Post Austerity: the economic value of health and innovation

Oliver O’ConnorChief Executive

National Healthcare Conference28 May 2015

In short

• The crisis is over.• The economy is recovering.• It’s time to invest• …intelligently in health• …for value and outcomes.

• ‘In their latest review of the Irish economy, the IMF notes that “a sustained job-rich economic recovery hinges on reviving healthy living”

– National Competitiveness Council, Ireland’s Competitiveness Challenge, December 2014

• Except it was …

Key priority for recovery

×lending”

Health plans and the economy

EU and Government take a view of the long term trend in public finances

They expect health to grow as %GDP by 2020 to

7% GDPSource: SPU April 2015, Health plus Long Term Care

Health plans and the economy

Health Spending cut

Economy recovering

-14%(HSE Gross Current Expenditure 2009-14Source: D/PER database)

+€27bnValue of GDP in 2018 now expectedCompared to one year agoSource: SPU 2014, 2015

It doesn’t add up

Modest growthin health ceiling

Fall to 6.1% GDP

+€213mDoH Health Ceiling 2015-17Comprehensive Expenditure Report

-0.5% GDPDoH Expenditure Ceiling as % GDP2015-17Source: SPU, CRE

What about that 7%?

Mind the gap

Health Ceiling 2016 €13.25bnCER, 2015-17 Ceiling for GrossCurrent Expenditure for Health

If 7% GDP in 2020 €17.3bn

€4bn

Starting point: compare

“The sale of Aer Lingus to IAG is a key factor in employment, earnings, productivity, economic development and growth”

Government, Healthy Ireland

“Health is an economic good in its own right and

Everyone agrees

• “Health is not just a value in itself – it is also a driver for growth.” European Commission Health and Growth

• “1% increase in life expectancy [results] in an average 6% increase in total GDP in the long run” R. Swift, Health Economics, Vol 20, issue 3, March 2011

One view:

Health is a big

lump of

uncontrollabe

COST ….

insatiable

One way:

…so let’s have the

traditional

ARM-WRESTLE

year-by-year

messy but necessary

over cash

A better way based on

Clear economic logicClear clinical outcomes

INTELLIGENT

Best available evidenceClear value assessments

Sweat the big stuff

Started already

QALY

at €45,000

is Value

Quality Adjusted Life Years

We do Value

• Medicines already subject to Health Technology Assessment

• Tested to meet QALY threshold• Incremental costs and benefits• Add wider economic value?• Being applied to devices, screening• Not a rigid rule, but a valuable guide

The flip side of Value

DALY

we pay to reduce at €??,???

is Waste

Disability Adjusted Life Years

Questions

• How much should we pay to cut a DALY?

• As much as we’d pay to get a QALY?

• The real waste is not paying for achievable QALYs and avoidable DALYs

Waste – sweat the big stuff

• Mental illnesses account for 12% of total DALYs in EU-30 countries – Ireland 14%– Half the impact of cancer or heart disease– 4x impact of diabetes– Cuts GDP annually by 3-4%

– EIU ‘Mental Health and Integration’, 2014

• Obvious economic value of each 1% of DALYs

Waste: the cost we bear for

• Mental illnesses: €11bn• Problem alcohol use: €3.2bn (1.9% GNP)

• Less than half borne by healthcare system» Source HSE Costs to Society of Problem Alcohol Use in Ireland

• Obesity – approx. €1.13 billion» Source: Healthy Ireland, p.11

• Tobacco: €1-2bn

• Start adding…

More waste

• Avoidable chronic disease• Cancer, cardiovascular conditions• Late diagnosed and untreated conditions• Delayed treatment

• 14 million days lost each year due to absence and ill health

– Quoted in National Competiveness Council, ‘Ireland’s Competitiveness Challenge’, December 2014

Everyone agrees, then

• “Keeping people healthy and active for longer has a positive impact on productivity and competitiveness”

– EU Commission Communication 29 June 2011, COM(2011)500 Final

• It’s an economic imperative• Just like lending (thank you IMF)

• Health will only succeed by making that case

And the Action Point is?

• It CANNOT be– This is a matter for health and social policy– The annual budget arm-wrestle is the best of

bad worlds– Simply cut prices and costs in health– Cut health spending as % GDP– Act as if Health will bankrupt us

A better way

Intelligent Investment

delivering Growthavoiding Waste

for Valueand Outcomes