1. The Value
of Life
Presentation prepared for the meeting of the Eurostat Task Force Price & Volume Measures for Services,
27-28 February 2018

2. Prologue: a brief review of preceding events
Act 1: Quality adjustment: a mission impossible?
Act 2: Substitution bias
Epilogue

3. A brief review of preceding events
Prologue
A brief review of preceding events
“From a theoretical point of view, hospital services should preferably be measured on the basis of DRG’s. However, it must be acknowledged that in practice this is not yet an option.”
L. Hoven, 1987, Medische zorg in de prijsindexcijfers van de gezinsconsumptie: een terreinverkenning

4. Present method
Volume change based on the Framework Agreement between Minister, producer-, insurer- and patient-organisations.
Estimate of development of health care demand, based on different parameters, adjusted for expected gain in efficiency.

5. DBC’s (Diagnosis treatment combinations)
In The Netherlands, the DBC system is in use as classification system for hospital treatments; presently, there are some DBC’s.
The DBC system is the basis for financing hospital care: the prices that hospitals charge are prices for DBC’s; they are supposed to cover all costs incurred (immovables, equipment, medicine, wages of specialists, nurses and other staff);
Prices are to a large extent negociated upon between individual hospitals and individual insurance carriers.

6. DBC Information System (DIS)
DIS contains information on nr. of specific (DBC) treatments and prices charged, for each individual hospital, broken down by each individual insurance carrier.
Based on this information, we can then compile our price and volume measures.

7. Starting point: matched items only approach
year
Value (% yoy)
Price (%yoy)
Volume (%yoy)
DBC’s
2014
2015
1.2
0.6
-5.5
1.3
2.3
-1.7
-6.7
Add-ons IC
11.8
6.1
11.9
4.1
5.8
-0.1
1.9
Add-ons
Medicines
28.8
10.5
8.4
0.7
-2.7
-3.1
28.0
13.6
Total
3.3
1.6
-4.1
1.8
2.0
1.5
-0.5
-5.2

8. Act 1. Quality adjustment: a mission impossible?
Volkskrant (11 November 2017): “A good health and a longer life cannot be expressed in monetary terms. This is why the costs of health care can rise limitlessly”

9. Sir William Thomson
“When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind.”

10. Explicit quality adjustment: what are the options?
General quality indicators
Time-series standardized hospital mortality ratio (TSHSMR)
Disease specific quality indicators

11. Time-series standardized hospital mortality ratio with (blue) and without (red) comorbidity

12. Expert Opinion
Expensive new medicines and treatments are judged by the National Health Care Institute, on the basis of:
Effectiveness;
Cost-effectiveness;
Necessity;
Practicability.

13. Concrete example
NHCI: “Palbociclib satisfies the legal criterion ‘State of the Art and Practice.’” “The relation between costs and effects is unfavourable: the costs of 1 QALY amount to € € With regard to the nr. of patients, the total costs will be € 118 million per year. Considering the limited growth of the total budget this will implicitly lead to less treatments that are more cost-effective, and thus to a lower health level for the entire population.” Advice to the Minister: “Do not include it in the package of the basic insurance, unless you can negociate a lower price with the producer.”

14. Act2: Substitution bias
How to deal with substitution bias?
From clinical to day treatment
From day treatment to policlinical treatment
From hospital to primary health care
From hospital to Airbnb-type accommodation

16. Price and volume indexes for treatment of IMDPM-patients

17. Price and volume indexes for treatment of IMDPM-patients, in case of substitution

18. Epilogue
“The task of calculating price indexes and output in the 21st century (…) is not for the rigid or the fainthearted. The BLS and BEA agree that price index mismeasurement continues to lead to understated growth in real output over time, perhaps especially in healthcare (…).
Groshen, Moyer, Aizcorbe, Bradley &Friedman, 2017, How government statistics adjust for potential biases from quality change and new goods in an age of digital technologies: a view from the trenches, Journal of Economic Perspectives, vol. 31, nr. 2, Spring 2017.

19. Encore Research on nowcasting healthcare services
Hospital services
Psychiatric services
Other human health services n.e.c.
Health care for disabled
Other social work
Main conclusion: time series models can improve the quality of flash estimates for health care services and at the same time reduce the complexity of the current process.