BIOE 301Lecture SixReview of Lecture 5 Health Systems What is a health system? Goals of a health system Functions of a health system Types of health systems Performance of Health Systems Examples of health systems Entrepreneurial Welfare-Oriented Comprehensive Socialist1. Health Systems It is often said that illness is a cause of poverty. Why? How do health systems work to prevent this from happening?2. DALY What does a DALY measure? How much are we willing to spend to gain a year of life? Name two health interventions that result in cost SAVINGS.3. Health Insurance What are the most common types of health insurance in the US? How many people in the US do not have health insurance?Overview of Lecture 6 How have health care costs changed over time? What drives increases in health care costs? Health Care Reform in the US – Back to OregonCenters for Medicare & Medicaid ServicesHOW have costs changed in the US over time? Health Expendituresper capitaActual ProjectedNational Health Expenditures$0$2,000$4,000$6,000$8,000$10,000$12,000$14,0007.2 %$3569.1 %$1,10212.3 %$2,81313.6 %$4,10413.8 %$4,79015.8 %$5,95216.0 %$7,09216.9 %$8,46817.9 %$10,11019.2 %$12,06219.2 %$12,782197019801990199319971998199920002001200720062005200420032002200820092010201520142013201220112016Centers for Medicare & Medicaid ServicesHOW have costs changed in the US over time? UP, UP, UP (1/7thof the economy)IN ABSOLUTE AMOUNTAS A SHARE OF GDPCenters for Medicare & Medicaid ServicesWHY have costs gone up so much? Centers for Medicare & Medicaid ServicesWHY have costs gone up so much? Administrative CostsAging populationUse of technologyIncreasing prescription drug costsCenters for Medicare & Medicaid ServicesWhat Drives Increases Costs? Administrative Costs US spends 25-30% of health care budget on administrative overhead 27% of US health care workers do “mostly paperwork” Canada spends only 10-15%What Drives Increases Costs? Aging Population “Baby boomers” will strain health care system Felt most in 2011-2030 Greatest single demand country has ever faced for long term care Elderly account for much of health care spending 40% of short term hospital stays 25% of prescription drug use 58% of all health expendituresCenters for Medicare & Medicaid ServicesTable 3.6Number of Medicare Beneficiaries, 1970-203025.531.034.138.652.268.220.48.68.77.35.43.33.0010203040506070801970 1980 1990 2000 2010 2020 2030Calendar YearDisabled & ESRDElderly * Numbers may not sum due to rounding.Source: CMS, Office of the Actuary.The number of people Medicare serves will nearly double by 2030.20.428.4*34.339.6*45.961.0*76.8Medicare Enrollment (millions)What Drives Increases Costs? Technology New technology can increase/reduce health care costs From 2001-2002, new technology was responsible for 22% of increase Growth in radiology $175,000 x-ray machines replaced with CT machines (>$1M) Increased utilization of technology increases costs 4X more PTCAs in pts aged 65-74 from 1990-1998 Direct marketing of high-tech procedures http://www.ew1.org/index.aspx?CORE_ElementID=ew1_OverviewWhat Drives Increases Costs? Prescription Drugs Fastest growing category of health spending Some reasons: Direct marketing of drugs to the general population (increased costs, increased usage) Drug company profitsCenters for Medicare & Medicaid ServicesWHY have costs gone up so much? Administrative CostsAging populationUse of technologyIncreasing prescription drug costsBack to Oregon How did Oregon state respond to the rise in health care costs? Coby Howard’s death: widespread media coverage John Kitzhaber Former ER physician State senator Governor of Oregon Oregon cannot afford to pay for every medical service for every person Oregon could expand insurance to cover all IF it was willing to ration carehttp://www.morris-verdin.co.uk/Oregon-map.gifHealth Care Reform in Oregon 1989 – Goal of Universal Coverage At that time only 42% of low-income Americans were covered by Medicaid Bill passed: Mandated private employers provide insurance for employees (never received federal waiver necessary for implementation) Expanded Medicaid to provide coverage for all people in state below federal poverty line Would expand Medicaid coverage by rationing careHealth Care Reform in Oregon How were services ranked? Appointed Health Services Commission List of 709 condition/treatment pairs First try at ranking 1600 health services Ranked according to cost-effectiveness Resulted in counter-intuitive ranking Negative public reactionBenefitDurationofdBenefitNetExpectetmentCostofTreatingpriorityra×=Results of First RankingTreatment Benefit Duration Cost Ranking Tooth Capping .08 4 years $38 371Ectopic Pregnancy .71 48 years $4,000 371Splints for TMJ .16 5 years $98 376Appendectomy .97 48 years $5700 377Some life saving procedures ranked below minor interventions!!Health Care Reform in Oregon Back to the drawing board Divided 709 condition/treatment pairs into 17 categories Ranked categories according to net benefit 1 – Treatment of acute life-threatening conditions where treatment prevents imminent death with a full recovery and return to previous health state 14 – Repeated treatment of nonfatal chronic conditions with improvement in quality of well-being with short term benefit Assigned condition/treatments to categories and ranked within categoryHealth Care Reform in Oregon How were services rationed? Each session legislature would decide how much $$ to allocate to OHP. Draw line – Cover all services above the line Cover no services below the lineWhere do they draw the line?Oregon Health Plan, 1999Rank Diagnosis Treatment570 Contact dermatitis and atopic dermatitis Medical therapy571 Symptomatic urticaria Medical therapy572 Internal derangement of knee Repair/Medical therapy573 Dysfunction of nasolacrimal system Medical/surgical treatment574 Venereal warts, excluding cervical condylomata Medical therapy575 Chronic anal fissure Medical therapy576 Dental services (eg broken appliances) Complex prosthetics577 Impulse disorders Medical/psychotherapy578 Sexual dysfunction Medical/surgical therapy579 Sexual dysfunction PsychotherapyDid it Work? No widespread rationing Number of services excluded is small and their medical value is
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