Increase in Healthcare Spending Yielded Better Health Outcomes

July 15, 2022 - Overall, the increase in healthcare spending in the US between 1996 and 2016 led to improved health outcomes, but healthcare spending effectiveness varied across the top 34 causes with high spending or high burden, according to a Health Affairs study.

Healthcare spending effectiveness is defined as the ratio of an increase in spending per case of illness or injury to an increase in disability-adjusted life-years (DALYs) averted per case. In simpler terms, spending effectiveness is the spending per unit of health gained.

Researchers used data from the Disease Expenditure Project and the 2017 Global Burden of Disease Study to estimate spending effectiveness. They analyzed spending and DALYs—the sum of years lost due to premature mortality and years lived with disability—for 139 causes.

The analysis focused on the 34 causes with the highest spending and highest DALYs in 2016, accounting for 73 percent of total spending and 76 percent of total DALYs.

Between 1996 and 2016, healthcare spending for all causes increased by $1.4 trillion or 121.5 percent. The change in spending per case accounted for a 78.8 percent increase, population growth was responsible for a 28 percent increase, and population aging accounted for a 17.3 percent increase, while fewer cases per person led to a 2.6 percent decrease.

Total DALYs for all causes also increased by 17.3 million or 21.2 percent during this period. Population growth accounted for a 19.8 percent increase and population aging led to a 12.2 percent increase, while fewer DALYs per case accounted for a 10 percent decrease and fewer cases per person contributed to a 0.8 percent decrease.

When looking at the 34 causes with the highest spending and burdens, changes in spending per cause were generally larger than changes in DALYs per case, researchers found.

However, spending changes and DALY changes varied across causes. For example, the mean change in spending per case ranged from a 27.3 percent decrease for breast cancer to a 255.9 percent increase for anxiety disorders. Similarly, the mean percentage change in DALYs per case ranged from a 45.3 percent decrease for diabetes to a 110.3 percent increase for drug use disorders.

For all causes, the median spending effectiveness ratio was $114,339 per DALY averted. Among the 34 causes, an increase in spending per case was associated with an increase in DALYs averted per case for 22 causes. This indicates that higher spending helped improve health outcomes for these causes.

For 11 of the 22 causes, the median spending effectiveness ratio was below $100,000 per DALY averted and above $500,000 per DALY averted for eight causes.

Breast cancer was the only cause that saw a decrease in spending per case accompanied by an increase in DALYs averted. The other 11 causes saw increased spending per case and decreased DALYs averted, suggesting that healthcare spending was ineffective for these causes.

After considering certain study limitations, researchers determined that spending did not improve outcomes for Alzheimer’s disease and other dementias; drug use disorders; chronic kidney disease; and endocrine, metabolic, blood, and immune disorders.

In addition to determining healthcare spending effectiveness, researchers assigned a dollar value to DALYs averted to calculate an outcome-adjusted healthcare price index.

When applying $100,000 as the dollar value per DALY averted, the ratio of 2016 spending to outcome-adjusted 1996 spending for all causes was 1.04, indicating prices increased 4 percent more than the gross domestic product (GDP) price index. The ratio was 0.87 when they used $150,000 as the dollar value per DALY averted, which resulted in a 13 percent decrease in relative prices.

For the 34 causes, the $100,000 dollar value scenario led to outcome-adjusted prices increasing slower than the GDP for 12 causes and faster for 17 causes. The $150,000 dollar value led to price increases that were slower for the GDP for 13 causes and faster for 16 causes.

The study findings highlighted that spending effectiveness differs by cause, suggesting that estimates for specific diseases cannot be applied to healthcare services as a whole.

To improve future spending effectiveness estimates, the study authors called for more research that uses a health-adjusted life expectancy framework and explores spending effectiveness across different periods. Additionally, future research should include changes in the severity of illness over time.