Health Care Issues

In preparation for the discussion of drug development, an important context is health care delivery and its related costs and benefits, which are key health issues potentially influencing drug development. This section discusses national health care incomes and expenditures, changes over time in them, causes of existing disabilities that create opportunities for improved health care, factors impacting health care utilization (increases and decreases), improvements in health care over the past couple of decades, along with the reasons for these changes, and specific health care factors impacting drug development.

The cost of health care in the United States of America (USA) rose to $1.6 trillion (National Health Expenditures; NHE) by 2002, or about $5,440 per person (Fig. 1.1). This amount consumed about 14.9% of the gross domestic product (GDP) of the economy at that time. The total NHE has been growing by about 5-10% per year since 1995. The NHE

Where Money Came From Where Money Went

Where Money Came From Where Money Went

increase is driven by changes to two factors: (1) utilization of services and products and (2) medical prices. The percentage contribution of these two factors varies annually. Each factor contributed about 50% to the growth in NHE from 2000 to 2002. Utilization is comprised of usage (e.g., number of visits or products), new technologies, and the mix of services. Figure 1.1 demonstrates that the income sources for the U.S.A. health dollar were private health insurance (36%), major government programs (33%, that is, Medicare, 17%, Medicaid, 16%), other public income, (13%), out-of-pocket payments by patients (14%), and other private sources (5%) in 2002. Other public resources include worker's compensation, Department of Defense, Veterans Administration, Indian Health Service, state and local subsidies, school health, and state children's health insurance program (SCHIP), a Medicaid supplement. SCHIP covered 19.8% of all children in the USA in 1998 for physician, emergency room, and hospital visits plus immunization, and surprisingly 15% of children had no health insurance. Other private sources include philanthropy, private construction, and in-plant industrial construction. Figure 1.1 also displays that the nation's health dollar expenditures included hospital care (31%), physician and clinical services (25%), nursing home care (7%), prescription drugs (10%), program administration and net costs (7%), and other costs (20%) in 2002. Other costs includes dental services, home health, durable medical products, over-the-counter medicines and sundries, public health, research, and construction [1-3].

In 2002, the 10% of U.S. NHE for prescription drug purchases totaled about $162.4 million per CMS and $208 million per industry, which increased to about $248 billion in 2004. Payments for prescription drugs include private health insurance (48%), out-of-pocket payments (OOP) by patients (30%), and government programs (22%). Prescription drugs costs have grown by about 15-16% per year (2000 to 2004), but not at an increasing rate in the past 4 years. The measures that have slowed the increase in spending on prescription drugs include more generic drug use, fewer new drugs in the marketplace, formulary controls (lists of approved products for use), prior authorization policies, special high-technology budgets, and higher tiered copayment growth for patients. Managed care organizations, prescription-based managers, hospital systems, and health insurers have used the aforementioned tools to help control costs [1-3].

Over the last decade (1990 to 2000), health care has changed dramatically in a variety of significant ways that has impact on drug utilization and needs for drug development (Fig. 1.2). The type of health care spending and site of care evolved, with the percentage contribution of hospital care costs falling from 36.5% to 31.7%. For the most part, this change was based on inpatient care as the site of care falling from 76% to 63%, whereas outpatient care conversely rose from 24% to 37%. Hospital admissions fell from 122 per 1,000 in population to 114, while outpatient hospital visits rose about 29% from the 1990s to 2000. Also, the average hospital stay went down from 7 to 5 days, also having a major impact on the percentage of care in hospitals versus outpatients. Prescription drug costs rose from 5.8% to 9.4% of NHE over this decade, whereas physician and clinic percentage contribution to costs were stable at 25.2% to 25%, as a percentage of NHE. Please be reminded, however, that actual health care costs in all three segments rose substantially over this decade (e.g., hospital costs rising by 3-10% per year). Furthermore, the type of payer changed a great deal as well, with private health insurance moving from only 24% to 46% and out-of-pocket payments by patients falling from 60% to 31%. Where the care occurs and who pays for services will be major influences on the type of drugs necessary to meet disease needs, health care system needs, payer coverage, and patient preferences [1-6].

1990 2000 % NHE

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