Upload
jemima-andrews
View
216
Download
0
Tags:
Embed Size (px)
Citation preview
Professor James C. Robinson
University of California, Berkeley
Market-Oriented Initiatives in Health Care:Market-Oriented Initiatives in Health Care:What Have We Learned?What Have We Learned?
Academy HealthAcademy HealthJune 3, 2007June 3, 2007
Goals: equity, efficiency, innovation Tradeoffs among goals Performance: biotechnology Performance: insurance Conclusions
OVERVIEWOVERVIEW
Apples to apples Compare real market initiatives to real
governmental initiatives– Not real markets and idealized governmental initiatives
A favorite tactic on the political left
– Not real governmental and idealized market initiatives A favorite tactic on the political right
Market failure and government failure
Principles of Evaluating MarketPrinciples of Evaluating Market(and non-market) Initiatives(and non-market) Initiatives
Be clear on the goals or standards against which performance is being evaluated– Markets tend to be good at some tasks, governmental
initiatives tend to be good at others Cherry-picking goals can pre-determine the comparison
Pick the most important set of goals Consider synergies and tradeoff among goals
– Success on one goal may facilitate or undermine success against others
More PrinciplesMore Principles
Equity: Access to services/products is based on health status, values, and preferences, not income or wealth or employment or race or religion
Efficiency: Services are produced at lowest possible cost, highest possible quality, lowest administrative burden, most appropriate mix
Innovation: Continual development of better drugs, devices, procedures, forms of organization
Three Goals of Health Care InitiativesThree Goals of Health Care Initiatives
Equitable access promotes efficiency– Lowers administrative costs of enrollment churning,
uncompensated care, unfunded mandate Efficiency promotes innovation
– Effective purchasing of today’s services gives signals to entrepreneurs and investors on where to focus
Innovation promotes equity– New technologies become cheaper with experience,
diffuse to even most disadvantaged populations
Synergies among GoalsSynergies among Goals
Equity can stifle efficiency– One-size-fits-all forms of payment and regulation distort
incentives, foster moral hazard, fraud, bureaucracy Efficiency can stifle innovation
– Low prices, ease of entry (e.g., bio-similars) undermine incentives for risk-taking, investment in fixed assets
Dynamic (Schumpetrian) competition v. static competition
Innovation can impede equity– New clinical opportunities can increase disparities
Tradeoffs among GoalsTradeoffs among Goals
Dynamic technology, with promise of significant benefits to sickest patients, potential for radical transformation of care for all patients– Genomics, personalized medicine, stem cell therapy
High scientific and commercial uncertainty (long lead time till revenue), major capital needs– Sector as a whole is yet to be profitable
Attractive economic spinoffs: jobs, training, etc.
Sectors for Evaluation:Sectors for Evaluation:BiotechnologyBiotechnology
Insurance as income re-distribution– Pooling of (known) unequal risks– Motivate the chronically well to support the chronically ill
Insurance as purchasing– Methods of payment give incentives to providers– Other incentives for providers: quality improvement,
review of appropriate use patterns – Design of cost-sharing give incentives to patients
Sectors for Evaluation:Sectors for Evaluation:InsuranceInsurance
Biotech products are directed at severe needs– Not population health but focus on the neediest
High prices and cost-sharing are financial barrier– But charitable donations help most patients in need
The US purchasers (CMS, private insurers, employers, individuals) are financing R&D for the entire world, including other rich nations
Biotechnology:Biotechnology:EquityEquity
Very high “value-based” pricing– Most biotech firms still not profitable; external access to
capital (VC and pharma licensing) remains crucial
Most clinical gains to date have been incremental Debate over physician “buy and bill” incentives Overall, however, biotech has best scientific basis
in medicine; expensive but worth it
Biotechnology:Biotechnology:EfficiencyEfficiency
The US biotech industry is the envy of the world– New products, firms, capital investment, jobs
Major new products target major unmet needs– Cancer, auto-immune diseases, rare genetic conditions
Mutual benefits for basic and applied science– Technology transfer: US universities are the world’s envy
Genomics, diagnostics, stem cell are revolutionary
Biotechnology:Biotechnology:InnovationInnovation
Biotech is classic Schumpetrian industry– High initial investments, high risk, with major potential
rewards (more clinical than financial, it appears)– To date, no lack of investment and entrepreneurship
Bio-generics and pressure for lower prices may reduce risk-taking. Short-term concern over early-stage investments?
– Rapid vertical integration between pharma and biotech– Extensive global competition for biotech investments
Biotechnology:Biotechnology:PositivesPositives
Biotechnology is not “disruptive technology”– It is high cost, not low cost and low functionality– It clearly raises the cost of care
Often by converting fatal diseases into chronic illness
– Cost-effectiveness ratio is not very favorable Longevity gains often measured in weeks or months
Continued access to private capital is not certain– Especially for early stage firms, frontier technologies
Biotechnology:Biotechnology:ChallengesChallenges
Equity: 8/10. Targets the sickest patients with greatest unmet needs; charitable programs blunt cost-sharing requirements
Efficiency: 6/10. High prices, weak cost-effectiveness, modest breakthroughs in short run
Innovation: 10/10. Envy of the world; no centralized system can come close (e.g.,Germany)
Biotechnology:Biotechnology:Summing UpSumming Up
Two functions of insurance must be evaluated– Redistribution: motivating the healthy to pay for the sick
and the rich to pay for the poor– Purchasing: creating appropriate incentives for providers
and consumers through network (provider payment) and benefit (cost sharing) designs
Insurance: Income Redistribution and Insurance: Income Redistribution and Purchasing of Health Care ServicesPurchasing of Health Care Services
The US insurance sector fails 46 million at any one time, many more at some time (churning)
Under-insurance (excessive cost sharing) for low income and chronically ill patients
Tax exclusion of health benefits favors high income taxpayers and those with gilt benefit designs
Medicare taxes fall on all workers, including uninsured, and favor all elderly, including wealthy
Minneapolis and Portland subsidize Miami and Manhattan
Insurance as Redistribution:Insurance as Redistribution:EquityEquity
The mix of public/private insurance imposes high administrative costs
– Enrollment, disenrollment, marketing– Confusion and chaos (e.g., Part D)
Tradeoff betw. admin costs and fraud in Medicare Private insurance reduces incentive distortions of
income taxes (on job creation, labor force participation), compared to Europe
Insurance as Redistribution:Insurance as Redistribution:EfficiencyEfficiency
Health Savings Accounts– Incentives for saving are important, but skewed
distribution of need attenuates social benefits– “Consumer” benefit designs “protect the healthy from ill”
The erosion of entitlement thinking– Health care is not free. It is a scarce social resource that
should be cherished and used when most needed. Personal responsibility should play a part.
Insurance as Income Redistribution:Insurance as Income Redistribution:InnovationInnovation
The US seems really and truly not to want NHI– Blue Cross was created as alternative to NHI– Employment-based coverage as alternative to tax-based– Consumer-driven coverage as alternative to
employment-based and tax-based coverage
The mixed system performs not too poorly, given this (controversial) philosophical stance
Insurance as Income Redistribution:Insurance as Income Redistribution:PositivesPositives
The US insurance system challenges most people’s concept of fairness
It undermines whatever social solidarity we have The administrative costs are horrific It gives the whole US market-oriented economic
philosophy a black eye in global discussions
Insurance as Income Redistribution:Insurance as Income Redistribution:ChallengesChallenges
Efforts by insurers to get lowest prices undermine provider ability to offer charity care
But insurer as purchaser is agent of enrollee in obtaining wholesale pricing
– Retail prices would be even more unfair for those most in need and least able to bargain
The uninsured pay the highest prices, if they pay
Insurance as Purchasing of Health Services:Insurance as Purchasing of Health Services:EquityEquity
US pays highest prices for health services– MD and RN earnings; drugs and devices
Continual conflict between insurers and providers– Providers hate HMOs, Medicare FFS, Medicaid
Multi-payer system reduces risk to providers– This reduces imperative for lobbying
Cost sharing facilitates generic substitution etc.
Insurance as Purchasing of Health Services:Insurance as Purchasing of Health Services:EfficiencyEfficiency
The multi-payer system facilitates experimentation– Methods of provider payment (DRG, capitation, EOC)– Disease management for chronic conditions– Methods of provider organization
Medical groups, vertical integration, specialty facilities
– Transparency and performance monitoring Report cards, pay-for-performance
Insurance as Purchasing of Health Services:Insurance as Purchasing of Health Services:InnovationInnovation
Multi-payer systems foster experimentation and diversity in organization and delivery of care
The US system fosters more transparency, performance measurement than many
It is less subject to capture by providers It offers less pork to politicians
Insurance as Purchasing of Health Services:Insurance as Purchasing of Health Services:PositivesPositives
Multi-payer systems lack cost control power– This may be a good thing (for innovative sectors)
Dynamic versus static efficiency
Conflict and confusion at the plan/provider interface Exhaustion and low expectations
– Case rates? Specialty organization? DM and QI?
Consolidation among insurers and providers
Insurance as Purchasing of Health Services:Insurance as Purchasing of Health Services:ChallengesChallenges
Tradeoffs between the two functions of insurance?– Single-payer governmental systems are more effective at
pooling risk, forcing healthy to pay for sick– Multi-payer (mixed public/private) systems allow more
experimentation in care delivery/organization
Universal coverage within a multi-payer system?
Insurance as Redistribution and Insurance as Redistribution and Purchasing: Summing UpPurchasing: Summing Up
Equity– Biotechnology: 8/10– Insurance (distribution): 4/10
Efficiency– Biotechnology: 6/10– Insurance (purchasing): 6/10
Innovation:– Biotechnology: 10/10– Insurance (purchasing): 6/10
Biotechnology and Insurance: Biotechnology and Insurance: Summing UpSumming Up