1 Moving Towards Higher-Value Health Care Katherine Baicker Professor of Health Economics Harvard School of Public Health and NBER

2 Lower Costs vs. Higher Value Rising costs have made reform a priority –Risk of uninsurance –Strain on private budgets –Pressure on public budgets Appeal of cost-saving quality improvements –Self-financing plans to cover the uninsured –Health-improving reductions in spending But is this the right metric?

3 Ample Evidence of Inefficient Spending International evidence: –Spend much more than OECD trading partners without commensurately better outcomes Domestic evidence: –Areas where we spend more are not areas with best outcomes

4 Quality Variation Even within Medicare Source: Dartmouth Atlas of Health Care

5 Variation in Medicare Spending Source: Dartmouth Atlas of Health Care

6 But Higher Spending not Associated with Higher Quality Source: Baicker and Chandra (Health Affairs 2004)

7 Some Causes of Inefficiency Public side: –Medicare reimbursement primarily based on quantity, not quality –Resources for the uninsured spent on inefficient modes of care Private side: –Biases in tax subsidy of employment-based insurance –Barriers to well-functioning insurance markets –Information on prices and quality often not available

8 Focus on Changes with System-wide Effects Few individual interventions likely to produce better health at lower cost –Doesnt mean there arent many worthwhile interventions –Wrong metric: probably willing to pay more if getting a lot more for it Interventions that affect the care received by some groups likely to have spillover effects –Insurance coverage – extent and type –Use of high-intensity interventions –Information –Use of best practices

9 Case of Hospital Quality Source: Baicker, Chandra, and Jha

10 Conclusions Bending the Curve highlights many areas in vital need of improvement and proposes many potentially high-payoff reforms Need not pursue only self-financing reforms: goal should be higher value, not just cost-saving quality improvements May get biggest bang for the buck from reforms that improve the quality of care system-wide