Determinants for Healthcare Expenditure Growth

1. Determinants for Healthcare Expenditure Growth Presented by LaToyia Floyd Wayne State University Fall 2013

2. Overview • Introduction • Health Care Trends • Literature Review • Data • Regression Model • Empirical results • Conclusion

3. Introduction • Health care expenditure • Current trends vs growth rates: past vs future state • Health care reform in the US • Equity Issues – who gets access to healthcare • Providing insurance for the uninsured • Quality issues – health outcomes • Quality of life; preventive care • Efficiency Issues – best utilization of resources • Cost: front end investment vs back end exploitation • Re-organization of primary health care • Expansion of Mid-level provider utilization

4. Introduction • Re-organization of primary health care • Improving quality • checks and balances • Coordination post hospitalization • Helping the equity conundrum – who receives healthcare • Distribute burden of service across resources • Low overhead clinics which serve local communities • Multi-payment structures • Re-introducing fee-for-service

5. Health Care Trends • % Change in spending downward slope Average Annual Percent Change in National Health Expenditures, 1960-2010 Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file nhe2010.zip).

6. Health Care Trends • Baby Boomers – increase dependence on health care Source: OECD health statistics database

7. Health Care Trends • Distribution of National Health Expenditures, by Type of Service (in Billions), 2010 Note: Other Personal Health Care includes, for example, dental and other professional health services, durable medical equipment, etc. Other Health Spending includes, for example, administration and net cost of private health insurance, public health activity, research, and structures and equipment, etc. Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file nhe2010.zip).

8. Health Care Trends • % Distribution for source of spending 1970 2010 1970 2010 1970 2010 1970 2010 Nursing Care Facilities & Continuing Care Retirement Communities Physician & Clinical Services Retail Prescription Drugs Hospital Care

9. Literature Review • Barros (1998) The Black Box of Health care Expenditure Growth • What contributes to the growth rate of health expenditure – future expansion • Contributions to level of health care expenditure – current and past factors • Fuchs (1974) Who Shall Live • Substitution of inputs – can this apply to healthcare resources such as providers • Macinko, Starfield and Shi (2003) Contribution of Primary Care Systems to Health Outcomes for OECD Countries • Strong relationship between strength of primary care system and health outcomes

10. Data • OECD Database • 4 countries: USA, Canada, Norway and Australia • Sample sizes (~40 data points) • Difficulty finding variables that fit into model meaningfully

11. Data

12. Data

13. Data

14. Data

15. Regression Model • Dependent variable: Total health care expenditure, per capita PPP • Independent variables: • Administration and Health Insurance, per capita PPP • Pharmaceuticals and non-durable medical goods, per capita PPP • Total number of curative (acute) beds, per 1,000 • Preventative measures, per capita PPP • Home care expenditures, per capita PPP

16. Regression Model • Time series regression, detrended • Country specific comparison • Model • Total Expenditure on Healthcaret = 0 + 1 GDPt1 + 2(Administration)t1 + 3(Pharma)t3 + 4(tot. curative)t4 + 5(preventive)t5 + 6t + ut • Detrending accomplished by adding time trend variable, 6t

17. Empirical Results • Significant Variables

18. Empirical Results • Elasticities: logs of variables for USA • Increasing returns to scale for number of Curative beds

19. Regression Model • Dependent variable: Total health care expenditure, per capita PPP • Independent variables: Total of 10, discussing 5 today • Pharmaceuticals and non-durable medical goods, per capita PPP • Total number of curative (acute) beds, per 1,000 • Total hospital beds per million population • Limited data points • Practicing physicians per 1,000 population

20. Regression Model

21. Regression Model

22. Conclusion • Number of Curative beds a factor in health care growth • Clue into organizational restructuring • Further studying on independent variables • Number of hospitals • Could the decrease in the number of hospitals contribute to lower percentage growth of healthcare • Practicing physicians • New medical schools • Leverage mid-level providers • Co-integration between variables • Endogenous effects vs exogenous effects on model • Insurance structuring • ER expansion