Congressional Budget Office

Eighth Annual Marshall J. Seidman Lecture, Harvard Medical School

New Ideas About Human Behavior in Economics and Medicine

Peter OrszagDirector

October 16, 2008

Federal Spending Under CBO’s AlternativeFiscal Scenario

Percentage of Gross Domestic Product

1962 1972 1982 1992 2002 2012 2022 2032 2042 2052 2062 2072 2082

0

10

20

30

40

Medicare and Medicaid

Actual Projected

Social Security

Other Spending (Excluding debt service)

Learning from Our Mistakes

As we seek to improve the efficiency of the health sector, let’s learn some lessons from economics.

Saving for Retirement, Econ 101

Retirement saving depends on projected income, projected rate of return, tax preferences, and the company’s matching contribution.

The Effect of Automatic Enrollment on Initial Participation Rates in Companies with 401(k) Plans

45

25

77

86

0

20

40

60

80

100

All Workers Income Less Than $30,000

Without Automatic EnrollmentWith Automatic Enrollment

Percent

Source: Nesmith, Utkus, and Young.

Share of 401(k) Plans Featuring Automatic Enrollment

Source: Data from Profit Sharing/401k Council of America.

Percent

1999 2000 2001 2002 2003 2004 2005 2006 2007

0

10

20

30

40

50

60

Companies with 5,000 or MoreEligible Employees All Companies

Behavioral Economics and Medicine

Are we ignoring the same lessons in health care and medical science?

The Placebo Effect: Mean Improvement on Hamilton Depression Scale, vs. Common Antidepressants

Source: Kirsch (2002).

Fluoxetine(Prozac)

Paroxetine(Paxil)

Sertraline(Zoloft)

Venlafaxine(Effexor)

Nefazodone(Serzone)

Citalopram(Celexa)

0

2

4

6

8

10

12

14

Drug

Placebo

The Placebo Effect: Angina Pectoris Treatment, vs. Surgery

Source: Cobb and others (1959).

Patients Reporting SignificantImprovement in Chest Pain

Decrease in Nitroglycerin Use

0

10

20

30

40

50

60

70

Internal Mammary Artery Ligation

Skin Incision Only

The Placebo Effect: Reduction of Pain After Knee Surgery

Source: Moseley and others (2002).

Mean Knee-Specific Pain Scale Score

The Placebo Effect: Fitness Outcomes from “Perceived” Exercise

Source: Crum and Langer (2007).

142

144

146

148

0.25

0.26

0.27

0.28Mean Weight BMI

33

34

35

36

37Percentage Body Fat

Waist-to-Hip Ratio

0.81

0.82

0.83

0.84

0.85

0.86

0.87

115

120

125

130

135Systolic Blood Pressure Diastolic Blood Pressure

70

75

80

85

ControlInformed

The Placebo Effect: The Effect of Price on Effectiveness

Source: Waber and others (2008).

Mean Difference

Shifting Professional Norms: Catheter Infections in Michigan ICUs After Instituting a Checklist

Mean Rate of Infection per 1,000 Catheter Days

Source: Provonost and others (2006).

At Baseline After 3 Months After 18 Months

0

1

2

3

4

5

6

7

8

Adherence to Medication Schedule According to Frequency of Dose

Source: Osterberg and Blaschke (2005).

Percentage of Patients Adhering

Once Daily Twice a Day Three Times a Day Four Times a Day

0

10

20

30

40

50

60

70

80

90

100

Medication Schedule

Adherence to Treatment: Nature and Scope of the Problem

Average adherence to medication recommendations for nonacute disorders among both pediatric and adult populations: 50%

Nonadherence is pervasive even under high stakes:– 25% of renal transplant recipients regularly miss doses of

antirejection medications– 42% of glaucoma patients persisted in not adhering to

treatment—even after losing sight in one eye

Doctors are no more accurate than relying on a coin flip in determining who will adhere to treatment and who won’t (even among patients they know well)

Adherence to Treatment: Bedside Manner

Two-year study on influence of doctors’ behavior on adherence to treatment showed that patients were more likely to adhere if:

– Their doctor scheduled definite future appointments

– Their doctor answered all of their questions

– Their doctor enjoyed his/her job

Adherence to Treatment: Setting Better Defaults

Dosing: Simplicity promotes, while complexity undermines, adherence: e.g., once-a-day dosing.

Drug Choice: Choosing more “forgiving” drugs promotes adherence: e.g., antihypertensive drugs with longer halflives.

Bedside Manner: Seeing patients more often and answering all their questions promotes adherence: e.g., definite follow-up appointments.

Bottomless Soup Bowls: The Premise

Source: Wansink (2004).

Bottomless Soup Bowls: Actual and Perceived Intake

Source: Wansink, Painter, and North (2005).

Accurate Visual Cue(Normal Soup Bowls)

Biased Visual Cue(Self-Refilling Soup Bowls)

0

50

100

150

200

250

300

Actual Calories Consumed

Estimated Calories Consumed

Influence of Container Size on the Consumption of Stale Popcorn

Source: Wansink and Kim (2005).

Medium Container (120 grams) Large Container (240 grams)

0

20

40

60

80

100

Some Behavioral Avenues for Reform in Federal Nutrition Programs

20 percent of Americans participate in a federal nutrition program

Supplemental Nutrition Assistance Program– Disbursing benefits more frequently could reduce stockpiling

and bingeing

School Lunch Program– Placing healthier foods at the front of cafeteria lines could

increase their prominence and consumption

– Decreasing the size of tables could reduce distraction-driven overeating

Source: Just, Mancino, and Wansink (USDA, 2007).

Increase in Life Expectancy, and Increase in Difference in Life Expectancy by Economic Status

Source: Data from Singh and Siahpush (2006) and CDC.

Years

At Birth At Age 65

0

1

2

3

4

Increase in Average Life Expectancy, 1980–2000

Increase in Difference in Average Life ExpectancyBetween Lowest and Highest Decile, 1980–2000

Sources of Growth in Projected Federal Spending on Medicare and Medicaid

Percentage of GDP

2007 2022 2037 2052 2067 2082

0

5

10

15

20

Effect of Aging Alone

Interaction

Effect of Excess CostGrowth Alone

Estimated Contributions of Selected Factors to Long-Term Growth in Real Health Care Spending per Capita, 1940 to 1990

Smith, Heffler, and Freeland (2000)

Cutler (1995)

Newhouse (1992)

Aging of the Population 2 2 2

Changes in Third-Party Payment 10 13 10

Personal Income Growth 11-18 5 <23

Prices in the Health Care Sector 11-22 19 Not

EstimatedAdministrative Costs 3-10 13 Not

EstimatedDefensive Medicine and Supplier-Induced Demand 0 Not

Estimated 0

Technology-Related Changes in Medical Practice 38-62 49 >65

Percent

Excess Cost Growth in Medicare, Medicaid, and All Other Spending on Health Care

Medicare Medicaid All Other Total

1975 to 1990 2.9 2.9 2.4 2.6

1990 to 2005 1.8 1.3 1.4 1.5

1975 to 2005 2.4 2.2 2.0 2.1

Percentage Points

Before We All Get Too Depressed…

Embedded in the nation’s central long-term fiscal challenge appears to be a substantial opportunity.

Can we reduce health care costs without impairing health outcomes?

Medicare Spending per Beneficiary in the United States, by Hospital Referral Region, 2005

Variation in State-Level Medicare and Overall Health Care Spending per Capita

Source: Based on data from CMS.

Coefficient of Variation

1974 1979 1984 1989 1994 1999 2004

0

0.05

0.10

0.15

0.20

0.25

Variation in MedicareSpending per Beneficiary

Variation in TotalHealth Spending per Capita

Contributions of Major Service Categories to State-Level Variation in Medicare Spending per Beneficiary

Source: Based on data from CMS.

Coefficient of Variation

1974 1979 1984 1989 1994 1999 2004

0

0.05

0.10

0.15

0.20

0.25

Outpatient

Post-Acute Care

Physician andLaboratory

Hospital

Geographic Variation in Health Care Spending per Capita in Selected Countries

Source: Based on data from CMS, HM Treasury (U.K.), and the Canadian Institute for Health Information.

Coefficient of Variation

1975 1980 1985 1990 1995 2000 2005

0

0.02

0.04

0.06

0.08

0.10

0.12

0.14

UnitedStates

UnitedKingdom

Canada

Variations Among Academic Medical Centers

UCLA Medical Center

Massachusetts General Hospital

Mayo Clinic(St. Mary’s Hospital)

Biologically Targeted Interventions: Acute Inpatient Care

Care Delivery―and Spending―Among Medicare Patients in Last Six Months of Life

CMS composite quality score 81.5 85.9 90.4

Total Medicare spending 50,522 40,181 26,330

Hospital days 19.2 17.7 12.9

Physician visits 52.1 42.2 23.9

Ratio, medical specialist / primary care 2.9 1.0 1.1

Use of Biologically Targeted Interventions and Care-Delivery Methods Among Three of U.S. News and World Report’s “Honor Roll” AMCs

Source: Elliot Fisher, Dartmouth Medical School.

Variations Among Academic Medical Centers

Supply-Sensitive Care: Days in the Hospital for Patients During the Last Six Months of Life

Source: John Wennberg, Dartmouth Medical School.

The Relationship Between Quality of Care and Medicare Spending, by State, 2004

0

75

80

85

90

0 5 6 7 8 9 10

Annual Spending per Beneficiary(Thousands of dollars)

Composite Measure of Quality of Care, 100 = Maximum

What Additional Services Are Provided in High-Spending Regions?

Source: Elliot Fisher, Dartmouth Medical School.

CBO’s Activities in Analyzing Health Care

New Hires and Expanded Staffing– New deputy assistant director in the Budget Analysis

Division

– Increase in health staff agencywide from 30 FTEs to 50 FTEs

Reports and Analysis in 2008– Critical Topics in Health Reform– Health Options