Saturday, March 31, 2012

Health care graphics

I am copying these excellent graphics from Derek Thompson on the challenges facing health care sector in the US. They are representative of the problems faced by health care sector across many countries.

Health care is most cost-effective in Western Europe and East Asia. The contrast with the hugely expensive and relatively ineffective American health care system is stark.

America's health care inflation over the past 30 years trumps that in all other major economies.

Contrary to conventional wisdom, health care costs are not dominated by insurer profits and transaction costs, but by hospital and physician costs and pharmaceuticals.

Slowing the growth of health care spending would require squeezing many of these slices of the pie at the same time by, for example, increasing the payoff of investments, making hospitals more efficient, reducing doctor pay, and making prescription drugs less expensive.

The top 5% of spenders account for almost half of all health care spending.

The top 1% spends $90,000 per person on health care, 381 times more than the bottom 50%. This also means that certain categories of consumers soak up a major share of the health care spending. This also means that the focus of cost-cutting should be focussed on them.

The 1% of health care spenders are much, much sicker than the rest of the country. But almost half of them are in good, very good, or excellent health. Is there a window for cost cutting there?

But of the top 1% of health care spenders who make up 20% of all health care spending, 2/3rds are older than 55.

America's long-term budget crisis is nearly entirely a crisis of government health care spending, which is overwhelmingly in Medicare and Medicaid.

Thanks to incredible advances in heart surgery and medicine, the cardiovascular related deaths per capita have declined by 80 percent since 1950.


Sai Prasad Guttapalli said...

Great One Gulzar.

Comment 1: If the top 5% is making 50% of the spending, the per capita spending in 4000$ for the rest of the population, which compares much better with the rest of the countries.

Bringing down the spend by this 5% could be a requirement in order to bring down the total spend, which would reduce the misery of the country a great deal.

Comment 2: That we need to cut down the expenditure on Hospital , doctors, pharma etc simultaneously is a good starting point. Has the government of USA taken any steps in this direction in its medicare and medicaid administration. I think they have taKen a lot of steps. They have fixed limits of individual items as well as on total spend by patients. They haver capped hospital and doctors' fees too. Dont know the net impacts though.

Sai Prasad Guttapalli said...

comment 3: we would face an ethical dilemma while deciding to cut spending on the top 5% of the spenders. In most cases these are older citizens. When the state needs to make such decisions, we are aware that the decision would be put off for as long as possible. We have seen examples where decisions are put off to the detriment of the system itself. Most would opt for destruction of the system rahter than take such a call during their time in office. Democratic polity also makes the decision difficult.

On the scientiific side, the argument would be that we cannot push the frontiers of medicine, if we make this cost cutting decision. The longevity that the human race has enjoyed, has in recent times, been the result of slow incremental work. The benefits of this work, when applied through the state, becomes all the more difficult to deny.

Sadly, the only public policy option available would be to let the system deteriorate to bad standards. We have seen many such systems go bad within a decade.

DSI said...

Interesting depiction of some well studied facts. Sir, Is ther an Indian study that has been done on the health care spending pattern of our population? It would be logical to do such a study on the existing health care spending pattern of the public, and then carve out the Universal Health Coverage / Health Insurance plans which are on the pipeline.

Urbanomics said...

thanks sir. a few responses

1. It needs to be borne in mind that health care spending is highly concentrated at the top, ie old aged, in all societies, though the degree of concentration varies. So, even if we compare per capita spending for the remaining 95%, the US is still likely to continue as the outlier.

Bringing down this spending may prove difficult. It may not be politically feasible to cut services or coverage to these people. So cutting costs at the supply side may be the only alternative.

2. No, in the US, the government at any level (except in Maryland) does not play a role in fixing prices of services procured by insurers. For Medicaid and Medicare, there are only the negotiated rates on service procurement, but not on patient spending limits. Not that I know of.

3. I fully agree with the moral dilemma of taking decisions on these issues related to cutting coverage for old aged so as to keep costs under control.

DSI, I am not aware of any Indian study on these. That's deeply disappointing. But it is understandable because, health insurance market in India is very small and fragmented. But as you suggest, we should incorporate these lessons when we design a universal health insurance plan for the country.

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