Healthcare Economics Is it all just dollars and cents? 19 April 2009 James S Eadie MD, FACEP Co-Chair, ACEP FGA Committee GSACEP, Immediate Past President Academic Faculty, Wilford Hall Medical Center, San Antonio, Texas

Overview 1.How much does the US spend on health care? 2.Where do the dollars go? 3.How fast are the costs growing? 4.What can be done to contain the costs? 5.Is the system really at a “crisis”?

Economics…..ouch Why do we need to study economics? I’d rather be herding cats….

Health Care Economics 101 Quiz How much did the US pay for health care in 2007? What is the % GDP spent on health care? What are the most expensive parts of the health care system?

Health Care Spending – 2007 >$2.2 Trillion dollars 16.2% of GDP, Switzerland next highest 11.4% $7,421 per living person Spending rose 6.1% (inflation 4.1%) “Spending is driven by new medical treatments, rising prices and growing utilization.” Smith et al. Health Affairs Jan 2006

US Healthcare = French Economy

Percent Health Care of GDP 2006 data from WHO

Expenditures per Capita 2006 data from WHO

Per Capita Health Spending in 2006 Source: McKinsey Global Institute and NEJM 2009

WHO Health Care Rankings 1.France 18. England 25. Germany 30. Canada 36. Costa Rica 37. United States 38. Slovenia

Health Comparisons

Health Care Spending Hospital Care –31% of total health care expenditures – $648.2 billion Physician Payment – 21% of total health care expenditures – $447.6 billion – Growth from inc. office visits and imaging

Health Care Spending Prescription drugs –10% of total expenditures –Total: $216.7 billion * greater than nursing homes and home health care combined ($177.6 billion) Health Insurance Admin Costs ( private + Gov ) -$204.1 billion

Health Care Spending Medicare – $401.3 billion – 19% of national health expenditures – Revenue 65% from payroll taxes and premiums 35% from general taxes –Key: this competes with Gov. spending

Health Care Spending Medicaid – $310.6 billion – 15% of national health expenditures –> 20% state budgets SCHIP –$ 8 billion Federal Government pays over 46% Health care bills

Federal Budget 2008 Federal Budget Trillion dollars Social Security612 billon Medicare/Medicaid682 billion Defense613 billion Education 59 billion Debt Interest249 billion

Federal Spending FY 2008 Source: Congressional Budget Office

US Federal Spending

Federal Receipts – FY 2008 Source: Congressional Budget Office

Projected Growth Health Care Projected Growth Rates –6.2% annually through 2018 –16.2% GDP 2007 to 20.3% GDP 2018 Public Payers –2016 – will be largest source of funding –2018 – over half of all health care spending Why? –Baby Boomers – 76 M

Projected Growth

Health Care Reform – Is it Possible?

Health Care Timeline 1930s – 70s Physicians / AMA Strong Pre-1880 Physicians limited authority Progressive Era – 1920 Industrial Revolution Rise in prestige 1980s - Present Corporations Competing Interests Loss of Political Influence Germany 1883 Social Security 1935 Clinton 1994 Rapid Health Care Growth 1950s-70s Medicare 1965 Nixon 1970s Truman Plan 1945 Medicare Drug Bill 2003

Health Care Reform Issues Uninsured and Underinsured Quality Initiatives Patient Centered Medical Home Health IT Physician Pay Reform Medical Liability

Health Care Costs

How Do You Share The Resources?

How Do You Slice The Pie? Who’s going to take the smaller piece? –Physicians? –Hospitals? –Drug Companies? –Trial Lawyers?

Emergency Medicine’s Slice of Pie million ED visits 2006 $ 37.5 billion on emergency care –Only 1.8% of all health care expenditures Emergency Medicine is a small fish Fixing the “over-utilization” of emergency departments will NOT fix the problem

1 in 10 Jobs in US is Health Care Related

Are we in Crisis? “US health care costs have been in “crisis” for roughly 40 years” Brown, NEJM 24 Jan 08 Imminent Collapse rests on 3 indicators 1.There are 47M uninsured – we must have universal coverage 2.Health care costs are extraordinarily high 3.US system is in fact not a system, but incoherent hodge-podge

Are we in Crisis? 1.The Safety Net for the Uninsured Community Health Centers Emergency Departments Public and voluntary hospitals –Funds come from donations, Medicaid, grants, etc. “11 th hour infusion of money” –President Bush told everyone that they can always go to the emergency room

Are we in Crisis? 2. Health Care Costs are High Costs have been skyrocketing since 1965 when Medicare/Medicaid were signed into law US system has pushed technology Research hospitals, drugs, medicines Public health fell to the side

Are we in Crisis? 3.The non-system of US health care will ultimately drive reform –Clearly deep interest on all parties to bring together the fragmented system, BUT: –Business, insurance, and providers have different priorities, but all agree: Big Government is NOT the answer Costs of reform should not fall on them Their agenda takes precedence

Law of Reform “There is nothing more difficult to manage, more dubious of success… than to initiate a new order of things. The reformer has enemies in all those who profit from the old order and only lukewarm defenders in all those who would profit from the new order.” Machiavelli 1513

What Glasses Are You Looking Through?

Every System is Perfectly Designed To Produce The Results It Produces Don Berwick, MD The Institute for Healthcare Improvement

Here we go again…. 1917, 1935, 1948, 1965, 1970,