Estimating the Value of Investment: Medicare & Overall U.S. Health Care Services Academy Health 2004 San Diego Bryan R. Luce, PhD, MEDTAP Frank Sloan,

Estimating the Value of Estimating the Value of Investment: Medicare & Investment: Medicare & Overall U.S. Health Care Overall U.S. Health Care

ServicesServices

Academy Health 2004 San Diego

Bryan R. Luce, PhD, MEDTAP Frank Sloan, PhD, Duke UniversityJosephine Mauskopf, PhD, RTIClark Paramore, MSPH, MEDTAP

U.S. HC Expenditures/Capita (2000 $)

$2,207

$3,541

$4,461

1980 1990 2000Source: Health United States 2002, Consumer Price Index (All Items)

The Value of this Investment is Seldom Part of the Debate

CBO Issues Warning on Rising Health Care Costs

Senate Republicans in Albany Eye Big Medicaid Cuts

Medicare Revamp Fails to Cure Angst Over Costs

Study Objective

Estimate the economic value of investment in health care over the past 20-30 years

Study Sponsors (“The Value Group”)

Advanced Med Tech Assoc (AdvaMed) American College of Cardiology (ACC) American Hospital Association (AHA) Federation of American Hospitals HealthCare Leadership Council National Pharmaceutical Council Pharm Research Mfts Assoc (PhRMA)

3 Approaches to Triangulate ROI*Approach 1: Overall Health Care,1980-2000Approaches 2 & 3: AMI, Type 2 Diabetes, Stroke, Breast Cancer

Approach 2. Medicare (1985-2000) Approach 3. Major Innovations (1975-

2000)

* Value of Statistical Life year assumed to be $100K (Cutler 1997; Cutler McClellan et al, 2001, Viscusi 1993, Bloomquist 2001, Nordhaus 2002, Ubel et al 2003)

Why these four conditions?

Common (31.5 M) High M/M rates Nearly all at risk for

one of these diseases

Medical breakthroughs have improved outcomes

Costs are high Value of investment

not documented

17

2.2

4.7

7.6

HeartAttack

Type 2Diabetes

Stroke BreastCancer

U.S. Population Affected by Conditions Studied, in millions, 2003

Source: American Heart Association; www.diabetes.org; www.cdc.gov/nchs

Approach 1: ROI Overall Health Care, 1980-2000

Compared changes in U.S. population morb/mort with…

Changes in total health care expenditures Monitorized only mortality gains Computed value of population health gains per

additional dollar invested (using 2000 vs 1980 rates)*

Sources include: Health U.S., 2002; National Vital Statistics 2002; Manton et al 2001; Houtenville 2001; Lubitz et al 2001; MEPS Surveys1996, 1999; US Census 2000; Nordhaus 2002

*Assumption: benefits and harms of non-health care even out (e.g. smoking, obesity, illegal drugs, environmental)

Approach 2: ROI Medicare, 1985-2000

Linked NLTC survey data with… Medicare claims for AMI, Diabetes, Stoke, Breast

Cancer Outcome Measures: 5 year survival, ADL limitations,

cognitive functioning, nursing home residence Monitorized both mortality & disability changes ROI: Dollar value of 5 year health benefits (less

beneficiary Rx & nursing home costs) compared to 5 year Medicare payments (1985-90 vs 1995-2000)

Sources include: NLTC Surveys; Medicare Claims; Cutler 1997; Viscusi 1993; Mrozek 2003

Approach 3: ROI Major Innovations 1975-2000 (4 diseases)

For each disease: Compiled 25 year timeline of “major

innovations” Compiled all CEA literature for each innovation Calculated ROI for each innovation

Sources include: PubMed, Bloomquist 2001, Cutler & McClellan 2001, Nordhaus 2002, Viscusi 2003, Tengs 1995, 2003, Neumann et al 2000, Selected clinical experts

FINDINGS

Overall Value of Investment: 1980-2000

Per capita expenses up $2,254, but: Overall death rate down 16% Life expectancy from birth up by 3.2 years Disability rates decreased 25% (65+)* 56% fewer hospital days

Overall ROI: $2.40 to $3.00 per dollar invested

*Value of these improvements not quantified.

Findings: Four Common Diseases

Heart attack Type 2 Diabetes Stroke Breast Cancer

Heart Attack

Heart Attack:Improvement in Outcomes

Mortality cut nearly in half

Death within 30 days cut from 1 in 4 to 1 in 8

Hospital stays: was 3-4 weeks; now 5-7 days

345.2

186.9

1980 2000

Death Rate Due to Heart Attack(Age-adjusted, per 100,000)

Source: www.cdc.gov/nchs

Medicare ROI: Heart Attack Patients

*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocketSource: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)

Value of improved outcomes:

--minus--

Increase in treatment costs*:

(Medicare plus out-of-pocket)

Net benefit in dollars:

$28,632

$26,093

$2,539ROI: $1.10 per dollar invested

AMI: ROI of Major Innovations vs Standard Treatment

Beta-blockers Mobile coronary care

units Statin therapy Angiography Rt-PA Angioplasty w/stenting Other

$1.42

At Least As Much As

$38.44

Source: Published literature

Type 2 Diabetes

Costs and Outcomes for Medicare Type 2 Diabetes Patients

*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocketSource: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)

Value of improved outcomes:

(7% gain in life expectancy) --minus--

Increase in treatment

costs*:(Medicare plus out-of-

pocket)

Net benefit in dollars:

$16,930

$11,337

$5,593ROI: $1.49 per dollar invested

Type 2 Diabetes: Value of Specific Medical Breakthroughs

Tight control of glucose, BP & cholesterol

Statins Ace inhibitors Screening and

treatment of diabetic retinopathy

Other

Breakthroughs vs. Current Standard Treatment

Range in Value per Dollar Invested

$3.00

At Least As Much As

$36.00

Source: Published literature

Stroke

Stroke:Improvement in Outcomes

Mortality cut by 37 percent

Stroke-related disability after 3 months reduced by up to 30 percent with rt-PA

96.2

60.8

1980 2000

Death Rate Due to Stroke(Age-adjusted, per 100,000)

Source: www.cdc.gov/nchs

Costs and Outcomes for Medicare Stroke Patients

*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocketSource: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)

Value of improved outcomes:

(10% gain in life expectancy)

--minus--

Increase in treatment costs*:

(Medicare plus out-of-pocket)

Net benefit in dollars:

$24,903

$16,035

$8,868ROI: $1.55 per dollar invested

Stroke: Value of Specific Medical Breakthroughs

Breakthroughs vs. Current Standard Treatment

Range in Value per Dollar Invested

$2.00

$6.00

At Least As Much As

Source: Published literature

Clopidogrel Ticlopidine rt-PA* Carotid

endarterectomy*

*Yields a savings in treatment costs

Breast Cancer

Breast Cancer:Improvement in Outcomes

Mortality cut by 21 percent

5-year overall survival rates increased from 77% to 87%

Risk of metastatic disease declined from 40% to 15%

32.3

25.4

1980 2000

Death Rate Due to Breast Cancer(Age-adjusted, per 100,000)

Costs and Outcomes for Medicare Breast Cancer Patients

*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocketSource: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)

Value of improved outcomes:

(8% gain in life expectancy) --minus--

Increase in treatment

costs*:(Medicare plus out-of-

pocket)

Net benefit in dollars:

$22,341

$4,676

$17,665

ROI: $4.80 per dollar invested

Breast Cancer: Value of Specific Medical Breakthroughs

Letrozole Breast-conserving

surgery Biennial mammography Adjuvant chemotherapy Stereotactic core biopsy

Breakthroughs vs. Current Standard Treatment

Range in Value per Dollar Invested

$3.27

At Least As Much As

$36.81

Source: Published literature

Conclusion: ROI US Health Care appears positive in terms of….

Overall HC Spending Medicare Spending and Major

innovations for Heart attack, Diabetes, Stoke, Breast Cancer…..

If we can agree that a year of life is worth $100,000

Selected Discussion Issues

Value of Statistical Year of Life: $100,000? ROI Overall HC

Non HC balance out (smoking, obesity/diet, illegal drug use, violence, environmental)?

No productivity No disability

ROI Medicare: Includes disability but not productivity

ROI Interventions: Does not include productivity

ROI seems positive: Could we do better?

Implications

Public policy discussions about health care costs should (and can) be accompanied by estimates of value returned.

For Study Report & Technical Appendices……

www.medtap.com

THANK YOU!