Sunday, April 10, 2011

An Organization for Economic Co-operation and Development (OECD) Report On Current & Future Costs: Welcome To Our World, World

Is a humbled United States entering a military and economic twilight?  The Disease Management Care Blog's latest read suggests otherwise. Yet, even as the U.S. is retrenching, the DMCB wonders if we Americans are not alone in our pain.  A recent report suggests the same may be true when it comes to global health care spending.

Check out a recently released and refreshingly apolitical paper titled "Health Care Systems: Getting More Value for Money" from the Organization for Economic Co-operation and Development (OECD) (hat tip to the WSJ Real Time Economics Blog).  While a superficial read of the 12 page report confirms, once again, that the U.S spends more as a percent of gross domestic product (GDP), with little to show in terms of life expectancy (see Figure 1), the DMCB uncovered some bigger news.

Total expenditure vs. life expectancy; US wayyyy on the right (2008 Data)

While the U.S. has historically been in the lead when it comes to spending, all developed countries, thanks to aging, health sector inflation and increasing use of technology, are now grappling with huge increases in per capita health spending.  According to the OECD report, costs have grown by 70% in the last decade. Health care is now consuming, on average, about 9% of every developed country's GDP (see Panel B below).

Absolute per capita spending per country - US leads!

That isn't necessarily new news. What is news is what OECD thinks, based on "various methods and assumptions about the effect of health care spending," is going to happen in the coming decades. That's important, because while the current spend is important, actuarial projections on the future rate of rise in health care costs have far more important implications for national economic security. 

From that point of view, it looks like the U.S. has less of a worry:

Projected future spending: U.S. behind the pack

The OECD report notes that every country is responding with various combinations of government-run and market system solutions.  Within those systems is a complex mix of options that includes the scope as well as depth of coverage (such as using health technology assessment), consumer choice of insurers and providers, insurer "levers" (such as gatekeeping, fee schedules and pay for performance), excess insurance coverage arrangements, use of gatekeeping, "price signals," decentralization, delegation to insurers (including administrative costs), the role of "government consistencies," priority setting, budget constraints, use of volume incentives, regulation of third parties, providers and workforce command and control (increase outpatient care) and sharing information on quality and prices.  According to OECD, no single country appears to have the best combination of approaches that, historical, economic and social issues notwithstanding, could result in an average gain of two years of additional life expectancy.

Lessons for the DMCB:

1. While the U.S. has led the way in health care costs, that has partially been a function of its wealth.  With the rise in global economic well-being, the rest of the world may catch up with us.  In the meantime, the U.S. is already slowing down.

2. Despite the fawning admiration of foreign governmental top-heavy health care systems by the DMCB's liberal colleagues, it turns out everyone is in the same boat and trying various combinations of the same levers.  The combination may not only turn out to be unique to each country but could hold lessons for the role of the American 50 states in the United States' future reform efforts.

3. The market for companies that can address the many "options" described above is not only global but huge.  This is one of the reasons why the DMCB is bullish on health care and why, in particular, it thinks the future is bright for population health management companies.  International examples are here, here and here.

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