An Unhealthy America: The Economic Burden of Chronic Disease

An Unhealthy America: The Economic Burden of Chronic Disease Charting a New Course to Save Lives and Increase Productivity and Economic Growth February 2008

Today s Presentation General trends in chronic disease in the U.S. Findings from the Milken study 2

Example of Rising Prevalence of Disease: Diabetes, 1994 and 2004 The prevalence of diabetes increased in nearly every state between 1994 and 2004 1994 2004 Source: US Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Division of Adult and Community Health, data from the Behavioral Risk Factor Surveillance System. Data computed by the Division of Diabetes Translation. Available at http://www.cdc.gov/diabetes/statistics/prev/state/fprev1994and2004.htm 3

Disease Prevalence and Health Care Costs More than 75 percent of the rise in costs for three common conditions can be explained by increases in treated prevalence and population growth Percent Change in Spending Due to Rise in Treated Prevalence and Increased Population, 1987-2000 Discussion of the magnitude of health care spending growth usually does not take into account changes in disease prevalence and demographic factors behind spending growth. -- Kenneth Thorpe, Emory University Percent Increase Due to Rise in Treated Prevalence and Increased Population 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 79% 79% Mental Disorders Cerebrovascular Disease 76% Diabetes Source: Thorpe et. al., Which Medical Conditions Account for the Rise in Health Care Spending, Health Affairs, 25 August 2004. 4

U.S. Health Care Spending for Patients with Chronic Conditions 65 percent of all health care spending goes to treat patients with 2 or more chronic conditions 100% 80% 60% 14% 12% 23% 47% 40% 18% 20% 0% 51% Population 20% 15% Health Care Expenditures 0 Conditions 1 Condition 2 Conditons 3 or More Conditions Source: Gerard Anderson, analysis, prepared for PhRMA, of the Medical Expenditure Panel Survey, 2004. 5

Per Capita Health Spending for Patients with Chronic Conditions Annual spending for individuals with two chronic conditions is more than 5 times greater than for those without any condition Spending is almost 17 times higher for individuals with five or more chronic diseases, compared to spending for those without any condition. $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Average Yearly Per Capita Health Care Spending for Persons with Chronic Diseases $994 $2,753 Source: Gerard Anderson, analysis of the Medical Expenditure Panel Survey, 2004. $5,026 $7,381 $10,091 $16,819 0 1 2 3 4 5+ Number of Chronic Conditions 6

Projected Rates of Chronic Disease Through 2030, the number of Americans with a chronic disease is expected to increase by more than 1 percent every year 180 160 140 120 100 Number of People with Chronic Diseases (millions) 171 164 157 149 141 133 125 118 1995 2000 2005 2010 2015 2020 2025 2030 Year Chronic illness is a major health challenge The aging of the U.S. population and increases in risk factors such as obesity suggest that chronic illnesses will be an even greater problem in future years. - Homer, Hirsch, and Milstein Sources: Wu, Shin-Yi and Green, Anthony. Projection of Chronic Illness Prevalence and Cost Inflation. Rand Corporation, October 2000; J. Homer, G. Hirsch, and B. Milstein. Chronic Illness in a Complex Health Economy: The Perils and Promises of Downstream and Upstream Reforms. Systems Dynamics Review, Oct 30 2007. Vol. 23, No.2-3, pgs.313-343. 7

Highlights from Milken Institute Report: An Unhealthy America: The Economic Burden of Chronic Disease 8

The Economic Burden of Chronic Disease: Two Paths, Two Choices Chronic Disease Today: The Current Toll The Human Cost The Economic Cost Chronic Disease Tomorrow: The Future Toll The Future on Our Current Path The Alternative Path: Cases and costs avoidable with reasonable action Longer Term Impact on GDP growth Conclusion and Recommendations 9

The Economic Burden of Chronic Disease: Two Paths, Two Choices Chronic Disease Today: The Current Toll The Human Cost The Economic Cost Chronic Disease Tomorrow: The Future Toll The Future on Our Current Path The Alternative Path: Cases and costs avoidable with reasonable action Longer Term Impact on GDP growth Conclusion and Recommendations 10

The Human Cost: Millions of Americans Have a Chronic Disease Number Reporting Seven Common Chronic Disease, 2003 United States Pulmonary conditions 49.2 Hypertension 36.8 Mental Disorders 30.3 Heart Disease 19.1 Diabetes Cancers 10.6 13.7 Stroke 2.4 0 10 20 30 40 50 60 Population Reporting Condition (Millions) Total: 109 Million Americans; 162 Million Cases 11

The Human Cost: Millions of Americans Have a Chronic Disease Number Reporting Seven Common Chronic Disease, 2003 California Pulmonary conditions 5,301 Hypertension 3,660 Mental Disorders 2,534 Heart Disease Diabetes Cancers 1,155 1,860 1,573 Stroke 241 0 1000 2000 3000 4000 5000 6000 Population Reporting Condition (Millions) Total: 109 Million Americans; 162 Million Cases 12

The Human Cost: The Burden of Chronic Disease Varies by State The Milken State Chronic Disease Index States in Top Quartile have the Lowest Rates of Seven Common Chronic Diseases Top Quartile Second Third Bottom Quartile States with Highest Rates of Chronic Disease: 1. West Virginia 2. Tennessee 3. Arkansas 4. Kentucky 5. Mississippi 6. Pennsylvania 7. Rhode Island 8. Maine 9. Oklahoma 10. Alabama 13

The Economic Cost: Chronic Diseases Account for Billions in Health Care Spending & Lost Output Economic Impact of Chronic Disease, 2003 United States Cancers Hypertension $48 $33 $271 $280 Mental Disorders Heart Disease $46 $65 $105 $171 Pulmonary Conditions Diabetes $27 $45 $105 $94 Total Treatment Expenditures = $277B Total Lost Economic Output = $1,047B Stroke $14 $22 $- $50 $100 $150 $200 $250 $300 $350 Billions 14

Sources of Lost Productivity Absenteeism Presenteeism 15

The Economic Cost: Lost Productivity From Chronic Disease Costs Our Economy Billions Each Year Lost Workdays Individual $127.5 Lost Productivity by Source, 2003 (in US$ Billions) Presenteeism Caregiver $80.2 Presenteeism Individual $828.2 Lost Workdays Caregiver $10.8 Total Lost Productivity in 2003 = $1.0 Trillion in U.S., and $106 Billion in California Alone 16

The Economic Burden of Chronic Disease: Two Paths, Two Choices Chronic Disease Today: The Current Toll The Human Cost The Economic Cost Chronic Disease Tomorrow: The Future Toll The Future on Our Current Path The Alternative Future: Cases and costs avoidable with reasonable action Longer Term Impact on GDP growth Conclusion and Recommendations 17

Chronic Disease Rates Are Expected to Grow Dramatically Expected Growth in Prevalence of Major Chronic Conditions 2003 to 2023 70% 62% 60% 53% 54% 50% 40% 30% 31% 39% 41% 29% 20% Population Growth = 19% 10% 0% Cancers Pulmonary Conditions Diabetes Hypertension Heart Disease Stroke Mental Disorders 18

Our Current Path: Chronic Disease Will Cost U.S. Economy Over $4 Trillion Annually by 2023 Total Economic Costs (US$ Billions) 4500 4000 3500 3000 2500 2000 1500 1000 500 Current Path: Combined Value of Treatment Expenditures and Productivity Losses in U.S. Lost Economic Output Treatment Expenditures For California, cost is over $430 billion annually by 2023 -- $360 in lost productivity and over $70 billion in treatment expenditures annually 0 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 19

The Alternative Path: Improvements in Prevention, Behavior, and Treatment Cases and Treatment Costs Under Alternative Path The Assumptions: From 2003 to 2023, we assume reasonable improvements, such as: A reduction in number of obese persons (to 1998 levels of 19%) A continued reduction in smoking to 15% A decline in at risk drinking (from 6% to 4%) An increase in physical activity (from 75% to 83%) A decrease in high cholesterol levels (to 2000 levels of 32%) An improvement in air quality A gradual decline in illicit drug use A modest improvement in early intervention and treatment Lower health care cost growth 20

The Alternative Path: We Could Reduce Chronic Disease Rates Dramatically Improvements in the prevention and management of chronic disease could avoid over 40 million cases of seven common chronic conditions in 2023 Mental Disorders Stroke -0.6-5.8 On Current Path Heart Disease -9.4 With Reasonable Increase in Prevention Efforts Hypertension Diabetes -2.8-9.6 Pulmonary Condtions Cancers -3.1-9.1 0 20 40 60 80 Reported Cases (Millions) Source: Devol, Ross and Armen Bedroussian, An Unhealthy America: Economic Burden of Chronic Disease. Milken Institute, October 2007. 21

The Alternative Path: And Reduce Economic Costs in 2023 by $1.1 Trillion Projected Annual Economic Costs 2003 2023 (Billions) United States $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $1,123 $297 $3,030 $2,192 $1,324 2003 2013 2023 Improvements in prevention and early detection could reduce economic costs of chronic disease by $1.1 trillion in 2023: $905 billion from gains in productivity $218 billion from avoided treatment expenditures 22

The Alternative Path: And Reduce Economic Costs in 2023 by $1.1 Trillion Projected Annual Economic Costs 2003 2023 (Billions) California $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 $117 $30 $314 $224 $133 2003 2013 2023 Improvements in prevention and early detection could reduce economic costs of chronic disease in California by $117 billion in 2023: $98 billion from gains in productivity $19 billion from avoided treatment expenditures 23

For Example, Lower Obesity Rates Would Avoid Over $800 Billion in Economic Costs in the Year 2023 Avoidable Economic Costs Attributable to Decline in Obesity Projected Estimates, 2023 Cancers $73 $312 Heart Disease $73 $118 Obesity Other Factors Hypertension $100 $87 Diabetes $52 $39 $0 $100 $200 $300 $400 $500 Avoidable Economic Impact (Billions) 24

Longer term impact: Chronic Disease Prevention & Management Can Accelerate GDP Growth US$ Trillions 6 5 4 3 2 1 0 Long-Term Forgone Economic Output Change in Real GDP Between Baseline and Optimistic Scenarios 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 WHY IS THIS? Healthy Americans are more productive Americans Healthy Americans are able to get higher levels of education The higher an income earner s human capital, the greater the probability of investment in their children s and grandchildren's education Year On this alternative path, U.S. GDP could increase by as much $5.7 Trillion Annually by 2050 25

Longer term impact: Chronic Disease Prevention & Management Can Accelerate GDP Growth California s Gross Domestic Product in 2050* Current versus Alternative Path GDP in 2050, Current Path GDP in 2050, Alternative Path Potential Real Gain in GDP $5,188 Billion $6,096 Billion $908 Billion *Inflation adjusted (2003 dollars) If Californian s take action today, California s annual GDP can be increased by as much as 18 percent, or $908 Billion, by 2050 26

Economic Burden of Chronic Disease: Conclusions and Recommendations Conclusions: Lost Productivity Surpasses Treatment as the Cause of Economic Burden Early Interventions and Medical Innovations Improve Quality and Longevity of Life Good Health Is an Investment in Economic Growth Recommendations from Milken Institute: Incentives for Prevention and Early Intervention We need private-public partnerships to incentivize patients and providers to prevent chronic disease effectively Healthy Body Weight Initiative We need a strong, long-term national commitment to promote health, wellness, and healthy body weight 27