Estimating the Value of Investment: Medicare & Overall U.S. Health Care Services

1. 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

2. U.S. HC Expenditures/Capita (2000 $) Source: Health United States 2002, Consumer Price Index (All Items)

3. 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

4. Study Objective Estimate the economic value of investment in health care over the past 20-30 years

5. Study Sponsors (“The Value Group”) • 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)

6. 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) * 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)

7. Why these four conditions? U.S. Population Affected by Conditions Studied, in millions, 2003 • 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

8. Approach 1: ROI Overall Health Care, 1980-2000 • 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)

9. Approach 2: ROI Medicare, 1985-2000 • 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

10. Approach 3: ROI Major Innovations 1975-2000 (4 diseases) For each disease: • 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

11. FINDINGS

12. 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.

13. Findings: Four Common Diseases • Heart attack • Type 2 Diabetes • Stroke • Breast Cancer

14. Heart Attack

15. Heart Attack:Improvement in Outcomes Death Rate Due to Heart Attack (Age-adjusted, per 100,000) • 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 Source: www.cdc.gov/nchs

16. Medicare ROI: Heart Attack Patients Value of improved outcomes: --minus-- Increase in treatment costs*: (Medicare plus out-of-pocket) Net benefit in dollars: $28,632 $26,093 $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)

17. $38.44 AMI: ROI of Major Innovations vs Standard Treatment • Beta-blockers • Mobile coronary care units • Statin therapy • Angiography • Rt-PA • Angioplasty w/stenting • Other Source: Published literature

18. Type 2 Diabetes

19. Costs and Outcomes for Medicare Type 2 Diabetes Patients Value of improved outcomes: (7% gain in life expectancy) --minus-- Increase in treatment costs*: (Medicare plus out-of-pocket) Net benefit in dollars: $16,930 $11,337 $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)

20. Type 2 Diabetes: Value of Specific Medical Breakthroughs Breakthroughs vs. Current Standard Treatment Range in Value per Dollar Invested $36.00 • Tight control of glucose, BP & cholesterol • Statins • Ace inhibitors • Screening and treatment of diabetic retinopathy • Other Source: Published literature

21. Stroke

22. Stroke:Improvement in Outcomes Death Rate Due to Stroke (Age-adjusted, per 100,000) • Mortality cut by 37 percent • Stroke-related disability after 3 months reduced by up to 30 percent with rt-PA Source: www.cdc.gov/nchs

23. Costs and Outcomes for Medicare Stroke Patients Value of improved outcomes: (10% gain in life expectancy) --minus-- Increase in treatment costs*: (Medicare plus out-of-pocket) Net benefit in dollars: $24,903 $16,035 $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)

24. Stroke: Value of Specific Medical Breakthroughs Breakthroughs vs. Current Standard Treatment Range in Value per Dollar Invested • Clopidogrel • Ticlopidine • rt-PA* • Carotid endarterectomy* *Yields a savings in treatment costs Source: Published literature

25. Breast Cancer

26. Breast Cancer:Improvement in Outcomes Death Rate Due to Breast Cancer (Age-adjusted, per 100,000) • Mortality cut by 21 percent • 5-year overall survival rates increased from 77% to 87% • Risk of metastatic disease declined from 40% to 15%

27. Costs and Outcomes for Medicare Breast Cancer Patients Value of improved outcomes: (8% gain in life expectancy) --minus-- Increase in treatment costs*: (Medicare plus out-of-pocket) Net benefit in dollars: $22,341 $4,676 $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)

28. Breast Cancer: Value of Specific Medical Breakthroughs Breakthroughs vs. Current Standard Treatment Range in Value per Dollar Invested $36.81 • Letrozole • Breast-conserving surgery • Biennial mammography • Adjuvant chemotherapy • Stereotactic core biopsy Source: Published literature

29. Conclusion: ROI US Health Care appears positive in terms of…. • 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

30. Selected Discussion Issues • Value of Statistical Year of Life: $100,000? • ROI Overall HC • 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?

31. Implications Public policy discussions about health care costs should (and can) be accompanied by estimates of value returned.

32. For Study Report & Technical Appendices…… www.medtap.com THANK YOU!