Oliver O Connor

1. Post Austerity: the
economic value of
health and
innovation
Oliver O’Connor
Chief Executive
National Healthcare
Conference
28 May 2015

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

3. • ‘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”

4. 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

5. Health plans and the economy
Health Spending cut
Economy recovering
-14%
(HSE Gross Current Expenditure 2009-14
Source: D/PER database)
+€27bn
Value of GDP in 2018 now expected
Compared to one year ago
Source: SPU 2014, 2015

6. It doesn’t add up
Modest growth
in health ceiling
Fall to 6.1% GDP
+€213m
DoH Health Ceiling 2015-17
Comprehensive Expenditure Report
-0.5% GDP
DoH Expenditure Ceiling as % GDP
2015-17
Source: SPU, CRE
What about that 7%?

7. Mind the gap
Health Ceiling 2016 €13.25bn
CER, 2015-17 Ceiling for Gross
Current Expenditure for Health
If 7% GDP in 2020 €17.3bn
€4bn

8. 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

9. 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

10. One view:
Health is a big
lump of
uncontrollabe
COST ….
insatiable

11. One way:
…so let’s have the
traditional
ARM-WRESTLE
year-by-year
messy but necessary
over cash

12. A better way based on
Clear economic logic
Clear clinical outcomes
INTELLIGENT
Best available evidence
Clear value assessments
Sweat the big stuff

13. Started already
QALY
at €45,000
is Value
Quality Adjusted Life Years

14. 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

15. The flip side of Value
DALY
we pay to reduce at €??,???
is Waste
Disability Adjusted Life Years

16. 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

17. 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

18. 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…

19. 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

20. 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

21. 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

22. A better way
Intelligent Investment
delivering Growth
avoiding Waste
for Value
and Outcomes