Health Care Costs: The Role of Technology Alliance for Health Reform 20 th Anniversary Series

Health Care Costs: The Health Care Costs: The Role of TechnologyRole of Technology Alliance for Health Reform20th Anniversary SeriesMay 29, 2012

Joseph R. Antos, Ph.D.Joseph R. Antos, Ph.D.Wilson H. Taylor Scholar in Health CareWilson H. Taylor Scholar in Health Care and Retirement Policyand Retirement PolicyAmerican Enterprise InstituteAmerican Enterprise Institute

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$140 million +

The power source for proton beam therapy

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“Traditional” Technology

Standard Technology circa

2000

Current Technology

X-Ray Machine$175,000

CT Scanner$1 million

CT Functional Imaging w/PET

$2.3 millionOpen Surgery Instrument Set

$10,000

Laparoscopic Surgery Set

$15,000

Surgery Robot~$2 million

Cardiac Balloon Catheter

$500

Stent$2,300

Treated Stent$5,000

Scalpel$20

Electrocautery $12,000

Harmonic (ultrasonic) Scalpel$30,000

High cost of advancing technology High cost of advancing technology

Source: Keith Kasper, “The Cost of Hospital Care,” National Health Policy Forum, October 8, 2010

AEI

16th century: “couching” a clouded lens with a thick needle

1960s: inpatient operation, with patient’s head held in place for 2 weeks with sand bags◦ “Intracapsular cataract extraction”

Today: outpatient procedure completed in an afternoon◦ “Phacoemulsification”

Better technology, more successful results Greater demand, more spending

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Cost Effectiveness of Treatment1

Deaths Prevented

% of Mortality Decline

A. Effective/Low Cost 83,285 52.3%B. Effective/Higher Cost

45,225 28.4%

C. Less Cost Effective

30,830 19.3%

Total 159,340 100.0%

Aspirin vs. AngioplastyDecline in Death from Coronary Disease,

1980-2000

1A: aspirin, heparin, warfarin, anti-hypertensives, β blockers, diuretics; B: statins, ACE inhibitors, IIa/IIb antagonists, thrombolytics; C: angioplasty/stents, CABG, cardio-pulmonary resuscitation, cardiac rehabilitation

Source: Amitabh Chandra and Jonathan S. Skinner, ”Technology Growth and Expenditure Growth in Health Care,” NBER, April 2011

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More Tests, Not More ProceduresAdditional Spending on Physician Services for Highest Cost Patients1

1Compares spending of Medicare patients in the highest quintile with those in the lowest quintile using the end of life expenditure index

Source: Elliott Fisher et al. , “The Implications of Regional Variations in Medicare Spending,” Annals of Internal Medicine, February 18, 2003

AEI

Effectiveness is NOT the same as value◦ Value depends on clinical effectiveness,

impact on quality of life, and cost Effectiveness studies at best reflect the

average patient—there is variation in response

Effectiveness studies at best reflect the average provider—there is variation in performance

Moving target—continual change in technology, professional judgment, public expectations

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What lies below the surface?

Medicare◦ Coverage with evidence

development◦ Centers of excellence◦ FFS payment reform◦ Premium support

Private insurance◦ Coverage policy◦ Selective provider

networks◦ VBID

Providers◦ Professional consensus◦ New business structures

Consumers◦ Information◦ Financial incentives◦ Changed expectations

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