1

Moving Towards Higher-Value Health Care

Katherine BaickerProfessor of Health Economics

Harvard School of Public Health and NBER

2

Lower Costs vs. Higher Value

• Rising costs have made reform a priority– Risk of uninsurance– Strain on private budgets– Pressure on public budgets

• Appeal of cost-saving quality improvements– Self-financing plans to cover the uninsured– Health-improving reductions in spending

• But is this the right metric?

3

Ample Evidence of Inefficient Spending

• International evidence: – Spend much more than OECD trading partners without commensurately

better outcomes

• Domestic evidence:– Areas where we spend more are not areas with best outcomes

Internation Comparison Health Expenditures as a Share of GDP

0

2

4

6

8

10

12

14

16

1960 1965 1970 1975 1980 1985 1990 1995 2000

Canada

Germany

Japan

United Kingdom

United States

Source: OECD

Percentage of GDP

0

5

10

15

20

25

30

35

1960 1965 1970 1975 1980 1985 1990 1995 2000

United States

Canada

France

Japan

Sweden

Switzerland

Median

UnitedStates

Source: OECD

Deaths per 1,000 Live Births

Infant Mortality Rates (per 1,000 Live Births) by OECD Country, 1960-2003

4

Quality Variation Even within Medicare

Source: Dartmouth Atlas of Health Care

5

Variation in Medicare Spending

Source: Dartmouth Atlas of Health Care

6

But Higher Spending not Associated with Higher Quality

Source: Baicker and Chandra (Health Affairs 2004)

7

Some Causes of Inefficiency

• Public side: – Medicare reimbursement primarily based on quantity, not

quality– Resources for the uninsured spent on inefficient modes

of care

• Private side: – Biases in tax subsidy of employment-based insurance– Barriers to well-functioning insurance markets– Information on prices and quality often not available

8

Focus on Changes with System-wide Effects

• Few individual interventions likely to produce better health at lower cost

– Doesn’t mean there aren’t many worthwhile interventions– Wrong metric: probably willing to pay more if getting a lot more for it

• Interventions that affect the care received by some groups likely to have “spillover” effects

– Insurance coverage – extent and type– Use of high-intensity interventions– Information– Use of “best practices”

9

Case of Hospital Quality

Source: Baicker, Chandra, and Jha

10

Conclusions

• Bending the Curve highlights many areas in vital need of improvement and proposes many potentially high-payoff reforms

• Need not pursue only self-financing reforms: goal should be higher value, not just cost-saving quality improvements

• May get biggest bang for the buck from reforms that improve the quality of care system-wide