Exam 3 - Painful vs Painless Cost Control

How much did the US spend on health care in 2020?

$4.1 trillion

Why are rising health care costs a concern?

They are firmly in the national health policy agenda

What contributes to rising costs?

Lack of adequate insurance and lack of care access

What legislation addressed access issues?

Affordable Care Act

What is health care inflation causing?

Unaffordable insurance and services for families and employers

What are private and public payers trying to do?

Curb expenditure growth

What strategies are used to curb expenditure growth?

• New approaches to utilization review

• ACO (accountable care organization) enrollment

• Increased out-of-pocket payment for care

How has per capita spending on healthcare changed from 1980 to 2020?

Increased from $1,110 to $12,530

What is projected per capita spending by 2030?

$19,294

What is the main question of cost control?

How to restrict expenditure growth without affecting patient health

What is painful cost control?

Rationing of beneficial services

What is painless cost control?

Eliminating unnecessary medical treatments and administrative expenses

What are two key considerations in cost control?

Relationship between costs and outcomes, and approaches to cost containment

What is the value of health care expenditures from society’s perspective?

Purchasing better population health

What key question is asked about spending?

Does more spending improve health outcomes

What must be compared in health care costs vs outcome?

Improvement in outcomes vs amount of resources invested

What defines “better health”?

Improved longevity and quality of life

What are additional indicators of better health?

• Reduced mortality and morbidity

• Relief of pain

• Improved function

• Reduced fear of illness and death

What happens as health care resources increase?

Outcomes improve

What happens with further investment?

Marginal improvement occurs

What is the issue with new technology?

High cost may yield little improvement

What does “bang for your buck” mean?

Value of intervention vs cost

Where does the US system operate?

On the flattened part of the curve

What does the slope graph represent?

Costs (X) vs outcomes (Y)

Moving from point A to point B on the curve is associated with what?

both higher costs and better health outcomes

What happens if spending is frozen?

Loss of improved health outcomes

What is cost containment?

Painful choice requiring rationing of beneficial care

What is needed instead of cost containment?

Greater efficiency

What is an example of rising cost?

Diagnostic imaging

What % of CT scans may be unnecessary?

30–50%

What % of US cancers are linked to CT radiation?

2–5%

What happens if unnecessary procedures are eliminated?

Costs decrease and health improves

What does Point C represent?

Better outcomes without additional cost

What does a higher trajectory indicate?

More efficient relationship between costs and healthcare outcomes

What are the 3 assumptions of the cost & outcomes model?

• Population health focus

• Ability to quantify health

• Difficulty separating social factors

What is the focus of outcomes in this model?

Overall population health rather than individual patients

How is population health measured?

Life expectancy and infant mortality

What factors affect health beyond care?

Poverty, education, lifestyle, social cohesion

What is the formula for cost?

Price × Quantity

What are examples of price?

Hospital room charge, physician fee

What are examples of quantity?

Length of stay, number of visits

What does cost containment focus on?

Minding prices and quantities

What happens if prices rise without increased care?

Inefficient resource use

What happens if costs rise only due to price inflation?

No improvement in outcomes and flat curve

What are the three main cost control strategies?

• Control price inflation

• Eliminate inappropriate care

• Reduce administrative waste

What is price inflation?

Major contributor to rising costs

How do US drug prices compare globally?

>50% higher than other countries

What behavior does higher drug prices in US cause?

Seeking drugs abroad (e.g., Canada)

What contributes to higher costs from providers?

Rising specialist income

What is the benefit of limiting price inflation?

Decrease costs without harming health

What is the goal of eliminating inappropriate care?

Reduce quantity without sacrificing beneficial care

Why do inappropriate procedures occur?

Physician practices and industry influence

What is an issue with new technologies?

Adoption without proven efficacy

Why were Medicare costs 3x higher in some cities?

More services provided, not higher prices or illness severity

What effect does hospital bed supply have?

30% higher hospitalization rates

What is the outcome in high-spending region and what does this indicate?

Worse quality and outcomes with unnecessary care

What is administrative waste?

Non-clinical cost in health care spending

What % of US health spending is administrative? How much?

15–25%; $600 billion–$1 trillion

What is the goal of eliminating administrative waste?

Stop non-beneficial activites

What happens when systems try to modify processes?

They become more complex

What is a better approach instead of modifying processes?

Eliminate unnecessary processes entirely

What are categories of administrative waste solutions?

Innovation, prevention, prioritization

What is innovation in health care?

Finding less costly ways to achieve equal or better outcomes

What are examples of innovation?

Cheaper drugs, non-specialist providers, outpatient care

What is the goal of new technology?

More efficient and less costly treatment

What is an example of innovation not reducing costs?

Gallbladder surgery (laparoscopic cholecystectomy)

What are benefits of laparoscopic surgery?

Smaller incision, less pain, shorter stay

What unintended effect occurred from laparoscopic surgery? What was the result?

Increase in surgery rates; 25% lower cost per procedure but 11% increase in total cost

What is prevention in cost control?

Ultimate painless strategy

Why can prevention increase costs?

Implementation costs exceed treatment costs

What is an example of prevention in cost control?

HTN/Cancer screening vs treating complications

What is the benefit of prevention in cost control?

Improved population health

What is the paradox of prevention in cost control?

Longer life with higher medical costs

What is cost-effectiveness analysis?

net cost/outcome (years of life saved)

Why must cost-effective analysis be used cautiously?

Requires accurate data

What bias exists in cost-effective analysis?

Discrimination against disabilities

What is an example of prioritization?

Smoking cessation vs invasive procedures

What example did Dr. David Eddy discuss?

Contrast media vs cervical cancer screening

What was the trade-off of prioritization and analysis by Dr. David Eddy?

$3.5M for safer contrast vs preventing 100 deaths/year

What are the three approaches to resource use?

• Invest in both services

• Trade-offs

• Maximize populations outcomes

What conflict exists in prioritization and analysis of cost-effectiveness?

Population benefit vs individual patient care

What must health professionals balance?

Individual patient needs vs population needs

What ethical responsibility is required?

Social accountability and clinical responsibility

What is the relationship between costs and outcomes?

Complex with diminishing returns

What does the cost-benefit curve show?

marginal improvements with increasing spending

What is the ideal cost control method?

Painless improvement via efficient resource use

How is the ideal cost control method achieved?

Control prices, reduce waste, eliminate ineffective care

What is painful cost containment?

Rationing beneficial services

What determines painful vs painless?

Perspective on trade

What is an example of painful control?

Denial of beneficial services

What limits painless cost control?

Political, organizational, and technical barriers

Who often opposes cost control?

Providers

What may be required for administrative savings?

System overhaul

What is the efficiency of US system?

Not close to maximum efficiency

Do higher spending regions have better outcomes?

No

What is the priority for cost control?

Better use of existing resources