Irish Healthcare Costs - unsustainable, unaffordable, unreformable?
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[email protected] Innovating for More Options Irish Health Spending - unsustainable, unaffordable, unreformable? Oliver O’Connor Royal College of Physicians of Ireland 28 November 2012
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Transcript of Irish Healthcare Costs - unsustainable, unaffordable, unreformable?
Innovating for More Options
Irish Health Spending -unsustainable, unaffordable,
unreformable?
Oliver O’ConnorRoyal College of Physicians of Ireland28 November 2012
Health Spending – unsustainable?
• Spending is growing too fast relative to income• We will have more older people needing more care• We will have more people with chronic diseases• We will have new technologies that cost more
• So – it will all come to some crisis• We may be in the crisis already• It will bankrupt us
The Malthusian Vision
OECD: Health spending up 4.5% GDP in 40 years
1970 1980 1990 2000 20080.0
2.5
5.0
7.5
10.0
5.2
6.66.9
7.8
9.0 Private expenditure Public expenditure
Shar
e of
GD
P (%
)
Average health spending as a share GDP across OECD countries
9.7
2010
What factors drove health spending growth?
• Income growth: 25% - 50%• Technology: 28% – 58%• Ageing: 6.5% - 9%• Price increases: 5% - 18%• Defensive medicine – negligible
– Source: OECD, ‘Value for Money in Health Spending’, 2011
- Very hard to estimate- In Ireland’s case, staff levels +37% 2000-09 and and pay
costs +21%, 2005-09
But spending growth now reversing for some
Average health spending as a share GDP across OECD countries
Netherl
ands
France
German
y
Denmark
Austria
Portuga
l
Belgium 2
Greece
Spain
Swed
en
United Kingd
omIta
ly
Irelan
d
Slova
k Rep
ublic
Slove
niaEU
-27
Finlan
dMalt
a
Luxe
mbourg 3
Hungary
Czech Rep
ublic
Cypru
s
Bulgaria
Poland
Lithuan
iaLat
via
Estonia
Romania
Switz
erlan
dSe
rbia
Norway
Icelan
d
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
ResidualPrivatePublic
%
Where we are now: Health as % GDP
OECD (2012), Health at a Glance: Europe 2012, OECD Publishing.doi: 10.1787/9789264183896-en
EU27 Average
Ireland 9.2%
Where is health spending going?
• Three views– OECD 2006 – out to 2050– OECD 2009 – out to 2025– IMF staff 2012 – out to 2030
1: OECD 2006 estimated Health could nearly double its % GDP
“Public expenditure on health and long-term care could rise to almost double current levels, from close to 7% of GDP in 2005 to some 13% by 2050”
- assuming that growth in... technological change remains unchanged- “restraining this” could halve the growth amount – correct?
2005 2050 Cost-pressure scenario 2050 Cost-containment scenario
0%
2%
4%
6%
8%
10%
12%
14%
5.7%
9.6%
7.7%
1.1%
3.3%
2.4%
Long-term care Health care
Publ
ic he
alth
and
long
-ter
m ca
re sp
endi
ng (%
of G
DP)
Total : 6.7%
Total: 12.8%
Total: 10.1%
Source: OECD 2006
2: OECD 2010 – ageing to add 1.2% GDP to Irish health cost by 2025 (plus 1.1% on long term care)
OECD, Economic Outlook 88, quoted in National Competitiveness Council Competitivenesss Scorecard 2012
3: Spending growth by 2030 - IMF staff view
• Worry: costs of ageing and the economy
• More worry: we add excess cost
• ECG – excess cost growth, over and above that resulting from demographics/ageing
3: Ireland – the least unsustainable?Projected increase in public health spending 2011-30, %GDP
• Average 3% extra %GDP• Ireland only 0.7%• Low “Excess Cost Growth”• Note … public spending only
Source: Clements, Coady and Gupta, IMF; “The Economics of Public Healthcare Reform in Advanced and Emerging Economies”
Ireland – youngest in Europe
• Arguably, health spending should be relatively lower for this reason• Ireland still has headroom to prepare for ageing (20 years behind most)
German
y²Ita
ly
Greece
Swed
en
Portuga
l
Austria
Bulgaria
Latvia
Finlan
d
Belgium
Estonia
Spain
France
Hungary
Denmark
Slove
nia
United Kingd
om
Lithuan
ia
Czech Rep
ublic
Netherl
ands
Malta
Romania
Luxe
mbourg
Poland
Cypru
s¹
Slova
k Rep
ublic
Irelan
d0.0
5.0
10.0
15.0
20.0
25.0
Share of population aged 65+, 2010
Unsustainable? Unaffordable?
• Irish health spending not growing too fast• Most countries health spending growth not out of control• No country ever bankrupted by health spending• Unlike banking/insurance, health moves slowly – a positive – so
adjustment possible• Ireland has great advantage from young population• But immediate challenge of adjustment and reform• Medium term: controlled growth in health spending• At 9%-11% GDP, with our demographics – affordable
– so long as debt servicing cost not absorbing too much
• But is it the right type of spending?– How efficient, how effective?
Why efficiency matters: winners and losers
• In a set budget, who gains and loses from inefficiency?– Suppliers, providers, staff: gain– Patients: lose (unmet needs, higher morbidity, mortality)– Taxpayers: neutral, if budget control is kept
• What happens in an efficiency gain?– Patients may get more services– Taxpayers may pay less cost– Or combination of both– But some among suppliers, providers or staff may lose– …in a static analysis…
Ireland is still expensive
• “pay remains high in both the public and private sectors, adding to costs and prices in the economy”
• “a lowering of the cost base, both public and private, would make a significant contribution to improving competitiveness and productivity in a fundamental way”
– Central Bank of Ireland, Quarterly Bulletin, October 2012
• Health costs high– Staffing, consumables, drugs
• Drugs total cost per person highest in OECD (but price cuts now)– Measures to reduce volume usage coming
• Efficiency not at achievable levels– e.g. average lengths of stay
• Barriers to efficiency in place (fixed costs and payment systems)
Unit wage costs still high
Central Bank of Ireland, Quarterly Bulletin, October 2012
OECD 2011: near 5% GDP efficiency gain possible for Ireland - €8bn worth
OECD: Going for Growth, 2011
Explanation of method
• “Potential savings represent the difference between i) a scenario where public spending and life expectancy gains would increase at the same pace over the next decade as over the decade 1997-2007 and ii) a scenario where countries would achieve similar health improvements with lower public spending by moving towards the efficiency levels of best-performing countries”
• Calculation highly influenced by high health spending growth 1997-2007
• Limitation on spending therefore delivers some relative efficiency gain
• But how practically to get to perform at the level of the most efficient?
Example from health insurance cost comparison
19 Jan 2011: VHI released comparative data to illustrate its costs were lower than US costs (and health utilisation), based on a survey by the International Federation of Heath Plans
*
*
Hospital day costs
Place VHI costs beside the other international comparisons in that 2010 IFHP survey:
VHI – $1,050 - $1,350
Irish Public Hospital Charge
UK NHS unit costs much lower
Caveat: Casemix a post-hoc averaging of cost; not very precisePatient level / procedure level costing neededExchange rate €1=£0.80
HIP REPLACEMENT + CCC HIP REPLACEMENT - CCC KNEE REPLACEMT +CSCC KNEE REPLACEMT -CSCC0
5,000
10,000
15,000
20,000
25,000
Irish Casemix rates vs UK NHS Tariffs - selected orthopaedics
Ireland 2009Ireland -10%UK Average
€
If we did these four operations at UK rates
Total cost savings / efficiency gain: €34mData used to illustrate; caveats needed
HIP REPLACEMENT + CCC
HIP REPLACEMENT - CCC
KNEE REPLACEMT +CSCC
KNEE REPLACEMT -CSCC
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
Costs and savings
IRL -10%UK CostSaving
€
Circulatory System Casemix Rates (2009)
CRDC VALV PR+PMP+INV INVES+CCC 33 56,927
OTHER CARDTHOR/VASC PR+PMP+CCC 56 47,660
IMPLNTN/REPLCMNT AICD TTL+CCC 82 46,577
AMPUTN CIRC SYS-UP LMB&TOE+CCC 76 44,292
CRNRY BYPSS+INV INVES+REOP/CCC 68 42,924
CRDC VALV PR+PMP+INV INVES-CCC 19 38,320
CRD VLV PR+PMP-INV INVES+CCC 205 38,178
MJR RECONSTRC VASC PR-PUMP+CCC 241 35,232
INFECTIVE ENDOCARDITIS +CCC 35 30,836
OTH CARDTHOR/VASC PR+PMP+SMCC 48 30,610
Top Ten by Unit Cost
Procedure No. Cases Cost €
Circulatory System UK Tariffs (2011)Top Ten by Unit Cost
Procedure Rate €
Implantation of Prosthetic Heart or Ventricular Assist Device 37,551 Other Complex Cardiac Surgery with Percutaneous Coronary Intervention, Pacing, EP or RFA 10,486
Other Complex Cardiac Surgery with Catheterisation 10,343 Major Complex Congenital Surgery 8,802 Single Cardiac Valve Procedures with Percutaneous Coronary Intervention, Pacing, EP or RFA 8,562
Single Cardiac Valve Procedures with Catheterisation 8,406 Other Complex Cardiac Surgery and Re-do's 7,862 Complex Congenital Surgery 7,569 Single Cardiac Valve Procedures 7,239 Coronary Artery Bypass Graft (First Time) with Percutaneous Coronary Intervention, Pacing, EP or RFA 7,194
Circulatory System Casemix Rates (2009)Top Ten by Total Cost
Procedure Cases Total Cost €
HEART FAILURE & SHOCK - CCC 4,175 5,155 21,522,125
CHEST PAIN 12,948 1,596 20,665,008
CRC DSRD+AMI-INVA INVE PR-CCC 2,953 6,320 18,662,960
ARRHY, CARD & COND DISDR -CSCC 6,013 2,470 14,852,110
INTERVENTN CORONARY PR+AMI-CCC 1,211 11,736 14,212,296
HEART FAILURE & SHOCK + CCC 1,173 11,718 13,745,214
CRC DSRD-AMI+IC IN PR -CSCC 2,751 4,991 13,730,241
CRNRY BYPSS-INV INVS+REOP/CSCC 433 27,317 11,828,261
SYNCOPE & COLLAPSE - CSCC 5,316 1,874 9,962,184
ARRHY, CARD & COND DISDR +CSCC 1,515 6,406 9,705,090
Cost €
OECD developing price/volume comparisons
OECD, Joint session of the meetings of Health Accounts Experts and Health Data Correspondents, 11 October 2012
“Explaining differences in hospital expenditure across OECD countries: the role of price and volume measures “
Public sector cost strategies• Staff
– HSE direct pay and pensions cost 40% but really 70%– A lot of staff costs are fixed not variable, so use differentiated strategies to
address quasi-fixed costs– Staff levels– Appropriate mix and deployment of staff– Rates of pay– Non-core pay– Pensions – Non-HSE staff costs
• Supplies– Achieve lower drug cost – good agreement now– Achieve lower supplier / procurement cost – potential
• Then… performance manage– Set high efficiency-clinical quality goals– Very detailed data for clinical care/resource management together– Measure and manage– People who can do it and incentives aligned
Quick notes: efficiency gains and technology
• New technologies both costly and beneficial• HTA measures cost-benefit for the patient• Ideal is that new technologies would also deliver efficiency
gains for payor (HSE/insurer/taxpayor)– help reconfigure the method of care or clinical pathways– reduce hospitalisation / lengths of stay
• Ideal collaboration: not to leave the public sector to extract cost or make reforms but partner with it
• Risk-share by provider?• Clinicians: their leadership both to achieve clinical
effectiveness and cost efficiency
Health insurance reform – which direction?
• Publicly-stated Government commitment to– Quasi-independent not-for-profit trust hospitals plus private hospitals all
competing for patients and activity– Public and private insurers competing for customers
• However, protection of income and managed change for existing public hospitals is a strong trend– Public hospitals to earn more from insurance funding pool – No clarity on when or how private hospitals can take part in ‘Money Follows
the Patient’ system
• Competing insurers promised, but could be– No control over policy benefits, pricing, premium or providers– Exemption from competition law -> not commercial– Effectively, administrators of a State-mandated benefits package– Supplementary insurance for minor matters only
• Dutch system, German or neither? NHS? Sweden?
Conclusions
• Health spending not unsustainable• Growth not out of control• Ageing cost not catastrophic, can be anticipated and
managed• But application of resources not efficient enough• Real gains available to benefit patient care• Adoption of new technologies would best also support
efficiency agenda of health payors• Clinical leadership for effectiveness and efficiency
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