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% GDP
2007
to 20.3% GDP
2018
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
1930s 70s
Physicians /
AMA Strong
Pre-1880
Physicians limited
authority
Progressive Era
1910 - 17
1880 1920
Industrial Revolution
Rise in prestige

1980s - Present
Corporations
Competing Interests
Loss of Political Influence
Germany
1883
Social Security
1935
Clinton
1994
Rapid Health Care Growth
1950s-70s
Medicare
1965
Nixon
1970s
Truman Plan
1945
Medicare
Drug Bill
2003
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. 11
th
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,
1965, 1970, 1994
2009