Transcript International experiences on cost pressures in health systems

Cost Pressures and Cost
Control in Health Systems:
International Experience
Magnus Lindelow
East Asia & Pacific Region, World Bank
ILO-WB-Thai Joint Workshop on Model Development
of Sustainable Health Care Financing
Bangkok, June 2007
18
Australia
Canada
Finland
Greece
Ireland
Korea
Netherlands
Poland
Spain
Turkey
16
Total health exp. as % of GDP
14
Austria
Czech Republic
France
Hungary
Italy
Luxembourg
New Zealand
Portugal
Sweden
United Kingdom
Belgium
Denmark
Germany
Iceland
Japan
Mexico
Norway
Slovak Republic
Switzerland
United States
12
10
8
6
4
2
Source: 2006 OECD Health Data
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
0
12.0%
5.0%
10.0%
4.0%
8.0%
3.0%
6.0%
2.0%
4.0%
1.0%
2.0%
0.0%
0.0%
NOTE: Data from 2006 OECD Health Data. (1): 1970-2003
(2): 1971-2004
Korea (4)
Mexico (5)
Poland (5)
Ireland
Finland
Czech Rep. (5)
Turkey (4)
Luxembourg
UK
Spain
New Zealand
Japan (1)
Hungary (3)
Italy
Denmark (2)
Netherlands
Australia (2)
Sweden
Austria
Portugal
Canada
Norway
Belgium (1)
France
Iceland
Greece
7.0%
GDP
Health exp.
THE as % of GDP
14.0%
(3): 1991-2004 (4): 1982-2004 (5):
Total health spending as % of GDP
6.0%
Germany
Switzerland
US
Annual growth in GDP & health spending 1970-2004
8.0%
16.0%
12.0
Total health exp. as % of GDP
Cambodia
Argentina
South Africa
9.0
Brazil
Mongolia
6.0
Uzbekistan
Vietnam
Kyrgyz Republic
India
Azerbaijan
Indonesia
3.0
China
Russian Federation
Kazakhstan
Thailand
Pakistan
0.0
0
4,000
8,000
GDP p.c. (current int. US$)
12,000
16,000
Public health exp. as % of total health exp.
100.0
90.0
80.0
70.0
Mongolia
Thailand
Russian Federation
60.0
50.0
Sri Lanka
Kyrgyz
Republic
Uzbekistan
Indonesia China
40.0
Argentina
Brazil
South Africa
Vietnam
Pakistan
India
Azerbaijan
Cambodia
30.0
20.0
10.0
0.0
0
5,000
10,000
15,000
GDP p.c. (current international US$)
20,000
Why are health care costs rising in
most countries?
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Income growth and high income elasticity of health care
Expansion in availability and coverage of health care
services
Ageing population  expanding and changing needs for
health care
Changing epidemiological profile  larger share of
burden of disease from chronic conditions
Low productivity gains in health sector relative to other
sectors  rising relative price of health care
All these factors are likely to play a relatively small role in
cost escalation. The missing element? Technology…
The role of technology
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What do we mean by technology?
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What do we mean by technological change?
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Pharmaceuticals, medical devices, diagnostic techniques,
surgical procedures, etc.
Innovation—arrival of new products and techniques
Utilization—how new and old technologies are used in the health
system
What determines the availability, utilization, and price of
technologies?
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Needs and expectations (create incentives for development and
promotion)
Scientific capabilities (in recent decades, advances in genetics,
account for fundamental change)
Features of the health system
Why should we be concerned
about rising costs?
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Fiscal constraints and distortionary effects of taxation
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Equity concerns  limits on scope for pushing expenditures to
private sector  government finance plays important role in
most health systems
Market ‘fails’ in important way in health sector—some
health expenditures may be wasteful
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Health insurance may make individuals demand ‘too much’
health care (moral hazard)
Physicians may exploit their information advantage to overprovide services (supplier-induced demand)
These problems also have ‘dynamic’ effects—stimulate the
development and use of technology
Approaches to controlling costs
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Direct approach to managing fiscal pressures
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Budget caps and input controls
Reducing ‘waste’ in the health system
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Patient cost sharing (exclusions, deductible and coinsurance,
benefit ceilings, etc.)
Making patients more informed consumers of health care
Controlling prices and changing provider payment methods
Managing introduction and use of technology
How should we evaluate cost control measures?
Not enough to focus on costs—must also pay attention to
impact on other health system goals: equity, efficiency, quality
Budget caps and input controls
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Most countries have relied on a mix of approaches
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Budget caps for sector as a whole or expenditure components (e.g.
pharmaceuticals)
 Budget caps for hospital sector or individual hospitals
 Caps on wages or prices of other inputs
 Restrictions on entry to medical and nursing training
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Some evidence that approaches have helped control costs
But, budget caps and direct controls have limitations
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Caps have proven easier to implement in public integrated systems than
in systems with multiple payers
 Caps are politically unpopular, and in most countries they have not been
respected
 Provider responses (e.g. increase volume in response to price
reduction) often undermine impact
 Caps and controls may result in cuts in the ‘wrong’ areas
Direct controls have role to play, but won’t do much to reduce
waste in health system—may even worsen the problem
Cost sharing to control demandside ‘moral hazard’
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Cost-sharing introduced or increased in many OECD
countries during 1980s and 1990s
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Cost-sharing typically remained low and with exemption policies
Took different forms
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Co-payment for services
Treatment restrictions through negative or positive lists, in particular
pharmaceuticals and dental care (e.g. moving drugs to OTC status)
Some countries—e.g. Singapore, China, South Africa, US—have
experimented with Medical Savings Accounts
Aim has been to shift costs to private sector and reduce
‘frivolous’ use of services (waste). Has it worked?
The impact of cost sharing: key
findings from experiences to date
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Rigorous evidence remains limited, but clear that higher prices
reduce the use of services and pharmaceuticals
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RAND study estimated a price elasticity of around -0.2
Use of services for the poor is more sensitive to price increases
Price increases lead to reductions in use of both unnecessary and
effective care/drugs
 Impact of exclusions / treatment restrictions often limited due to
substitution
 In some cases, reduction in service use may contribute to cost
increases due to delay or under-use of services
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The bottom line
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Cost sharing is unlikely to be significant source of revenues
Can be useful in steering patients to the right level of the health system
 May be able to reduce utilization without adverse health consequences,
but needs to be carefully monitored
 Equity implications need to be managed
Making patients more informed
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‘Consumer driven health care’—a force for quality and
efficiency?
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Promoted in some health systems as means of improving quality
and controlling costs
Consumers provided with information about health plans and
providers
Idea is that this will create competitive pressure to improve
efficiency and reduce waste
Evidence suggests that consumers do not understand much of
what is included in report cards, and that information is not
important factor in choices
Consumers in the driver seat—potential for worsening
demand-side moral hazard
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Direct marketing of pharmaceuticals and new technologies is
becoming more important in many countries
Is ‘supplier induced demand’ a real
problem?
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Difficult to assess—studies rely on different approaches
Supply of physicians  increased supply of services
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Impact of changes in remuneration
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E.g. in Australia, 10% increase in doctors resulted in 5-10%
increase in service volume
Shift from fee-for-service to capitation results in reduction in
number of tests and procedures
Reduction in doctors’ fees  increase in service volume (~0.4
elasticity)
Small-area variation in clinical practice
Consensus that supplier induced demand is a real issue,
but scale and scope of the problem depends on
incentives in the health system
Provider payment reforms to
control costs
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Extensive experimentation with provider payment reform
in recent decades
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Capitation-based payment (fixed payment per patient on
provider list) for ambulatory care
Fixed payment per case (e.g. Diagnostic Related Group system
in US Medicare program) or global budgets for hospital care
Often mixed system—e.g. capitation combined with fee-forservice for preventive services
The logic of payment reforms
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Move away from reimbursement of costs (e.g. through fee-forservice) towards paying for ‘bundle’ of services
Provided clinics and hospital can benefit from savings, this
rewards efficiency and cost consciousness
But may also reward quality skimping, patient dumping, gaming
of classification system, etc.
Impact of provider payment reforms
and considerations for Thailand
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Some key lessons from experiences to date
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In many cases, reforms have resulted in savings due to shorter
length of stay and/or reduction intensity of care (diagnostic
procedures, drug use, etc.)
Evidence on impact of quality often limited—represents
important risk
Case-based payment for hospital services has often resulted in
rapid increases in volume
Provider payment reform has come a long way in
Thailand, but…
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Fee-for-service remains in Civil Service Scheme
Lack of coordination across schemes creates mixed incentives
for providers—cost shifting, patient preference, etc.
Too much reliance on supply-side cost sharing in UC & SSO?
Adequate incentives for quality and prevention?
Managing introduction and use of
technology
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Many countries regulate investment in technology
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E.g. permission—certificate of need—required for large investments in
US in 1970s/80s
 Mixed evidence—decisions about what services and procedures will be
covered may be more effective
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Growing trend toward ‘Health Technology Assessments’
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Use of clinical evidence and economic evaluation to approve use /
cover—does technology represent ‘value for money’?
Economic evaluation is often difficult—reliable evidence on
effectiveness may take years to emerge
Yes/no decisions on technology often contested—effectiveness /
efficiency often conditional on patient or circumstance
Managing use of technology equally important
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Different approaches: clinical guidelines, utilization reviews, second
opinions, profiling of clinical practice, etc.
 Scope for both improving quality and controlling costs, but evidence on
impact still limited
Summing up
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Cost pressures are going to persist
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Risk of waste, but also opportunities to improve welfare—should Thailand be
spending more on health care?
Growth in health expenditures will result in sustained fiscal pressure
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Direct expenditure controls may have role to play in managing cost pressures,
but has important limitations
 Need to keep eye on efficiency and equity issues in financing of government
spending
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Fiscal pressures raise difficult questions that do not have simple answers
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Boundary be between public and private finance? Distribution of financing burden
for health care? How much inequity in access to services and technologies is
acceptable?—largely political, not technical issues
There is a need to avoid waste in the health system
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Limited cost sharing may have role to play
 There will have to be some exclusions—need for effective process for rationing
 Need for systems and incentives to ensure appropriate use of technologies
 Effective methods for paying providers part of the solution, but other elements
also needed
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Multiple payer system presents particular challenges—need for coordination
Thank you!