better tx leads to diagnosis
Health status effects
– Use more unrelated stuff if healthier
– Live longer (maybe not in great health)
Early and Mid 1990s
– Pharmaceuticals
Spending Equation
An Inverted U?
Spendingt = # of Beneficiariest * $ per Beneficiaryt
$ per beneficiaryt = Xtβt + et
Cost
• Technology affects each of these terms
• What would happen if technology were constant?
• Some change in X’s:
health behaviors
• Some change in β’s:
Low cost
Poor
outcomes
Higher
cost, better
outcomes
Lower cost,
best
outcomes
Time
Continued diffusion of existing ‘stuff’ (depends on
coverage/ reimbursement)
• Cost growth would likely be manageable
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What Drives Technology
Coverage/ Reimbursement
Controlling Cost Growth
Tools
– Finkelstein 2005
Medicare is a key driver of cost growth/
technology diffusion
– How strict would we need to be?
– What restrictions would we tolerate?
Coverage and technology are interrelated
– Weisbrod (1991)
Some exogenous factors
– Comparative effectiveness research
– IT
– System redesign
Incentives (coverage/ reimbursement changes)
Organization
Focus on value
No magic bullet
Level vs. Trend
Costs
Baseline
Constant cost
reduction
Time
•Savings that reduce spending (or tech adoption/ use)
by a constant % will not solve the cost growth problem
•Managed care generally thought of as constant savings
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