Irish Healthcare Costs - unsustainable, unaffordable, unreformable?
- 1. Innovating for More Options Royal College of Physicians of Ireland Oliver OConnor 28 November 2012 ooc@sky.com
- 2. Health Spending unsustainable? The Malthusian Vision Spending is growing too fastrelative to income We will have more older people needing more care We will have more people with chronic diseases We will have new technologies that cost more So it will all come to some crisis We may be in the crisis already It will bankrupt us ooc@sky.com
- 3. OECD: Health spending up 4.5% GDP in 40 years Average health spending as a share GDP across OECD countries 9.7 10.0 9.0 Private expenditure Public expenditure 7.8 7.5 6.9 6.6 Share of GDP (%) 5.2 5.0 2.5 0.0 1970 1980 1990 2000 2008 2010 ooc@sky.com
- 4. What factors drove health spending growth? Income growth: 25% - 50% Technology: 28% 58% Ageing: 6.5% - 9% Price increases: 5% - 18% Defensive medicine negligible Source: OECD, Value for Money in Health Spending, 2011 - Very hard to estimate - In Irelands case, staff levels +37% 2000-09 and and pay costs +21%, 2005-09 ooc@sky.com
- 5. But spending growth now reversing for some Average health spending as a share GDP across OECD countries ooc@sky.com
- 6. % 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 -2.0 EU27 Average Netherlands France Germany Denmark Austria Portugal Belgium 2 Greece Spain Sweden United Kingdom Italy Ireland Slovak Republic Slovenia EU-27 Finland ooc@sky.com Malta Luxembourg 3 Hungary Czech Republic Cyprus Bulgaria Ireland 9.2% Poland Lithuania Latvia Estonia Romania doi: 10.1787/9789264183896-en Switzerland Serbia Norway Where we are now: Health as % GDP Iceland Public Private OECD (2012), Health at a Glance: Europe 2012, OECD Publishing. Residual
- 7. Where is health spending going? Three views OECD 2006 out to 2050 OECD 2009 out to 2025 IMF staff 2012 out to 2030 ooc@sky.com
- 8. 1: OECD 2006 estimated Health could nearly double its % GDP 14% Public health and long-term care spending (% of GDP) Total: 12.8% 12% 3.3% 10% Total: 10.1% 2.4% 8% Total : 6.7% 6% 1.1% 9.6% 4% 7.7% 5.7% 2% 0% 2005 2050 Cost-pressure scenario 2050 Cost-containment scenario Long-term care Health care Source: OECD 2006 Public expenditure on health and long-term care could rise to almost double current levels, from close to 7% of GDP in 2005 to some 13% by 2050 - assuming that growth in... technological change remains unchanged - restraining this could halve the growth amount correct? ooc@sky.com
- 9. 2: OECD 2010 ageing to add 1.2% GDP to Irish health cost by 2025 (plus 1.1% on long term care) OECD, Economic Outlook 88, quoted in National Competitiveness Council Competitivenesss ooc@sky.com Scorecard 2012
- 10. 3: Spending growth by 2030 - IMF staff view Worry: costs of ageing and the economy More worry: we add excess cost ECG excess cost growth, over and above that resulting from demographics/ageing ooc@sky.com
- 11. 3: Ireland the least unsustainable? Projected increase in public health spending 2011-30, %GDP Average 3% extra %GDP Source: Clements, Coady and Ireland only 0.7% Gupta, IMF; The Economics of Public Low Excess Cost Growth Healthcare Reform in Advanced and Emerging Economies Note public spending only ooc@sky.com
- 12. Ireland youngest in Europe Share of population aged 65+, 2010 25.0 20.0 15.0 10.0 5.0 0.0 Arguably, health spending should be relatively lower for this reason Ireland still has headroom to prepare for ageing (20 years behind most) ooc@sky.com
- 13. Unsustainable? Unaffordable? Irish health spending not growing too fast Most countries health spending growth not out of control No country ever bankrupted by health spending Unlike banking/insurance, health moves slowly a positive so adjustment possible Ireland has great advantage from young population But immediate challenge of adjustment and reform Medium term: controlled growth in health spending At 9%-11% GDP, with our demographics affordable so long as debt servicing cost not absorbing too much But is it the right type of spending? How efficient, how effective? ooc@sky.com
- 14. Why efficiency matters: winners and losers In a set budget, who gains and loses from inefficiency? Suppliers, providers, staff: gain Patients: lose (unmet needs, higher morbidity, mortality) Taxpayers: neutral, if budget control is kept What happens in an efficiency gain? Patients may get more services Taxpayers may pay less cost Or combination of both But some among suppliers, providers or staff may lose in a static analysis ooc@sky.com
- 15. Ireland is still expensive pay remains high in both the public and private sectors, adding to costs and prices in the economy a lowering of the cost base, both public and private, would make a significant contribution to improving competitiveness and productivity in a fundamental way Central Bank of Ireland, Quarterly Bulletin, October 2012 Health costs high Staffing, consumables, drugs Drugs total cost per person highest in OECD (but price cuts now) Measures to reduce volume usage coming Efficiency not at achievable levels e.g. average lengths of stay Barriers to efficiency in place (fixed costs and payment systems) ooc@sky.com
- 16. Unit wage costs still high Central Bank of Ireland, Quarterly Bulletin, October 2012 ooc@sky.com
- 17. OECD 2011: near 5% GDP efficiency gain possible for Ireland - 8bn worth OECD: Going for Growth, 2011 ooc@sky.com
- 18. Explanation of method Potential savings represent the difference between i) a scenario where public spending and life expectancy gains would increase at the same pace over the next decade as over the decade 1997-2007 and ii) a scenario where countries would achieve similar health improvements with lower public spending by moving towards the efficiency levels of best-performing countries Calculation highly influenced by high health spending growth 1997-2007 Limitation on spending therefore delivers some relative efficiency gain But how practically to get to perform at the level of the most efficient? ooc@sky.com
- 19. Example from health insurance cost comparison 19 Jan 2011: VHI released comparative data to illustrate its costs were lower than US costs (and health utilisation), based on a survey by the International Federation of Heath Plans * * ooc@sky.com
- 20. Hospital day costs Place VHI costs beside the other international comparisons in that 2010 IFHP survey: Irish Public VHI Hospital $1,050 - Charge $1,350 ooc@sky.com
- 21. Hip replacement VHI Source: International Federation on Health Plans, 2010 ooc@sky.com
- 22. UK NHS unit costs much lower Irish Casemix rates vs UK NHS Tariffs - selected orthopaedics 25,000 20,000 15,000 Ireland 2009 Ireland -10% 10,000 UK Average 5,000 0 HIP REPLACEMENT + CCC HIP REPLACEMENT - CCC KNEE REPLACEMT +CSCC KNEE REPLACEMT -CSCC Caveat: Casemix a post-hoc averaging of cost; not very precise Patient level / procedure level costing needed Exchange rate 1=贈0.80 ooc@sky.com
- 23. If we did these four operations at UK rates Costs and savings 60,000,000 50,000,000 40,000,000 30,000,000 IRL -10% UK Cost 20,000,000 Saving 10,000,000 0 HIP REPLACEMENT + HIP REPLACEMENT - KNEE REPLACEMT KNEE REPLACEMT - CCC CCC +CSCC CSCC Total cost savings / efficiency gain: 34m Data used to illustrate; caveats needed ooc@sky.com
- 24. Circulatory System Casemix Rates (2009) Top Ten by Unit Cost Procedure No. Cases Cost CRDC VALV PR+PMP+INV INVES+CCC 33 56,927 OTHER CARDTHOR/VASC PR+PMP+CCC 56 47,660 IMPLNTN/REPLCMNT AICD TTL+CCC 82 46,577 AMPUTN CIRC SYS-UP LMB&TOE+CCC 76 44,292 CRNRY BYPSS+INV INVES+REOP/CCC 68 42,924 CRDC VALV PR+PMP+INV INVES-CCC 19 38,320 CRD VLV PR+PMP-INV INVES+CCC 205 38,178 MJR RECONSTRC VASC PR-PUMP+CCC 241 35,232 INFECTIVE ENDOCARDITIS +CCC 35 30,836 OTH CARDTHOR/VASC PR+PMP+SMCC 48 30,610 ooc@sky.com
- 25. Circulatory System UK Tariffs (2011) Top Ten by Unit Cost Procedure Rate Implantation of Prosthetic Heart or Ventricular Assist Device 37,551 Other Complex Cardiac Surgery with Percutaneous Coronary 10,486 Intervention, Pacing, EP or RFA Other Complex Cardiac Surgery with Catheterisation 10,343 Major Complex Congenital Surgery 8,802 Single Cardiac Valve Procedures with Percutaneous Coronary 8,562 Intervention, Pacing, EP or RFA Single Cardiac Valve Procedures with Catheterisation 8,406 Other Complex Cardiac Surgery and Re-do's 7,862 Complex Congenital Surgery 7,569 Single Cardiac Valve Procedures 7,239 Coronary Artery Bypass Graft (First Time) with Percutaneous 7,194 Coronary Intervention, Pacing, EP or RFA ooc@sky.com
- 26. Circulatory System Casemix Rates (2009) Top Ten by Total Cost Procedure Cases Cost Total Cost HEART FAILURE & SHOCK - CCC 4,175 5,155 21,522,125 CHEST PAIN 12,948 1,596 20,665,008 CRC DSRD+AMI-INVA INVE PR-CCC 2,953 6,320 18,662,960 ARRHY, CARD & COND DISDR -CSCC 6,013 2,470 14,852,110 INTERVENTN CORONARY PR+AMI-CCC 1,211 11,736 14,212,296 HEART FAILURE & SHOCK + CCC 1,173 11,718 13,745,214 CRC DSRD-AMI+IC IN PR -CSCC 2,751 4,991 13,730,241 CRNRY BYPSS-INV INVS+REOP/CSCC 433 27,317 11,828,261 SYNCOPE & COLLAPSE - CSCC 5,316 1,874 9,962,184 ARRHY, CARD & COND DISDR +CSCC 1,515 6,406 9,705,090 ooc@sky.com
- 27. OECD developing price/volume comparisons Explaining differences in hospital expenditure across OECD OECD, Joint session of the meetings of countries: the role of price and volume measures Health Accounts Experts and Health Data Correspondents, 11 October 2012 ooc@sky.com
- 28. Public sector cost strategies Staff HSE direct pay and pensions cost 40% but really 70% A lot of staff costs are fixed not variable, so use differentiated strategies to address quasi-fixed costs Staff levels Appropriate mix and deployment of staff Rates of pay Non-core pay Pensions Non-HSE staff costs Supplies Achieve lower drug cost good agreement now Achieve lower supplier / procurement cost potential Then performance manage Set high efficiency-clinical quality goals Very detailed data for clinical care/resource management together Measure and manage People who can do it and incentives aligned ooc@sky.com
- 29. Quick notes: efficiency gains and technology New technologies both costly and beneficial HTA measures cost-benefit for the patient Ideal is that new technologies would also deliver efficiency gains for payor (HSE/insurer/taxpayor) help reconfigure the method of care or clinical pathways reduce hospitalisation / lengths of stay Ideal collaboration: not to leave the public sector to extract cost or make reforms but partner with it Risk-share by provider? Clinicians: their leadership both to achieve clinical effectiveness and cost efficiency ooc@sky.com
- 30. Health insurance reform which direction? Publicly-stated Government commitment to Quasi-independent not-for-profit trust hospitals plus private hospitals all competing for patients and activity Public and private insurers competing for customers However, protection of income and managed change for existing public hospitals is a strong trend Public hospitals to earn more from insurance funding pool No clarity on when or how private hospitals can take part in Money Follows the Patient system Competing insurers promised, but could be No control over policy benefits, pricing, premium or providers Exemption from competition law -> not commercial Effectively, administrators of a State-mandated benefits package Supplementary insurance for minor matters only Dutch system, German or neither? NHS? Sweden? ooc@sky.com
- 31. Conclusions Health spending not unsustainable Growth not out of control Ageing cost not catastrophic, can be anticipated and managed But application of resources not efficient enough Real gains available to benefit patient care Adoption of new technologies would best also support efficiency agenda of health payors Clinical leadership for effectiveness and efficiency ooc@sky.com