COST CONTAINMENT IN HEALTH CARE: A REVIEW AND RECOMMENDATIONS. Two Important questions to be addressed: what the right amount is that countries should spend on health care ? (societies’ preference not just the countries’ economy) whether cost-containment should be directed at total expenditure or public expenditure ? Cost containment is the business practice of maintaining expense levels to prevent unnecessary spending or thoughtfully reducing expenses to improve profitability without long-term damage to the company.Economic stagnation is a prolonged period of slow economic growth (traditionally measured in terms of the GDP growth), usually accompanied by high unemployment.

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2. Contents
1. What is Economic Stagnation?
2. From Economic Stagnation or Crisis to Health
3. Health Expenditures (OECD) During Last Three Decades
4. Impact of Economic Crisis on Health, Health Expenditure and Health
System
5. The Role of Health System During Economic Crisis
6. Cost Containment and Its Factors
7. Focus of Cost Containment
8. Cost Containment Instruments
9. Cost Containment Strategies
10. Options of Cost Containment
11. Overview of Cost Containment Methods
12. Potential Impact of Cost Containment Instruments
13. Lessons:A case of Hungary
14. Recommendations
15. Policy Questions on Recommendations
16. References
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3. What is Economic Stagnation?
• Economic stagnation
---Economic Stagnation, sometimes crisis or recession used as
synonyms, is a prolonged period of slow economic growth
which is traditionally measured in terms of the GDP growth.
---The term bears negative connotations, but slow economic
growth is not always the fault of economic policymakers.
---It always indicates the period of no or slow economic growth
or of economic decline, in real (inflation-adjusted) terms.
---The greater economic stagnation occurred in the 1929 and
1970s and a latest economic recession of 2007
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4. From Economic Stagnation or Crisis to
Health
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5. Health Expenditures during Last Three
Decades
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6. Impact of Economic Crisis on Health, Health
Expenditure and Health System
1. Domestic Health Spending
• Decreased household expenditure
• Government expenditure on health often but not
always falls. Some governments have in the past
increased health and social sector spending during
a recession.
• Postponed Capital investments (infrastructure,
equipment) funds are either saved or switched to
other more pressing expenditure categories.
• When the local currency is devalued, imported
goods (e.g. medicines and consumables) become
more expensive in local currency and thus less
affordable.
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7. Continuation……..
2. Health Service Utilization
• Decreased utilization of health services for charge
• Increasing utilization of government and subsidized or not-for-
profit facilities
• Imbalance in the demand and supply of health services due to
budgetary constraints
3. Mortality and Morbidity
• In low-income countries, an increase in infant and child mortality,
and micronutrient deficiency and anaemia in women
• In higher-income countries, an increase in mental illness, suicide
rates and sometimes adult male mortality
• A heavier burden of illness is imposed on the poor and vulnerable
• In countries with a functioning social protection and assistance
scheme in place, there is a modest or no negative impact on
health, depending on how severe, long and entrenched the crisis
is.
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8. The Role of Health System During
Economic Crisis
Changes that affect health
• The resources available for health,
• Living conditions, lifestyles and consumer
behaviors, and
• Social norms and values
Role of health system
(i) Protect those most in need,
(ii) Concentrate on areas in which it is effective and
adds value,
(iii) Behave as an intelligent economic actor in terms of
investment and expenditure
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9. Cost Containment and Its’ Major driving factors
Major Driving Factors
1. Economic Crisis
2. Public Health budget
deficit
3. Advancement in
Health Technology
4. Demographic
Changes (Aging,
migration,
population growth)
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Cost Containment
• Process of reducing cost or
limiting expenditures
• An effort to control or
reduce inefficiencies,the
consumption,allocation
or production of health
care services in order to
lower the level of the health
care costs or slow the rate of
increase in health care costs

10. Focus of Cost containment
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1. The plan itself (structure, purpose, and
goals),
2. How the plan is paid for (self-funded
versus fully funded, as well as participant
contributions),
3. The factors influencing demand (largely
determined by the employee population)

11. Cost Containment Instruments
1. Supply Side
• Monetary
1. Fee For Service
2. Per Diem Payment
3. Diagnosis Related Group
4. Capitation
5. Budget
6. Salary
• Non-Monetary
1. Treatment protocols
2. Prescribing guidelines and
3. Subsequent monitoring of
clinical behavior
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2. Demand Side
• Monetary
1. Patient Charges
2. Reference Pricing System
• Non-Monetary
1. Drug information,
2. Information Promotion
and Health Education

12. Cost Containment Strategies
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1. Strategies that rely on market force
More familiar to market consumers, e.g. cost sharing, taxing employer’s
health insurance contribution, increasing competition between insurers
and providers
2. Strategies that control prices
Hospital rate setting, controls on physician’s fee
3. Strategy to control use of health services
Various limits placed on providers, through some technical tools called
utilization review e.g. clinical practice guidelines and capacity controls
4. Strategy to control expenditure
Imposing physicians’expenditure targets, cutting hospital budget,
limiting national, regional and local health budget

13. Overview of Cost Containment Methods
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14. Potential Impact of Cost Containment Instruments
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15. Lessons: A case of Hungary
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• Serious fiscal crisis started by 1995 (After the political transition in
the early 1990s, Hungary’s government expenditure grew faster than
its economy)
• However, the number of doctor-patient contacts did not diminish in
primary care and even increased in hospital care (that is, hospitals
became more productive under the pressure of fiscal constraint)
Year 1970 1980 1991 1993 1995 1997 1999 2001
Life
Expectancy 66.3 65.5 65 64.5 65.3 66.4 66.3 68.2
Table 1 : Life Expectancy at Birth (1970 to 2001)

16. Continuation…….
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Year 1980 1991 1993 1995 1997 1999 2001
IMR 23.2 15.6 12.5 10.7 9.9 8.4 8.1
Table 2 : Infant Mortality Rate Per 1000 Live Births
Budget cut
Items
Total Health
Expenditure
Cash Benefit
paid by
Health
Insurance
Dental Care
Benefit
Expenditure
on Hospital
Inpatient
care
No. of
Hospital
Beds
Primary
Care & Out
patient
specialist
care
Percentage
dropped
(%) 26 >50 30 15 20 24
Table 3 : Health Expenditures

17. Continuation…..
Problems
– investments dropped by almost 40%,
– delaying necessary investments and
– Problems of service quality
– Patient dissatisfaction
– High drug expenditure and increasing co-payment
• generous cash benefits and an oversized hospital sector offered relatively
safe options for cuts without eroding not only health outcomes but even
service utilization
• strong mechanisms for control of costs by the single payer through capped
case-based payments for hospitals produced significant efficiency gains in
hospital productivity
• relatively weak government control and regulation led to increased
inefficiencies in the area of drug expenditure
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18. Summary

19. Home Assignment on influencing policy
options in your country
Cost-containment as a policy issue is related
to the question
1.what the right amount is that countries
should spend on health care ? (societies’
preference not just the countries’ economy)
2.whether cost-containment should be
directed at total expenditure or public
expenditure ?
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20. Questions ???

21. References
1. Health in times of global economic crisis: Implications for the WHO European
Region, Regional Committee for Europe Fifty-ninth session Copenhagen, 14–
17 September 2009
2. Manfred Huber, Ph.D : Health Expenditure Trends in OECD Countries, 1970-
1997
3. Technical Briefs for Policy Makers, Number 2 Feb. 2007, Provider Payment and
Cost Containment Lessons from OECD Countries
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