ECON 440 Lecture 10: Health Care Production, Costs, and Value
13 Jun 2018
School
Department
Course
Professor
Improve the patient care experience
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Improve the health of a population
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Reduce per capita health care costs
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Optimize health system performance
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The Institute for Healthcare Improvement's Triple Aim
Broadly similar populations
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Medicare beneficiaries in McAllen, TX spend twice as much as those in El Paso, but don't have significantly better
health outcomes (Gawande 2009)
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Large academic medical centers have higher average costs than small community hospitals
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Health care spending grows at a faster rate in the US than in Canada
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FFS vs salary pay
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MDs are paid more
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Other inputs (drugs, technology) prices vary with country
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Same countries need to spend more because they start off with unhealthy populations
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Aging populations, behaviors
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Population health
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More expensive medical technology
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Demand for care and more expensive care
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Administrative costs
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Why? What's going on?
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We Observe That:
How much "bang" do we get for those extra bucks?
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Productive efficiency
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Why are health care costs higher in some jurisdictions?
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Should we slow that growth?
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Welfare implications and allocative efficiency
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Why are health care costs rising?
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Health care spending = health care costs
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Outline
On production frontier
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Maximal output for a given cost (choice of inputs)
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What output could have been achieved with this level of costs?
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How low a cost could have produced this output?
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Inefficiency can be measured in terms of output or cost distance
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Relationship between costs of inputs and outputs: how to produce health most efficiently?
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Productive Efficiency
US spends more per capita on health care than many other countries, but has worse aggregate outcomes (life
expectancy)
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Does the US Display Inferior Productive Efficiency?
Lecture 10 - Health Care Production, Costs, and Value
Wednesday, February 14, 2018
5:49 PM
ECON 440 Page 1
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Same production function - is flat-of-the-curve medicine efficient? (A to B)
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Different production functions (C and F)
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Heterogeneous demand? (avg of C and A = D)
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High-spending regions in the US do no better, or worse, on health measures than low-spending regions
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Output: potential years of life (deaths by treatable causes)
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Inputs: hospitals, physicians, Rx, etc.
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Question: can you ever control enough to say that regions are health constant/comparable?
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Control for level of education, share of immigration, and share of population that's not aboriginal
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Regions with higher levels of smoking obesity, etc. have lower efficiency
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Regions with higher hospital admissions rates have lower efficiency
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Alternate level of care: patients that have been treated in hospital and no longer need to be, but can't go
home yet so they stay in the hospital
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Health care system operation factors
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Higher alternate level of care ---> lower efficiency
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Findings:
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Data Envelopment Analysis
e.g. prevalence of smoking, obesity, physical inactivity, and chronic conditions
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Potentially missed prevention opportunities
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Hospital admission rates
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Health care system operation factors:
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Associated with Efficiency in Canada
ECON 440 Page 2
Document Summary
Lecture 10 - health care production, costs, and value. Medicare beneficiaries in mcallen, tx spend twice as much as those in el paso, but don"t have significantly better health outcomes (gawande 2009) Large academic medical centers have higher average costs than small community hospitals. Health care spending grows at a faster rate in the us than in canada. Other inputs (drugs, technology) prices vary with country. Same countries need to spend more because they start off with unhealthy populations. Maximal output for a given cost (choice of inputs) Inefficiency can be measured in terms of output or cost distance. Us spends more per capita on health care than many other countries, but has worse aggregate outcomes (life expectancy) High-spending regions in the us do no better, or worse, on health measures than low-spending regions. Same production function - is flat-of-the-curve medicine efficient? (a to b) Heterogeneous demand? (avg of c and a = d)
