MEDICAL ECNOMICS AUGUST 2001 JIM ROHRER, PHD DEPT OF HEALTH SERVICES RESEARCH & MGT

OBJECTIVES –be able to  IDENTIFY UNMET ASSUMPTIONS IN HEALTH CARE AND WHY THEY MATTER  EXPLAIN SOME WAYS HEALTH CARE SYSTEMS ARE DIFFERENT IN OTHER COUNTRIES  DESCRIBE RECENT TRENDS IN US HEALTH CARE  EXPLAIN HOW PRODUCTION COSTS CAN BE CONTROLLED

ECONOMIC THEORY  “..ECONOMIC THEORY PROVIDES NO SUPPORT FOR THE BELIEF THAT COMPETITION IN HEALTHCARE WILL LEAD TO SUPERIOR SOCIAL OUTCOMES.” Tom Rice, The Economics of Health Reconsidered. HA Press 1998.

UNMET ASSUMPTIONS  CONSUMER KNOWS WHAT IS BEST FOR HIM/HER  CONSUMERS ARE RATIONAL  CONSUMERS HAVE ENOUGH INFORMATION  FIRMS DO NOT HAVE MONOPOLY POWER

RICE’S CONCLUSIONS  IF YOU WANT THE COMPETITIVE MARKET TO WORK, YOU MUST FIRST GIVE CONSUMER’S PURCHASING POWER – UNIVERAL HEALTH INSURANCE  WHEN HEALTH INSURANCE IS VOLUNTARY, THE FREE RIDER EFFECT WILL RESULT IN UNDER-FUNDING  EQUITY REQUIRES THAT THE HEALTHY SUBSIDIZE THE SICK VIA EQUAL PREMIUMS

REVIEW  US HAS MOST EXPENSIVE HEALTH CARE SYSTEM IN THE WORLD  YET WE HAVE ACCESS PROBLEMS  AND QUALITY PROBLEMS  SOMETHING IS NOT WORKING RIGHT

INTL COMPARISON, 1998 INDICATORGERMANYUS MD VISITS/CAPITA MD’S / CAPITA VISTS / MD HOSP DAYS / CAP BYPASSES/100,000 $/CAPITA

MD PERSPECTIVES, 2000 PROBLEMCANADA %US % NMBR GP’S SPECIALSTS EQUIPMT SURG WAIT MEDS COST COST REVIEW PT TIME VISIT COST

EXPLANATIONS  MANAGERIAL INEFFICIENCY (EG 1500 INSURANCE COMPANIES)  CLINICAL INEFFICIENCY (UNNECESSARY CARE) * HIGH SURGERY RATES IN US * VARIATION IN SURGERY RATES NOTE: MD’S DO NOT DELIBERATELY PERFORM UNNECESSARY PROCEDURES

POLICY REACTION  MANAGED CARE AND GOVERNMENT WANT REDUCED COSTS/ENROLLEE  TTL COST = PRICE X QUANTITY  REDUCE ALLOWED CHARGES  REDUCE NUMBER OF EXPENSIVE PROCEDURES PERFORMED  SUBSTITUTE LOWER COST PERSONNEL

RECENT DEVELOPMENTS  LARGE CAPITATED MD NETWORKS MAY BE GOING OUT – SMALL GROUPS WORKING ON FEE SCHEDULES ARE COMING BACK  MEDICARE+CHOICE IS A FAILURE- SENIORS DON’T SIGN UP-BUT “COMPETING HMO’S” IS THE ONLY REFORM IDEA AVAILABLE

ECONOMICS OR MEDICINE?  MD’S TELL MANAGED CARE THAT MANY PROCEDURES ARE UNNECESSARY  LONG STANDING CONFLICT BETWEEN MEDICINE AND SURGERY?  ROYAL COLLEGE OF PHYSICIANS AND SURGEONS (APOTHECARIES AND BARBERS?)

WHY DO WE OVERUSE PROCEDURES IN THE US?  REIMBURSEMENT ON FFS BASIS  POOR COVERAGE OF PRIMARY CARE AND PREVENTION  GOOD COVERAGE OF EXPENSIVE PROCEDURES

COMPARE TO NHI/NHS  PATIENT DOESN’T PAY OUT OF POCKET  VISIT FAMILY DOCTOR AS NEEDED  HOSPITAL MD’S ARE SALARIED/NO INCENTIVE TO DO PROCEDURES

UK EXAMPLE  5% OF GDP VS 17% IN US  EVERYONE HAS ACCESS  PREVENTIVE MED MUCH MORE INGRAINED (SEE BMJ, PREV MED)  IF WE TRIPLED THE BUDGET OF THE NHS IT WOULD BE A GOOD SYSTEM AND STILL CHEAPER THAN US

BACK TO REALITY  WE ARE STUCK WITH US SYSTEM SO  MD’S START HMOS AND REDUCE PROCEDURES RATES?  TRIED AND FAILED  HOSPITAL PARTNERS DEPEND ON PROCEDURES  MOST FACULTY ARE PROCEDURAL

SECOND OPTION  CUT COSTS – REDUCE COST PER VISIT VIA MANAGERIAL CONTROLS  NOTE:MGRS DON’T LIKE THIS ANY MORE THAN MD’S DO  INCREASE VISITS/MD  REDUCE OVERHEAD – BUILDINGS, CLERKS

INCREASING PRODUCTIVITY  KEEPING SAME NUMBER OF MD’S * GET MORE PTS (MARKETING) * REDUCE WAIT TIME FOR APPT * MORE SCHEDULED CLINIC HRS * INCENTIVE PAY (A LA FFS) * CHANGE MIX OF MD’S TO INCREASE REVENUES (PROCEDURES)

INCREASING PRODUCTIVITY OTHER OPTIONS  REDUCE THE NUMBER OF MD’S IN THE PRACTICE  REDUCE MD SALARIES

HAMPSTER IN ITS WHEEL?  IRRATIONAL IN SOME WAYS  BUT CONSISTENT WITH FREE MARKET VALUES  COMPETITION  PERSONAL RESPONSIBILITY FOR HEALTH  OPPORTUNITY FOR PROFIT

DISCUSSION QUESTIONS  IS THERE A PROBLEM WITH PRACTICING IN A PROCEDURAL SPECIALTY WHEN WE SUSPECT THAT MANY OF THE PROCEDURES ARE NOT NECESSARY?  IS THERE A PROBLEM WITH DOING QUICK PRIMARY CARE VISITS W/O PREVENTION SVCS?