Estimating the Value of
Investment: Medicare & Overall
U.S. Health Care Services
Academy Health 2004
San Diego
Bryan R. Luce, PhD, MEDTAP
Frank Sloan, PhD, Duke University
Josephine Mauskopf, PhD, RTI
Clark Paramore, MSPH, MEDTAP
U.S. HC Expenditures/Capita (2000 $)
$4,461
$3,541
$2,207
1980
1990
2000
Source: Health United States 2002, Consumer Price Index (All Items)
The Value of this Investment
is Seldom Part of the Debate
CBO Issues Warning on Rising Health Care Costs
Senate Republicans in Albany Eye Big Medicaid Cuts
Medicare Revamp Fails to Cure Angst Over Costs
Study Objective
Estimate the economic value of
investment in health care over the
past 20-30 years
Study Sponsors (“The Value Group”)
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Advanced Med Tech Assoc (AdvaMed)
American College of Cardiology (ACC)
American Hospital Association (AHA)
Federation of American Hospitals
HealthCare Leadership Council
National Pharmaceutical Council
Pharm Research Mfts Assoc (PhRMA)
3 Approaches to Triangulate ROI
*
Approach 1: Overall Health Care,1980-2000
Approaches 2 & 3: AMI, Type 2 Diabetes,
Stroke, Breast Cancer
Approach 2. Medicare (1985-2000)
 Approach 3. Major Innovations (1975-2000)
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* Value of Statistical Life year assumed to be $100K (Cutler 1997;
Cutler McClellan et al, 2001, Viscusi 1993, Bloomquist 2001,
Nordhaus 2002, Ubel et al 2003)
Why these four conditions?
U.S. Population Affected by
Conditions Studied,
in millions, 2003
17
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7.6
4.7
2.2
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Heart
Attack
Type 2
Diabetes
Stroke
Breast
Cancer
Common (31.5 M)
High M/M rates
Nearly all at risk for
one of these diseases
Medical breakthroughs
have improved
outcomes
Costs are high
Value of investment not
documented
Source: American Heart Association; www.diabetes.org; www.cdc.gov/nchs
Approach 1: ROI Overall Health
Care, 1980-2000
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Compared changes in U.S. population morb/mort with…
Changes in total health care expenditures
Monitorized only mortality gains
Computed value of population health gains per additional
dollar invested (using 2000 vs 1980 rates)*
Sources include: Health U.S., 2002; National Vital Statistics 2002; Manton et al 2001;
Houtenville 2001; Lubitz et al 2001; MEPS Surveys1996, 1999; US Census 2000;
Nordhaus 2002
*Assumption: benefits and harms of non-health care even out (e.g. smoking, obesity, illegal
drugs, environmental)
Approach 2: ROI Medicare, 1985-2000
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Linked NLTC survey data with…
Medicare claims for AMI, Diabetes, Stoke, Breast Cancer
Outcome Measures: 5 year survival, ADL limitations,
cognitive functioning, nursing home residence
Monitorized both mortality & disability changes
ROI: Dollar value of 5 year health benefits (less beneficiary
Rx & nursing home costs) compared to 5 year Medicare
payments (1985-90 vs 1995-2000)
Sources include: NLTC Surveys; Medicare Claims; Cutler 1997; Viscusi
1993; Mrozek 2003
Approach 3: ROI Major Innovations
1975-2000 (4 diseases)
For each disease:
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Compiled 25 year timeline of “major innovations”
Compiled all CEA literature for each innovation
Calculated ROI for each innovation
Sources include: PubMed, Bloomquist 2001, Cutler & McClellan 2001,
Nordhaus 2002, Viscusi 2003, Tengs 1995, 2003, Neumann et al 2000,
Selected clinical experts
FINDINGS
Overall Value of Investment: 1980-2000
Per capita expenses up $2,254, but:
 Overall death rate down 16%
 Life expectancy from birth up by 3.2 years
 Disability rates decreased 25% (65+)*
 56% fewer hospital days
Overall ROI: $2.40 to $3.00 per
dollar invested
*Value of these improvements not quantified.
Findings: Four Common Diseases
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Heart attack
Type 2 Diabetes
Stroke
Breast Cancer
Heart Attack
Heart Attack:
Improvement in Outcomes
Death Rate Due to
Heart Attack
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(Age-adjusted, per 100,000)
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345.2
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186.9
1980
2000
Source: www.cdc.gov/nchs
Mortality cut nearly in
half
Death within 30 days
cut from 1 in 4 to 1 in 8
Hospital stays: was 3-4
weeks; now 5-7 days
Medicare ROI: Heart Attack Patients
Value of improved outcomes: $28,632
--minus-Increase in treatment costs*: $26,093
(Medicare plus out-of-pocket)
Net benefit in dollars:
$2,539
ROI: $1.10 per dollar invested
*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocket
Source: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)
AMI: ROI of Major Innovations vs Standard
Treatment
$38.44
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$1.42
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At Least
As Much As
Source: Published literature
Beta-blockers
Mobile coronary care units
Statin therapy
Angiography
Rt-PA
Angioplasty w/stenting
Other
Type 2 Diabetes
Costs and Outcomes for Medicare
Type 2 Diabetes Patients
Value of improved outcomes: $16,930
(7% gain in life expectancy)
--minus-Increase in treatment costs*: $11,337
(Medicare plus out-of-pocket)
Net benefit in dollars:
$5,593
ROI: $1.49 per dollar invested
*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocket
Source: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)
Type 2 Diabetes:
Value of Specific Medical Breakthroughs
Breakthroughs vs. Current Standard Treatment
Range in Value per Dollar Invested
$36.00
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$3.00
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At Least
Source: Published literature
As Much As
Tight control of glucose, BP
& cholesterol
Statins
Ace inhibitors
Screening and treatment of
diabetic retinopathy
Other
Stroke
Stroke:
Improvement in Outcomes
Death Rate Due to Stroke
(Age-adjusted, per 100,000)
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96.2
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60.8
1980
2000
Source: www.cdc.gov/nchs
Mortality cut by 37
percent
Stroke-related disability
after 3 months reduced
by up to 30 percent with
rt-PA
Costs and Outcomes for Medicare Stroke
Patients
Value of improved outcomes: $24,903
(10% gain in life expectancy)
--minus-Increase in treatment costs*: $16,035
(Medicare plus out-of-pocket)
Net benefit in dollars:
$8,868
ROI: $1.55 per dollar invested
*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocket
Source: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)
Stroke:
Value of Specific Medical Breakthroughs
Breakthroughs vs. Current Standard Treatment
Range in Value per Dollar Invested
$6.00
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$2.00
At Least
Source: Published literature
Clopidogrel
Ticlopidine
rt-PA*
Carotid
endarterectomy*
As Much As
*Yields a savings in treatment costs
Breast Cancer
Breast Cancer:
Improvement in Outcomes
Death Rate Due to
Breast Cancer
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(Age-adjusted, per 100,000)
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32.3
25.4
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1980
2000
Mortality cut by 21
percent
5-year overall survival
rates increased from
77% to 87%
Risk of metastatic
disease declined from
40% to 15%
Costs and Outcomes for Medicare Breast
Cancer Patients
Value of improved outcomes: $22,341
(8% gain in life expectancy)
--minus-Increase in treatment costs*: $4,676
(Medicare plus out-of-pocket)
Net benefit in dollars: $17,665
ROI: $4.80 per dollar invested
*Five-year costs 1985-1989 versus 1995-1999, Medicare plus out-of-pocket
Source: Analysis of Medicare Part A and Part B and National Long-Term Care Survey data (1982-2000)
Breast Cancer:
Value of Specific Medical Breakthroughs
Breakthroughs vs. Current Standard Treatment
Range in Value per Dollar Invested
$36.81
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$3.27
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At Least
As Much As
Source: Published literature
Letrozole
Breast-conserving surgery
Biennial mammography
Adjuvant chemotherapy
Stereotactic core biopsy
Conclusion: ROI US Health Care
appears positive in terms of….
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Overall HC Spending
Medicare Spending and Major innovations
for Heart attack, Diabetes, Stoke, Breast
Cancer…..
If we can agree that a year of life is worth
$100,000
Selected Discussion Issues
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Value of Statistical Year of Life: $100,000?
ROI Overall HC
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Non HC balance out (smoking, obesity/diet, illegal drug
use, violence, environmental)?
No productivity
No disability
ROI Medicare: Includes disability but not
productivity
ROI Interventions: Does not include productivity
ROI seems positive: Could we do better?
Implications
Public policy discussions about
health care costs should (and can)
be accompanied by estimates of
value returned.
For Study Report & Technical
Appendices……
www.medtap.com
THANK YOU!