Technology and Health Care Spending
Bruce Steinwald
February 5, 2008
• Unsustainable Spending Trends
• How does technology manifest itself in health
care spending
• Potential Congressional action
Growth in Health Care Spending: Health Care
Spending as a Percentage of GDP
Percent
25
19.6
20
16.0
13.7
15
10.6
10
8.4
5
0
1976
1986
1996
Year
2006
2016
Source: The Centers for Medicare & Medicaid Services, Office of the Actuary.
Notes: The figure for 2016 is projected. The most current data available on health care spending are for 2006.
Effect of Entitlements on Federal Budget: Assuming Discretionary
Spending Grows with GDP After 2007 and All Expiring Tax Provisions are Extended
Percent of GDP
50
40
30
Revenue
20
10
0
2006
2015
2030
2040
Fiscal year
Net interest
Social Security
Source: GAO’s January 2007 analysis.
Medicare & Medicaid
All other spending
Cumulative Growth in Health Care Spending Per
Capita, Medical Inflation, GDP Per Capita, and
General Inflation, 2000-2006
50 Cumulative percentage
46.68
40
28.91
26.69
30
20
17.07
10
0
2000
2001
2002
Health care spending per capita
2003
CPI-Medical
2004
GDP per capita
2005
2006
CPI-Urban consumers
Source: Bureau of Labor Statistics, The Centers for Medicare & Medicaid Services, Office of the Actuary, and the Bureau of
Economic Analysis.
Note: The most current data available on health care spending per capita are for 2006.
Changes in Volume and Intensity of Physician Services Provided per
Medicare Beneficiary, April 2000 to April 2005
Average annual percentage
change in the number of
services per beneficiary
(volume)
Average annual percentage change
in the intensity of services per
beneficiary, as measured in
RVUs
All services
4.4
5.2
Evaluation and
management services
2.4
3.7
Procedures
5.7
4.3
Major
-0.7
2.3
Minor
6.3
5.2
Imaging
6.9
10.5
Tests
9.1
13.9
Type of service
Source: GAO analysis of Medicare Part B claims data from CMS.
Differences in Services Provided by Level of
Medicare Spending
Percentage more services provided in highest Medicare-spending regions as compared to
lowest Medicare-spending regions for select services for three chronic disease cohorts
Service Type
Imaging
Percentage
Chest radiography
60%
Computed tomography (CT) or magnetic
resonance imaging (MRI) of head or brain
80%
CT or MRI of lumbar spine
50%
Minor or Diagnostic Procedures
Skin biopsy
Holter monitor
Diagnostic upper-GI endoscopy
120%
290%
60%
Source: Elliot S. Fisher, David E. Wennberg, et. al, “The Implications of Regional Variations in Medicare Spending.
Part 1: The Content, Quality, and Accessibility of Care,” Annals of Internal Medicine, vol.138, no.4 (February 2003).
Diagnostic Technology Advances Subject to
Multiplier Effect
• Diffusion of Dx Technology leads to …
• More Diseases/Conditions Diagnosed, leading to …
• More Treatment, which results in …
• More Spending on both Dx and Tx
Sources of Information on Health Care
Reform
• Presidential Candidates’ Proposals
• President’s 2009 Budget
• Non-governmental Organizations (e.g.,
Commonwealth’s “Bending the Curve,” (12/2007)
• Potential Congressional Actions (e.g., CHAMP, Summer
2007)
Congressional Action Driven By…
• Faith-Based Beliefs (e.g., IT, CE, Consumerism)
• The Need to Fix Medicare’s Sustainable Growth
Rate (SGR) Problem
Near Term Congressional Action on
Medicare
• Replace SGR with Differential Fee Updates
• Adjust Relative Prices in Medicare’s RBRVS
• Expand Bundled Payments
• Physician Profiling and Feedback
Long Term: What Can We Afford?
Trend: Real GDP + 2.5% … Unsustainable
SGR Standard: Real GDP + 0 % … Unacceptable
Medicare Trustees: Real GDP + 1% …Reasonable?