Health Economics, Healthcare Finance, and Health Policy: What Every Student Needs to Know About the

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Health Economics, Healthcare Finance, and Health
Policy What Every Student Needs to Know About
the Health Care Field Before Entering It!
Howard P. Forman Department of Diagnostic
Radiology, Yale School of Medicine Yale School of
Management Yale School of Public
Health Department of Economics, Yale
College Howard.Forman_at_Yale.edu
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Agenda

• Why is this important?
• Key Issues in US Healthcare today
• Key Crises, Globally
• What is the current political healthcare agenda?
• What key facts should students be familiar with?
• Questions and Discussion

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Why is this important?

• Interviewers will ask questions for a host of
  reasons
• Uninformed, or unsophisticated, answers are
  increasingly hard to defend
• Need to have some substantive understanding of
  the healthcare climate and basic economics
• Making a decision to practice medicine without
  understanding some of the basics of health
  services and health economics is dangerous!

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Key Domestic Crises

• 45 million people are uninsured and another 30
  million are under-insured
• As healthcare gets more expensive, more people
  are left behind
• Medicare Under-funded and getting more costly
• Medicaid reliant on States Budgets
• Torts Malpractice Costs
• New Healthcare Threats Bio-terrorism
• Vaccines What do you think about the Flu
  Vaccine?
• Infectious Disease Response issues
• Moral/Ethical Issues Cloning, Stem Cells

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Health Care Spending (NHE) 2002Highlights

• 1.55 Trillion up by 9.3 from prior year. 5440
  per capita up by 8.3 (both are accelerations
  from 8.5 and 7.5 from 2001 data)
• GDP (nominal) growth 3.6
• 14.9 of GDP (highest ever, grew by 0.8 this
  year, matching fastest rate of prior year)
• Healthcare, as percent of GDP, has been growing
  for 4 years now
• Medicaid and SCHIP (11.7) are both growing
  faster than all other spending components
• Private spending grew at a 9.3 rate and public
  spending at 9.4 (45.9 of NHE are PUBLIC)
• This is a multi-year trend of slight increases in
  public sector spending- - - why?

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Where it came from
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Where it went
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Footnotes to Pie Charts

• 1 "Other Public" includes programs such as
  workers' compensation, public health activity,
  Department of Defense, Department of Veterans
  Affairs, Indian Health Service, and State and
  local hospital subsidies and school health.
• 2 "Other Private" includes industrial in-plant,
  privately funded construction, and non-patient
  revenues, including philanthropy.
• 3 "Other Spending" includes dentist services,
  other professional services, home health care,
  durable medical products, over-the-counter
  medicines and sundries, public health, research
  and construction.
• NOTE Numbers shown may not add to 100 because of
  rounding.

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Components of Health Care Spending and Change
From Prior Year (thru 2002)

• Research and Construction 56.7 B 11.9 1
• Hospital Care 486.5B 9.5
• Home Health Care 36.1B 7.2
• Nursing Home Care 103.2 B 4.1
• Physician Services 339.5 B 7.7
• Prescription Drugs 162.4 B 15.3
• Administration 105 16.2
• Overall 9.3
• CPI proxy (really CW-GDP-PD) 1.1
• Population Growth 0.9
• GDP 3.6
• Personal Health Deflator (HC-CPI-proxy) 3.9

• Government administration and net cost of
  private health insurance
• 1 Research and development expenditures of drug
  companies and other manufacturers and providers
  of medical equipment and supplies are excluded
  from research expenditures but are included in
  the expenditure class in which product falls.

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National Health Care Expenditures Growth

• 1996 - 5.2
• 1997 5.3
• 1998 4.8
• 1999 5.6
• 2000 6.7
• 2001 8.5
• 2002 9.3

• 1970 - 10.6
• 1980 12.9
• 1990 11.7
• 1991 - 9.5
• 1992 - 8.6
• 1993 - 7.3
• 1994 - 5.5
• 1995 - 5.4

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Medicare Highlights(2003)

• 41.8 million people (35.1 M aged 6.0 M disabled)
  covered
• Combined expenditures growing faster than GDP
  (from 2.6 of GDP in 2002 to 5.3 in 2035 and
  then 9.3 in 2076)
• HI sources of income do not increase
  automatically, while SMI do

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Long Range Total Medicare
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HI-Medicare Part A (2003)

• Hospice care (since 1982)
• Inpatient Hospital services
• Skilled nursing facility care
• Home Health Agency (now transitioning to SMI)
• 22 of beneficiaries actually received HI
  services in 2002
• BBA- 1997 slowed expenditures depletion now
  predicted for 2019
• Average expenditure per enrollee increased by 3.4
  after three years of declines (BBA-1997
  effects) Now 3,689
• Intermediate estimates call for rates of growth
  of 1.4 5.6 per year for the next decade

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Part A Trust Fund
CMS, 2003
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Medicare Part B - Supplemental Medical Insurance
(SMI)- 2003

• Physician services
• Durable medical equipment (DME)
• Outpatient medical services
• Clinical lab tests
• PT/OT
• Ambulance transportation
• Hep B, Flu, Pneumococcal vaccines
• Pap smear and screening mammography
• Prescription drugs which can not be
  self-administered including certain anti-cancer
  drugs

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SMI Part B/2003 Highlights

• 93 of the 41.8 Million Medicare enrollees are
  enrolled in Part B
• 11 increase in 2001 (some due to shift of HHC
  services, etc.)
• SMI benefits will grow 1.5 faster than GDP going
  forward (assumption)
• 95 of enrollees received services (2000 data)
• Administrative costs are 2.1 of program costs,
  compared with 1.7 for HI
• Average benefit per enrollee is 2915, increasing
  10.1 in past year

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Part B Financing
CMS, 2002
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Key Global Crises

• HIV in Lesser Developed Nations
• Landmines
• Starvation and Diarrheal Diseases in Children
• Affording healthcare/prescription drugs

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Current (2005/6 congressional term) Domestic
Healthcare Agenda

• Tort Reform Politics vs. Policy
• Medicare reform Constant and incremental What
  does it mean?
• Medicare Prescription Drug Benefit - Not til
  2006 for most people
• Uninsured Problem
• Influenza Vaccine
• PBOR

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Key Issues to be aware of

• What is Medicare, Medicaid, S-Chip?
• Bonus points for Medicare part A and B
• Bonus points for understanding funding of any of
  this..
• How much does our nation spend on healthcare? How
  much is too much? How does this compare to other
  nations?
• What is Universal Health Coverage (Insurance)?
  (Why should you not discuss this topic without
  very very serious thought, in advance)?

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Key Issues, continued

• What is the Patients Bill of Rights?
• What are the issues around stem cells/cloning?
• What is the fastest growing component of
  healthcare costs? Why? What does this mean for
  you as a provider-to-be?
• Disparities in healthcare, health services, and
  health
• Ethnic, racial, economic
• What is the main Health Problem in the US today?
• What is the main Healthcare Problem in the US
  today?
• Be Prepared Dont fake it

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Questions?