The Mounting Price of Health Care’s Status Quo

by Lesley Politi on March 25, 2009

February 27, 2009, 6:00 am

<!– — Updated: 1:51 am –>

The Mounting Price of Health Care’s Status Quo

Uwe E. Reinhardt is an economics professor at Princeton.

No sooner had the provisions concerning health care in the House’s economic stimulus bill seen the light of day than the defenders of the status quo came out, guns blazing.

One target is the proposed development of a nationwide electronic health information infrastructure. The other is an initiative for “comparative effectiveness analysis,” which refers to estimates of the cost of different therapies used to reach a particular outcome (e.g., there are multiple ways to treat high blood pressure, and they all cost different amounts). Both have strong bipartisan support.

The status-quo posse was led by the American Enterprise Institute resident fellow Scott Gottlieb, M.D. He wrote that government involvement in comparative effectiveness analysis is a mischievous Machiavellian plot (a) to deny expensive health care to critically ill patients, especially to cancer patients and the elderly, and (b) to stunt the progress of medical technology in general, all for the sake of saving taxpayers money.

Two weeks later Betsy McCaughey, currently of the conservative Hudson Institute and formerly New York’s lieutenant governor, wrote a commentary with the ominous title, “Ruin Your Health With the Obama Stimulus Plan.”

Ms. McCaughey warned that a “National Coordinator of Health Information Technology will monitor treatments to make sure that your doctor is doing what the federal government deems appropriate and cost effective,” and, further on, that “penalties will deter your doctor from going beyond the electronically delivered protocols when your condition is atypical or you need an experimental treatment.”

In my view, the passages in the plan cited by Ms. McCaughey (pp. 442 and 446) simply do not support the dire interpretation she puts on them. Nor does comparative effectiveness analysis envision the hard-hearted scenarios conjured by Dr. Gottlieb.

Unfortunately, a defense of the status quo is par for the course in American health policy. If the defense carries the day in the coming debate on health care reform, then the American people have only themselves to blame for the predictable consequences, which are:

First, health-spending per capita in the United States will continue to rise 2 to 2.5 percentage points faster than the rest of per-capita gross domestic product, as it has done for the last four decades. Health care then will absorb about 40 percent of G.D.P. by 2040.

Second, more and more middle- and lower-income American families will find themselves priced out of needed health care, as the cost outpaces the growth in the wage base that supports the families. They will experience harsh rationing of health care, not by government, but by price and their ability to pay.

And, third, the waste most experts impute to our health system would continue unabated, as it thrives on the opaqueness of a heavily paper-based, fragmented health system that shuns comparative effectiveness analysis.

Part of the problem is that the defenders of the status quo always skillfully mingle several distinct issues that ought to be treated separately. These issues, much discussed in the well-respected literature, are:

  • 1. Appropriateness: A growing body of scholarly literature suggests that a surprising fraction of the health care given to patients in the United States — and in other countries as well — does not appear to be the clinically most appropriate response to the patient’s medical condition.
  • 2. Cost-Effectiveness: Even if clinically effective and appropriate, a good part of the health care delivered in this country does not appear to be the lowest-cost therapeutic approach to reach a given therapeutic target (e.g., managing diabetes or controlling blood pressure).
  • 3. The Price of Changes in Health Status: As the cost of health care keeps rising, severely straining the budgets of households, businesses and governments, sooner or later we must confront the question of whether there should be an upper limit to the price that should be paid for a given improvement in health status, at least insofar as it is paid for out of collective health-insurance pools in private, commercial insurance or public health insurance programs.

It is hard to see why there should be much controversy about the first two issues, other than among those who profit from inefficiency. Here I would cite what I have called Alfred E. Neuman’s Cosmic Law of Health Care, namely: “Every dollar of health spending is someone else’s health-care income, including fraud, waste and abuse.”

The third issue — the price to be paid for improvements in health status — is very controversial. It touches on deeply philosophical and ethical issues on which honorable people may disagree honorably.

It is true that in the more resource-constrained health systems of other countries the third issue is being gingerly explored. It is also true that millions of American households without health insurance or with shallow insurance necessarily must confront it squarely — for example, when they are asked to pay a coinsurance rate of 30 percent or more for a specialty drug that can cost $100,000 or more for a treatment.

But as far as I know, no one in the Obama administration has put the third issue on the table. These folks will have their hands full merely focusing on first two issues, leaving the third to administrations further in the future.

In the next three posts to this blog, I shall address each of these three issues separately.


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