alan m. garber, m.d., ph.d. center for primary care and outcomes research center for health policy...

Alan M. Garber, M.D., Ph.D.Center for Primary Care and Outcomes ResearchCenter for Health PolicyStanford University

VA Palo Alto Health Care System

PCOR/CHP 10th Anniversary CelebrationSeptember 16, 2008

CENTER FOR HEALTH POLICYCENTER FOR PRIMARY CARE AND OUTCOMES RESEARCH

CENTER FOR HEALTH POLICYCENTER FOR PRIMARY CARE AND OUTCOMES RESEARCH

Alan M. Garber, M.D., Ph.D.Center for Primary Care and Outcomes ResearchCenter for Health PolicyStanford University

VA Palo Alto Health Care System

PCOR/CHP 10th Anniversary CelebrationSeptember 16, 2008

Alan M. Garber, M.D., Ph.D.Center for Primary Care and Outcomes ResearchCenter for Health PolicyStanford University

VA Palo Alto Health Care System

PCOR/CHP 10th Anniversary CelebrationSeptember 16, 2008

Alan M. Garber, M.D., Ph.D.Center for Primary Care and Outcomes ResearchCenter for Health PolicyStanford University

VA Palo Alto Health Care System

PCOR/CHP 10th Anniversary CelebrationSeptember 16, 2008

Alan M. Garber, M.D., Ph.D.Center for Primary Care and Outcomes ResearchCenter for Health PolicyStanford University

VA Palo Alto Health Care System

PCOR/CHP 10th Anniversary CelebrationSeptember 16, 2008

Should we be concerned about rising health expenditures?

It’s about value

Should we be concerned about rising health expenditures?

According to economists, Increased longevity since 1970 worth

$95 trillion (3x health spending) Improvements in health and physical

function highly cost-effective

Citizens of other nations are also living longer

0

5

10

15

20

25

30

35

Jan Feb Mar Apr May Jun

Food

Gas

Motel

It’s also about the money

Medicare sources of non-interest income and expendituresas a percentage of Gross Domestic Product

Source: Office of the Actuary, CMS; 2008 Medicare Trustees Report

Unfunded liability $7600 per

working age adult*

*In constant 2008 dollars

Why we spend more: the usual suspects

High pricesHigh Prices

High pricesHigh Prices

Misaligned incentives

Cutting costs

Cutting costs with little political pain

Promote electronic health records

$77 billion annual savings (Obama advisers)

$88 billion 10-year savings (Lewin group)

Reduce administrative costs

$ 43 billion annual savings (Obama advisers)

Prevention and disease management: $81 billion annually (Obama health advisers); more than $493 billion over 10 years (Lewin Group)

Additional opportunities for savings

INITIATIVE 10-YEAR SAVINGS

“Comparative effectiveness”

(Center for Medical Effectiveness)

Align payment incentives

Improved health insurance markets

Limit health insurance tax exclusion

$368 billion*

$457 billion

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*Lewin Associates calculations, in Bending the Curve, Commonwealth Fund Commission on a High Performance Health System, Dec. 2007

Cost control efforts must cut growth rate to have lasting effects

The key to sustained savings: better incentives based on better information

Medical interventions will need to be judged by the value they provide

COX-2 Inhibitors vs NSAIDS

Cha

nge

in c

osts

Gain in health benefit (QALYs)

Comparator: Naproxen

0 0.100.05

$12k

$6k

$0

Source: Spiegel et al., The Cost-Effectiveness of Cyclooxygenase-2 Selective Inhibitors in the Management of Chronic Arthritis, Ann Intern Med. 2003;138:795-806.

$100k per

QALY

COX-2 Inhibitors vs NSAIDS

Cha

nge

in c

osts

Gain in health benefit (QALYs)

Comparator: Naproxen

Assumption: Excludes effects on heart

Change in cost: $11,600

Change in benefit: 0.04 QALYs

Incremental CER: $290,000/QALY 0 0.100.05

$12k

$6k

$0

Source: Spiegel et al., The Cost-Effectiveness of Cyclooxygenase-2 Selective Inhibitors in the Management of Chronic Arthritis, Ann Intern Med. 2003;138:795-806.

$100k per

QALY

Basecase

COX-2 Inhibitors vs NSAIDS

Cha

nge

in c

osts

Gain in health benefit (QALYs)

Comparator: Naproxen

Assumption: INCLUDES effects on heart

Change in cost: $11,600

Change in benefit: 0.03 QALYs

Incremental CER: $395,000/QALY 0 0.100.05

$12k

$6k

$0

Source: Spiegel et al., The Cost-Effectiveness of Cyclooxygenase-2 Selective Inhibitors in the Management of Chronic Arthritis, Ann Intern Med. 2003;138:795-806.

$100k per

QALY

Basecasew/ heart

COX-2 Inhibitors vs NSAIDS

Cha

nge

in c

osts

Gain in health benefit (QALYs)

Comparator: Naproxen

Assumption: High-risk patients

Change in cost: $4,720

Change in benefit: 0.08 QALYs

Incremental CER: $56,000/QALY 0 0.100.05

$12k

$6k

$0

Source: Spiegel et al., The Cost-Effectiveness of Cyclooxygenase-2 Selective Inhibitors in the Management of Chronic Arthritis, Ann Intern Med. 2003;138:795-806.

$100k per

QALY

Basecasew/ heart

High risk

Moving to a cost-effectiveness criterion shifts both expenditures and outcomes

Reducing expenditure growth in 2 steps

1. Better financing and payment

Payment incentives for more effective and efficient care-will almost certainly require major IT investments-remove barriers to more effective payment mechanisms

2. Better information

Produce comparative effectiveness and cost-effectiveness information

Value-enhancing innovation will be rewarded