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But what if this conventional wisdom is wrong? In my view, several pieces of evidence suggest that increases in health care costs might actually moderate significantly, if not decline relative to the GDP, over the next few decades — even without the type of systemic changes proposed in current legislative efforts. As a result, the financing crisis in health care could be much less dire than most people believe.
The first moderating factor is the changing nature of medical technology. The primary cause of the cost increases in medical care during the past half-century has been the development and diffusion of new treatments. But for better or for worse, some of the pipelines that have delivered much of this innovation in the past are beginning to run dry. During much of the 1990s, new pharmaceuticals led the cost advance. Yet forecasts suggest that U.S. sales of pharmaceutical products will decline this year and then hold essentially constant over the next 5 years.1 The pipeline for medical devices is also relatively dry in comparison with those of the past. A substantial proportion of the recent growth in spending has resulted from increased use of medical imaging. Although a drying pipeline may not be the issue in this area, the use of imaging may well be cut back: health care plans are beginning to hire radiology benefit managers, who may do for imaging what pharmacy benefit managers did for high-cost statin drugs and behavioral health companies did for inpatient psychiatric care — bend the escalating cost trend.
Even in areas where the pipeline is still full, new technologies may not increase costs as much in the future as they have in the past. As the market becomes more crowded, new technologies increasingly substitute for older technologies and thus naturally result in less cost growth than the first high-cost technological intervention for a given problem. One example is the shift from the use of coronary-artery bypass grafting (CABG) to stents. CABG tended to increase total medical costs because before its advent few people received any intensive treatment for heart attacks; but stents are often substituted for CABG that would otherwise have been performed and thus increase total spending less than the initial introduction of CABG did. Although new treatments will continue to increase the costs of care for some diseases (such as Alzheimer's disease and cancer), these increases will be tempered by such substitutions in the more crowded fields of other diseases (cardiovascular disease being a prime example).
Finally, new technologies have the potential to reduce the number of patients receiving expensive treatments. Many pharmaceuticals (such as chemotherapy agents and antidepressants) work in some patients but not in others — for reasons that have yet to be determined. As we learn more about the genetic and physiological basis of these differences, we will be able to limit the number of patients who receive ineffective treatments. For example, studies showing that trastuzumab (Herceptin, Genentech) is effective in the treatment of invasive breast cancers that are positive for human epidermal growth factor receptor type 2 (HER2) but not in the treatment of HER2-negative breast cancers have helped to ensure that patients who test negative for the protein do not receive an expensive and ineffective therapy. The trastuzumab model may become the norm.
The second moderating factor is the potential for technology to lower the administrative costs of care. The American Recovery and Reinvestment Act allocated $31 billion for health information technology (HIT), with the goal of wiring nearly the entire U.S. medical industry within the next decade. The savings resulting from this project could be immense. Consider how providers spend their time. A recent study estimated that physicians spend an average of 142 hours per year interacting with health plans, at an estimated annual cost of $70,000 per physician.2 Another study showed that 35% of nurses' time in medical and surgical units was spent on documentation, at an estimated annual cost of more than $50 billion.3 Money is also wasted in insurance administration and in efforts to comply with regulations promulgated by multiple agencies with overlapping responsibilities.
HIT can help to change all that through real-time electronic adjudication of claims, voice-recognition software, and automatic recording of vital statistics in electronic records. Changes in practice organizations can complement these innovations, as providers move from the current system to a truly paperless one. Lower administrative costs would not translate into permanent reductions in cost growth, but they would slow growth for some years. As the experience of other industries shows, in every realm where computers have become ubiquitous, layers of bureaucracy have been eliminated. Health care need not be the exception.
The final factor that could moderate cost growth is improvement in the management of care for chronic conditions, which is now notoriously poor. The rates at which hypertension, high cholesterol levels, and diabetes are controlled fall well below 50%. Secondary prevention efforts are also limited. Readmissions for congestive heart failure, for example, are often preventable but still very common. In many of these cases, better management of care is associated with lower lifetime spending.
Poor control of a patient's condition is often related to underuse of medication. Policies that encourage adherence to medication guidelines could result in substantial long-term savings. Experience gained in other fields can offer some guidance. In the realm of pensions, for instance, it is well known that people stay with the default program; if the default status is that employees contribute to their 401(k) plans, they will continue to do so. In health care, default programs might take the form of automated prescription refills or appointment reminders that would help patients take the appropriate steps in managing chronic conditions.
Price also matters: people stop taking medications when the out-of-pocket price increases. One strategy that might address this problem would be to refund a portion of those out-of-pocket costs to people who take their medications regularly over the course of a year; the savings in health care costs should more than make up for the expense of such partial reimbursement. HIT can also play a role. Wireless technology can be used to monitor patients' physiological status on an outpatient basis, with results fed back to patients and providers. Corrective action could then be taken before a condition reached the acute stage.
Innovation along these lines is possible — and indeed is already occurring. Many firms are experimenting with "value-based insurance design," default programs, and HIT-based prevention strategies. If the business model works, the savings could be immense.
None of this is to deny the importance of fundamental health care reform. The absence of reform has, without doubt, hindered the ability of the health care system to realize efficiencies. With or without reform, however, I believe we may find the future cost of the health care system to be lower than many have predicted.
No potential conflict of interest relevant to this article was reported.
Source Information
From Harvard University, Cambridge, MA.
References
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