The past several decades have seen amazing advances in science and technology that can improve our well-being (“the good”). Although they cost a lot of money, they can bring great value if used intelligently. Unfortunately, the ways these advances are used in our society vary greatly: we use some intelligently and others wastefully (“the bad”). The incentives in our system neither promote intelligent use nor eliminate wasteful use, a problem (“the ugly”) that will persist until we find ways to alter those incentives. Let’s explore the good, the bad, and the ugly in more detail.
The Good
Diagnostic imaging. We’ve moved from blurry X-ray images to astonishing CT, MRI, and PET scans, all of which improve diagnostic certainty and hence improve health outcomes with amazing images of human tissue and organs.
Surgical improvements. New noninvasive surgery (arthroscopy and laparoscopy) has greatly reduced the risks and disability of surgery and greatly shortened recovery periods. Improvements in anesthesia have almost eliminated anesthetic deaths, which fifty years ago killed about 1 in 10,000 patients (now only about 1 in 200,000), eliminating 95 percent of that risk.
Pharmaceuticals. Drugs have brought about immense gains in longevity and health during the past half century or so, and we can expect even more in the future. But, first, let us consider some of the great pharmaceutical triumphs of the twentieth century.
Antibiotics. Beginning with the discovery of penicillin in 1928, sulfa drugs about the same time, streptomycin in 1943, and Terramycin in1950, antibiotics (coupled with clean water) have almost eliminated deaths from infections in our country. In 1900, the death rate from pneumonia and tuberculosis was 1 per 125 persons; now it’s 1 per 1,700 persons. Life expectancy rose thirty years during the past century (from forty-seven to seventy-seven years), most of the gain coming from safe water and antibiotics, which alone added eight years to life expectancy between 1944 and 1972.
Drugs for the treatment of mental illness. In 1970, the United States had more than 400,000 inpatient mental hospital beds; today that number is below 60,000. Some of this shift came about through the development of outpatient mental health centers, but much of it was due to the introduction and refinement of psychoactive drugs. The results are remarkable: those drugs not only improved the health and well-being of patients with these disorders (and that of their families and friends) but actually reduced the costs of treatment (primarily by eliminating hospitalizations).
New discoveries in the biological sciences suggest an even wider array of possibilities. Thanks to an improved understanding of the role of genetic differences across individuals and how they affect disease and therapy, we stand on the edge of potentially amazing new innovations in medicine, including
- Curing genetically linked diseases such as cystic fibrosis
- Individualized therapy based on understanding how various genotypes respond to different therapeutic choices
- Refining the search for other therapies based on improved understandings of the biological pathways of disease mechanisms
Innovations in regenerative medicine (stem cell–based medicine) hold the promise of reversing problems created by diseased or damaged tissue, including (among others)
- Cure of neurological disorders such as Alzheimer’s disease and ALS
- Growth of new bone and joint tissue to reverse arthritic damage
- Regeneration of pancreatic functions to reverse diabetes
- Repair of diseased portions of the cardiovascular system
In parallel, a wide array of bioengineering inventions shows promise for improving human function. The past few decades have seen remarkable innovations in such areas as treatment of hip fracture; total joint replacement for arthritic or damaged knees, hips, and shoulders; vision improvement (lens replacement for cataracts and laser-guided vision improvement); and continuous-injection insulin devices for diabetics.
New artificial limbs have progressed to the point where a man with two artificial lower legs could compete for a position on his country’s Olympic track team. The future shows even more promise, including such things as artificial retinas to bring sight to the blind, highly sophisticated artificial limbs, artificial hearts, and much more.
Those new medical and engineering discoveries can bring great benefit to our society, but few, if any, will lower health care costs. Most will cost more money, often a lot of it. One great task of our future health care financing system is to devise intelligent and appropriate ways of introducing new technologies into the mainstream and ensuring that they become available for those who will benefit sufficiently to justify the costs.
The Bad
The bad news is that we don’t have any good way of determining who should receive various medical treatments and diagnostic interventions. To put it mildly, our health care system demonstrates large-scale confusion about whom to treat and how intensively to treat them.
The same thing occurs geographically. There are far larger systematic differences across geographic regions in treatment intensity than we observe (on average) for those with no health insurance compared to those with excellent health insurance. One could write many tomes on the diverse practice patterns we find in the United States. I’ll relate just a few.
Boston and New Haven are centers of excellence in health care. Nobody questions the excellence of the doctors or the hospitals in those two cities (both of which have similar populations and per capita incomes). The cost of caring for Medicare patients in Boston, however, is twice that of caring for Medicare patients in New Haven. And for twice the per-person spending, there’s little meaningful differences in health outcomes; Medicare enrollees have about the same life expectancy in both cities. Thus no one can argue that New Haven’s citizens are deprived of good health care; it just costs half as much per person as the health care delivered in Boston.
It’s not just Boston versus New Haven. Pairs of cities in the same state exhibit markedly different health care spending. The Dartmouth Health Care Atlas, which documents these regional differences in treatment intensity, shows us that Orlando costs half as much per person as Miami; Rochester, New York, costs half as much as New York City or Long Island; and San Francisco costs half as much as Los Angeles.
Further, broad-scale comparisons of health outcomes across the United States show that per-person spending has nothing to do with those outcomes. Those who live in the higher-spending areas don’t live longer; they are not more satisfied with their care; they don’t have better functional status (mobility, freedom from pain, etc.); they just use more resources.
The upscale spending patterns begin at the primary-care level. Primary-care physicians in high-spending areas are more likely to make specialist referrals, order more expensive diagnostic tests (even with minimal potential value), and recommend more-frequent return visits. Even within a single region (and controlling for patient illness characteristics), doctors’ styles can greatly affect the costs of treating patients in their practices. Ranking the doctors by practice style shows that the top 10 percent of resource users will cause twice as much to be spent on their patients as the lowest 10 percent of resource users.
The Ugly
Everything about our health financing system seems designed to keep everybody–patients in particular–in the dark about how much various treatments cost.
A second problem–exacerbated by the tax subsidy to health insurance–is the generosity of the insurance coverage held by many people. That insurance goes far beyond protecting people from risk, getting to the point where cost is largely irrelevant in medical decision making. Although some people admire that feature of our insurance system, it leads to profligate uses of medical care.
Now couple overly generous insurance with the apparent confusion about how intensively doctors should treat patients. Completely setting aside issues of induced demand, the lack of incentives for cautious spending combines in an unfortunate way with the various practice styles around the country.
Expensive practice style in my community? No problem! My insurance pays for it! Few individuals in the United States bear the full brunt of the effects on health insurance costs (or can’t see them) because of tax subsidies to insurance, hidden financing through employer-paid insurance mechanisms, or Medicare’s not altering the costs to participating in Parts A or B (the key sections of Medicare) by region.
How to Make the Ugly Duckling Beautiful. What do we need to make more of the “ugly” become part of the “good”? No single magic solution exists. One thing does seem clear: fixing this problem requires some mix of incentives, rules, and information that needs to be improved for both providers and consumers, as follows:
Incentives. Incentives matter a lot in dealing with this problem. As consumers, we could change the ways in which insurance pays for care so that it protects against financial risk but makes people more acutely attuned to the resources they and their doctors decide on. Current health insurance plans do this very poorly, offering a chance for significant change.
For providers of health care–doctors, hospitals, dentists, nurses, pharmaceutical companies, and so on–an array of ways already exists to change provider behavior, ranging from the length of hospital stays to the rates at which new drugs get into the marketplace; these also offer a great opportunity for reshaping our health care system in desirable ways.
Physician information. Guidelines help physicians understand when (and when not) to employ a medical intervention. All physicians learn this art during medical school and residency training, as well as ongoing continuing medical education. But (as the widespread variability in medical practices across regions suggests) what they have learned may differ greatly from what other doctors have learned in other settings. Too often, the teaching doctors’ personal experiences guide their teaching recommendations. Systematically developed guidelines could bring a wider range of experiences and, most important, systematic data (epidemiology and results of randomized controlled trials) into play.
Researchers studying regional differences in medical practice intensity (cost) have found that, where good practice guidelines exist, little regional variation exists. The widespread resource utilization differences come in areas that are more subjective and lacking in guidelines. Thus, we have good reason to expect that more widely spread and uniform guidelines can help solve the puzzling problem of regional differences in treatment patterns that do not match patterns of patient illness.
Patient information. Patients can climb onto the information train just as can doctors. Individuals now have access to a dizzying array of information about medical treatments and their consequences through such diverse sources as the Internet, print media, and broadcast media. Each of these has its own strengths and weaknesses.
The Internet has numerous websites that contain clear information about various medical conditions; such sites include WebMD and the informational sites of numerous medical centers around the country. For many diseases and conditions, single-issue websites focus on a particular disease, some highly organized (American Heart Association, American Cancer Society) and others with more modest resources (e.g., Restless Legs Syndrome Foundation, ALS Association, Muscular Dystrophy Association). Search engines lead patients to many such sites. Alas, the Internet also has numerous sites that contain incorrect information. That’s the problem with the Web: it takes a knowledgeable user to sort the wheat from the chaff.
Broadcast and print media now overwhelm us with direct-to-consumer ads, most notably for drugs that affect people’s lifestyles, including those treating hair loss, heartburn, and the ubiquitous erectile dysfunction but also for drugs that can have important consequences for survival, including various cholesterol-reducing drugs (statins and their kin) and hypertension medications. These ads have been shown to increase patients’ awareness about these conditions and to encourage them to discuss with their doctors the conditions and the drugs. (We still don’t know whether those ads increase appropriate use more than they drive inappropriate overuse.)
Our health care system behaves almost randomly in the way in which treatments get recommended and used. What treatment you receive (if any) may depend as much on where you live and what doctors you use as much as your actual illness or injury. Incentives and information for both providers and consumers of health care could help bring some rationality to this process, offering considerable opportunity for improving the effectiveness of our health care and controlling costs.
