Chaos and Organization in Health Care

2. Progress

2 Progress Health care has its share of “bad guys” who warrant criticism—including businesses reaping exorbitant profits, criminals who commit fraud, and physicians who practice sloppy medicine, to name a few. And our challenges would be simpler if the driving force behind U.S. health care’s problems was the greed or incompetence of these people. We could round the culprits up and put them out of business. Unfortunately, we cannot lock up the dominant force behind rising health care costs, and even if we could, we would not want to. That force is progress itself—technological innovations like new drugs that make incurable diseases curable; new tests that hasten diagnosis and reduce uncertainty; and new surgical techniques that lead to shorter recovery periods. When used correctly on the right patients, these innovations can mean a longer and better life, peace of mind, or at least the knowledge needed to make informed decisions. But these innovations also generate costs and confusion. Increasingly sophisticated care requires sophisticated specialists who immerse themselves in narrow areas of medicine. That trend inevitably means more physicians must be involved in the care of complex patients, with more opportunities for miscommunication and inefficiency. In this chapter, we examine the role of several factors that are often blamed for the crisis in health care and explore how the ongoing explosion of medical knowledge leads to the chaos described in chapter 1. We believe that regardless of how health care is financed, the management of information and choices created by medical progress is a challenge that must be addressed. We also believe that this challenge is surmountable. Before we can imagine the “cure,” however, we must understand the “disease process” at work. 20 Chapter 2 Why Are Health Care Costs Rising? Let’s focus for now on rising costs as the destabilizing issue in health care, and temporarily put aside concerns about quality and safety. After all, if health care is unaffordable, patients cannot get access to care, and quality and safety concerns become academic. Let’s also temporarily put aside the issue of the high baseline level of U.S. health care spending compared to other countries. Many other books and articles look at issues such as what percentage of U.S. gross domestic product devoted to health care is sustainable, the percentage of health care spending attributable to the “overhead” of a fragmented multipayer health care system, and the higher prices of everything in U.S. health care from pharmaceuticals to personnel. For the moment, though, we would like to concentrate on the factors driving the increases in health care costs, because it is those annual increases of 7 to 12 percent that disrupt the budgets of employers, individuals, and government. All of these budgets seem stretched to the limit right now, and the knowledge that they will be stretched even more next year by higher health care costs induces a sense of panic. What can possibly cause increases that have averaged about 9 percent per year for such a large industry over the past quarter century [1]? The usual suspects are: 䊏 Rising pharmaceutical and device prices 䊏 Administrative costs of the health care system 䊏 Medical malpractice 䊏 Aging of the population 䊏 Behavioral and lifestyle choices 䊏 Hospital and physician costs 䊏 Technological innovations 䊏 More frequent use of older tests and therapies All of these factors contribute to the high baseline cost of health care, but some of them are surprisingly unimportant as drivers of growth in overall health care spending. A thorough and objective examination of the drivers of increases in health care costs was presented in a January 2008 Congressional Budget Office (CBO) paper titled Technological Change and the Growth of Health Care Spending [2]. The CBO paper confirms that the United States Progress 21 spends more on health care per person than do other industrialized countries, but notes that other countries have had about the same rate of increase. Table 2.1 shows the CBO’s analysis of the average annual growth by country from 1975 to 1995. In summarizing the context for its analysis, the CBO paper says, “Although growth rates vary by country and by period, most industrialized countries—even those with a financing system quite different from that in the United States—have experienced a substantial long-term rise in real spending on health care. In fact, growth rates in per capita spending in some countries have...