Rx for Health Care Reform

23. Must Technology Break the Bank?

282 23 Must Technology Break the Bank? In every advanced country, regardless of what kind of health care system it has, the cost of care has been relentlessly advancing for many years. The growth in global affluence accounts for much of this increased spending, but costs are rising faster than wealth everywhere. According to the Princeton health economist Uwe Reinhardt, a 1 percent cost increase in per-capita GDP will push up health costs between 1.2 and 1.4 percent, depending on the nation. “In the U.S., that ratio has been about 1.4. So every time income rises 10 percent, health care spending rises 14 percent,” he says. “That’s the big cost driver.” Clearly, a great deal of inefficiency and waste can be cut out of the U.S. system if we give providers the correct financial incentives, eliminate unnecessary administrative expenses, and resist the pressures of the medical-industrial complex. Interconnected health information systems would also reduce redundancies and help ensure that the right care was provided to the right patients at the right time. But, even though these changes would cut health spending substantially, it would soon resume its inexorable forward march. This chapter and the next analyze the technology factor from two perspectives: how to determine what should be in a standard benefit package, and how we can encourage beneficial advances without bankrupting the system. Technology’s Impact Health economists attribute about half of the rise in costs to “technology,” which is a catchall term covering all kinds of medical advances.1 Technology can range from new drugs and medical devices to new tests and procedures. What most of these things have in common is that they lead to an increase in the volume and intensity of care. This higher intensity level accounts for part of technology’s Must Technology Break the Bank? 283 impact on raising costs. The rest comes in the form of excess medical price growth in everything from patented drugs and PET scanners to the people who are hired to run and maintain the new equipment.2 Three other aspects of technology tend to drive up costs: First, new technologies don’t always replace old ones. The introduction of MRI and CT scanners didn’t put X-ray machines out of business, and coronary artery bypass grafts didn’t go away after angioplasties became commonplace . Although about 1.2 million angioplasties were done in 2002— quadruple the number of operations just a decade earlier—cardiothoracic surgeons also performed 515,000 coronary artery bypass grafts in the United States that year.3 (That’s nearly double the number done in 1991.) So while coronary artery bypass grafts have been declining of late, they’ve certainly not been replaced. Second, there is a tendency for doctors to perform new procedures more often when they’re less invasive and patients are more willing to undergo them. When minimally invasive gallbladder operations came along in the late 1980s, for example, they were much less expensive and dangerous than open surgery, but the number of procedures rose so much that the total cost increased.4 The same has been true of angioplasties , especially since the advent of stents that keep arteries open after the procedure.5 Third, many new technologies lend themselves to “extensions.” In some instances, as with cataract removal, the technology improves and is gradually applied to a wider group of people who can benefit from it. Sometimes, a new drug or treatment is applied to patients who won’t benefit. For example, the Food and Drug Administration (FDA) approved Vioxx as an alternative to nonsteroidal anti-inflammatory drugs that caused stomach bleeding in some patients. But, partly as a result of heavy television advertising, many doctors soon began prescribing these expensive drugs to all arthritis patients who wanted them, whether or not they had gastric bleeding.6 The result was to drive up costs—and, incidentally, to expose patients to the cardiac risk of Vioxx and other COX-2 inhibitors. Interactions with Other Factors Population growth and aging also increase consumption of health care, including new technologies . Reinhardt doesn’t consider aging a major factor, because the demographic change is occurring slowly. But other experts point out that 284 Rx for Health Care Reform more and more people are living longer and longer.7 During all those additional years, they’re bound to use more health care, even if...