Healthcare Economics

Is it all just dollars and cents?

19 April 2009

James S Eadie MD, FACEP

Co-Chair, ACEP FGA Committee
GSACEP, Immediate Past President
Academic Faculty, Wilford Hall Medical Center,
San Antonio, Texas
 Overview

1. How much does the US spend on

health care?
2. Where do the dollars go?
3. How fast are the costs growing?
4. What can be done to contain the
costs?
5. Is the system really at a crisis?
 Economics..ouch

Why do we need to study economics?

Id rather be herding cats.

 Health Care Economics 101 Quiz

How much did the US pay for health

care in 2007?
What is the % GDP spent on health
care?
What are the most expensive parts of
the health care system?
 Health Care Spending 2007

>$2.2 Trillion dollars

16.2% of GDP, Switzerland next highest 11.4%
$7,421 per living person
Spending rose 6.1% (inflation 4.1%)

Spending is driven by new medical treatments,

rising prices and growing utilization.
Smith et al. Health Affairs Jan 2006
US Healthcare = French Economy
Percent Health Care of GDP 2006

data from WHO http://www.who.int/en/

Expenditures per Capita 2006

data from WHO http://www.who.int/en/

 Per Capita Health Spending in 2006

Source: McKinsey Global Institute and NEJM 2009

WHO Health Care Rankings

1. France

18. England

25. Germany

30. Canada

36. Costa Rica

37. United States

38. Slovenia
Health Comparisons
 Health Care Spending - 2006

Hospital Care
31% of total health care expenditures
$648.2 billion

Physician Payment
21% of total health care expenditures
$447.6 billion
Growth from inc. office visits and imaging
 Health Care Spending - 2006

Prescription drugs
10% of total expenditures
Total: $216.7 billion *
greater than nursing homes and home
health care combined ($177.6 billion)

Health Insurance Admin Costs (private + Gov)

- $204.1 billion
 Health Care Spending - 2006

Medicare
$401.3 billion
19% of national health expenditures
Revenue
65% from payroll taxes and premiums
35% from general taxes
Key: this competes with Gov. spending
 Health Care Spending - 2006

Medicaid
$310.6 billion
15% of national health expenditures
> 20% state budgets

SCHIP
$ 8 billion
Federal Government pays over 46% Health care bills
 Federal Budget 2008

Federal Budget 2008 2.979 Trillion dollars

Social Security 612 billon

Medicare/Medicaid 682 billion
Defense 613 billion
Education 59 billion
Debt Interest 249 billion
Federal Spending FY 2008

Source: Congressional Budget Office

US Federal Spending
Federal Receipts FY 2008

Source: Congressional Budget Office

 Projected Growth

Health Care Projected Growth Rates

6.2% annually through 2018
16.2% GDP2007 to 20.3% GDP2018
Public Payers
2016 will be largest source of funding
2018 over half of all health care spending
Why?
Baby Boomers 76 M
Projected Growth
Health Care Reform Is it Possible?
 Health Care Timeline

Social Security
1935 Medicare Clinton
Progressive Era
Germany 1965 1994 Medicare
1910 - 17 Truman Plan
1883 Nixon Drug Bill
1945 1970s 2003

Pre-1880 1930s 70s 1980s - Present

Physicians limited Physicians / Corporations
authority AMA Strong Competing Interests
Loss of Political Influence
1880 1920
Industrial Revolution
Rise in prestige Rapid Health Care Growth
1950s-70s
 Health Care Reform Issues

Uninsured and Underinsured

Quality Initiatives
Patient Centered Medical Home
Health IT
Physician Pay Reform
Medical Liability
Health Care Costs
How Do You Share The Resources?
 How Do You Slice The Pie?

Whos going to take the smaller piece?

Physicians?
Hospitals?
Drug Companies?
Trial Lawyers?
 Emergency Medicines Slice of Pie

119.2 million ED visits 2006

$ 37.5 billion on emergency care
Only 1.8% of all health care expenditures

Emergency Medicine is a small fish

Fixing the over-utilization of emergency

departments will NOT fix the problem
1 in 10 Jobs in US is Health Care Related
 Are we in Crisis?

US health care costs have been in crisis for

roughly 40 years Brown, NEJM 24 Jan 08

Imminent Collapse rests on 3 indicators

1. There are 47M uninsured we must have
universal coverage
2. Health care costs are extraordinarily high
3. US system is in fact not a system, but
incoherent hodge-podge
 Are we in Crisis?

1. The Safety Net for the Uninsured

Community Health Centers
Emergency Departments
Public and voluntary hospitals
Funds come from donations, Medicaid,
grants, etc. 11th hour infusion of money

President Bush told everyone that they can

always go to the emergency room
 Are we in Crisis?

2. Health Care Costs are High

Costs have been skyrocketing since 1965
when Medicare/Medicaid were signed into
law
US system has pushed technology
Research hospitals, drugs, medicines
Public health fell to the side
 Are we in Crisis?

3. The non-system of US health care will

ultimately drive reform

Clearly deep interest on all parties to bring

together the fragmented system, BUT:
Business, insurance, and providers have
different priorities, but all agree:
Big Government is NOT the answer
Costs of reform should not fall on them
Their agenda takes precedence
 Law of Reform

There is nothing more difficult to

manage, more dubious of success
than to initiate a new order of things.
The reformer has enemies in all those
who profit from the old order and only
lukewarm defenders in all those who
would profit from the new order.

Machiavelli 1513
What Glasses Are You Looking Through?
Every System is Perfectly Designed To
Produce The Results It Produces

Don Berwick, MD
The Institute for Healthcare Improvement
 Here we go again.

1917, 1935, 1948, 2009

1965, 1970, 1994