Jack Homer with Gary Hirsch and Bobby Milstein System Dynamics Winter Camp Austin, TX

American Healthcare in Transition: Exploring the Evolution of National Health

Expenditures from 1960 to the Present

Jack Homerwith Gary Hirsch and Bobby Milstein

System Dynamics Winter CampAustin, TX

January 5-6, 2007

Background

• Facts:

– U.S. has world’s highest healthcare costs, but our health is only so-so

– Most spending is for treating existing disease (“downstream”) rather than for prevention (“upstream”)

– Most spending is for chronic illness, not acute infections or injuries

– 15% of Americans have no health insurance coverage

• Are these facts connected? Some preliminary thinking

– Upstream/downstream loops – CDC 2003, AJPH 2006*

– Healthcare system loops – HPSIG/ISDC 2005

• Now, we want to refine our thinking in light of historical data and via model-based theory-testing

– Key data source: National Health Expenditures (NHE) 1960-2004 from Centers for Medicare and Medicaid Services (CMS)

* Homer JB, Hirsch GB. System dynamics modeling for public health: Background and opportunities. American J Public Health 2006; 96: 452-458.

Healthcare stakeholder map(presented at ISDC 2005)

Employers- Health coverage

Insurers/Payers(Public, Private)- Reimbursement criteria & rates for risk & disease mgmt and urgent care- Number of competitors

Providers(MDs, RNs, Hospitals)- Risk & disease mgmt extent and efficacy- Urgent care extent and efficacy- Specialty fragmentation - Lobbying of insurers & regulators

Patients- Health and risk status

General Public- Improvement of living conditions Funds available Citizen involvement

Drug/Device Makers- Developing high-tech products for urgent care and risk & disease mgmt

- Lobbying of insurers & regulators

Regulators & Monitors(Public, Private)- Usage guidelines & controls

Health Care Costs- Risk & disease mgmt- Urgent care- Administrative- Capital investments

Stock-flow view of disease and spending

Popn at riskPopn withdisease

Disease onset

Deaths

Risk onset

Risk reduction

Popn not at risk

Overall healthcarespending (and % of

GDP)

Effectiveness ofrisk mgmt

-

Effectiveness ofdisease

managementEffectiveness of

urgent care

-

Disease mgmtspending

Urgent carespending (and % of

GDP)

Urgent episodesEffectiveness ofhealth protection

-

-

Trends in risk behavior& exposure & popn

aging

Risk mgmtspending

Disease cureand recovery

Death as costcontroller

Urgent care and disease management both prolong the lives of people with disease. Urgent care unequivocally raises healthcare spending, whereas disease mgmt. can be a net cost saver, because it prevents expensive urgent care.

Closing the loops: Initial dynamic hypothesis


Disease onset

Deaths

Risk onset

Risk reduction

Popn not at risk

Healthcarecoverage

Assets forurgent care

Acquisition ofurgent care

assets


GDP)


-


management

Effectiveness ofurgent care

-



GDP)


-

-Trends in risk behavior& exposure & popn

aging

Risk mgmtspending


Assets fordisease & risk

mgmt

Acquisition ofdisease mgmt

assets

-

Fraction of healthcarerevenue reinvested in

assetsAssetinvestments

Fraction ofinvestments for

urgent care-

B1

R1

R2

B2

Reinvest

Drop coverage

Preventcomplications

Prolong lifewith disease


We expected to see naturally greater reinvestment in urgent care than in disease/risk mgmt., and also selective “squeezing out” of D/R mgmt. as healthcare coverage declines.

$0

$1,000

$2,000

$3,000

$4,000

$5,000

200420001996199219881984198019761972196819641960

Hospital Care

Total

Non-Hospital Services

Rx Drugs and Personal Products & Eqpmt

Fractions 1960 1980 2000 2004 Hospital Care 39% 47% 37% 37%Non-Hosp Svcs 37% 40% 45% 44%Drugs/products 21% 12% 15% 16% % of GDP:Total pers. care 4.4% 7.7% 11.6% 13.3%

Personal healthcare spending per capita 1960-2004,by National Health Expenditures components(in year 2000 dollars; personal healthcare does not include

admin., public health, research, capital investments)

Personal healthcare consistently accounts for 83-85% of all health spending. The fastest growth was in hospital care 1960-82, non-hospital services 1983-94,and prescription drugs 1995-2004.

$0

$1,000

$2,000

$3,000

$4,000

$5,000

200420001996199219881984198019761972196819641960

Disease/Risk Mgmt

Total

Urgent Care

Fractions 1960 1980 2000 2004Urgent Care 52% 76% 56% 49%Dis./Risk Mgmt. 48% 24% 44% 51%Rx drugs 11.5% 5.5% 10.5% 12%Dis./risk mgmt defined as (4.2)(Rx drugs). Urgent care is Total spending - Dis./risk mgmt.

Estimated urgent care vs. disease/risk management portions of personal healthcare spending

(in year 2000 dollars)

Urgent care includes all hospital services plus some fraction of non-hospital services.For 2002-04, we roughly estimate that fraction as 30%. This makes urgent care about 50% of spending, the other 50% being for disease/risk management. We posit D/R mgmt. as proportional to Rx drug spending, which accounted for 12% of spending in 2002-04. Thus, the estimated ratio of D/R mgmt to Rx drugs = (50%/12%) = 4.2.

0%

10%

20%

30%

40%

2004200220001998199619941992

Fraction of self-reports

Good, Fair, or Poor (not Excellent or Very Good)

Fair or Poor

Self-reported health status, 1993-2004(National Health Interview Survey for G/F/P since 1997,Behavioral Risk Factor Surveillance System for other)

The fraction of adults with health less than “very good” has increased steadily since 1993.

0%

10%

20%

30%

40%

50%

200019981996199419921990

1

>2

0

Risk factors include high blood pressure, high cholesterol, diabetes, obesity, smoking

Fraction with specified # of risk factors (source: NHIS)

Prevalence of cardiovascular risk factors, 1991-1999(National Health Interview Survey)

The fraction of adults with 1 or more risk factors has grown from 58% to 62%, and the fraction with 2 or more risk factors from 24% to 28%. All risk factors grew except smoking (which declined only 1 percentage point in the 90’s), with obesity being the largest contributor to the overall growth in risk factor prevalence.

60%

65%

70%

75%

80%

85%

90%

200420022000199819961994199219901988

0%

5%

10%

15%

20%

25%

30%

Total insured

Private insured

Gov't-only

Medicaid

Health insurance coverage, 1987-2004(US Census)

During the 1987-2003 period, private coverage fell 7 percentage points, while total coverage fell only 3 percentage points. Thus, more than half of those who have lost private insurance have had government coverage, generally Medicaid, to fall back on.

Revised dynamic hypothesis


Disease onset

Deaths

Risk onset

Risk reduction

Popn not at risk

Healthcarecoverage



assets


GDP)


-


management

Effectiveness ofurgent care

-



GDP)


-

Payorreimbursement

policies

-Trends in risk behavior

& exposure & popnaging

Risk mgmtspending



mgmt


assets

-



-


urgent care--

B1

R1

B3

B4

Govt coveragepolicy<Payor

reimbursementpolicies>

- R2

B2

Reinvest

Drop coverage



Cut overallreimbursement

Shiftreimbursement

priorities


Increasingly high costs led to two reactions by insurers: first, overall reimbursement restrictions, and then, a shifting of priorities toward D/R mgmt & away from urgent care.

What-if tests for understanding causal contributions

1) Base

2) No invest cut (No cut in investment rate)

Fixed 35% investment rate (Base: declines to 15% by 2005)

3) No DRM shift (No shift toward disease/risk management)

Fixed 79% of investments to Urgent Care (Base: declines to 39% by 1995 before rebounding to 69% by 2005)

4) No covg down (No decline in private coverage after 1975)

Private coverage remains at 85% (Base: declines to 73% by 2005)

5) No obese up (No exogenous increases in risk and disease onset)

Onset multipliers remain at 1 (Base: risk onset multiplier increases to 1.5 during 1980-2005, disease onset multiplier increases to 1.33 during 1990-2005)

Deaths per capita

0.01

0.0085

0.007

0.0055

0.004

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Fraction of popn with disease

0.4

0.35

0.3

0.25

0.2

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Fraction of popn with healthcare coverage

1

0.9

0.8

0.7

0.6

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Healthcare costs fraction of GDP

0.3

0.2

0.1

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

What-if test results: Healthcare spending, coverage, disease prevalence, and deaths

No invest cut

Base

No DRM shift

No obese up

No invest cut

Base

No DRM shift

No obese up

No invest cut

Base No DRM shift

No covg down

No obese up

No invest cut

BaseNo covg down

No obese up

No DRM shift

No covg down

Investment cutback restrained costs but also slowed health gains

Coverage cutback restrained costs a bit but also slowed health gains somewhat

Shift to D/R mgmt improved health with little increase in cost

Obesity epidemic has been a major driver of disease and cost

No covg down

Feedback policies for spurring non-medical upstream efforts at health protection


Disease onset

Deaths

Risk onset

Risk reduction

Popn not at risk

Healthcarecoverage



assets


GDP)


-



urgent care

-



GDP)


-

Proportionalfunding policy

Proportional fundsfor health protection

Payorreimbursement

policies



Risk mgmtspending

Sin tax policyCitizen concern



mgmt


assets

-



-


urgent care--

B1

R1

B3

B4

Govt coveragepolicy

<Payorreimbursement

policies>

-R2

B2

B6

Sin tax funds forhealth protection

B5

Reinvest

Drop coverage



Cut overallreimbursement

Shiftreimbursement

priorities

Tax and preventrisky behavior

Upstream funding inresponse to high

medical costs


ADDITIONAL SLIDES

0%

4%

8%

12%

16%

2004200019961992198819841980

Anti-hypertensive

Anti-cholesterol

Combined

Anti-hypertensive & anti-cholesterol drug spending as a fraction of all Rx drug spending, 1980-2004

(numerators based on pharmaceutical industry reports,denominator from NHE)

The combined fraction serves as our estimate of “risk management” as a fraction of D/R management. Why were the anti-hypertensives so fast to emerge relative to the rest of D/R management? Perhaps because of their broad applicability, in both symptomatic and asymptomatic cases of hypertension and heart failure.

Simulated history (1): Healthcare spending, Assets, and Coverage

Healthcare costs fraction of GDP (sim vs. data)

0.15

0.1

0.05

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Healthcare assets per capita

8,000

6,000

4,000

2,000

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Fraction of popn with healthcare coverage (sim vs. data)

1

0.75

0.5

0.25

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Total spending-sim

Total-data

Urgent-sim

Urgent-data

D/R mgmt-sim

D/R mgmt-dataTotal coverage-sim

Total-dataPrivate-sim

Private-data

Govt only-sim

Govt only-data

Total assets

Urgent care

D/R mgmt

Simulated history (2): Disease & risk prevalence, Death rate, and Effects of medical care/mgmt.

Effect of efforts on flow rates

1

0.9

0.8

0.7

0.6

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Deaths per capita and per urgent episode (sim vs. data)

0.01 1/year0.08 dmnl

0.008 1/year0.06 dmnl

0.006 1/year0.04 dmnl

1960 1970 1980 1990 2000 2010Time (year)

Fraction of popn with disease or at-risk (sim vs. data)

0.8

0.6

0.4

0.2

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Time (year)

Disease or at risk prevalence-simAny cardiovascular risk-data

Disease-simLess than very good health-data

Death rate per total popn-sim

Death rate-data

Per urgent episode-sim

Per hospitalization-data

Eff of urgent care on fatality

Eff of dis mgmt on urgent episodes

Eff of risk mgmt on disease onset

Effectiveness of care is determined by assets (equipment, skills) and insurance coverage


Disease onset

Deaths

Risk onset

Risk reduction

Popn not at risk

Healthcarecoverage



GDP)


-



urgent care

-



GDP)

Urgent episodesEffectiveness of

public work

-



Risk mgmtspending



mgmt


Rapid growth in health spending

Heirich M. Rethinking health care: innovation and change in America. Boulder CO: Westview Press, 1999.

Pear R. Health spending rises to record 15% of economy. The New York Times 2004 January 9.

The health sector now employs

more people than any other

sector of the US economy and

tripled its share of GDP from

1960 to 2000.

And the trend is projected to continue….

Centers for Medicaid and Medicare Services. Health accounts. Centers for Medicaid and Medicare Services, 2004. http://www.cms.hhs.gov/statistics/nhe/projections-2003/t1.asp

US Health Care ExpendituresPercent of GDP 1960-2013

0

5

10

15

20

1960 1970 1980 1990 2000 2005 2010 2013

Pe

rce

nt

of

GD

P

Observed

Projected

http://broadcast.forio.com/sims/syndemic2003/

Downstream efforts have led to major achievements

600

500

400

200

100

501950 1960 1970 1980 1990 1995

Age-a

dju

sted D

eath

Rate

per

10

0,0

00

Popula

tion

1955 1965 1975 1985

300

700

Year

Population Death Rate from Coronary Heart Disease, 1950–1998

Marks JS. The burden of chronic disease and the future of public health. CDC Information Sharing Meeting. Atlanta, GA: National Center for Chronic Disease Prevention and Health Promotion; 2003.

Source: Centers for Disease Control and Prevention. Health-related quality of life: prevalence data. National Center for Chronic Disease Prevention and Health Promotion, 2003. Accessed March 21 at <http://apps.nccd.cdc.gov/HRQOL/>.

But health-related quality of life has worsened

14% increase

Upstream work is a very small fraction of health spending

Upstream Prevention and Protection-----------------------------------Total 3%

Downstream Care and Management--------------------------------Total 97%

Brown R, Elixhauser A, Corea J, Luce B, Sheingod S. National expenditures for health promotion and disease prevention activities in the United States. Washington, DC: Battelle; Medical Technology Assessment and Policy Research Center; 1991. Report No.: BHARC-013/91-019.

Why so little upstream work?

As a result, the health system naturally tends toward managing affliction rather than preventing incidence and protecting against vulnerability.

Health professionals focus on disease management and care, where their expertise, the weight of scientific evidence, and the urgency lie.

Upstream work requires public concern and citizen organizing. But public concern is diffuse and not necessarily focused on health issues.

The U.S. health system is resistant to change

Lee P, Paxman D. Reinventing public health. Annual Reviews of Public Health 1997;18:1-35.

“At least six times since the

Depression, the United States has

tried and failed to enact a national

health insurance program.”

-- Lee & Paxman

Types of healthcare reform initiatives (ISDC 2005)

• Expanding access

– Improving coverage to employees, the poor, children– Providing health care resources to inner cities and rural areas

• Containing cost– Government limits on capacity, service provision, or reimbursement

– Employer shift to managed care plans

• Improving quality of care

– State regulation of facilities, professional licensure, Medicaid quality monitoring

– JCAHO setting of standards, NCQA evaluation of managed care orgs

• Protecting health

– Risk management, promotion of healthy lifestyles, family planning– Safer workplaces, better housing, safer neighborhoods

Documents

Jack Homer with Gary Hirsch and Bobby Milstein System Dynamics Winter Camp Austin, TX