health system watch - Institute for Advanced Studies

Transcription

II/Summer 1999
HEALTH SYSTEM WATCH
Supplement of the journal Soziale Sicherheit
Institute for Advanced Studies (IHS) – IHS HealthEcon
Edited by the Hauptverband der österreichischen Sozialversicherungsträger
(Federation of Austrian Social Security Institutions)
HIGHER SATISFACTION IS EXPENSIVE –
RESOURCE UTILIZATION IN THE EU
HEALTH SYSTEMS
CORE SUBJECT:
Managed Care, Part I
by Maria M. Hofmarcher and Monika Riedel*
Summary
According to a recent survey almost one fifth of the Austrian population is highly satisfied
with the country’s health care system. Austria ranks second in the category “highly
satisfied with the existing system“ just behind Denmark. Compared with the latter,
however, the Austrian population is more content to reforms. It also became obvious that
the higher the expenses per capita, the greater the satisfaction with the existing health care
system. In general, the population of tax-financed European health systems are more
inclined towards reforms than the inhabitants of social security countries with France
forming the only exception of the rule.
Compared to other EU countries, Austria’s per capita expenses for both physician
treatment and in-patient care rank above average. The combination admission rates which
are higher than average and a length of stay which is lower than average indicates
"hospital centralisation" of the Austrian health system. In terms of technical equipment,
Austria has nearly twice as many magnetic resonance appliances and computer
tomographs per one million inhabitants available as other EU member states while the
physician density as well as the number of physician contacts per capita roughly
correspond to the EU average.
*We would like to thank Jürgen Schwärzler for his contributions to this project and Bettina Sallaberger for the translation.
HEALTH SYSTEM WATCH 2/99
With growing health spending the satisfaction with the health system increases
The correlation between the total amount of health spending and the average life expectancy usually serves
to determine the standard and efficiency of a country’s health care system with the income elasticity of
health care expenses also being used as an approximate indicator. In terms of health care consumption
reflected by the estimation of income elasticities the Austrian population attaches much importance to the
health care system.1 Determinig the population’s satisfaction with the existing health care system, which is
basically financed by the incomes of employees,2 is still more difficult than measuring its efficiency.
Figure 1: Satisfaction with the existing health care systema) and health spending per capitab)
4,5
Denmark
4,0
Finland
Belgium
Austria
Netherlands
Sweden
Satisfactionscore
3,5
3,0
Spain
2,5
Luxembourg
France
Germany
Ireland
Great Britain
Greece
Portugal
Italy
2,0
1,5
1,0
500
700
900
1100
1300
1500
1700
1900
2100
2300
2500
Health Expenditure per capita US$ PPP
a)
b)
c)
1996, weighted according to population size.
1996, expressed in US dollars, adjusted through purchasing power parities, average weighted according to population size.
Source: Mossialos, E.: Citizens and health systems: main results from a Eurobarometer survey, European Commission,
DG V/F.1, 1998 and IHS HealthEcon calculations 1999.
In a recently presented Eurobarometer Survey random sampling in all EU member states was used to
evaluate the satisfaction with the respective health system.3
1
Compare Health System Watch No.1/Spring 1999, special attachment to the journal ”Soziale Sicherheit”, by the Institute for
Advanced Studies IHS HealthEcon.
2
Even the employer’s contribution must be considered as forming a part of the wages since it is an important issue in wage
negotiations and decisive for the amount of wage paid, let alone its rebound on prices.
3
Mossialos, E.: Citizens and health systems: main results from a Eurobarometer survey, European Commission, DG V/F.1, 1998.
The results presented in this paper refer to the question: “Are you very satisfied, rather satisfied, rather dissatisfied or very
dissatisfied with the health care system in your country? Or are you neither satisfied nor dissatisfied?” The individual answers,
which were expressed in percentage points, were classified according to a scoring system ranging from 5 to 1 and integrated
into an overall score. This score was put into relation to the health care expenses per capita of 1996.
In this study Denmark takes an overwhelming lead with every second inhabitant being very satisfied with the
existing system. In the category “very satisfied“ Austria ranks right behind Denmark but shows a much lower
level of high satisfaction with only one out of five Austrians being very satisfied with the health care system. In
contrast to 63% of the Austrians, 90% of the overall Danish population are satisfied (very satisfied and fairly
satisfied) with the existing system. In other studies, however, the satisfaction of the Austrians with their
health care system is reflected more clearly.4
If the individual pieces of information are integrated into a score and combined with the amount of health
spending per capita – as illustrated in figure 1 –, we can see that satisfaction is increasing when health
spending is rising5. However, this increase is diminishing when expenses have reached a certain amount.
Furthermore, we can observe that the EU member states are split into two camps, one positioned in the
North and the other in the South with Ireland and Great Britain ranging right in between. Compared to the
other countries, satisfaction is lowest in Greece, Italy and Portugal. In Italy, health spending per capita is just
slightly below EU average. However, the Italians are the least satisfied with their existing system. In Spain,
the majority of the population is indifferent when asked about their health care system. Although satisfaction
is highest in Denmark, the expenses rank far above average but they are only slightly higher than in Sweden
and Belgium, roughly corresponding to those of the Netherlands and Austria. In relation to the average
amount of health spending in their country, the Finnish are highly satisfied with their health care system.
Relative to the per capita amount spent on health care, satisfaction in Germany, France and Luxembourg is
less strong than in Austria.
The Austrians are inclined towards reforms
Due to the survey results, it became also obvious that a high level of satisfaction goes hand in hand with
subtle or no wishes for reforms. The greatest need for reforms could be identified in Italy, where satisfaction
with the existing system was lowest in relation to health spending per capita. Based on the weighted EU
average almost every second person considered slight changes necessary whereas 40% of the EU citiztens
opted for fundamental changes. Austria ranks seventh in the category “fundamental changes needed”.
However, only 3.3% of those persons who opted for changes considered a total reform of the current system
to be desirable. It is also interesting to note that regarding the wishes for reforms the member states are also
equally split into countries with health care systems financed by taxes and countries with a social insurance
system. In contrast to Ireland, Spain, Great Britain, Greece, Portugal and Italy, where health care systems
are financed via taxes, typical social insurance countries such as Luxembourg, Germany, Belgium, the
Netherlands, Austria and France expressed only slight wishes for reforms with Denmark and Finnland forming
striking exceptions.
4
Compare IFES/Fessel-GfK: Studie Sozialversicherung, Survey commissioned by the Federation of the Austrian Social Security
Institutions, December 1997, and IMD – International Institute for Management Development, World Competitiveness Yearbook 1999,
Switzerland 1999.
5
When we apply an OLS regression, the amount of health spending per capita accounts for 42% of the variance in the
satisfaction score.
Table1: Public´s viewpoint of the need for reform in their health system a)
Minor changes neededb)
Fundamental changes
neededb)
Health spending per
capitac)
91.6%
7.5%
1802
Finland
90.5
7.7
1380
Luxembourg
75.8
15.8
2139
Germany
76.1
18.9
2278
Belgium
75.7
19.4
1708
Netherlands
77.0
21.1
1766
Austria
73.7
21.3
1748
Sweden
72.6
25.2
1675
France
66.5
29.6
1983
Ireland
50.1
45.2
1276
Spain
44.5
47.5
1115
Great Britain
42.0
56.0
1317
Greece
29.3
69.2
888
Portugal
23.0
70.1
1071
Italy
18.5
76.9
1584
54.4
41.4
1689
Denmark
d)
EU-15
a)
b)
c)
d)
Ranked according to the category “Extensive reforms necessary”.
The category “Others” was not included, which is the reason why the individual figures do not add up to
100.
1996 US-Dollar, the differences in purchasing power were taken into account.
Average amount weighted according to population size.
Sources: Citizens and health systems: main results from a Eurobarometer survey, European Commission, DG
V/F.1, 1998, IHS HealthEcon calculations 1999.
Resource consumption compared
While Germany, Luxembourg and France spend by far the highest amount of money on health care,
Denmark, the Netherlands, Austria and France have the highest per capita expenses for in-patient care. In
addition, Luxembourg, Germany and Italy have the highest per capita expenses for physician treatment (see
table A1 and A2). Greece, Portugal and Spain do not only have the lowest amount of overall health spending
per capita but also the lowest expenses for in-patient treatment. In the field of physician services these three
countries‘ expenses also rank below average but correspond slightly to the amount spent on physician
services in Ireland, Denmark and the Netherlands.
Do in-patient care expenses converge?
A tendency towards convergence of in-patient care expenses became obvious during the 1990s. Compared to
the figures of 1990, only four countries – Austria, Finland, Great Britain and Spain – continued to fall further
below the average EU spending for in-patient treatment between 1990 and 1996. The other countries‘ effort for
convergence can be interpreted as effort to reach the Maastricht criteria, especially since the share of public
spending for in-patient care has traditionally been higher than for physician services. In addition, European
countries have been aiming at similar policy goals to enhance micro- and macroeconomic efficiency since all
of them have already accomplished the utmost objective of granting medical treatment to almost all of their
citizens. In implementing fixed budgets, quasi-markets 6 and alike, most countries have introduced similar
measures to keep the pace of health expenditure growth in line with overall budget criteria. In addition, even
in Switzerland and in the United States convergence of the in-patient expenditures can be observed. High per
capita expenses for in-patient care might be caused by either frequent admissions (e. g. Austria and France),
long stays in hospital (e. g. the Netherlands) or costly treatment during the stay (e. g. Denmark). Admission
rates below EU average could be found in countries with below average health expenditures per capita.
However, per capita in-patient expenditures in those countries exceed the EU average. The Netherlands form
an exception to this rule since they combine very low hospital admission rates with high health spending per
capita and still higher expenses for in-patient treatment. This pattern in the Netherlands might be due to the
high average length of stay, which exceeds the EU average about three times and is twice as long as in
Luxembourg, which ranks second.
While there is evidence for a slightly positive correlation between admission rates and satisfaction, a similar
association cannot be noticed between duration of stay and satisfaction. Short hospital stays appear to be
uncorrelated with the publics´ satisfaction; i. e. while people in Denmark are highly satisfied with their health
system they get discharged after seven days, the almost lowest average length of stay in the EU.
Is there divergence in physician expenses?
In contrast to the pharmaceutical markets, competitive forces are weak in the provision of physician services
due to either supply-side regulations and/or due to yard-sticked demand. Thus, convergence in this field is
considerably low. Furthermore, health statistics appear to be much more accurate in the in-patient care
sector and in the pharmaceutical market, respectively.
Tax-financed health care systems spend relatively low per capita amounts on physician care. Italy, however,
constitutes an exception in this respect since its expenses for physician treatment are more than one third
above the EU average. However, it has the highest physician density within the whole Union and has a
relatively large private health care sector. 7
According to a study on the convergence of overall public health spending in EU countries, neither divergence
nor convergence became evident between 1960 and 1990. Since 1990, however, convergence trends have
6
Comas-Herrera: Is there convergence in the health expenditures of the EU member states? In: Mossialos, LeGrand (ed.): Health
care and cost containment in the European Union, Ashgate, 1999, p. 197—218.
7
Fattore, G., Cost containment in the Italian National Health Service. In Mossialos, LeGrand 1999, ibid., p. 513–546.
become more obvious in tax-financed health care systems.8
Austria
In 1996, per capita expenses for physician services as well as for in-patient care are above EU average in
Austria. In addition, both the physician density as well as the number of physician contacts per capita were
slightly above EU average9. The admission rate ranks significantly above average while the average length of
stay is rather short, which indicates "hospital centralisation" of the health system but may also be
contributed to – yet unrevealed – efficiency improvements in the hospital sector over time. Efficiency would
be probably even enhanced if the substitution between in-patient and out-patient treatment will take on more
thoroughly. In terms of technical equipment, Austria provides more computer tomographs and magnetic
resonance appliances than any other EU member state and exceeds the EU average by 100%. However,
well-equipped hospitals do not automatically generate satisfaction. In Finland and Denmark, for example, the
population is highly satisfied with the existing health care system although the availability of advanced
medical technology in both countries is below the EU average while the low-ranked Italian system provides
rather well-equipped facilities.
8
Comas-Herrera 1999, ibid.
With a probability of 95% the average physician density ranged within a confidence belt of 2.9 to 3.9 per 1,000 inhabitants in
1996 while the average number of physician contacts is betwenn 5.2 and 6.8 per capita. See table A3.
9
Core subject: No Free Health – Does Managed Care make medical
treatment more costly? – Part 1
Summary
Part I of the series on core subjects deals with Managed Care and its evolvement in the publicly-provided
health plans in the United States. The development of Managed Care in the public sector is of particular
interest to social security countries like Austria since in those countries physician services are mainly
provided contract-based in the private sector, a characteristic Managed Care is predominantly concerned
with.
More than one third of the American population is enrolled in publicly-provided health plans. By introducing
Managed Care in the public sector, the intention was to extend coverage and facilitate the access to medical
care – aims which so far have not been realized yet. Guaranteeing medical care to the needy, the biggest
health insurance provider Medicaid registers three times as many enrollees in Managed Care organizations
than Medicare, the insurance of the elderly.
The pace of health spending growth has slowed down and is on its lowest level in years. This development is
probably only partly due to the Managed Care revolution. As in any other developed country, the US hospital
sector accounts for the lion’s share of health spending, 50% of which is paid by public health insurance
plans. The occupancy rates are still quite low and although consolidation has begun, there is little evidence
that this development is due to the prevalence of Managed Care. Thus, consolidation is far more considered
as the result of other factors including changes in the remuneration system for physician services. The
considerable slow-down in the growth of physician incomes was mostly attributed to efficient negotiations by
Managed Care organizations which might have been provoked by increased competition between the various
organizations. From 1998 on, a rise in health spending has been predicted, which is assumed to be caused
by the private sector.
The second part of the series “No Free Health – Does Managed Care make medical treatment more costly?”,
which will be published in Health System Watch No. 3, will deal with two main questions: 1) How and where
can costs be contained by Managed Care? 2) Does Managed Care provide effective cost containment
measures for social security countries?
Preface
In 1973, the Congress of the United States adopted a law to regulate existing Health Maintenance
Organizations (HMOs). 10 The background of this initiative was the extension of coverage in the still young
Medicare plan, which was percieved to cause a financial crisis in the US health care system.
The emergence of Health Maintenance Organizations, however, occured only in the late 1980s due to the
increase in health spending by two-digit growth rates at the beginnig of the 1980 and thus due to the
employers´ concern to look for alternative ways of granting health insurances to their employees 11.
What is Managed Care?
Managed Care plans combine various sets of mechanisms which consist of a selection of organizations of
providers, methods used for paying providers and methods used for monitoring service utilization. What they
basically have in common is that they grant access to physicians and hospitals that have agreed to give
health care to beneficiaries who pay a certain monthly premium. In all its different forms Managed Care aims
at containing health spending by exerting a certain amount of control over patient-doctor relationships.12
Managed Care organizations mostly limit access to certain services as well as to certain providers and thus
restrict the range of physicians among which their enrollees may choose. Moreover, they mainly rely on
general practitioners and therefore contract less specialists. In combination with the limited range of
physicians to be chosen by the enrollees, this fact constitutes an increased risk for medical specialists who
have definitely less chance to be contracted by such organizations than general practitioners.
Main forms of Managed Care organizations and insurance coverage
Enrollees are granted medical services by a specified group of general practitioners with the insurance
covering services by this pre-defined group only.
The beneficiaries of Preferred Provider Organizations (PPOs) may also choose their physician from an
independent network of providers who offer their services at discounted rates insured with PPOs.
In 1997, 77.3% of the American population were either granted health insurance by a private employer
(43.1%) or by a social insurance programme (34.2%), whereas 7.1% financed their health insurance through
their income and 15.6% had no health insurance at all.13
10
This law abolished limitations on state control over HMOs, fixed certain standards to be preserved by these organizations and
allowed certain groups of employers to offer both HMO insurances as well as fee-for-service insurances.
11
Paul Ellwood, MD quoted in A Quarter Century of Health Maintenance, Medical News & Perspecitve – December 23/30.
JAMA.1998; 280:2059–2060.
12
”HMO is a misnomer (…) What you do have are these amorphous creatures that are basically organizations that regulate the
patient-doctor relationship. HMOs are private-sector health care regulators”. U. Reinhardt in JAMA.1998; 280:2059–2060.
13
Carrasquillo, O., Himmelstein, D. U., Woolhandler, S., Bor, D. H.: A Reappraisal of Private Employers´Role in Providing Health
Insurance, NEnglJMed January 14, 1999, Vol. 340:109–114, No. 2; Carrasquillo et al. corrected the calculations done by the US
Bureau of Census by removing all those with more than one health insurance. According to their calculations, the persons enrolled
in a social insurance programme formed a much bigger group than originally figured out by the US authority.
Health Care Funding
In 1997, health spending accounted for 13.5% of the GDP – a share which had hardly changed since 1994.
Public health spending, which mostly consists of the expenses for both Medicare, the insurance programme
for 65+, and Medicaid, the insurance for the needy, amounted to 4.8% of the GDP. 14
In 1997, health care expenditure grew by 4.8%, which marked the lowest increase in the past 35 years. The
publicly-financed share in overall health spending amounted to 46% and had thus risen by 6 percentage
points since 1990. As a consequence, the privately-financed share in health care expenditure decreased from
60% to 54% within the same period. 15 In 1997, Medicare and Medicaid roughly financed 34% of overall health
spending. Medicare and Medicaid together constitute the major part of mandatory expenditures in the US
Budget.
Figure 2: Financing of the health expenditures in 1997
Private expenditures
17,2%
Medicaid
19,6%
Other private expenditures
4,6%
Medicare
14,6%
Private insurance
31,9%
Other public expenditures
12,2%
Source: Health Care Financing Administration 1998 and IHS-HealthEcon 1999.
In 1998, mandatory spending amounted to 57% of overall federal expenditure. This share is predicted to rise
to 63% by the year 2002 and to 73% by the year 2009. Both Medicare and Medicaid expenses accounted for
33.2% of overall mandatory spending in 1998. According to official predictions this share will have increased
to 34.5% by 2002 and to 40.3% by 2006, thus rising by a total of 7 percentage points. Medicare and
Medicaid spending as well as public expenses on pensions amounted to 73.3% of mandatory expenditure.
Thus, social security and health care expenditure accounted for 41.7% of overall federal spending – a share
14
15
In Austria public health spending amounted to 6.0% of the GDP in 1997.
Iglehart, J. K. The American Health Care System – Expenditures; NEnglJMed, January 7, 1999, Vol. 340:70–76, No. 1.
which is projected to rise by 14 percentage points to 46.3% in 2002 and to 56.3% in 2009 (which amounts to
a total increase of 14%). 16 According to forcasts by the Health Care Financing Administration (HCFA) health
spending will amount to 16.6% of the GDP in 2007. The health expenditure growth will mainly be due to an
increase in costs in the private sector. 17
Table 2: Projections on health spending
1998
2002
2009
Mandatory expenses (in percent of federal expenditures)
57.0%
63.2%
72.8%
Medicare and Medicaid expenditures (in percent of mandatory
expenditures)
33.2
34.5
40.3
Medicare and Medicaid expenditures (in percent of federal
expenditures)
18.9
21.8
29.3
Social security and health care spending (in percent of federal
expenditures)
41.7
46.3
56.3
GDP share of health expenditures
13.7
14.5a)
16.6b)
a) 2001 b) 2007
Sources: A CBO Report: The Economic and Budget Outlook: Fiscal Years 2000–2009, January 1999, The Congress of United
States, Congressional Budget Office, Washington DC, Smith S., Freeland M., Heffler S., McKusick K.; Health Expenditures
Projection Team. The next ten years of health spending: what does the future hold? Health Aff (Millwood) 1998; 17(5):128–40 and
IHS HealthEcon calculations 1999.
Medicaid – the plan for the needy
Medicaid constitutes the biggest insurance programme within the US health care system. In 1997, 41.3
million people were covered for emergency treatment, long-term care and medical drugs. From 1993, the
number of beneficiaries has risen by nearly 70% percent. In 1996, roughly 85% of the overall Medicaid
expenses were spent on hospital treatment as well as long-term care. Prior to 1995, persons with low
incomes were automatically enrolled in the Medicaid programme. The entitlement, however, turned into
means testing due to the enforcement of the Balanced Budget Act in 1997. This change entailed an increase
in bureaucracy for both enrollees and providers and thus raised the number of persons who would be entitled
to participation regarding their incomes, but do not apply. 18
In 1998, the growth in Medicaid spending amounted to 6% (compared to 3% in 1996 and 4% in 1997).
Medicaid expenditures are financed by both state and federal authorities. The growth rate for Medicaid
outlays is projected to be 7% in 2007 and slightly more than 8% in 2009, respectively. 19 These higher growth
rates will be due to new legislation aiming to increase the enrollment of Medicaid beneficiaries in Managed
Care organizations. Furthermore, wage costs in the field of long-term care are expected to grow. And finally
16
A CBO Report: The Economic and Budget Outlook: Fiscal Years 2000–2009, January 1999, The Congress of United States,
Congressional Budget Office, Washington DC.
17
Smith, S., Freeland, M., Heffler, S., McKusick, K.; Health Expenditures Projection Team. The next ten years of health spending:
What does the future hold? Health Aff (Millwood) 1998; 17(5):128–40. Ginzberg, E., The Uncertain Future of Managed Care,
Sounding Board, NEnglJMed, January 14, 1999, Vol. 340:144–146, No. 2.
18
Iglehart, J.K. The American Health Care System – Medicaid; NEnglJMed, February 4, 1999, Vol. 340:403-408, No. 5.
19
A CBO Report, ibid.
constant changes in both legislation as well as the implementation of service provision to the needy will lead
to increasing administration costs. On the other hand, however, the economic boom is expected to contain
Medicaid expenses.
Medicaid Manged Care
In 1997, Medicaid beneficiaries were offered health care in Managed Care organizations in 49 states. The
number of Medicaid beneficiaries enrolled in Managed Care programmes had risen tenfold since 1993 and
accounted for 48% in 1997. 20 Individual states either contract general practitioners on a capitation basis as
"gatekeepers" or they contract both hospitals and/or group practices which provide services without bearing
all the financial risks. In regions where Managed Care is fairly developed state legislation is mainly targeted
towards enrolling Medicaid beneficiaries in Managed Care organizations, which ensure comprehensive
services and take all the financial risks.21
In 1997, 50% of a total of 36.2 million Medicaid beneficiaries were children, 19% were needy adults, another
19% were handicapped persons and 12% were elderly persons.22 Although the group of mothers with children
comprised about 70% of the Medicaid enrollees, they only use 30% of overall Medicaid spending. The main
question concerning the Medicaid Managed Care revolution thus is whether profit-oriented insurance
companies are able and willing to enroll persons with chronical conditions or elderly people who utilize 70%
of the Medicaid expenses.23
Medicaid Managed Care’s main objectives have been to widen the access to health care as well as to
contain costs. According to most recent estimates, however, these aims have been enforced to a limited
extent only. Medicaid Managed Care has mainly been restricted to two target groups – children and women
with children. Fees for Medicaid beneficiaries are traditionally low so that the individual states have had many
difficulties so far to force down the HMOs‘ flat rates per capita and negotiate discounts.
In addition, the willingness of commercial HMOs to conclude contracts has lessened in certain regions
because states continue to provide financial support to existing welfare institutions, thus prohibiting market
access for Managed Care Organizations. As a result, greater access to health care has not yet really been
enforced. 24
20
US Department of Health and Human Services, Health Care Financing Administration (HCFA): Financial Report, Fiscal Year 1997,
Baltimore 1998.
21
Iglehart, J. K. The American Health Care System – Medicaid, ibid.
22
HCFA Financial Report 1997, ibid.
23
Ginzberg, E., ibid.
24
Holahan, J., Wiener, J., Wallin, S., Health Policy for the low income population: major findings from the Assessing the New
Federalism case studies. Occasional paper no. 18. Washington, D.C.: Urban Institute, 1998.
Medicare – the plan for the elderly
The Medicare programme offers two kinds of insurances. Part A pays for hospital care while part B
constitutes a kind of supplementary insurance which covers the vast majority of part A enrollees seeking
treatment by practicing physicians and in out-patient departments.
Parts A and B are funded by four different sources. While 88% of the insurance costs for hospital care are
financed via payroll taxes, the remaining 12% are raised out of interest rates (7%), taxes and supplementary
contributions by beneficiaries (5%). 25 Part B, for which Medicare beneficiaries may register on a voluntary
basis, is mainly funded by the federal state (73%). 24% are raised out of premiums, while the remainig 3%
are paid out of interest rates. The balanced budget intiative of 1997 (Balanced Budget Act) led to the
introduction of a third kind of insurance called Medicare+Choice in January 1999, which primarily aims at
restructuring Medicare Managed Care with the help of creative ways of funding.
During the 1990s, Medicare spending experienced an average annual increase of 10% with an average growth
of 7.3% is being projected for the next ten years. 60% of the future rise will be due to the growing number of
beneficiaries and to inflation adjustments. Technological changes in both medical treatment and
administration as well as the ever rising number of elderly people are held responsible for the remaining
40%.26
Medicare Managed Care
In 1997, 39 million people were insured with Medicare – a number which had risen by 100% since 1967.
Between 1966 and 1995, the share of beneficiaries older than 85 doubled. In 1997, 33 million people were still
enrolled in the traditional fee-for-service insurance programmes. In 1997, 14.2 % of all Medicare beneficiaries
(5.7 million) were enrolled in an HMO, which incurred Medicare Managed Care expenditures of about 25.7
billion US dollars, thus accouting for 12.4% of overall Medicare spending. 27
In January 1999, the introduction of Medicare+Choice, which mainly was aimed to adjust flat rates for
medical services that vary from region to region as well as to implement new ways of payment for home care,
entailed many difficulties and problems in the run-up. After the new charges for medical treatment had
become public, 43 of 347 HMOs which were held under contract by Medicare did not want to prolong their
agreement while 54 other HMOs announced to reduce the number of regions served. 28 These changes
roughly affected 500,000 Medicare beneficiaries, 87% of whom have been enrolled in for-profit HMOs.29 The
remuneration for medical treatment strongly differs from region to region and this led to the manifestation of a
25
A CBO Report, ibid.
27
28
Iglehart, J. K. The American Health Care System – Medicare; NEnglJMed, January 28, 1999, Vol. 340:327–332, No. 4.
29
Neuman, P., Langwell, K., Medicare´s choice explosion? Implications for beneficiaries. Health Aff (Millwood) 1999, 18(1):150–60.
26
certain trend: HMOs have been increasingly settling in “rich“ regions while they have been leaving the market
in low-profit territories. Thus, the federal insurance authority Health Care Financing Administration (HCFA)
began to question both the continuity and the reliability of HMOs.30
Expenditure of private households
In 1997, private households contributed 31.9% to thanks overall health spending by employment-based
insurances, while 21.8% were financed via deductibles, supplementary contributions and other expenses.
90% of all those privately insured had a employment-based health insurance. 31 70% of this group were
insured via private employers and comprised non-elderly, white, non-Hispanic males. Between 1980 and
1995, however, their number decreased by 9%. Such a development was probably due to an increasing trend
towards job migration into the service sector, to a rising number of part-timers and still growing health
spending, which caused many employers to either no longer enroll their employees in any health plan or to
raise their contributions. This situation led to a higher number of drop-outs among low-income earners.32
Health Care Spending
In 1997, 61.5% of the overall health care expenditure was spent on hospital care (34%), nursing homes
(7.6%) as well as on physician treatment including out-patient services (19.9%). Moreover, 7.2% of the
resources were spent on medical drugs, while 3.2% were used for research activities (1.65%) and
construction (1.55%).
30
Dr. Robert A. Berenson, director of HCFA, Center of Health Plans and Providers, in Igelhart, J. K.: The American Health Care
System – Medicare, ibid.
31
Kuttner, R., The American Health Care System – Employer-Sponsored Health Coverage; NEnglJMed, January 21, 1999, Vol.
340:248-252, No. 3.
32
Carrasquillo et al., ibid.
Figure 3: Health care spending in 1997
1.6%
Research 1.5%
3.5%
Building activity
Public health care
15.9%
Dental care,
home health care,
other services
33.9%
Inpatient care
4.6%
Various administration
costs
4.1%
Other drugs
spectacles
remedies
7.2%
Prescription drugs
7.6%
Nursing homes
19.9%
Ambulatory care
Source: Health Care Financing Administration 1998 and IHS HealthEcon 1999.
Slightly more than three fifths of the overall health care expenditure are used for in- and out-patient treatment
including physician services.
In-patient care
Medicaid and Medicare provide roughly half of the spending for hospital care, while one third is being paid by
private insurance companies. About 3% come from private households. The rest is financed by the Ministry of
Defence, subsidies and private donations.33 According to recent projections by the Health Care Financing
Administration34, the share of spending for in-patient treatment will decline to 32% by 2001 – a development
which will mainly be due to the enforcement of austerity measures for Medicare laid out by the Balanced
Budget Amendment. Since more and more Medicare beneficiaries will join Managed Care organizations, an
increasing trend towards substitution between in-patient and out-patient care is expected. This substitution
process is thus assumed to contain Medicare expenses for hospital care.
During the 1990s, hospitals have very often changed ownership status. Between 1994 and 1996, roughly 41%
of 5,200 private hospitals were involved in transactions which changed the ownership status. From 1985 to
1995, the number of acute care hospitals declined from 5,732 to 5,194 while the number of beds was reduced
by 13% from 1 million to 837,000. The occupancy rate, however, which had still accounted for 64.5% in 1990,
continued to decrease to 59.7% in 1995. It is very interesting to note, though, that the share of for-profit
33
34
Iglehart, J. K., The American Health Care System – Expenditures, ibid.
Smith, S., Freeland, M., Heffler, S., McKusick, K., Health Expenditures Projection Team, ibid.
hospitals remained at a stable 14% between 1985 and 1995. 35
Between 1985 and 1993, the number of acute care beddays per capita decreased by 9%. The evolvement of
HMOs and their rising importance, however, was hardly held accountable for this trend. Moreover, all the
other indices regarding utilization were only to a very negligible extent associated with the spread of
Managed Care. Thus, researchers jumped to the conclusion that a host of other socio-demographic,
economic, technological and development-related factors including the different forms of remuneration for
physician services (Relative Value Scale) were responsible for the obvious change in the utilization of
services and the decrease in beddays per capita spent in hospital.36
Anyway, this development induced a general trend to horizontally consolidate health markets.37 Such an
efficiency-enhancing strategy was obviously induced by the fact that the hospital sector has been facing
considerable overcapacities. In 1995, the cost for an empty acute care bed amounted to US$ 48,826 (roughly
ATS 500,000/ 39,032 Euro) per year – a result which holds true even if reserve capacities are taken into
account. Thus, it was found out that a reduction of beds which would raise the average occupancy rate from
59% to 79% would in fact lead to a 9% reduction of the operating costs per patient .38
Empirical studies, however, also showed that increasing concentration in the hospital sector entailed a rise in
charges for services – a development which even became obvious in non-profit hospitals. On the other hand,
a positive correlation between increased competition, mortality and re-admission to hospitals was observed,
and that price competition was accompanied by a reduction of quality competition, respectively.39 Recently
implemented rate adjustments within the Medicare programme which were enforced within the framework of
the Balanced Budget Act increased the pressure on nursing homes and thus led to rejections of costly
patients suffering from multiple conditions .40
Physician services
In 1997, 19.7% of the overall health care expenditure was spent on physician services. About half of this
amount are attributable to net incomes, which are roughly four times as high as the net incomes of
physicians in Finland, Norway and Sweden. 41 The net income of physicians in the United States is about 6
35
Gaynor, M., Haas-Wilson, D., Change, Consolidation, and Competition in Health Care Markets, Working Paper W 6706, National
Bureau of Economic Research 1998.
36
Bokhari, F., Caulkins, J. P., Gaynor, M., Does Managed Care Matter? Hospital Utilization in the US between 1985 and 1993,
Working Paper of the H. John Heinz III School of Public Policy and Management, Carnegie Mellon University, Pittsburgh, November
1998.
37
Gaynor, M., Haas-Wilson, D., ibid.
38
Gaynor, M., Anderson, G. F., Uncertain Demand, the Structure of Hospital Cost, and the Cost of Empty Hospital Beds, Journal of
Health Economics, 1995, 14:291–317.
39
40
McGinley, L., "As Nursing Homes Say 'No,' Hospitals Feel Pain," Wall Street Journal, May 26, 1999.
41
Anderson, G. F., Poullier, J.-P., Health Spending, Access, and Outcomes: Trends In Industrialized Countries, Health Aff (Millwood)
1999, 18(3):178–192.
times as high as the average income in the United States, four times as high as the average income in
Germany and three times as high as the average income in Great Britain. 42 The introduction of Managed Care
schemes was responsible for a considerable slow-down in the growth of the net income of physicians. While
between 1986 to 1992 net incomes had increased by 7.1% annually, its growth slowed down to 1.7%
between 1993 and 1996. 43
Over the years, the evolution of Managed Care originated the creation of physican networks designed to
improve the capability of single practice physicians to deal with contractual issues. From 1991 to 1995, the
share of single practicing physicians declined by 5%, thus reaching a level of 25% while the number of
physicians who are either employed by hospitals and/or insurance companies rose by 8% to a total of 30%
within the same period. The spread of Managed Care organizations also accelerated the growth of group
practices. The optimal size of group practices has been evaluated to comprise three to five physicians.44
Furthermore, the number of physicians who join trade unions is expected to grow at an annual rate of 15%
due to the expansion of Managed Care. About 90% of all US physicians have a contract with at least one
Managed Care organization, 5% of them are organized in trade unions with the American Medical
Association supporting the enrollment of their members.45
Spending on medical drugs
For several years now spending on prescription drugs has been growing by two-digit rates. In 1995, the
growth rate amounted to 10.6% while it increases to 13.2% in 1996 and 14.1% in 1997. This trend, however,
is not only due to the extension of insurance coverage for prescription drugs but also due to the growing
number of new drugs available. These factors have been contributing to a constant rise in insurance
premiums.46
42
Hsiao, W. C. L., lecture at the public event “Remuneration Systems for Medical Performance”, St. Wolfganger Gespräche 1998,
Federation of the Insurance Companies.
43
Iglehart, J. K., The American Health Care System – Expenditures, ibid.
44
45
Steven Greenhouse, "Angered by HMO's Treatment, More Doctors Are Joining Unions," New York Times, February 4, 1999.
46
Iglehart, J.K. The American Health Care System – Expenditures; NEnglJMed, January 7, 1999, Vol. 340:70–76, No. 1.
Table A1:
a)
Austria
Belgium
Denmark
Germany
Finland
France
Greece
Great Britain
Ireland b)
Italy
Luxembourg
Netherlands
Portugal
Sweden b)
Spain
EU15 d)
EU11 d)
Switzerland
United States
1990
634
410
866
444
571
684
199
419
417
598
395
693
198
744
360
In-patient care expenditures per capita
US-Dollar, purchasing power parities
EU15=100
1991 1992 1993 1994 1995 1996 1990 1991 1992 1993 1994
677
756
799
864
897
940
125
120
123
126
131
461
516
563
586
613
692
81
81
84
89
89
868
900
973 1032 1067 1131
171
153
146
153
156
551
621
656
709
737
796
88
97
101
103
107
621
599
548
526
552
564
113
110
97
86
80
727
785
812
838
876
904
135
128
127
128
127
208
233
247
261
*
*
39
37
38
39
39
455
498
499
512
521
*
83
80
81
79
77
470
578
622
660
692
692
82
83
94
98
100
671
721
705
735
707
743
118
119
117
111
111
421
469
530
536
650
703
78
74
76
84
81
745
802
839
865
941
925
137
132
130
132
131
241
282
319
346
371
*
39
43
46
50
52
717
663
652
637
665
*
147
127
108
103
96
414
447
473
472
471
501
71
73
73
75
71
1995
130
89
155
107
80
127
*
76
100
103
94
136
54
96
68
1996
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
507
522
566
591
616
647
634
669
661
700
689
717
*
768
100
103
100
104
100
105
100
105
100
106
100
104
*
*
871
1230
996
1344
1086
1439
1130
1508
1178
1560
1219
1603
1231
1646
173
245
177
239
178
235
179
239
179
238
178
234
160
214
Estonia
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Poland
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Slovenia
134
162
205
296
331
*
*
27
29
34
47
50
*
*
Czech Republic
*
*
*
*
*
176
252
*
*
*
*
*
26
33
Hungary
*
*
*
127
142
136
179
*
*
*
20
22
20
23
a) 1990 to 1992: BASYS 1997 Gesundheitssysteme im internationalen Vergleich – Übersichten; 1993 to 1996 expenses for public
hospitals (Fonds Krankenanstalten) including depreciation Federal Ministry of Labour, Health and Social Affairs 1999
b) public spending only
d) average amount weighted according to population
Source: WHO Health for all database; OECD Health Data 98 for Ireland, Sweden, USA; OECD Economic Surveys 1999 for
Hungary, Federal Ministry of Labour, Health and Social Affairs, IHS HealthEcon Calculations 1999.
Table A2:
Spending for physician services per capita
US-Dollar, purchasing power parities
EU15=100
1990 1991 1992
1993 1994 1995 1996 1990 1991 1992 1993
1994
Austria
Belgium a)
Denmark
Germany
Finland
France
Greece
Great Britain
Ireland a)
Italy
Luxembourg
Netherlands
Portugal b)
Sweden
Spain
220
202
99
226
227
241
87
145
69
255
323
130
179
215
*
242
220
110
272
253
259
90
157
83
276
347
138
187
213
145
264
241
120
309
244
276
102
172
160
296
393
146
193
192
150
291
241
127
320
248
279
107
180
113
306
431
143
189
158
*
311
242
132
340
242
278
114
184
120
322
421
145
200
188
*
*
*
*
354
*
*
*
*
*
312
*
153
*
*
*
*
*
*
375
*
*
*
*
*
321
*
154
*
*
*
108
99
49
110
111
118
43
71
34
125
158
64
87
105
*
111
101
50
124
116
119
41
72
38
126
159
63
86
97
67
111
102
50
130
103
116
43
73
67
125
166
62
81
81
63
115
95
50
126
98
110
42
71
45
121
170
56
75
62
*
118
92
50
129
92
105
43
70
46
122
160
55
76
71
*
EU15 d)
EU11 d)
205
200
218
237
237
258
253
251
264
261
n.v.
n.v.
n.v.
n.v.
100
98
100
108
100
109
100
99
100
99
Switzerland
United States
312
586
330
642
362
689
368
711
394
730
422
746
n.v.
761
152
286
151
294
152
290
145
281
150
277
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Estonia
Poland
Slovenia
Czech Republic
Hungary
a) Public spending only
b) Data by the National Health Service (NHS) only
c) Estimates
d) Average amount weighted according to population size
Source: OECD Health Data 98, MOSSIALOS, E., LE GRAND, J., (1999), Health Care and Cost Containment in the European Union,
Asghate, Aldershot, Gesundheitssysteme im internationalen Vergleich – Übersichten 1997, Basys, Augsburg, IHS HealthEcon
calculations 1999.
Table A3:
Hospital
admission
rates in %a)
Average
number of days
in hospitala)
Patients
treated
Resource utilization, 1996
MRA per 1
CT per 1 million
FTE
Physicians per
Physician
million
inhabitants
employees per
1,000
appointments
inhabitants
patient (b)
inhabitants
per capita b
25 .1
20.0
19.5
20.9
25.7
22.5
15.0 b)
16.0
15.2
16.2 b)
19.0
11.1
11.4
18.1
10.0
10.5
11.3
7.3
14.3
11.6
11.2
8.2
9.8
7.0
9.8
15.3
32.5
9.8
7.5
11.0
35.9
26.7 b)
43.7 b)
27.0
30.8 b)
46.0
*
49.5 c)
30.6 c)
30.8 b)
*
26.7
32.9
42.0
32.6 c)
7.4
3.3 b)
2.5 e)
5.7
2.4
2.3
1.2
3.4 b)
0.3
3.5 b)
2.6
3.9 b)
2.8
6.8 b)
3.2
23.9
16.7 c)
5.8 e)
16.4
9.0 e)
9.4
6.1
6.3 g)
14.3
17.5 b)
15.7 e)
9.0 g)
12.0 f)
13.7 g)
9.0
1.9
1.5 d)
3.2 c)
1.5
2.1 c)
1.1
1.4 c)
3.5
1.8
2.2
*
2.2
2.6
*
c)
2.6
3.52 i)
3.40 c)
2.90
2.80
2.90
3.40
3.9 b)
2.10
5.50
2.2 b)
2.6 f)
3.00
4.20
3.10
1.70
6.30
8.0 e)
5.40
4.10
6.5 e)
6.40
*
*
*
*
5.70
3.20
*
3.00
5.90
17.7
18.1
12.0
12.8
36.0
32.9
3.8
3.9
12.2
13.7
2.1
1.8
3.40
3.74
6.03
6.22
Switzerland
USA
15.00
12.20
15.0
7.8
21.5 e)
33 b)
7.4 g)
16.0 b)
17.7 g)
26.9 g)
2.0 i)
3.9
3.20
2.60
*
6.00
Estonia
Poland
Slovenia
Czech Republic
Hungary
*
11.6 b)
15.8 c)
22.30
23.4 b)
*
10.6
10.6 c)
12.3
10.8
*
*
*
29.6
33.3
*
0.2
*
1.1
1.4
*
0.4
*
7.1
5.1
*
1.0
*
1.6
0.5 c)
2.90
*
4.2 b)
2.40
*
*
*
14.80
5.40
*
Austria
Belgium
Denmark
Germany
Finland
France
Greece
Great Britain
Ireland
Italy
Luxembourg
Netherlands
Portugal
Sweden
Spain
EU15 h)
EU11 h)
MRA...magnetic resonance appliances, CT...computer tomographs, FTE...full time equivalent,* no data available, a) emergency and non-emergency , b) 1995, c) 1994, d) public
spending only, e) 1996, f) 1990, g) 1993, h) average weighted according to population, i) practising physicians excluding dentists; according to OECD Health Data the number of
practising physicians generally excludes “physicians who are still being trained”; thus, Austria has 2.8 physicians per 1,000 inhabitants.
Sources: OECD Health Data 1998, WHO Health For All 1998, Gesundheitsstatistisches Jahrbuch 1995/96, ÖSTAT Jänner 98, IHS HealthEcon 1999

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