Cost-Containment, Medical Technology and Access to Care: A

Comparative Analysis of Health Policy in the United States, the United

Kingdom And Canada

Emily Adrion

Economics 2003

Health System Structure• Goals: Universal and equal

access, cost-containment, efficiency.

• Financing: determines the budget constraint and the resource distribution/ allocation within the system.

• All industrialized nations, excluding the U.S., have national health services or compulsory insurance coverage.

Purpose of Research• Exploding costs have been a major issue faced by U.S.

health policy makers• Overuse of new medical technology is often cited as one of

the primary factors responsible for cost growth. • Have the more stringent cost-containment strategies of

nations with lower per-capita spending inhibited the introduction and diffusion of new medical technology?

• Greater control of costs neither limits the introduction of medical technology nor results in lower health outcomes.

Health Care in the United States

• Private health insurance

• Traditional Insurance

• Managed Care: HMOs; PPOs

• Medicare, Medicaid• 16% of the U.S.

population remains uninsured (44 million Americans)

                          

Why the U.S. system suffers from inefficiency and rising costs

• Market failures of health care:• Information failures - Gov’t regulation• Uncertainty- health insurance

• Problems with health insurance: • Risk pooling => gaps in coverage• Moral Hazard=> exploding costs

– The third party payment problem

• Managed Care as a Solution:• LT effects on cost growth?• Slower diffusion of new technology?

– RAND study (1981)

The Third Party Payment Problem and Health Insurance

Traditional health insurance and the consumption of health care in the United States

Canada: National Health Insurance

• Universal coverage• Single-payer plan financed through general

taxation • Reimbursement: global budgets to hospitals;

negotiated fee-for-service to physicians• Private production of health services• With virtually no role for the market to set prices,

health care expenditure growth becomes almost entirely a political decision made independently in each province.

United Kingdom: National Health Service

• Model of socialized health care• Nearly universal coverage: small market for

private health insurance• Single-payer plan financed through general

taxation• Reimbursement: global budgets to hospitals;

Salaries and per-patient payments to physicians• Public production of health services

Prices and quantities in a controlled market

The Supply and Demand for health care in the UK

Theory: Technological Change and Health Care Cost Growth

• Health insurance and the bias towards cost-increasing technological change

– The Goddeeris Model

• Diffusion of new medical technology

– Impact of regulation and cost control

– Baker and Spetz (1997)

Analysis: Overview of the Concepts and Statistics

• Basic concepts:• health vs. health care

• Outcome benefits vs. utility benefits

• Statistical problems:• Data not available for every

year for every country

• For many variables no data could be found

• Differences in definitions of variables

Regression AnalysisQuality of Health Care= f(total HC, R&D,

age, income, lifestyle, tech access)

• Regression Analysis• Quality of Care

represented by: infant mortality, death rate, life expectancy and patient satisfaction

• Heteroscedasticity; Multicollinearity

75.5

76

76.5

77

77.5

78

78.5

79

79.5

0 20 40 60 80

r&d per cap

life

expe

ct life expect

Canada United Kingdom United StatesTotal Health Spending (%GDP)

1999 9.31 6.91 12.87Total per capita (US$ PPP):

1999 2428 1666 4373

Technologyhealth R&D per capita (US$):

1999 30.857 11.03 61.5MRIs per million pop:

1999 1.7 3.4 7.7CT scanners per million pop:

1999 8.1 6.3 13.4

Health OutcomesInfant Mortality:

1999 5.3 5.8 7.1Life expectancy:

1999 79 77.4 76.7

The Raw Data

Analysis: Data from 10 Developed Nations

Plot of life expectancy and Angioplasty Procedures per 100,000 pop.

life expect

7071727374757677787980

0 100 200 300 400

angioplasty per 100000 pop

life

exp

ecta

ncy

life expect

Data from 10 Developed Nations, (continued)

70

71

72

73

74

75

76

77

78

79

80

0 1000 2000 3000 4000 5000

HC spending per capita

life

exp

ecta

ncy

life expect

Plot of life expectancy and health care spending per capita.

Conclusions• Theory: high costs and worse outcomes of US

system may be the result of insurance• Without adequate control over total spending or

total quantity supplied the system may have inefficient levels of cost-increasing technologies

• The raw data suggests the US may have inefficient levels of high tech equipment (CT scanners, MRIs)

• Equally troublesome is that higher spending has not resulted in greater health outcomes

• However, the effects of R&D are long term

• Outcome vs. Utility Benefits

Ways Forward

• Premium regulation• Development of

standardized treatment guidelines and protocols

• Medical Technology Assessment

• To ensure cost-effectiveness, safety and efficacy of medical innovations