Paul Dawson

Australian health & medical research: Improving health and saving costs
http://www.asmr.org.au
Dr Paul Dawson
Immediate Past-President
The Australian Society for Medical Research

Outline
1. Background ASMR
2. Economic benefits from investment in health & medical research (HMR)
3. Australia’s projected health and ageing expenditure
4. Australian Health Insurance: extrapolated savings from HMR
• Future private health insurance premiums, incomes and pensions
• Reducing burden of disease – economic savings to PHI sector
5. Investment in Australian HMR: Plan to alleviate future health costs

1. Background - ASMR
Australian Society for Medical Research (ASMR)
• Peak professional body representing Australia’s 24,000 health & medical research (HMR)
workforce
• Established in 1961
• Independent
• Structure
o ASMR Office Sydney (SEO and Admin. Officer)
o Board 11 Directors (President, President-Elect, Treasurer, Secretary)
o State committees (Convenor, Deputy convenor, Treasurer, Secretary)
• Promotes HMR through public, political and scientific advocacy
• Committed to clearly articulated, evidence-based political advocacy

ASMR submissions to Government
• Annual pre-budget submission
• Additional 62 HMR submissions to Government
• Submissions 2012-13
o McKeon Strategic Review of HMR in Australia
o McKeon Review Consultation paper
o Chubb review on innovation
http://www.asmr.org.au/Submissions.html

ASMR publications: evidence based advocacy tools
Australian Health & Medical Research workforce
2005 Perceptions in Health and Medical Research Careers: The ASMR Workforce Survey
2009 Planning the HMR Workforce 2009 - 2010
Economic evaluations of investing in Australian HMR
2003 Access Economics Report - Exceptional Returns: The Value of Investing in Health R&D in
Australia
2008 Access Economics Report - Exceptional Returns The Value of Investing in Health R&D in
Australia II
2011 Deloitte Access Economics Report - Returns on NHMRC funded Research and
Development
2012 Deloitte Access Economics Report - Extrapolated Returns on Investment in NHMRC
Medical Research
http://www.asmr.org.au/Publications.html

Economic evaluations of investing in Australian HMR
• Australian HMR between 1993 and 2005 is estimated to have returned a net benefit of
$29.5 billion
• Every dollar invested in Australian HMR returns on average $2.17 in health benefits
• Annual value to Australians of gains in well being, >$100 billion females, >$270 billion
males by 2045.
• Potential impacts of Australian Health and Medical Research achievements, include:
o Gardasil to vaccinate against 70% cervical cancer – benefit cost ratio 2.5 to 1.
o Prevention/delay of vision loss in diabetes by 2025 – savings of $7.6 billion.
o Decreasing Alzheimer’s disease by 5% - savings of $10.3 billion by 2050.

Economic evaluations of NHMRC-funded HMR research
NHMRC funded R&D 2000-2010 (Cardio-vascular disease, cancer, SIDS, asthma, muscular
dystrophy)
o 98,426 DALYs averted in Australia between 2040-2050
o Save $966 million in direct/indirect costs to health system
o Gains of $6 billion linked to increased well-being
o Return on investment: 509% CVD, 170% cancer

Australia faces unprecedented health and economic challenges
Dementia – expenditure projected to outstrip that of any other health condition
by the 2060s.
o Delaying the onset of dementia by 5 years through Australian HMR –
estimated savings of $67.5 billion by 2040.
Diabetes is Australia’s largest growing chronic disease projected to increase
by 436% in the period 2003-2033.
o Prevention or delay of vision loss associated with diabetes will save $7.6
billion by 2025.

Australian Government, The Treasury 2010.
Australia to 2050: future challenges – The 2010 Intergenerational Report.
Projections of Australian government
spending by category.

Projected Australian government
health spending

health spending
aged care spending

Investment in Australian HMR → alleviate the future health spend.
→ health insurance expenditure ?
ASMR commissioned Deloitte Access Economics to prepare report.
“Australian health insurance: extrapolated savings from health and medical research”
Australia - next 50 years:
• Private health insurance premiums, policy numbers and revenues
• Household income and the aged pension
• Greater investment in HMR – savings to the PHI sector

Trends in PHI premiums
• 2010-11 data from Private Health Insurance Administration Council website
• Disaggregated by Hospital and general (ancillary) cover
• Number of policies – disaggregate data by single and family policies
• Data from PHI companies to estimate split between singles and families for
premium revenue

Trends in PHI premiums
• 2010-11 data from Private Health Insurance Administration Council website
• Disaggregated by Hospital and general (ancillary) cover
• Number of policies – disaggregate data by single and family policies
• Data from PHI companies to estimate split between singles and families for
premium revenue
Extrapolate average premium estimates into the future (5.31% increase/year)
• 2061-62 Single hospital and general $27,535
• 2061-62 Family hospital and general $55,070

Trends in PHI policy numbers and revenues
• Reviewed Private Health Insurance Administration Council data
• Baseline to extrapolate number PHI policies over next 50 years, based on
demographic growth rates

Trends in PHI policy numbers and revenues
• Reviewed Private Health Insurance Administration Council data
• Baseline to extrapolate number PHI policies over next 50 years, based on
demographic growth rates
Extrapolate overall revenue from PHI:
• number of policies of each type in each year, multiplied by premium costs per policy

Trends in average incomes
• Extrapolate average household income over next 50 years – using historic
rises in average weekly earning from the Australian Bureau of Statistics
Trends in future AWE - Deloitte Access Economics macroeconomic model (3.77% p.a.):
• Average annual income $344,330 by 2061-62.

Trends in pensions
• Age pension rates derived from Centrelink website for singles and couples
(maximum rates as the age pension is both income and assets tested)
Average of ABS data 2009-2012 (3.0% p.a.):
• 2011-12: Singles $17,914 and Couples $27,009
• 2061-62: Singles $78,533 and Couples $118,404.

Comparison of PHI premiums, average incomes and pensions
2011-12 2061-62
Family (% pension) 15.3 46.5
Single (% pension) 11.6 35.1
Family (% income) 7.7 16.0
Single (% income) 3.8 8.0

Scenario analysis
• Increasing investment in Australian Health and Medical Research to
result in a reduction in certain diseases by 5% and 10%.
• Diseases – cardiovascular disease (CVD), cancer, asthma, sudden
infant death syndrome (SIDS) and muscular dystrophy.
• Health system cost impact of this disease reduction is calculated
• Reductions in health insurance costs estimated.
• Epidemiological data on prevalence rates applied to population
projections to 2062, by age and gender

Prevalence of conditions and estimate of disability adjusted life years (DALYs)
• Prevalence rates applied to population projections to 2062, by age and
gender, obtained from the Deloitte Access Economics demographic model.

Prevalence of conditions and estimate of disability adjusted life years (DALYs)
• Prevalence rates applied to population projections to 2062, by age and
gender, obtained from the Deloitte Access Economics demographic model.
Health system cost associated with each DALY lost to these specific was
estimated in ASMR’s 2011 Deloitte Access Economics publication:

Health system cost (2011 prices) associated with each DALYs:
• $22,503 for cardiovascular disease
• $13,602 for cancer
• $15,687 for asthma
• $17,207 for muscular dystrophy
• $66 for SIDS
• Units costs applied to the DALY projections, inflated at 3% p.a., and the
resulting total impost was discounted by 5% and 10% for each scenario.
Health system cost associated with each DALY lost to these specific was
estimated in ASMR’s 2011 Deloitte Access Economics publication:

Saving to PHI funds in costs
• Assume to have been passed on in proportionately lower premium prices:
Savings per policy
2012-13 2061-62
Single (5% scenario) $39 $321
Single (10% scenario) $77 $642
Family (5% scenario) $77 $642
Family (10% scenario) $155 $1,284

Extrapolating the savings in total PHI expenditures to a single dollar metric
• Discounted back to 2011-12 dollars at 7% p.a., and estimated the net present
value of the extrapolated savings on PHI premiums.
Total extrapolated savings in PHI expenditure (net present value terms) over next 5 decades:
• $21.4 billion (5% senario)
• $42.9 billion (10% scenario)

http://www.asmr.org.auhttp://www.asmr.org.au/Publications.html
ASMR’s plan
• Lift investment into NHMRC from ≈ 0.8% to 1% of the total Australian health expenditure
as soon as possible.
• Subsequently increase investment into NHMRC by 0.2% annually to reach 3% by 2022.
0
50
100
150
200
250
300
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 2062
NHMRCR&DExpenditure($bn)
TotalHealthExpenditure($trilion)
Health system (base case) NHMRC (scenario) NHMRC (base case)
Deloitte Access Economics 2012. Extrapolated returns on investment in NHMRC medical research.

This strategy will:
• Build knowledge for prevention, intervention and innovation.
• Reduce the predicted unsustainable escalation of health spending.
• Safeguard both community and government from economic and health challenges.
Thank you

Paul Dawson

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