Annual Health Care Expenditures Research Articles

The Costs of Schizophrenia: Assessing the Burden

Much has been learned about the costs of schizophrenia during the last three decades. Assessing the costs is a challenging task given the complexity of the disease. Much can be done to refine the methodologies of cost of schizophrenia studies based on the human capital approach and to develop the conceptual framework for a consistent account of the income distribution effects of the disease. The knowledge base, however, is quite extensive and data presented here indicate that although people with schizophrenia account only for about 1% of the adult population, they consume about 2.5% of total annual health care expenditures, they constitute about 10% of the totally and permanently disabled population, and comprise as high as about 14% of the homeless population in some large urban areas. These data clearly indicate the negative economic consequences of the disease: People with schizophrenia tend to be high users of medical care and tend to concentrate in subpopulations that are highly dependent on public assistance funds as a result of the disabling nature of the disease. These negative economic consequences of schizophrenia provide a powerful economic case for developing strategies to improve treatment effectiveness through biomedical and services research.

Towards a capitation formula for competing health insurers. An empirical analysis

In many countries the concept of capitating health care insurers is receiving increasing attention. The main reason is, that capitation may induce health care insurers in a competitive environment to concentrate more on cost containment. However, if the adjusters on which capitation payments are based, are too global, there may be ample room for risk selection by the insurers whilst also an unfair distribution of funds over the insurers may result, thereby undermining the objectives of capitation. The prime motivation for the present study is, that the Dutch government, as part of proposals for a new, market oriented structure of health care system, is considering to capitate insurers on the basis of global parameters like age, gender and location. Our analysis based on panel data of some 35,000 individuals, shows that the proportion of variance in annual health care expenditures that can be predicted ( R 2) by such a global capitation formula, is only 0.024. This is less than 1 5 of our estimate of the theoretically maximum achievable R 2 which amounts to 0.138, implying the existence of abundant selection oppurtunities, e.g. on the basis of past expenditures or other health indicators. Alternative capitation formulae incorporating prior-year's costs and reaching about 3 5 of the maximum obtainable R 2, effectively remove the profitableness of selection on the basis of past expenditures. The findings suggest, however, that selection via (chronic) health status may still be profitable to some extent. Therefore, we also analyzed data from the Dutch Health Interview Survey ( N ≈ 20,000) which comprised better health indicators. It appeared that a capitation formula based on the global adjusters mentioned above as well as three health status indicators and several background characteristics, yields an R 2 of about 0.114, which probably accounts for 3 4 of our estimate of the maximum obtainable R 2. The main conclusion is, that in the short term information on prior expenditures, which is available in the files of most insurers and thus may be used for risk selection, should be included in the capitation formula. For the more distant duture, the formula should be expanded with indicators of chronic health status, possibly based on diagnostic information from previous, non-discretionary hospitalizations.

High-Tech Medicine and Rising Health Care Costs

SINCE the early 1970s the United States has pursued multiple strategies aimed at moderating the increases in its annual health care expenditures. In the search for causes and cures of health care inflation, high-tech medicine (HTM) is identified increasingly as the major culprit responsible for our steeply rising health care costs. To illuminate the issue, this article offers an operational definition of the term HTM, examines the supporting arguments for the claim that HTM is the principal propellant of escalating health care costs and that it is often counterproductive, reviews the role of public policy in speeding the growth of HTM, and concludes with some forecasts about the probable impact of HTM on future US health care costs. <i>High-tech medicine</i>may be defined simply and comprehensively as the sum of all the advances in medical knowledge and technique that have been translated into improved diagnostic, therapeutic, and rehabilitative procedures during

High-tech medicine and rising health care costs

SINCE the early 1970s the United States has pursued multiple strategies aimed at moderating the increases in its annual health care expenditures. In the search for causes and cures of health care inflation, high-tech medicine (HTM) is identified increasingly as the major culprit responsible for our steeply rising health care costs. To illuminate the issue, this article offers an operational definition of the term HTM, examines the supporting arguments for the claim that HTM is the principal propellant of escalating health care costs and that it is often counterproductive, reviews the role of public policy in speeding the growth of HTM, and concludes with some forecasts about the probable impact of HTM on future US health care costs. <i>High-tech medicine</i>may be defined simply and comprehensively as the sum of all the advances in medical knowledge and technique that have been translated into improved diagnostic, therapeutic, and rehabilitative procedures during

Defensive Medicine: It Costs, but Does it Work?

In this issue ofThe Journal, Reynolds et al 1 take a giant first step in replacing loose conjecture about with formal quantitative analysis. From 1983 to 1984, Reynolds et al estimate that the average malpractice insurance premium rose by $1300 to $8400 annually. Concurrently, in response to a perceived increase in malpractice risks, American Medical Association—surveyed physicians reported changes in their medical practices that were worth an additional $4600 per physician per year. The $4600 increase in defensive medicine costs was more than 3.5 times the concomitant $1800 increase in premiums. From such a finding, Reynolds and colleagues posit that each $1 of malpractice risk—as gauged by insurance premiums— induces $3.50 in defensive medicine expenditures. Hence, the average physician who paid $8400 in malpractice premiums for 1984 was responsible for a total annual health care expenditure of $30 000 for defensive medicine. Reynolds et al acknowledge that