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Technology and Health Care Spending Bruce Steinwald February 5, 2008.

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1 Technology and Health Care Spending Bruce Steinwald February 5, 2008

2 Unsustainable Spending Trends How does technology manifest itself in health care spending Potential Congressional action

3 Growth in Health Care Spending: Health Care Spending as a Percentage of GDP Source: The Centers for Medicare & Medicaid Services, Office of the Actuary. Notes: The figure for 2016 is projected. The most current data available on health care spending are for 2006. Percent Year

4 Effect of Entitlements on Federal Budget: Assuming Discretionary Spending Grows with GDP After 2007 and All Expiring Tax Provisions are Extended Revenue Source: GAO’s January 2007 analysis.

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8 Cumulative Growth in Health Care Spending Per Capita, Medical Inflation, GDP Per Capita, and General Inflation, 2000-2006 Source: Bureau of Labor Statistics, The Centers for Medicare & Medicaid Services, Office of the Actuary, and the Bureau of Economic Analysis. Note: The most current data available on health care spending per capita are for 2006. Cumulative percentage 46.68 26.69 28.91 17.07

9 Changes in Volume and Intensity of Physician Services Provided per Medicare Beneficiary, April 2000 to April 2005 Type of service Average annual percentage change in the number of services per beneficiary (volume) Average annual percentage change in the intensity of services per beneficiary, as measured in RVUs All services4.45.2 Evaluation and management services2.43.7 Procedures5.74.3 Major -0.72.3 Minor6.35.2 Imaging6.910.5 Tests9.113.9 Source: GAO analysis of Medicare Part B claims data from CMS.

10 Differences in Services Provided by Level of Medicare Spending Service Type Percentage Imaging Chest radiography 60% Computed tomography (CT) or magnetic resonance imaging (MRI) of head or brain 80% CT or MRI of lumbar spine 50% Minor or Diagnostic Procedures Skin biopsy 120% Holter monitor 290% Diagnostic upper-GI endoscopy 60% Percentage more services provided in highest Medicare-spending regions as compared to lowest Medicare-spending regions for select services for three chronic disease cohorts Source: Elliot S. Fisher, David E. Wennberg, et. al, “The Implications of Regional Variations in Medicare Spending. Part 1: The Content, Quality, and Accessibility of Care,” Annals of Internal Medicine, vol.138, no.4 (February 2003).

11 Diagnostic Technology Advances Subject to Multiplier Effect Diffusion of Dx Technology leads to … More Diseases/Conditions Diagnosed, leading to … More Treatment, which results in … More Spending on both Dx and Tx

12 Sources of Information on Health Care Reform Presidential Candidates’ Proposals President’s 2009 Budget Non-governmental Organizations (e.g., Commonwealth’s “Bending the Curve,” (12/2007) Potential Congressional Actions (e.g., CHAMP, Summer 2007)

13 Congressional Action Driven By… Faith-Based Beliefs (e.g., IT, CE, Consumerism) The Need to Fix Medicare’s Sustainable Growth Rate (SGR) Problem

14 Near Term Congressional Action on Medicare Replace SGR with Differential Fee Updates Adjust Relative Prices in Medicare’s RBRVS Expand Bundled Payments Physician Profiling and Feedback

15 Long Term: What Can We Afford? Trend: Real GDP + 2.5% … Unsustainable SGR Standard: Real GDP + 0 % … Unacceptable Medicare Trustees: Real GDP + 1% …Reasonable?

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