The Value of Knowing: National Health Accounts

1. The Value of Knowing: National Health Accounts David M. Cutler, Harvard University

2. Questions We Need to Answer • US medical spending has doubled as a share of GDP since 1975. Is it worth it? • Where should we spend our research dollars most productively? • Which country is best at hockey?

3. What is Needed? • A way to tell what is happening in the medical sector, and what it’s worth.

4. Inputs Medical spending By disease Behaviors Smoking, obesity Environment Genetics Outputs Population health By demographic group The Health Sector

5. Inputs: Factor payments Wages paid to workers Raw materials Return to capital Output: GDP Overall Consumption, investment, and government spending By industry The Analogy: GDP

6. Inputs Medical spending Behaviors Environment Genetics Outputs Population health 2 1 3 What We’re Up To The “industry” in medical care is the disease

7. More on the Rationale “The BLS should develop a research program to look beyond its current "market basket" framework for the CPI… “We strongly endorse a move in the CPI away from the pricing of health care inputs to an attempt to price medical care outcomes.” - The Boskin Commission

8. The Idea of a Satellite Account “[W]e recommend the development of satellite accounts to report on selected activities not included in the conventional accounts. Satellite accounts can link to the existing economic accounts as appropriate, but also expand into areas that the NIPAs do not cover.” - Beyond the Market

9. Medical Spending

10. Medical Spending: Big Challenges • The industry • MI vs. Diabetes • Prevention vs. screening vs. treatment • The data • They don’t give conditions unless people say they are why they sought care. • We know what we spend on diabetes, but not what the average diabetic spends. • The level of analysis • What disease to attribute to an office visit for a hypertensive diabetic with a past MI?

11. Cost Model Approach Annual spending = condition categories + e Note that this is a ‘person-based’ method rather than an ‘encounter-based’ method.

12. Smoking BMI Taking it Back Farther CHD Diabetes Spending Cancer

13. Population Health

14. Components of Population Health • Mortality • Quality of life

15. 1. Official mortality data are problematic • Accuracy of diagnosis coding is in doubt • Doesn’t get at risk factors (obesity) or precursor diseases (diabetes)

16. Mortality model approach • Estimating models of mortality, similar to spending Prob die = condition categories + e • With these and the disease / risk factor transition models, we will have a way to determine ‘true’ cause of death

17. 2. Quality of Life Health Domain 1: Symptoms / Impairments Domain 2: Symptoms / Impairments Domain 3: Symptoms / Impairments Disease 1 Disease 2 Disease 3

18. Trend in Quality of Life, 1987-2004 Increased obesity

19. Symptoms/impairments with largest decrements

20. Disease Models

21. A Catalog

22. What Will We Learn? My Guesses • By and large, technological advance has been very important and cost effective • In recent years, obesity trends have significantly increased spending and lowered health • May have overwhelmed technology in parts