RH - week 3

Question 1

1. Fiscal sustainability take-aways

Answer 1

• Sustainability of health care spending is (almost) never about affordability (in narrow sense). Issues are
  o Efficiency
  o Distribution of costs and benefits
• Unsustainable government finances imply a funding gap that has to be filled by younger generations
  o Financing defaults, like pay-as-you-go, put financial burden of health spending growth at younger/new generations
• Although separate issues in theory, what is funded by the health system and how the system is funded are interrelated questions in practice

Question 2

Types of fiscal rules

Answer 2

• Expenditure Rules
• Revenue Rules
• Debt Rules
• Balanced Budget Rules

Question 3

Effects of fiscal rules on government spending

Answer 3

• Fiscal rules seem to have been successful in containing gov. spending
• Rules which embedded expenditure targets worked best
• Effect on transfers greater than on government consumption
• Endogeneity is a big issue: countries with greater intrinsic fiscal discipline might be more likely to set up fiscal rules

Question 4

2. Do health care budgets respond to fiscal pressure? Take-aways

Answer 4

• Health care spending is not unique and is affected by fiscal pressures and fiscal rules
• Fiscal rules might contribute to more predictable government spending and (moderately) contribute to medium-run health spending containment
• However,
  o Risk of misallocation of resources across more/less protected sectors
  o No guarantee of allocative efficiency (most value for money)
  o One time savings, limited effects on long-term spending growth

Question 5

3. How do governments (try) to control health care spending?
   Key policy challenges

Answer 5

• As medical care becomes more expensive, the tradeoff between equality and efficiency becomes even more difficult. How countries balance these three factors—the desire for equality, the goal of efficiency, and the increasing cost of medical care—will have major implications for medical-care systems for decades to come (Cutler, 2002)
• Many cost containment strategies hod the risk to turn into policies of cost-shifting (Stadhouders et al., 2016)

Question 6

When is a technology cost-effective?

Answer 6

If the ICER is below the monetary threshold it is cost effective, if it is above it is not cost effective

Question 7

absolute shortfall

Answer 7

disease - related health loss

Question 8

proportional shortfall

Answer 8

(disease - related health loss) / remaining health expectations in absence of disease

Question 9

fair innings

Answer 9

fair innings is the only severity approach that takes past health into account

Question 10

two arguments in fair innings

Answer 10

1. Equal innings argument:
   * People who have not yet had their fair innings (i.e., a ‘normal’ life-span) are worse off than those who have (yet) had their fair innings
   * QALY gains should be given weight >1 in economic evaluations
2. Sufficient innings argument:
   * People who have had their fair innings are better off than those who have not (yet) had their fair innings
   * QALY gains should be given weight <1 in economic evaluations

Question 11

Why proportional shortfall?

Answer 11

Normative justification:
* Health technologies for more severely ill patients are more necessary
* Combines aspects of severity and fair innings approaches (past health disregarded)
* Balances concerns about discrimination based on age in reimbursement decisions (proportional shortfall is 1 in case of immediate death at all ages)

Question 12

Equity weighting based on age

Answer 12

(Explicit) equity weighting based on age in economic evaluations is not allowed, but:
* Using QALYs in economic evaluations may prioritize younger patients (they have more potential QALYs to gain than older patients, so ICER more likely to be <vi)
* Prospective health and rule of rescue may prioritize older patients (they have less remaining QALYs than younger patients)
* Absolute shortfall may prioritize younger patients (they have more remaining QALYs left to lose than older patients)
* Proportional shortfall may prioritize older patients (they are more likely to lose a larger proportion of their remaining QALYs, e.g., in case of chronic illnesses).

Question 13

Rationing in tax-funded healthcare system

Answer 13

Tax-funded healthcare acts are enforced by the government and and implemented by municipalities.
Government responsible for:
* Allocation of fixed budget to municipalities based on objective distribution key (supply-side rationing)
* Determining level of co-payments (demand-side rationing)
Municipalities (344 in March 2022) responsible for:
* (Timely) access to customized, high-quality care
* Early signalling of care needs

Question 14

Rationing in insurance-based healthcare system

Answer 14

Insurance-based healthcare acts are enforced by the government and implemented by policymakers, health insurers and healthcare providers.
Long Term Care Act (Wlz):
* Mandatory income-based premium (≥ 15 years); fixed percentage (~10%) of income on a maximum gross income of ~€34,000
* Demand-side rationing:
o Access based on needs (re-) assessment by the Care Assessment Agency (CIZ) and availability of informal care
o Income-dependent copayment: accounts for differences in price sensitivity between SES groups and ensures access for lower income groups

Health Insurance Act (Zvw):
* Mandatory for everyone of >= 18 years
* Broad coverage of curative healthcare services
* Insurance companies obliged to accept anyone at same premium and contract competing care providers
* Healthcare allowance for lower income groups

Focus on demand-side rationing:
* Mandatory deductible of €385; voluntary deductible of +€500 against premium rebate of €240
* Demarcation of basic benefits package by National Health Care Institute (ZIN)

Question 15

ZIN advises the Ministry of Health, Welfare and Sport on the demarcation of the basic benefits package on the basis of four decision criteria:

Answer 15

1. necessity of care (proportional shortfall) and insurance
2. effectiveness
3. cost-effectiveness
4. feasibility (e.g. budget impact)

Question 16

Open system

Answer 16

Concerns specialist inpatient (pharmaceutical) care:
* Automatically included in basic benefits package if it meets the “medical science and practice” criterion

Since 2018:
* Expensive new pharmaceuticals are not automatically included in basic benefits package, but labelled “in transit” (in Dutch: “de sluis”) when:
o Costs are ≥ €50,000 per treatment per year and ≥ €10 million per year in total, or:
o Costs are ≥ €40 million per year in total, irrespective of costs per treatment
* Only included after price negotiations (ZIN advises Ministry of Health, Welfare and Sport on price reduction that is necessary to meet the cost-effectiveness criterion)

Question 17

Closed system

Answer 17

Concerns outpatient (pharmaceutical) care:
* ZIN advises Minister of Health on inclusion in basic benefits package

Pharmaceuticals reimbursed if included in Drug Reimbursement System (GVS):
* Annex 1a –> Clustering of interchangeable pharmaceuticals
o Reimbursement limit
o Co-payment (max €250 per year) for pharmaceuticals that are above limit
* Annex 1b  Unique pharmaceuticals
o Fully reimbursed
o Move to annex 1a when pharmaceuticals become interchangeable
* Annex 2 –> Unique or expensive pharmaceuticals (overlap annex 1a and 1b)
o Reimbursement if certain conditions are met (e.g., only reimbursed for specific subgroup)

Question 18

Assessment phase

Answer 18

• Collecting, presenting and assessing information on the four decision criteria (necessity, effectiveness, cost-effectiveness, feasibility)
• (Independent) Scientific Advisory Board (WAR) assesses and advises ZIN on the quality and content of the available scientific evidence
• WAR meetings are private

Question 19

Appraisal phase

Answer 19

• Naming and weighing all relevant arguments (see part 1, reasons for reimbursing technologies that are not cost-effective or vice versa)
• (Independent) Insured Package Advisory Committee (ACP) advises ZIN on decisions “that affect society”
• ACP meetings are public: stakeholders (e.g., patients and physicians) can respond in writing to ACP reports, but can also attend meetings and request speaking time (5 minutes)

Question 20

Public involvement

Answer 20

Policymakers increasingly seek ways to (also) involve members of the public in reimbursement decisions, with the objective to:
* Actively involve the public in shaping new policies that affect their lives
* Better align outcomes and process of decision making with societal preferences
* Increase legitimacy of and societal support for decisions on rationing healthcare

Question 21

berekening incremental costs

Answer 21

costs new treatment - costs standard care

Question 22

berekening incremental QALY gain

Answer 22

effects new treatment - effects standard care

Question 23

berekening incremental cost-effectiveness ratio

Answer 23

incremental costs / incremental QALY gain

Question 24

Efficiency arguments

Answer 24

• Allocative efficiency
  o Can we better spend additional health care euros on something else (either other gorvenment spending or private consumption)?
  o Already central question in CEA (cost effectiveness analysis). Don’t really `need’ financial sustainability as a motivation…
• Marginal costs of public funds (MCPF)
  o Collective financing of health care comes at a cost:
• Taxes distort individual decisions, e.g. to work

Question 25

net benefits

Answer 25

services received - taxes paid

Question 26

why does it matter? –> stijging uitgaven

Answer 26

• Efficiency
• Fair distribution of costs and benefits across generations

Question 27

How are fiscal sustainability and cost-effectiveness linked?

Answer 27

In CEAs, we generally look at
Δc/ΔQ<v ,
where Δc is the discounted sum of all current and future costs and ΔQ the discounted sum of all current and future health gains.
The value of v (or k) and the way in which we discount future c and future Q reflects the willingness/ability to trade-off current gains in health versus future costs (or vice versa)
While distribution of Q (sometimes) plays a role, distribution of (the financing of) C less so.
In theory, this makes sense: the government can arrange health care financing (across income, age, etc) anyway it wants, regardless of the distribution of the benefits
In practice, these things are strongly intertwined!

V is de grenswaarde waarin we het nog steeds kosteneffectief vinden. Hoeveel ben je bereid te betalen voor 1 Qaly als maatschappij

Question 28

Budget control in normal times

Answer 28

• Fiscal rules aim to depoliticize policymaking and remove discretionary intervention
• Aim: predictability of government action

Question 29

Containment policies in practice (Dutch case)

Answer 29

• Long-term policy has followed the international trend:
  o Budgeting (80s/90s)
  o Market Oriented Policies to stimulate efficiency(00s/10’)
  o Increasing role of government and return of budgeting (and waiting lists?)
• Major reforms, at least partly aimed at increased efficiency
  o Cure: Regulated competition 2006
  o Care: Long-term care reform, aimed at shift from institutional care to home- and informal care
• Risk of cost-shifting very real
• Hard to steer on efficiency in short-term policy:
  o Difficult to see how budget cuts/slices at the national level affect allocative decisions on lower levels (e.g. within the hospital)

Question 30

economic reason deductible

Answer 30

reduce moral hazard

• However
  o In political debate deductible is often seen as a means to redistribute costs between healthy and sick
  o Pricing of treatments and incentive from deductible do not align
  o In long-term care, discussion on co-payment seems to be even more driven by distributive effects…

Question 31

3. Cost-containment policies take-aways

Answer 31

• Policy makers have a large toolbox to influence health spending growth
  o Price controls, volume controls, budgeting, market-oriented policies
• These policies all contain elements to reduced inefficiencies
  o Allocative and productive inefficiencies
• In practice..
  o Hard to align incentives and policies across the complex health system
  o Short-run policies often motivated by cost-shifting, as this is where the potential savings are most tangible

Question 32

severity of illness

Answer 32

operationalizations all focus on future health (remaining health or loss of health) from the moment of illness/ need for treatment. past health losses not considered.

Question 33

fair innings

Answer 33

focuses on lifetime health (past health losses also considered relevant)

Question 34

Reflect on the previous slide(s) and write down 3 advantages and 3 disadvantages of rationing in the tax-based healthcare system in the Netherlands.

Answer 34

Advantages:
* Objective distribution key (horizontal and vertical equity, tailored budgets)
* Co-payments may reduce moral hazard
* Early signaling of care needs ‘now’ may reduce specialist care needs in the future (cost-containment)

Disadvantages:
* Each municipality has own budget, this may lead to inequalities in access to care between municipalities (implicit rationing, postcode rationing)
* Co-payments are income-independent and may lead to inequalities in access to care between SES groups (Wmo €19 per month, JW €0 after concerns that co-payments constituted a barrier to care)
* Fixed budget may lead to increase in waiting times (youth care!)

Question 35

Expenditures will rise further…

Answer 35

If nothing changes:
* Healthcare expenditure expected to rise from ~10% of GDP in 2018 to ~20% – ~30% of GDP in 2040 (different calculations yield different estimates, but all draw the same conclusion)
* Sustainability of healthcare system jeopardized, increased pressure on solidarity (e.g., of younger, more healthy and wealthy members of the public)
* Risk of crowding out of other collective expenditures, e.g., on public order and safety, housing, and education (which are also determinants of (mental) health)
* The need to ration healthcare will likely become even more pressing.

Question 36

4 package criteria

Answer 36

Necessity: a. is the disease serious enough (severity)? (medical necessity)
b. is treatment so expensive that people would be unable to pay for it themselves? (insurance necessity)

Effectiveness: is there evidence that a given treatment works?

Cost-effectiveness: is the ratio between the costs of a treatment and its results acceptable?

Feasibility: can the inclusion of a given treatment in the package be realised in practice?